Enrollment-tied funding change pitched for schools

An Arkansas advisory committee Tuesday proposed changes to the state’s system of distributing millions of dollars to school districts for building-related costs to favor the ones that have had sharp declines in student enrollment.

The Advisory Committee on Public School Academic Facilities also called for the state to budget $90 million a year for its share of the cost of school construction — encompassing new academic space, as well as replacement of roofs, heating and air conditioning systems, and other “warm, safe and dry” systems.

The committee, made up of educators, engineers, architects and others, developed the 73-page report and recommendations over the past year. The report was done in accordance with Act 801 of 2017 that called for a comprehensive review of the state’s academic facilities programs to ensure that they are as effective and efficient as they can be.

The state has been contributing to school construction and replacement costs since 2004 when the state Public School Academic Facilities Program was established in the wake of an Arkansas Supreme Court ruling that the state’s public school system — including school buildings — were inadequate and inequitable and, as a result, unconstitutional.

Charles Stein, vice chairman of the advisory committee, presented the recommendations Tuesday to the three-member Public School Academic Facilities and Transportation Commission, which asked questions about the report but delayed any action on it until later this year.

Stein was aided by Jim-

my Alessi, a contractor and chairman of the committee, and Brad Montgomery, secretary of the committee and director of the state Division of Public School Academic Facilities and Transportation.

The state’s Academic Facilities Partnership Program, the largest of the state building aid programs, includes state and local school district money for building projects. A wealth index is used to provide a greater state share of school building costs to school districts that have fewer local resources. The state’s average share of building costs has been 15 percent, but that has gone as high as 88 percent for an individual district, according to the advisory committee report.

“Multiple concerns about the fairness of the wealth index have been raised, based on the way the factors used in the calculation affect the index,” the report states.

A district’s student enrollment and assessed property values are components of the wealth index.

“This means that if a school district loses students, even if its assessed value stays the same, it will be eligible for less state funding,” the report says. “By the same token, if a school district gains enrollment, even as its assessed value stays the same, it will be eligible for more state funding. The committee views this as an unintended consequence of the current wealth index.”

The report cites the Pocahontas and Lee County school districts that in 2008 qualified for similar percentages of state building aid. The districts are in east Arkansas. Over time, Lee County lost 36 percent of its enrollment, while Pocahontas grew by almost 11 percent. Both districts are now building new elementary schools, but Pocahontas will receive $9.6 million in state funding while Lee County will receive about $600,000.

The advisory committee is recommending the use of a calculation proposed by the state Bureau of Legislative Research that uses the highest 10-year enrollment and median income in a district to determine the eligibility for state funding.

“The proposed wealth index change will favor districts that have had sharp declines in enrollment, particularly small districts. It will also reduce state funding participation for large, fast-growing school districts,” the advisory committee concluded about the proposal that would require legislative action to go into effect in 2021-22.

Some 174 of the state’s districts could see an increase in the state’s share for their projects, 51 districts would have a decrease and 10 districts would not see a change, according to the committee’s analysis, which also noted that the calculations would need to be adjusted annually.

The committee’s report includes an appendix that shows the current and proposed state share of projects for districts using the existing and proposed wealth index calculations. The Bentonville School District is currently eligible for a 34 percent state share for its projects. That would change to 0.5 percent under the proposal. Valley

View School District in the southwest side of Jonesboro is eligible for 54 percent, but that would be reduced to 12.3 percent.

Brinkley is eligible for a 17.9 percent state share that would increase to 66.7 percent. The Little Rock district is eligible for an 8.4 percent state share now and that would grow to 12.8 percent. The Cabot School District that is eligible for a 60.9 percent state share now could see that decrease to 48.7 percent.

The largest gainers are primarily small systems: Augusta, Clinton, Dermott, Hampton, Lee County, and Marvell-Elaine, for example. Other potential gainers include Hot Springs, Newport and Helena-West Helena school districts.

From 2004-17, the state spent $918.8 million on public school facilities, which is about 15 percent of the total $6 billion spent.

Of that $6 billion, 81 percent, or better than $4.8 billion, was spent by local school districts, and 4 percent, or almost $265.9 million, was spent from federal sources. While $918.8 million in state money has been spent, the state funding authorized for facilities programs is a total of $1.37 billion.

Gov. Asa Hutchinson last summer urged the advisory committee to pursue changes that would meet school district needs while lowering the state’s financial participation, saying that recent annual funding levels were not sustainable.

State funding for the program has been about $58 million per year with $41.8 million allocated from the Revenue Stabilization Act and $17.1 million from bonded debt assistance. That has been supplemented with unspent funds from earlier years and other revenue sources. The state has spent on average $102 million a year on the building program over time but that fluctuates greatly from year to year.

The advisory committee’s call Tuesday for $90 million a year from the state to be equally divided between new building spaces and warm, safe and dry projects generated some concerns from the Commission for Arkansas Public School Academic Facilities and Transportation.

Aaron Burkes, president of the Arkansas Development Finance Authority, and Larry Walther, director of the Arkansas Department of Finance and Administration, along with Arkansas Education Commissioner Johnny Key make up the commission.

Burkes and Walther questioned the advisory committee leaders about the proposed $90 million a year. Burkes called it a substantial increase and “contrary to the goals of reducing the costs.”

Key questioned the potential for providing additional state aid for buildings in districts that are in jeopardy of having to consolidate with other districts because of falling below the minimum of 350 students necessary to maintain a district.