Possible fund cuts worry districts
A proposal to change how the state distributes money for public school facility projects would benefit most Arkansas school districts, but some stand to lose funding and that has them worried.
Bentonville, for example, qualifies to receive state aid for 34.5 percent of a building’s construction cost under the state’s current wealth index, which is used to determine what share of the cost of an approved building project the state will pay. The proposed change would shrink that percentage to the minimum of 0.5 percent.
The state has contributed to school construction and replacement costs since 2004 when the state Public School Academic Facilities Program was established after the Arkansas Supreme Court ruled that the public school system, including school buildings, was inadequate and inequitable, and thus unconstitutional.
But Gov. Asa Hutchinson has said the state cannot sustain its average annual investment of $100 million in the program. Act 801 of the 2017 legislative session mandated a comprehensive review of the state’s role in school facility funding “to ensure that the most efficient and effective programs are in place.”
That review fell to the Advisory Committee on Public School Academic Facilities, which spent the past year compiling recommendations, and released its 73-page report in July.
The committee’s report raised concerns about the fairness of the current wealth index formula, which takes into account a district’s enrollment and assessed property values.
To determine a district’s wealth index, the value of one mill is divided by the district’s number of students, providing the value of one mill per student. That amount is compared with the value of the district at the 95th percentile for all districts in the state. Based on that comparison, the percentage of state aid for a particular district’s building project is determined.
“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 states. “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 committee recommended adopting instead a calculation proposed by the state Bureau of Legislative Research that uses a district’s highest 10-year enrollment and a community’s median income to determine eligibility for state funding.
This proposed change is viewed as more favorable to districts, particularly small ones, that have had sharp declines in enrollment. It also will reduce state facility funding for large, fast-growing districts.
The committee’s analysis shows that 174 of the state’s school districts could get increases in state funding for their projects, 51 districts would see decreases and the amount for 10 districts would not change.
Parkers Chapel in El Dorado and Valley View in Jonesboro are the only school districts in the state that stand to lose a larger percentage of their wealth index than Bentonville under the proposed change.
The Helena-West Helena School District in east Arkansas has been losing students for years. Enrollment was 1,328 last fall, about half what it was 10 years ago. That district’s wealth index would increase state funding for facilities from 50 percent to 85.3 percent.
Including a community’s median income adds fairness to the wealth index calculation, said Andrew Bagley, president of the Helena-West Helena School Board.
His district passed a millage increase in 2016 to build a $28.5 million high school. Bagley said the district originally was told it would receive $7.3 million in state
money for the project, but that amount shrank to $6.5 million because of the wealth index formula. A drop in enrollment made the district appear to be wealthier than it was previously.
“Helena is not richer today than it was a year ago,” Bagley said.
Bagley said he believes the state should help all districts provide students appropriate facilities, but “I know Helena would trade places with Bentonville tomorrow. We would love to have growing enrollment, growing assessments and growing median incomes.”
Rogers, another steadily growing school district, would see its state share slashed from 27 percent to 12.4 percent under the proposed formula. Marlin Berry, the district’s superintendent, wrote in an email that the current formula for facility assistance was created to account for the differences in the abilities of communities to raise money for facilities.
“We understand that there are some smaller communities who could not begin to levy enough to build a school and so they need assistance,” Berry wrote. “A rapidly growing district like ours also needs assistance to keep up, but it makes sense it is at a lesser rate.”
The formula that introduces median income to the equation, however, is “a little puzzling,” Berry wrote.
“Nothing in our funding formula is based on median income for a district — only our total assessed value. In the proposed formula, our district would receive about half of what we did in the current formula, creating a bigger burden on our taxpayers,” he wrote.
Bentonville school officials have pleaded their case to lawmakers and are urging residents to voice their concern to the state.
Bentonville is building two schools — its 12th elementary, which is set to open next year, and a fourth junior high scheduled to open in 2020. The state is providing about $4.53 million for the elementary, which is being built for about $26.9 million. Also, the state has pledged $2.56 million for the junior high school, the cost of which has not yet been determined.
Debbie Jones, Bentonville’s superintendent, wrote to the governor and local legislators last month urging them to reject the committee’s recommendation.
“The proposed formula essentially removes state funding for some school districts experiencing the greatest growth in the state, defying logic,” Jones wrote to Hutchinson.
Jones, district finance director Janet Schwanhausser and three other district representatives traveled Aug. 21 to Little Rock to state their case in front of the Legislature’s Academic Facilities Oversight Committee.
“The inclusion of median income into the wealth formula is based upon the perception that districts with a higher median income have extra, additional, or setaside funds to meet facilities needs,” Schwanhausser wrote in a district document. “Median income does not provide a single dollar of direct funding for schools. In districts experiencing rapid growth, local contribution is not sufficient to meet need.”
She noted that Bentonville already has the fourth-highest millage rate in the state at 48.5 mills because it has had to pay to build additional schools to keep up with enrollment growth of roughly 40 percent in the past decade. The district carries more debt than any in the state, she said.
By the time the district’s fourth junior high school opens, Bentonville will have built 10 schools in 11 years at a cost of more than $250 million, with the state contributing a little more than $29 million, according to Schwanhausser.
“Our community has done more than its part to help us support the growth,” Jones said. “The state also needs to do its part to help us build school buildings for the state’s children.”
The Gravette School District in Benton County also would see its state share of funds cut from 8.7 percent to 0.5 percent. Gravette has applied for, but never received state partnership money for facilities, said Superintendent Richard Page. He said he supports Bentonville and Jones’ objection to the proposal.
The Lincoln School District in Washington County would see its state funding rise from 64.4 percent to 73.8 percent under the committee’s proposal. The district received about $5.3 million in state money to help build a high school that opened in 2012.
Superintendent Mary Ann Spears said Lincoln has no projects on the horizon that would qualify for state money,
so the state funding question is not currently relevant to her, but there are some “desperate” school facility situations across the state.
“Any plan they come up with needs to be fair and equitable to all the districts,” Spears said.
Hutchinson, in an emailed statement, said that while there is broad agreement that changes in the facilities funding formula are needed, no final decision has been made.
The Commission on Public School Academic Facilities and Transportation will need to review the proposal, and there may be a need for legislation to change the current formula, he said. The next legislative session begins in January.
He said he understands Bentonville’s concern.
“I do expect adjustments to be made in the current formula, but it is important to recognize the legitimate needs of fast-growing districts such as Bentonville,” Hutchinson said.
State Sen. Bart Hester, a Republican who lives in the Bentonville School District, was one of the legislators at the Oversight Committee’s August meeting. He called the proposed funding formula “ridiculous,” and said he’s confident it won’t be adopted.
State Rep. Bruce Cozart, R-Hot Springs, who co-chairs the Academic Facilities Oversight Committee, said he hasn’t made up his mind about the proposal.
“I want to see across the state who the winners and losers are, and the ill effects of it,” Cozart said.
State Sen. Jane English, R-North Little Rock, and the oversight committee’s other co-chairman, said the advisory committee made some good recommendations, but it’s too early to say whether the Legislature will adopt any of them.