A new way to fund schools
State formula seeks to reduce gap between rich and poor districts
Last year Pennsylvania had the highest public school funding gap in the country between rich school districts and poor school districts, according to data from the United States Department of Education.
The recent passage of House Bill 1552 is part of an effort toward closing that funding gap.
Pennsylvania’s Basic Education Funding Commission, a bipartisan group of state senators and representatives, recommended in June 2015 that the General Assembly adopt a new “fair funding formula,” known as the Basic Education Funding formula for distributing state funding to the 500 school districts in the commonwealth.
The General Assembly passed HB 1552 with overwhelming bipartisan support: the Senate voted 49-1 in favor of the bill on May 18, and the House voted 188-3 to pass the bill on May 25. The bill amends the Public School Code of 1949 to establish “student-weighted basic education funding.”
Gov. Tom Wolf signed HB 1552 — now Act 35 — into law on June 2, making BEF the official formula for distributing state funds to school districts. The new formula is intended to provide sufficient, predictable and equitable funding for all school districts across the state.
The funding formula includes student-based factors such as: the number of children in the district who live in poverty, the number of children enrolled in charter schools, and the number of children who are learning English as a second language. The formula also includes district-based factors such as: wealth of the district, the district’s current tax effort, and the ability of the district to raise revenue.
Pa. among last to adopt fair funding
Pennsylvania had previously been one of only three states in the country that did not use a funding formula for public schools. Delaware and North Carolina are the only two remaining states that don’t have a funding formula.
Under the “hold harmless” provision of Pennsylvania’s previous system for funding public schools — which was first implemented in 1991 — all school districts in the commonwealth were guaranteed to receive at least 2 percent more funding each year than the previous year, regardless of factors like the student population and the wealth of the district. This system had been criticized as unfair for providing more funding per pupil to districts with shrinking student populations and less funding per pupil to districts with growing student populations.
State Rep. Dan Truitt, R156th Dist., who is a member of the House Education Committee, said the funding formula received so much support from both parties in the House and Senate because everyone agreed that the algorithm was fair. He said the previous system was random, and he compared it to flying over the state, and just dumping money out of a helicopter and seeing which districts it would land in.
Truitt said the Basic Education Funding Commission spent about a year working on the formula, and they de- cided it was fair to include factors like, student population, number of English language learners and poverty levels around the district as a way to determine the percentage of state funding each district will receive.
He said the funding formula would benefit school districts in Chester County, for example, because the formula takes student population into account, and Chester County has been one of the fastest growing counties in the state. Under the new law, the funding formula will be used to distribute new state funding for schools, but hold harmless will still apply to the state funding currently in place. The formula has already been applied to distribute $150 million in school funding that was approved by Wolf and the Legislature for the 2015-16 school year.
Truitt said more funds could be distributed through the formula in future years, but it may take some time. “My constituents want more money to be invested in education, but they don’t want more taxes,” he said. “It’s hard to do one without the other.”
7 factors determine need
State Sen. Andy Dinniman, D-19th Dist., said the Basic Education Funding Commission worked to come up with a total of seven factors – four student-based factors and three district-based factors — to ensure that the funding formula would be fair. Dinniman is the minority chair of the Senate Education Committee and a member of the Basic Education Funding Commission.
The student-based factors in the funding formula are: student count, based on average daily membership of schools in the district; percentage of pov- erty and degree of poverty in the district; number of English language learners in the district; and number of students in the district who are enrolled in charter schools. Dinniman said it costs more to educate students living in poverty and students learning English as a second language, so it’s crucial to include those factors in the formula.
Dinniman said all the school districts in Chester County should benefit from the student count factor because enrollment in schools in the county has been increasing. He said a district such as Coatesville Area School District would benefit from multiple aspects of the formula because the district has a high number of students affected by poverty, a significant number of English language learners, and a high number of students enrolled in charter schools.
The district-based factors in the funding formula are: sparsity size adjustment, which takes into account how far students live from the school, and is meant to help rural districts; median household income index, which measures the median household income in the district in comparison to the median household income of the whole state; and tax effort capacity index, which determines a district’s ability to generate local tax revenue, compared to the statewide ability to generate tax revenue.
Spreading the pain and wealth
Dinniman said some of the more rural districts would benefit from the sparsity size adjustment factor. He said districts with a lower tax capacity could receive more money under the formula, but districts in wealthy areas that have a higher tax capacity with both residential and com- mercial taxes would not receive quite as much funding through the formula.
“If you look at the formula, you’ll see we tried to make sure that all school districts received some type of assistance,” Dinniman said. “Here in Chester County, we have school districts that are growing at a quicker rate. We also have school districts that have almost no tax capacity but a high millage (rate), so we’re trying to help them.”
The caveat that goes along with the funding formula is that it is simply a means to distribute state funds, but it has no effect on how much state funding will be available in the first place.
“How much you give any school district in the end depends on how big the pie is,” Dinniman said. “If the pie is large, everyone gets more, but the formula doesn’t necessarily solve the problem of poor school districts if the pie is small.”
Dinniman said the hold harmless provision could still cause some complications, but it’s a separate issue from the funding formula. He said the Basic Education Funding Commission agreed that all new money for school funding would be distributed through the funding formula, but it would hurt many school districts in the commonwealth if hold harmless was taken away immediately. He said school districts in areas of the state with shrinking populations, like rural areas and old steel towns, depend on hold harmless. “There’s no easy answer,” he added.
Wolf’s proposed budget for 2016-17 includes a $200 million increase to the basic education subsidy, which would be distributed using the new funding formula, but it remains to be seen if Wolf, a Democrat, and the Republican-controlled General Assembly will be able to agree on a budget by the July 1 deadline, and avoid a stalemate like last year.
Downingtown Area School District Superintendent Lawrence Mussoline said the new funding formula is certainly a step in the right direction, but there is still more work to be done.
“There are two general funding questions we all ask in public education: ‘how will money be allocated, and how much money will be allocated?’” he said. “At least we’ve gotten out of the Stone Age in terms of how we’re going to allocate the money.”
However, Mussoline said the formula would be relatively meaningless without actual funds to distribute through it. He said the burden of taxation for school funding has shifted from the state to local property owners over the past 40 to 50 years, but in some areas of the state, property owners simply can’t afford to pick up the bill.
“When you’ve got that vast difference in what property owners can pay, you’re going to have vastly different education systems by zip code,” Mussoline said. He said legislators would have to figure out how to address those differences between zip codes, and establish a more equal way to make sure schools are funded.
Downingtown is the only one of Chester County’s 12 school districts that is not raising property taxes this year. Mussoline said DASD has not raised taxes for four consecutive years, and the district has been able to accomplish that through growth in the student population, industries and businesses growing in the district, paying off some of the district’s debt, and past school boards saving money.
A survey conducted by the Pennsylvania Association of School Administrators and the Pennsylvania Association of School Business Officials found that 85 percent of school districts in the commonwealth plan to raise property taxes this year.