Tag Archives: school finance

New Report: Benefit Spending Consumes Growing Share of Education Budgets

The recent teacher strikes in Arizona, Colorado, and West Virginia highlight a common problem: education spending is stagnant or in some cases decreasing. If teachers working multiple jobs to make ends meet isn’t bad enough, here’s worse news: skyrocketing benefit costs, such as healthcare and pensions, are consuming an increasing share of K-12 education budgets.

In a new report, “Benefits Take Larger Bite out of District K-12 Budgets,” I analyzed district education and benefit spending from 2005 to 2014. The results are troubling. Over that ten-year span, benefit spending increased more than 22 percent nationally. K-12 spending, on the other hand, grew less than 2 percent. As a result, more than $11 billion fewer dollars made it to classrooms in 2014 compared with 2005, after adjusting for inflation.

The problem of rising benefit costs varies significantly by state. As shown in the graph below, in the vast majority of states, benefit spending grew far faster than education budgets overall. In North Carolina, for example, benefits grew 48 percent while the state’s education spending only increased 2 percent. The problem persists even in states like Michigan that cut both K-12 and benefit spending, because they weren’t cut at the same rate. The Wolverine State cut education spending by 19 percent, but benefits were cut by only 2 percent. As a result, benefits eat up an even greater share of Michigan’s education budget than they did previously.

via “Benefits Take Larger Bite out of District K-12 Budgets”

Barring a dramatic change, the problem of ballooning benefit spending will only get worse. Due to many states’ histories of underfunding their pension systems while simultaneously increasing the generosity of the plan, costs will continue to rise. Legislators will need to find politically viable solutions that both meet existing obligations and mitigate rising costs going forward.

Read my full report here.

Three Potential Risks of New Federal Weighted Student Funding Pilot

The education field widely acknowledges that some students may need additional support to thrive in school and beyond because of challenging life circumstances, specific learning needs, or other factors. And, in fact, the structure of federal funding programs like Title I and the design of many state school funding formulas recognize this principle and provide targeted support and differentiated funding based on specific student needs.

However, this idea is rarely reflected at the local district and school level, where budgets are more commonly based on inputs like staffing ratios and salary schedules that are not directly linked to the needs of students served in a given school. But a new federal pilot program authorized under the Every Student Succeeds Act, 2015, (ESSA) seeks to change that by incentivizing more districts to redesign their school funding methods around students.

School districts’ applications to participate in ESSA’s weighted student funding pilot program are due to Secretary DeVos today. And while these funding models could theoretically increase equity, the devil is in the details. The Department, advocates, and ed-watchers should be on the lookout for both the potential rewards and the risks of these district proposals.

Under a weighted student funding model (WSF), districts fund schools in whole or in part through a formula that considers the total number of students served in each school and specific student characteristics linked to higher costs. These types of formulas assign greater funding weight to students with such characteristics, sending more money to the schools serving them.

Well-designed WSF systems can counter the unfortunate result of common funding distribution methods currently in practice in many districts, where input-driven funding methods often result in higher funding levels in schools that serve fewer high-need students. As such, in theory, encouraging more districts to implement funding allocations that shift resources toward student need should be a boon to equity — a potentially big “reward.”

To date, districts that have implemented WSF, such as Boston, Denver, and Indianapolis, have limited these allocation methodologies to state and local funds. Federal funds have been left out of the mix primarily because federal regulatory and reporting requirements make it complicated and burdensome to mingle federal, state, and local resources in a single, unified WSF formula.

This ESSA pilot could change that by waiving many federal requirements and permitting approved districts to combine funds and allocate them to schools under locally determined WSF formulas. In exchange, these formulas must provide “substantially more” funding to low-income students and English language learners compared with other students. Continue reading

This 40-Year-Old Supreme Court Case Allows States to Fund Schools Inequitably

People sue the government for discriminating against them all the time. The Trump Administration was recently sued by a handful of states after the attempted travel ban, claiming religious discrimination. The owners of Hobby Lobby sued the Obama Administration arguing that the Affordable Care Act (ACA) violated their religious freedom by requiring the company’s insurance to pay for contraception.

Lawsuits against state governments for school funding inequities are commonplace. In February Chicago Public Schools (CPS) sued Illinois Governor Bruce Rauner claiming that the state school funding system and its teacher pension system discriminate by underfunding low-income students and students of color. They have a point: a recent study found that Illinois operates the most inequitable school funding system in the country. CPS educates around 20 percent of the children in the state, yet it receives roughly 15 percent of state funding. While the judge recognized that Illinois’s school finance system is obviously broken, he nevertheless threw out the case.

Photo by Andy Blackledge

So what can affected children and families do now?

The short answer is nothing. Although Judge Franklin Valderamma is allowing the plaintiffs to refile their case, the efficacy of school finance litigation, regardless of a court’s ruling, depends entirely on the state’s willingness to right a wrong of its own creation. In other words, those treated unjustly by a state school finance system must hope that their abusers change their ways without any way for the state to be held accountable.

This latest case in Chicago raises the specter of San Antonio v. Rodriguez from 1973, in which the U.S. Supreme Court ruled that there is no Constitutional right to education. The court also ruled that wealth (economic status) is not a protected class, unlike race or religion, and therefore is not subject to the strict scrutiny test, the most demanding form of judicial review. This means that the constitutional rights’ of low-income people are not afforded the highest level of protections when weighed against the government’s interest.

There are several serious consequences of Rodriguez. First, state courts are more likely to rule in the state’s favor even if the system discriminates against low-income students. Second, the hands of the federal government are basically tied when it comes to inequitable state school finance systems. Thus, if a state ignores a court order to improve its school finance system, families have no recourse. They are stuck. Third, school funding systems based on local property taxes, which comprise virtually every system in the country, are constitutional, even though they produce class-based disparities.

Due in large part to Rodriguez, there have been over 40 years of school finance litigation that struggle to produce sustained results increasing equity. Texas has been in and out of court since Rodriguez was decided. The state took action in response to a court order, and then rolled back those policies. The pattern continues to this day.

For a more recent example, consider the victory of the Campaign for Fiscal Equity in New York. The plaintiffs won a strong pro-equity ruling, and the state of New York responded positively. Good news. The problem, however, was that shortly thereafter, the state’s commitment wavered and eventually buckled. Now students are back in the same situation they were in previously.

The problem is similar in Washington State, where the state supreme court held the legislature in contempt of court for failing to comply with their order. And when the legislature has proposed changes, the court has continuously rejected them as far too insufficient to repair their broken education finance system. The court is doing the right thing here, but the buck stops with the legislature.

And although there is no silver bullet that could suddenly end disparities in school funding, overturning Rodriguez would provide a significant boost for equity. The federal government would then be able, as it does with voting rights, to ensure that all students have equitable access to the necessary resources for a high-quality education.

This Financing Model Could Make School Buses Cheaper and Greener, But No One Is Using It

Every day, nearly 500,000 school buses transport students to and from school in districts across the country. Many of these buses are older diesel models that release dangerous emissions, harming both the environment and student health. While cleaner and cheaper alternative fuels like propane, compressed natural gas (CNG), and electric exist, higher upfront costs prevent most districts from transitioning.

The good news: there’s an increasingly popular financial tool out there that could solve this problem.

Social Impact Bonds (SIBs) are typically used to finance programs that can generate both societal benefits and cost savings, particularly programs administered by nonprofit organizations and government entities. Under the SIB model, private investors provide initial capital in exchange for a return funded from eventual cost savings. Those investors, and not taxpayers, absorb the financial losses if these programs do not achieve projected savings. SIBs have been used to fund programs related to prisoner recidivism, high-quality preschool, and reducing common health hazards, with varying levels of success. As of 2016, nine SIBs operate in the United States, with 50 more in development, representing over $90 million in private investment.

As we describe in our recent report, “Miles to Go: Bringing School Transportation into the 21st Century,” the benefits of switching to buses that run on alternative fuels are well-documented. And they cost less to run, benefiting district budgets. However, in contrast to the public transit sector, where more than one in three buses runs on alternative fuels or hybrid technology, uptake in the school transportation sector has been limited. Of all buses sold in the U.S. and Canada in 2014, only six percent were alternatively fueled. In 2012, that figure was less than three percent.

This is largely due to the additional costs associated with shifting away from diesel. Propane buses cost about five percent more than their diesel counterparts; that figure is 25 percent for buses run on compressed natural gas. Electric buses, which offer the most cost savings and environmental benefit, are more expensive still — often costing an additional $100,000 to $120,000 more than diesel buses.

Transitioning to these buses may also require infrastructure expenditures in the form of fueling and charging stations. For example, case studies from the Department of Energy estimate that installing a propane fueling station costs between $55,000 and $250,000, depending on the station’s size and equipment.

This is where SIBs can help. For SIBs to work, projects have to attract investors by demonstrating the potential for a return on investment. A number of case studies have provided evidence of the potential cost savings of switching to alternatively fueled buses, savings sufficient to offset the higher upfront cost. A 2014 report from the U.S. Department of Energy’s Argonne National Laboratory found savings of between $400 and $3,000 per bus per year associated with replacing diesel with propane, with the incremental costs of the vehicles and related infrastructure being offset over a period of three to eight years. And researchers from the University of Delaware have shown that using an electric school bus instead of a diesel bus could save a district roughly $230,000 per bus over a 14-year lifespan, with the initial investment being recovered after five years.

Alternatively fueled buses are cheaper to fuel, operate, and maintain than diesel buses. Alternative fuels cost less than diesel, and their prices remain relatively stable compared to diesel, which varies with the fluctuation of crude oil prices. There are also a variety of savings from maintenance costs. These buses use less oil and cheaper filters, and unlike their diesel counterparts, they do not require additional treatment to meet federal vehicle emissions standards, potentially saving thousands of dollars in maintenance each year.

Electric buses that use vehicle-to-grid technology — which allows vehicles to communicate and interact with the overall power grid, rather than just draw a charge from it — can even become “prosumers,” meaning they return energy to the grid. The energy stored in the buses’ batteries can be tapped to lower a facility’s electricity bill.

A SIB model for bus replacement could work as follows:

Graphic by authors

SIBs are not without criticism: they may limit the savings that governments could reap from traditional means of public investment. This is the other side of the equation when privatizing potential risk: governments also privatize some of the reward.

However, to date, most districts have not been able to invest the initial capital needed to replace their diesel fleets. Implementing a SIB model could help speed up this process without further draining district budgets. Such a program would not only benefit the environment: districts could also reinvest the savings to improve other aspects of their school transportation systems, or funnel those dollars back into classrooms. It could be a win-win.

To learn more about the current state of the school transportation sector, including how it impacts the environment, read Bellwether’s new report: “Miles to Go: Bringing School Transportation into the 21st Century.”