School Finance

Connecticut governor’s education plans take hit in revised budget

Idaho House passes public schools budget for 2013

Concerns hover over California illegal school fee legislation

Senate panel considers New Jersey education budget

Connecticut governor’s education plans take hit in revised budget
Connecticut lawmakers scaled back Governor Dannel Malloy’s education reform proposals for fiscal year 2013 this week as the Democratically-controlled joint House-Senate budget committee issued a recommendation for a more constrained budget proposal. For example, Malloy recommended $22.9 million for efforts to turn around the state’s lowest-performing schools, but the committee recommended only $10.8 million. Appropriations Committee members also proposed less funding than Malloy had requested for charter school students and implementation of a new statewide teacher evaluation system. They also proposed more funding for science education than Malloy had included. The Governor said that the committee would have to produce a recommendation with many more reforms and a higher funding level before he would sign it. More here…

Idaho House passes public schools budget for 2013
The Idaho House passed a budget proposal this week that would fund state programs for fiscal year 2013. The budget includes $1.27 billion in general funds, $56 million more than in fiscal year 2012. Though this represents a 4.6 percent increase in state funding, slow growth in federal support means that this will represent on 0.4 percent growth in overall state revenue. Still, one lawmaker says the increase in funding will permit more funding for schools next year. Other legislators have said that the funds won’t be sufficient to cover increased costs for teacher salaries, promised to faculty once the economy recovered. The plan also includes numerous education reforms; among them, increasing minimum teacher salaries and implementing merit pay bonuses. More here…

Concerns hover over California illegal school fee legislation
The California state legislature is working on a bill that would enforce existing laws against schools implementing student fees, but the bill’s future may be in jeopardy. The bill was passed out of the Assembly Education Committee and is currently before its Appropriations Committee. However, special interest groups have argued that the bill would only further hurt schools struggling with spending cuts. The director of education advocacy for the ACLU of Southern California, Brooks Allen, said that a UCLA survey last year found that one-fifth of public school principals reported instituting fees at their schools for instructional materials. The fees run counter to a 1984 state Supreme Court decision that found charges for children for extracurricular activities and participation in courses to be unconstitutional. The legislation before lawmakers now would require districts to review school finances annually and report to the local school board any improper fees, as well as establish a reporting system for parents to submit complaints. More here…

Senate panel considers New Jersey education budget
The New Jersey Senate Budget Committee is currently reviewing Governor Chris Christie’s proposed education budget and reforms. Education Commissioner Christopher Cerf testified before the committee this week, pushing for the reforms included in the budget. Christie’s 2013 budget, which would include an additional $135 million over fiscal year 2012 levels for public K-12 schools, also reforms the school aid formula. It would provide less funding for economically disadvantaged students and English language learners, but would increase overall per-pupil funding. State Senator Paul Sarlo, chairman of the Senate Budget Committee, says that schools would receive less under Christie’s proposed budget in fiscal year 2013 than they did in 2010. In all, the proposal provides $7.82 billion for education in fiscal year 2013, roughly $100 million below 2010 levels. More here…

On Thursday, the House voted to approve a fiscal year 2013 budget resolution drafted by Budget Committee Chairman Paul Ryan (R-WI). The resolution is a long way from a final budget, and includes no agency or programmatic funding plans, but it kicks off the 2013 budget debate, at least on the House side.

Georgia State Senate adopts $19.2B state budget plan

Missouri House budget proposal comes with no higher education costs

More funding proposed for Mississippi public schools in separate plans

New Mexico estimates 2 percent increase in key funding factor for public schools next year

Georgia State Senate adopts $19.2B state budget plan
A fiscal year 2013 budget proposal passed unanimously by the Georgia State Senate this week allocates $19.2 billion for state programs, a slight increase over fiscal year 2012. According to State Senator Jack Hill (R), legislators had $80 million in discretionary spending to allocate, an increase over last year forced by increasing education and health care program costs. In the new budget, more students would be eligible for low-interest loans. The loans are meant to replace a statewide scholarship–the HOPE scholarship–that was cut in the 2012 budget. While the HOPE scholarship once provided full in-state tuition to students, it now provides a lower amount. The low-interest loans are intended to cover the difference in full tuition costs for awardees. The budget already passed the House earlier this month. More here…

Missouri House budget proposal comes with no higher education costs
Legislators in the Missouri House this week approved a $24 billion state budget for fiscal year 2013 – a $1 billion increase over fiscal year 2012. Most of that “additional money” came from budgeting changes that more accurately reflect expenditures. State revenue decreased by $500 million, primarily because of the loss of federal stimulus funds and Medicare reimbursements. To avoid raising taxes, lawmakers made cuts to other programs, including health care spending. However, the budget maintained the same level of funding for higher education. Governor Nixon’s proposal initially included a 15 percent decrease to the state’s public universities, but he later amended the plan by using revenue from a national settlement with mortgage companies to avoid the cuts. The House also cut welfare benefits to avoid any reductions in higher education funds from fiscal year 2012 levels. More here…

More funding proposed for Mississippi public schools in separate plans
The Mississippi House and Senate have not yet come together on a fiscal year 2013 budget proposal, but each chamber’s plan includes an increase in public K-12 schools funding over current year levels. The Senate bill prioritizes debt payments, whereas the House bill prioritizes additional funding for mental health programs.  Some House members unsuccessfully attempted to insert an additional $29 million for K-12 education. The chambers are expected to be in negotiations for a final version of the budget by late April  The final budget will likely total about $5.6 billion (excluding federal funding). The state fiscal year begins July 1. More here…

New Mexico estimates 2 percent increase in key funding factor for public schools next year
New Mexico’s Public Education Department said that one aspect of the state’s school funding formula will increase this year for the first time in three years, providing additional per-pupil state aid. The state determines funding for schools by multiplying a set dollar amount, called the unit value, by the number of students per school. The funding formula allocates a percentage of the unit value to each student depending on his grade level. The dollar amount will be increased by 2 percent to $3,668 for the 2013 school year. Most districts will benefit from this change, although districts with high rates of growth in student enrollment will benefit more than other districts. In all, the school funding budget will total about $2 billion. More here…

This week the Republican majority on the House Budget Committee released a fiscal year 2013 budget resolution. For the second year in a row, the document includes a so-called “fair value” rule that applies to cost estimates for federal loan programs—including student loans. While the rule went largely unnoticed last year (except by us here at Ed Money Watch), this year it has attracted a bit more attention. And with any budget rule, added attention begets added confusion.

Many have mischaracterized fair-value accounting as a Republican gambit to reinstate some version of a guaranteed student loan program and replace the 100 percent direct lending model in place since 2010. If that is in fact the intent, Republican lawmakers are terribly confused because reinstating the guaranteed loan program in place of direct lending would cost $102 billion over a ten-year budget window according to fair-value estimates.

The math on this is simple. A 2010 Congressional Budget Office (CBO) study compared the two loan programs under fair-value accounting and found that the typical direct loan costs the government about $12 for every $100 lent, but the same loan made through the guaranteed program (under the Federal Family Education Loan [FFEL] program that existed in 2010) costs $20 for every $100 lent. Multiply the higher cost for guaranteed loans by the $128 billion in loans that will be issued annually over the next 10 years and you get an added cost of $102 billion. That means if Congress adopted fair-value accounting and then proposed a bill to reinstate guaranteed student loans, they would need to find $102 billion in spending cuts or tax hikes to make the switch budget neutral.

Guaranteed lending costs more than direct lending even under fair-value accounting because guaranteed lending subsidized both borrowers and private lenders. Direct lending subsidizes just the borrower because the government does not need to guarantee interest payments to private lenders or pay a complicated array of fees to guarantee agencies.

Is the fair-value movement really just about better, more honest accounting then? Mostly, yes. But it would also remove the budgetary incentive that Congress has under the current rules to expand subsidized loan programs. Under current rules, loans appear profitable even when they provide valuable subsidies to borrowers (and lenders). As a result, when lawmakers expand loan programs, it looks like they have simultaneously reduced spending. Generally, fair-value accounting reveals that government loan programs impose a cost on taxpayers when they subsidize borrowers (and lenders).

The difference arises because official rules value government loans as if the estimated performance of the loan (repayment rate, defaults, recovery rates, delinquencies, deferments, etc.) is certain to occur as projected. In contrast, fair-value accounting uses the exact same estimates of loan performance as the current rules (repayment rate, defaults, recovery rates, delinquencies, deferments, etc.), but it assumes that the estimated performance is not certain and that taxpayers bear a cost for assuming the risk that the loans will cost more than expected. The CBO explains that this is “market risk,” which is the risk that defaults will be higher and more costly in times of economic stress and that the federal government bears it when making loans just as any private lender would.

The Obama Administration’s proposal to revamp and expand the Perkins Loan program is a good example of the policymaking and political implications of fair-value accounting. The president’s proposal would turn the existing Perkins Loan program into one that allows some students to take out additional Unsubsidized Stafford loans—the most widely available federal student loans. Current accounting rules show that the proposal would generate a profit for the government—more lending at profitable terms means more profits. Fair-value accounting, on the other hand, shows the proposal would increase federal spending—more lending at subsidized terms means additional spending.

The table below, based on a 2011 CBO estimate of the Perkins Loan proposal included in the president’s fiscal year 2012 budget, compares the costs of the proposal under current rules and fair-value accounting.

Private companies that used to be the primary lenders under the old guaranteed loan program (Sallie Mae, et al) do not favor fair-value accounting because it gives them a shot at returning to the days of politically negotiated subsidies and rent seeking under the old guaranteed loan program. They support it because it shows that if Congress expands the federal student loan program or creates an entirely new one—such as the president’s Perkins Loan proposal—it imposes a cost on taxpayers. That makes such proposals unlikely to pass given today’s record budget deficits. Private student loan companies have a better chance, then, of preserving the small slice of the student loan market they currently occupy.

Lastly, there is the matter of loan sales. For years, student loan companies lobbied Congress to sell off the direct loan portfolio. Even last year, investment banks were pitching a similar (albeit nonsensical) idea to Congress as a phony way to reduce government debt. Current accounting rules show that selling the loans, even at market prices, would present a cost to the government, making a loan sale proposal a nonstarter. Fair-value accounting, on the other hand, would theoretically show that a loan sale is budget neutral. That is, the loans are worth what someone is willing to pay for them so selling them leaves the government in the exact same financial position had it kept them.

It’s possible that student loan companies see a move to fair-value accounting as a way to convince lawmakers to sell the government’s direct student loan portfolio. But it’s hard to imagine something like this coming to fruition. Even so, many ill-informed members of Congress think that selling the direct loan portfolio somehow reduces the government’s costs. Again, such a transaction, at fair-value prices, offers no financial gain to taxpayers.

There is no doubt that fair-value accounting would make it harder for Congress to expand student loan programs, be they guaranteed or direct lending programs. And that may well be the primary motive of some who support the accounting rule, just as those who oppose fair-value accounting tend to do so only because it ends the “free lunch” of providing subsidies while earning apparent profits. But setting political motivations aside, fair-value accounting is the most comprehensive and meaningful way to measure what taxpayers are being asked to give up when the government uses their money to make student loans. Whatever policy outcome it favors shouldn’t be a factor in whether to adopt it.

The economic recession that began in 2008 hit state and local tax revenues hard and has had a lasting effect. Many states targeted education budgets—often their largest expenditure—to make up for budget shortfalls in the past few years. Although some states cut general K-12 funding, the federal government has a mechanism to prevent states and districts from making disproportionate cuts to special education services. And for the most part, the strategy has worked.

Under the Individuals with Disabilities Education Act (IDEA), the federal government provides annual grants to states to help cover the cost of providing special education services. To receive these funds, states must meet a “maintenance of effort” requirement that Congress included in the law to ensure that states prioritize special education in their budgets and don’t use federal funds to replace their own spending.

Specifically, states must provide funding for special education in a given year that is equal to or greater than what they provided the prior year. School districts must expend the same amount or more of combined local and state funding for special education as they did in the prior year. If a district spends less, the U.S. Department of Education will fine its respective state government for the difference between that year and the prior year’s spending. If a state allocates less than it did the previous year, the federal government will deduct the difference from its federal IDEA allocation the following year. States are held accountable for district cuts because they receive and distribute IDEA grants.

Many states have met the IDEA maintenance of effort provision (MOE) by making steeper cuts elsewhere in their budgets to maintain their special education funding – a sign that the provision is working as Congress intended. But the law grants states a way out of meeting MOE – a state can apply for a waiver from the Department of Education if it cannot maintain its special education funding due to “exceptional or uncontrollable circumstances.”

How does the Department of Education determine if a state has endured “exceptional or uncontrollable circumstances”? A closer look at some of the reasons state requests were approved or denied helps answer this question.

From the 2008-09 school year to the 2010-11 school year, seven states—Alabama, Iowa, Kansas, New Jersey, Oregon, South Carolina, and West Virginia—requested these waivers. In their applications, these states cited huge budget shortfalls as the reason they could not meet the MOE. Each state specifies in its waiver request the amount of special education funding the state plans to cut. In some instances, states do not discover that they have cut funding until after the fiscal year has ended, forcing them to apply for waivers after-the-fact.

The Department of Education has not approved some of the waivers based on whether or not a state prioritized special education in its budget. For example, Alabama requested a waiver for $9.2 million, a 1.5 percent reduction in the state’s share of special education funding for the 2009-10 school year. According to their request, the state experienced a 10.0 percent drop in tax and other sources of revenue, but protected special education from most of the cuts. Because Alabama cut its special education funding less than other programs, the Department of Education approved the waiver.

The case of South Carolina, on the other hand, shows that the Department of Education does not take granting waivers lightly.

Last year, the state submitted waiver applications for the 2008, 2009, and 2010 school years because newly elected State Superintendent of Education Mick Zais realized the state had not met the maintenance of effort requirement for those years. The Department approved the request for 2008 because the state made cuts to special education that were proportionally smaller than those for other agencies, but it denied the waiver requests for the other years.

Specifically, in 2009 South Carolina cut special education spending by 12.0 percent, or $67 million, despite a decline in tax revenue for the year of only 4.7 percent. In response, the Department of Education is reducing South Carolina’s IDEA allocation for 2012 by $36 million – an amount that reflects the state’s special education spending gap. South Carolina is appealing the Department’s decision.

For 2010, South Carolina requested a waiver for a proposed $75 million special education funding cut even though the state’s revenues had increased by 2.6 percent that year. This funding gap was based on the state’s 2008 special education funding levels, the last year it met the MOE. After the Department denied the waiver, the state ultimately restored the $75 million in special education funding. Had it not, the Department of Education would have likely withheld additional IDEA funding from the state in the annual appropriation. In this instance, it appeared that South Carolina applied for a waiver even though it had sufficient funds to meet the MOE.

Kansas is another good example of the Department’s implicit criteria for approving or denying IDEA MOE waivers – the proportion by which states cut spending for special education cannot exceed the proportion by which state revenues have decreased. For the 2009 school year, the state requested a waiver for the $60 million it planned to cut from its special education budget, a 14.0 percent reduction. In that year, however, the state’s revenue fell by a smaller proportion – 12.3 percent. Ultimately, the Department approved an amended waiver for Kansas for $53 million, a 12.3 percent decrease commensurate with the revenue decline the state reported.

The table below shows the requested waivers by year and the Department’s decision for each of the seven states.

Based on these applications, it appears that the federal government has actually been quite successful in using the IDEA MOE provision to ensure that states maintain or increase their special education funding. No doubt, this has helped maintain the quality of special education services in schools across the country, particularly as spending for other areas of education have dropped. Check back with Ed Money Watch to see if this pattern persists as we continue to track state IDEA MOE waivers.

To see the state waiver applications, click here. 

In August of 2010, Congress passed and the president signed into law the Education Jobs Fund, a $10 billion program meant to fill gaps in state funding for K-12 education salaries and benefits. The funds, which were intended for use in the 2010-11 school year, are available through September 30^th, 2012. Much like the State Fiscal Stabilization Fund, a similar program created in the American Recovery and Reinvestment Act of 2009, Congress required that the Department of Education distribute the funds among states based on population. Lawmakers also included a maintenance of effort (MOE) provision that essentially required states to maintain certain levels of funding for both K-12 and higher education. The data gathered through this maintenance of effort provision, which each state must submit annually on spending levels, provide an interesting picture of state spending for K-12 and higher education and tax revenues since 2006. Below, we examine that data to gain insight on the degree to which low tax revenues have affected state spending on education during the downturn.  

Unlike the State Fiscal Stabilization Fund, the maintenance of effort provision for the Education Jobs Fund allowed each state to select a different MOE calculation depending on their tax revenue situation. The three options are: (1) maintain K-12 and higher education spending at 2009 spending levels; (2) maintain K-12 and higher education spending levels at the same proportion of state spending as they did in 2010; or (3) if state tax revenues in 2009 were lower than in 2006, maintain K-12 and higher education spending levels at either 2006 levels or in the same proportion of state spending as they did in 2006.

Each method results in very different data, so it is best to analyze fluctuations in state spending for education by each MOE method. Today, we will examine the data on the 31 states that opted to use method 3 – because their tax revenues were lower in 2009 than in 2006, they could keep spending for K-12 and higher education at 2006 levels (we’ll save the discussion of states that kept spending in the same proportion of total spending as 2006 for another day).

Unsurprisingly, the degree to which total tax revenues in these 31 states dropped from 2006 to 2009 varied greatly. New Mexico saw the greatest drop in revenues at 23.2 percent, while Georgia saw a 16.7 percent drop and Arizona saw a 15.6 percent drop. West Virginia experienced the smallest drop at 0.1 percent (about $4 million).

Despite the revenue drops these state reported, their MOE submissions show that they increased education spending significantly from 2006 to 2011, particularly for K-12 education. For example, Utah’s submission shows a 28.4 percent increase in funding for K-12 education from $1.8 billion to $2.3 billion. Oregon shows an increase of 19.2 percent and Illinois shows an increase of 19.8 percent. Increases in Indiana and Nevada are both over 65 percent.  Only three states – Arizona, Minnesota, and Mississippi – showed increases below 3.0 percent.

Of course, it wouldn’t be unusual for states to increase  K-12 education spending over a 5-year period under more normal budget circumstances due to increasing enrollment and costs. What the MOE data could be telling us is that many states protected K-12 spending during the economic downturn that began in 2007.

But these numbers are also curious, if not dubious. Large contractions in state tax revenues and repeated media reports of states cutting education spending make some of these data difficult to believe. 

The MOE data for the 31 states also show growth in higher education spending, though not at as high of rates as K-12 spending. New York State showed an increase of 22.3 percent from $3.3 billion to $4.0 billion from 2006 to 2011 and Connecticut showed an increase of 17.6 percent. But many states showed increases below 3.0 percent – 13, including Arizona, Colorado, Illinois, Pennsylvania, and Virginia. Low growth for higher education in many states is not surprising. States often make cuts (or delay increases) to higher education before K-12 education because it has a smaller constituency and they can rely on tuition increases to make up the difference. However, many public higher education systems have faced dramatic increases in enrollment as a result of the economic downturn, placing greater pressure on their strapped systems.

One can’t help but wonder what to make of the MOE reports. Are state K-12 and higher education systems really better off in terms of state support than media reports would have us believe? It’s hard to know for certain because the numbers may include block programs or additional funding streams that are not included in basic state support. State spending through these specific programs could benefit only certain districts or be earmarked for very specific uses.

What is clear is, however, is that states have been able to use the MOE provision of the Education Jobs Fund to their advantages. All 31 states successfully show that their tax revenues were lower and that they funded K-12 and higher education above 2006 levels in 2011 – thereby meeting the MOE requirement. Whether districts and schools are actually seeing more funding than in 2006, especially per pupil, is entirely another story.   

To download data on all 50 states and the District of Columbia, click here.

Minnesota House GOP approves payment to schools

More than 20,000 California teachers pink-slipped

Texas schools face bigger classes and smaller staff

New Jersey Governor Chris Christie’s budget would boost state spending by $2.1 billion

Minnesota House GOP approves payment to schools
A Minnesota fiscal year 2012 budget agreement the state legislature reached last year withheld $770 million in funding intended for public K-12 schools to be paid later. Added to a previous delay of K-12 payments, the state owed schools $2.7 billion as of last month; that total has since dropped to $2.4 billion as state finances have begun to recover. This week, House Republicans passed a plan to repay some of that debt – $430 million – through the state’s rainy day fund, arguing that with over $1 billion in cash available to legislators, the state should begin to repay the money. Democrats preferred to leave the rainy day fund untouched and instead repay the entire amount by repealing some tax breaks for businesses. State officials have also expressed concern about dipping into the rainy day fund, warning that the state’s fiscal circumstances may change in the coming months and leave it short on cash. The Senate has not yet taken up the measure, and Governor Mark Dayton of the Minnesota Democratic-Farmer-Labor (DFL) Party has said he feels the bill is fiscally irresponsible. More here…

More than 20,000 California teachers pink-slipped
California school districts this week were required to distribute pink slips to teachers, a preliminary warning that the district may not receive enough state funding to offer them a position next year. As is the case every year, the state legislature won’t be able to finalize the state budget for public K-12 education it concludes its budget process this summer. But this year, the state is facing increased ambiguity because a tax measure that would prevent a $4.8 billion cut to education funding won’t be on the ballot until November. If the measure fails, one advocacy group claims, it would cause cuts equivalent to 55,000 teacher layoffs or the elimination of 17 days of school. Districts have rescinded pink slips in the past after their fiscal outlooks were settled, but looking ahead to fiscal year 2013, districts are unsure of their financial positions. It remains unclear whether the layoff notices will be cancelled before the start of the school year. More here…

Texas schools face bigger classes and smaller staff
According to figures from the Texas Education Agency, the number of elementary school classrooms that exceeds the 22:1 ratio cap on students to teachers in kindergarten through 4^th grade classes has nearly quadrupled since the 2011 school year, jumping to 8,479 this year from 2,238. That’s because the legislature passed a measure in its 2011 session to make it easier for schools to receive exemptions to the cap following a $5.4 billion cut to public K-12 education over the 2012 and 2013 fiscal years. The cuts have presented a particular challenge for the state’s 102 fastest-growing districts, which have collectively seen 92 percent of the state’s total student enrollment growth since 2007. Nearly half – 46 percent – of schools in those districts have been granted student to teacher ratio exemptions. More here….

New Jersey Governor Chris Christie’s budget would boost state spending by $2.1 billion
New Jersey Governor Chris Christie introduced a $32.1 billion fiscal year 2013 budget last month that restored some of the funding cuts he made during his first two years in the governor’s mansion. After a fiscal year 2010 budget that cut more than $2.2 billion across agencies, the funding restorations included in the budget document are a relief to many. But Democrats in the state argue that he should not receive credit for the funding increase for fiscal year 2013 because it only restores funding to the levels at which they were funded three years ago. Christie’s fiscal year 2010 K-12 education budget cut funding to $7.9 billion, from his predecessor’s $8.8 billion 2009 budget which included federal stimulus funds. The next year, he increased aid for education by more than $800 million, but a state Supreme Court ruling sent most of the funding to the state’s neediest school districts. His proposed fiscal year 2013 budget would increase K-12 funding back to fiscal year 2009 levels – $8.8 billion – without the benefit of federal stimulus funds. The proposed budget would also increase spending for public higher education to $2.08 billion, up slightly from his fiscal year 2010 budget of $2.06 billion. More here…

Late last month, Ed Money Watch wrote about the variation in Title I allocations in rural, urban, and suburban school districts. That analysis showed that rural school districts typically receive far less Title I funding per poor pupil than urban districts due to a variety of factors. This topic has been at the forefront of Elementary and Secondary Education Act (currently known as No Child Left Behind) reauthorization discussions as a broad base of constituents have banded together to encourage lawmakers to rewrite the Title I funding formulas. Our previous analysis unintentionally glossed over some  effects of the number weighting provision in the Title I formulas.

The Title I Targeted and Education Finance Inequity Grant formulas both include number weighting provisions that artificially inflate a district’s number of Title I eligible students to increase its share of funding. Districts with more Title I eligible students are weighted more than districts with fewer. Those weights are determined by brackets written into law. For example, districts with 691 or fewer Title I students (bracket 1) receive a weighting of 1 (meaning each Title I student counts as one student in the formulas), while districts with 35,515 or more Title I students (bracket 5) receive a weighting of 3 (meaning each student counts as three students). This benefits larger districts because they often serve higher numbers of Title I students even if those students make up a smaller proportion of their total populations. The table below shows the five number weighting brackets and the weights they receive under the formulas.

Thanks to data from the Rural Schools and Community Trust, we are now able to present a far more detailed view of the potential effect of the proposed All Children are Equal Act (ACE), introduced by Rep. Glenn Thompson (D-PA) last year. If enacted, the bill  would phase out impact of the number weighting in the Title I formulas over a four year period. Below, we analyze data on how Title I allocations would change under the full implementation of ACE assuming all other factors (like number of Title I students) stay the same. And because locale type (urban, suburban, rural, and town) – used in our last analysis – doesn’t account for the actual size of each district’s Title I eligible population, here we instead examine the change in Title I spending by district number weighting bracket.  This provides us with a nuanced view of the impact of the ACE formula on districts in each bracket and allows us to determine whether the changes would truly benefit the districts with the highest proportions of low-income students.

For this analysis, we calculated the population-weighted average change in Title I allocations in both dollars and percentage per pupil under ACE (comparing actual 2011 allocations to projected 2015 allocations with phased-out number weighting) in each state by number weighting bracket. We also calculated the population-weighted average percentage of Title I-eligible students in districts in each bracket for each state.  Using these averages, we can better understand whether the shifts in Title I funding under ACE will truly provide more funding to the districts that need it most.

We find that districts in the first bracket – those with 691 or fewer Title I students – would see substantial increases in Title I allocations per poor pupil in almost all states. Districts in bracket 1 in Florida will see an average 16.5 percent ($174) increase – a compelling change given that those districts serve the second highest average proportion of Title I eligible students in the state (25.2 percent). Bracket 1 districts in Vermont will see the smallest increase at only 0.1 percent ($4) per Title I pupil on average.

Districts in bracket 2 in the vast majority of states (districts with between 296 and 2,262 Title I students) will also see large increases. Again, bracket 2 districts in Florida will experience the largest increase at 16.4 percent ($178) on average. But some bracket 2 districts will see decreases on average, particularly those in rural states like Wyoming, Vermont, New Hampshire, and Maine.

And because ACE will lessen the benefit of number weighting for large districts, districts in brackets 4 and 5 (with 7,852 or more Title I students) in most states will see large decreases in Title I allocations per poor student. In bracket 4, districts in Massachusetts will experience the largest average decrease at 13.6 percent ($314) per Title I pupil. This includes the Boston and Springfield, Massachusetts School Districts. Interestingly, some bracket 4 districts will see moderate average increases, including Flint and Grand Rapids in Michigan and Pittsburgh in Pennsylvania. However, each of these districts has rather high student poverty rates (35.0 percent on average in Michigan, for example), explaining why the phase-out of number weighting would not necessarily adversely affect their Title I allocations.

All 18 districts in bracket 5 (with 35,515 Title I students or more) in the nation would see decreases under ACE, with the largest in Los Angeles Unified School District in California at 13.7 percent ($241). Philadelphia public schools would see the largest decrease in dollar terms at $303 per Title I pupil. Clark County Public Schools in Nevada would see the smallest decrease at $50 per Title I pupil.

Given these findings, it appears that ACE would achieve the goal of its sponsors and advocates – generally, the smallest districts will see large increases in Title I funding per poor pupil while many of the largest districts will see decreases. But in some cases, these shifts in funding may hurt districts with both large numbers and large proportions of Title I students.

For example, in Connecticut, the state’s districts with the smallest Title I populations (bracket 1) would receive an average 8.2 percent ($94) increase in funding under ACE, while its largest— bracket 3 – districts (the state has no districts in bracket 4 or 5) would see a 6.4 percent ($130) decrease on average. But even though the bracket 3 districts will still get more Title I funds per pupil, $1,907 compared to $1,240 on average, they also have dramatically higher average concentrations of Title I students – 25.9 percent compared to 5.7 percent in bracket 1. Will Connecticut’s large districts truly be able to provide all of the necessary services to their low-income students with significantly reduced federal support?  A similar pattern is evident in other states like California, Illinois, and Wisconsin.

The ACE proposal has opened up the field for a real discussion on improvements to the Title I funding formulas. And it does succeed in bringing more equity to Title I funding per pupil, particularly for smaller districts. But it appears that the proposal as it stands (based on the data we have) could be problematic for large districts with high poverty concentrations; they stand to lose funding.

These findings illustrate the complexities of the current formulas and the unintended consequences they often have. At the same time, this new information should encourage lawmakers and stakeholders to continue to work at improving the formulas rather than settle for the status quo.

To download data for all 50 states and the District of Columbia, click here. Red shading denotes the bracket with the highest proportion of Title I students in each state.

Kentucky House approves $19.5 billion budget bill

No agreement on Washington State budget; special session is called

Alaska Governor Sean Parnell adds $30.3M for school funding

Iowa Governor Terry Branstad warns Republicans against college funding cut

Kentucky House approves $19.5 billion budget bill
Legislators in the Kentucky House this week voted to approve a $19.5 billion biennial budget for fiscal years 2013 and 2014. The proposal includes 8.4 percent cuts to many state programs, as well as a 6.4 percent cut to state public universities. Governor Steve Beshear’s budget proposal, submitted to the legislature in January, included those cuts to make up for insufficient tax revenue projections to maintain current funding levels into fiscal year 2013. Additionally, lawmakers did not approve a request from the state universities to finance $450 million in construction projects using their own revenue. One lawmaker said the decision would protect the state from increasing debt, a problem that has plagued the state in recent years and led to a bond rating downgrade last year. The Senate must approve the bill before the end of the legislative session on April 15^th. More here…

No agreement on Washington State budget; special session is called
Washington State lawmakers worked this week to finish the biennial budget for fiscal years 2013 and 2014 before the session ended Thursday night, but failed to reach an agreement in time. Governor Chris Gregoire has called the legislators back for a 30-day special session to complete the budget, beginning next week. Facing a $1 billion budget shortfall, lawmakers have struggled to reach an agreement on cuts. Last week, Republicans and three conservative Democrats took over the budget process in the Democratically-controlled Senate. Democrats also hold the majority in the House, where they passed a budget proposal this week with a 53-45 vote. However, the bill was never brought to the floor in the Senate. The House Democratic bill included a provision to delay payments to public K-12 schools by one day, a budget gimmick Republicans oppose because it would push $330 million in spending into the next biennium. Though the House-passed Democratic proposal would not cut K-12 or higher education, the Senate Republican proposal would cut $44 million from K-12 education and $30 million from higher education. More here…

Alaska Governor Sean Parnell adds $30.3M for school funding
In a fiscal year 2013 budget proposal submitted several months ago to Alaska’s legislature, Governor Sean Parnell proposed funding public K-12 education at fiscal year 2012 levels. The backlash that followed from lawmakers and advocates convinced him to offer this week an amended version of the budget that adds $30.3 million to education spending for energy and transportation costs. Though the amount is close to the state Senate’s proposed $30.6 million increase for K-12 schools, Parnell’s proposal would provide funding as a one-time appropriation rather than adding it to the existing formula for schools, making it easier to cut in future years. Parnell and Republican lawmakers have warned that the state may face deficits within two to three years, and are working to contain spending now in anticipation of those challenges. More here…

Iowa Governor Terry Branstad warns Republicans against college funding cut
Iowa Governor Terry Branstad, speaking at a news conference this week, stated his intention to request funding for the state’s public universities that will exceed House Republicans’ proposal by $54 million. While House Republicans are proposing a $31 million cut for public higher education institutions below fiscal year 2012 levels, Branstad warned that the cuts could lead to tuition hikes for students. Instead, he is recommending a $23 million increase over fiscal year 2012 levels, to $545 million. That number is still below Senate Democrats’ recommendation of $556 million. It is also less than the Iowa Board of Regents requested, but Regents board president Craig Lang said that the $23 million increase would be sufficient to limit tuition increases to the already-approved 3.75 percent increase for the 2013 school year. More here…

Here’s an added wrinkle in the debate on federal student loan interest rates that has gone entirely unmentioned. Middle and lower income borrowers don’t actually pay the 6.8 percent interest rate on Unsubsidized Stafford loan or the 3.4 percent rate that is set to expire for Subsidized Stafford loans issued later this year. They pay something lower because the federal government rebates a portion of their payments in the form of a tax deduction. We at Ed Money Watch aren’t sure why this important point is largely ignored or dismissed in the policy debates.

Is it because the benefit is too limited to really matter to borrowers? Probably not.

The student loan interest tax deduction allows individuals making less than $60,000 a year, and those filling joint returns and making less than $120,000 a year, to deduct up to $2,500 in student loan interest payments from their taxable income.  Eligibility phases out for individuals earning between $60,000 and $75,000 or joint filers earning between $120,000 and $150,000. Moreover, it is an “above-the-line deduction” and is therefore available to all filers, including those who do not itemize.

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