Politics, Fiscal Issues Frame Pa. School-Aid Debate

—Matt Rourke/AP

In November’s Republican-dominated elections, the Pennsylvania governor’s race was a big outlier, and the implications for public school spending in the Keystone State are just starting to play out.

The Democratic victor, newly elected Gov. Tom Wolf, made support for increased school spending a centerpiece of a campaign that ousted incumbent Gov. Tom Corbett, the only Republican governor who won a seat in 2010, but then lost it in 2014.

Now, Pennsylvania joins Nevada and Georgia as states with momentum building to overhaul school funding.

In Pennsylvania, which has the nation’s sixth-largest public school enrollment according to recent federal statistics, official efforts got under way prior to Mr. Wolf’s election to change the K-12 funding system. The debate moves now to the GOP-controlled state legislature, which was set to reconvene Jan. 6.

In Nevada, a legislative task force last June recommended switching to a weighted funding formula that would direct more resources to English-language learners and low-income students. And in Georgia, GOP Gov. Nathan Deal has expressed a desire to revamp education spending.

But unlike in those two states, where there is one-party, GOP rule, Pennsylvania faces obstacles to achieving that broadly shared objective that other states don’t.

Mr. Wolf may face a fight with Republicans, who increased their majorities in the state legislature two months ago and could be interested in attaching other policy changes to K-12 finance reform.

“What are the potential sources of revenue if you have an aging population, slow job growth, and a highly volatile economy based on [natural] gas exploration?” asked Maureen McClure, an associate professor of administrative and policy studies at the University of Pittsburgh’s School of Education.

John Callahan, the chief lobbyist for the Pennsylvania School Boards Association, said, “There’s a whole lot of things that would probably give schools relief. They’re all on the table. The question is: Which ones are we going to get done? That’s a tough question.”

The Keystone State has a discomfiting variety of challenges that affect K-12 aid.

Pennsylvania is facing a nearly $2 billion revenue shortfall heading into fiscal 2016, and in November, officials announced that the state had almost exhausted a $1.5 billion line of credit being used to fund operating expenses. Two investment-ratings agencies have downgraded the state’s bond rating since July, and Pennsylvania ranked dead last in job growth among states from January 2011 to October 2014.

Challenges Ahead

On another front, Pennsylvania faces a $50 billion unfunded liability in public-worker pension funds that include retirement benefits for K-12 employees, according to a presentation last year from the state budget office.

Fulfilling Mr. Wolf’s pledge to increase the state’s share of basic per-pupil K-12 spending—from roughly 32 percent to 50 percent—will be a challenge. Jonathan Cetel, the executive director of PennCAN, a Philadelphia-based advocacy group that supports charters, suggested that the incoming governor and GOP lawmakers could fashion a spending compromise in the mold of the recent deal in Philadelphia. That city’s district successfully lobbied for an increase in the cigarette tax in exchange for allowing new charter schools to open.

“The only way a final deal will get done is if it’s packaged with other reforms. And that’s because Republicans have a ton of leverage in this debate,” Mr. Cetel said.

In addition to political and fiscal uncertainty, there’s external pressure on legislators to act on a new funding formula.

A lawsuit filed six days after the election by a coalition of parents, districts, and others has challenged the state’s education finance system as “irrational and inequitable.”

Pennsylvania is often highlighted as the only state that doesn’t use a codified funding formula. A key feature of K-12 spending is the state’s “hold harmless” provision that guarantees districts at least their previous year’s per-pupil funding, regardless of enrollment changes or their demographic profiles. The state approved a new funding formula in 2008, but has not used it over the past several years amid economic turmoil. Districts largely rely on local property taxes to fund schools.

Basic state aid for K-12 in fiscal 2015 is about $5.5 billion, and each district is receiving the same amount as it did in fiscal 2014.

However, the state is officially on course to enact some sort of new funding formula this year. The Basic Education Funding Commission, established by a law passed in 2014, is required to submit a proposal for a new formula by mid-June and has been holding hearings about K-12 spending since August.

Momentum is building to scrap the hold-harmless method and to create a formula that will likely use various funding weights for different groups of students, such as low-income students and English-language learners.

James Paul, a senior policy analyst at the Commonwealth Foundation in Harrisburg, which favors conservative fiscal policies, said that the state’s current funding method is irrational, and not just because of how it rewards districts with shrinking populations.

Without any weighting for needy students in the current system, Mr. Paul said in an interview, “It actually harms districts that might have a really high number of low-income students. For every district that is being protected by this, there’s another district that is not being held harmless.”

The state’s funding allocations also pose problems for districts with rising enrollments. An analysis produced by Mr. Paul and a colleague last month showed that the 20 fastest-growing districts in the state from 1996 to 2013 saw their state aid increase by 57 percent (or $1,110), while the 20 fastest-shrinking districts saw their state aid increase by 146 percent (or $5,800).

Thorny Questions

But concerns about winners and losers in any new formula could hamstring several ideas about spending changes. “If you take away hold-harmless and you flick that switch, then half the school districts are bankrupt, unable to function. So you can’t do that,” said Mr. Callahan of the school boards association. “The million-dollar question is: What do you do about hold-harmless? And if you really want a formula, you have to deal with that. We haven’t found a solution yet.”

The state is also facing a bruising debate over how much to fund schools, aside from how that aid will be distributed.

Mr. Wolf campaigned on a platform of more-robust education spending, but it isn’t a one-party issue, said David Broderic, a spokesman for the 180,000-member Pennsylvania State Education Association, which strongly backed Mr. Wolf. “A large number of legislators, both Republicans and Democrats, have said that it’s important to restore public school funding,” he said.

Finding specific revenue sources to support a dramatic K-12 spending increase could prove difficult, however.

As an example of one potential approach, Mr. Broderic pointed to Mr. Wolf’s proposal to tax natural gas extraction from the Marcellus Shale in the northern and western sections of the state, in order to boost the state budget.

But Sen. Dominic Pileggi—a Republican from suburban Philadelphia who served as majority leader for the past nine years until Republican colleagues voted to replace him late last year—cited estimates that such a tax would only yield $500 million annually. That would fall far short of the state’s budget deficit, let alone any new funding for schools. Beyond that proposal, he said, no firm ideas have been put forward or gained significant support.

“I haven’t seen any evidence that the people of Pennsylvania support an increase in the personal income tax, or the sales tax,” Mr. Pileggi said.

The funding issue could become entangled with other prominent education policy topics, Mr. Pileggi noted.

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For example, the state’s charter school laws and cyber-charter laws have not been significantly altered since 1997 and 2002, respectively. Lawmakers have tried and failed repeatedly in recent years to change them in a variety of ways, from creating a new system that differentiates between cyber and brick-and-mortar charters to allowing new charter authorizers. Mr. Pileggi indicated that any overhaul to K-12 spending would likely address at least some aspects of how charters, including cyber schools, are funded.

The same holds true, he said, of the relationship between action on education spending and changes to the state’s pension system.

“I’m certain that those issues will be considered side by side. Whether or not they’re resolved together is to be determined,” he said.

Vol. 34, Issue 15, Pages 1, 25

Published in Print: January 7, 2015, as Politics, Fiscal Issues Set Up Pa. Aid Fight

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