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State needs an education spending formula that works

01:00 AM EDT on Sunday, June 8, 2008

Pennsylvania is about to pass an education funding formula, leaving Rhode Island the only state that finances education in a way that has nothing to do with actual students.

A funding formula is a mathematical calculation — always very complex — that determines first, how much money a child needs to be educated — a regular-education child might need $10,000 and an English-language learner $12,000, say. And second, the formula calculates the extent to which the child’s community is able to pay. So a well-heeled community will get less state aid than a low-income urban district. The point is to be fair to the child and to the community both.

A laudable group of Rhode Island legislators is trying to get a formula passed — bill H-7597. Their efforts highlight what a mess a state can make without some rational way of parceling out aid to education. Predetermined calculations beat the pants off a political free-for-all.

No perfect formula exists. And every single calculation that goes into a formula is highly controversial. (Should the English-language learner get $13,000? Nothing extra?) So states are continually grappling with their formulas to get them closer to “equitable” (fair) and “adequate” (enough to get the kid educated).

Called “The Fair Share Education Funding Formula,” the recently proposed legislation is far from perfect. But I’m with state Rep. Edith Ajello, one of the bill’s sponsors, when she says: “If our proposal isn’t right, show me the one that is, because we can’t continue to do nothing.”

Right up to the 1990s, Rhode Island had a reasonable formula for financing education.

But Rhode Island was a fiscal train wreck in the early 1990s, suffering from the local banking crisis as well as a national recession. In 1992, the state was forced to cut its education budget, and in the process strayed from its previously careful calculations.

In 1997, the state gave up any pretense of calculating by formula and declared that whatever money each district was already getting was their “base.” Since then, the state has given districts an annual percentage increase of their “base.” The state funneled some money to the cities by giving extra for kids in poverty, and in certain other categories.

But regardless of whether a district was growing or shrinking, thriving or failing, efficient or spendthrift, it still got the same 3-percent or 4-percent increase as any other district.

The new legislation assumes that Rhode Island’s wretched financial position will offer no new money for education. So the formula tries to divide up the existing pot of money fairly. The pot is $691 million.

To give you an idea of how calculations become controversial, the Fair Share formula gives special-education children an added 0.5 “weight,” which is to say each child identified as needing special education would get half again as much money as a regular-ed child. Rhode Island already has more students in special education than any other state. That weight creates an incentive for districts to identify even more. Ajello says, “That number is an average [of the cost of all special-ed kids]. We have to start somewhere. We can change it later. Some day we’ll differentiate between different kinds of special education, but we don’t have time now.” The sponsors’ decisiveness is admirable, but you see the problem.

In any case, if you calculate according to their formula, using the state enrollment figures and the Fair Share measures of community wealth, three very problematic stories emerge, all of which are a result of where the “base” was in 1997.

First, during the last 10 years, the enrollment in Newport schools dropped by a quarter. Like other systems whose enrollments dropped, Newport still got its “base” plus a percentage increase. Newport now has a $2.7-million surplus. Everyone else in the state is in an acute budget crisis.

Second, in 1996, a new state law gave a big bonus to school districts that joined together into “regional” districts. For the first two years, these new districts got an extra 2 percent of their operating budget, for each grade involved in the consolidation. After that, the bonus was supposed to drop by one-quarter percent each year and disappear altogether eight years later, when the district was presumably reaping the benefits of having consolidated.

In 1996, the towns of Bristol and Warren combined all their grades, prekindergarten-12, for a fat 28-percent bonus. In 1997, the total dollar amount of the bonus was cut by about one-third, but thereafter, two-thirds of the bonus was included in their base, instead of dwindling to zero. The new formula eliminates the regionalization bonus, leaving that district with the largest loss of state aid, $18 million.

And lastly, when districts began losing students to charter schools, the district was “held harmless,” meaning that the state kept paying the district for the now-absent child — as well as paying the charter school for that same child. This softened the blow to the districts, but the extra money was included in the base for students the district was not educating.

Bear in mind that these lucky fiscal windfalls of the past have already been promised away via teacher contracts and other obligations. The state can’t just pull that money out and expect the “loser” districts to thrive. The Fair Share bill phases in the decreases — as well as increases — over three years. But the loss of millions of dollars could devastate “loser” districts.

So we’re caught between a rock and a hard place. We don’t want to punish certain school districts because politics made them lucky in the past. But on the other hand, Ajello barks, “Who are you holding harmless now? Certainly not the kids in Providence, Pawtucket and Woonsocket. They’ve been going without all this time. So we can’t do nothing. Absent another measure, we need to do this.”

Oh what a mess Rhode Island lets itself be. Straightening this out will take years. But we must begin with a formula. Ajello is right.

Julia Steiny, a former member of the Providence School Board, consults for government agencies and schools; she is co-director of Information Works!, Rhode Island’s school-accountability project. She can be reached at juliasteiny@cox.net , or c/o EdWatch, The Providence Journal, 75 Fountain St., Providence, RI 02902.