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School funding plan stumbles

Missouri's school funding formula could soon be short by nearly $700 million. That has triggered a political war on how to fix it.

Kailip Hines, 11, pauses as he takes a test in Mike Meyer's fifth-grade social studies class on Friday at Oakville Elementary. The Mehlville School District would be hurt under a plan to lower state per-pupil spending targets.

By Matthew Franck

St. Louis Post-Dispatch

4/29/2012

The promise behind Missouri's funding formula for public schools is simple and one that many thought would stand for years: Make sure that all children, from the poorest rural towns to the wealthiest suburban ones, have access to adequately funded schools.

Now, just six years after it was enacted - and before it has even been fully phased in - the school funding plan is fracturing amid budget shortfalls and what some call its own defects.

The breakdown is paralyzing the Legislature, with political squabbles making it nearly impossible to agree on even a temporary adjustment as lawmakers approach the final weeks of the session.

Without an agreement, many school districts could experience chaotic and seemingly nonsensical changes in their state aid.

And the school districts that were designed to receive the most from the funding formula could take the hardest hit. Under one scenario, the Affton district could lose 24 percent of its state funding; Mehlville schools could lose 16 percent; and Francis Howell 10 percent.

"It's frustrating to me as someone who is planning a budget - and it's frustrating to me as a citizen of Missouri - that the Legislature has to make this so political, " said Affton Superintendent Steve Brotherton.

At issue is how to best patch a formula that could soon need nearly $700 million more to accomplish its goals.

That shortfall has done more than just delay the state's goal of raising per-pupil spending for children in poorly funded schools.

Because of the intricacies of the formula, the lack of new school funding has turned a relatively simple method for divvying up $3 billion in state aid into a confusing set of calculations and scenarios.

It's a tug-of-war that's pitting 500-plus school districts against one another, each fighting for a fix to the formula that works in its favor. The St. Louis school district, for example, has $20 million riding on the passage of one plan over another.

But rather than reach a deal that could smooth out large spikes and drops in state aid, the Legislature seems likely to punt to the state's education department.

"If we don't come up with a solution, we will be abdicating that responsibility, " said Sen. David Pearce, R-Warrensburg, who has so far failed to secure support for a compromise plan that he said could fix the problem for years.

Instead, some say, the state appears poised once again to plunge into lawsuits over school funding.

A SIMPLE PLAN

If the formula had all the money it needed, its mechanics would produce little to no acrimony.

The spending plan was built around a simple concept that had broad support when it took effect in 2006. It works like this: Set a goal for minimum spending for each student, then make sure even the poorest school districts can reach it.

The plan's initial yearly spending target was $6,117 per pupil. The target was based on the amount that school districts the Legislature deemed to be successful were already spending. So if a school district could raise only $2,000 per pupil through local taxes, the $3 billion state formula would fill the gap.

In reality, it was more complicated.

To secure political support, the Legislature handed out extras to school districts that otherwise would have gotten little from the plan. Those concessions - and the wrinkles they added to the formula - are the heart of the current predicament.

Much of the dispute centers on school districts that needed no help to reach the $6,117 target.

If the formula had been strictly applied, those districts would not have received a dime in new money. In fact, they might have been asked to give back some aid to needier schools.

But that would have made passage of the plan politically impossible.

Instead, those districts were "held harmless" - meaning they were spared from funding cuts under the new plan.

Many hold-harmless districts, such as Ladue and Brentwood, are wealthier. Others, such as Normandy, Riverview Gardens and St. Louis, are not. Yet all held on to more money than the formula called for.

Then the Legislature went a step further to appease hold-harmless districts. It kicked in extra money to schools in metropolitan areas - where many hold-harmless districts are congregated - on the premise that teachers there are more expensive to hire.

That provision gave many hold-harmless districts a 10.4 percent spike in state aid - and secured their support for the formula.

At least in the first three years, the formula drew few complaints.

From 2006 to 2009, the state could afford to shell out the $120 million in new school spending that was needed each year to phase in the plan by 2013. During those years, per-pupil spending rose by as much as 20 percent in some of the neediest school districts. At the same time, the hold-harmless districts benefited from the plan's extras, adding an average of $580 in new money per pupil under the plan, according to a legislative report.

Then the economy tanked. State spending on schools soon stagnated, leaving Missouri roughly $250 million behind its goal.

"So we're back in the same spot; we have a formula we can't afford, " said Chris Straub, a Missouri school finance expert. He recalls how the state's previous schoolfunding plan broke down in lawsuits involving more than 200 of the state's school districts.

What's worse, the price tag for the new plan keeps growing.

Because the per-pupil spending target - initially set at $6,117 - is tied to what successful districts spend, it's a rising target. As total spending increases in those districts, so does the state's per-pupil spending goal.

The plan originally had a provision to cap that growth. But lawmakers eliminated that measure in 2009 when they expected new casino revenue, which has largely failed to materialize.

The plan now calls for spending $6,423 per pupil beginning in July, a figure slated to rise to more than $6,700 next year. All told, that would leave the state nearly $700 million shy of paying for the plan.

A POLITICAL HEADACHE

The headache now facing the Legislature is figuring out how to give school districts less than the formula prescribes, in a way that minimizes political backlash.

At first blush, that might not seem so difficult.

The first option involves sticking to the new target of $6,423 per pupil, but recognizing that the state would have only enough money to pay about 87 cents on the dollar.

Under that plan, all school districts - rich, poor, those that are held harmless and those on the formula - would bear an equal cut.

The second option calls for the state to lower the target to something affordable, say $5,760 per pupil.

Doing so would enable the state to pay 100 cents on the dollar -giving hold-harmless districts their full allotment.

Of course, that would come at a cost to poorer districts - some of whom could see state aid cut by $3 million or more annually.

For example, the Washington district would lose 20 percent of its state funding, even as hold-harmless districts such as St. Louis Public Schools would fare better, to the tune of $20 million.

Few in Jefferson City like those extremes. They say a formula that produces dramatic gains for one district while shortchanging another is broken.

"Superintendents will say they don't want to gain at the expense of neighboring school districts, " Pearce said.

So Pearce and other legislators have attempted to forge compromises that would smooth the formula's peaks and valleys. Even those plans are controversial for treating districts differently.

House and Senate compromise plans would soften the blow to hold-harmless districts. Under the House approach, for example, hold-harmless districts would bear only one-third of the burden of making up the shortfall.

Critics say the plan surrenders too much to the hold-harmless districts. Those districts, they say, can already afford an adequate education and many have cashed in on concessions built into the formula to gain their support. They say the highest priority should be increasing spending in needier school districts.

But others say the compromise would still benefit lower-spending districts by setting a higher target for per-pupil spending. For most low-spending districts, that increase would more than make up for the amount withheld by the state.

In fact, some - such as Sen. Eric Schmitt, R-Glendale - oppose the compromise, saying it tilts too far in favor of poorer districts at the expense of hold-harmless ones.

Schmitt said cutting any money would violate a promise the state made to keep hold-harmless funding level.

Even so, many school districts back the compromise, chiefly because it avoids creating big winners and losers.

"We ought to be looking at what's best for schools across the state, " said Brotherton, the Affton superintendent. "So if I have to give up a little, I'm OK with that."

CONSEQUENCES OF INACTION

The prospects for passing such a compromise are bleak.

Many legislators represent multiple school districts, some of which gain and lose under any plan. Others come from districts that are not significantly affected by any of the various proposals.

"If school districts can't agree on a compromise, realistically how can legislators who represent many school districts agree on a compromise?" said Straub, theschool finance consultant.

Straub and others say the chances of a compromise are further diminished because it has been tied legislatively to a broader education bill related to school choice. That bill seeks to address a Missouri Supreme Court ruling that could allow thousands of students from unaccredited districts such as St. Louis to migrate to better schools.

Some hope that by connecting the school funding to the issue, legislators might be more motivated to come to the table for a solution. Instead, many say, the approach has made what could be a simple school funding fix an impossibility.

Barring any legislative action this year, the Missouri Department of Elementary and Secondary Education would be left to figure it out.

In the past two years, the state has dealt with underfunding by simply shorting all districts equally. But the state may no longer have that option.

That's because under a formula provision that kicks in this year, the state for the first time has the authority - and some say the obligation - to adjust the per-pupil spending target downward.

In other words, if the Legislature fails to act, the state may transfer the burden of the formula's shortfall to poorer districts.

State education department leaders have given school districts no indication of how they might resolve the matter.

Rep. Mike Thomson, who is pushing the House compromise, said punting to the state would almost certainly land the matter in court. However the state deals with thefunding shortfall, he said, districts on the short end of the stick would sue.

"I don't know how they avoid lawsuits no matter what they do, " said Thomson, R-Maryville.

He fears such lawsuits could once again trigger even broader legal attacks on the school funding plan, such as the one filed by more than 200 districts in 2004. Thomson said the state could be vulnerable because it once again has a formula that establishes goals it cannot afford.

Noel Knobloch, chief financial officer of the Mehlville district, says his more immediate concern is that lawsuits over small details of the plan could tie up state aid for next year. Such a scenario, he said, would be particularly difficult, given that the Legislature has the power to avoid it.

"It seems like you could get 15 intelligent people in a room with some common sense to come up with a solution, instead of tying it to politics, " he said.

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