Fair distribution, not simply more money, the answer for Pa. schools

Pennsylvania schools are the most inequitably funded in the entire country. Actions of the General Assembly and the governor’s office to address this do not appear to go far enough. They seem only to increase funding for education without fully resolving the spending inequalities.

According to the National Center for Education Statistics, Pennsylvania schools are the most inequitably funded in the entire country, with poorer school districts receiving 33.5 percent less in education funding than more affluent school districts across the state. The Commonwealth Foundation’s School Spending Database, which breaks down education expenditures per student by school district, and School Tax Database, which breaks down local education revenue by county, support this data. 

These discrepancies have not only garnered negative attention nationally, embarrassing legislators in Harrisburg, but also have spurred members of the General Assembly and policymakers in the governor’s office to address these egregious variations across the state. For the most part, their efforts have focused on changing the way Pennsylvania finances education, with the intention of increasing funding for schools. Unfortunately, the current proposals do not appear to go far enough to redress the current problem. They seem only to increase funding for education without fully resolving the spending inequalities.

The odds are stacked in favor of rich districts

At present, public school revenue for each student in Pennsylvania totals an average of $19,000 a year (p. 39, table F-2), and local governments bear the largest burden of generating these funds – 54.3 percent (p. 39, table F-8) during the last fiscal year for K-12 education. Under current Pennsylvania law, local governments accomplish this feat by way of local school district property taxes, which are appropriated for education. Obviously, however, more affluent districts have higher property taxes, which means that more money is generated for schools in those areas, resulting in discrepancies between poorer and wealthier school districts across the state.

For example, Chester County, which has a median household income of $86,050 (2010 census), derives 80.9 percent of its educational revenue from local taxes (2011-2012), and the Chester Upland School District spends about $35,000 per student (2012-2013). Meanwhile, Cambria County, which has a median household income of $41,730, derives 31.2 percent of its educational revenue from local taxes (2011-2012), and the Cambria Heights School District spends about $12,500 per student.

In 2009, Forbes reinforced the serious nature of this funding disparity when it ranked counties in order of the property taxes paid in each area. According to its calculations, Chester County ranked 120th nationally, with homeowners paying an average of $4,086 on their property, which amounted to 4.2 percent of their annual income. Alternatively, Cambria County ranked 440th, with homeowners paying an average of $1,150 on their property, which amounted to 2.5 percent of their yearly earnings. These sets of figures demonstrate the problem with the way schools are funded and call for a new approach to financing education in Pennsylvania.

The link between educational spending and student success

Though historical research suggests that school funding and student performance are largely unrelated, there has been a growing consensus that student success is linked to educational spending. To be sure, lower-income students already are at a disadvantage because of other related social inequities — a disadvantage exacerbated by variations in school spending. Richer school districts can afford to pay more, making it easier to attract strong teachers and to offer students more support and enrichment, which is critical to their success.

The correlation between educational expenditures and this achievement gap can be seen in Pennsylvania. According to the Pennsylvania District Rankings of 2013-2014, six Chester County schools ranked in the top 50 out of the 462 schools in Pennsylvania (respectively, 1st, 6th, 18th, 22nd, 23rd, and 34th). Schools in Cambria County, however, did not appear until ranking 191, and one of its districts ranked almost dead last at 454.

This achievement gap has serious consequences not only because it hinders student success, but also because it inhibits upward social mobility after high school by reducing students’ chances of going to college and finding a job. Society at large also experiences adverse effects, because the achievement gap perpetuates income inequality. Earlier this year, the Economic Policy Institute released a report revealing that the income gap has grown significantly in Pennsylvania, with the top 1 percent capturing between half and all income growth between 2009-2012.

Parents and teachers sue the Pa. Department of Education

In Pennsylvania, all of this has prompted considerable controversy. In fact, a group of parents, educators, and advocates took a stand last November when they filed suit against the Pennsylvania Department of Education as a result of the current inequities. In the suit, the plaintiffs alleged that the present system, which decisively underfunds schools, violates the Pennsylvania Constitution, which explicitly contains a clause promising a right to education.

The plaintiffs requested that the state be compelled to reform the way the Department of Education finances education in Pennsylvania. Regrettably, the Commonwealth Court of Pennsylvania ultimately issued an order dismissing the case in April after it determined that this matter is better left to the legislature. However, the plaintiffs will appeal to the Pennsylvania Supreme Court for reconsideration of the issue.

Harrisburg attempts funding reform

Though the outcome in the aforementioned litigation hangs in the balance, legislators are attempting to respond to the problem. Just last week, the Pennsylvania House of Representatives passed H.B. 76, “The Property Tax Independent Act,” which would eliminate school property taxes across the state and replace them with funding from a single source called the Education Stabilization Fund (ESF). Financing for the fund would derive from expanding and increasing the state sales tax, in addition to increasing the personal income tax rate. According to proponents of the measure, this would provide “a predictable and stable funding source that is tied to economic growth […] in contrast to the property tax […] which is subject to much variation.”

Supporters of H.B. 76, which passed by a vote of 105-86, have characterized its progress as “the most significant action in decades on relief from the state’s widely reviled property taxes.” Though the bill’s fate in the hands of the Senate remains unknown, the Senate Finance Committee did approve an identical measure last year, which may bode well for its chances of arriving in the governor’s office. Governor Wolf, whose budget proposal for this year includes increases in the sales and personal income tax rate, is expected to sign the bill if that happens.

A plan to increase education funding

For the most part, it appears that the proposal to replace school property taxes primarily aims to increase education funding. According to the governor’s budget for FY 2015-2016, overall funding for schools would be increased by $1 billion. To be more specific, the proposed budget calls for:

$400 million increase in basic education$100 million increase in special education
$120 million increase in early childhood education
$160 million savings from cyber charter reform
$143 million increase in higher education investment
$20 million for career and technical education and equipment grants
$8 million for career counselors in middle and high schools
$9 million for dual enrollment
$47 million for other pre K-12 and higher education investments

However, increasing funding for education in general likely will not solve the funding dilemma in Pennsylvania’s school districts. In fact, public spending on education nationally has been estimated to be at an all time high — yet, a comparison of long-term spending trends with long-term measures of student academic achievement indicates that proposals like the current one pending in Harrisburg will not improve academic achievement or adequately resolve the primary problem of educational disparity in the commonwealth.  

Independent Fiscal Office predicts plan would actually decrease revenues

Aside from this particular uncertainty, and in spite of presumably good intentions, proponents of this legislation seem to have overlooked striking shortfalls predicted by Pennsylvania’s Independent Fiscal Office (IFO). In its 2013 report analyzing the proposal to replace school property taxes, the IFO projected that the new plan would actually result in decreased revenues for education over the next four years. It forecasted that the funding system under current law would generate $14.2 million, while the new proposal would yield only $12.1 million in 2015-2016. Similar deficits would result in 2017-2018 and 2018-2019, with the final year producing $2.6 million less in revenue than it would with school property taxes.

Legislators also seem to have overlooked the possibility of recessions in the future. The proposal’s proponents say that sales and personal income taxes would be a more predictable and stable funding source, but this may not be true if the economy once again experiences a decline. If people earn less and have less money to spend, sales and personal income taxes will likely be insufficient and unreliable sources of school funding.

Moreover, as the IFO report notes, the proposal does not account for how residents would use the additional income from lower property taxes. Though it is estimated that property taxes would decline by $11.2 billion for FY 2014-2015, residents may not spend those savings on taxable goods and services. This may be especially true if the market declines, prompting taxpayers to save their money rather than spend it.

A state-based distribution formula is as yet unsettled

Even if the proposal to replace school property taxes and raise additional revenues is successful, it is unclear whether it will actually address the primary problem of equitable distribution of funds. At present, the governor’s proposal will require the Pennsylvania Department of Education to make quarterly distributions from the ESF to school districts based on a formula to be developed by the bipartisan Basic Education Funding Commission.  

Advocates for this reform say that the state’s poorest school districts would see the biggest influx. Nonetheless, questions linger as to how the formula will accomplish this. So far, the only certainty, according to the report, is that it will be grounded on FY 2013-2014 property tax collections. Other than that, the plan is largely unsettled.

Pennsylvania needs creative solutions

Ultimately, a comprehensible and effective mechanism for equalizing disbursement is needed in order to solve the problem of funding disparities in Pennsylvania school districts. Distributing dollars based on student enrollment might work. With this approach, the state would provide all districts with an equal amount for every student they serve.

Alternatively, the state could allocate dollars based on district need, taking into account each district’s fiscal capacity and the characteristics of the students it serves. According to a recent report on the funding gap by the Education Trust, decisions like these could “have a profound effect on the resources districts receive and the educational opportunities they provide.”

Having said that, regardless of how much money the current proposals in Harrisburg raise for education, the governor and the bipartisan commission will need to seriously consider creative solutions like these in order improve the school funding dilemma and ensure the Pledge of Allegiance’s promise of “liberty and justice” for all students in Pennsylvania.

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Andrea C. Anastasi is graduate of the University of Pennsylvania and Temple University Beasley School of Law.  She currently works as an attorney, writer, and advocate in the Greater Philadelphia Area.