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Funding failures

Pennsylvania gets low marks on equity and adequacy in school spending. A new formula may help, but only slightly. Charters and districts are left elbowing each other.

This article was originally published in The Notebook. In August 2020, The Notebook became Chalkbeat Philadelphia.

To put it bluntly, Pennsylvania has had the worst of all possible worlds when it comes to education funding.

For starters, the commonwealth contributes a smaller share of funds to education than most other states do, forcing local districts to carry more of the financial burden for schools. Partly as a result, it has one of the largest spending gaps between wealthy and poor districts in the country.

And the state has a flawed charter school law that has not been updated significantly since being passed nearly 20 years ago. The law’s mechanism for getting money to charters worsens the funding woes of the low-income districts where most charters are located.

Since the early 1990s, the commonwealth has operated without a predictable formula for distributing state education dollars. Such formulas, which most states have, are driven by enrollment, student need, and the overall wealth or poverty of each district.

Pennsylvania used to have such a formula, called Equalized Subsidy for Basic Education (ESBE). It was based on actual student enrollment, with weights for circumstances such as poverty and a district’s wealth and taxing capacity. When that method was jettisoned in 1991, rules dictated that no district could get less than it had the year before, regardless of demographic trends or loss of enrollment – the so-called “hold harmless” provision.

For most of the time since, Pennsylvania’s education funding distribution has been driven by politics.

When education funding is judged by two main measures – equitable spending among districts and adequate resources so that all students receive a quality education – report after report has shown that Pennsylvania falls woefully short.

While courts in many other states have intervened when faced with lawsuits over school spending, those in Pennsylvania, despite several lawsuits, have stayed hands-off over the years of wrangling about the equity and adequacy.

In May, the General Assembly finally enacted a school funding formula that most advocates are touting as more fair and long overdue. But the new formula does not solve all the problems that Philadelphia and many other districts have.

For one thing, it applies only to funding increases, not to all the education aid a district gets. That means the distribution of new funds locks into place decades of inequity.

“State funding is out of whack because the lion’s share of existing state revenues are grandfathered under decades in which we had no rational distribution,” said David Lapp, who now works for Research for Action and formerly was with the Education Law Center.

Secondly, the formula is only as good as the amount of money put into it. And there is no indication that Gov. Wolf and the General Assembly will come to any agreement soon on how much more money is needed. The vastly different views between the Democratic governor and the Republican-led legislature on taxation and spending led to a nine-month impasse starting in February 2015, during which districts’ education aid was held up and many had to borrow money to stay afloat.

The bipartisan Basic Education Funding Commission that devised the formula was explicitly told not to figure out how much money was actually required to help all districts provide a quality education to their students, only how to distribute whatever new money was made available.

“How can you have a debate about the current budget for schools without a debate on what schools actually need?” asked Michael Churchill, of the Public Interest Law Center.

His organization did a study of the new formula, calculating that an additional state investment of at least $3.2 billion was needed for all districts to reach a modest level of “adequacy” – the statewide median average instructional expense among the 501 districts. That was considered to be the minimum necessary for students “to meet the state-imposed academic standards,” Churchill said.

But his group also calculated how much it would take for all districts to reach the level of the 189 districts in the state that scored average or above on the state tests in 2014-15. That brought the cumulative new investment above $4.2 billion.

The current level of state investment, Churchill said, is just 35 percent of all education spending, well short of the national average of nearly 50 percent. That means Pennsylvania is consistently ranked in the bottom 10 states on this measure.

The state “doesn’t put in enough money to adjust for the imbalances in wealth it has created between districts very closely related to each other,” he said, citing Delaware County as an example. The county includes both Radnor, one of the state’s wealthiest, and Chester Upland, the state’s poorest district. Other states, like Maryland, try to even out similarly huge wealth disparities by creating countywide school districts.

“Some districts just don’t have the resources to compete or protect their own students’ futures,” Churchill said.

That is true even before charter school funding is considered. Because charters are located almost exclusively in areas where many schools are struggling, money sent to charters, including cyber schools, drains resources from already-poor districts, including Chester (see story on p. 16), York, Allentown, Bethlehem and Harrisburg.

This is especially evident in Philadelphia, by far the state’s largest district and home to well more than half of the charters in the state. The 83 charters educate 63,000 students. If those students were taken together, it would comprise the second-largest school district in Pennsylvania. And there are 7,000 more Philadelphia students in cyber charters.

“We have a charter law which everyone from the state auditor general, to the city controller, to members of the General Assembly have described as the worst in the nation,” said Uri Monson, chief financial officer of the Philadelphia School District. “When you have a bad law, when more than half the charters in the commonwealth are in Philadelphia, and when you layer that on top of funding that was drastically cut five years ago to the detriment of Philadelphia … you have problems.”

Monson was referring to a more than $1 billion reduction in state funds for districts that started in 2009, during the Corbett administration. Philadelphia absorbed about a quarter of that loss – more than $250 million.

The city is projecting that without new stable, recurring funding, it will begin running structural deficits in 2019. In fact, Monson said, the District’s expenses are rising at twice the rate of its expected revenues – even under the new funding formula recently enacted by the state legislature — unless the overall investment for Philadelphia and the rest of the state substantially outpaces recent trends.

According to current projections, Philadelphia’s shortfall could reach $600 million by 2021. In that year, it is expected to send more than $1.1 billion to charter schools.

Said Monson: “Going forward, revenues over which we have no control grow at half the rate of expenditures over which we have limited control and result in a projected deficit in five years of over half a billion dollars. And that’s math, not politics.”

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