Supporting Education Initiatives: Legislative Perspective

Presentation at NGA’s Annual Institute for

Governors’ Education Policy Advisors

Steve Smith

Manager of NCSL’s

National Center on Education Finance

(303)856-1531 Stephen.Smith@ncsl.org

April 4th, 2003

Legislative Landscape• Due to term limits, there has been significant

turnover in legislatures across the country

• Turnover in legislative leadership has been no exception.

• Result is new people working in a complex issue area in a very difficult time.

• Need to understand the capacity of legislative “players” and shape approaches accordingly.

• Gain a solid understanding of what outside entities have influence on key “players”.

Legislative Process• Significant differences between the two

branches of government. There are a lot more of them!

• Result is slow, tedious process that involves a lot of compromise. Consider something you would be willing to trade for.

• Also understand the parameters they are operating under, such as legal and structural parameters.

• Can initiative work through current finance system, or are significant changes required?

How Effective is the Initiative?• Legislatures want to know how much bang

for the buck? Need to show evidence of effectiveness.

• Need to know the counter evidence that will then arise.

• Unfortunately, overall in education there is a lack of consensus and best practices are difficult to generalize.

• Difficult to get hard numbers. In Florida, somewhere between $8 and $26 billion?

Initiatives to Consider• With No Child Left Behind, many data collection systems

will have to be created or have significant modifications.

• Along with individual student performance data, collect student finance data. First requirement in determining “value added”.

• Look at financial reporting that is currently required, and make modifications.

• Examine role and purpose of auditor general office? Perhaps enhance program evaluations?

• Check to see how much Medicaid funding for special education your state is receiving? Estimates are that states are missing out on over $2 billion.

Questions and Discussion

South Carolina’s Education Finance Formula

• Over 25% increase in funding over the past 4 years.• Student to teacher ratios better than national average.• One of the highest per-pupil expenditure levels in the

South.• Operate dual system for state funding with half of funding

going through traditional foundation program (appox. $2100), and other half provided through categorical (EIA).

• Required local effort can vary across the state.• May want to consider combining state funding into

foundation program with uniform local requirement.

Adequacy in Education Finance

• Current Adequacy movement can be traced back to A Nation at Risk and the “Standards Based Reform Movement”.– Gained tremendous momentum throughout the 1980’s and

1990’s and continues to be the basis of education reform.

– The recent reauthorization of the Elementary and Secondary Education Act (ESEA), also know as No Child Left Behind (NCLB) has academic standards as its main ingredient.

– States will be required to develop assessment to measure student progress towards meeting education standards.

• Can be argued that state education standards define an adequate education, and that State Legislatures are responsible for determining education standards.

– All state constitutions require the state to provide a free and public education, with many also referring to a “thorough and efficient system”.

– Therefore, education is a state responsibility that has historically been provided at the local level.

– No Child Left Behind requires that all students in a state meet high academic standards by 2014.

Adequacy in Education Finance

Adequacy in Education Finance

• Implicit within the “Standards Based Reform Movement” and No Child Left Behind is that sufficient resources are provided to the education system in order for them to education goals.– However, historically there has been a lack of analysis

between education finance and education goals.

– For example, in Florida they have a foundation program that was created in 1973 changes in funding to the foundation program has been a “political process”.

– However, courts across the country want some type of rational for funding levels and are saying that funding levels are not simply a legislative priority.

State Efforts to Define Adequacy• Three approaches have emerged that are being used by states

to determine adequate levels of funding. These approaches each have strengths and weaknesses and none is perfect, which has led some states to use multiple approaches.

• One is the “professional judgement” approach, which was developed in Wyoming in response to a court requirement that the actual costs of providing services be determined and that has been used, or is being used, in Indiana, Kansas, Maryland, Montana, Oregon, and Wisconsin to develop school finance system parameters (the approach is being used in several other states for other purposes, including by plaintiffs and defendants in adequacy litigation).

State Efforts to Define Adequacy• A second is the “successful school district” approach, which

was developed in Ohio in response to a court requirement that the state stop funding schools by a process of “residual budgeting” and that has been used, or is being used, in Illinois, Kansas, Maryland, Mississippi, and New Hampshire to develop the parameters used to distribute state aid.

• The third, which we call the “whole-school reform” approach was used in New Jersey to determine the cost of programs thought to be necessary in the state’s “Abbott” districts (28 urban districts with high levels of family poverty out of nearly 600 districts in the state). This approach has not been used anywhere else.

• These approaches: (1) have different underlying philosophies; (2) focus on different kinds of formula parameters; (3) use different kinds of information; and (4) produce different results.

• The professional judgement approach assumes that: (1) experienced educators can specify the resource needs of hypothetical school districts so that students can meet a set of input and outcome standards and (2) the costs of such resources can be determined. The approach produces a foundation level – or base cost figure (the amount needed by a student with no special needs attending school in a district with no unusual cost-related characteristics) – as well a series of adjustments for such things as special education, students at-risk of failing, bilingual education, and school district size.

Professional Judgement

• The successful school district approach assumes that a basic cost figure can be determined by examining the basic expenditures (excluding capital spending, transportation, and spending for programs such as special education for which adjustments will need to be developed separately) of districts identified as actually meeting state standards.

• The approach requires that a number of decisions be made about which districts to include or exclude from examination and does allow policymakers to focus on school district efficiency to some extent.

Successful School Method

• The whole-school reform approach assumes that there is a particular whole-school approach (such as one of those developed by the New American Schools Development Corporation, a charter school, or a private firm like Edison) that policymakers support, that the cost of that approach can be determined, and that such costs can be translated into a base cost figure and a series of adjustments.

• If the costs cannot be disaggregated, then the result may only be applicable to school districts with particular characteristics,

not all districts.

Whole School Method

• South Carolina Supreme Court found state system constitutional on equity grounds in 1988 in Richland County v. Campbell.

• However, in 1999 South Carolina Supreme Court upheld plaintiffs constitutional claim of adequacy based on the education clause in South Carolina’s Constitution and remanded the case for trial that should begin in 2003.

• Numerous adequacy studies have found that foundation program should be increased in order to meet education goals.

• State not fully funding or equalizing total costs of EIA initiatives makes in vulnerable. In addition, funding gifted students based on availability of funds is a red flag in today’s education finance litigation.

• Plaintiffs continue to have success across the country, and some courts can be very prescriptive.

Reasons for Concern?

• Reducing property taxes by increasing state aid should consist of simple calculations.

• Larger concerns will be how state distributes aid and what local effort should/can be required?

• Combining all state funding into single funding initiative is more aligned with current education reform efforts. In addition, easier to defend in litigation.

• Adequacy studies can be undertaken, but at this time an appropriate formula needs to be created. Then issues concerning how much money should be distributed through the formula can be addressed.

• Creating hypothetical models should not be difficult and can be created by beginning of legislative session.

Policy Options

Questions and Discussion

Accessing Medicaid Funds• States can access Medicaid funding to pay for

services provided to special education students.

• Some states are accessing between $500 and $700 per special education student, which can account for at least 5% of state expenditures for special education.

• Oregon example: $4.5 billion spent on education, 20% of expenditures on special education = $900 million. Let us assume the state can receive additional 3% from Medicaid = $27 million.

• Nationwide states missing out on $2-3 billion.

Accessing Medicaid Funds

Strategies to Increase Medicaid Funding– Ensuring that educational services are highlighted

within Medicaid “contract with the Feds.

– Requiring Health and Human Services Department to inform Department of Education of students covered under Medicaid.

– Training district personnel on what services are covered under Medicaid

– Possibly centralize processing of paperwork or at least obtain statewide bid from private sector