School financing expert Joe Martin sent out this note about House Bill 824, which deals with a school funding mechanism in Georgia that few people understand.
But equalization grants have great implications for the many Georgia districts that rely on them, and Martin’s note about proposed reductions is worth reading if yours is one of them.
Here is Martin’s note:
The sponsors of the proposed change in Equalization Grants are trying to make the best of a bad situation, and they should be commended for redirecting more of the available funds to the least wealthy systems. Nevertheless, we have to recognize the far-reaching consequences of HB 824 over time unless it is amended.
The General Assembly has not followed its own formula for calculating Equalization Grants in recent years. Instead, it has reduced these grants by whatever percentage was needed to keep the overall total at a certain amount. When compared with the current situation, HB 824 would provide short-term relief to the least wealthy systems, but this would be accomplished by substituting a new formula that would cut all of the grants almost in half even before any further reduction is made. This formula would establish a much lower ceiling for Equalization Grants from now on.
As a result, one of the primary forms of equity in the financing of Georgia’s schools would be greatly diminished – not just temporarily to meet an immediate problem – but permanently.
One of the recommendations to the State Education Finance Study Commission was to set the “benchmark” for calculating Equalization Grants at the statewide average instead of the tax digest per student for the system at the 75th percentile. There is a simple and compelling rationale for this approach in the sense that every local system should be able to raise at least as much revenue for its schools as it could with a tax base equal to the statewide average.
Some of us went a step further to recommend lowering the benchmark below this level on a temporary basis if it was necessary in any year to reduce the total amount of these grants by a certain amount. This is a fairer way to make adjustments than the current method of reducing all of the grants by the same percentage.
HB 824 incorporates both of these ideas, but uses them to produce a much different outcome than was intended. As the old adage goes, the devil is in the details.
The proposed benchmark is the statewide average, but this “average” is being calculated in an artificial way. It is not unusual to exclude the “outliers” at the top and bottom of a distribution, but care should be taken to ensure that the items being deleted are similar in nature. In this case, the top nine and bottom nine systems are being excluded, but the systems at the top are three times larger than the ones at the bottom and have 20 times as much taxable value. If there is going to be an exclusion, it should be based on a group of systems at each end of the distribution which have roughly the same number of students.
The proposed approach has the inevitable result of lowering the “statewide” average, and the implications are quite significant. The total amount of Equalization Grants in FY 13 would be reduced by $340 million or 41 percent from $832 million to $492 million, and even the smaller amount might not be fully funded in next year’s budget.
Unfortunately, the guiding principle in supporting our schools has become not what is best for our students, or required by the Georgia Constitution, or even logical as a matter of public policy, but what the state can afford after continuing to make tax cuts and exemptions for other reasons.
–From Maureen Downey, for the AJC Get Schooled blog