Reduction to equalization grants: Sounds boring but will impact many Georgia school districts

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

23 comments Add your comment

chuck

February 14th, 2012
2:32 pm

In Troup County, they eliminated the grant for next year, forcing them to fire 60 teachers and close a school for next year.

Lee

February 14th, 2012
3:17 pm

“…a school funding mechanism in Georgia that few people understand.”

Maybe that’s the problem. When you make something so complex that few people understand it, how do you ensure compliance?

Old timer

February 14th, 2012
3:36 pm

Amen Lee……

C Jae of EAV

February 14th, 2012
4:24 pm

Proponants of local control over local money rejoice. Restructuring the formula for equalization grants would appear to be a greater impact to the overall budgets of smaller districts rather than how charter schools are funded. I willing to bet with all the focus put on the charter school admendment, this bill will sail through will little fanfare.

Teacher Reader

February 14th, 2012
5:29 pm

Wondering how much Gwinnett will receive next year. I don’t mind helping out truly poor and rural districts, but when Gwinnett receives these funds and wins a national award for being an urban district something is wrong.

3schoolkids

February 14th, 2012
5:30 pm

Last year’s Supreme Court decision unfortunately has opened the floodgates for legislative fixes (some might say retaliation). This Georgia Public Policy Foundation link explains the perceived justification for this:

http://gppf.org/article.asp?RT=&p=pub/Education/EdImpact120206.html

Maureen, do you know if there have been any new education lawsuits stemming from the Supreme Court decision?

FYI, Charters are not currently excluded from equalization grants.

Ron F.

February 14th, 2012
5:44 pm

I work in one of the small systems that have a relatively low local tax base. We’re begging voters right now to allow a local SPLOST to be continued as an E-SPLOST just so we can go down to a 1.5 million shortfall for next fiscal year. We’ve cut all the teachers we can reasonably and cut county office to bare bones. Unlike the larger systems where the fat is at the top, we’re all doing without. Once again, our duly elected representatives have found a way to justify taking even more funding. How much you want to bet they get away with it and when we’re all shuttering schools they’ll suddenly find all sorts of money for charter schools they want.

Maureen Downey

February 14th, 2012
5:47 pm

@3schoolkids, None so far.
Maureen

Brandy

February 14th, 2012
7:17 pm

@Maureen

I would like to know more about this issue. Maureen, could you share some informational links that more thoroughly explain equalization grants?

Where I’ve worked in the past, such legislation was called Robin Hood Funding and was very unpopular. How is it viewed in Georgia?

Makes you wonder if local control is the problem, not the solution…If the state (or, heck, the Feds) ran all education, money could, theoretically be equally distributed to all schools. Might mean more money for many and less for others. But, of course, that will never happen.

catlady

February 14th, 2012
8:09 pm

Are Equalization Grants the same thing as Fair Share?

My system, for several years, has sent several millions of dollars to the state for Fair Share. This was based on a hyperinflated valuation of property, in which the bank executives and real estate agents gouged the rest of us. We are at over 75% free lunch, but we were sending MILLIONS of our local tax dollars to places like Gwinnett (which got 15 MILLION as a “poor” district a couple of years ago!) Since the market is correcting and we have had 4 of 5 banks to FAIL, we are hopeful that it will soon be recognized that we are not wealthy!

BTW, unless a system taxes at the max of 20 mils school tax, it should not be eligible for money from other systems! I am not for higher taxes, but it isn’t right to pay 16 mils here and get money from other systems that tax the max!

THe Devil is This

February 14th, 2012
8:11 pm

THe devil is this — unemployment. When people are unemployed, they don’t pay taxes and taxes pay for schools.

If people don’t have jobs they don’t pay taxes. without those taxes, we can’t pay for schools. It’s that simple. The formula is pointless. Our piece of the pie will only get smaller and smaller because the pie is smaller.

We need to take back our jobs from overseas. We need to get illegals out of this country. They suck the life-blood out of us.

Good Mother

Anonmom

February 14th, 2012
8:42 pm

yes — Catlady — a system like DCSS taxes at mil rates above what the state allows the max to be (I believe but I could be wrong that we were grandfathered in along the line somewhere to allow it to be higher than the state max rate) and then we have a huge percentage of kids on title 1 and Free & Reduced lunch and we are at the bottom of the bottom for results and we are a “sending” district as “wealthy” for “equilization” while house after house is being foreclosed upon and business after business is being shut down. Meanwhile, Gwinnett, because of its farmland, is considered “poor” and “receives” and other counties don’t max out their mil rates and they recieve. Something is very backwards.

alm

February 15th, 2012
6:11 am

So true Anonmom. Every school I’m zoned for is Title 1 and my millage is over 20. If Dr Walker gets his way it will be even higher. The higher our millage rate the “richer” DeKalb looks.

Maureen – Does Decatur pay into it as part of DeKalb or on their own?

ScienceTeacher671

February 15th, 2012
6:51 am

Ditto Brandy’s 7:17 pm post. I’d also like more information.

And over the past few weeks, I’ve had several junior & senior class military kids transfer in, and their schedules are just insane because Georgia graduation requirements (especially Math 1-4) don’t seem to quite match up with what they’ve taken in other states…for all our students who move in & out of the state, I’d like to see curriculum more standardized across the U.S.A.

catlady

February 15th, 2012
7:01 am

Anonmom: Dekalb and a few others got special permission to go over 20 mils, as I understand it.

I don’t think my system, which taxes at 16-17 should get any fair share money until the BOE is willing to tax the full 20 mils. HOWEVER, I don’t think we have any business sending money from this poor county to Gwinnett or anywhere else!

C Jae of EAV

February 15th, 2012
10:01 am

@Brandy 02/14 19:14pm – Ditto your curious inquiry ! Is local control of fiscal collection and dispersement the problem or the solution? I believe we could engage a healthy debate around that one.

@Catlady 02/14 20:09pm – hyperinflated valuation of property , the subsequent collapse of this bubble & Rep. Rodgers recent legislation forcing county tax assessors to write to true market value rather than create an artifical valuation to prop up the tax digest are without question contributing factors to the reduction in the pool of local public school funding available in many districts. I think your suggestion of an additional element of evaluation in determining who is eliglble to receive an equalization grant is reasonable to consider.

Again I say watch this bill sail through toward passage with little fanfare.

Ron F.

February 15th, 2012
10:28 am

The bill to set up the new equalization grant formula was originally supposed to balance the problem of places like Gwinnett getting all this extra money when their tax digest is larger than most truly ‘rural’ counties put together. As is usually the case, the various political forces have mucked it up so that basically everyone who receives any equalization money will be cut short. Watch the legislation and read carefully folks. Double Deal promised to put money back into education as the economy improves, but the legislation currently under consideration will only reduce it…permanently.

Chaos

February 15th, 2012
10:47 am

The vote on HB824 is tomorrow. There are over 20 systems that will lose substantial funding if this passes. Those 20 + systems need to mobilize and let their Rep know to vote “no”. If that happens, the Bill will likely fail. Unfortunately, we all know that no one is paying attention and the Bill will pass…(sigh)…this gets old…

Maureen Downey

February 15th, 2012
10:55 am

@Alm, Decatur operates as a separate system and does not pay into DeKalb.
Maureen

catlady

February 15th, 2012
11:18 am

C Jae, the proper valuation of property now should help my system get off the “contributors” list. However, NO SYSTEM that is not maxed out, in South Georgia or anywhere, has any business getting money from another system’s levy. That’s like a person on welfare spending their money getting fancy Nikes and cable TV!

alm

February 15th, 2012
11:36 am

I know they are separate but do they pay into this fund at all? Are they exempt from it?

Ned

February 15th, 2012
1:01 pm

@catlady
I could not agree more. Doubly so if the “receiving” county is far from poor or rural.

Warrior Woman

February 15th, 2012
1:45 pm

Martin is absolutely wrong about how outliers should be identified and removed. From a statistical standpoint, outliers should be removed based on distance from the mean. This may result in equal students removed from top and bottom, but most likely will not. Of course, the method in the bill is not statistically correct either . . .

That said, I agree that no system taxing less than the 20 mil max should be eligible to receive Equalization Grants. Further, systems taxing more than the 20 mil max should not have the excess millage funding considered in the formula.