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Basic and Special Ed Funding

House Bills 1046 (P.N. 1223) and 1048 (P.N. 1224)
House Education Committee
May 30, 2007

Mr. William LaCoff, PSBA President and
member of Owen J. Roberts school board

Good morning, my name is William LaCoff and I am the president of the Pennsylvania School Boards Association and a school director with the Owen J. Roberts School District located in Chester County.1 I would like to thank Chairmen Roebuck and Stairs for holding hearings throughout this month on Governor Rendell's proposed budget initiatives. This open process has provided all education stakeholders with the opportunity to provide you with recommendations on how to improve funding for public education in this Commonwealth. At the center of this issue are House Bills 1046 and 1048 - the proposals for basic and special education funding for the 2007-08 fiscal year. In addition to comments on both bills, I also hope I can leave you with a clear charge for how Pennsylvania 's school districts can and should be funded.

In Pennsylvania, where the Commonwealth provides, on average, 34% of funding to school districts (see attachment A), this funding discrepancy has created an often hostile environment between school directors, parents of special needs children, teachers, local taxpayers and, unfortunately, state legislators. This is an ironic situation, in as much as all of these stakeholders want to give children an equal opportunity for a good education. With that said, PSBA appreciates and supports the proposed increases in basic and special education funding in the governor's proposed budget. The administration's commitment to public education funding has shown what Pennsylvania's school boards have known for years - that funding for school districts is, essentially, an investment in the future of this Commonwealth and if our goal is to further improve our students' competitiveness in a global economy, we must continue prioritizing these funds and ult imately increase them.

The bottom-line is that the governor's proposed budget provides a level of funding that is, at best, a starting point for public schools. An increase of 3.5% for basic education funding and 3% for the special education subsidy causes the Commonwealth to fall well short of its obligation to provide an adequate level of state funding for public education because expenses continue to grow at a rate of 6-8%. Thus, school districts will fall further behind in the long run and continue to rely on local revenues to make up the difference (see attachments B, C and G).

My school district is a prime example of this all too common phenomenon. For the 2007-08 FY, Owen J. Roberts' costs are expected to increase by $4,678,255 or 6.88%, whereas basic education funding will only increase by $98,420 or 2%. If you look at attachment G of my testimony, you will see that the biggest increase in costs for 2007-08 are in pupil transportation services, a cost that all of us, including the Owen J. Roberts School District, has little or no control over. My district will also experience increases in special education, pension, and healthcare costs totaling $1.18 million (see attachment H for trend data on special education expenses).2 However, with a proposed state subsidy increase of $98,420, we have to turn to our local taxpayers to make up the difference. The bottom-line is that all of these costs are beyond the scope of school board members' control. Special education costs are driven by the requirements of IDEA, Pennsylvania regulations (which cover gifted as well as disabled students) and the unique needs of the students in our district. We cannot refuse services to a child with special needs or prevent him or her from moving into our district any more than our growing school districts can stop residential development and the influx of new students and the need for additional school buildings. All we can do is continue to fund the mandates and prioritize the educational progr ams that benefit our students.

In the mean time, we must all make do with what we have, and what we have today are House Bills 1046 and 1048. With regard to House Bill 1046, PSBA remains concerned over two key components of the legislation: the growth supplement and the proposed oversight over school district budgets. House Bill 1046 commits only $2.5 million toward additional assistance to growing school districts. In talking with board members from growing school districts, we know that their costs are increasing far beyond the growth supplement provided by the Commonwealth. At a February hearing of the Task Force on School Cost Reduction, representatives from the East Stroudsburg Area School District testified that their student enrollment increased by 77% in the past 15 years. The district currently receives 21% of its revenue from the Commonwealth. Under the current growth supplement proposal, East Stroudsburg qualifies for only an additional $63,571. This is $240,941 less than the growth supplement received last year and is a small fraction of  the $10.6 million increase in East Stroudsburg 's budget for 2007-08 fiscal year, which can be directly attributed to increases in personnel, healthcare, and debt service payments for 4 ongoing school construction projects.

Rapidly growing districts, like East Stroudsburg , have no choice but to turn to local taxpayers in order to maintain the educational programs and finance new school buildings. I urge the members of the General Assembly to prioritize school district growth in upcoming budget negotiations just as you did last year and provide the necessary financial assistance to those districts. Speaking on behalf of a district whose enrollment is expected to increase 26% in the next 10 years (see attachment D), the absence of increased Commonwealth assistance will force growing school districts to cut valuable educational programs or turn to their local taxpayers to shoulder the burden by increases in property taxes allowable under Act 1.

PSBA's second concern with House Bill 1046 relates to proposed oversight of school district budgets. PSBA interprets Section 2502.48 of House Bill 1046 to require PDE budget oversight over school districts that receive a percentage increase over its prior year allocation if the percentage increase is greater than or equal to:

•  200% the basic education appropriation percentage increase; or

•  10% over districts' prior year basic education subsidy.

Adopting a budget is one of the most important functions of school boards. The budget is ultimately the description of programs and services that districts and communities prioritize to improve and enhance student achievement. No matter how large or small the budget, it is a delicate balance of student and taxpayer interests. These policy choices represent long hours of compromise and hard work that provides school administrators and teachers with their vision for the upcoming school year. This leads PSBA to question: Would PDE recommendations then be interpreted to mean that districts' educational priorities and visions are wrong? Are all the days spent determining educational priorities and trying to hold down spending worth nothing if PDE finds problems with how districts allocate their basic education subsidies? Frankly, this provision is an insult to all the hard working school board members, school business officials and school administrators in Pennsylvania

PDE analysts do not attend school district budget presentations or budget negotiation sessions. They do not know the community input received by school boards prior to decisions on basic education subsidy priorities and the bill only provides 15 days for PDE to review and provide recommendations to districts on their basic education subsidy decisions. PSBA does not believe that PDE should, nor can it commit, the same quality of attention to school district budgets and communities' educational priorities that school districts' administrative teams and school board members dedicate each and every year. Can 15 days of analysis really compare to 5 months of preparation, scrutiny, and determination of commun ities' educational priorities?

With regard to House Bill 1048, and the proposed funding formula for special education, PSBA recommends that the bill be amended to reflect the actual cost of special education services in each individual school district. School districts of all descriptions - rural, urban and suburban - are experiencing the need to increase taxes or make cuts in existing programs in order to cover the growing costs of special education. The report on Act 1 exceptions released by PDE affirms this fact.3 The special education exception was the second most requested exception this year, accounting for $66 million in allowable costs. The need for this exception is due, in large part, to the inadequacy of the current formula for distributing state fun ds for this important program.

First, the distribution formula for special education subsidies assumes that only 16% of students in all 501 school districts need special education services. Second, the formula allocates aid as if students with special education needs are evenly distributed across the Commonwealth, an obvious inaccuracy. Third, the fixed dollar reimbursement assumes that all special education costs are the same - not only across a broad range of needs, but also in different regions of the Commonwealth. In our experience, the preponderance of special education funds go to serve a fraction of students with special needs.  Programs that could serve a large number of students with real, though less severe needs, often go unfunded.  All three of the assumptions in the special education formula fail to account for the actual cost of educating special needs children with varying disabilities, the obvious difference in providing special education services from region to region, and the actual percentage of students needing special services in a school district.  The result of this formula is that districts will have to eliminate or reduce other budgetary line-items to keep up with special education costs or continue to seek special edu cation exceptions under Act 1.

In conclusion, while PSBA appreciates the proposed funding commitments for basic and special education, we believe that the only way we can address school district funding, and ultimately property tax relief, is by overhauling the formulas for basic and special education funding. If I can leave you with one thought to take away from today's hearing, it is this: the funding system for public education is broken and we all know that high property taxes are the most obvious symptom of the problem. Until we address the heart of the problem -namely the funding formulas - we will never be able to solve the conundrum of how best to fund schools and provide equity throughout Pennsylvania 's 501 school districts. Thank you for your consideration of PSBA's comments and I look forward to answering any questions you may have.

The Owen J. Roberts School District is comprised of seven townships covering 100 square miles and is located in Northern Chester County . There are approximately 4,500 students from kindergarten through twelfth grade in one high school, a middle school, and four elementary schools. Student enrollment is expected to increase by 1,202 students or 26% by 2017.

Healthcare and pension costs will increase by 8.3%, while special education expenses will increase by 4.3% for the 2007-08 fiscal year. Owen J. Roberts School District was able to budget a lower increase in special education costs this year because the district's Director of Pupil Services was able to obtain alternate funding sources for approximately $900,000 of special education expenditures. Without these alternative funding resources, the actual increase in special education expenses would have been approximately 14%, which would have been consistent with the prior fiscal year's increase in special education costs.

Taxpayer Relief Act Special Session Act 1 of 2006: Report on Referendum Exceptions for School Year 2007-2008 . Pennsylvania Department of Education. April 20, 2007. Page 8.