Legislative Testimony

Home / Issues & Advocacy / Advocacy Services / Legislative Testimony

Testimony-Task Force on School Cost Reduction, North Allegheny SD
February 2007

The Dilemma:
HOW TO FUND EDUCATION FOR PENNSYLVANIA STUDENTS
Daniel Hubert

Public education for all Pennsylvanians should give residents a sense of pride. Pennsylvania offers some of the best public educational opportunities in our nation. The challenge for Pennsylvanians is the funding of this service to the young people of the Commonwealth.

The concept of School Cost Reduction is admirable, but a better concept might be managing the cost of public education. If we expect to reduce school costs by some absolute dollar amount, we may find ourselves caught in a cycle of impossibilities. We all know education is not an inexpensive endeavor and what students need in the 21 st century to compete globally may actually cost more if we do not make some adjustments today.

I am a School Director in the North Allegheny School District , a suburban district just north of the city of Pittsburgh . Of the 43 Districts in Allegheny County , my district is the largest except for the Pittsburgh Public Schools. North Allegheny is approximately 43 square miles, has about 8,000 students and a budget of $110,000,000. We have a student to teacher ratio of 13 to 1 and a student to administrator ratio of 211 to 1. Our SAT scores have risen dramatically in the last few years with our latest score being 1130 with 95% of our students taking the test and 90% going on to college. I am giving you these statistics so that you can understand that even districts with very good results are struggling, finding themselves in a difficult financial situation.

Before looking at "cost reduction", I think it's important to understand the underlying dynamics of public education funding in Pennsylvania and how they affect districts like mine. There are two different aspects to the cost issue. The first, and perhaps most important, is the funding allocation and how a change in one funding source affects the other funding sources. The second aspect is the actual cost of delivering the services.

If educating Pennsylvania 's students were truly a partnership between local and state government, the Commonwealth would be paying 50% of the cost, on average. Instead, it is paying about 34%. If this funding level were uniform, district by district, that would mean North Allegheny would have to support 66% of the cost. Assuming that we could continue to receive about 5% of our funding from the federal government and grants, that would still leave us asking taxpayers for 61% of our funding. What we actually have is a very different situation.

Our Market Value Aid Ratio is .3446, so you can see that we are considered a wealthy district by state standards. Instead of receiving the average 34%, North Allegheny receives about 17%. In other words, the bulk of the financial responsibility for the education of our students comes from our local taxpayers, not from the state or federal government. Currently, North Allegheny 's budget consists of approximately 81% of funding from local sources. In other words, about $88,000,000 comes from our taxpayers. That amounts to about $4,000 a household.

Now, we know that as a wealthier district, we simply are going to have to carry more of the burden locally, but the problem has been exacerbated by a state funding trend over the last four years that is actually taking dollars away from the educational components of education. Of every dollar we receive from the state, a greater and greater percentage of it is a result of reimbursements rather than funding for basic and special education. In fact, the component of each dollar attributable to basic education has actually declined by 5%, going from 42.17 cents per dollar to an estimated level of 40.45 cents per dollar. Commonwealth funding has increased at less than the inflation rate. That situation simply adds more burden at the local level each year.

 

A similar trend has taken place with Special Education. There, funding has declined almost 1% over the last four years. Again, funding has not kept pace with inflation.

And that creates problems for North Allegheny . We pride ourselves on operating an outstanding Special Education program. Before 1991, the State assumed the "excess cost" of educating Special Education students, in other words, the costs over and above what it costs to educate a typical student. In North Allegheny , the cost to educate a typical student is $6,259. To educate a Special Education student costs an additional $11,884 per student. Costs like that are no longer borne by the state but instead are absorbed by the local district. In the last 10 years, the cost of Special Education in our district has increased 223%. Since 2001, our Special Education costs have risen 48.2% while state funding has only increased 10.6%.

Districts who strive to provide a first-rate Special Education program are doubly penalized. As we improve our programs, more families needing these services move to our district, causing our costs to rise even higher. The state discontinued the excess cost method because Special Education was becoming too expensive. The thought was that local districts could control the costs better. Our ability to control these costs has been significantly impeded by PDE regulations and court decisions that mandate extensive services for many highly involved children. In addition, local districts do not have the ability to delegate this burden to someone else. Unlike the Legislature, which could divest itself from the responsibility of paying the excess cost, we bear both the cost and the obligation to deliver the services. The time has come to make hard choices as to how special education will be funded in Pennsylvania . Sharing the cost of educating these youngsters equally between the state and local district would not only help districts financially but would also ensure consistency of service delivery across the state.

Transportation funding is another significant problem. Funding from the Commonwealth has been steady for the last four years at about 9 cents for every dollar received. However, during that time, the cost of transportation has increased dramatically. During the 2007-08 fiscal year, we estimate that our subsidy will increase $20,000 while our fuel cost alone will increase by $67,000. The fuel cost increase would be even greater if it were not for the fact that North Allegheny participates in a regional purchasing consortium that negotiates fuel prices. With a fleet of 120 vehicles, we must replace 8-10 buses each year to ensure the safety of our students. That extra $20,000 we expect this year will not help us in that regard.

Because our district is large (43 square miles) and because the state mandates transportation for private and parochial school students within 10 miles of our borders, we end up transporting over 9,000 students to 48 additional schools, many outside our borders, as well as to our own 12 buildings. Our transportation costs next year are projected to be $5.45 million or about $678 per student. We project that the Commonwealth will fund about $1.81 million or 33% of the transportation cost. This is the only funding that North Allegheny receives that is anywhere near the statewide average of 34%. However, it simply doesn't keep pace with the escalating costs. If additional funding from the state were unavailable, another possibility would be to reduce the distance within which we must bus students from 10 miles to 5 miles.

Reimbursements are an unusual concept to me. We send you dollars so that you can simply send them back to us. I am not sure how that really qualifies as a revenue source. This category is the only component of state funding that has increased over the last four years relative to dollars received. And the primary reason that has occurred is the rapid rise in retirement costs. As reimbursements increase as a percentage of the total funds the state spends on education, the educational component will suffer; that is, basic education and special education funding from the state will decline.

In the last four years, the problem of funding has gotten worse, and over the foreseeable future, it looks as if the burden will continue to bear down on our local taxpayers. As School Directors, we ask ourselves why this is happening and what we can do about it. We certainly need education specific funding from the state fairly distributed. If that's not going to happen, we will make changes in local operations. These changes would mean the kinds of things we know will shortchange our students in the long run - like cutting AP and Honors courses, changes to the quality of special education or eliminating Band, Chorus, Orchestra or athletics.

So, where are our problems and how can we control them? Let's break that budget down so you can see what the drivers are.

Of the $110,000,000 North Allegheny budget, about $80,000,000 or about 75% goes to Salaries and Benefits. Our salary increases have actually been going up less than the rate of inflation because that is an item that really is in the control of the local School Board. But, benefits are not within our control. Since 2001, our benefits costs have risen 83.1% which includes both health care and pension costs. Despite all our efforts on the health care side (switching to managed care several years ago, insisting on contributions from our employees and instituting co-pays), our health care costs have risen, although not as rapidly as other districts who did not take some of these steps. On the pension side, our costs now are 7.13% of salary with 18% looming on the not-too-distant horizon. Since 2001, our pension costs have increased 511%. No business, private or public, can sustain itself when pension and health care costs represent such a significant portion of the budget. To look at it another way, the pension costs per student in North Allegheny today are about $125 a student; in 2013, we are estimating the cost will be about $1,400 a student.

Medical insurance costs for the educational industry are no different than any other industry. Private enterprise has been much more realistic in their approach to health benefit costs - the employee simply must share a greater responsibility for these costs than in the past. Thirty years ago, when public sector employees made significantly fewer dollars than private sector employees, it was possible to justify a more lucrative public sector benefit package. That is no longer the case. According to the most recent Kaiser Foundation survey, private sector employees contribute, on average, 16% for single coverage and 27% for family coverage. In fact, employees of other state governments contribute, on average, 9% for single coverage and 21% for family coverage. In Pennsylvania , we've recently had the governor and legislature tout a contract with a 3% employee contribution toward health care "as a great management deal." That's the kind of thing that makes it exceedingly hard for those of us at the local level to convince employees that they should and must pay more for health care. If North Allegheny could simply move from our current 7.1% employee funding to the national average for government employees, we could save approximately $500,000 or .5% of our budget. The cost of this benefit will continue to spiral out of control for districts as long as the cost of medical insurance continues to outpace inflation.

The costs for cyber/charter schools and our affiliated vocational-technical school are also rapidly rising without any ability on our part to really exercise control over them. For the coming school year, we anticipate the cost for cyber/charter schools will rise by 48%; our portion of the vocational school budget is predicted to increase by 42%. In 2001, we had 22 students attending cyber/charter schools at a cost of $184,000; in 2007-08, we expect that number to be approximately 85-90 at a cost to the district of $675,000 with less than one-quarter of that being reimbursed by the state.

From a local school district perspective, cyber schools are a real problem. Funding for the schools bears no relationship to the actual cost per student. We must simply pay the cyber school at our district's tuition rate. The policies governing cyber/charter schools are unfair not only from a financial perspective, but also from a procedural perspective. Local districts retain the responsibility for truant children though we have no ability to verify attendance and are usually not informed by the cyber/charter school if a child is truant. We are often unaware of which children are attending cyber/charter schools until we are billed for their attendance. The Commonwealth should mandate that payments to cyber/charter schools reflect the actual cost rather than each district's tuition rate and/or should absorb the full cost.

Although I believe that vocational-technical schools provide a necessary and valuable service to the continuum of education within Pennsylvania , I question why they should not be subject to the provisions of Act 1 such as the referendum on spending. When supporting districts must abide by millage limitations enforced through referenda, it seems only fair that vocational-technical schools must do the same.

The ESL program has also contributed to rising costs in North Allegheny . Not only do we have more students involved but also court cases have mandated significantly increased services for these students. In 2001, we serviced 41 students at a cost of $115,000. Today, we are instructing 124 students at a cost of $300,000. In an effort to control rapidly rising costs charged by our Intermediate Unit for this service, our district began to provide the ESL program itself a few years ago. Had we not taken that action, we anticipate that costs this year would have been $350,000. Without outside funding to help support this initiative, the burden again falls on the local community.

Every School Director I know struggles to balance the competing interests of providing the best educational program for students without burdening taxpayers beyond their ability to pay. We often feel that we are between a rock and a hard place on many of these issues. I know that in North Allegheny we have stepped to the plate on the issues that are under our control - salary levels, hiring, assuming functions internally for programs like ESL and Hearing Impaired whenever it made good economic sense, and to the extent that we can, health care costs. But, as stated, so many of the significant costs are beyond the ability of one district to control. We need those of you in the legislature to focus on being a full partner with local districts by bearing 50% of the cost and by adopting some of the changes we have suggested to reduce or eliminate the most burdensome mandates.