Missouri public school aid formula facing $700 million shortfall

Sunday, July 22, 2012 | 6:00 a.m. CDT; updated 2:35 p.m. CDT, Monday, August 6, 2012

COLUMBIA — Both returning and newly appointed state lawmakers will have to deal with a contentious, yet vital, issue: how to fully fund the foundation formula that determines how much state aid Missouri's public school districts get.

Lawmakers and Gov. Jay Nixon this year approved more than $3 billion for elementary and secondary education. That amount, however, still falls about $250 million short of what education officials said was required. By fiscal year 2014, the foundation formula will face an estimated $700 million shortfall.

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The formula divides public schools into two main categories known as "hold harmless" and "formula" districts. "Hold harmless" districts are those that rely more on local property taxes and receive the same amount of state aid per student every year. Aid to formula districts, which rely more on state funding, is recalculated every year.

Although Missouri education officials have begun implementing a plan to help fund public schools, the state remains without a long-term solution to the problem.

What candidates are saying

Candidates for local seats in the Missouri House and Senate agreed not only that K-12 funding is a priority but also that the foundation formula is complicated and confusing. Newcomers to legislative campaigns said they will have to look to others with more experience before developing fully informed opinions about what should be done. The consensus among most of the candidates is that the state needs more revenue, but some have suggested the state could throw more money into education by tweaking its budget.

State Senate District 19

  • Incumbent Sen. Kurt Schaefer (R) said education funding has to be a priority, second only to paying off Missouri's public debt. "You can close the gap (in the formula) with funding from other areas in the budget," said Schaefer, who is the chair of the Senate Budget Committee. Still, he expects stagnant economic growth over the next couple of years will make funding the foundation formula a continuing challenge.

  • State Rep. Mary Still (D) said the state could "tinker around with hold harmless and not hold harmless, but it becomes increasingly unfair" to some schools. She would like to look at increasing state revenue and adjusting education funding to find more "viable options" for fixing the funding disparity.
House District 44

  • Mike Becker (R) suggested school districts could save money by not building lavishly constructed schools. "We need to build simple multipurpose buildings. Schools should be a place of education, not a place of glamour."
  • Caleb Rowden (R) said lawmakers have to find a way to be "transparent" about how schools are funded and keep pushing to find a proper fix for the formula. Rowden said he's open to finding more revenue, but is "not a big fan of increasing revenues more than you have to."
  •  Chris Dwyer (R) conceded he knows "very, very little" about the formula and said he would talk to members of the legislature's education and budget committees to learn more. Dwyer also said the state should look at how private and home-based schools manage on smaller budgets. 
  • Former state Sen. Dennis Smith (R) said lawmakers should take a closer look at the overall budget. "We need to narrow our financial obligations in other parts of the budget and put the extra money into education."
  • Former state Sen. Ken Jacob (D) said that the foundation formula is a "major problem facing the state" and that proposed solutions would only be a marginal stopgap. "You can't succeed in a knowledge economy when you rank near dead last in education funding."

House District 45 

  • Incumbent Rep. Chris Kelly (D) could not be reached for comment. He is unopposed in the primary and in the November general election.

House District 46

  • Incumbent Rep. Stephen Webber (D)  said the answer "is that we need to fully fund the formula." Because the formula has been underfunded, Webber said Columbia residents are having to pay higher property taxes to fund schools.
  • Fred Berry (R) said he would wait until he had the opportunity to speak with state budget and education officials before offering a solution. "You have to look at each element ... this is not something you want to hip-shoot."

House District 47

  • Former state Rep. Nancy Copenhaver (D) said that the new formula "needs to be tweaked" and that "it hasn't been doing what it was supposed to be doing" since its inception. "We can't keep cutting money," she said, adding that legislators also must find new revenue streams. "The problem is we don't have fewer and fewer students, we don't have less complicated situations."
  • Neither John Wright (D) nor Mitch Richards (R) could be reached for comment.

House District 50

  • Incumbent Rep. Caleb Jones (R) said state lawmakers have to make sure "we get students a good opportunity" to attend school and receive an education. He added that it is necessary to reevaluate funding for schools that are performing poorly and "we should give kids the opportunity to go somewhere else (if they are attending a poorly performing school) and take their funding with them."

Explaining the foundation formula

Missouri's foundation formula is used to calculate how much money the state's 559 local education agencies — which include 520 school districts and 39 charter schools — should receive. School systems get additional funding from various statewide and federal programs, but the foundation formula is the main source of money besides local property taxes.

Funding amounts are determined by a variety of factors, including local wealth, student attendance and property tax rates, and a "state adequacy target," established by the Missouri Department of Elementary and Secondary Education, that sets a desired amount of average spending per student each year.

The adequacy target now is $6,131 per student; it was supposed to rise to $6,423 this school year and to $6,716 in fiscal year 2014. Budget woes and lawmakers' inaction, however, prompted the education department to freeze the adequacy target.

State lawmakers adopted the most recent foundation formula in 2005, replacing a previous formula that relied heavily on local property tax revenue as a way to determine how much state aid school districts would receive. The new formula has been phased-in over the past seven years and was scheduled to take full effect this school year.

Chris Nicastro is the state's commissioner of education. She explained the decision to freeze the adequacy target in a May 23 letter sent to Missouri's public and charter schools. "The fiscal challenges now facing Missouri prohibit full funding of the current formula, resulting in the potential of extreme funding shifts for school districts," she wrote. 

Past work and the effect on Boone County

Although leaders in the General Assembly touted full funding of education as a top priority for the 2012 legislative session, lawmakers ultimately failed to find a fix due to disagreements over how the legislation would affect school districts. Some worried about the disparity in the impact on urban vs. rural districts, others about the impact on hold-harmless and formula districts.

During the session, Rep. Mike Thomson, R-Maryville, and Sen. David Pearce, R-Warrensburg, sponsored measures intended to fix the funding issues and "minimize the winners and losers." The bills died, however, requiring the education department to step in.

Roger Dorson, the department's coordinator for financial and administrative services, said the "across-the-board" approach meant all school districts bore the burden of the budget shortfall. Deputy Education Commissioner Ron Lankford told the Associated Press in early June that more districts would see cuts rather than increases.

Thomson and Pearce's legislation would have cut less aid from hold harmless districts than formula districts. Still, debate over the fairness of their bills brought them to a standstill.

One-hundred and sixty of Missouri's school districts were considered hold harmless in fiscal 2012. Of the five districts in Boone County, only Sturgeon is hold harmless; Centralia, Columbia, Harrisburg, Hallsville and Southern Boone have formula district status. Columbia and Hallsville used to be hold harmless but became formula districts in 2010 and 2011, respectively. 

Regardless of status, every district in the state shared in the lack of funding in fiscal 2013. That means they either suffered cuts or received smaller increases than proposed under law. The Centralia, Harrisburg and Hallsville school districts received slight increases; Columbia and Sturgeon were cut.

Dorson said the freeze is intended to be in place only this year, but the department might be forced to extend it. "We don't know what fiscal year 2014 will bring."

Revenue opportunities 

Several potential avenues for increasing state revenue have stalled in the legislature. They included a mechanism that would allow the state to collect taxes on Internet sales, which would generate an estimated $20 million to $40 million annually as well as a $70 million tax amnesty program that would have encouraged people to pay back taxes without penalty. The Internet sales tax was never scheduled for floor debate in the legislature. The House passed tax amnesty, but the Senate held it up.

Lawmakers also have had extensive debates on paring back the state's tax credit programs, but the House and Senate couldn't find agreement. State officials estimate Missouri will redeem $685 million in tax credits this fiscal year.

Pending a legal challenge before the state Supreme Court, Missourians might get to vote in November on whether to increase the state's cigarette tax, which is 17 cents per pack. The 73-cent increase proposed by the initiative would generate between $283 million and $423 million to the state's coffers. The money would be used for K-12 and higher education and for tobacco-cessation programs. 

Missourian reporter Jordan Shapiro contributed to this report.

Supervising editor is Scott Swafford.

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Mike Martin July 22, 2012 | 12:08 p.m.

I've become as skeptical of stories about "foundation formula" woes as I have been of local stories wherein the county, city, and school district cry poverty, and all of the interviewees are either politicians or agency officials.

These stories are routinely used as excuses to raise taxes and as a result, they never go away (foundation formula woe stories date back to at least when I first moved here in 1997).

If school funding were such a problem, we would have fair property taxation here in Boone (we don't -- the rich and oodles of "non profits" pay nothing); we wouldn't have just built an $8 million Taj Mahal for administrators (the new Worley Street addition); and we wouldn't spend twice the money, per square foot, on a public high school (Battle) vs. a private high school (Tolton).

At $80 million and climbing Battle High, I hear from a principal inside the district, is so mind-blowingly overbuilt it's almost palatial. Meanwhile, it sits on poor roads that will need millions more in infrastructure and will anchor two huge new subdivisions built by developers who pay virtually no property taxes on their land.

This does not sound like a budget crisis scenario to me.

(Report Comment)
Michael Williams July 22, 2012 | 12:40 p.m.

Maybe if all that casino money coming in the front door had not been matched by general revenue exiting out the back door, we wouldn't be having these problems.

One of the biggest State of Missouri lies I can remember....ala democrat Mel Carnahan.

I've NEVER believed a "The money is for the children's education" pitch ever since, especially when spouted from a politician's or educator's mouth. Voted "no" each and every time and I'm quite satisfied with that posture. This will continue until I see the changes in education I wish to see.

The "problems" outlined in this particular article have only one effect upon me.....ho hum, what else is new?

(Report Comment)
Corey Parks July 22, 2012 | 1:25 p.m.

I had not seen the price tag for the new HS down the road from me yet but that seems like a lot. I drove by for the first time the other day and man on man it is massive and shiny and new. I can see where the money went but with a price tag like that you would think they were paying 1990 building prices instead of 2010 building prices.

They just finished up the road that connects Stadium with Richland and the bridge. Not open yet but I can see that they only built part of it and you can see where the 2nd bridge will be going in more then likely a few years from now. Makes you wonder why they spent 6.5 million on that and another 5 million in a few years when they add that other bridge. Surely they know history and EVERYTHING is more expensive down the road.

(Report Comment)
Paul Cushing July 23, 2012 | 8:42 a.m.

Why wouldn't we fully fund the K-12 formula before we fund any post secondary institutions? Properly preparing kids for college, vocational school or simply going into the workforce should be given priority in the state budget in my personal opinion.
Paul Cushing

(Report Comment)
Mike Martin July 23, 2012 | 12:48 p.m.

Maybe it is fully funded -- at least as fully funded as it's ever going to be.

In politics and in life, actions usually speak louder than words.

If local districts like ours blow millions on palatial buildings; subsidize subdivision development infrastructure; refuse to investigate questionable if not corrupt property tax collection practices; support corporate welfare that takes money from schools like the EEZ; and pack their ranks with highly-paid administrators, how then can they argue that a major source of funds isn't fully funded?

Money, it would seem, is gushingly plentiful.

More troubling to me is that the story never goes away, while talk about it is driven by district officials seeking money and politicians seeking election.

I count 234 Trib stories from prior to 2009 that mention the school foundation formula, mostly worrying over it or tying it to the need for local property tax increases.

Here's a title from a 2006 piece: "District officials lobby legislators for more money. Columbia clamors for school funding."

Look at the lede:

"Columbia Public Schools officials say they’re ready to ask voters to pay more property taxes...Money - or the lack thereof - dominated discussion yesterday between Columbia school officials and local lawmakers...
Administrators say they aren’t sure yet just how much new funding the district will not receive under the recently implemented foundation formula."

Some other examples all the way back to 1998:

(Paul -- probably a good idea to let people know you're a school board member. Some people know, but many may not.)

(Report Comment)
Ellis Smith July 23, 2012 | 1:38 p.m.

By what means or formulas do the following three states fund K-12 education: Minnesota, Wisconsin and Iowa?

Why those three? Because year after year those three are at or near the top of ACT scores, ranked by state.

Of course organization, and quality of instruction, COULD have some bearing on those test results. Do you think so?

PS: An article in the Wall Street Journal points out that we've essentially doubled the number of K-12 teachers nationwide but during that same time period the number of students has only increased by 8.5%.

(Report Comment)
Jimmy Bearfield July 23, 2012 | 3:28 p.m.

To fully fund schools, all that counties need to do is to calculate the difference between the schools portion of each parent's property tax bill and the average annual amount that the district spends to educate each child. Parents then would receive a bill for that amount. Non-parents still would contribute a significant amount of funding via their property taxes, but parents now would finally be paying their fair share.

(Report Comment)
Corey Parks July 23, 2012 | 6:47 p.m.

Jimmy. What about those parents that would opt for a private more affordable school? Would they be exempt?

(Report Comment)
Fred Stevens August 10, 2012 | 2:20 p.m.

Those naysayers regarding the new high school in Columbia are not informed about the situation. The Foundation Formula has nothing to do with the new high school being built, nor the taxes used to "operate" a public school district. The expense of the building comes from a completely different fund of money than what it takes to pay salaries, benefits, textbooks, transportation, etc. While public schools should not build lavish and palatial facilities, clarification of this issue is important prior to rushing to judgement.

(Report Comment)

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