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Columbia Missourian

Missouri public school aid formula facing $700 million shortfall

By Matthew Patane
July 22, 2012 | 6:00 a.m. CDT

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

House District 44

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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.