Districts resist budget lawsuit

Hold-harmless districts are protected from larger budget cuts.
Sunday, November 2, 2003 | 12:00 a.m. CST; updated 1:58 p.m. CDT, Tuesday, July 22, 2008

JEFFERSON CITY — Not all Missouri school districts have rallied around the idea of suing the state for not fully funding public education. School officials from the wealthiest districts in Missouri fear that a successful suit could leave their districts hurting for funds.

Some superintendents of so-called “hold-harmless” school districts have cautioned their boards of education not to join in the suit.

“I just can’t recommend that they jump on a bandwagon that might actually inflict more harm than good,” said Mark Bowles, a leader of the Hold Harmless Coalition and the superintendent for Cape Girardeau schools.

Hold-harmless districts are protected from losing money under the current funding system and guaranteed the same amount of money they received per-pupil in the 1992-93 school year — the year the funding system changed.

What the suit involves

The planned suit revolves around two issues. One is that the state is not funding education properly — a charge school officials call adequacy of funding. The other issue is that the formula by which the state funds are distributed leads to unequal levels of educational quality across the state — an issue school officials call equity.

Hold-harmless districts suffer smaller budget cuts when state funding to education drops. For instance, the Columbia school district received more than $3 million less in state funding for the 2003-04 school year due to budget withholdings. In contrast, Cape Girardeau, a hold-harmless district, received cuts of around $50,000.

Under a provision in the Outstanding Schools Act, the bill that created the current school funding system, districts essentially are protected from getting less state funding than they did in the 1992-93 budget.

That protection, called the “hold-harmless clause,” was adopted in order to win support from legislators representing districts with high economic growth.

The Cape Girardeau district received about $910 per student from the state this year, or about the same amount as the 1992-93 school year. Without the hold-harmless provision, however, Cape Girardeau schools would receive less than half of that amount, about $384 per student.

Gerri Ogle, department of education’s associate commissioner for financial services, said the reason that hold-harmless districts are at odds with the pending suit is because they know that the courts will be looking at the issue of equity.

“The hold-harmless provision is not fair from an equity perspective,” Ogle said. “To be hold harmless is good for these districts, but bad for other districts because the state is giving them money that would otherwise go to districts that need it more.”

Money from nowhere

Since the Outstanding Schools Act prevents significant cuts in state funding for hold harmless districts, the only way to give more money to districts with declining economic conditions is to boost the total amount of state funds appropriated by the legislature — an increase that has become financially impossible given the state’s stagnant economy.

Districts such as Mexico in Audrain County, which is dealing with a loss of local revenue from plant closings, have been hit particularly hard by state withholdings.

The number of hold-harmless districts has increased from 10 in 1993 to more than 70 this year. There are no hold-harmless districts in Boone County.

“The more the formula is underfunded … the more schools are going to fall into the hold harmless category,” said Denise Pierce, director of school finance for the Missouri Department of Education.

While districts planning a court challenge point to the need for legal action to spur the legislature, hold-harmless schools maintain that the best avenue for action is through the regular legislative process.

“I think legislatively we have a better chance to come up with compromises that will benefit everybody than we will through anything that’s happened court ordered,” Bowles said. “I challenge anyone to find me a successful court ordered resolution to school finances anywhere.”

Richard McIntosh, a lobbyist for hold-harmless districts, said the schools he represents are not a part of the lawsuit because, by and large, he has not heard that they are going to talk about both equity and adequacy.

“The state has increased standards over the past 10 to 11 years and can unaccredit our schools, but cannot send us dollars to achieve those standards,” McIntosh said. “The only way we can achieve those standards is by asking the local property owners to continue to increase their taxes.”

Getting a boost

The state auditor found that for the 2002 school year, hold-harmless districts received additional revenue that totaled $244 million. Schools on the foundation formula, a complex mathematical equation used to calculate their share of state funds, faced withholdings.

But McIntosh said hold-harmless schools are still facing budget shortfalls. He said they’ve suffered from near-static levels of state funding since 1993.

“I do not see how that situation is good for any of the 200,000-plus students in hold harmless schools,” McIntosh said.

Bruce Johnson, superintendent of Stanberry R-2 district, said he doesn’t feel sorry for hold-harmless districts.

“I have no sympathy for hold-harmless schools in the last two years because they have been exempt from the majority of the cuts when schools that were not hold harmless were given hundreds of thousands of dollars of cuts,” Johnson said.

Attorney Alex Bartlett, hired to represent districts mounting the legal challenge, said he hopes hold harmless districts will not fight the suit because school districts all face the same issue — lack of funding.

“Many hold-harmless districts are just hold harmless on paper,” Bartlett said.

McIntosh said hold-harmless districts might intervene in the lawsuit while continuing to push for an increase in the amount of funding given to hold-harmless schools.

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