Major issues to address include tax reassessments, a special “hold-harmless” clause and the “proration factor.”
A Missouri tax law, known as tax reassessment, requires a biennial recalculation of property values. If property values increase, then the tax rate must decrease.
While this is good news for the property taxpayers, it can dramatically alter a tax-sensitive formula like Missouri’s, Fajen said. So, the group created a “recalculated tax rate” to adjust the formula.
“We discovered that we had a formula where, when that rate goes down, the district loses not only local money but also state money,” he said. “So we had to make a fudge-factor adjustment.”
And go back to the drawing board.
In its written form, the final “how-to” for Missouri’s foundation formula is a 16-item, 2,416-word piece of legislation. It offers explicit detail on the math and the method required.
But, while the formula allows staffers to calculate annually a number for each of Missouri’s 524 school districts, it offers neither context nor interpretation for what that calculation means.
Fajen, who until 18 months ago was part of the Senate Education staff, knows first-hand the nuanced role of politics in what seems to be a scientific and meticulously factual debate.
“When you have an issue with a lot of resources, the whole legislature is engaged,” Fajen said. “This is a big deal with big money, and everyone wants to look like they’re doing the right thing.”
An example of the interaction between the art of politics and the science of finance is in the formula’s “hold-harmless” clause. Essentially, the clause allows districts to receive more money from the state than the formula allows. The clause now affects 54 districts in Missouri, including the state’s two richest — St. Louis suburbs Clayton and Ladue, and the state capital, Jefferson City. The Columbia Public School District is not held harmless.
The clause was a last-minute addition to the Outstanding Schools Act in 1993. Its inclusion was not then, and is not now, supported by the formula’s authors, including finance specialist John Jones. In April 2003, the state auditor’s office also criticized the clause, saying the “hold-harmless provision contributes to the inequities ... among school districts.”
Often, holding districts harmless runs counter to what the formula is trying to do, Jones said.
“The hold-harmless districts have about $275 million dollars to spend on school finance, and they would not have that if they were on the formula,” Jones said. While some of that money is local revenue, he said, the state also contributes a large portion.
“If they were on the formula, that money would go to everyone,” Jones said.
But Goode said the effects of the hold-harmless clause are not as simple as they seem. Some districts may try to present the clause as a penalty, but it also can be a protection against losing money.
“Everyone’s elected and represents their own areas. You almost always end up with a grandfather clause,” he said. “Of course, everyone would like more money, but the data is such that they’re not always going to get it.”
They might not get all of the money because of a key component of the formula known as the proration factor. It determines how much money is available from the state to be used in the calculation. Any fraction less than one means that the state can’t provide all of the money it normally would.
In Columbia, the foundation formula can make or break the budget. The money provided through the formula makes up one-third of the school district’s funding. For the 2003-04 school year, the district is to receive $26 million of the $37.1 million that would have been allocated had the formula been fully funded, said Jacque Cowherd, deputy superintendent for administration.
Looking to 2004-05, Cowherd said the only thing known about state aid is that the state doesn’t have the ability to fully fund the formula.