Despair and Disparity

Every day, it seems that another school district announces either specific cuts or at least vague plans to reduce spending for the upcoming school year. Big districts. Small districts, Rural, suburban, and urban districts too. With the Legislature trying to mend a $1.3 billion shortfall and giving vague promises to hold common education cuts to five percent (on top of what we’ve already lost this year, as well as during the last several years), we’re all planning tenuously for the future.

One question I’ve seen a few times on various Facebook pages is about why some districts seem to have deeper cuts than others. After all, doesn’t the state funding formula pretty much level off per pupil funding to make up for inherent differences in the property values in our communities?

Yes and no. For the most part, Oklahoma’s very complex funding formula equalizes per pupil allocations to districts. This is why, for years, the Cooperative Council for Oklahoma School Administrators (CCOSA) has cautioned the Legislature against tweaking the funding formula. Even small adjustments would make winners and losers.

That is why last May, when the Legislature was working to fill a $611 million shortfall and try to hold funding flat, CCOSA sent out an alert to its members, asking them to contact their legislators and stop House Bill 2244.

LEGISLATIVE ACTION ALERT: Protect Dedicated Revenues for Schools! via @CCOSA & @USSA10 http://t.co/MgvuNaB8Un #oklaed #OklaSupts

— CCOSA (@CCOSA) May 18, 2015

The text of their alert is no longer online, but fortunately, I have an assistant superintendent who keeps every email ever. Here’s what the alert warned:

We are tracking HB 2244 which is a bill that would cap motor vehicle dedicated revenues for county roads and bridges, cities and towns, and schools at various levels.  For schools, the motor vehicle apportionment would be capped at the FY 2015 level – which is an all-time high for this revenue stream.

This bill may be heard in the Joint Committee on Appropriations and Budget TODAY. If it passes the committee, it could move very quickly to a vote of the full House and Senate.

HB 2244 by Rep. Earl Sears, Rep. Dennis Casey and Sen. Clark Jolley, Sen. Greg Treat would CAP the apportionment of motor vehicle tax paid to school districts and municipalities at the FY2015 LEVEL, and move revenues received in excess of the FY 2015 level to the state’s general revenue fund for appropriation.

HB 2244 also caps motor vehicle apportionment to the County Roads and Bridges Fund at $120,000,000.00 with excess revenues going to the state general revenue fund.  Some estimates project that capping county road and bridge revenues at $120 million could immediately produce approximately $24 million for appropriation in FY 2016.

While we appreciate the legislature’s willingness to review off the top apportionments, we are extremely concerned with any plan that disrupts dedicated apportionments to schools as these dollars are a key source of revenue at a time when state appropriated revenues struggle to reach pre-recession levels.

Again, this was from May 18, 2015. HB 2244 was introduced May 15^th and signed by the governor May 22^nd. It popped up out of nowhere during the last week of session and quickly became law. We have watched bills that would create vouchers for months, only to see them fizzle into the ether. We waited as the House and Senate argued over what constituted the 30^th day of the legislative session so that we could enact the new Oklahoma Academic Standards.

We watch agendas and call our elected leaders for the bills we want and the bills we want to kill – as long as we know they exist. When someone introduces new legislation during the last week of the session, however, we need to mobilize more quickly.

HB 2244 was a piece of the funding pie last year that helped the Legislature hold education funding flat – well, as flat as the paper on which it was written. It was flat-ish, other than the two revenue failures and the need for Rainy Day Funds. What the bill’s supporters wanted to do was take a growing revenue stream, Motor Vehicle Registrations, and cap the percentage that came off the top to schools, roads, and bridges. They wanted to hold at that level and take the rest to make the General Revenue Fund healthier so they’d have more to give to agencies.

As I mentioned, CCOSA has warned that there would be winners and losers when you tinker with the formula, and they were right. The Oklahoma Tax Commission (OTC) prepared a Fiscal Impact statement showing that the apportionment from this fund to schools would remain constant, at about $260 million. Overall, they estimated the excess revenue that would go to the General Fund at just over $23 million.

 

Again, the Legislature was trying to make up a $611 million shortfall. This gave them a small percentage with which they could exercise some discretion. At the time, I also cautioned against the bill:

Maybe one day last week, our legislative leaders were sitting around trying to figure out how to plug the hole in the state budget. They looked at all available revenue sources and noticed that one in particular – the motor vehicle tax – was actually growing. They decided to cap the revenue source at current levels and divert the remaining money in future years to the general fund. Whatever this tax produces for education funding in the current fiscal year is the maximum it will ever produce. Never mind that enrollment and expenses are rising. This fund could yield as much as $20 million next year above the cap and start to chip away at the $611 million deficit in the budget that they created.

In other words, they can’t fund education because of the budget hole, so they’re going to divert money away from education to try to very partially fill the hole. In case you’re wondering, HB 2244 passed through A & B on a 13-4 vote after minutes of debate. With that kind of transparency and consideration, I just have to ask why we keep electing these people.

When legislation appears and passes quickly, it often carries unintended consequences. HB 2244 has done just that. I don’t agree with the strategy to cap Motor Vehicle Revenue apportionments, but I understand it. The bigger problem lies deeper in the bill, however, on page 11 of 12.

N. In no event shall the monies apportioned pursuant to subsections B, E, F, G, H, I and L of this section be less than the monies apportioned in the previous fiscal year.

The strikethrough indicates that this subsection of existing statute is being removed. This particular subsection is known as the hold harmless provision. With this one sentence removed, the OTC can distribute less than the previous year, should revenues decline. What has happened – and I still can’t figure out how – is that the OTC has changed how those funds are distributed to school districts.

Early in the fall, many of us began to notice wild swings in the amount of motor vehicle revenues we were receiving. Some were actually receiving considerably more than in previous years. Others – the district I lead included – were receiving considerably less.

Another district’s Chief Financial Officer has been pursuing this OTC interpretation of HB 2244 vigorously. Along the way, he compiled a spreadsheet showing each district’s motor vehicle gains or losses through the first five months of the fiscal year (July through November). He used those figures to estimate 12 months of gains and losses. Then I put those figures in a spreadsheet alongside our state aid losses.

The image below shows what happens when I limit that comparison to the 30 largest districts in the state. The first column with dollar amounts shows each district’s state aid amount prior to Christmas. This is the last notification before the State Department of Education started making adjustments due to the revenue failures. The next column shows each district’s state aid amount as of March 29^th. This is the adjusted amount after the two revenue failures and the application of Rainy Day funds.

The following column shows that the percentage lost by each of these districts varies, but not too much. Mid-Del’s loss of $613,485 (1.49%) is painful, but not debilitating. My previous employer, Moore, lost $973,410 (1.57%). Again, the percentages are comparable, but these are hard losses to absorb halfway through the school year, no matter the district.

The next two columns show each district’s five month motor vehicle gain or loss and then the 12 month estimate. This is where it becomes evident that going into the 16-17 school year, some districts will have to make much deeper cuts than others.

Through the first five months of the fiscal year, Mid-Del received $802,301 less than the previous year. That alone is worse than our state aid cuts. Extrapolate that out over a full year, and we’re dealing with revenue losses from motor vehicle collections that are three times as bad as what we are suffering through from state aid.

Meanwhile – and I only point this out to illustrate the disparity – other districts have benefitted from the OTC interpretation of HB 2244 to the extent that they aren’t down at all this school year. While we are all bracing for cuts next year, some districts are in vastly better financial shape than others. Indeed, tweaking the formula has produced an unintended consequence.

While the Legislature has failed to fund public education adequately for years, they typically have been able to do so in an equitably disappointing manner. For the current school year, if the 12 month motor vehicle estimate holds, Mid-Del will lose the most ($174.21) on this list, when figured on a per-pupil basis. If we go just a couple of school districts beyond the top 30, we could see that Ardmore will lose an estimated $402 per student.

(If you want to see the full spreadsheet, click here.)

A little over a month ago, Christy Watson with the Oklahoma State School Boards Association wrote about the difference in per pupil funding in Oklahoma compared with neighboring states. It’s a great blog post, but one part in particular resonates with me right now.

I’m not OK with the idea that students in surrounding states have $30,000 or more invested in their education throughout the course of their school years. I don’t think most parents or business leaders think that’s OK, either.

Taken a step further, as the Mid-Del superintendent, I’m not OK with the idea that other large districts around us would get more than $300 per pupil above what we’re getting. Our kids are worth as much as anyone’s and we deserve legislators who pay enough attention to detail to keep disparities such as this from happening again. We also deserve a remedy to this problem now. Otherwise, The districts at the top of this spreadsheet – many of which serve a high poverty population – will have to make deeper cuts to their workforce next year than the districts at the bottom of it.

If you were one of the people asking about the different approaches and the different levels of cuts among districts, I’m sorry I couldn’t give you a quicker answer than that. School finance is never easy to understand, unfortunately.