Lawmakers discussing state aid for schools

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Posted: Thursday, October 17, 2013 12:00 am

The Nebraska Legislature is weighing the best way to fund public schools, and school officials from across the Learning Community are chiming in with their two cents.

An interim study is examining the mix of property, income and sales tax that fund school districts across the state, including those in the metropolitan area’s 11-district Learning Community.

School officials, as well as members of the public, testified at a series of hearings earlier this month to tell lawmakers how they should proceed when the Legislature returns to session this January.

Schools receive most of their income from property taxes, but the State of Nebraska spends nearly $1 billion in aid to schools, with most of that money coming from income and sales taxes. Federal aid and other revenue, such as motor vehicle registration fees, also support public schools.

To provide property tax relief, some lawmakers have suggested allowing public schools to use local option sales and income taxes. To provide more predictability to school budgets, lawmakers are also considering setting state aid money a year in advance.

But perhaps the most daunting proposal is to simplify the formula used to determine how much money is distributed to schools in state aid.

Lawmakers must balance the needs of rural and urban school districts, as well as adjust for those districts with needs related to poverty, special education, transportation, English proficiency, changing enrollment and other factors.

The state aid formula, defined in statute as the Tax Equity and Educational Opportunities Support Act or TEEOSA, is a political issue because the Legislature has historically not made a large enough appropriation to fully fund the formula.

That means changes to the formula that bring extra dollars to one district will mean there is less money to go around to other districts. Changes that benefit rural districts might create issues for urban districts, and piecemeal fixes end up making the formula more complex — the antithesis of the goal lawmakers have to make the formula more comprehensible.

The Learning Community potentially exacerbates this in the metropolitan area. State aid is awarded to the Learning Community as a whole, so some districts receive more aid and some receive less than they otherwise would receive under the formula.

That means if the formula is changed so some Learning Community districts would receive less on their own but others would receive more, those changes could cancel each other out, leaving fewer dollars in total to be split among the districts.

The Learning Community was established by the Legislature to improve student achievement. Part of the political subdivision’s role is to redistribute the funding that supports local schools.

Under the current system, Omaha and Bellevue schools lose out a lot on state aid through the Learning Community, while Papillion-La Vista loses out on couple of million dollars, according to a comparative analysis by the Learning Community.

The other districts receive more in state aid under the Learning Community— with significant gains for Elkhorn, Douglas County West, Millard, Ralston, Westside and Springfield Platteview schools.

The Learning Community also pools a considerable majority of metropolitan-area school districts’ property taxes into a common levy. The winners and losers for state aid are inverted, so those districts receiving more state aid all receive less property tax revenue.

In most cases, the loss of one source of revenue is not made up by the gains in the other. Even in those districts that come out ahead in the analysis received less funding in 2013-14 than 2010-11.

So every school district in the Learning Community has a case that it needs additional funding, and superintendents from the metropolitan area joined others from across the state contributing to the conversation prompted by the Education Committee.

Gretna wants ‘every child’ to be formula’s primary focus

If lawmakers flew over the Gretna Public Schools, the majority of the district’s 70 square miles would be agricultural land, Superintendent Kevin Riley told the Education Committee.

The Gretna district has seen enrollment grow by 103 percent in the past decade, and only five school districts in the state spend less per student, Riley said. Nevertheless, the district taxes its residents at the maximum rate under state statute, in addition to holding “significant” bond debt to pay for new schools.

Riley asked the Education Committee to recognize the unique challenges facing the Learning Community school districts, and he said that “when there is a levy difference of 10 to 60 cents between school districts” then arguments that large school districts benefit from economies of scale falls apart.

“The education of every child in this state is of primary concern,” Riley said in prepared remarks. “It doesn’t matter if a school district has 66 students or 50,000. Every child matters. Some districts need a lot of help, some not so much. You have to determine the balance between all these issues and what we can afford as a state.”

Bellevue ‘trapped,’ reliant on adjustment to increase needs

Bellevue Public Schools Superintendent Frank Harwood acknowledges that the Learning Community Coordinating Council has its hands tied when it distributes state aid, because it is following a formula based on the needs of each district established in statute.

However, that formula was based on assumptions that didn’t work out — in part driven by a sluggish economy — so now not all of the needs are being funded, the same issue facing other schools relying on state aid but magnified for Learning Community districts.

“Given the fact that the needs of the Learning Community districts are not fully funded based on available resources, this significantly multiplies the impact of the proposed changes,” Harwood said in prepared remarks.

Harwood testified that the core idea of the formula, which is “needs minus resources equals equalization aid,” is simple, but “the devil is in the details.”

One of those details is the use of historical per-pupil spending as part of the needs calculation. So long as historical data is used, Harwood said high-taxing, low-spending districts like Bellevue will not see their needs grow.

As a result, he said the averaging adjustment is “a critical component of being fair to all districts” because it corrects the calculation for “districts that are trapped in the formula.”

Papillion-La Vista needs fix to account for fast growth

The state’s fourth-largest school district continues to experience “significant needs and exponential growth” while seeing revenue remain flat.

School finance expert Doug Lewis, assistant superintendent for business and finance for the Papillion-La Vista School District, told the Education Comittee the “Learning Community distribution formula, as currently written, simply is not working.”

Papillion-La Vista has lost well over $1 million in state aid, with a $450,000 drop in the past year alone. That is after the State of Nebraska has spent more than $10 million less on state aid after treating the Learning Community as one district, which is money that could have gone to hire teachers, improve buildings and purchase textbooks.

“Now is the time to update our state aid formula,” Lewis said in prepared remarks. “We don’t necessarily believe wholesale changes are necessary to TEEOSA. However, we must assure that our formula recognizes the challenges of fast-growing districts, such as Papillion-La Vista, and districts who are already asking their taxpayers to pay the maximum amount.”

Springfield Platteview losses from LC ‘significantly higher’

Brett Richards, the superintendent of Springfield Platteview Community Schools, wants the Education Committee to understand that the Learning Community’s two more rural districts face unique challenges.

He said both Springfield Platteview and Douglas County West Community Schools have losses “significantly higher than the rest of the districts’ losses from a financial standpoint” even though they both have high-achieving students based on state test results.

Springfield Platteview’s challenges are grounded on the redistribution by the Learning Community of both state aid and property tax dollars based on enrollment and needs.

“The formula doesn’t work for smaller districts,” Richards said in an interview. “Because of the economy of scale, the two smaller districts in the Learning Community get more money per child, but it also costs us more money per child to run the district.”

He told the Education Committee that his concerns center on the common levy, where the Learning Community assesses 95 cents per $100 valuation and redistributes it based on the needs formula, leaving only 10 cents available for school districts to levy locally.

“I would be happy to help research and find solutions for the changes needed in the common levy formula and work with the Education Committee on a solution to this issue,” he said.

Ralston wants state to avoid ‘one-size-fits-all’ approach

Ralston Public Schools Superintendent Mark Adler wants to keep the state aid formula focused on equalization, distributing resources to schools based on their needs, which he said was the goal when TEEOSA was first created by the Nebraska Legislature.

“Just as all of our students across Nebraska are individuals with diverse needs and goals, education funding across the great State of Nebraska is equally diverse,” Adler said in prepared remarks. “With that I urge you to continue to research and implement ways to address the diverse needs of all students while keeping the cost of those important services equitable.”

Budget pressures have Ralston experiencing significant staff reductions — 53 fewer staff members since last school year — caused by stagnant funding.

He asked lawmakers to continue to include a mechanism to keep high-taxing, low-spending districts from falling behind, the same averaging adjustment defended by Bellevue Public Schools.

In addition, he asked the Education Committee to pay attention to the cost of “poverty, early childhood education and students who don’t speak English as their primary language” and factor those considerations into the formula.

Adler also asked state senators to be mindful of the special situation of the 11 districts in the Learning Community and to look at changes to the common levy, as well as how money is redistributed based on need, if they also change how state aid is calculated.

“A one-size-fits-all approach in such a diverse state is simply not a good idea,” Adler said. “We believe that any change to the TEEOSA formula should be accompanied by a review and potential revision of the Learning Community distribution formula as well.”

Omaha wants committee to focus on special education

Omaha Public Schools has lost about $159.3 million in state aid since 2010-11 because of how the Learning Community pools the funding, according to a Learning Community analysis.

Superintendent Mark Evans encouraged the committee to provide funding for special education. He also offered a list of other areas of focus: early childhood education, transportation costs, distance education, poverty, English-language learners, summer school and after-school tutoring.

The president of the Omaha school board, Justin Wayne, told committee members that OPS needs financial stability so that, as it implements a strategic plan, it can predict where to put money to best serve students.

“I am asking you to give us a solid foundation to operate over the next five years,” Wayne told the lawmakers.

Additional testimony focuses on other competing priorities

Several speakers echoed comments made by Omaha Public Schools officials to provide more support for early childhood education.

The Nebraska Farm Bureau Federation urged lawmakers to reduce taxes on farmers and ranchers by allowing districts to enact income taxes.

Angelo Passarelli, the director of administrative affairs for Millard Public Schools, asked the Education Committee to preserve parts of the formula that steer extra money to districts that keep children in school longer and have teachers with advanced degrees.

Nebraska Taxpayers for Freedom, asked for districts with cost-sharing agreements be rewarded by the state.

Loretta Carroll, a spokeswoman for the Learning Community, said Learning Community CEO Ted Stillwell and Coordinating Council Chair Lorraine Change attended the hearing but did not offer any testimony themselves.

Breeze Associate Editor Adam Klinker, Breeze Staff Writer Elizabeth Brown and the World-Herald News Service contributed to this report.

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