GCEI Report Introduces New Variables, But What Would They Mean?

GCEI
An excerpt from the report, Geographic Cost of Education Adjustment for Maryland. The report suggests changes to the GCEI equation without providing any fiscal effects.

The geographic cost of education index (GCEI) has been in the news often in 2015, as the Governor’s decision to fund the additional grant program at only 50% for FY 2016 left thirteen of the State’s counties with $65 million less than they received from the grant in FY 2015.

Also this year, the General Assembly passed legislation to make funding the GCEI mandatory in future years, contingent on the Governor funding the formula at less than 100% in FY 2016. The legislation has gone into effect without the Governor’s signature, though some wonder if a late-coming provision of the additional 50% funding could still nullify the bill.

At the same time, the Maryland State Department of Education is conducting a study of the GCEI and reviewing possible updates as part of its Study of the Adequacy of Funding for Education in Maryland. The current GCEI funding formula was codified in 2004. While a 2007 law required that the formula be updated in 2009 and every three years thereafter, the 2009 update was not codified and further updates were subsequently delayed.

Until now.

APA’s report, Geographic Cost of Education Adjustment for Maryland, reviews the current GCEI formula, provides context from other states, and ultimately recommends fundamental changes in Maryland’s formula. The reports fails, however, to reveal what these changes would mean in terms of dollars received by Maryland’s various school districts.

Current Formula

The report discusses how Maryland’s current GCEI formula is a combination of indices of professional and non-professional worker wages, energy costs, and student characteristics in each school system. The current formula uses what is called a hedonic wage index, “calculated by breaking down variation in current wages due to a number of different identifiable variables,” capturing variation due to both geographic location characteristics and student characteristics.

The consultants also point out that Maryland’s GCEI is formula is only provided in additional to other education funding, preventing any county from losing education funding based on the fact that the costs of education are less there than in other counties.

The current GCEI is included in the Maryland school finance program as an add-on to the base foundation formula, and the hedonic index is truncated at 1.0. (That is, districts with values less than 1.0, e.g. with costs that are lower than average, are treated as if their value is 1.0.)

 Recommendations

The consultants pose three recommendations for updating Maryland’s GCEI. These include replacing the current hedonic wage index with a straight comparable wage model, removing the energy cost element from the calculation, and incorporating the GCEI into the base education funding formula and allowing it to result in a decrease in funding for some school systems. From the report,

  1. The current wage indices within the GCEI should be replaced with indices estimated using comparable wage methodology.

  2. The Energy Cost Index and the other expenditures should be removed so that the GCEI cleanly isolates the wage costs associated with geographic location. These wage costs could still be a combination of professional and non-professional wages, weighted for budget shares.

  3. The GCEI should not be truncated, and should be integrated into the base foundation formula rather than treated as a separate, add-on program.

These recommendations are not accompanied with any projection of what they would mean to the funding currently received by 13 Maryland school systems, or perhaps to the others, who might see a negative effect based on the third recommendation.

Discussion

This month the Stakeholder Study Group, whose charge is “ensuring the [Adequacy Funding] study is thorough and reflective of the distinctive characteristics of Maryland and its public schools” met to discuss this report and other progress by the consultant. Based in the stakeholders’ conversation, the report has raised more questions than answers, drawing criticism from multiple directions rather than driving any form of consensus.

At this point, it seems unlikely that the consultants’ recommendations to change the GCEI in Maryland would be transformed into stand-alone legislative proposals. Airing the ideas at this point, however, leaves them available for incorporation into more broad-based changes to the education funding formula that could be proposed based on the Adequacy Study’s work. The Adequacy Study Final Report is planned to be complete on October 31, 2016.

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