School Funding Formula Workgroup Charts Path Forward

The Funding Formula Workgroup of the [Kirwan] Commission on Innovation and Excellence in Education today held its first meeting in Annapolis. The thirteen-member panel is charged with working through what is perhaps the most challenging portion of The Blueprint for Maryland’s Future – a ten-year plan to make Maryland schools more competitive both nationally and globally – the development of a plan to finance, realign, and apportion the costs of these ambitious, but expensive, goals.

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Specifically, the Workgroup will make recommendations on the distribution of funds, by local education agency and between State and local governments, for the programmatic recommendations in the Kirwan Commission policy report, and recommend specific funding formulas for ongoing costs within the policy recommendations. Further, the Workgroup will prioritize the order of funding for the Commission’s recommendations.

The Blueprint for Maryland’s Future

The 2019 bill represents the initial steps to implement the findings of the Kirwan Commission, targeting broad changes to Maryland’s support for, and expectations of, its education system.

“Maryland is the first state to undertake an international standard in a rigorous way for the expectations of our schools,” Dr. William “Brit” Kirwan said.

This initial bill includes a limited number of funding commitments for FY 2020 and 2021. One component of the bill creates an incentive for counties to find a 3% salary increase in each of those years, with additional state funding for teacher salary enhancements as the inducement to do so.

The full bill is described thoroughly in the Fiscal and Policy Note from the Department of Legislative Services (DLS).

According to DLS:

Achieving The Blueprint for Maryland’s Future will require a sustained and coordinated effort in five main policy areas as recommended by the Kirwan Commission:
  • Early support and interventions for young children and their families, including full-day prekindergarten that is free for low-income three-and four-year-olds and expanding services and supports for birth to two-year-olds and their families
  • High-quality and diverse teachers and school leaders, including elevating the teaching profession comparable to other fields with the same education and with comparable compensation, establishing a career ladder so that excellent teachers remain in the classroom, and increasing the rigor of teacher preparation programs and State certification standards
  • A college and career readiness (CCR) standard set at the level required to virtually guarantee success in the first year of a community college program, with Maryland schools focused on getting most students to CCR by the end of tenth grade, and nearly all by the end of high school; providing supports for students who are not on track for CCR; and providing post-CCR pathways for students who achieve CCR, including early college programs that allow a student to earn an associate degree at no cost while in high school and career and technical education pathways that lead to an industry-recognized credential
  • Additional resources, supports, and services for students who need them to achieve the CCR standard, including English learners, students with disabilities, and students from low-income families, with particular attention on students in schools with high concentrations of poverty; and
  • A strong accountability system with the authority to hold all entities accountable for implementing The Blueprint for Maryland’s Future effectively to ensure that all students are successful.

The Commission’s deadline to submit its final report is extended to December 1, 2019, and the law extends the due date for the special education study report required under Chapter 715 of 2017, and expanded under Chapter 361 of 2018, to December 1, 2019.

The law also updates references to the Consumer Price Index for the Washington Metropolitan Area for purposes of determining the annual inflation rate for certain education formulas. The Maryland State Department of Education (MSDE) and the Maryland Department of Health must take specified steps toward the use and sharing of Medicaid data as part of the direct certification process to identify and verify student eligibility in the new information technology system that is currently under development by MSDE.

Overview of Education Funding in Maryland

Maryland’s current funding system is largely driven by the Thornton Commission, which issued wide-ranging recommendations in 2001, driving 2002 legislation. A report from DLS provides a detailed history.

The two main components of school funding being centrally debated by the Commission are generally known as Foundation and Targeted funding.

Click here to read the latest article from a special series on Conduit Street, featuring elements of Maryland’s current school funding debate. For more general information on school funding formulas today, see “School Funding: This is How We Do It” from 22 May 2019, and for more information on the county wealth formula, see “Money Changes Everything (The Wealth Formula)” from May 30.

The following charts and graphics are from DLS’s detailed analysis of education funding in Maryland.

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Building the PreK-12 Funding Formulas

The Foundation is the workhorse program. Developed through a combination of “successful schools” and “professional judgment” models (more thoroughly discussed by DLS in this report) the result is an overall amount of funding per pupil, generally associated with the funding level required to offer a successful school.

The per pupil figure is then “wealth-adjusted” to develop a state share of these funds for each public school student.  Based on each jurisdiction’s conceptual “ability to pay,” the state contributes a certain share of these foundation costs to each school system – with a statewide split of essentially 50/50 state/county.

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Nearly all state education funding is distributed on a per-pupil basis, meaning that the more students a school system serves, the more funding it receives. By contrast, when the number of students declines, schools can experience a sudden drop in funding. School systems often strive to offer equivalent courses and programs, even with fewer students.

This dynamic can strain local budgets – reflecting the reality that not every dollar spent in a school system is truly a “variable cost.” A 1% drop in students across a county school system may mean some cost savings in bus transportation and meals service – but may not have any effect on the majority of system-wide costs for education and administration.

To help offset the sudden drop-off in education funding to jurisdictions with declining enrollment, the General Assembly approved an enrollment-based supplemental grant to provide funding if a county’s most recent prior three-year average full-time enrollment (FTE) is greater than the FTE in the previous school year. This legislation is only effective for fiscal years 2018 through 2020 as a stop-gap measure.

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Currently, a county’s wealth includes both the income of county residents (NTI) and a portion of the assessed value of the property in the county. These two amounts are added together to calculate the overall wealth of a county.

Augenblick, Palaich and Associates (APA), the education consulting firm hired by the State to study adequacy in education, recommended a multiplicative approach, whereby each county’s percent of the State average NTI is multiplied by each county’s property wealth. The overall effect of this approach will magnify the disparities in wealth between all 24 counties and significantly alters the distribution of State aid.

DLS, in a presentation to the Kirwan Commission last year, recommended using the current additive method and adjusting the proportion of income and wealth to reflect the proportion of actual revenues collected by the counties. This approach weights property wealth less than the current formula.

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Geographic Cost of Education Index (GCEI)

The education funding model, as far as it goes, implicitly suggests that the cost of delivering a quality of education is a constant in all parts of the state. Economic data, however, contradicts this – most obviously in labor markets. If the required wage to hire a quality, experienced classroom teacher varies from place to place within the state, how should school funding address this?

Since 2002 and the passage of legislation formulated by the Thornton Commission, Maryland has used a system known locally as the Geographic Cost of Education Index (or GCEI) as a tool to recognize disparate costs of providing educational services.

This simple summary from the Maryland State Education Association offers the basics:

Geographic Cost of Education Index (GCEI): Since the cost of education is different across the state, the state provides additional funding through the GCEI to make up the difference for counties where delivering education is more expensive. Using an index that values each jurisdiction’s cost of education, the GCEI formula multiplies the per pupil foundation amount for each county by the county’s predetermined adjustment factor. Thanks to the work of the General Assembly in the 2015 legislative session, GCEI is now mandatory funding.

In short, the GCEI uses multiple factors to determine not only the cost of living, but also the cost of education, in each county.

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Maintenance of Effort (MOE)

Under the current Maintenance of Effort (MOE) law, counties are required by the State to maintain the same amount of funding for education per pupil each year. There are two components of MOE:

  • Local share of the foundation program
  • Local appropriation on a per FTE basis

MOE Escalator

If a jurisdiction’s funding effort is below the five-year Statewide average, then required MOE per pupil amount is increased by lesser of the jurisdiction’s increase in per pupil wealth, the Statewide average increase in per pupil wealth, or 2.5%.

Noncompliance results in a redirection of the jurisdiction’s revenue to the school system thus holding the school system harmless.

Targeted Funding

Maryland recognizes that certain classes of students drive real costs beyond the basics incorporated into the foundation formula. Students with special needs, students from economic disadvantage, and students with limited English proficiency all represent an additional funding modifier to drive needed resources to those systems. In essence, a special education student triggers additional expected funding of 74% of the foundation amount for other students.

These funds are then, just like the foundation funds, adjusted based on local wealth, and the state share is calculated and distributed to the school systems for each county.

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Next Steps

DLS provides a snapshot of the work ahead:

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The Workgroup is expected to make its final recommendations to the Kirwan Commission this fall. In turn, the Kirwan Commission plans to vote on the Workgroup’s recommendations before the General Assembly convenes for the 2020 legislative session.

County governments share concerns regarding current education funding law, including the State’s wealth calculation, funding of jurisdictions with declining enrollment, and the effect of nonrecurring costs on “maintenance of effort” calculations. MACo will continue to advocate on these issues through MACo President and Harford County Executive, Barry Glassman, who represents MACo on the panel.

The next meeting will be held on Tuesday, July 16, 2019; 10:00 am-4:30 pm, at 120 House Office Building (House Appropriations Committee Room), 6 Bladen Street, Annapolis, Maryland.

Materials from today’s meeting are available on the Department of Legislative Services website, and the meetings viewable online by searching the House Appropriations Committee room on the dates of each meeting.

Stay tuned to Conduit Street for more information.

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