After the 2023 Legislative Session, What’s Next for School Funding?

This article is part of MACo’s Policy Deep Dive series, where expert policy analysts explore and explain the top county policy issues of the day. A new article is added each week – read all of MACo’s Policy Deep Dives.

How Maryland funds its public schools is one of the more nuanced and complicated policy responsibilities of the State, counties, and policymakers. The 2023 legislative session challenged some of the long-established educational funding protocols, to the disadvantage of county governments. In this Policy Deep Dive, we explore what it might mean for the Blueprint for Maryland’s Future (“the Blueprint”) and the future of school funding.

How Maryland funds public education

Maryland primarily funds public school education based on full-time student enrollment and local wealth.

Maryland conducts an annual enrollment or “head count” of all students enrolled at a full-time equivalent (FTE) in the state’s public schools on the same day every year — Sept 30. That headcount is important not only to inform statewide education policies and data but also for counties as a major funder of our public schools.

The enrollment count plays a crucial role in school funding formulas in Maryland and is ultimately one factor in determining how much funding local school districts will get in the state’s budget via “per pupil” spending. This happens through the Foundation Program Formula — the main program in general education aid and accounts for about half of the state-funded aid.

The Blueprint changed enrollment math in several ways, including revamping the State’s funding formula by altering how we calculate enrollment and adjusting the local wealth calculations used in the Foundation Formula:

  • The foundation formula grant under the Blueprint now requires that the count of students, or per pupil count, to be the greater of either:
    • the prior year’s full-time equivalent (FTE) enrollment, or
    • the three-year rolling average of FTE enrollment
  • The Blueprint also adjusted the local wealth calculations of the Foundation Formula to better reflect the actual wealth of county residents by:
    • using the November net taxable income and incorporating a tax increment financing (TIF) exclusion in property wealth calculation

Additionally, The Blueprint established new funding formulas for specific purposes and programs, such as the concentration of poverty grants and publicly funded full-day prekindergarten programs. Furthermore, in the 2021 “Blueprint Revision Bill,” the legislature actually adjusted per-pupil state spending to also include some factors related to the COVID-19 pandemic, including the per-pupil need for additional technology during virtual and hybrid schooling.

Calculation complications

Accurately measuring local wealth — or more specifically, “net taxable income,” proved challenging in the 2023 development of the FY24 budget for state aid and the local shares of education funding. Ultimately, it was resolved in a supplemental budget.

Incomplete information on county tax bases, specifically each county’s “net taxable income,” was initially provided to develop the Governor’s FY24 budget, and the error was not detected before the original budget proposal was assembled and printed. The corrected data became available after that process had taken place, and updating multiple budget components here is attributable to that updated, more complete, information.

The State uses this source data, on the taxable income of residents in each county, in multiple ways:

  • The Disparity Grant program provides additional funds to counties that generate substantially less revenue from income taxes, relative to the Statewide average
  • Most State Aid to Education is based on a wealth-equalizing formula, with county net taxable income as one of its two major components, which guides the State/local share of total funding for each jurisdiction

The updated information about county net taxable income included a number of late-filed returns, with those late-filed returns generally being more complicated and often coming from higher-income filers. So, the net effect of the updated data is to show jurisdictions with a relatively high density of late-filed returns to appear more wealthy, relative to the statewide average.

Under the Disparity Grant program, each jurisdiction receiving funds is scheduled for a funding increase by recognizing the revised income data, as they (in effect) fell further behind the statewide average. Supplemental Budget #1 includes over $53 million to update those distributions.

2023 legislative session: new precedent set

Adding to the complexities of school funding was an onslaught of 2023 legislation introduced to recalculate, reprioritize, and ultimately complicate the local share of public education funding. While many of the bills introduced this year to do so failed to pass the General Assembly, the legislative process of two bills offer a glimpse into looking glass of how the legislature might approach school funding in the future.

HB 1196 – Blueprint for Maryland’s Future Implementation – Funding and Independent Evaluation – Alterations

HB 1196 as introduced would have provided state grants of $150,000 to each of the 24 local education agencies (LEAs) for FYs 25-26 to cover the salaries of Local Blueprint Coordinators. The Blueprint requires that all school districts hire a professional Blueprint Coordinator to guide the LEA’s implementation of the educational reform law and to liaise with the State.

MACo and counties were in strong support of HB 1196 as drafted and introduced, viewing the bill as a clear demonstration of the State’s commitment to partner with locals to successfully manage the Blueprint’s many financial challenges.

Unfortunately, the bill was amended and passed in a manner that greatly alters the intent of the bill. Amended, HB 1196:

  • Seemingly mandates every county board of education to provide a minimum salary of $150,000 for its Blueprint Coordinator position, regardless of variances in costs of living and financial capacity among the 24 diverse jurisdictions;
  • Strikes the State grants to pay for these positions and instead splits the salary cost at the foundation formula rate between the State and counties; and
  • Provides some financial support/relief for two specific LEAs.

While HB 1196 ultimately did not pass at the last minute on Sine Die, the bill’s odd history still signals potential turbulence for future initiatives seeking to lessen counties’ Blueprint burden. The bill was intended to aid in one of the Blueprint’s many funding mandates by providing State grants to fund an otherwise unfunded mandate. Counties and MACo were in strong support of the bill as introduced and what would have been a clear signal of the State’s commitment to helping implement and pay for the Blueprint.

Notably, the General Assembly did add $2,000,000 in special funds for the Blueprint for Maryland’s Future Grant Program budget within MSDE to provide funds for counties to hire local coordinators. The distribution of funds will follow the same proportion by which the State allocates funding for the State share of public education funding.

HB 448/SB 311: Nonpublic Education – Placements of Children With Disabilities – Teacher Salaries (Teacher Pay Parity Act)

In Maryland, if a child that would have normally attended a public school has special needs too great for special education in the public system to handle, they are sent to attend a private school specializing in their needs.

The State and counties split the cost of their education as they do for public schools. However, these kids get an additional level of funding on top of the foundational per-pupil funding, under the presumption that it costs more to serve these students and their unique needs. Currently, that additional funding is borne by the local school system, up until 3x the general per-student costs for students in that system, then added costs are split as 70 percent State, 30 percent counties.

For several years, there had been legislation introduced requiring teachers at these private placement schools to make the same minimum salaries as their public school counterparts — which would be a significant funding mandate. For the first time, the 2023 edition of the bill provided some balance to outweigh the significant costs of increasing private placement teacher pay. HB 448/SB 311 as introduced did so by lowering the county share of the additional per pupil funding from 30 percent to 20 percent and subsequently freeing up funds for the pay increases.

Unfortunately, the bill did not pass as introduced. During the last week of the legislative session, the House amended the bill to strip out the balance offered by the proposed reduction in the county per pupil obligation. As amended, it now required the same per-pupil spending from counties, plus mandated the local share of the pay increases.

The Senate accepted those amendments and took those principles even further, additionally amending the bill to make county governments (rather than the schools) directly responsible for paying the pay increases. By creating code language stipulating that county governments pay instead of local boards of education, HB 448/SB 311 bill sets an alarming precedent.

Additionally, many questions remain about the logistics of this new policy: Will a county receive an invoice directly from the private placement schools, or will the local board of education send one? Or will it come from the State Department of Education? Will a county be expected to pay the private placement school directly? Do these county funds count toward the county’s “highest local appropriation” to the schools for the purpose of the Maintenance of Effort funding law?

Moreover, how will this new, differential way of funding education be used in the future? Will the legislature use this strategy to mandate counties pay for other aspects of school funding that are historically the responsibility of LEAs?

While only time will answer these questions, one thing is clear: the Maryland General Assembly seems ready to shake up school funding, or to alter it for specific purposes as warranted…and it may very well continue to do so considering county governments as funding engines to bear some of the new costs arising from new policies, even as the ambitious Blueprint plans continue their ramp-up.