Fact Sheet: A summary of the financial crisis facing Georgia's schools
1. Georgia’s K-12 schools are funded through a combination of State and local funds, with the State paying for about 60% of the total cost for general operations. Nearly all of the funds from the Federal government are restricted to specific programs.
2. The QBE Formula is supposed to represent the cost of providing a basic program for all students. The funds which each system “earns” through the QBE Formula include a required local share equal to 5 mills of property taxes. Each system contributes additional funds not only to supplement the basic program through higher local salaries and expanded programs but also to cover deficits in the funding of the basic program.
3. Nearly all of the new funds from the State for K-12 education in the last decade have been used to raise the State minimum salary schedule for teachers, to cover the increased costs related to enrolment, and to construct additional classrooms. Local systems have to cover the remaining deficits. Meanwhile, the limits on class sizes have been tightened significantly, and new requirements have been added.
4. The under-funding of the QBE Act affects some systems more than others, since the systems without a large amount of commercial property per student do not have the same ability to raise the needed funds locally, but all systems are harmed.
5. Even with the last-minute reduction in the proposed cuts for FY 2005, the cumulative cuts in QBE Earnings for all local systems in the last three years come to more than
- $400 million in total,
- $270 per student, and
- $6,000 per classroom.
6. In addition, local systems have to compensate for
- the deficits in the QBE Formula that existed in FY 2002 (at least $500 million),
- inflation since FY 2002 (at least $500 million in the State share of all costs), and
- the cost of new State and Federal requirements.
7. Taken together, these factors imply that the total funding by the State of $5.6 billion in FY 2005 is at least $1.4 billion or 20% less than what is needed to meet the most basic State standards. The under-funding of the basic program by the State has forced local systems to reduce supplemental programs and increase local property taxes.
8. An improving economy will not be enough to correct this problem, especially since the budget for FY 2005 budget already anticipates a revenue growth of over 6% for the entire year. There are also competing demands on the use of any additional revenues.
9. Although the source of revenues is up to the General Assembly, it is clear that the current tax structure does not generate enough funds to meet the State’s obligations. However, any new State taxes would be offset to some extent by reductions in local property taxes.
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