Georgia School Funding Association

REPORTS

Proposed Funding Formula for Georgia’s Schools

General Concept

This is a proposal for a simple, transparent, and flexible method to finance elementary and secondary education in Georgia. Despite some similarities, it represents a significant departure from the approach set forth in the Quality Basic Education Act.

The underlying premise is that the State should provide enough funds to local systems to support a sound instructional program for all of our students. Local systems would then raise additional funds to supplement the basic program in accordance with local needs and desires. The State would set goals and standards, but local schools should have wide latitude in helping every student meet these standards and develop his or her special talents.

The overall approach must begin with the State’s constitutional obligation to provide an adequate education for every student in Georgia and then create an effective partnership between the State and local systems. To meet both of these requirements, the funding formula must recognize the varying instructional needs of each student and the wide fiscal disparities among local school systems.

This proposal differs from QBE in the sense that it is not based on a weighted student cost. Instead, it relies on the number of teaching positions earned by each school system according to approved staffing ratios but with broad latitude in how these positions are filled. There would be “add-ons” for various forms of support at each school. The resulting allotments to local systems would then be adjusted in relation to the fiscal capacity of each system, but also in a way that is different from the current approach in QBE.

Many of the specific ideas in this proposal could be implemented, however, even if Georgia continued to use a weighted student cost for each instructional program.

Compensation for Teachers

Education is a “people business.” Over 80% of all operating expenses in Georgia’s schools are used to pay salaries and benefits. Moreover, the quality of teaching is the crucial to the success of our schools.

All of our efforts in education should be focused on our students, but the funding formula is largely tied to the number and cost of teaching positions. The staffing ratios, salary schedule, and employee benefits are the primary factors in the cost of K-12 education. Each of these factors requires careful consideration in a separate study, but once determined, they become the basic building blocks in the funding formula.

Although there are various ways to construct a salary schedule, it is assumed in this proposal that the State will set a minimum salary for a beginning teacher with a bachelor’s degree along with fringe benefits expressed as a percentage of that salary. Similar amounts would be specified for counselors, subject specialists, technology specialists, media specialists, psychologists, and school social workers.

It is also assumed that, whatever the salary increments might be for advanced academic degrees and additional years of service, they will be recognized on a system-wide basis according to the overall characteristics of the certificated employees in each local system without being apportioned among the various programs.

In any event, the State’s salary schedule for each type of position (which could and should be supplemented by local systems) should be comparable to the compensation paid for similar duties in other professions, reflect various levels of responsibility, and include annual adjustments for changes in the cost of living. There could be further increases in compensation based on broad measures of performance.

Teaching Positions

One of the key aspects of this proposal is the concept of a teaching position, which could be filled by (1) a certificated teacher, (2) a certificated teacher with supporting staff, (3) the use of instructional technology, or (4) some combination thereof. Applying this concept is the most realistic way to control the cost of K-12 education in the future.

The number of students in each instructional program would continue to be the basis for determining the number of earned teaching positions, but the allotment of teaching positions would become the starting point for the funding formula. This approach has the advantage of focusing on the underlying relationship between teachers and students instead of a program weight or a cost per student, which is hard for the general public to understand.

The cost of providing teachers for our schools depends on the total number of students, the placement of these students into various programs, the salaries and benefits for our teachers, and the staffing ratio for each program. Therefore, unless the level of compensation for teachers is changed, the only variable within our control is the number of students per teacher. Because of the financial pressures at each level of government, we will have to find effective ways to adjust the staffing ratios without harming the quality of instruction.

Under this proposal, most local systems would continue to fill a teaching position by assigning a single certificated teacher, but they would have the flexibility to substitute other combinations of employees and technology. For example, they could assign non-certificated employees to work with a lead teacher or use various types of technology in accordance with approved delivery models.

As such innovations were accepted into common practice, the State might decide to adjust the staffing ratio for an organizational level or specific program; but in the interim, local systems would have a financial incentive to develop and refine new approaches.

If it was necessary for the State to adjust its appropriation for K-12 education, it could do so by changing the number of students per teaching position for various instructional programs. Any such adjustment would be much more transparent than the current method of applying a percentage decrease to the total budget as initially calculated. The implications of the “austerity reductions” that have been imposed in recent years are not well understood by the general public and create confusion in the budget-setting process for local school systems.

Proposed Funding Formula

Although the proposed funding formula differs from QBE in many ways, it would continue the concept used by many states of defining a “foundation” of financial support that is provided by the State and augmented by local schools systems. The foundation represents the estimated cost of a sound instructional program for every student in Georgia according to the needs of each student, but is not derived from a weighted cost per student for each program. The calculation of total needs would therefore be much simpler than in QBE.

This foundation would be supported by a combination of state funds and a required local share, which would vary from system to system but require the same level of tax effort in each system. Local school systems would raise additional funds to supplement the State’s minimum salary schedule and enhance the instructional program for their students.

The purpose of the foundation is to provide an adequate instructional program for every student in Georgia, regardless of where he or she may live, while affirming the ability of local communities to exceed the basic instructional program based on local needs and desires.

New: The proposed formula is described in the following outline, and spreadsheets have been prepared to illustrate how it would work in actual practice. The calculations in these spreadsheets are based on the number of students by instructional program in FY 2011, the current staffing ratio for each program, and the other assumptions set forth in this proposal. Reducing the indicated class sizes by 28.5% would bring the total cost of this formula in line with the actual state appropriation in FY 2011.

Conclusion

The proposed funding formula represents a simple, transparent, and flexible way to allot state funds to the local school systems in Georgia. Even though it would still be based on the individual needs of every student, the calculations are not nearly as detailed as is now the case.

This proposal does not attempt to suggest how educators should be compensated, how student achievement should be evaluated, or how instruction should be delivered. Instead, the intent is to define a framework for incorporating these factors into a formula to allot the necessary resources to our schools in the most effective and efficient way. A related goal is to build public confidence in the value of our investment in Georgia’s schools by explaining in simple terms how these funds are being spent to educate our students.

If the cost components are estimated realistically, the necessary flexibility is allowed, and the required funds are distributed in a way that compensates for the disparities in local resources, the use of this formula would provide adequate and fair funding of Georgia’s schools. However, there would still have to be a through and balanced evaluation of the educational outcomes by all students to ensure that these resources are used to improve student achievement.

Attachments

Outline of the Proposed Funding Formula

1. The State would support the basic instructional program for every student, as follows:

  1. Determine the number of earned teaching positions to serve the number of students in each instructional program according to the staffing ratio for that program.

    • The number of teaching positions can be based on the number of FTE students in each of the existing instructional programs in each segment of the school day and the staffing ratio for each program, as is now being done.

    • Alternatively, the number of teaching positions can be based on the total number of students at each organizational level (K-5, 6-8, and 9-12 or K, 1-3, 4-5, 6-8, and 9-12) and a general staffing ratio for each level, plus the number of teachers required to serve the number of students in each of the various supplemental programs (such as Special Education, the Early Intervention Program, the Remedial Education Program, English for Speakers of Other Languages, Gifted Education, and the Alternative Education Program) for certain portions of the school day.

  2. Compute the total cost of these teaching positions, using the salary and fringe benefits for a beginning teacher with the minimum certification (with adjustments to the extent that some of these positions have a higher starting salary).

  3. Recognize the salary increments for training and experience by adjusting the total allocation for all of the earned teaching positions in each system by a percentage equal to the overall level of experience and training for these employees.

  4. Provide support for staff development, based on the continuing need to update and improve the skills of all educators, at a cost equal to 1.5% of the base salary for the covered positions.

    • This percentage was originally set at 1.5%, but was reduced to 1% in FY 2002 and has not been restored.

  5. Add reasonable estimates of the cost for the required supervision of a typical school and school system, at a cost equal to 7% of the total cost of the earned teaching positions at each school for school administration and 3% of the total cost of the earned teaching positions in the system for central administration.

    • The prescriptive and artificial staffing ratios for school and general administration would be replaced by simple “overhead” rates, as used by many businesses.

    • New: To moderate the cost to the State, the overhead rate for school administration could be changed to 6% of the salaries in direct instruction; and to cushion the effect on small systems, the overhead rate of for general administration could be set at 2% of these salaries in systems with up to 5,000 FTE, 4% in systems with 5,000 to 9,999 FTE, and 8% in systems with 10,000 or more FTE (based on the current divisions).

  6. Add allowances for textbooks, technology, supplies, equipment, library books and media, and travel, based on a reasonable amount per student at each organizational level along with other “add-ons” as may be necessary for certain programs.

    • There should be a “reality check” to ensure that the overall total is not less than 75% of the statewide average cost per student for these expenditures in the most recent year for which such data is available.

  7. Share in the total cost of facility maintenance and operation, based on the estimated cost per student of maintaining a typical school building.

    • There should be a “reality check” to ensure that the overall total is not less than 60% of the statewide average cost per student for these expenditures in the most recent year for which such data is available.

2. The State would also provide system grants to cover the operating costs that are relevant to an entire system as opposed to individual students, as follows.

  1. Provide a system grant to cover a major part of the cost of student transportation according to the specific needs in that system.

    • There should be a “reality check” to ensure that the overall total is not less than 60% of the statewide average cost per student for these expenditures in the most recent year for which such data is available.

  2. Provide a system grant, which reflect per-student guidelines, to cover a major part of the cost of nursing services, according to the specific needs of that system.

    • There should be a “reality check” to ensure that the overall total is not less than 60% of the statewide average cost per student for these expenditures in the most recent year for which such data is available.

  3. Provide a system grant to defray the extra costs caused by extreme sparsity and the geographic isolation of specific schools, as well as financial incentives to encourage small systems to coordinate services and functions with RESAs and other systems.

3. The State would pay 80% of the total cost of the basic instructional program and system grants for the state as a whole, and the remaining 20% of the total cost would be apportioned among all local school systems in relation to the taxable wealth of each system.

Although the concept of an 80%-20% split is already embodied in state law through a cap on the Local Five Mill Share, the specific percentages are less important than the goal of creating a true partnership, in which the State and local school systems would share the cost of the any increase in the foundation as well as the savings from any decrease.

As now set forth in QBE, the required local effort is equal to the revenues generated by five mills of property taxes, regardless of the cost of the basic instructional program. This means that any increase in the cost of the foundation is solely the responsibility of the State and any savings accrues solely to the benefit of the State,

In contrast, the total local share under this proposal would vary according to the total amount of the formula and grants that comprise the foundation. The total local share for the entire state would then be apportioned among all local systems according to the percentage of the statewide equalized property-tax digest that is represented by each system. Although the total amount could change from year to year, the number of mills required to cover each system's local share would be the same in every system (after adjustments are made for differences in the assessment methods and property tax exemptions from system to system).

Since the ability to pay property taxes also depends on the taxpayer’s income, a further adjustment can be made in defining the required local effort for each system, based on median household income, local retail sales, or the percentage of students who are eligible for free or reduced-price meals.

4. Because of the importance of local discretion, local systems would be able to spend the funds for the foundation and other services in the way they believe is the most beneficial to their students, subject to overall standards, limits on class sizes, a minimum salary schedule, and accountability for the academic performance of their students.

The detailed expenditure controls that now exist (except for the temporary waivers) should be replaced by the simple requirement that all funds allotted by the State to each local school system for direct instruction be spent for this purpose.

Every local system would have to provide at least as many teaching positions as the number earned through the staffing ratios for each instructional program, but as a way to encourage innovative approaches, the system could fill a teaching position by substituting various forms of technology and/or various combinations of certificated teachers and other employees.

A system would also have flexibility in the size of individual classes so long as any single class did not exceed the base class size for its program and grade level by more than 25%.

5. To meet local needs and desires beyond the foundation, local systems would be able to levy property taxes in excess of the required local share for the purpose of increasing their salaries above the State’s minimum salary schedule and enhancing the services to their students.

The intent of the foundation is to ensure the provision of an adequate education for every student in every school, including the children who have disabilities, do not speak English as their first language, or need extra help. This foundation should be available in every school regardless of local circumstances, but local systems should also have the right to expand and enrich the instructional program for their students through local funds to whatever extent they are willing to do according to the local resources available to them.

6. The State would provide supplemental grants to enable all systems to increase salaries and enhance the services to their students on the same basis as the system at a defined level of taxable wealth.

Since the quality of education can be significantly enhanced by local spending in excess of the indicated foundation, the State should provide additional funding to the school systems that are not able to offer supplemental services on the same basis as a typical system which has as much local resources per student as the statewide average.

This goal can be achieved through grants that are similar to the current Equalization Grants, except that the benchmark should be the statewide average for the equalized property-tax digest per student instead of the equalized property-tax base per weighted student for the system at the 75th percentile when all systems are ranked on this basis. Using the actual statewide average per student would be a logical and reasonable standard that would be more stable and predictable and much easier to understand than any percentile.

If the total amount of Equalization Grants has to be reduced to a certain amount, the benchmark can be adjusted to a level which reduces the total amount of these grants to the prescribed total. This approach would allocate the available funding so that the percentage reduction declines on a graduated basis from the current benchmark to the system with the lowest wealth per student, instead of reducing all of the grants by the same percentage.

Federal Impact Aid should not be counted in the number of mills to be equalized in the calculation of Equalization Grants. The current approach inflates the Equalization Grants to certain systems by counting federal Impact Aid as revenue generated by local property taxes.

Also, the calculation of Equalization Grants should be simplified by using the total FTE rather than the weighted FTE. If the use of program weights was discontinued as recommended in this proposal, there would no longer be any weighed FTE counts. However, this change would not cause a significant shift in the relative distribution of these funds.

7. The guidelines for the major compensatory programs should be updated as follows:

  1. Modify the Early Intervention Program (EIP) to provide the extra help needed by students in grades K-5 to perform at grade level on a sustained basis.

    • This program should be offered to all students who either meet the current criteria for eligibility or are eligible for free or reduced-price meals and have not met grade-level expectations for at least two consecutive years (to avoid abrupt changes). In addition, the “cut-off” score for continued eligibility should be increased to a higher level so that a student does not move into and out of EIP as a result of small changes in test scores above the threshold for meeting expectations on the CRCT.

    • The rules for implementing the various delivery methods, especially in terms of the maximum class sizes, should be revenue-neutral so that a school can choose the method that is best for its students without a financial penalty.

  2. Modify the Remedial Education Program (REP) to provide the extra help needed by all of the students in grades 6-12 who are not making satisfactory progress toward graduation from high school, without a ceiling on the number of eligible students in each school.

    • Participation in REP is now arbitrarily limited to 25% of the students at any school or 35% of the students at a school if half of the students at that school are eligible for free or reduced-price meals.

  3. Modify the Alternative Education Program (AEP) to serve all of the students who need a non-traditional setting to graduate from high school in addition to the students who have been identified as being disruptive, without a ceiling on the number of eligible students in each system.

    • Participation in AEP is now arbitrarily set at 2.5% of the total number of students in grades 6-12 in each school system.