#### REPORTS

## Under-Funding of the Basic Program in QBE

### Executive Summary

Table 1 indicates the cost of complying with the minimum requirements of the Quality Basic Education Act for the basic program defined by the QBE Funding Formula. However, this estimate does not represent the funding that would be needed to meet the State’s standards for student performance or provide an adequate education as required by the Georgia Constitution.

This analysis is based on the following assumptions:

- Assume that the funding for
*Instructional Personnel*is exactly the same as the amount currently calculated by the State. - Set the funding for
*Staff Development*at 1% of salaries. - Set the funding for
*Textbooks & Supplies*at 90% of current expenditures, $25 per student for*Media Materials*, and $25 per student for*Instructional Equipment*. - Set the funding of
*School Administration*and*Central Administration*at 10% and 3% of the instructional personnel costs at the school and system levels, respectively. - Assume that a typical school system will spend 25% more for
*Facility Maintenance*than the minimum amount in the funding formula. - Assume that local systems will spend 50% more for
*Student Transportation*than the minimum amount in the funding formula.

Table 2 indicates that the cost of the minimum educational inputs required by the QBE Act (apart from what is needed to meet the State’s standards for student performance) is at least $1.2 billion less than the funding provided through the QBE Formula (including the required local effort) and transportation grants. This total includes the following components:

- $600 million for the under-funding of the basic program in QBE in FY 2002,
- $400 million in austerity reductions and direct cuts since FY 2002, and
- $200 million for the effect of inflation on all costs except for instructional personnel.

The purpose of this analysis is not to estimate the cost of an adequate education. It is simply a measure of the under-funding of the basic program defined in the QBE Act, based on assumptions that are so conservative that no one could possibly dispute them.

### Introduction

Table 1 indicates the amount of funding that would be needed to comply with the minimum requirements of the Quality Basic Education Act for the basic program defined by the QBE Funding Formula. It is expressed in terms of the required inputs instead of the expected outcomes. This estimate does not represent the cost of meeting the State’s standards for student performance or providing the adequate education required by the Georgia Constitution, but the analysis on which it is based is a reasonable starting point for further research.

There are three concepts underlying this analysis that ought to be stated explicitly.

- Adequate funding is a necessary but not a sufficient condition for educational success. There is no substitute for capable, dedicated teachers, strong leadership, involved parents, and a supportive community. However, even these factors require adequate compensation to attract and retain skilled educators, and adequate resources are essential in taking full advantage of everything else.
- The State of Georgia is responsible for establishing a foundation of educational opportunity for every student in Georgia. In other words, the State, with whatever local effort it may require as a condition for receiving State funds, sets a floor for the funding that is necessary to provide an adequate education for every student in every system. Local systems can then pay higher salaries and supplement the basic program to whatever extent they are willing to invest and able to afford.
- The funding model should be used to guide the allocation of resources in meeting the needs of every student, but not to dictate the form of instruction. The mechanics of the funding formula have often taken precedence over the ability of teachers and schools to decide what is best for their students. The funding formula should be viewed instead as the means by which the necessary resources are allocated to support the instructional process, with rules and accountability being imposed in other ways.

The purpose of this analysis is to estimate the minimum amount of funding which each system throughout the state must have to comply with what the current law requires in terms of staffing, textbooks, supervision, transportation, facilities, and other educational inputs. This estimate does not recognize the additional resources that are needed as part of the basic program to meet the minimum standards for student achievement or to overcome the obstacles to student learning. The funds provided by a local system in excess of its required local effort should be used to enrich or supplement the basic program and not to cover deficits in the funding of the basic program for all students.

**Therefore, the purpose of this analysis is solely to indicate the magnitude of the under-funding of the basic program defined in the QBE Act. It is not a measure of the cost of an adequate education. The intent is to estimate the cost of the required educational inputs without asking whether these inputs are enough to produce the desired educational outcomes. It is based on assumptions that are so conservative that no one could possibly dispute their reasonableness.**

### Analysis

This analysis is based on six very simple assumptions. They are intended to describe the most basic educational inputs required by State law, but once again they do not represent the level of funding that is needed to meet student performance standards or to provide an adequate education. These assumptions are as follows:**1. Assume that the funding for Instructional Personnel is exactly the same as the amount currently calculated by the State.**

The calculations in this analysis are based on the minimum salary schedule and staffing ratios set by the State. In fact, the total expense shown for instructional personnel is exactly the same as shown on the combined allotment sheet for all local systems in Georgia.

This methodology is not meant to imply that the minimum salary schedule is adequate. Nor should the existing staffing ratios be considered adequate.

Some of these ratios defy logic, such as the allocation of 1 specialist in art, music, and physical education for every 345 students in grades 1 to 8 with no regard for what the educational outcome might be. Similarly, there is no educational justification for the arbitrary caps on the number of students who can be served in alternative programs, remedial education, and instructional extension (sometimes referred to as 20 days of additional instruction).

Other ratios are misleading or conceptually flawed, such as the allocation of 1 teacher for every 23 students in high school, which appears reasonable at first glance but ignores the requirement for every teacher to have a planning period, fails to address the need for hands-on instruction in science, and does not allow specialized courses with a small number of students.

**2. Set the funding for Staff Development at 1% of salaries.**

This analysis recognizes the need for the ongoing training of teachers, especially at a time when Georgia is introducing a new curriculum. Not only are local systems explicitly required to provide staff development, but they have to do so as a practical matter to implement the instructional program required by the State.

This analysis uses a simple and modest standard for staff and professional development (1% of certificated salaries), which is considerably less than suggested by applicable research but is approximately the same as the standard of 1.5% of beginning certificated salaries that was adopted by the General Assembly in 2000 (but subsequently cut by one-third).

**3. Set the funding for Textbooks & Supplies at 90% of actual expenditures, $25 per student for Media Materials, and $25 per student for Instructional Equipment.**

The indicated minimum cost of textbooks and supplies (90% of actual expenditures or $188 per student), media materials ($25 per student or $11,250 for a school with 450 students), and instructional equipment ($25 per student or $575 for a class with 23 students) should not be considered to be an estimate of what is adequate. These allocations are intended only to illustrate the dramatic under-funding of these items in the current formula. This estimate is considerably less than the total of related expenditures, which do not meet the real needs, and is far less than the cost that would be necessary to provide modern technology in support of instruction.

**4. Set the funding of School Administration and Central Administration at 10% of the instructional personnel costs at the school level and 3% of personnel costs at the system level.**

Instead of trying to identify the specific elements of administration at the school and central levels, this analysis uses the simple idea of an “overhead” rate of 10% for each school and 3% for each system. Many businesses and other organizations use this approach for budgeting, and it is much easier to understand and calculate than the detailed tables in the current formula.

Here again, the intent is not indicate what would be adequate but only to use a common approach with percentages that are clearly reasonable. These rates are about one-quarter less than what was actually spent on school and central administration in FY 2002, and the estimate for central administration is even less than the present allocation in the QBE Funding Formula.

It should be noted that this approach automatically takes into account the possibility that a local system might pay salaries that are higher than a statewide minimum, since the estimates of personnel costs at the school and system levels that are calculated in this analysis are based on the minimum salary schedule for certificated employees.

**5. Assume that a typical school system spends 25% more for Facility Maintenance than the minimum amount in the funding formula.**

In lieu of an in-depth study, which should be undertaken but would have to take into account the wide diversity in the age, size, and nature of school facilities across Georgia, the estimate for facility maintenance in this analysis is based on an overall average of what local school systems are actually spending to maintain their facilities, without implying that these expenditures are adequate to create an environment that is conducive to learning.

As the first step in determining a cost per student, all of local school systems were ranked by their expenditure per student for facility maintenance in FY 2002. Next, the systems at the top of this list with 20% of all students and likewise at the bottom of the list with 20% of all students were eliminated from consideration to exclude all of the systems that might represent unusual situations. The average expenditure per student was then calculated for the remaining systems.

To be even more conservative, this average was reduced by multiplying it by 80% to set a statewide minimum. The purpose of this adjustment is to recognize the possibility that some systems may pay salaries to their maintenance employees that are higher than what the State would consider to be a floor. If a typical local system spends 25% more than a statewide minimum, this theoretical floor can be calculated by multiplying the average actual cost by 80%.

The resulting cost per student is still less than the comparable cost per square foot for maintaining low-rise commercial office space in suburban Atlanta in 2002, even though the wear and tear on school buildings is certainly greater than on commercial office space.

**6. Assume that local systems spend 50% more for Student Transportation than the minimum amount in the funding formula.**

Likewise, the estimate of the cost of student transportation in this analysis is assumed to be only two-thirds of what all local systems spent in FY 2002 to transport their students to school. The fact that some local systems exceeded this amount does not mean they were spending more than was necessary to meet local needs. In many cases, these expenditures were necessary for the safety of their students and are therefore essential for an adequate education.

The intent, once again, is only to indicate the magnitude of the difference between current expenditures and the related funding and not to suggest what is adequate. The gap is so great that it cannot be explained by unreasonable expectations at the local level or inefficient operations.

### Conclusion

This analysis relates to FY 2002, the last year for which complete data is available on school expenditures in Georgia. FY 2002 was also the “high water” mark in the funding of Georgia’s schools. Since then, there have been substantial austerity reductions and targeted cuts in the funding formula and other grants totaling about $400 million per year.

The estimate of minimum costs should also take inflation into account. The impact of inflation applies to all parts of the education budget, since school systems have to compete in the general economy. In this analysis, however, the impact of inflation since FY 2002 is considered only on those operating expenses that are not included in the cost for instructional personnel. In effect, teachers have been forced to absorb the effect of inflation on their compensation above the modest increases in the State’s minimum salary schedule over this period, unless a local system intervened to cover the difference through local funds.

**Table 2 indicates that the cost of the educational inputs for the basic program in QBE is at least $1.2 billion less than what is provided through the QBE Funding Formula (including the required local effort) and transportation grants – without even considering local salary levels or the need for additional services beyond the basic program in QBE.**

This amount includes the following components:

- $600 million for the under-funding that existed in FY 2002,
- $400 million in austerity reductions and direct cuts since FY 2002, and
- $200 million for the effect of inflation on all costs since FY 2002 except for the cost of instructional personnel.

Expanding the instructional program to assist all students in meeting the State’s minimum performance standards and bringing the minimum salaries to an appropriate level would push the estimated cost to a level that is much higher than indicated by this rough and incomplete analysis.

*April 21, 2005*