School Funding, Residual Budgeting, and Kansas

If you live in Ohio, and if you were paying attention during the 1990s, the decade of decisions and appeals of the DeRolph school funding case, you understand the concept of residual budgeting.  School funding in Ohio, the plaintiff’s attorneys explained again and again, is a mere budgetary residual. The legislators calculate the pot of tax money available this year; then they look at what they spent on education last year; then they divide available revenue  up across all the functions of government including education—usually making sure they don’t spend too much less on education than last year unless there is a budgetary emergency.  Any year’s state budget allocation doesn’t necessarily reflect what services are really needed, nor does it demonstrate an investigation of what different programs cost. In fact, because last year’s funding is usually the baseline, and because last year’s funding was likely way too low, the school funding formula is likely over time to become way out of kilter relative to the rising cost of services.  Although legislators may allocate something extra to support school districts serving a lot of children in poverty, nobody ever really measures what it would take to make our poorest rural and urban schools operate as schools do in wealthy communities.

At the federal level, the most visible case of residual budgeting is for the Individuals with Disabilities Education Act.  When Congress passed the IDEA in 1975, Congress said the federal government would pay 40 percent of the costs, but in 2014, Congress paid for only 16 percent. Local school districts are simply expected to pick up the expenses of what is known to be a huge unfunded mandate.  Similarly, Title I was created in 1965 as the centerpiece of the Elementary and Secondary Education Act to assist schools serving a large number or high concentration of children in poverty, but Title I has never been funded at a level to support the education of all the children who qualify. Neither has it sufficiently compensated for school funding inequity across the states.

In the 1990s, the problem of residual budgeting at the federal level was compounded by outcomes-based demands for accountability.  David Cohen and Susan Moffitt, in their book The Ordeal of Equality, describe how the 1994 and 2001 reauthorizations of the Elementary and Secondary Education Act failed.  These two reauthorizations incorporated an outcomes-based strategy, “profoundly at odds with the unequal conditions of education in the United States.  Neither policy was paired with policies that supported improved employment, better health care, and early education, nor did either make a substantial effort to reduce unequal educational resources among schools within districts, among districts within states, or among states. The two bills addressed public education as though schools could dramatically change their operations quite in isolation from the political, social, and economic sources of educational problems.” (The Ordeal of Equality, p. 191)

The Every Student Succeeds Act, the recent, 2015 reauthorization of the Elementary and Secondary Education Act, represents the same sort of denial. In the new law, Congress failed to expand Title I, despite that its own 2013, Equity and Excellence Commission had concluded: “The common situation in America is that schools in poor communities spend less per pupil—and often many thousands of dollars less per pupil—than schools in nearby affluent communities, meaning poor schools can’t compete for the best teaching and principal talent in a local labor market and can’t implement the high-end technology and rigorous academic and enrichment programs needed to enhance student performance. This is arguably the most important equity-related variable in American schooling today. Let’s be honest: We are also an outlier in how many of our children are growing up in poverty… We are also an outlier in how we concentrate those children, isolating them in certain schools—often resource-starved schools—which only magnifies poverty’s impact and makes high achievement that much harder.”

There have been efforts by school finance experts and advocates to get Congress and  legislative bodies across the states to measure equity according to the actual cost of services. The plaintiffs in Ohio’s DeRolph school funding case called expert witnesses who defined a Basket of Essential Learning Resources for the 21st Century (scroll down the left side in the link to find the document). Experts call this an “inputs” approach and urge states to conduct “costing-out studies” to identify what schools must pay for the services they are expected to provide.  Legislators, on the other hand, have preferred an “outcomes” approach that instead measures test scores “produced” by school districts; they have liked to pretend there is no real connection between inputs and outcomes.  The reality, of course, is that because neither the federal government nor most of the states are willing to generate enough tax dollars to cover what would be the real costs, everybody seems to prefer the denial afforded by residual budgeting.  If a formula sends more state dollars to very poor school districts, surely that will improve the test scores, even if that amount can be proven to be inadequate.

This year’s poster child for residual budgeting and a school funding system way out of whack is Kansas, the victim of Governor Sam Brownback’s efforts to reduce the size of the state’s government through tax slashing. We are reminded by a 2014 piece in the NY Times that,  “Kansas’ current constitutional crisis has its genesis in a series of cuts to school funding that began in 2009. The cuts were accelerated by a $1.1 billion tax break, which benefited mostly upper-income Kansans, proposed by Governor Brownback and enacted in 2012.”  The newest report from the Center on Budget and Policy Priorities explains: “Another state that has imposed deep funding cuts—Kansas—eliminated its funding formula this year (2015), making impossible direct comparisons to earlier years.  Formula funding in Kansas was down 14.6 percent per student between 2008 and 2014, after adjusting for inflation.”

Last week the Kansas Supreme Court affirmed the trial court decision in Gannon v. State of Kansas, and found the state’s current funding system unconstitutional.  According to the Education Law Center: “In its decision, the Court explained that Article 6 of the Kansas Constitution requires the legislature to ‘make suitable provision for finance of the educational interests of the state…’ Article 6 contains both adequacy and equity requirements.  It necessitates that the legislature provide enough funds to ensure public school students receive a constitutionally adequate education and that the funds’ distribution does not result in unreasonable wealth-based disparities among districts.”  The Education Law Center continues: “The Court had found an earlier funding system inequitable, and the legislature revised the system and brought it into compliance with the Constitution during its 2014 session.  However, in its 2015 session the legislature reversed itself, and the Gannon plaintiffs returned to the Kansas courts, arguing that the funding system had become unfair (inequitable) and therefore unconstitutional again.”  This time the Kansas Supreme Court says it will shut down the state’s schools if the legislature and governor neglect to find enough money by June 30 to fund schools adequately and to address inequity.

The NY Times reports, “The decision is the latest blow to Gov. Sam Brownback, a Republican, and the state Legislature, which will probably have to find tens of millions of dollars in its budget for additional education funding. Kansas is already facing deep fiscal woes in the wake of Mr. Brownback’s decision to cut taxes, which he predicted would help bolster the state economy.  Revenue has fallen short of projections and he and lawmakers are scrambling to fill a roughly $200 million gap before the close of the session.”  As Kansas has discovered, when the size of the state budget pie becomes very small, residual budgeting—making all the pieces of the pie smaller without considering the real price of the services that need to be provided—reduces the state’s allocation for education far below the actual cost of essential programs for children.

Linda Darling-Hammond, the Stanford University professor and education researcher, “wonders what we might accomplish as a nation if we could finally set aside what appears to be our de facto commitment to inequality, so profoundly at odds with our rhetoric of equity, and put the millions of dollars spent continually arguing and litigating into building a high-quality education system for all children.” (The Flat World and Education, p. 164)

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