The Cost of Adequate Education Funding: An Updated Report

Last year Pennsylvania adopted a fair funding formula to distribute Basic Education appropriations to school districts. The new formula takes account of changes in the number of students enrolled in a district, how many are in poverty, how many are English language learners, as well as other factors related to the cost of funding students and the ability of a district to raise funds locally. The formula, which was identical to that proposed by a bi-partisan Basic Education Funding Commission, applies only to new funds, and thus does not apply to the $5 billion of funding already in place in 2014-15.

Although the formula adopted by the legislature provides a guide for how to distribute new state funds, it did not provide an answer to another crucial question: how much actual state funding do all Pennsylvania schools need to properly educate their students? In other words, while the formula demonstrates relative needs between school districts, it purposefully did not include the total amount of state funding needed for all Pennsylvania children to succeed and meet state standards. We call this missing figure the State Adequacy Cost.

In 2015, we issued a report that used the legislature’s own formula to answer the question. Using the Pennsylvania Department of Education’s latest school finance numbers, issued in July 2016, we have now updated our report and its State Adequacy Cost. We conclude that in order for districts to have adequate funding to enable their students to meet state standards, the Commonwealth must provide school districts with between $3.036 and $4.073 billion more in additional funding than it is distributing for the 2016-17 school year.  

As stated in the earlier report, this range was created using two scenarios. The smaller estimate is based very conservatively on the median basic education costs for school districts in Pennsylvania in 2014-15. The larger estimate of $4.1 billion is based on the median basic education cost (using 2014-15 costs), among the subset of 188 school districts with average or above average performances on all three of  last year’s PSSA exams.

Put differently, the larger estimate uses costs of school districts that are performing reasonably well—relatively speaking—on state tests. Given the difficulty of a majority of the Commonwealth’s students to score proficient with current funding, it is apparent that the $3.0 billion increase should be the minimum target for state funding increases. Concurrent with this update, we are publishing how much each district would receive based on applying the Commission’s formula to the $3.036 and $4.073 billion increases over six years. In other words, parents and advocates can again use the report to examine what adequate funding would mean for their individual schools.

We note that the current State Adequacy Cost increases are very similar to the amounts needed in the first report, despite the increase of $200 million in funding last year. This is because of the increase in the adjusted Actual Instructional Expense used in the calculations. Put simply, education costs continue to increase. The unreimbursed increase in district pension costs alone, for example, exceeded the Commonwealth’s $200 million increase in basic education funds last year, so most districts had to take funding out of other line items or increase local taxes in order to fund this one budget category, leaving any expansion in services to be paid for entirely by increases in local taxes. Unreimbursed retirement costs are expected to increase by at least $200 million again next year.

The Commonwealth’s constitution requires the legislature to fund a “thorough and efficient system of public education.”  That means sufficient funding to allow all students the opportunity to successfully meet state performance standards. The legislature is not given the discretion to fund the system on the basis of whatever revenues happen to be available without raising taxes nor does the constitution say it may underfund the system if a thorough and efficient system costs more than current revenues can pay for.  Until the legislature conducts a full  study of the base cost to meet state standards, this report, using the relative costs set by the legislature itself, provides the best measure of how far the legislature has to go in order to comply with its constitutional duty to provide all students, no matter where they live, with the resources they need to have a fair chance to succeed.

Issued: December 2016