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More Than a May Day Coincidence: SB 213 Tax Hike and “Phantom” Funding Reform

There are a few possible explanations for all those shouts of “May Day” Coloradans may have heard yesterday. Some might have been the annual calls for an imaginary workers’ paradise, while others might have been desperate pleas of displaced Texans and Californians calling for relief from the late-season snow. In my education policy wonk world, though, “May Day” was code for a noteworthy coincidence. Have you heard?

As Ed News Colorado reports, the state legislature yesterday put the finishing touches on Senate Bill 213, the new school finance bill tied to some form of a billion-dollar tax increase initiative. Finishing its partisan course, the senate approved house amendments by a party-line 20-15 tally. Every legislative vote cast for SB 213 has come from Democrats; every vote against has come from Republicans. The Governor, also a Democrat, has given every indication of signing it into law.

The strict partisan divide may have something to do with all the bill’s missed reform opportunities, including continued inequities for charters and only a tiny share of total funds assigned to student “backpacks” (and in the final version of SB 213, pgs 139-140, even that small amount of principal “autonomy” is subject to district-level review). Then there’s the issue of “phantom students,” an ongoing problem of inequity left completely untouched by this new legislation.

That brings us to the May 1 coincidence. The same day as Colorado’s SB 213 received its final stamp of legislative approval, the smart people over at Education Next published a research-based commentary by Marguerite Roza and Jon Fullerton titled “Funding Phantom Students: State policies insulate districts from making tough decisions.”

Among other topics, the article brings attention to two existing Colorado funding policies that remain unchanged in the SB 213 “reform” plan. First, districts with declining student enrollment are still able to average up to the past five years to determine their base student funding count — something that doesn’t apply to districts with growing enrollment. That’s extra money for students no longer there, who may have even graduated from college already. If fixed costs are the issue (and the authors point out how most districts count too many expenses as such), then why do the weighted allocations only flow one way?

Second, (mostly rural) districts with small numbers of students receive more dollars per student due to the “size factor.” Colorado isn’t as heavily overweighted in this area as some states (e.g., California, Georgia, Arizona, New Mexico), Roza and Fullerton show, and one can make a justifiable argument for divvying up dollars this way. But they also note:

Small-district subsidies also reinforce the assumption that there is one best method to deliver schooling: a traditional school building with a principal, a nurse, on-site teachers in all subjects including specialty courses, and so forth. This mind-set has prompted advocacy groups like the Rural School and Community Trust to seek both small-district subsidies and protection against loss of enrollment to charters. In contrast, some small and geographically isolated districts have found that with digital learning technology, they are able to provide students with better course options and at a per-pupil cost that provides for parity with other districts.

How innovative… Not! That’s what it comes down to in the Education Next analysis. These policies are about protecting the status quo function of existing government school districts. Why not instead create incentives to more efficiently and more effectively serve students, regardless of what type of school they attend? Why not, indeed. Roza and Fullerton offer up a number of solutions that are worth reading closely. One recommendation touches on a true fixed cost known as public employee pension contributions:

A possible way out of this mess is for states to execute a grand bargain. States could assume existing liabilities from school districts, effectively spreading the costs across all current providers. Simultaneously, though, states should adopt strict requirements that, from this point forward, districts (and other providers) must fully fund all employee benefits in the year that those benefits are accrued. [emphasis added]

Hmmm… Where have I heard “grand bargain” before? Another May Day coincidence, perhaps? Yet even the article’s modest (and likely inadequate) proposal to address Colorado’s unfunded PERA liability surpasses the current legislative project. SB 213 won’t touch the issue with a 10-foot pole, but won’t go into effect without asking voters to sign on to another billion dollars a year in new taxes first.

Seeing the problems and potential solutions put forward in this thoughtful article just brings home how much reform was missed by Colorado’s touted version of a “grand bargain.” And that, my more mature friends, is more than just a coincidence.