There is nothing — absolutely nothing — more important to the future of our state than fixing education. And as a result of the Abbeville case, we have a once-in-a-lifetime opportunity to fix it. The question is: Will we?
The Abbeville case began more than 21 years ago when nearly half of the state’s school districts — the poorest in the state — challenged how our schools were funded. Finally, the state Supreme Court told the Legislature: “fix it.”
In the coming months, the issues of how it will, or won’t, be fixed will be decided. Dr. Holley Ulbrich of the Strom Thurmond Institute is the state’s leading analyst on education spending and below is her analysis of what we must do. This stuff is a bit complex, but it is absolutely vital and we should all try to understand this issue.
The Abbeville decision puts the solution to funding the state’s poor districts squarely in the hands of the districts and the General Assembly. The focus is now on funding equity, although the level of funding matters too. Part of the answer to the equity problem can be found in revising the 1977 Education Finance Act formula to address today’s funding challenges.
Under EFA, each district has a target funding amount that is the “base student cost” multiplied by the number of weighted pupils. The target amount is then split between the state (average 70 percent) and the district (average 30 percent). The state pays a smaller share for districts with higher tax bases and a larger share for districts with little tax base.
While EFA had the biggest role in equalizing educational resources across rich and poor districts, it was never meant to be the sole source of state K-12 funds. Most of the other funds–Education Improvement Act (grants for transportation and employee fringe benefits), were distributed on a per-pupil basis. That did less to equalize than EFA.
Property tax relief has become an increasing part of state funds to districts, and it doesn’t consider either pupil counts or the district’s tax base. In fact, distribution of property tax relief favors wealthier districts and districts with fewer pupils. Taken together, EIA, EFA and property tax relief account for about 75 percent of state aid to public education.
In rethinking EFA, there are three important pieces to the puzzle. The first is the level of EFA funding, which reflects base student cost. Today EFA supplies only 31 percent of state aid, compared to 49 percent in 2000, because base student cost has not kept pace with inflation. Right now it is $2,200 per pupil. Adjusted for inflation, it should be closer to $2,800.
The second puzzle piece is weighted pupils. Weights adjust the number of students based on the higher cost of students who are more expensive to serve, such as those with disabilities, those in vocational education or the gifted and talented. Recently a poverty weight was added. Low population density also affects costs in rural districts because it raises transportation costs and results in smaller schools and class sizes. A density weight would help the plaintiff districts.
The final piece of the EFA puzzle is the split between state aid and local match, which depends on the district’s tax base relative to the rest of the state. The property tax base used to be a good way to measure ability to raise local funds until 2006, when Act 388 removed homeowner property from the base for school operations. While some adjustments have been made, Act 388 has still resulted in some shift of state funds toward wealthier districts and away from poorer ones, because having more higher-valued homes results in more property tax relief.
Total state aid per pupil from all sources was $5,364 in 2013, compared to $3,850 in 2000. Adjusted for inflation, state aid per pupil would have needed to be $5,507 by 2013 just to have the same purchasing power. So on average, the state was providing fewer resources per pupil in 2013 than in 2000 and sending less of it to poorer districts because more of those funds were in the form of property tax relief.
In 2007-08, the state Department of Education began to rethink how South Carolina funds public education. Revisiting the complex formula of weights, base student cost and the local match were all up for reconsideration, with the idea of creating a simpler and fairer alternative. However, in 2008 the financial crisis hit and reform was shelved. Given the Abbeville mandate to reform education funding, the idea once again is timely and worth reviving.
The alternative that developed from those discussions was a local match that was based on how much money each district can raise by levying the same millage — say, 150 mills for school operations. The tax base no longer measures ability to raise local funds, because of fee in lieu agreements on industrial property and taking homeowner property out of the picture. This way of measuring the local contribution is easier to understand and in fact has been adopted in some form in at least 17 states.
Along with setting the required minimum mill rate (districts could levy more but not less), the state could also replace base student cost with a target dollar amount per weighted pupil. After each school district collected its share at that mill rate, the state would then add in state-funded property tax relief per pupil—Homestead, Tier I, and Act 388. Finally, the state would “top it up” to the target amount per pupil with funds currently distributed through EFA, EIA and state grants.
Suppose District X has 2,000 (weighted) pupils and the state’s target is $11,000 per pupil. A levy of 150 mills raises $12 million, or $6,000 per pupil. The state’s contribution to that district, including property tax relief, would be $5,000 per adjusted pupil. Any taxpayer or parent can understand where the money is coming from, and if they want more for their students, the district can levy a higher mill rate.
Right now, many poor districts have really high school mill rates to meet their education obligations. School taxes are the lion’s share of local property taxes. With equalized millage, these districts would have a better shot at attracting or retaining jobs and businesses.
South Carolina needs to create a way to distribute state funds that treats our children equitably, regardless of what district they live in. After that, we can argue over how high that target amount per pupil ought to be.
Phil Noble is a businessman in Charleston and president of the S.C. New Democrats, an independent reform group started by former Gov. Richard Riley. Email him at email@example.com.