May 24 — 12:00 am, 2007

How schools are funded in Pennsylvania: A primer

The Philadelphia School District will spend this summer grappling with its ongoing budget crisis. Schools face cuts of teachers, counselors, librarians, and nurses. The central administration, still reeling from last winter’s round of pink slips, braces for the next – and likely more brutal – wave of cuts.

Administrators in each of Pennsylvania’s 501 school districts will also be laboring to balance the books for next year. As this juggling act swings into high gear, the public is left to wonder: How do we fund schools in Pennsylvania? Is there a better way?

Sources of revenue

As in most states, school districts in Pennsylvania receive their money from three separate sources: locally raised and distributed monies (usually collected through property taxes), a state appropriation, and federal funds – a relatively small share. These three streams form the pool of money school districts work with each year when they craft their budgets.

Nationwide, state appropriations are the largest source of funding, providing more than 50 percent of the cost of public education.

However, Pennsylvania districts rely heavily on local sources. In total, only 36 percent of K-12 revenue comes from the state. In this respect, Pennsylvania ranks 49th among the 50 states, with only Nebraska making a stingier state contribution.

The consequence of this dependence on local funding is plain. Many poor rural and urban communities struggle to raise sufficient funds to pay for adequate schools. Ironically, these poor communities are often home to the highest property tax rates in Pennsylvania.

This point was highlighted by Ed Rendell during his 2002 gubernatorial campaign. “School districts across Pennsylvania are chronically underfunded, forcing them to choose between cutting important programs and raising local taxes,” he said. “The state’s funding inequities – among the worst in the nation – mean that where you live determines the quality of education your child receives.”

The City of Reading provides a clear example of this point. An old industrial town with a population of 80,000, Reading is home to a large Latino and African American population and a high rate of poverty. The Reading property tax rate is 29 mills ($29 in tax is levied per thousand dollars of property value). This rate is significantly higher than the state average of 20 mills. Despite this high rate of taxation, Reading raises a scant $2,245 per pupil locally for its schools. The state contributes $4,914 per pupil, or 69 percent of Reading’s school budget. Reading’s total per pupil funding is only $8,430, ranking 487th in the state out of 501 districts.

By contrast, suburban Chester County’s nearby Tredyffrin-Easttown School District is able to raise $12,680 per pupil locally with a tax rate of only 14.5 mills – generating almost six times as much money per pupil as Reading from taxes set at half the rate. Although the state gives significantly more per-pupil funding to Reading than it does to Tredyffrin, there remains a $6,500 per-pupil spending gap between the two districts. Multiplied over a classroom of 25 students, the difference in spending between these neighboring districts grows to $162,500 per classroom per year.

Lack of taxable property wealth explains why Philadelphia has $2,100 less per student than the average of its 61 neighboring school districts. In six of those suburban districts, per pupil spending is greater than Philadelphia’s by $5,000 or more per student. The Philadelphia School District is struggling to replace crumbling infrastructure and meet academic performance targets set by the No Child Left Behind Act with significantly fewer resources than its property-rich neighboring districts.

Pennsylvania’s reliance on local funding for public schools has exacerbated the wide disparity in wealth between city and suburbs.

Increasing the state’s share

The only apparent way to overcome the problems of large differences in wealth among local school districts is to increase the proportion of spending that comes from the state, thus decreasing the reliance on local taxes.

Pennsylvania’s contribution was at its highest point in 1972, when the state carried 55 percent of the funding burden. The next three decades saw a steady erosion of K-12 funding.

For the past 16 years, Pennsylvania has not had a consistent formula for distributing funds to school districts. Instead, each year the General Assembly agrees to give each district what it received the year before, plus any adjustments or inflationary increases that are negotiated into the education budget. This system consistently fails to react to a district’s change in enrollment, demographics, or level of need.

At the local level, property tax rates have been rising as districts struggle to keep up with tougher state standards, new technology, and the need to prepare students for an economy without many blue-collar jobs.

Because of a growing local tax strain on many communities, Pennsylvania’s General Assembly voted last year to use expected casino gaming revenues to reduce local property taxes. This is expected to reduce the local contribution to schools by approximately 10 percent. While this may temporarily relieve the burden of high property taxes, it will not lessen the spending disparities between districts.

State Supreme Court decisions, which have been crucial for school funding reform in New York, New Jersey, and Maryland, have been absent from the dialogue in Pennsylvania since the Pennsylvania Supreme Court dismissed an equity lawsuit brought by the Pennsylvania Association of Rural and Small Schools in 1998. The court ruled that all education funding issues are the purview of the legislature and that Pennsylvania’s courts have no role in this process.

Given the court’s stance, Pennsylvanians have looked to the state legislature to be the instigators of change. Last year, the General Assembly authorized a “costing-out” study to determine the cost of providing an adequate education in every school district in Pennsylvania. That report is due in November of this year and is widely expected to show that more than 75 percent of the districts need significant increases in resources in order to meet the academic standards set by the Commonwealth.

Good Schools Pennsylvania, the Educational Policy and Leadership Center, Public Interest Law Center of Philadelphia, and the Education Law Center are among the groups working to encourage the legislature to adopt a new formula that will provide increased state funding for the underfunded districts and reduce the inequality between Pennsylvania school districts.

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