School Funding Tops Short List Of Demands

Jun 26, 2017

On Sunday, House Speaker Michael Madigan issued three demands for budget negotiations, and one of them was for Gov. Bruce Rauner to sign Senate Bill 1 — a massive overhaul to the state’s school funding structure. But he also said he was open to changes in that bill. Education Desk reporter Dusty Rhodes gives us a refresher course on what those changes might be.

 


Of course, the main issues involve Chicago Public Schools. On Saturday, (before Madigan made his three demands), the Illinois House of Representatives spent almost three hours discussing two school funding bills — the aforementioned Senate Bill 1 (HB 2808) sponsored by Democrats Andy Manar and Will Davis; and Senate Bill 1124 (HB 4609) sponsored by Republicans Jason Barickman and Bob Pritchard. Both Barickman and Beth Purvis, who is the governor’s secretary of education, were on the first panel to appear before lawmakers. In her opening remarks, Purvis spelled out Rauner’s objections to Senate Bill 1:

 

“House amendments 1 and 2 transform this bill from a school funding reform bill to a school funding and CPS pension reform bill,” she said.

 

Earlier this month, Purvis said the governor likes 90 percent  of SB1, but would veto it anyway. On Saturday, she had prepared a comeback:

 

“I’ve been much-quoted on this and I would like to say that, where I’ve been criticized on this, I wouldn’t get in a car that the brakes only work 90 percent of the time either,” she said.

 

But children in Illinois have been relying on school buses that have been underfunded by up to 40 percent dating back to the Pat Quinn administration. That’s one reason all sides — Democrats, Republicans, the governor and Purvis — agree the current formula doesn’t work.

 

The new plans, like all school funding measures, come with spreadsheets that purport to show how each of the state’s 850 school districts will fare. These are models or simulations, calculated by the staff of the Illinois State Board of Education, using a series of educated assumptions. Spreadsheets aren’t the same as legislation.

 

One education professional who has been following school funding for years offered this advice: “I would say all models are fake news and anyone voting on a bill because that how much their districts are going to ‘get’ is an uninformed person.”

 

These spreadsheets -- from  both sides -- are just snapshots of a promise.

 

Both plans have the goal of making school funding more equitable, but the new money envisioned in each of them is just icing that goes on top of a cake that’s a giant hold-harmless provision. It bakes in the current funding every district gets. In the legislative language, it’s called the “base funding minimum.” Both parties agree on the lingo, but disagree about what should be in the BFM, especially for Chicago Public Schools.

 

All districts receive state reimbursement for seven “categoricals” above what they receive in General State Aid. Since 1995, CPS has received its reimbursement in the form of a block grant. But as enrollment has declined and the block grant has not, CPS now receives about $250 million more from this block grant than it would if it had to submit vouchers for reimbursement. The Democrats, sticking to the “hold harmless” concept, would bake that $250 million into CPS’s base funding minimum. The Republicans would allow CPS to keep four categorical bonuses that add up to about $50 million; the remaining $202 million would be redistributed via the new funding formula.  

 

Here’s how Barickman explained it at the Saturday hearing:

 

“When you make adjustments to the Base Funding Minimum for Chicago, and that’s the only place where adjustments are made, that eats up dollars first that cannot then go through the formula," he said. "And for all of us who purport to say we want to fix the formula and create something with equity, the way in which we do that is by driving money through the formula.”

 

As a result of these conflicting interpretations of “hold harmless,” the two school funding bills run very different amounts of funding through the new formula. The Democrats’ most recent model assumes a $350 million appropriation (despite their own appropriation bill setting aside only $288 million). The Republicans’ model uses $672 million through the new formula, which results in much larger dollar amounts promised to each district. That $672 million includes fiscal year 2017 appropriation plus the $288 million proposed by Democrats, along with the $202 million taken from Chicago Public Schools’ block grant. (Despite conflicting testimony at Saturday’s hearing, this amount does not appear to include the “equity grant” that was given to districts with heavy concentrations of low-income kids).

 

The windfall promised by the Republican plan made for some uncomfortable moments for school superintendents who testified before the House on Saturday. Asked to explain why they prefer the Democrats' plan, even though the Republican plan promises more money for their schools, they said they didn't believe in taking money away from CPS, and they believe SB 1 is the more viable legislation, having already passed both chambers.

 

The block grant isn’t the only adjustment related to CPS. In fact, at Saturday’s hearing, the block grant received scant attention. Instead, more discussion centered on CPS teacher pensions.

 

Chicago is the only school district that pays its own teacher pensions. All other teacher pensions are paid by the state through the Teacher Retirement System (TRS). In SB1, the Democrats add normal cost pensions to CPS’s base funding minimum; Republicans remove it and put it in separate legislation (SB 2214) that would cover CPS normal costs for a year. If Republicans’ pension overhaul plan (HB 4065) succeeds, CPS could get ongoing pension relief. If the Republican school funding bill succeeds and their two pension bills fail, CPS will lose both its block grant and pension reimbursement.

 

At Saturday’s hearing, Barickman explained why he believed the pension issue should be kept separate from school funding by referencing the governor’s School Funding Reform Commission — a bipartisan, bicameral group that met over six months between July 2016 and January 2017.

 

“There was a very specific discussion about whether in fact we should broaden the scope of our objectives and try to tackle pensions along with fixing the formula, and the conclusion driven by members of both sides of the aisle, was that we should treat them separately,” Barickman said Saturday.

 

I also attended those commission meetings, and my notes indicate that on Jan. 17, Sen. Daniel Biss kicked off a vigorous debate about pensions that was joined by several Democrats. Manar pointed out that the state of Illinois currently pays teacher pensions ranging from $300 per pupil to $1,400 per pupil, making it a significant source of inequity. Rep. Barbara Flynn Currie said not including it would be a missed opportunity. Biss pushed the issue, arguing that it made little sense to devote so much effort to fixing the general state aid formula of approximately $5 billion, while ignoring the massive inequities in the $4 billion pension piece. But Purvis, who ran the commission, declared that tackling pensions would derail the entire process.

 

Both the Chicago pension fund and TRS have massive unfunded liability. In the upcoming fiscal year, the state’s TRS payments will increase from $4 billion to $4.6 billion. Jessica Handy, with the statewide advocacy organization Stand For Children, testified Saturday that CPS’s statutorily required pension payment will be $721 million. The Democrats’ plan would provide a partial accommodation to CPS by adding a $500 million credit to its “local capacity target.”

 

What’s a local capacity target? In simple terms, both bills (Democrat and Republican) use a model built on interactive parts, like a mobile you’d see hanging over a baby’s crib. When one part is pulled down, the opposite side goes up. The State Board would calculate for each district an “adequacy target” (the amount needed to fund schools) and a “local capacity target” (the amount the district can be expected to generate using local property taxes). The state would supply funding to bridge the gap in between.

 

Ralph Martire, with the Center for Tax and Budget Accountability, helped write the Democrats’ plan, and on Saturday, he tried to explain that it handles CPS legacy pension costs less like a gift and more like a tax credit.

 

“The way we decided to deal with that in SB 1 was to acknowledge they can’t spend the same tax dollar twice,” Martire said. “So if they have to devote their local capacity to covering these unfunded liability costs, that local capacity is also not available to help fund schools.”

 

Another major point of contention on Saturday was whether the hold-harmless should be done on a per-district basis or a per-pupil basis. The Democrats’ plan uses district funding; Republicans, in an effort to compromise, use district funding for the first few years and then switch to per-pupil. That switch could result in decreased funding for districts that have lost enrollment. Rep. Christian Mitchell, a Democrat from Chicago, did a little research on how that might play out, and found that the majority of schools that have lost enrollment are in Republican-held districts.

 

“This bill, that you’re all fighting for, actually screws your side of the aisle harder than it screws ours,” he said. “So understand that the message being sent by the senator, by the secretary, by the governor, is that they are absolutely willing, that they are more interested in screwing poor children in Chicago than making sure your districts get the funding they deserve. That’s the message being sent right now.”

 

It made for good theater (two security officers actually appeared on the House floor as Mitchell spoke), but after 725 days without a state budget, there’s no way to predict what the educational climate might be in Illinois in 2021.