Troubled schools on trial: A broken formula for state aid
One of Connecticut’s top lawmakers was upset. Norwalk – his hometown and a low-performing school district – was slated to lose $72,524 in state education funding.
So to relieve that political pressure and get the state budget across the finish line, the governor’s budget office in 2012 tried to craft a plan to protect Republican Minority Leader Larry Cafero’s hometown from a cut but still stick to a principled formula for providing school aid to all towns.
“I wanted to touch base with you to see if you think [this approach] would satisfy Cafero before I spent too much time trying to find other ways to hold Norwalk harmless like you requested,” Leah Grenier, a budget specialist at the Office of Policy and Management emailed the governor’s budget chief in February 2012.
But her recommendation meant the state would have had to tweak its entire aid formula to give more money to some towns and cut back on increases the governor was proposing for the state’s other low-performing districts.
In the end the 2012 state budget shielded Norwalk from the cut, not by sticking to a statewide formula, but by crafting a solution for the city alone. The General Assembly rejected a proposal by the governor to repeal a law enacted during a previous administration that set aside an extra $650,000 annually for Norwalk schools.
And then in 2013, the legislature raised Norwalk’s annual earmark to $2.02 million.
Welcome to the messy world of funding schools in Connecticut, where politics often trumps policy in determining how much state aid is sent to certain communities.
Frustrated that the legislature and governor seemed to regularly bypass the complex formula created to ensure state aid is apportioned to cities and towns that need it the most, a Superior Court judge recently ruled after a five-month trial that the state had created an “irrational” and thus unconstitutional method of distributing education funding that takes place in a “black box of secrecy.”
“The state cannot afford to misallocate it or hide its spending priorities from scrutiny. Without a defensible and discernible plan, no one can be sure what the state is delivering and what lines it may not cross,” wrote Judge Thomas Moukawsher in a 90-page decision that has sent shock waves through the state. “Achievement gaps in Connecticut certainly can explain the stakes. The distance between the rich and poor students in this state is great enough to remove any doubt about the importance of being careful to send money where it is most needed.”
That ruling has cast a national spotlight on how schools are funded in Connecticut. It also has spurred Gov. Dannel P. Malloy and numerous advocacy groups and elected officials to call upon the legislature to finally fix the school-funding system, even if the Connecticut Supreme Court eventually overturns all or parts of the decision.
“It’s about doing the right thing for our kids. It’s about doing the moral thing for the state of Connecticut,” Hartford Mayor Luke Bronin said during a press conference outside the state Capitol. “We appeal to you to not let this moment fade away.”
But that could be easier said than done. A look at how the state funds schools now, and the legal and political constraints that have helped determine where the money goes, offer a glimpse into the challenges policymakers would face in trying to mend what the judge deemed an irrational system.
Legislators would be forced to decide whether the problem is inequity in how state aid is distributed, simply a lack of money, or both.
Whatever the fix, there would be huge fiscal obstacles and political battles.
Finding additional state money to direct to the state’s most impoverished schools means legislators would need to either cut spending elsewhere in the state budget or raise taxes. Alternatively, redistributing existing state education aid would require approval by legislators representing many of the communities that could be on the losing side of any new formula.
Or legislators could decide their present approach is fine and wait to see if the state Supreme Court, which will hear an appeal from the recent trial-court decision, forces a shakeup. Attorneys representing the state during the trial maintained that focusing on the small, year-to-year changes in how schools are funded misses the bigger picture – that two-thirds of the state’s primary education grant goes to the state’s 30 lowest-performing districts.
How are schools funded?
First, a look at how the state now spends money on elementary and secondary schools – $4.8 billion during the 2015 fiscal year.
Ninety percent of that aid was provided in four ways:
- The Education Cost Sharing (ECS) grant that the state sends municipalities to help run their schools has garnered the most attention – and criticism – and accounted for 42 percent ($2.03 billion) of all state education spending.
- Pensions for retired teachers took $984 million. Factor in the annual debt payment on borrowing Connecticut did years ago to shore up the teachers’ pension system, and the state spent $1.12 billion.
- The state committed to spending $609 million to build and renovate schools. This spending is put on the state’s credit card through bonding, and the state then makes regular payments out of its operating budget to pay down the debt. The state spent $674 million paying off school construction debt in fiscal 2015.
- Operating charter and regional magnet schools cost $403 million.
The remaining 10 percent of state aid pays for a wide range of programs and services, such as special education, vocational-technical high schools, school transportation grants, healthy school meals and after-school tutors.
Who gets what?
The judge in the school funding trial focused heavily on the Education Cost Sharing grants to towns when he described Connecticut’s funding system as irrational, but the state actually has a formula for distributing the money. Lawmakers routinely tinker with the way it is implemented, however.
The formula is rooted in a 39-year-old state Supreme Court ruling that found relying largely on local revenues to fund schools without regard to disparities in town wealth was unconstitutional.
Lawmakers created the Education Cost Sharing grant in response. It takes into account how many students from low-income families a district enrolls and how much taxable property there is to support the schools.
Educators from Bridgeport, Danbury, East Hartford, New Britain, New London and Windham took turns during the trial explaining what having less money means at their schools, where the majority of students are multiple grades behind academically. Data from the Connecticut Department of Education also show these underachieving districts have larger class sizes, lower average teacher pay, higher teacher turnover and fewer social workers and psychologists for higher concentrations of high-need students.
So why have glaring differences in education funding from district to district persisted despite the ECS grants?
When it has come time to follow the ECS formula, state legislators and governors have taken several approachs that have left many stakeholders – as well as Judge Moukawsher – labeling the school funding mechanism as “broken.”
Changes are made to fit fiscal and political realities, such as the amount of money legislators have to work with or the need to win enough support to get a state budget to the finish line.
Here are some of the manipulations:
- The formula uses a “foundation” number, which it then adjusts using enrollment and wealth data to determine how much state aid to send a district. For the last several years, the foundation number has been $11,525. No one was able to explain to the trial judge how the foundation number had been selected over the last two decades. Essentially, the state has not determined how much it actually should cost to educate a child.
- When legislators raise the foundation number, overall state education spending and the amounts provided to individual school districts should rise. But facing fiscal constraints, legislators for years have not provided as much money as the formula calls for, and grants have been capped. If the cap were removed and the most recent data for student enrollment and town wealth were used, the state would have to provide $599.6 million more than it is this fiscal year, reports the legislature’s nonpartisan fiscal experts. Because of all the adjustments over the years, the rate at which certain town ECS grants are funded varies drastically. For example, Farmington is slated to receive 180 percent of what the formula calls for this fiscal year while its neighbor West Hartford will receive just 58 percent.
- Municipalities are regularly protected from cuts when the formula is run with updated data, even when student enrollment has dropped or a town’s taxable property has increased. In practice, this means several Connecticut school districts in the wealthiest towns — towns that have fewer high-need students — are collectively receiving $15.9 million more from the state than they would otherwise be entitled to.
- How much weight to give various factors in the formula is often based on the state’s ability to afford the result, rather than the actual cost to educate children. For example, the state has stopped factoring in the number of students who speak limited English, which has left the number of students who qualify for free- or reduced-priced school lunch as the lone measure of student need. Town wealth is based almost entirely on taxable property. This has left officials from places like Norwalk and Stamford complaining that, while the houses in their communities may be worth a lot, the average household income is middle-of-the-pack – and residents are not able to afford a huge tax bill to fund schools.
- Since state budget negotiations take place behind closed doors, details on how various final amounts were determined are not readily available to the public. While nearly all of the changes made behind the scenes have a formula and policy reason to back them up, earmarks are at times provided for various legislators.
- When a student leaves a local district school to attend a regional magnet school, the state continues sending the child’s regular share of the ECS grant to his or her old district. In addition, the state sends a separate grant to the regional magnet school.
This maze was at the core of Judge Moukawsher’s decision.
“The state spends billions of dollars on schools without any binding principle that education aid goes where it’s needed. During the recent budget crisis, this left rich schools robbing millions of dollars from poor schools,” Moukawsher wrote. “Without consciously and logically marshaling education aid – if the legislature can adopt principals and ignore them – the state cannot be said to have a formula at all.”
Top officials have been griping about the formula for years.
“It’s broken, and we all know it,” Gov. Malloy told the General Assembly in his 2011 budget address during his first month in office. “We need to fix this formula once and for all, and we will.”
One year later, the Democratic governor’s administration was deciding whether it wanted to pick a fight by cutting state education aid to some of the wealthiest communities in the country – and redirecting it to the state’s most impoverished communities.
“Must we really send millions to Greenwich and New Canaan?” Benjamin Barnes, the governor’s budget chief, emailed the state education commissioner and other administration officials as they built a budget proposal for the General Assembly in 2012. “I am untroubled by the losers, and believe that we should not undertake heroic efforts for that group. That said, the decision to hold harmless is ultimately a tactical political call.”
Politics would end up calling the shots, and Malloy shielded wealthy communities from cuts in each of his next five proposed budgets.
Instead, he pressured the legislature to follow a 2013 task force recommendation to phase in additional money to fully fund the formula and not manipulate it because of fiscal constraints. The General Assembly in turn passed legislation that set the state on a path to get the worst-performing districts closer to being fully funded.
The state’s 30 lowest-performing districts received $132.2 million more in state support during the 2014-15 school year than during the 2011-12 school year.
But as the state faced budget shortfalls, the governor and legislators agreed to override that phase-in and then, earlier this year, cut the ECS grant by $32 million and other education spending by $52 million.
The governor had proposed a budget that ended education aid for the 28 richest towns, cut aid for middle-class towns, and shielded the state’s 30 poorest communities from any cuts.
The legislature couldn’t get the votes for that approach, and the budget axe fell hardest on the state’s wealthiest communities but also on the big cities. For example, Bridgeport, Hartford, New Haven and Waterbury – the poorest communities in the state – each lost at least $2 million. The state’s wealthier communities – Greenwich, Fairfield and Westport – each lost about $1 million — the majority of their state education funding.
It was the first cut to the ECS grant in 24 years, but even as the grant was cut statewide, several towns saw increases – and they weren’t the neediest ones.
Fourteen of the state’s poorest districts were cut $5.3 million while 22 districts the judge characterized as wealthy saw increases of $5.1 million. Attorneys defending the state were unable to explain why.
The sloppiness and inconsistency in funding schools was maddening to Moukawsher.
“Tests reveal alarming statistics about reading skills among the poor that suggest there are no resources the General Assembly can afford to spare them in favor of indiscriminate impulse or political routine,” he wrote in his decision. “If the egregious gaps between rich and poor school districts in this state don’t require more overall state spending, they at least cry out for coherently calibrated state spending… Yet, while the plaintiffs were in court complaining of the lack of a principled system, the legislature started moving money from poor towns to rich ones.”
“An approach that allows rich towns to raid money desperately needed by poor towns makes a mockery of the state’s constitutional duty to provide adequate educational opportunities to all students,” the judge wrote.
But the House chair of the legislature’s Education Committee said the yearly adjustments to the funding formula have a reason: They’re largely done with the goal of getting money to communities that need it most.
“It isn’t arbitrary or pulled out of thin air,” said Andrew Fleischmann, D-West Hartford, who has been the leader of the Education Committee for 12 years.
For this fiscal year, budget documents show ECS cuts ranged from half a percentage point to 1.32 percent, depending on whether a town had been identified as one of the 15 lowest-achieving districts and whether that community was receiving at least three-quarters of what the formula shows it should receive. Towns also were not allowed to receive more than 138 percent of their fully funded ECS grant.
These changes meant that one-quarter of the $32 million cut fell on the state’s worst-performing districts and the remaining cuts were made to the state’s wealthiest towns or to districts that were receiving substantially more than the formula showed they were owed. In addition, tens of millions were cut from other programs that help districts pay for tutors, after-school programs and other supports predominantly in struggling districts.
But where did the increases for some towns come from?
Many of the increases stemmed from decisions made a year earlier to ensure that each town receives at least 55 percent of what the formula said it should, budget documents show.
For example, West Hartford landed an additional $1.4 million because it was only receiving 42 percent of what the formula showed it was due.
Gov. Dannel P. Malloy‘s administration did not support that rule when it was proposed.
“This approach would benefit those towns that are, for the most part, relatively better off during extremely tough fiscal times,” Barnes, the governor’s budget chief, testified in 2015.
Not all of the increases can be explained by the goal of giving every town at least 55 percent of what the formula dictates, a review of budget document by the Mirror shows. Of the 22 towns that received increases, six were already over the 55 percent threshold. Nothing in the published state budget or legislative record provides an explanation for how Berlin, Canton, Hamden, New Fairfield, Seymour or Woodbridge received increases.
Additionally, three more affluent towns were protected from the rule that no town should receive more than 138 percent of its fully-funded grant. Those towns – Farmington, Madison and Stonington – would have lost an additional $200,000, $117,000 and $300,000 respectively had the rule been enforced.
Seventeen of the 26 General Assembly members who represent those nine towns were Democrats and nine were Republicans.
The Office of Fiscal Analysis, the legislature’s nonpartisan fiscal office, does not publish earmarks to the ECS grant in its budget analysis.
But state Sen. Beth Bye, the Senate chair of the Appropriations Committee, said that while some towns receive funding beyond what the formula would call for, in some cases it follows appeals from legislators to help make up for cuts to other programs that would disadvantage their towns.
“ECS was a way to fill in some of those challenges. There is no doubt that that is part of the political process,” said Bye of the earmarks for the current fiscal year. “Politically it is hard to run a formula when there are losers… We tried to at least run a semblance of a formula.”
And Bye said the earmarks are less than $15 million – a fraction of a percentage point of the ECS grant total.
Similarly, in court, Associate Attorney General Joseph Rubin suggested viewing the earmarks in a broader context: Even if there are some tweaks to how the dollars are distributed, two-thirds of the $2 billion in ECS funding still goes to the state’s 30 poorest districts.
This translates to the state sending the wealthiest districts about $500 for each student they enroll compared to about $7,000 for the poorest districts, the legislature’s nonpartisan fiscal experts report.
“Saying that every single dollar, every single appropriation must be explained particularly and specifically and that, if it’s not, it’s not rational, I submit to the court that that’s not the constitutional test of rationality,” Rubin told the judge during closing arguments.
The judge disagreed.
“In desperate times, in desperate towns, $5 million dollars is a lot of money,” he wrote. “If this view of the state’s constitution won out, the legislature would be free to make today’s $5 million tomorrow’s $50 million and the next day’s $500 million. There are no millions to be diverted in the face of financial circumstances that are choking poor Connecticut towns to death.”
Both Bye and Fleischmann said the real problem is that the formula is underfunded, which is why it is not being followed.
“The state has an education cost sharing formula that, if used properly it would do a reasonably good job of delivering support to local school districts,” Fleischmann said. “If the formula currently on the books were funded properly, it would address the demands and the needs of Connecticut’s districts.”
“We have a formula. We have to run it,” said Bye. “We need to let a formula work and the legislature has to have the fortitude to do that… It’s going to take more funding. There is no two ways about it.”
This story is part of a seven-part series. Troubled Schools on Trial:
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