Education funding reform: More for the cities — or maybe less

Gov. Dannel P. Malloy’s proposed state budget would be a financial boon for Connecticut’s cities, but nothing he is proposing ensures that any additional money headed their way will go to their troubled schools – schools he says are failing far too many students.

Instead, the governor proposes allowing municipalities facing “financial hardship” to cut spending on low-achieving schools starting next school year. Malloy would leave it up to municipal leaders to determine how to spend the additional revenue they would get from his budget. The governor also proposes the state’s share of school construction project costs be scaled back and that state spending on after-school and summer school programs that provide tutoring for students be significantly cut.

When pitching his admittedly austere budget plan last week, Malloy appealed to legislators to consider it their responsibility to help their less fortunate neighboring cities and towns.

“Dignity, opportunity, prosperity – none of these are a zero sum game. We are all guaranteed access to these fundamental rights,” Malloy, a Democrat, told state senators and representatives in his high-profile budget address last week. “We must reset the system for ensuring equal opportunity for success.”

Here are the major elements of the changes in educational funding Malloy has proposed.

More money for struggling municipalities

Malloy’s proposed budget would increase state education grants to 52 cities and towns with struggling schools by about $230 million. To pay for that he would dramatically cut education funding to dozens of better-off towns, eliminating all funding for Greenwich, the state’s wealthiest community. (See how your town fares under Malloy’s proposal here.)

However, in many of the impoverished districts, the education aid increases he proposes would be more than offset by another one of his proposals — to send municipalities a bill for one-third of their teacher pension costs.

For example, Hartford would get $12.2 million more in education grants under the governor’s plan, but the city would have to pick up $17.1 million in teacher pension costs that the state now covers. To compensate, however, the governor proposes allowing municipalities to levy a new tax on the property of hospitals. In Hartford, that tax, if approved, is projected to generate $57.1 million a year in new revenue for the city. (See the bottom line for your town in the governor’s budget here.)

New money does not necessarily go to troubled schools

Rep. Noreen S. Kokoruda, a Republican member of the Education and Appropriations committees, wants to know what she is supposed to tell her constituents in Madison and Durham to explain why they should give up more than $5 million in state funding to help the nearby struggling cities as the governor proposes.

“Can I guarantee my taxpayers that those extra dollars that they’re going to be paying now are going to go to those kids in those urban areas — that that extra money – the $47 or $38 million more for some of these towns – is strictly going to kids sitting in that classroom? I think that’s an important thing to be able to say,” Kokoruda asked the governor’s budget chief last week.

Ben Barnes, the state’s budget director, could offer no guarantee except to say it will be up to local municipal leaders to decide.

“In Hartford, there is no way we are going to give them more money than they are spending on their public school system,” Barnes said. “I would argue that if we give more money to some of these towns that have developed these extraordinary tax rates in order to support their school systems, it’s only reasonable they should be allowed to use some of that money to keep their taxes low… It’s appropriate that some new money, if we can find a way to give them new money, some of that new money needs to be given over to allowing them to reduce their taxes.”

Hartford, which has by far the highest property tax rate in the state, is slated to spend $416 million this year for the 21,300 students it is responsible for educating, or about $19,000 per-student. That per-student expenditure rivals what some of the state’s highest-performing districts, including of Darien and Westport, are spending.

Urban educators are quick to point out, however, that it’s not about struggling districts being able to spend the same amount as districts which enroll students with far fewer needs, but being able to spend enough to address their students’ needs. Many poor districts are spending far less than Hartford.

During the recent landmark school-funding trial, several school-finance experts testified that it can easily cost twice as much to provide students from low-income families or those who speak limited English with the education they require.

At the conclusion of that trial, Superior Court Judge Thomas Moukawsher outlined huge disparities in achievement and spending between rich and poor towns, ruling that the state’s education spending system is irrational and unconstitutional. “Too little money is chasing too many needs…,” he said. “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” that factors in “the special circumstances of the state’s poorest communities.”

The appeal of that decision will soon be heard by Connecticut’s Supreme Court, but Malloy has said the budgetary changes he is calling for address the problems that the lower-court judge accurately identified.

School construction scaled back

Facing a limit of how much the state can put on its credit card, the governor has proposed the state limit the amount it commits to spending on school construction projects to $500 million a year. This is significantly less than levels typically approved by the legislature in the past.

One way Malloy proposes to reduce capital spending is by scaling back the state’s share for renovating and building schools. For Connecticut’s poorest communities, the state would pick up 70 percent of the cost as opposed to the current 80 percent share. For the wealthiest, the state’s share would drop from 20 to 10 percent of a project.

Starting in three fiscal years, districts that enroll fewer than 2,500 students will be eligible for much smaller reimbursements than they currently receive. Barnes told legislators that this will hopefully be an incentive for more districts to regionalize.

But leaders of the state associations that represent school boards, superintendents and school business officers said the state’s retreat from its commitment to help pay for school construction is worrisome.

The governor also proposes the state take an inventory and report to the public the condition of schools in the state every every five years instead of three. The most recent survey from 2013 found that one out of every 40 elementary schools needed asbestos remediation and that the local district had no immediate plans to address it. One out of every 25 elementary or high schools and one out of every 29 middle schools had a roof problem and had not scheduled repairs to fix the underlying issue. One in 13 schools had poor air conditioning, and one in 70 had a poor heating system.

In the state’s most impoverished districts – Bridgeport, Hartford, New Haven, New London, New Britain, Waterbury and Windham – a lower percentage of schools had areas of their buildings rated as being in fair or excellent condition, according to the survey.

In the most affluent districts – Darien, Easton, New Canaan, Redding, Ridgefield, Weston, Westport, and Wilton – 88 percent of the schools either had been built in the last 20 years or had undergone a major renovation, compared to 71 percent in the high-poverty districts.

Teacher pension costs rising

The governor proposes cities and towns pick up one-third of the cost of providing retired teachers and other school staff with pensions.

“Now I want to be very clear – the teachers’ retirement program is a sustainable, well-organized system,” Malloy said during his budget address last week. “I believe this is a sensible policy. After all, this funding is not distributed based on student need or relative town wealth. Rather, it’s based entirely on local decisions about how much towns decide to pay their local educators and how many teachers and administrators they employ. Under my proposal, towns maintain that control, but they do it with some skin in the game.”

Educators say the governor is mistaken in saying that the teacher pension system is sustainable or that requiring local towns pay for a share will give them control over the pension costs.

Joseph Cirasuolo, the executive director of the Connecticut Association of Public School Superintendents, says state law requires arbitration panels to take into account a town’s ability to pay when making decisions about salaries.

So for better-off towns, the amount they must pay teachers is too often out of their control – and the governor has not proposed changing that law.

“Really, if he wants to change how much those pensions will cost down the road, that’s where to start,” Cirasuolo said.

State law also prescribes how much teachers must pay into the system, how long they must work before qualifying for a pension, and what they will receive upon retirement. Malloy has said he does not intend to change any of those requirements.

Another problem with shifting these costs onto towns is the massive $13.2 billion unfunded pension liability facing the state. It is the result of the state legislature’s decades-long failure to properly fund the teachers’ pension system.

A recent review of this fund by Boston College concluded that the state’s required payments are set to multiply over the next 15 years – from just over $1 billion this fiscal year to $6.2 billion in 2032.

As the costs surge, the cost-shift would have a huge impact on local budgets.

If New Haven had been required to pick up one-third of its teacher pension cost last fiscal year, it would have had to pay $11.3 million, according to data provided by the governor’s budget office. Next year, one-third of the cost rings in at $14.9 million. And the costs would continue to rise, given the state is on the hook for covering $381.4 million of pension costs for that city’s retired teachers.

If Malloy’s plan goes forward, $127 million of that liability would be spun off to New Haven over the next 15 years.

Rep. Toni Walker, the House chairwoman of the legislature’s powerful Appropriations Committee, has asked the governor’s office for a year-by-year schedule of these surging costs.

“I want towns to know what this means, because that’s going to have a major impact on their systems. So that’s a concern to me,” Walker, D-New Haven, told the governor’s budget director last week.

Barnes is well aware of the issue.

“The amount of contributions, they could double between now and 2032,” he told the Appropriations Committee last week. “It really depends though on what happens on the returns on the funds – but there is a significant risk.”

A new way to fund special education

Funding special education is a special problem – one the governor proposes to address by repurposing nearly $600 million in existing state education spending. He would put it into a new pool dedicated to reimbursing towns for their special education costs.

Currently, the state helps towns pick up the cost of severely disabled students when the cost of their education exceeds 4.5 times the average per-student cost. Barnes said this grant, that helps pay for the cost of educating just over 4,000 students each year, does not provide the appropriately incentive districts need to rein in the costs of these students after they’ve reached the threshold.

“I don’t think it is as effective as it could be in incentivizing districts to find the most cost effective, close-to-home treatment options for their students,” Barnes said. “There is less interest on the part of the town to reduce that cost, or frankly, in my view to bring that kid back.”

The governor instead proposes reimbursing towns, based on town wealth, between zero and 54 percent of all of a district’s special education costs. The governor’s bill, however, caps the grant so that no more than the legislature appropriates is provided. So, if costs exceed the budgeted amount, the state would not pick up 54 percent of the poorest district’s special education costs.

Kokaruta, of the Appropriations Committee, worries the governor’s plan – one that would do away with this so-called high-deductible system that helps districts pay for extremely expensive students – will leave towns worse off when one or two severely disabled students move into the district.

“Two children can make a difference to the budgets of these small towns,” she told Barnes last week. “What happens if a small town all of a sudden gets a family that comes in and two of their children need extremely expensive outplacement programs?”

Barnes said “that is a legitimate concern” and that the administration is open to considering some sort of plan to pool risk so that such unexpected costs don’t cause huge issues. “Those proposals are worth considering,” he said.