Friday, July 10, 2009
NOTES FROM THE SENATE, JULY 10, 2009
WINNERS AND LOSERS--K-12 EQUALIZATION FORMULA
This is Part 3 of a discussion of the growth of education formulas and the winners and losers as a result of these formulas and the underfunding of these same formulas. As a review, K-12 education funding in Georgia essentially comes from the QBE formula and the Equalization Formula. The QBE formula, while not fully funded, has increased in total dollars over the past years due to enrollment growth in faster growing counties. This formula is consistent at $4148 per student per 8 hour school day and "follows the child"--the more students a system enrolls, the more QBE funds they receive. If a system is losing enrollment, it is losing QBE funds.
The Equalization Formula is tied to tax base growth and has a multiplier that increases the formula allocation if the systems tax base is not growing the same rate generally as student growth.
As covered last week, the Equalization formula has grown mainly because of several large growing systems whose tax base growth was outstripped by population and enrollment growth.
To help control costs in this program, the Governor proposed legislation that would lower the number of mills eligible for equalization from 15 to 12. This legislation did not pass, but the Equalization formula was reduced from $548.2 million in FY09 to $436.1 million in FY10 due to budget restraints.
The funding trends for Equalization are as follows:
· FY06, $372 million
· FY07, $427 million
· FY08, $458 million
· FY09, $576 million
· FY10, $436 million
Because no legislation passed to change the Equalization formula, the FY10 reduction will be prorated across all systems participating in the program. As a result, systems that had steep increases in formula earnings will still receive significant increases in funding, while systems with only modest increases will see those increases wiped out altogether. No growth or negative growth systems lost some funding over what they would have received under the original formula.
For example, Gwinnett’s funding went from $6.4 million in FY08 to $38 million in FY10. With the FY10 reduction, Gwinnett will now receive $26.2 million. Bulloch County school district went from $2.5 million in FY08 to $3 million in FY10, but with the cut will only receive $2 million. Tattnall went from $2.2 million in FY08 but the final FY10 amount will be $1.7 million.
Adjusting the Equalization formula is one of the many potential challenges that lie ahead. Also, if the economy continues to decline, the state might be forced to actually make reductions in QBE funding since it makes up such a significant part of the overall budget. In addition, the state budget is dependent on over $1.4 billion in stimulus including over $413 million for education. If there is no growth in the economy, lawmakers will also have to find a way to replace these funds starting in 2012.
So, even though total funding for K-12 Education has increased even in the last two budgets, not every system shares that increase and under each formula, QBE and Equalization, there are winners and losers.
Winners – systems with rapid growth of new students.
Losers – systems losing enrollment.
Winners – Fast growing large systems where growth in enrollment is higher than growth in tax base. Also, systems that have an increasing tax base and a rapidly growing enrollment.
Losers - Systems that do not receive any equalization due to flat enrollment and adequate tax base, also systems with no-growth or slow growth tax base and flat or declining enrollment.
When the Equalization formula is not fully funded, the total available funds are prorated, so growing systems still get increases and no growth systems, mostly rural, lose a portion of what they already earned.