With the Governor’s presentation of his State of the State address on Tuesday and his budget on Thursday, the General Assembly will pick up its pace of work, and I will be reporting to you from my assignments to the Finance, Education and Oversight Committees. In this week’s letter, I will complete my review of the State’s education aid funding formula.
A. The three main components of the funding formula
As noted in my January 1 letter, the formula’s “core instructional amount” (reviewed in the January 8 letter) sets the budget per regular needs pupil. The “student success factor” (reviewed in the January 15 letter) adds money to the “foundation budget” for high-need students. Today’s letter will describe how the State allocates the cost of the “foundation budget” between local communities and the State as a whole.
B. Basic design of the “state share” component
If you wish to learn all of the details of the formula’s “state share” calculation, I recommend pages 3-4 and 6-7 of a Report I prepared in 2016 as a private citizen the last time the General Assembly reviewed the funding formula. My more “reader friendly” description today will not delve into all of these details; instead, I will now present the basic structure of the “state share” calculation, the problems caused by a components of it called the “quadratic mean” and conclude by suggesting possible reforms.
The State has used different types of education aid funding formulas for more than half a century, but the division of cost between the State and local school districts has, throughout this period, followed the same general principles.
The current funding formula’s calculation of state share begins with what I will call a “baseline State share” that follows these basic principles. First, the State decides how much of the total school budget will be paid with State funds (usually around 50%, currently 52.5%). Second, that global amount is distributed among local school districts based on each community’s ability to pay, as measured by the size of its property tax base per pupil. If a community had the State average of property per student, the State will pay 52.5% of that community’s “foundation budget.” If the community has less than the State average tax base per student, the State share will be greater, exceeding 80% in urban core communities. On the other hand, if a community has a wealthy tax base, then the State share will be less than 52.5%; indeed, if a community’s tax base per student is especially rich (as in more than 2.1 times the State average), the “baseline State share” is zero, because that community can pay its entire school budget at a lower property tax rate than the State average.
If the funding formula ended with this “baseline” calculation, it would follow consistent past practice in our State, common practice in other states and be eminently fair in my opinion. Unfortunately, Rhode Island’s formula takes another step that causes it to deviate from these principles by incorporating the “quadratic mean.”
C. The “quadratic mean” and its anomalies
To calculate the “quadratic mean,” the current funding formula adds another factor, namely the proportion of children in poverty residing in a particular school district. It combines these elements in this algebraic formula: