• Warnock Associates, LLC

Promises Made, Promises Broken - Education Part II

Updated: May 16, 2019

When it comes to size and resources, there is no comparison between public education today and mid-19th century public schools.

Pennsylvania currently has nearly 1.6 million students attending K-12 public schools in 500 districts across the state at a total cost of $31 billion a year, which averages out to $17,832 per pupil.

But, one of the vestiges of the past that remain are pauper schools - at least their modern incarnation.

The legislature voted to fund public schools for all in 1834, but, prior to that, it set aside money to educate poor children, either by paying for spaces for them in private schools or by setting up what came to be called pauper schools. (See Part One).

Pennsylvania does not have pauper schools per se today, but we do have pauper districts, where the amount spent on public education is significantly lower than the statewide average. These districts do not have enough local wealth to generate as much money as districts that are better off. State subsidies are not enough to make up the difference. They must make do with less, often much less.

To use one example, the Lower Merion School District spends an average of $30,054 per student. Median household income in this Main Line community is $107,326 a year, so it has the wealth to sustain this level of spending.

Ninety miles away, the Hazleton Area School District spends $12,021-a-year per student. The district includes the city of Hazleton and 16 other townships and boroughs. The median household income is $46,256 a year.

Because it can afford to, Lower Merion spends 2 ½-times as much as Hazleton on each student enrolled.

This is not an isolated case. There is a wide disparity between the districts that have the highest per-student spending and districts with the lowest per-pupil figures. Click here to see a complete list of per-pupil expenditures by district.

On average, these Top 100 districts spend thousands more per student ($8,295 more, to be exact) and get 20 percent more state aid than the Bottom 100. When it comes to local money, the Top 100 outspend the Bottom 100 districts by 2-to-1.

To view the data on enrollment trends, click here.

William Hartman, a Penn State professor who recently studied education funding for the Center on Regional Politics has divided school districts in Pennsylvania into the Haves and the Have Nots. He said the Have Nots represent 60 percent of the state’s 500 districts.

“The Have Nots are the districts that have consistent (budget) shortfalls,” he explained. When financial pressures increase: “They have to let teachers go or not replace people. They don’t have other options. Their education program is either not getting better or deteriorating.”

The Great Divide

A division between the Haves and Have Nots was exactly what Pennsylvania’s governors feared the early 1800’s.

Education, they believed, was the keystone to success for a democracy. Without an educated citizenry they feared the new United States could lapse into the ways of the Old World, with its ingrained class distinctions and sharp divisions between rich and the poor. To them, democracy was linked with equality of opportunity, which could only be realized by equal education for all.

Despite the pauper schools, as the Commonwealth grew – tripling in size from 434,000 in 1790 and 1,348,000 million in 1830 – more and more children were left behind, with little or no schooling. Private and parochial schools were the only options at the time and they charged tuition that was out of reach for many citizens. By the 1830’s, only one in four children attended school.

In the 1830’s, this spread of ignorance provided the impetus for creation of a system of public schools, free to all. This idea was pushed by reformers, including the governor, George Wolf, who was a populist and follower of President Andrew Jackson. Gov. Wolf (no relation to the current governor) got a so-called Common School law passed in 1834 and was able to beat back a furious effort by opposition forces to repeal the law the next year.

But, 185 years later, Pennsylvania’s children are still divided into the Haves and Have-Nots.

A case filed by a collection of education advocates and school districts argues that today’s stark inequality in spending among districts violates the state Constitutional amendment that states:

“The General Assembly shall provide for the maintenance and support of a thorough and efficient system of public education to serve the needs of the Commonwealth.”

“Pennsylvania is not getting the [kind of] students it needs in this world,” said Michael Churchill, a longtime public advocate who is lead attorney in the suit. “We set standards for what they should learn, but it is a very simple, very historical fact that legislators are cowards when it comes to raising sufficient revenue for the job.”

There’s historical proof of that assertion. The Constitution of 1790 called for public education for the poor. The legislature dawdled for decades before it ended up creating a limited, underfunded system that drew few takers.

For early lawmakers inaction and delay was better than risk-taking. They feared voter backlash at an extension of state powers and additional taxes. As one historian later put it, “there was also the class, whom unfortunately we always have with us, opposed to all change [who] denounced with the greatest severity what they considered a revolution in school policy in the state.”

The Fear Factor

Skip forward 180 years and same fear factor was in play in the early 1990’s, then-Gov. Robert Casey wanted to raise taxes to provide more money for the public schools, but the legislature would not consider taking that step. Instead, it jiggered the existing school subsidy formula to fit the money available, thus following the time-honored maxim: When in doubt, delay.

The inequities in funding for public education today date to the legislature’s decision in 1991 to stop using the existing school funding formula, which then governed allocation of the state’s subsidy for education.

The subsidy, which provided the base of all state aid to education, was designed to smooth out the differences caused by the uneven distribution of wealth across the state. The goal was not to make the amount spent per student be exactly equal in each district, but to ease inequities. For a long time, it succeeded, with the state filling in some of the holes left by the lack of local funding.

The touchstone of the formula was enrollment -- under the logical assumption that the more students a district had the more expensive it would be to educate them. The pre-1991 formula also provided additional state aid for districts that were poorer, rural and urban. Finally, it took into account a district’s wealth, as measured by the market value of its real estate.

Districts that were wealthy were expected to raise more money for their schools through local property taxes and got less help from the state. The local wealth factor is the reason Lower Merion gets only 14 percent of its annual budget from the state while Hazleton gets 56 percent.

The 1991 law based the subsidy on 1991 enrollments. It also carried over a provision in the school code that said no district could get less state aid than it did the year before. This “hold harmless” provision would prove crucial.

Neither provision was seen as major. The 1991 law was considered a temporary fix, while the legislature hashed out the most important question: How much money overall did it want to devote to aid to local schools? A new formula would then be devised to mesh with those new dollars.

Unfortunately, that temporary fix turned out to be semi-permanent -- it remained in effect for the next 25 years, throwing the whole subsidy system off kilter.

Even if enrollment, the number of poor children and property values in a district fluctuated the state subsidy did not. The enrollment figures it used were from 1991. Hold harmless froze aid at 1991 levels, except for the one or two percent extra a year the state added to the pot.

“When we stopped putting an emphasis on counting students in figuring aid we got distortions,” said Jay Himes, the long-time director of the Pennsylvania Association of School Business Officials. “You will get that if you keep adding two percent a year [in subsidy money] and the number of students is declining.”

Winners and Losers

And the number of students is going down. If the 19th century was marked by a rapidly growing population in Pennsylvania, in the modern era we have slow-to-no growth at work. In the five years between 2013 and 2017, there were 373 districts that lost enrollment while only 127 districts gained pupils.

Under the pre-1991 subsidy system, the 127 districts with rising enrollment would have gotten additional state aid. But, the new system turned that logic on its head.

Today, the 373 “loser” districts get an average of $4,264 per student from the basic subsidy, while the “gainer” districts get $2,510 per student, about 60 percent less.

Here is a map that outlines gains and losses in enrollment by county.

There is another important trend at work. Because of state inaction – with zero or only small increases in state aid – as costs rose more and more of the share of paying for the public schools shifted to local governments, which then had to cut services, increase local taxes or some combination of both to balance their budgets.

Public education is a big ticket item. Of the $31 billion a year spent by the 500 districts, $19 billion comes from local governments and $12 billion comes from the state. The split is 61% local vs. 39% state. (The federal government provides negligible aid.) The state share is among the lowest in the nation. The state has been retreating from its promise to provide a “thorough and efficient system of public education…”

The $12 billion the state spends divided into about $6 billion in the form of basic subsidies for the everyday operation of districts, and $6 billion for variety of special programs. (For a list of those programs, click here.)

The state has an array of taxes it can use to support education, including the personal income tax, the sales tax and a corporate net income tax. Most local districts must turn to just one tax for the money needed: the property tax.

Once again, logic has been turned on its head. The government entity with the most resources and taxing capability has shifted the burden of paying for the schools onto the government entity with the least resources and taxing capability – local school districts.

To make matters worse, even though the state threw a little extra money into the pot in recent years, much of it never made it into the classroom. The new money was used to pay for the rising cost of employee benefits, especially pension costs, as the state went into a hurry-up mode to plug a huge deficit in the state’s teachers’ pension fund.

Chambersburg Case Study

Alexander Sharpe is something rare – a second-generation school board chairman. His mother chaired the Chambersburg Area School Board from 2004-2011. He heads it today. During his mother’s day, the district paid $4 million a year in contributions to the state teachers’ pension fund. Today, Sharpe said, the district pays $22 million, roughly 18 percent of its total budget.

In 2001, the legislature under Gov. Tom Ridge increased the future pensions for state employees and teachers (and legislators) by 25 percent by changing the formula used to determine pensions.

Ridge and the legislature assumed the stock market would continue offering high yields so they took advance payment on future profits. Of course, the market tanked. Those big gains turned into losses. The pension funds went into long-term deficit. The day was coming – not today or tomorrow or next year, but still coming – when the pension funds would not have enough money to pay retirees.

At first, the legislature dithered over the problem, hoping the market would return to new heights and wipe out the deficit. (When in doubt, delay.) Eventually, the guys in green eyeshades (actuaries, really) said something had to be done before the funds sank.

In 2010, the legislature asked school districts – which provided 50 percent of the pension contributions – to pony up more money. The state did, too. Today, the state is paying $1 billion extra a year and the districts’ $1 billion extra a year to fill the pension-fund gap.

Joseph McLaughlin, one of the wise men of state politics and director of Temple University’s Center on Regional Politics, called the dilemma the schools face today “the cost of politics.”

“We are spending a billion dollars a year on the state level to pay for the cost of pensions, the part a problem caused by legislative action, not the market,” McLaughlin said. “And school districts must pay toward half the cost of the unfunded liability.”

Another cost of politics is reliance on the hold-harmless system. As McLaughlin put it: “No legislator wants to go home and tell people: ‘I am getting less money in school support this year than last.’ ”

By freezing the subsidy formula in place for so long, the state failed to respond to two of the biggest demographic trends of the last 25 years: The decline in population, particularly in western Pennsylvania, and the rise of Hispanic residents, who tend to be concentrated in an arc of cities and towns that run from the Poconos to the farm country of central Pennsylvania.

Counties, mostly in western Pennsylvania, are losing population due to the exodus of residents, particularly young people, and a declining birthrate among white women. Not surprisingly, school enrollment has declined as well. (Click here to see enrollment trends in all 500 districts.)

Losing People & Students

To take just one example, Cameron County, a sparsely populated, mostly forested county in north central Pennsylvania, has seen its population decline by nearly 10 percent, its school enrollment go down by 17 percent, and its real estate values decline by three percent since 2010. The county (pop. 4,500) has one school district with 570 students.

While school districts in these rural counties have benefited from the hold-harmless system, they are not wallowing in cash. They cannot benefit from the economies of scale larger districts can use nor can they tap into the level of taxable local wealth of larger, more prosperous counties.

It’s a costly challenge to get students to and from school in large but sparsely populated rural districts. For example, in rural Forest County, vehicles transporting students to and from school travel 2,699 miles a day and the trip takes between 45-to-90 minute each way.

In all, 75 percent of school districts lost enrollment between the 2013 and the 2017 school years; while 25 percent of districts gained pupils.

Many of those gainers are east of the Susquehanna River where towns have seen a substantial rise in Hispanic students, due to migration and a high birth rate. In Sharpe’s district in Chambersburg, enrollment has risen five percent in the last five years to stand at 9,330. During that period, the district lost 157 white students and gained 631 minority students, most of them Latino. (Click here for data on districts with high Hispanic enrollment.)

That’s a big change since Sharpe graduated from the district’s high school 15 years ago.

“Now, we have 52 percent of students qualifying for free lunch [because of poverty],” he said. “Students speak 17 different languages. Hispanic students are increasing. The poverty is different, the need is different.”

What is not different is the amount of state aid the district gets, which pays for just 35 percent of the district’s total budget.

The school districts with sizable Hispanic enrollment include Reading (83% Hispanic); Allentown (70%); Lebanon (64%); Lancaster (60%) and Hazleton (51%). All of them have seen overall enrollment increases in the last five years. All of them are, to varying degrees, in financial distress.

With higher enrollment and more poor students, these districts should have been getting more subsidy money from the state. But, they did not.

Voter Backlash

After state aid to the schools was cut by Republican Gov. Tom Corbett – setting off a round of personnel and program cuts and higher local taxes -- a chorus of educators, advocates, school board officials, the teachers’ union and parents clamored for change that culminated in Corbett’s defeat in his bid for re-election in 2014.

In turn, the legislature did what legislatures often do when confronted with the necessity of action. It created a study commission, which did what study commissions do: hold hearings, take reams of testimony and consult the relevant experts.

The commission came up with a new formula that took into account enrollment, wealth, and such factors as poverty and the differing needs of rural and urban districts. In fact, it very much resembled the formula abandoned 25 years before.

The new subsidy formula passed the legislature and became Act 35 of 2016.

However, there was a glitch, created by another legislative trait. Radical incrementalism – the practice of taking a mile-long problem and solving it one foot at a time.

Act 35 did come up with a new formula, but applied it only to the new money that went to the schools, which has amounted to about $100 million a year in new money since 2016. (In his budget proposal made February 5, Gov. Wolfe proposed a $200 million increase for next year.)

The bulk of the $6 billion in the school subsidy is still handed out under the old method, locked in place since 1991. So, the amount of subsidy money doled out under the new formula will be gradual. Very gradual.

For children in first grade today, the new formula won’t go fully in effect until those students are in their late 30’s.

After the 2016 law passed, Republican lawmakers filed a motion in the court to have the suit by advocates and districts challenging the subsidy’s fairness dismissed, arguing the suit was now moot. The court rejected the motion.

In another legal challenge, Republican leaders argued that the legislature did provide 50 percent of what it felt districts would need. If a district wanted to spend more, so be it, as long as the district got it from local taxes. The court rejected that motion as well.

[Republicans have the majority in the state House and Senate.]

So, the suit filed by districts and advocates has survived and is due to be heard by the state Supreme Court next year.

The Tax Taboo

Why go through these gyrations? Because if the new formula outlined in the 2016 law took effect immediately it would require a realignment in how state subsidy money is distributed and also require a major increase in the amount of the subsidy.

Politically, it cannot be done simply by changing how the subsidy pie is sliced because it would create too many losers. The only way to do it would be to increase the size of the pie – add enough new money to the subsidy so that each district either gets more or its losses are minimized.

Unfortunately, making the pie bigger is nearly impossible because of another trait of the legislature: The Tax Taboo.

Tax legislation can only pass through the application of these attributes: strong leadership, persistence and a willingness to compromise. Deals must be struck, arms must be twisted, promises made and threats delivered – all to overcome this inordinate fear many legislators have of voting “Yes” on tax bills.

The same fear was present in the 1830’s. There was a bloc of voters who viewed all taxes as usurious, an illegal seizure of their assets by the state. One writer who opposed the 1834 common school law said that citizens were already overtaxed and could not bear yet another tax, this time for schools.

“Impose additional burdens on them and they will be compelled to….migrate into the great unknown regions of the far west there to enjoy in peace and tranquility the well-earned reward of their labor and toil,” he wrote.

Today, the descendants of these anti-taxers are alive and well -- and better organized. The rise of the anti-tax Tea Party in the early 2000’s has heightened the reluctance to support taxes, which party members believe finance an overweening government that has smothered individualism and self-reliance.

Grover Norquist became a leader of the national anti-tax movement with his group Americans for Tax Reform, which asked politicians to take a pledge never to vote for tax increases while in office. The Pledge became a litmus test for conservative candidates.

As Norquist once explained in a radio interview: “I'm not in favor of abolishing the government. I just want to shrink it down to the size where we can drown it in the bathtub."

Taking the Pledge

Gov. Corbett took the pledge. Many Republicans in the legislature did, too. Rabid anti-taxers do not constitute the majority of legislators. They have little hold on Democrats. But, they dominate the Senate and House Republican caucuses in Harrisburg, partly due to their willingness to call out – and run opponents against – incumbents in their own party viewed as insufficiently resolute or inclined to make compromises with the enemy (Democrats).

In the last 12 years, these anti-taxers have caused a profound political and philosophical shift in Harrisburg. In the past, Republican leaders often were conservatives, but they believed government served a public purpose and needed sufficient funds to operate (the usual disagreement was over how much was sufficient.) There is now a core of Republicans who believe that government confiscates individual wealth and applies it towards dubious, even destructive, ends. Like Norquist, they want to shrink government and then, perhaps, drown it.

That was the aim of Scott Wagner, the former state senator, who was the Republican nominee for governor in 2018. He practically salivated over getting his hands on government or, perhaps more accurately, wrapping his hands around its throat. Wagner lost to Gov. Tom Wolf by 800,000 votes, which can be interpreted as voter rejection of his approach, the ineptitude of his campaign or a combination of both. “The demon of ignorance,” to borrow a phrase from the 1830’s, was beaten back.

Wagner lost sight of this political reality: Voters want and value government services, they just don’t want to pay for them.

The last broad tax increase – an increase in the personal income tax -- was passed in 2003, early in Gov. Ed Rendell's administration. As the money got tighter in recent years, Republican legislators refused to consider any new taxes.

Instead, they became like a pirate raiding party, sacking what were supposed to be protected state funds for such things as paying off large medical malpractice claims. (That issue is still in the courts). The Pennsylvania Turnpike Fund, the highway fund, the state lottery fund and the Tobacco Settlement Fund have seen revenues diverted to fill holes in the state’s general budget. Still, it has not been enough.

Our expenditures exceed our tax revenues, a fact Wall Street investment analysts have pointed out repeatedly.

Spending Exceeds Income

The rope on this snatch-and-grab tactic may have run out. With the economy booming, the state’s Independent Fiscal Office (IFO) has reported that tax revenues this year are coming in above the levels estimated. Still, the IFO predicts the state will end up with a $1 billion-plus deficit in the next fiscal year and similarly sized deficits running until 2023-24.

The only reliable and assured way to get more money is with new or increased state taxes.

Legislators who represent the 373 school districts that have lost enrollment are insulated from loss of subsidies because of hold harmless. They have little reason to support higher state taxes for the schools and can safely stay in their anti-tax cocoon.

But what about the anti-tax lawmakers who represent have-not districts that have gained enrollment and have a larger number of poor children?

Some of these legislators have used a back door to funnel additional money to their districts, not through the subsidy, but through money (called WAMS) tucked away in the budget line item for the state’s Ready to Read program. This off-the-books money is supposed to be hush-hush, but a reporter (Jeff Hawkes of Lancaster Online at discovered that about two dozen districts got additional money via this route last year, a list that includes the Erie, Allentown, Scranton, Stroudsburg, Wilkes-Barre, Pottstown and the Upper Darby school districts.

Some of these districts are in desperate financial shape, so there is no disputing their need for more money, but with the cheesy way they got it. This is what happens when you have a subsidy system that is broken: political favoritism replaces equity as a determining factor.

The anti-taxers in Harrisburg may pat themselves on the back for holding the line on state taxes, but what they really have done is redistribute the burden of paying for the schools to local districts. This is not less government, this is worse government.

Absent a willingness by the Republican majority in the Legislature to have a serious and thorough discussion about the state’s financial needs, the state Supreme Court eventually may be the only recourse for those looking for action on the issue of school funding.

So, one option will be to watch the situation unfold in the courts and hope the justices will order changes. The other option is to sit back and wait until the formula passed in 2016 goes fully into effect -- in about 2050.

Change comes slowly in Pennsylvania.

Cover Picture: Public school students, Cambria County, 1930.

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