BEP Backlash

Is Tennessee’s school funding system broken? Local officials increasingly say ‘yes’

PHOTO: Kayleigh Skinner
Shelby County budget director Mike Swift studies information presented by leaders of Shelby County Schools during a budget hearing on July 5.

Shelby County Mayor Mark Luttrell says it’s time to rethink the cost of K-12 education — in Memphis, and likely in Tennessee as well.

Fresh from reviewing the latest funding allocations to Shelby County Schools, Luttrell points out what the state is paying, what the county is obligated to pay, and what the county actually pays to operate the state’s largest public school district.

Shelby County Mayor Mark Luttrell
Shelby County Mayor Mark Luttrell

It’s the $52 million gap between what the county is obligated to pay and what the county actually pays that worries him, especially given the state’s stagnant allocations and the county’s increasing contributions, often to pay for state-mandated education reforms.

“We’re giving a lot of money to education that’s over and above — that we shouldn’t have to,” Luttrell said. “[That figure] also tells us that the state is not meeting their full contribution.”

Luttrell’s conclusion is one that’s being reached by more and more local government officials across Tennessee amid tension over perennial requests from local school leaders for more funding.

Historically, the local government receives notice of the state’s education allocation, as well as the local education obligation, under the state funding formula known as Basic Education Plan, or BEP. School district leaders then go before the local government funding bodies, typically asking for more local money to cover their increasing costs, and get grilled over their spending priorities, before the final funding amount — and local property tax rate — is set.

But increasingly, in the midst of often heated discussions between local government and school leaders, officials are looking up from their spreadsheets and wondering aloud whether the funding system they’re working under might be broken, or at the very least outdated.

“The argument used to be how we divied up the pie,” said Wesley Robertson, a budget and finance consultant for county governments across the state. “Now they’re saying the pie is not big enough.”

Breaking down the BEP

Created in 1992 in an attempt to provide a fair and equitable allocation of state education funding between urban and rural districts, the state’s BEP is designed to provide a basic level of education for all Tennessee students, no matter what their school district. The formula uses 45 ratios based on factors such as what a typical class size should be and how much an administrator should be paid.

The BEP was last updated in 2007 — five years before Tennessee launched sweeping education changes under the federal Race to the Top initiative. Critics charge that the formula now low-balls the cost of education, with allocations that have not kept pace with inflation, on-the-ground enrollment challenges, a growing charter school industry and new mandates to improve the state’s worst-performing schools — efforts that require extra staff and expensive intervention programs.

While Tennessee taxpayers spend around $6 billion a year on education — which should be split about 50-50 between state and local revenue — around $4 billion currently is being paid by local governments, according to a Chalkbeat analysis.

The additional local expense has evolved due to several factors — the bulk of which stems from a misalignment between what the state deems an average class size and the local realities of staffing schools. Fluctuating student populations often force officials to scramble at the last minute to avoid overcrowding, but BEP doesn’t factor in the need for extra teachers.

In addition, BEP formulates an annual teacher salary at $40,000, but the average teacher salary across the state last year was $50,000. In Shelby County, a first-year teacher makes $42,000, with the average salary at $60,000.

Meanwhile, a growing charter sector is siphoning off thousands of students from Shelby County Schools, which results in decreased BEP revenue for the district but not a decrease in fixed costs such as loan payments for buildings, utilities or administrators’ salaries.

In Shelby County, county government now contributes more than $391 million a year to education through Shelby County Schools and six suburban municipal school systems. That’s $52 million more than they’re obligated to pay under the BEP, according to a Chalkbeat analysis.

Against that funding reality, the Shelby County Commission signed off earlier this month on its 2015-16 spending plan — without a tax increase — after numerous budget hearings in which leaders of Shelby County Schools asked for $15 million more to pay for new student computers and additional literacy coaches, among other things. They got close to $8 million more, but not before commissioners questioned the district’s spending priorities and suggested where the extra money should go.

“We need to bring prudence to Shelby County Schools, as we do for Shelby County government,” budget committee chairwoman Heidi Shafer told school leaders during a two-hour hearing in May.

"What incentive does the state have to fully fund the BEP if we keep picking up their slack?"David Reaves, Shelby County Commissioner

District leaders countered that they’re already there. The Shelby County Board of Education cut $125 million before approving a $1 billion budget this spring, laying off more than 500 employees, closing several schools and tapping into its savings account to stave off more cuts. During the last two years, the district has made $275 million in cuts.

District leaders complained to commissioners that they’re working off a spending plan that the state is woefully underfunding based on a formula that they say grossly underestimates the “true cost” of education. If the state paid its full obligation under the BEP, the district would receive an extra $100 million annually, according to board member Chris Caldwell.

“What incentive does the state have to fully fund the BEP if we keep picking up their slack?” asked commissioner David Reaves during one budget hearing in May. “We need to create a climate where there’s a burning need [for the state to fulfill its obligation].”

“If you want to get off the hot seat,” an exasperated Caldwell told commissioners, “you should go to the state and tell them to give us our due amount.”

Picking a battle

Shelby County isn’t an outlier. School leaders for all three of the state’s other largest districts—in Nashville, Knoxville and Chattanooga — asked their local funding bodies for additional money as well this spring.

The biggest request—for a 40-cent tax increase to generate an additional $34 million for schools—was hashed out in Chattanooga through Hamilton County Schools. Hamilton County Mayor Jim Coppinger rejected the proposal, forcing Superintendent Rick Smith to go back to the drawing board and reduce a proposed teacher pay increase from 5 to 2 percent.

Meanwhile, across the state, local governments are picking up $1 billion more than they’re obligated to under the state’s BEP formula, and district and local government leaders are increasingly shifting the focus of their frustrations to Nashville and the state Capitol, where the state distributes education funding based on the BEP.

“(Districts and local governments) can’t get anything done locally and they want to fight,” said Robertson, who represents county governments across the state. “Our message is, ‘You need to be on the same team. Come together and turn your attention toward the state.'”

In March, that’s exactly what boards for seven school districts in southeast Tennessee did. Led by the Hamilton County Board of Education in Chattanooga, the districts filed a lawsuit charging that the state has created a system that “shifts the cost of education to local boards of education, schools, teachers and students, resulting in substantially unequal educational opportunities across the State.” But unlike three prior lawsuits alleging built-in inequities in the formula, Hamilton’s lawsuit focuses on inadequacy and argues that the formula fails to “account for the true cost of educating students in Tennessee.”

Tennessee Gov. Bill Haslam delivers his 2015 State of the State address, in which he advocated the state not stray from his standards review process.
PHOTO: TN.gov
Tennessee Gov. Bill Haslam delivers his 2015 State of the State address.

The state is urging dismissal, arguing that the legislature has leeway in funding K-12 education. And Gov. Bill Haslam, who this year championed a $147 million increase in education spending across Tennessee to address BEP funding and increase teacher salaries, has repeatedly urged district leaders to engage the state in conversation instead of litigation.

“The reality is we’re making dramatic improvements in education,” Haslam said in April after lawmakers wrapped up their legislative session. “I challenge you to go around and look at any other state and see what they’re doing in terms of improving funding for education, and I’ll take Tennessee.”

Before recessing for the year, lawmakers considered a bill that would have required the state to fully fund the BEP, but the measure was tabled and never reached a committee vote. The bill is scheduled for discussion Thursday as a House education panel convenes its summer study session.

Shelby County school leaders aren’t waiting around for state lawmakers to act.

Shortly after passing its leaner budget, the district’s Board of Education voted to hire an attorney to explore suing the state over its level of funding. District leaders elsewhere in the state, including in Nashville and Knoxville, have explored similar action, though no additional lawsuits have been filed.

Caldwell has led the charge to take the state to court in Memphis, arguing that neither Haslam nor any individual legislator can guarantee anything to local school districts.

“We’re 45th in per-pupil spending in the country, and it’s beyond the time for empty promises. These kids don’t get these years back,” he said.

A looming new baseline

Luttrell is watching all of these moving parts with interest with the knowledge that Shelby County government is in a unique position to reset the cost of education in Memphis, despite whether the state eventually increases state education funding or tweaks the BEP further.

While Tennessee law prohibits reductions in local education funding from one year to the next, Shelby County government can choose to lower its contribution by 2017. That’s because state law allows an exception to local governments due to significant operational changes such as, in Shelby County’s case, the merger of the city and county school systems in 2013 and the break-off a year later of six suburban municipalities that created their own school systems.

Luttrell says he’ll be watching closely how Shelby County Schools Superintendent Dorsey Hopson manages his education budget and whether he makes more cuts, noting that the district operates dozens of under-enrolled schools. He’ll also be looking to see how the district reduces its worrisome liability for retiree benefits.

“We’ve got three years to ask the tough questions of education,” Luttrell said. “I’d like to be comfortable that we’ve done our due dilligence, and we collectively agree what should be our new baseline.”

Indiana's 2019 legislative session

As Indiana’s teacher pay debate heats up, some lawmakers say schools spend too much outside the classroom

PHOTO: Allen Underwood, Courtesy of Wayne Township Schools
A teacher helps a student during classroom instruction at McClelland Elementary School.

Facing a tight budget year and widespread calls for teacher pay raises, some Indiana politicians are questioning whether school districts are spending too little of the funding that they already receive in the classroom and too much on administration.

The lawmakers point to statistics from the Office of Management and Budget showing that 57 percent of the $11.9 billion state dollars schools spent in 2016 were used in the classroom. And a report using data from the National Center for Education Statistics shows personnel hiring across the country has dramatically outpaced enrollment, with non-teacher hiring dwarfing that of full-time teachers.

“While the number of teachers and students in our public schools have essentially flatlined, administration and non-teaching staff have ballooned,” House Speaker Brian Bosma, a Republican from Indianapolis, told fellow lawmakers in November.

But school districts — eager to receive more money for teacher pay increases that will make them competitive with neighboring states — are pushing back on the characterization that they aren’t using funding as efficiently or responsibly as possible. Trimming administrative payroll alone won’t be enough to raise money for higher teacher salaries.

“When people make broad brush stroke comments about funding, it’s easy to take a shot at administrators,” said Flora Reichanadter, superintendent of Pike Township schools. “There’s this misconception … that (districts) just kind of squandered their money, which is an absolutely inaccurate statement.”

But just figuring out how much of what Indiana spends on schools directly affects students is a complicated endeavor — and figuring out what share goes solely to teachers is even harder. We know that in 2015, the most recent year available, 38 percent of Indiana’s K-12 staff members were full-time teachers. But Rep. Bob Behning, chairman of the House Education Committee, said Indiana can’t isolate teacher salaries and benefits from those of other licensed educators in order to see how much schools and districts spend on them alone.

“Part of our discussion has been trying to isolate those numbers and trying to figure out exactly what that is,” Behning said. “We’ve had difficulty getting data … The fact that teacher by definition is not just a classroom instructor, but could be a librarian or any number of things.”

During last month’s ceremonial first day of the legislative session, Bosma said lawmakers and education advocates, including the state teachers unions, were working on a plan to ensure teacher raises are part of the state’s next two-year budget — mirroring efforts underway to raise teacher pay across the nation. Gov. Eric Holcomb said he also plans to address teacher compensation — in the short- and long-term — though it’s not yet clear whether that means any action in 2019.

But numerous interests are fighting for limited state budget dollars this year, so lawmakers are scrutinizing how existing state funds are being spent by school districts.

“I think we need to have an open discussion about how do we have efficiencies and drive dollars to the classroom,” Behning said. “There’s no question there are things we can do … how do we do more to streamline the operations of the system?”

As an example of cost savings, Behning said that many districts, some of them small and rural, have their own bus depots and maintenance teams — services that could be combined with other districts or cities and towns to reduce spending.

A 2017 report from EdChoice, a national pro-school choice organization based in Indianapolis, criticized school districts for increasing spending on non-teaching staff instead of using the dollars on teacher salaries. Marty Lueken, director of fiscal policy and analysis for EdChoice, questions whether that has helped students.

“Whenever I hear someone say that schools are struggling with large classes, or need more resources for schools or classrooms, or teachers should be paid more, I think about these hiring practices,” he added. “We could have had those other things, like smaller classes or higher take-home pay for teachers, if district leaders made different personnel decisions.”

But only looking at staffing and comparing spending on full-time teachers and to spending on non-teacher leaves a lot out of the picture, said Dennis Costerison, executive director for the Indiana Association of School Business Officials. On its face, that comparison underestimates what schools spend on other adults, such as counselors and principals, who work directly with students, and part-time instructors, who are often cheaper and easier to hire than full-time educators.

“Administrator,” too, is a finicky term, Costerison said. Sometimes, the term includes department heads, who might also be full-time teachers.

Money not spent on teacher salaries also funds resources necessary to ensuring clean and safe schools, such as custodians, accountants, human resources staff, and school safety officers.

Reichanadter, who previously led Franklin Township schools, said school funding has not kept pace with the cost of living, and even if it had, cutting administrative positions isn’t enough to add up to teacher raises.

“There’s only so much you can cut,” she said. “There’s only one of me. There’s 500 teachers. Divide my salary up between 500 teachers and we’re talking about maybe a cup of coffee.”

Administrators, she cautions, also do work that otherwise would fall to principals or teachers, who should be spending their time in the classroom or guiding instructions, she said, not doing payroll or buying supplies. And while some administrative work seems far removed from student learning, the tasks add up to an environment and a system where learning can be the priority, she said. Plus, she added, some non-teaching roles have naturally increased as schools have added services for vulnerable students, such as nurses, occupational therapists, and interpreters.

“It’s ludicrous for some of the legislators to conclude that we didn’t pay attention to this,” Reichanadter said. “I have to be a really good steward of my resources because if I don’t and I don’t compete with my local area, then I’m going to lose teachers and have a lot of turnaround … and that affects learning.”

Costerison added that a portion of a district’s non-teaching costs are the result of mandates made by the very legislature that is critiquing school spending, such as requirements around school safety, testing, and teacher training.

“Whenever bills are passed and laws are enacted, some of them do have repercussions from the standpoint of additional staffing and additional responsibilities for administrators and teachers,” Costerison said.

The state’s most recent 2016 report on classroom spending from the Office of Management and Budget estimates about 57 percent of state dollars go to the classroom — a figure that includes teacher and principal salaries, dollars spent on materials and textbooks, and pay for counselors and similar staff. But that percentage not spent on classrooms includes funding that state law currently says can’t be spent on instruction, Costerison said.

Those off-limits categories include money for building maintenance and debt service — money that, until changes in the state laws about district budgeting take effect next year, couldn’t go toward teacher salaries even if districts wanted.

Lawmakers will have a tough time come January deciding which funding asks to prioritize in the face of shrinking state revenue and several urgent competing issues, including the need to better fund the Department of Child Services.

“When you look at the revenue that exists, the funding, quite frankly, isn’t there at the moment,” said Sen. Jeff Raatz, the new chairman of the Senate Education Committee. “The reality is that we have some significant hurdles we have to overcome to get where we need to go.”

negotiations

The Denver district has offered to raise teacher pay. Will it be enough to avert a strike?

PHOTO: Melanie Asmar/Chalkbeat
A Denver teacher rallies support for increased teacher pay in front of the school district headquarters in September 2018.

Most Denver teachers would get raises under a new salary structure proposed by the school district Wednesday night. The proposal would boost the salary for first-year teachers by nearly 8 percent to $45,000 annually.

The current contract between the district and the teachers union expires Jan. 18, and the union has threatened to strike if an agreement is not reached.

While union leaders said the district’s proposal is “moving in the right direction,” they said it still falls short. For one, they said it wouldn’t give teachers enough of a salary boost for furthering their own education by taking classes toward earning advanced degrees.

“You’re listening,” Rob Gould, a special education teacher and member of the union bargaining team, told district negotiators. “I will say that. We still need you to listen further.”

Denver Public Schools and the Denver Classroom Teachers Association have been negotiating for the past year against a backdrop of widespread protests over teacher pay. The two sides are not negotiating the main teacher contract. Rather, they are negotiating the contract that governs the district’s complex pay-for-performance system, known as ProComp.

Negotiations have been heated, in part because of a state law that requires the district and the union to bargain in public where teachers can watch. Wednesday’s session was no exception. At the end, Gould pointed to a red and white button he had pinned to his union T-shirt.

“This button says, ‘Ask me why I am ready to strike,’” Gould said, as a chorus of teachers “mmmhmmm”-ed in the audience. “I’m ready to strike because I’m sick and tired of teacher salaries paying for other things. And you need to prioritize teachers.”

Denver teachers have long said the pay-for-performance system is too complicated and unpredictable. It pays teachers a base salary and allows them to earn bonuses and incentives for things like high student test scores or working in a hard-to-fill position.

The sole finalist for the district’s open superintendent job, Deputy Superintendent Susana Cordova, has said repeatedly the district should invest more in teachers’ base pay.

District officials said their proposal would simplify the system. It would also increase by $11 million the amount of money Denver Public Schools spends out of its $1 billion budget on teacher pay. The $11 million would come from a combination of increased state funding and cuts to the central office, said Debbie Hearty, head of human resources for the district.

However, the proposal does not give the teachers union what it really wants: the opportunity for veteran teachers to earn $100,000. The union has proposed its own salary schedule that would pay a teacher with 20 years of positive evaluations and a doctorate a base salary of $100,000.

Under the district’s proposal, a teacher with a doctorate and 20 years of positive evaluations would earn a base salary of $85,750.

The union’s proposal would cost a lot more than $11 million, maybe even three times as much. But union leaders said the district could come up with the money if it prioritized paying teachers over other things, such as calculating school ratings they think are flawed.

The district’s proposal gets close to a $100,000 salary but not all the way. The highest it goes is a base salary of $90,750. That would be for a teacher with 30 years of positive evaluations and a doctorate or a combination of advanced degrees, certifications, and longevity.

The district is proposing that teachers who have worked for the district 15 years be bumped up on the salary schedule as a way to honor retention — a proposal Hearty called “bold.”

The two sides do agree on where the salary schedule should start: $45,000 for a first-year teacher with a bachelor’s degree. Currently, first-year teachers earn a base salary of $41,689.

A $45,000 starting salary would be higher than in the surrounding metro districts, including Jeffco, Aurora, and Cherry Creek, but still lower than the well compensated Boulder Valley School District, according to a chart prepared by Denver Public Schools.

The district and the union also disagree on the size of the bonuses and incentives. The union favors larger base salaries and smaller incentives, with some as small as $1,000. The district has proposed offering an extra $2,500 to teachers who work in hard-to-fill positions, high-poverty schools, or other schools deemed “highest priority” by criteria not yet set.

About 75 percent of the district’s roughly 5,000 teachers would earn at least one of the $2,500 incentives, and about 25 percent would earn two, according to the district’s calculations.

The district can’t get rid of the incentives altogether because of the way they’re funded. In 2005, Denver voters passed a tax increase to fund ProComp. The ballot language was specific about how the tax revenue would be used, including to pay teachers for things like working in hard-to-fill positions, increasing their teaching skills, and earning positive evaluations.

Giving up the incentives would also mean giving up the tax money, which district officials project will be $33 million next year.

The district and the union are next scheduled to meet Jan. 8, which will give them just 10 days to come up with a deal before the current contract expires and a strike vote looms. The union has been holding community meetings this week to explain to parents and community members why a strike is a possibility. The union has three more such meetings scheduled next week.