(from Maine Townsman,
May 2003)
by
Geoff
Herman, Director of State & Federal Relations, MMA
The cement trucks are on the job site and the new footings are being poured on which to build a rational and coherent school funding formula. The new foundation is called “Essential Programs and Services.” If the state is willing, the three-letter acronym “EPS” could become commonplace in the nomenclature as a respected and accountable centerpiece of the state’s system of financing public education.
EPS, in itself, is not a school funding formula. EPS does not revise, amend or recreate the dense and difficult “fiscal capacity” calculus that decides what slice of the state’s $732 million school subsidy pie will be served-up to each school administrative district.
The politics of the school funding are so prickly, the point is worth repeating. The Essential Programs and Services model is essentially blind to the question of who pays what share of the cost of public education…whether state or local government, either on a school-by-school basis or in the statewide aggregate. EPS is not a subsidy distribution model. The task of EPS, instead, is to define how much kindergarten through grade 12 public education should cost for each school administrative unit and, in sum, for the state as a whole.
There will be plenty of time later for the politics of distribution. For now, the EPS program is an attempt to replace the incremental, expenditure-driven school budgeting system with an honest, built-from-the-ground-up, zero-based budgeting approach, and EPS proponents are hoping the politics of school funding will slink into abeyance long enough to give this fresh model a fair hearing.
Old Wine In New Bottles
The current school funding system revolves around the “foundation allocation” which represents the cost of operating any public school that the state defines as appropriate and worthy of participation. (Note: The term “allocation” as used in this context can be distracting. It should be understood as a synonym for “state and local resources”.) The “foundation allocation” is defined by a magic number called the “per pupil guarantee”. The per pupil guarantee is currently $4,816, and in theory it represents the minimum amount of money the state believes should be spent on every public school student (not counting major capital expenses) in order to provide an adequate education. Multiply the number of students in any school system by $4,816, and you have the “foundation allocation”.
If there was once some sort of ground beneath the calculation of the per pupil guarantee, it has long since turned to quicksand. For years the Department of Education has been trying to convince the Legislature to increase the per pupil guarantee so that it could at least equal the average foundation-related per pupil spending statewide ($5,204), but the state’s financial shortfalls and the politics of school funding have frustrated that goal. Even if the goal were achieved or achievable, no one can say with any conviction whether the average statewide per pupil spending level is the spending benchmark to which we should all aspire.
EPS serves the function of redefining the per pupil guarantee and re-establishing the “foundation allocation” as the “EPS allocation”, but that task is not accomplished on the basis of historical statewide spending and it is not accomplished by backing into some arbitrary number on the basis of whatever the Legislature is able to appropriate for education. After years of painstaking research, and extensive discussions among the State Board of Education, The Department of Education, the Legislature’s Education Committee and the Maine Education Policy Research Institute, EPS has achieved a level of design that not only defines a new, rational “per pupil guarantee”, but tailors that per pupil guarantee to the special situation of each school administrative unit according to the circumstances of its student population, the investments it has made in instructional staff and certain other quantifiable adjustments.
Before walking through the detailed EPS design, a brief history of its development deserves a recounting.
EPS and Learning Results
The benefits of rebuilding the foundation of the school funding system should be obvious, if for no other reason than to enable state and local policy makers to work off a model that comports with reality rather than the world of pretend.
$1.7 billion in state and local resources was spent on K-12 public education this year, but only 85% of the total state and local budget for education is recognized by the General Purpose Aid to Education (GPA) model. Nearly a quarter of a billion dollars of local spending on education is considered “optional” or “not required” or “outside the formula” by the worn-out GPA model. Anyone familiar with the reality of providing educational services is aware of how inaccurate it is to characterize this local spending for schools outside of the GPA model as “optional” or “not required”. It is particularly frustrating to hear legislators characterize the local funds for education raised outside the GPA formula as evidence of excessive and uncontrolled spending. That so-called “optional” local spending is the obvious local reaction to an ever-shrinking state contribution – in real terms – to public education.
But it is more than the revamping of a dysfunctional distribution formula that gives life to a new funding foundation. According to the several reports that have been submitted over the last six years to the Legislature’s Education Committee, EPS is actually the financial accountability counterpart to the educational performance measures mandated by the “Learning Results” system.
The first such report, submitted in January 1999 by a working group formed by the State Board of Education (State Board), begins with the following overview:
“The concept of essential programs and services is tied directly to Maine’s Learning Results. Learning Results are state standards, embodied in Maine law, which spell out what public school students should know and be able to do at various points in their K-12 education. Essential programs and services are the way to reach that goal; they are the educational programs and services which are essential if all Maine students are to have an equitable opportunity to achieve the Learning Results.”
The Learning Results system mandates satisfactory student performance in eight program areas: English, Mathematics, Social Studies, Science & Technology, Health & Physical Education, Career Preparation, Visual & Performing Arts, and Modern & Classical Languages. Maine’s eighth graders will be the first class graduating from High School in 2007 that will be measured as graduates by the Learning Results standards.
In the second “interim” report submitted to the Education Committee in 2000, the State Board summarized the developing EPS model as follows:
“Currently, education funding is based on what has been spent in the past, adjusted for inflation, and reduced to the amount of funds the Legislature decides can be appropriated. The new recommendation is for funding based on the resources required if all children are to meet the Learning Results standards. Expressed another way, funding would be based on providing the resources needed to get the job done.”
Throughout this incubation period, subcommittees of the State Board’s working group and the researchers at the Maine Education Policy Research Institute were breaking down the myriad cost-center components of educating Maine’s 210,000 public school students.
Working from reams of survey data taken directly from Maine’s schools and other state and national educational resources, the research project identified base unit costs, measured on a per-student basis for three different grade brackets (K-5, 6-8, and 9-12). The identified cost-center categories are: teaching instruction, ed. tech. services, guidance, administration, health programs, clerical support, library and media, physical plant operations and maintenance, supplies and equipment, system administration, co-curricular and extra-curricular activities, and professional development and instructional leadership. This extraordinary task required the breaking down of the seamless educational program into its unitized segments and rebuilding those segments back into the whole, all for the purpose of identifying the base financial components of providing a “Learning Results” education in Maine.
Once the base costs were developed, the State Board’s work had just begun. The next step was to increase the sophistication of the model by developing a variety of weighting systems, adjustments and allowances that are designed to apply the model to any real-life school system in a way that gives proper recognition to both the known educational (and therefore financial) challenges presented by certain student populations and the investments the school has made in its teaching staff. Many of those sophistications were (and continue to be) hammered out only after extensive discussions among the several architects of the model, including the State Board, the Department of Education, the Research Institute, and the Education Committee.
The State Board’s progress reports in late 2000 and 2001 indicate that the work was not without its complications and frustrations. The builders of the model struggled to calculate the per-student unit pricing for such volatile, disproportionate and unevenly provided educational services as special education and transportation, and more work still has to be done to fit those “program costs” (as they are currently called) into the EPS model. Until those special educational services are introduced into the model, they would be financed under the present program-cost system. Major capital and renovation costs were never envisioned to fit into the EPS model and would also continue to be financed under the present system.
What Does EPS Cost?
Nurturing the growth and acceptance of the EPS model is like trying to keep a newborn calf alive that was born mid-winter in a cold barn. To survive, it needs to be kept out of the drafts and given good nutrition. The politics of school funding distribution could kill this calf, and the model needs to be sheltered from that cold wind until it’s standing strongly on its four legs. A sour colostrum that could also put the calf down is a common misunderstanding about the “costs of EPS”.
There are reasons why the question about the cost of EPS is difficult to pin down with laser precision. As the model moves off the drafting table and onto the testing grounds, adjustments continue to be made to some of the moving parts, such as changes to the weight given to economically disadvantage students, or the decision to exclude, for now, special education adjustments within the model.
Also, the current game plan is to transition into EPS, so the financial impacts, whatever they might be, would be phased-in over a 5-year time frame rather than all at once. (On that score, because it is a per-pupil model, the calculated aggregate cost increases over time are muted by the state’s generally declining student population.)
A thornier question asks how much any cost increases associated with EPS are attributable to the additional expenses of meeting the Learning Results mandate versus cost increases that might result from implementing EPS irrespective of Learning Results. As tempting as it is to identify with some science the actual cost of the Learning Results mandate, the question doesn’t make sense in one respect, and at best is purely academic. Without Learning Results or some other common curricular base to benchmark, an EPS model would be impossible to craft.
The most deeply-rooted confusion around the question of “what will EPS cost?” has nothing to do with these issues. The central confusion is whether the cost question pertains to the total K-12 expenditure or only a subset of that total cost – the subset that the state agrees to financially participate in, currently referred to as the “foundation allocation”.
Some say that if EPS were the law today, it would increase costs by $213 million. Others say that there would be no cost increase. It turns out both positions are correct! The size of the foundation allocation that formally identifies the level of appropriate school spending would grow under EPS by approximately $200 million, but the level of “optional ” or “outside the formula” local school spending would shrink in rough proportion.
Which leads us to a remarkable coincidence.
As mentioned above, the total cost of providing K-12 education in Maine for FY 04, based on current law, state appropriations, and local spending trends will be $1,706,368,936.
According to the EPS model as currently configured, the total cost of providing K-12 education in Maine for FY 04, if EPS were fully implemented, should be $1,708,540,751.
For all purposes, the two cost estimates are identical but they are derived in completely different ways. The actual cost estimate is an accumulation of the actual school expenditures across the state, that range in both per-pupil cost and educational offerings in enormous variation. Alternatively, the EPS estimate is calculated independently of actual school budgets by applying the benchmarked per-student costs, along with all the various adjustments, to the student population of the entire state, as though Maine was a single, super-sized school administrative district.
The point to the exercise is that the EPS model in the statewide aggregate does not further stretch the statewide K-12 school budget. What is stretched is the size of the “foundation” resources. Under the current system, the state participates in a fraction of the whole, and another fraction is purely local spending. In the EPS model, the state would participate in the whole, provided the local school program fit within the model.
Walking Through the EPS Design
For the last eight years, Jim Rier has served on the State Board of Education, playing an instrumental role in the development of a long list of public policy advances, including the school renovation grant and loan program, alternative school district budgeting procedures, oversight of the new school construction approval process, optional cost-sharing formulas to reduce inter-municipal tension within school districts…the list goes on. Rier has recently been hired as the Director of Planning and Management Information Services for the Department of Education.
While still on the State Board, Rier was tasked with developing a presentation of the EPS model that moves the discussion from the theoretical phase to the stage of practical implementation. The power-point presentation Rier has prepared, entitled “Essential Programs and Services: Applying the Math to the Concept”, has been presented to the Legislature’s Education Committee and Taxation Committee, and deserves to be reviewed by a much wider audience.
As the title suggests, the Rier presentation is a workbook that allows anyone with some readily available information about their school system to work through the EPS calculation of that school’s “foundation allocation”. In the process, the rationality of the EPS model becomes readily apparent.
Gathering the data and getting started: The data required to complete the workbook are the school system’s:
1. total student population in the three grade ranges (K-5, 6-8, and 9-12), as may be applicable to the school administrative unit;
2. three “specialized” student populations, including the number of economically disadvantaged students (who receive free or reduced school lunch), limited English proficiency students, and all K-2 students; and
3. teacher staffing data, including the number of teachers in each grade range, their years of teaching experience and their education level.
The “Applying the Math to the Concept” presentation walks through the EPS calculation for a hypothetical school administrative unit that has 1188 students, 220 of whom are enrolled in the K-2 grade levels. 580 of the school system’s students are economically disadvantaged and 4 students are identified as having limited English proficiency. The school system has a teaching staff of 82, and the education-and-experience credentials of those teachers range from a first year teacher with a Bachelor’s degree to three teachers with over 16 years experience and advanced Master’s degrees, with the rest of the teaching staff falling in between.
In order to calculate the total operating costs for the school system according to EPS, four separate calculations are required:
General operations, which equals the total student population in two grade-range categories (K-8 and 9-12) multiplied by the EPS-designed per-pupil rates.
Weighted populations, which equals the two specialized student populations (economically disadvantaged and limited English proficiency) multiplied by the weighted adjustments to the EPS-designed per-pupil rates.
Targeted adjustments, which equal certain fixed-dollar amounts multiplied by the student population to recognize the direct costs of administering student assessment systems, implementing technology and early school instruction.
Regional cost factor to adjust the salaries and benefits component of the overall EPS calculation to reflect the relative cost-of-living in the school’s labor market area.
General Operations
The starting point is the general operations calculation, and the key ingredient in that formula is the EPS per-pupil rate. As discussed above, the “per pupil guarantee” that creates the foundation of the current school funding system is a crude number ($4,816) that lacks any underlying justification.
In contrast, the EPS per-pupil rate is tailored to several characteristics of each individual school system to ensure that the one-size-fits-all approach doesn’t punish the school for investing in its instructional staff. The tailoring also puts focus on the recommended teacher-student ratios.
Here’s how the EPS rate is calculated, step-by-step:
General Operations Step #1. Combined teachers’ salaries. The lion’s share of any school budget is personnel costs. The first step in calculating the EPS allocation is a summing-up of the total teacher salary allowance. The total allowance is calculated by ascribing the state average salary to each teacher in the school according to the teacher’s actual years of experience and education levels. A carefully-developed matrix matches the interplay effects of education and experience on teacher salaries, starting from a beginning salary for a first-year teacher with a Bachelor’s degree of $25,274. Additional education and/or additional years of experience allow for a factoring of that starting salary so that the “allowance” salary of a teacher with 16 years of experience and a doctorate in the field of instruction would be $58,130 (see Fig. #1).
FIGURE 1 | |||||
EPS Statewide Teacher Salary/Experience/Education Matrix | |||||
x Statewide Average Base of $25,274 | |||||
Education Level | |||||
Years of | BA | BA+ | MA | MA+ | Doctorate |
Experience | |||||
<1 | 25,274 | 26,538 | 29,065 | 31,593 | 37,911 |
5-Jan | 27,081 | 29,065 | 31,593 | 34,120 | 40,438 |
10-Jun | 31,593 | 32,856 | 35,384 | 37,911 | 44,230 |
15-Nov | 37,911 | 39,175 | 41,702 | 44,230 | 50,548 |
16+ | 45,493 | 46,757 | 49,284 | 51,812 | 58,130 |
The first step, therefore, to calculate your school system’s EPS per-pupil rate is to plug the school’s teachers into the experience/education matrix and calculate the total value of the combined “allowance” salaries.
General Operations Step #2. Adjust for the student-to-teacher ratio. The student-to-teacher ratio adjustment to the aggregate teachers’ salary just calculated is simple mathematics. In the example provided in Fig. 2, the hypothetical school district with 1188 students is presented. After breaking down the recommended student-to-teacher ratios for each of the three grade ranges (K-5, 6-8, and 9-12), the optimum staff size according to the EPS model would be 74.1 teachers. Because the sample school system has 81.5 teachers, the aggregate teacher salary as calculated under Step #1 is adjusted by a factor of .91. It is a ‘Goldilocks’ public policy. EPS is designed to support an optimum student-to-teacher ratio that is neither too high (to the detriment of the students) nor too low (to the taxpayers’ expense).
FIGURE 2 | |||||
Total EPS Teacher Salaries for Actual FTE $3,296,231 | |||||
Adjust for Number of Teachers in EPS Model | |||||
K-5 | 8-Jun | 12-Sep | K-12 | ||
EPS Pupil Teacher Ratio | 17 | 16 | 15 | ||
Pupils | 519.5 | 267 | 401.5 | 1188 | |
EPS Model Staff | 30.6 | 16.7 | 26.8 | 74.1 | =91% |
SAU Current Staff | 81.5 | ||||
EXAMPLE: $3,296,231 X .91 = $2,999,570 | |||||
Adjusted for Teacher Salaries |
General Operations Step #3. Add in support staff and all benefits. Statewide experience and other supporting data establishes for each of the different grade ranges the appropriate student-to-staff ratios and average staff salaries for ed. techs., guidance counselors, librarians and media staff, health staff, clerical workers and school administrators. To complete this step, the formula crunches those numbers based on the actual school system’s student populations rather than actual staffing levels. At this point, the aggregate instructional and support salaries for each grade range, measured in dollars, is converted into a per-pupil value by simple division (Fig. 3).
FIGURE 3 | |||||||
Adjusted Teacher Salaries from EPS Matrix $2,999,570 | |||||||
Add All Other Salaries and Benefits per EPS Model | |||||||
K-8 | 12-Sep | K-8 | 12-Sep | State | K-8 | 12-Sep | |
Ratio | Ratio | Staff | Staff | Avg. | Salaries | Salaries | |
Ed Tech | 100 | 250 | 7.9 | 1.6 | 14,228 | 111,903 | 22,850 |
Guidance | 350 | 250 | 2.2 | 1.6 | 43,825 | 98,481 | 70,383 |
Librarian | 800 | 800 | 1 | 0.5 | 42,691 | 41,971 | 21,426 |
Media | 500 | 500 | 1.6 | 0.8 | 15,517 | 24,408 | 12,460 |
Health | 800 | 800 | 1 | 0.5 | 37,674 | 37,038 | 18,908 |
Clerical | 200 | 200 | 3.9 | 2 | 22,590 | 88,835 | 45,349 |
Admin. | 305 | 315 | 2.6 | 1.3 | 61,264 | 157,981 | 78,087 |
Substitute - 1/2 day per pupil | $30 | $30 | 23,595, | 12,045 | |||
Subtotal - All Other Salaries | 865,720 | 584,212 | 281,508 | ||||
Teacher Salaries from EPS Matrix | 2,999,570 | 1,979,716 | 1,019,854 | ||||
Benefits (All) | 639,237 | 423,958 | 215,279 | ||||
Total Salaries & Benefits | 4,504,527 | 2,987,886 | 1,516,641 | ||||
Per Pupil Salaries & Benefits |
$3,799 | $3,777 |
General Operations Step #4. Final step, non-staffing costs. Again, statewide experience and other supporting data identify certain per-pupil costs in the two major grade categories (K-8 and 9-12) for physical plant costs, school supplies, co-curricular/extra-curricular activities, etc. After these per-pupil costs are added to the instructional and support per-pupil costs as previously calculated, the EPS per-pupil rates are finalized. In the case of this sample school system, the EPS “per-pupil guarantee” is $5,369 per student in the K-8 system, and $5,631 per student in grade 9-12 system. As has been shown, the only two variables that might change those rates from school system to school system are the teachers’ experience and education levels and the school’s student-to-teacher ratios.
Weighted Populations
The “weighted populations” calculation will also adjust the EPS allocation from one school system to the next…another example of the model turning away from the one-size-fits-all approach. Calculating the weighted population number is simple. The total number of students entitled to receive free and reduced school lunch (according to federal standards) is multiplied by 15% of the EPS base rate for each of the two major grade categories (K-8 and 9-12). The number of students identified as having limited English proficiency is multiplied by 50% of the EPS base rate for each grade category. For schools with significant non-English speaking school populations, the 50% weight factor adjusts in a couple of directions reflecting actual economies and dis-economies of scale (Fig. 4).
FIGURE 4 | |||||||
Total Operating Cost Calculation SAU #99 | |||||||
Total | |||||||
Total Population | Pupils | EPS Rate | Allocation | ||||
• K-8 Pupils | 786.5 | X | $5,369 | = | $4,222,719 | ||
• 9-12 Pupils | 401.5 | X | $5,631 | = | $2,260,846 | ||
$6,483,565 | |||||||
Weighted Amounts EPS wt.* | |||||||
• Disadvantaged K-8 | 0.15 | X | 384 | X | $5,369 | = | $309,254 |
12-Sep | 0.15 | X | 196 | X | $5,631 | = | $165,551 |
• Limited English K-8 | 0.5 | X | 4 | X | $5,369 | = | $10,738 |
12-Sep | 0.5 | X | 4 | X | $5,631 | = | $11,262 |
$469,805 | |||||||
* Additional Per Pupil Amounts for Limited English Proficiency (LEP) and Economically Disadvantaged |
Targeted adjustments. The targeted adjustment calculation is also entirely straight forward. To help support the always-developing student assessment requirements, the total student population is multiplied by $100. For technology support, the entire student population is multiplied by $175. For special support in the early grades, the kindergarten-through-grade 2 student population is multiplied by 10% of the EPS base rate for the lower grade categories. The sum of these three totals are added to the growing EPS allocation.
There is one aspect of targeted adjustments, however, that should be noted. As a general rule, none of the weights, adjustments or factors that go into calculating the EPS allocation are prescriptive. The weighted adjustments for students with limited English proficiency, for example, do not come with strings tying the school to provide certain language programs. Similarly, the adjustment based on the school’s student-to-teacher ratio is not provided on a contingency that the school change the teacher ratios that the community wants to provide.
Having said that, the targeted adjustments for student assessment, technology and K-2 programs do come with certain expectations. In order to access these components of the state subsidy, the schools will have to maintain certain programmatic minimums in the targeted areas.
Regional Cost Factor
The sum of these first three calculations – general operations plus weighted adjustments plus targeted adjustments – is very nearly the bottom line. The last adjustment is modest in size and designed to reflect the fact that the costs of supporting a service-delivery system so dependent on employees is not the same in every corner of the state. The regional cost adjustment is calculated by dividing the statewide average teacher salary (currently $36,524) into the average teacher salary within the labor market area in which the school is located. That division yields a factor that tips one way or another off 1.0.
That factor is then applied to a subset of the EPS allocation that represents the total salaries and benefits of all personnel in the school system as previously calculated under “general operations” on the basis of statewide averages.
In the hypothetical school system used in the “Applying the Math to the Concept” workbook, the school is located in a labor market area where the average teacher salary is approximately $2,000 less than the statewide average, so the regional cost adjustment factor is .94. When applied to the salary base in that school system of $4.5 million, the regional cost adjustment reduces the overall EPS allocation by $270,000 (Fig. 5).
FIGURE 5 | |||||||
Total Operating Cost Calculation SAU #99 | |||||||
Total | |||||||
Total Population | Pupils | EPS Rate | Allocation | ||||
• K-8 Pupils | 786.5 | X | $5,369 | = | $4,222,719 | ||
• 9-12 Pupils | 401.5 | X | $5,631 | = | $2,260,846 | ||
$6,483,565 | |||||||
Weighted Amounts EPS wt. | |||||||
• Disadvantaged K-8 | 0.15 | X | 384 | X | $5,369 | = | $309,254 |
12-Sep | 0.15 | X | 196 | X | $5,631 | = | $165,551 |
• Limited English K-8 | 0.5 | X | 4 | X | $5,369 | = | $10,738 |
12-Sep | 0.5 | X | 4 | X | $5,631 | = | $11,262 |
$469,805 | |||||||
Targeted Amounts EPS wt. | |||||||
• Assessment K-12 | 1188 | X | $100 | = | $118,800 | ||
• Technology K-12 | 1188 | X | $175 | = | $207,900 | ||
• K-2 Pupils | 0.1 | X | 220 | X | $5,369 | = | $118,118 |
$444,818 | |||||||
Regional Cost Adjust | |||||||
• Total Salaries & Benefits $4,505,527 X .94 - 4,504,527 = ($270,272) | |||||||
Total Operating Costs $7,154,917 |
Conclusion
The Essential Programs and Services model represents an opportunity to construct a new foundation for the state’s school funding system. EPS strives to define the resources that should be available to every school administrative unit in Maine so that the students enrolled in that school system, wherever it’s located, can meet the performance standards put into motion by the Learning Results system. The EPS model rejects almost all the characteristics of the current “foundation allocation” system because the functionality of that system has eroded away from its original justifications.
EPS is built from the bottom-up, based on a system of benchmarking necessary costs. EPS is calculated independently of the Legislature’s appropriations to support school funding and independently of the incremental increases in actual school expenditures. Finally, EPS rejects the one-size-fits-all application, making adjustments to take into account each school system’s educational challenges, student-to-teacher ratios and cost-of-living pressures.
Critics of EPS, anticipating the changes a rebuilt foundation might have on distribution, might take issue with the influence of a weighting factor or the impact of a certain adjustment, but there is a more fundamental question that EPS poses to state and local school funding policy makers; a question that transcends the parochial politics of school funding distribution. Are we satisfied with a school funding system that is indifferent to what a public school education should reasonably cost? If the answer to that question is ‘no’, it’s time to say ‘yes’ to an EPS model.