Study: Structural changes needed to fund educational system

Unless structural changes are made by the Legislature in the way schools in the state are funded, the state educational system will continue to be divided into have and have-not districts, according to a study by William Hartman and Timothy J. Shrom.

About 25 community and educational leaders attended the event of the Pennsylvania Economy League at Lycoming College.

Shrom is director of research for the state Association of School Business Officials. Hartman is a professor at Penn State in the educational leadership department. Both were part of a consortium formed to support state legislators, local officials and education policymakers in a review of ways to improve public school finances.

The duo has published a policy brief based on their findings entitled “A Tale of Haves and Have-Nots: The Financial Future of Pennsylvania School Districts.”

The focus of their study was fiscal conditions for the state’s 500 school districts from 2017 to 2022. It featured a review of district revenues and expenditures to illustrate the shortfalls and surpluses that resulted.

“We’re seeing the fiscal environment for public schools change and solidify, not in a good case, but we’re seeing it get more fixed. The main finding is, if nothing happens and we keep the same policies and the same practices that are currently in existence, 60

percent of the school districts in Pennsylvania are going to be locked into fiscal crisis, year-by-year fiscal crisis, and it’s going to negatively affect their educational programs. It will negatively affect children. They’ll have less resources to provide. Those are the have-nots,” Hartman noted.

“A strikingly large number of school districts — 60 percent, 300 school districts — will be locked into fiscal stress year after year and it will worsen year after year,” Hartman added.

Fiscal stress for a district, as defined by the study, is “a condition where a district’s projected revenues are less than their projected expenditures.” This creates a shortfall, which has to be compensated by either raising taxes or cutting back on programming.

Hartman noted that school districts are required by law to have a balanced budget every year.

“You can’t pass the budget without it being balanced. That’s the law,” he said. “Expenditures equal revenue. If they don’t, you have to do something to make that happen. Either you get more revenues or you cut your expenses.”

Projected major revenues for a district, Hartman said, include property taxes, earned income taxes and state subsidies for basic and special education. The largest expenditures are for salaries, charter school tuition, net state school employee retirement system, commonly referred to as PSERS, and other employee benefits.

Shrom and Hartman found that some of the funding problems that districts are encountering are attributed to state mandated costs for charter school tuition and PSERS, which for some districts equal the amount the state subsidizes for basic education.

“If you subtract basic ed, which is the main state driving education instruction engine, subtract those two line items from basic ed. You can see that some school districts, there’s their basic ed less charter and pension increases. There’s their five-year property increases,” Shrom said.

“Every year they do the same thing with their taxes. They’ve built in their Act I increase, they’ve built in what they’re going to get from the state, and then they’re done. At that point they have to make expenditures equal that. If they’re in that shortfall condition, they pull back just like in your own checking account,” Shrom said.

They contended, based on the findings of the study, that any changes to alleviate this situation will have to come from state government.

“Those changes that need to be made, that could be made and the choices about the changes to be made, are in the hands of the Legislature, the governor and individual legislators. Every one of those have to make choices, have to vote on various legislation and that’s where change will occur,” Hartman said.


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