Proposed change to school funding formula sparks debate

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A proposal to adjust the school funding formula could strip millions from urban and rural districts and shift it to others.

Had it been in place this year, Oklahoma City Public Schools’ state aid would have been reduced by more than $7 million. Tulsa Public Schools would have received nearly $3 million less – the equivalent of 50 teachers’ salaries.

The negative effect could be significant on small, rural districts, too. The 315-student district of Fort Towson in southeastern Oklahoma, for instance, would have received $775,000 less from the state – a 40% cut in its state aid.

These are projections using this year’s student count by the state Education Department based on the provisions in House Bill 2078. The bill’s author, state Rep. Kyle Hilbert, R-Depew, called those figures misleading. However predicting enrollment in 2022, when the bill would go into effect, is nearly impossible.

The bill could be heard by a Senate committee as early as this week. If the measure is passed by the Senate, Gov. Kevin Stitt will almost certainly sign it into law.

Stitt called for this type of legislation in his State of the State address when he decried the number of “ghost students” in the funding formula. Because a district’s funding is based on the current year or the higher of the previous two, students who move could potentially be counted by multiple districts.

HB 2078 would remove the option of using two years prior, which Hilbert says will boost the amount of money to each student. The concept: If the total amount of state aid for schools were a pie, slicing it by fewer students would result in a slightly bigger slice.

Supporting the measure are the Oklahoma Council of Public Affairs, a conservative think tank, and ExcelinEd, a pro-school choice advocacy group founded by former Florida Gov. Jeb Bush.

Coming out against the proposal are education advocacy groups including the Oklahoma State School Boards Association, Oklahoma Education Association, Cooperative Council for Oklahoma School Administration, Oklahoma Rural Schools Coalition and Oklahoma Parent Legislative Action Committee.

“This (bill) is a real knee-capping to public education,” said JJ Burnam, head of the Tulsa Parent Legislative Action Committee. He thinks the current political climate – in which many parents are angry with schools’ COVID-19 policies and distance learning – is favorable to pass a law like this.

What projections show

The bill aims to make a tweak to the funding formula that could have large, unpredictable and unintended consequences, according to school finance officers, education advocates and Democratic lawmakers.

“This is going to be a very volatile situation in a moment in time when that’s the last thing we need,” said Nolberto Delgadillo, chief financial officer of Tulsa Public Schools. “A bill like this is essentially going to handicap us and destabilize our ability to plan over the long term.”

There are many factors that can lead to declining enrollment. Many are unrelated to the quality of education. Families follow economic opportunities, particularly in rural communities that rely on energy industry jobs. Fluctuations in enrollment also are related to birth rates. For instance, fewer babies were born in the Great Recession, an age group that attends middle school today.

If the proposal had been in effect for this year, 188 school districts would have been negatively affected; most are small, rural districts and would have had state funding reduced by as much as 59%.

Rural school leaders are very concerned about the proposal, said Erika Wright, a parent in Noble who also leads the Oklahoma Rural Schools Coalition.

“This bill will further cripple the stability of rural education during a time when districts need more stability in recovering from the COVID-19 pandemic,” she said.

Suburban districts and virtual charters – which have experienced the most student growth – would have been the biggest winners, the projections show. Epic Charter Schools’ state aid allotment would have increased from $310 million to $314 million combined across its two school models.

Virtual charter schools would have benefited the most. More than $4 million additional state dollars would have been allotted to Oklahoma’s seven virtual charter schools, with a combined $3.6 million to Epic Charter Schools’ two models.

Effect on Epic

The state funding formula is designed to cover the gap between local revenue and the amount necessary to have quality schools in each community. Charter schools, like Epic, receive no local tax revenue and nearly all funding comes from the state.

Hilbert said preventing a sustained windfall to Epic is one of the reasons he proposed the measure.

“The district with the most to lose is Epic, because they got as high as 60,000 students at one point, and they’ll be able to use that for two years after this year if we don’t change the law,” Hilbert said on the House floor Wednesday.

That’s assuming Epic’s enrollment declines for the next two years, since the bill, if passed, would go into effect in July 2022. Epic has reported an enrollment increase every year since the school began in 2010.

Public school enrollment experienced major fluctuations this year and dropped overall for the first time in 19 years. Next year’s enrollment is unpredictable, too.

Secretary of Education Ryan Walters said getting an actual estimate of fall enrollment would be difficult, but he thinks students are already starting to return.

“Hearing our conversations with school leaders, we feel confident that we are going to see that enrollment (back) in their traditional schools,” he said.

Walters said another of Stitt’s education initiatives – to increase student transfers – necessitates the funding formula change. If students are moving between districts more often, and being counted by their current and former districts due to the current formula provision, the amount of money available per student could decline, he said.

It’s this “double counting” that Stitt referred to in his State of the State address when he used the term “ghost students.”

“We’re sending money to districts to educate kids who don’t go there, and that’s simply not fair,” he said.

The term “ghost students” was first used by an Oklahoma State Bureau of Investigation agent in July 2019 to describe Epic Charter Schools’ alleged practice of enrolling pupils who received no actual teaching from the school.

Hilbert’s bill is contingent on one of two school transfer measures (House Bill 2074 and Senate Bill 783) also being approved. The bills would allow a student to transfer to another district any time during the year, as long as the receiving district isn’t at capacity, and limit the reasons a district could deny a transfer.

Hilbert’s bill also would increase the percentage of funds districts can carry over year to year.

Winners and losers

Oklahoma distributes funding using a weighted formula, which provides extra amounts for students with greater needs, such as students with disabilities.

An evaluation of the school funding formula by Ed Build, a nonprofit consultant that advocated for fair school funding, found that it was “basically sound,” just underfunded. EdBuild ceased operations in 2020.

A legislative task force also proposed changes to the formula, none of which involved eliminating the two-year high.

“There’s nothing you can do with the formula that won’t affect some districts negatively and some positively, unless you add money to it,” said Lori Smith, the chief financial officer of Edmond Public Schools.

Though Edmond schools would likely benefit from Hilbert’s bill because the district is growing, except this year, Smith emailed her lawmakers on Wednesday, urging them to consider decreasing the weight of virtual students.

“The student weights currently provide so much more money than is necessary to educate in a virtual environment, leading to a huge inequity,” Smith wrote.

Walters says the Stitt administration wants to continue to invest in education, too. “We’re not against more funding to education, but there is a finite amount of resources we have.”

‘Big, bold, disruptive and cheap’

Burnam, from the Tulsa Parent Legislative Action Committee, said the premise of the bill implies the public education system is the problem and parents should “shop” for a school. That design gives schools the power to pick students and could leave some students behind. “You would find a great weeding out of the least advantaged,” he said.

State Rep. John Waldron, D-Tulsa, echoed that concern when speaking against the bill Wednesday.

“It’s going to accelerate white flight to the suburbs. It’s going to accelerate the decline of many of our rural communities. It’s going to leave large pockets of poor students, often Black and brown, in even more poorly funded schools in already stressed urban or rural neighborhoods,” he said.

He also questioned the timing of the bill – a year when districts, more than anything, need stability, not instability.

“This campaign has all the hallmarks of an ALEC-funded education reform,” Waldron said, referring to the American Legislative Exchange Council, a group that disseminates conservative model bills to state legislatures. “It’s big. It’s bold. It’s disruptive. And it’s cheap.”

Oklahoma Watch is a nonprofit, nonpartisan news organization that produces in-depth and investigative content on a wide range of issues facing the state. For more Oklahoma Watch content, go to oklahomawatch.org.