(Editor’s note: This is the third and final story in a three-part series about funding issues in Madison County and other Kentucky school districts.)



Various studies have proposed that state funding for Kentucky school districts should be increased by hundreds of millions of dollars, according to Lisa Gross, press secretary for the Kentucky Department of Education’s Division of Communications.

“School funding in Kentucky, overall, is not where it should be” she said. “Although the funding system does provide equity, the pool of money is just not big enough. So, districts may struggle over time or have difficulty during a given year, depending on factors such as enrollment, facilities and other expenditure-related items.”

Kentucky has traditionally ranked lower than most states when comparisons are made on the amounts allocated per student for P-12 education, Gross said.

The amount of public school expenditure per student in 2005-06 for the state was $8,195, ranking Kentucky 31st in the nation, according to fall 2006 rankings and estimates by the National Education Association.

Washington, D.C., and Utah were first and last in the rankings, respectively, with $15,864 and $5,347 per student.

The seven adjacent states to Kentucky — Illinois ($10,271), Ohio ($10,034), West Virginia ($9,790), Virginia ($9,275), Indiana ($8,978), Missouri ($7,680) and Tennessee ($7,079) — ranked 11th, 17th, 18th, 21st, 23rd 39th and 45th, respectively.

The state always has to acknowledge the increase cost of education, said state Sen. Ed Worley, D-Richmond.

“That is a core responsibility in our budget,” he said. “About 60 percent of all dollars in the state budget currently goes to education, all of education. As we privatize in other areas of state government, find savings and reductions, as the economy grows and additional revenue exists, we need to appropriate additional money from the state level.”

“(Kindergarten through 12th grade) are the most crucial years of a child’s development,” Worley said. “There has been significant improvement in funding over the past few years with the development and changes in the SEEK formula. But, as far as adequately funding for the full needs, until all of K-12 have the technology they need, the classroom sizes that they need and until teachers are compensated to a level that is fair and comparable to surrounding states, then it’s underfunded.”

‘Great progress’

“We’ve made great progress since 1990,” state Rep. Harry Moberly, D-Richmond, said about the rankings. “At one point, we were ranked 47th or 48th. But, it is my goal to get it down more. Our kids are starting to perform at the national average or above on tests. I continually talk about the need for more money, at the same time as we have more accountability. If we put more money in, we expect more results.

“I’m a strong advocate for squeezing every dollar we can out of the budget for education,” he said. “I think the greatest responsibility in the General Assembly and the governor is to assure that we have a good system of education P-20 (pre-school through college).”

However, Gross said it is a positive sign that the 2006 General Assembly added more funding to the state formula.

“We have greatly increased the amount of K-12 money in the budget since 1990,” Moberly said. “Our last full budget in 2006, I think was the best education budget that we ever passed. But, we’re going to have to go in 2008 and address the issues (school districts have.) We’re still not funding elementary and secondary at a high enough level.

“We need more money, particularly in preschool,” he said. “We need to improve our test scores across the board. We need more teachers. We’re going to need to do more. I’m committed to doing more, and I always have been.”

Elementary and secondary education has always been the legislators’ number one priority, he said.

“It has lost some share in terms of percentage in the budget, not dollars, because the dollars have been going up greatly,” Moberly said. “But, in terms of percentage, it’s lost some ground since 1980 because of the amount of money we’ve had to put in Medicaid and prisons. We think we’re starting to get a handle on those costs with some new and innovative ways of looking at those. So, education remains our top priority. I think 2008 needs to be a session where we show what a priority education truly is for us.”

Watch List

Two of the state’s 174 school districts were on the Kentucky Department of Education’s Financial Watch List at the end of 2006.

The Clark County and Ludlow Independent school districts were placed on the list because their budgets were close to not having the 2 percent contingency fund required by state law. There usually is no more than five districts on the list within a given year with the average being two to three districts, Gross said.

“We monitor districts’ financial status to ensure that they have at least that 2-percent reserve, and we offer resources and assistance when the contingency gets close to the required level,” she said. “Madison County was not one of those districts.”

KDE staff works with districts to help them implement sound business practices and make the most of the funding they receive, she said.

The state Department of Education and the Kentucky Board of Education continue to encourage and support expanded funding for the state formula, along with growth taxes that would benefit districts that experience rapid enrollment growth, Gross said.

“Growth is a big issue in a number of districts, and it is cyclical, meaning that a district usually experiences rapid growth over a period of time, then levels off for a while,” she said. “Every year, some districts struggle with growth, which affects their financial status in a variety of ways. But, once district officials adjust to the growth, the district tends to bounce back.”

Funding

All districts have enacted local taxes, ranging from utility to “growth nickels,” which the Madison County School District has two of for building purposes, in order to raise revenues.

For the 2007-08 school year, the Madison County School District, will derive 65.7 percent ($38.7 million) of its general fund budget from state funding, 33.9 percent ($19.9 million) from local sources, including property taxes, utility taxes, franchise taxes, motor vehicle taxes and delinquent taxes, and less than 1 percent from miscellaneous funding.

The district also receives about $7 million in federal funding separate from the general fund.

The total budget is about $64.2 million with $5.3 million of that carried over from the 2006-07 school year.

While districts do have the ability to increase taxes by a particular amount or attempt to have a referendum to raise taxes to improve revenue, Moberly said he disagreed that more funding should come from local sources.

“Kentucky is in the top five in percentage of state contribution (to school districts),” he said. “We have traditionally been a much larger state contributor than a local contributor, although the local money is very important. I believe it’s a consensus politically of the people of Kentucky, including Madison County, that they want to continue that heavy state participation, and they don’t want to do anything where they’ll be paying a lot more local taxes.”

There is no one answer that covers all of the state’s school districts about whether putting more demand on local sources for revenue for school districts, Gross said.

“In some districts, raising the level of local effort is the best solution,” she said. “In others, more state funding would be of greater help. And, for still others, some combination of the two would be most effective. Given that there’s a limited pot of money, it’s more a matter of sound fiscal policy, rather than counting on a great windfall, that will help districts manage funding successfully.”

SEEK can hurt

One way the Madison County District gets hurt with the state SEEK formula, said Glenn Marshall, acting superintendent, is when the county’s existing property values increase by more than 4 percent because the district can only receive 4 percent more than the previous year.

The Support Education Excellence in Kentucky (SEEK) funding program is a formula driven allocation of state provided funds to local school districts. The formula includes funding for transportation costs and special needs students as reported by districts.

“If they increased 7 percent, our SEEK formula assumes we get a 7 percent increase, so they reduce SEEK based on that 7 percent,” he said. “But, we can only get 4 percent. That’s cumulative over the years. So, we’ve been hurt by hundreds of thousands of dollars over the years from that rule. A lot of districts like us that have increasing property values are hurt by that.”

“New property coming on helps us a lot,” Marshall said. “But, when new property comes on, that is additional children. Therefore, the money from the new property is supposed to generate income to serve those children. But, when we get reduced because of the older property increasing more than 4 percent, then that is a setback.”

Moberly admits that there are several factors in the SEEK formula that need to be looked at, including Marshall’s concern about property values.

“We’ve been hesitant in the past to change that because anytime you change something, there are winners and losers because there is only so much money that goes in,” he said. “But, that’s an issue that we have to talk about because that’s not fair to those districts that have that phenomenon happen. I’m going to try to do something about that this time.”

Studies have shown that SEEK is equitable, Gross said, because it provides weights for a variety of items whose “worth” will vary from district to district.

Equitable, not equal

“SEEK is designed to provide equitable state funding, rather than equal funding,” she said. “More funding for SEEK would help all districts, including Madison County. And, more flexibility for districts to level “growth” taxes also would be helpful.”

In the past 20 years, four independent districts have merged with their county counterparts with financial considerations being the primary reasons for the merger.

Gross, however, said communities should remain optimistic about their school district.

“I’d encourage those who are concerned about a district’s financial situation to have confidence that district officials work hard to ensure that students get the support they need in school, and that means they are focused on implementing good business practices,” she said.

There is no easy solution to any district’s financial struggles, Gross said. “Sometimes, those resolve themselves when state funding is allocated, if the issue is that the district experiences unforeseen growth or has a one-time major expense,” she said.

“Sometimes, it takes a thorough review of fiscal practices and assistance from our staff to help the district get back on track,” she said. “The issue is not equity, but adequacy — more funding for the state SEEK formula will help all districts and balance out local funding.”

Kentucky constantly has to be thinking about creating a more stable economy and a more stable source of revenue, Worley said, so when there is a major industry dip because of a recession, the state still has the ability to address core needs, such as education.

“The first thing that Harry and I will do before the 2008 session of the General Assembly is meet with the superintendent and members of the board of education,” he said. “We’ll learn from them exactly what caused them difficulty and whether or not it’s the anomalies that are in the SEEK formula where often times some of the more prosperous districts have a penalty as opposed to some of the less prosperous districts. We’ll do an assessment in terms of their financial needs so that cuts don’t have to be made.”

Bryan Marshall can be reached at bmarshall@richmondregister.com or 624-6691.