The arithmetic of school budgeting- Illinois Issues, March, 1980

WHEN the days are the shortest and coldest, those concerned with state budgets spend long days in heated arguments. One of these annual bouts pits the governor and his Bureau of the Budget (BOB) against the state super-intendant of schools and his staff at the Office of the State Board of Education (OSBE).

Gov. James R. Thompson proposed a $2.614 billion elementary and secondary education budget, but OSBE asked for $82 million more. The governor suggested one state aid formula change, but OSBE wants three changes. And the governor proposed a pupil support level of about $1,450, but OSBE requested about $1,500. The battle lines have been drawn.

Major differences occur in proposed general funds levels (Common School and General Revenue Funds) which finance general state aid, categorical aid, teacher retirement and grant programs. The governor proposed $2,156,697,100 in general funding, while OSBE requested $2,238,313,800 — a difference of over $81 million.

Officials at both the governor's budget bureau and OSBE disagree on what the difference means. Budget bureau officials call the governor's proposed general funds increase an 8.5 percent increase per pupil. That percentage is exagerated by declining enrollment; the proposed increase — $120 million over fiscal 1980 estimated spending — is only 6 percent higher than last year.

But OSBE officials don't see the numbers the same way. The BOB estimates OSBE will underspend by $8 million in fiscal 1980, so OSBE officials consider Thompson's proposal only a $112 million, not a $120 million increase. OSBE officials see Thompson's proposal as a 5.5 percent increase over the fiscal 1980 general funds appropriation, and not a 6 percent increase over that year's estimated spending.

"If you deduct the $8 million from the $120 million, that would be a $112 million increase . . . which you'd have to call chintzy or stingy given the 13 percent inflation rate or even given the restrained and responsible 9.5 percent request of the State Board of Education," said Joseph M. Cronin, state superintendant of schools. OSBE requested a 9.5 percent increase over the fiscal 1980 appropriation. A comparison of general funds appropriations since fiscal 1974 shows that this year's OSBE request is larger than all other general funds appropriation increases except in fiscal 1977 when the funds increased by 10.5 percent. OSBE, however, traditionally receives an increase smaller than its request. According to OSBE officials, the high request is warranted by the high inflation rate.

About half of the governor's proposed general funds increase, $55 million, would go toward general state aid with the rest going to other grant programs. OSBE requested an increase of about $99 million for general school aid. Both the BOB and OSBE agree that inflation and declining enrollment are driving down the cost of general aid because of the way the school aid formula is calculated. The state school aid formula calls for about $128 million less in fiscal 1981 than in fiscal 1980.

Again, what the figures mean depends on who you talk to. Officials at the BOB see the $128 million reduction in formula general aid costs as new general aid funding which combines with the governor's proposed $55 million general state aid increase to make a total general school aid increase of $183 million. Officials at OSBE see the governor's proposal as only $55 million in additional general aid funding.

General school aid funds are distributed according to two formulas: the resource equalizer and the Strayer-Haig. A district gets state aid through the formula generating the most money. Although there are three different ways to compute the Strayer-Haig, it is essentially a flat grant to a district. The resource equalizer is a more complex formula, and because it distributes the lion's share of general school aid, it receives the most attention.

General funds allocations of elementary and secondary education since FY74
Year	Allocation	% Change
FY74	$1,417,997,100
FY75	$1,459,397,100	2.9%
FY76	$1,556,889,500	6.6%
FY77	$1,721,622,500	10.5%
FY78	$1,791,044,500	4.0%
FY79	$1,925,331,000	7.5%
FY80	$2,044,541,500	6.2%

Support level

The resource equalizer formula is based on the notion that all students should have the same chance for a quality education despite the wealth of the student's school district. Wealth, in this case, is measured by property values (equalized assessed valuations). A "support level," currently $1,363 per student, is determined by a combination of local taxation and state aid for a school district. Those districts with the ability to produce more local funds — that is, those districts with high equalized assessed valuations (EAV) — get less state aid per student, In this way local resources are equalized to provide the support level (see "State aid to schools," June 1977).

Both the governor and OSBE agree that the support level should be increased, but they differ on the amount. The governor has proposed increasing the support level from $1,363 per student to $1,454. OSBE has asked for a bigger increase to $1,501.

The governor's proposed increase and the OSBE request are not directly comparable. The OSBE pupil support level is based on proposed formula changes which would increase the local

share of the support level. The governor has not accepted OSBE's proposed formula changes. But if he did, his proposed support level would rise to about $1,480 without a change in his general funds request. This is because part of the increase under OSBE's proposed formula changes is paid for by an increase in the local share of support.

In order to equalize resources and determine state aid, the state sets a guaranteed assessed valuation (GAV)— a guaranteed level of wealth to support each student. The formula subtracts local wealth from guaranteed wealth — EAV from GAV — to calculate aid. If a district had no local wealth, it would claim state aid on the entire guarantee. The greater the district's local wealth, the lower the difference between EAV and GAV: thus, the greater the local wealth, the lower the state aid claim.

In order to increase the support level, Thompson has proposed increases in the GAV. He would increase it from $73,280 to $78,172 for elementary districts, from $129,810 to $138,476 for high school districts, and from $48,163 to $48,467 for unit districts.

The support level proposed by OSBE is based on two proposed formula changes: increasing both the GAV and the maximum operating tax rate, which is another factor in the formula. Under the OSBE plan the GAV would increase from $73,280 to $76,974 for elementary districts, from $129,810 to $142,952 for high school districts, and from $48,163 to $50,033 for unit districts. The maximum operating tax rate — a key element in determining the amount of local funds generated — would increase from $1.86 per $100 assessed valuation to $1.95 for elementary districts and from $2.83 to $3.00 for unit districts. The high school rate would stay at the current $1.05.

Both the governor and OSBE agree that the support level should be increased, but they differ on the amount. The governor has proposed $1,454 per pupil; OSBE asked for $1,501

Under the governor's GAV plan, elementary, secondary and unit districts, as well as rich and poor districts, would receive the same proportion of the total general aid funds currently available. The OSBE changes would shift the proportion in two ways. First, looking at only elementary and unit districts, those with low EAV's would get a greater proportion of general state aid than the richer districts. This is because the lower a district's EAV, the less local money produced by a given tax rate. For example, an increase of 9 cents would generate $18 for a district with a $20,000 EAV per student and $36 for a district with $40,000 EAV per student. In other words, an increase in the tax rate would make the state's share of the support level larger for districts with low equalized assessed valuations.

Looking at all three types of school districts, the proposed OSBE tax rate increases the proportion of state funds going to high school districts. Since OSBE didn't propose an increase in the high school district tax rate, under its plan the burden will be on the state to pick up the entire increase in the per pupil support level. Elementary and unit districts, however, would pick up part of the tab for their support level increases. Since about 55 of the state's 124 high school districts are in Cook and the collar counties, the major benefactor of this change is the Chicago area.

OSBE originally proposed a formula change which would shift funds from downstate districts to Chicago under the funding provision for low-income students. Under this provision low-income students are "weighted" — counted as more than one student when figuring the number of students a district can get aid for — in order to provide more money to educate low-income students. The weighting is based on a comparison of the percentage of low-income students in a district to the percentage of low-income students across the state. Currently, the state percentage includes only two-thirds of all nonpoverty level students who are benefactors of the Aid to Families with Dependent Children (AFDC) program in the state (based on census data). OSBE's proposal calls for counting all low-income AFDC students, which, in turn, would increase the statewide percentage. Although this proposal does not alter the system used to determine low-income student weightings, the increased percentage which would be used in that system would shift funds from districts with lower concentrations of low-income students to districts with high concentrations. That is, funds would move from downstate to Chicago.

Under OSBE's original proposal, Chicago would get about $54 million of the $99 million increase requested in school aid funding, with about $24 million due to the proposed AFDC student count change. As of March 7 the state board appeared to be withdrawing that proposal. The board's budget committee voted February 28 to recommend withdrawing the AFDC proposal. According to Cronin, the proposal will be postponed until fiscal 1982. He still favors counting all AFDC students, but isn't sure the financially troubled Chicago Board of Education will be ready to handle a large state aid increase. He stressed the change is not a reprimand; rather, he "doubts the new Chicago Board of Education will be ready to use the money on targeted programs."

The committee also recommended replacing the AFDC proposal with a change in student weightings. Under this new plan each elementary student in kindergarten through third grade would be counted as more than one student when computing state aid. The effect would be to direct more money to the early years of education, which Cronin says are the most important in determining a child's success in school.

major factor in determining the weighting, however, will be cost. About $28 million will be saved by eliminating the AFDC count proposal, but the committee recommendation of counting elementary children as 1.15 students would cost about $43 million. Since Cronin and budget committee chairman Frederick Rabenstein do not plan to increase the total budget request, the weighting cost would force a reduction in the overall pupil support level. But some OSBE staff members say they plan to recommend a 1.10 student count at a cost of about $28 million, which is about equal to the original AFDC proposal.

Although Cronin says OSBE's proposed formula changes make the formula more equitable, Robert Mandeville, director of the BOB, disagrees. He believes the formula is equitable and shouldn't be "tinkered with." Mandeville does, however, see some formula changes necessary in the future. He said the enactment of the corporate personal property replacement tax last year has created the need for formula revision by fiscal 1982 when the results of the new tax will finally be felt by school districts. Since fiscal 1982 general school aid funding will be based on calendar 1979 equalized assessed valuations (the first year corporate property was no longer assessed), fiscal 1982 EAV's will drop dramatically for those districts with corporate property. Without a formula change districts with corporate property will be paid twice for that property: once because the EAV drop will result in an increase in state aid distributed through the formula, and once through the new tax.

Mandeville pointed out another problem with the replacement tax. He said most downstate districts collected almost all of the old corporate personal property tax revenue due them. Chicago, on the other hand, collected only about 50 percent of it. Consequently, without a change in the formula Chicago will triple its corporate personal property tax receipts in fiscal 1982: once through the new tax, and twice through the formula (receipts formerly collected and receipts formerly neglected). Mandeville said he prefers the corporate tax issue be resolved this session, adding that it doesn't have to be addressed now as the problem won't occur until fiscal 1982.

The battle over the next elementary and secondary education budget promises, as usual, to be drawn out and emotional: each side has legitimate claims, and each side will use numbers which put their case in the best light. The governor and OSBE have squared off for another budget battle in the name of public education.

Alden Solovy, a master's degree candidate in Sangamon State University's Public Affairs Reporting Program, is an intern with Illinois Issues and Paddock Publications.