School funding

Five things to know about Shelby County Schools’ pared-down budget

More than three months after Shelby County Schools began publicly building its 2015-16 budget, the long, arduous process reaches a milestone Monday when the Shelby County Commission is expected to vote on the county’s $1.1 billion spending plan, funneling about one-third of the amount to K-12 education.

The vote will come more than a month after the Shelby County Board of Education approved the district’s own spending plan — a $974 million budget that slashes $125 million — and requires approval from the County Commission.

Here are five things to know about the significance of the commission’s vote, as well as the financial challenges facing the district under a pared-down budget for next school year.

1. Superintendent Dorsey Hopson is getting additional funding from the commission, but probably only about half what he requested.

Hopson and board members had asked commissioners to invest an extra $14.9 million in Shelby County Schools on top of the $381 million allotted based on student population.

During two appearances, they pled their case and were grilled by commissioners over their spending habits. Last week, the commission’s budget and finance committee recommended $7.9 million more for the county’s largest school district, about 10 percent of which would go to district-authorized charter schools and other schools operated by the state-run Achievement School District. The recommended budget also includes another $2.1 million to be distributed among the county’s six suburban municipal school districts.

An increase in funding for education likely will mean cuts to other county departments.

2. How the additional money will be spent is uncertain, since both Hopson and commission leaders have different ideas of what should take priority.

District leaders had asked for extra money to hire more reading intervention coaches, purchase computers for online testing, and recruit a marketing director to promote the district to parents, among other things. They argued that such investments would improve educational outcomes and bring more students back to the district, which has struggled under declining enrollment and related decreases in per-pupil state funding.

But commissioners are recommending that the district dedicate the extra money to ballooning retiree health insurance costs.

While the commission can’t dictate how the district spends its money, district leaders acknowledge the significance of the school system’s $1.4 billion liability for other post-employment benefits. The board is planning to discuss the issue at its June 10 workshop.

3. The district already has approved $125 million worth of cuts for next year.

To balance its budget, the Board of Education voted in April to eliminate 482 positions and outsource services such as school maintenance. At the same time, the district will keep the majority of its 8,000 teachers, who will receive step pay increases, and invest another $7 million in school turnaround efforts. The district also has closed three schools and is moving students out of three others that are being taken over by the state due to low test scores. To stave off more cuts, it will pull $25 million from its savings account.

The district is responding to significant changes in the county’s educational landscape in recent years. In 2013, the former Shelby County Schools merged with the former Memphis City Schools after a funding dispute — then fractured with the creation of six municipal districts in the county’s suburbs. The state also took control of 15 underperforming schools resulting in the loss of thousands of students, while per-pupil funding has remained flat. Meanwhile, costs associated with educating the county’s students — most of whom are poor and academically struggling — continue to climb.

The municipal districts — smaller and just a year old — also struggled financially this year after underestimating their upstart and operating costs and taxpayers’ willingness to pay for new buildings. Municipalities have responded by cutting back on cafeteria services and debating whether to build new schools as originally planned.

4.  The county is increasingly shouldering the cost of K-12 education to offset perceived underfunding by the state.

About one-fourth of the district’s funding comes from the county, with the state providing most of the rest.

County Commission spent almost a third of its total revenue and 60 percent of its collected property tax revenue — about $381 million — on education this fiscal year, which ends June 30. Another 12 percent went toward capital debt accrued through new school construction in the suburbs during the 1990s. On average, the commission has provided the district with $2,800 per student, up 30 percent from 2005.

Meanwhile, state funding levels have generally stagnated, except for some additional money pushed through the state legislature this year by Gov. Bill Haslam, mostly earmarked for teacher pay increases.

At one budget hearing this spring, school administrators complained that the state is increasingly shifting significant education costs onto the county. District leaders in Knoxville, Chattanooga and Nashville also have asked their local funding bodies for more money this year, with Chattanooga’s Hamilton County seeking the biggest hike of 10 percent.

“What incentive does the state have to fully fund the (Basic Education Program) if we keep picking up their slack?” Commissioner David Reaves asked at one point. “We need to create a climate where there’s a burning need [for the state to fulfill its obligation].”

5. Shelby County Schools may take the state funding issue to court, and the county may join the lawsuit.

The Board of Education voted last week to hire an attorney to explore options to force the state to fully fund its BEP formula for funding public education.

District leaders say Shelby County Schools would net at least 103 million more state dollars annually under a fully funded BEP. As it is, the district is challenged to raise teacher pay, improve test scores and provide the innovations necessary to address gaps in student learning. Commissioners say they would consider backing such a lawsuit.

Hamilton County and six other small school districts in southeast Tennessee already have sued the state over the issue. The state’s attorneys have asked that their lawsuit be dismissed, arguing that it is based on a “profoundly flawed interpretation” of three successful previous lawsuits over BEP funding.

School Finance

Burdened by school retiree costs, Memphis leaders explore dropping new-hire benefits

PHOTO: Laura Faith Kebede
Chief of Human Resources Trinette Small presents during a 2016 board meeting for Shelby County Schools.

Memphis leaders have been grappling for years with how to cut a $1 billion-plus liability for retiree benefits through Shelby County Schools. But even as they’ve put options on the table, they’ve never settled on a sure-fire reduction plan.

Now school board members are exploring one extreme option anew: eliminating all retiree benefits for employees hired after January of 2018.

The proposed policy change was presented Tuesday to school board members by Trinette Small, the district’s chief of human resources. (The original proposal would have applied to employees hired this year too, but was amended before the meeting.)

At issue is the $1.2 billion obligation known as OPEB, or “other post-employment benefits” such as health and life insurance. The liability is the projected cost based on employment, mortality, and healthcare trends. (OPEB does not include pensions. Retired school employees receive their pensions from the state.)

Two years ago, Superintendent Dorsey Hopson called the OPEB liability “a huge gorilla around our neck” as his administration offered up options that included cutting spouses from coverage. He backed off, though, following a series of protests from retirees.

PHOTO: Kayleigh Skinner
Retired educators attend a 2015 forum to discuss a cost-cutting plan that later was tabled.

The liability has not gone away, however. It remains a point of serious concern for the cash-strapped district and for the county commissioners who allocate funding for schools. The district now pays out retiree benefits as they occur — and sets aside millions each year to offset future costs.

Currently, about $570 out of $8,800 per-pupil costs, or about 7 percent, goes toward the obligation.

“We could be putting that money into the classroom instead,” Hopson said in 2015.

While district leaders haven’t said publicly how much the newest proposal would save, Small said the change would go a long way toward relieving longstanding tension surrounding the obligation.

“Long term, this will allow us to invest more in our teachers and not have to fund an ever-increasing OPEB debt,” Small said according to a report in The Commercial Appeal.

At the same time, some leaders have worried that cutting future benefits would make the district less competitive at a time when it’s seeking to attract and retain high-quality teachers.

Shelby County Schools has had to shoulder the responsibility for OPEB costs amid a tide of changes in the local education landscape.

While the district’s funding is based on student enrollment, the population of Memphis has declined in recent decades and more students have headed to charter schools in recent years. Exacerbating the problem, six suburban municipalities pulled out of Shelby County Schools and created their own school systems in 2014, the year after city and county schools merged. All of the changes have left the Memphis district with a smaller pool of funding to pay for the legacy costs for retirees.

The school board is expected to review the OPEB proposal at its Nov. 28 and Dec. 5 meetings.

money matters

Why Gov. Hickenlooper wants to give some Colorado charter schools $5.5 million

Students at The New America School in Thornton during an English class. (Photo by Nic Garcia)

If Mike Epke, principal of the New America School in Thornton, had a larger budget, he would like to spend it on technical training and intervention programs for his students.

He would buy more grade-level and age appropriate books for the empty shelves in his school’s library, and provide his teachers with a modest raise. If he could really make the dollars stretch, he’d hire additional teacher aides to help students learning with disabilities.

“These are students who have not had all the opportunities other students have had,” the charter school principal said, describing his 400 high school students who are mostly Hispanic and come from low-income homes.

A $5.5 million budget request from Gov. John Hickenlooper, a Democrat, could help Epke make some of those dreams a reality.

The seven-figure ask is part of Hickenlooper’s proposed budget that he sent to lawmakers earlier this month. The money would go to state-approved charter schools in an effort to close a funding gap lawmakers tried to eliminate in a landmark funding bill passed in the waning days of the 2017 state legislative session.

Funding charter schools, which receive tax dollars but operate independently of the traditional school district system, is a contentious issue in many states. Charter schools in Colorado have enjoyed bipartisan support, but the 2017 debate over how to fund them hit on thorny issues, especially the state’s constitutional guarantee of local control of schools.

The legislation that ultimately passed, which had broad bipartisan support but faced fierce opposition from some Democrats, requires school districts by 2020 to equitably share voter-approved local tax increases — known as mill levy overrides — with the charter schools they approved.

The bill also created a system for lawmakers to send more money to charter schools, like New America in Thornton, that are governed by the state, rather than a local school district.

Unlike district-approved charter schools, which were always eligible to receive a portion of local tax increases, state-approved charter schools haven’t had access to that revenue.

Terry Croy Lewis, executive director of the Charter School Institute, or CSI, the state organization that approves charter schools, said it is critical lawmakers complete the work they started in 2017 by boosting funding to her schools.

“It’s a significant amount of money,” she said. “To not have that equity for our schools, it’s extremely concerning.”

CSI authorizes 41 different charters schools that enrolled nearly 17,000 students last school year. That’s comparable to both the Brighton and Thompson school districts, according to state data.

Hickenlooper’s request would be a small step toward closing the $18 million gap between state-approved charter schools and what district-run charter schools are projected to receive starting in 2020, CSI officials said.

“Gov. Hickenlooper believes that working to make school funding as fair as possible is important,” Jacque Montgomery, Hickenlooper’s spokeswoman, said in a statement. “This is the next step in making sure that is true for more children.”

If lawmakers approve Hickenlooper’s request, the New Legacy charter school in Aurora would receive about $580 more per student in the 2018-19 school year.

Jennifer Douglas, the school’s principal, said she would put that money toward teacher salaries and training — especially in the school’s early education center.

“As a small school, serving students with complex needs, it is challenging and we need to tap into every dollar we can,” she said.

The three-year old school in Aurora serves both teen mothers and their toddlers. Before the school opened, Douglas sent in her charter application to both the Aurora school board and CSI. Both approved her charter application, but because at the time her school would receive greater access to federal dollars through CSI, Douglas asked to be governed by the state.

Douglas said that her preferred solution to close the funding gap would be to see local tax increases follow students, regardless of school type or governance model. Until that day, she said, lawmakers must “ensure that schools have the resources they need to take care of the students in our state and give them the education they deserve.”

For Hickenlooper’s request to become a reality, it must first be approved by the legislature’s budget committee and then by both chambers. In a hyper-partisan election year, nothing is a guarantee, but it appears Hickenlooper’s proposal won’t face the same fight that the 2017 charter school funding bill encountered.

State Rep. Jovan Melton, an Aurora Democrat who helped lead the charge against the charter school funding bill, said he was likely going to support Hickenlooper’s proposal.

“You almost have to do it to be in alignment with the law,” Melton said. “I don’t think with a good conscience I could vote against it. I’m probably going to hold my nose and vote yes.”