Higher Education State Funding for Big Ten Schools is in decline

As part of my research for the our expenditure paper, I began to wonder about if other Big Ten institutions were experiencing the same institutional pressures and reductions in funding as the U has over the past two years.

As a graduate student, I am taught to go straight to the source for information, so I called the budget directors of the 9 other public schools that currently comprise the Big Ten. All but the Indiana University responded, and I was able to determine some interesting trends.

As the graph above demonstrates, most of our Big Ten peers have either seen their state appropriations stagnate or decline over the past decade. The singular exception is The Ohio State University, which has seen a 24 percent increase in funding since 2000. OSU is led by E. Gordon Gee, who is well-known for his combative educational style and his ability to wring more and more dollars out of the state capitol in Columbus.

The picture is otherwise pretty bleak, with most institutions loosing ground considerably.

As the University of Minnesota looks at closing or consolidating programs and other significant changes and our peer institutions worry about losing 50 percent of their state support in the next year, perhaps it is time for a reexamination of whether public higher education is a priority in state legislatures across the country. And, if we find it is not, a discussion of what (electorally) needs to happen to ensure higher education becomes a priority again.

Here We Go Again, Schools Lose As Minnesota Legislators Fight Over School Funding

Last year, the Minnesota State Legislature did not pass an Omnibus K-12 spending bill. Hours before midnight on the final day of session, the Minnesota House of Representatives amended the bill and successfully passed it, and that’s as far as it went. One of the key sticking points that held up the bill in the House was the inclusion of a new spending proposal known as "The New Minnesota Miracle." The intention of the new spending changes according to the then Chair of the K-12 Education Finance Committee Mindy Greiling was to:

“Fundamentally change the way the state funds public education. The new miracle would raise education funding for every pupil, and help to make students ready for success. The ready for success component of this plan is to prepare students for their life after high school, whether they choose to attend a university, technical college, trade schools, or enter the job market.”

One of the fundamental ways this plan would accomplish this goal was to increase the basic school funding allowance per pupil from $5,124 to $7500, and index it to inflation. In addition, compensatory revenue for schools with special needs such as providing reduced price lunches, provide assistance to students who are non-native English speakers, and give relief to school districts that have sparsity issues (low populated districts where students are disbursed over a large land area). Overall, the bill called for an additional $1.7 billion per year in K-12 education spending.

However, that was then, and this is now. Under the Republican controlled House, the squabble over school funding isn’t on the merits of appropriating additional funding to schools. It’s now about cutting spending on school programs, teacher development workshops, and freezing compensatory revenue. Some of the actual passages in the bill related to these topics include:

2011 Omnibus Education Bill Summary

· (b) Repeals the staff development set-aside (§ 122A.61), the January 15 late contract deadline penalty (§ 123B.05), and training and experience revenue (§ 126C.10, subd. 5) effective for revenue for fiscal years 2012 and later.

· Compensatory education revenue - Delinks compensatory revenue from the basic formula

· Secondary sparsity revenue - Delinks secondary sparsity revenue from the formula allowance.

· Elementary sparsity revenue - Delinks elementary sparsity revenue from the formula allowance.

· Basic revenue - Increases the basic formula allowance from $5,124 to $5,174 in fiscal year 2012

The dispute doesn’t stop there, unfortunately. Some provision in the bill take aim at the collective bargaining rights of teachers including issues surrounding negotiating teacher contracts, and eliminating conditions under which teachers could strike. Education Minnesota’s President Tom Dooher urges Governor Mark Dayton to veto the bill citing amongst other things “Wisconsin-style attacks on collective bargaining rights.”

While the battle over school funding continues at the state capital, schools are continuing to struggle year in and year out. It’s bad enough to dramatically shift the discussion of school funding from providing necessary additional funding one year, to cutting and freezing the very next. What’s even worse is that this year’s K-12 appropriation is financed by next year’s debt. One of the best choices we can make as a state, whose economy can be classified as stagnant at best, is to invest in human capital in order to promote growth. It’s one of the surest ways to collect benefit more from in the future than we have to pay for in the present.

Charter Schools and their Effects on Public School Costs

In 1991 the state of Minnesota became the first state to begin the charter school movement. Today in Minnesota there are 149 charter schools who enrolled 35,000 students in the 2009-2010 school year (MN Association of Charter Schools). Currently in the United States charter schools are getting more attention as movies such as Waiting for Superman document the shortcomings of the U.S. education system. As the number of students who choose to attend charter schools increases, there are major implications for both traditional school districts and the state of Minnesota's education finance system.

Charter Schools and Minneapolis Public Schools

Schools in Minnesota get the majority of their funding from the state, who primarily allocates money to public schools based on student enrollment. Many charter schools enroll children that would have otherwise gone to a traditional public school, which reduces the number of students enrolling in these schools. This can have a significant effect on the finances of traditional public schools.

The Minneapolis Public School (MPS) system, for example, had an almost 30% decline in enrollment in the last decade. This precipitous decrease has left MPS in a financial disaster due to high fixed costs and vacant building costs (MDE). The cause of this decline is partially due to charter school growth -- there are an estimated 11,000 students enrolled in charter schools in the city of Minneapolis (I added up the enrollment #'s from the MDE and MN Charter School Association websites). While some of the Minneapolis Public School's loss is due to demographic changes and enrollment attrition from other traditional school districts in the area, charter schools certainly played a part in exacerbating their current financial circumstances of MPS.

This example highlights how charter schools may affect some traditional school districts in the short-term, as rapid enrollment changes create financial issues for school districts with large student declines. Charter school proponents cite increased competition as a major benefit of school choice because it encourages school districts to improve their educational outcomes. While I agree it is true that the charter school movement awoke some public schools from complacency, a side effect of this competition is the financial deterioration of traditional school districts who 'lose out' to charter schools. In other words, in some instances charter schools are diverting resources away from traditional schools.

Changes at the Individual School Level

The proliferation of charter schools also brings into light two large differences in how education funding is spent compared to traditional public school districts. The first difference is teacher pay. A Minnesota Association of Charter Schools survey in 2008 found an average licensed charter school teacher makes $46,792 in total compensation (salary+benefits) (MN Association of Charter Schools). Assuming benefits+salary is 1.5 times larger than the average salary charter school teachers are making a bit over $30,000 in salary alone. In contrast, the average union teacher (all traditional school districts have unionized teachers) had a salary of $51,938, which does not take into account benefits (Education MN).

This indicates that traditional public schools are spending proportionately more on their teachers on a per teacher basis than charter schools. While charter schools may spend less because they hire teachers with less years of experience, the average first-year teacher at a unionized public school still has a salary of $33,039 (Education MN). Unless all charter school teachers are first-year teachers (which I doubt), the labor input of teachers at charter schools is less per teacher than at traditional public schools.

The second difference is district-wide administration costs. Typically charter schools are singular schools with small numbers of students. Although they are small they require all the administrative necessities to run the school such as an IT department and administrative staff. With fewer students the charter schools can't spread the costs of district administration across a large number of students. In contrast, traditional school districts usually have multiple schools and hundreds if not thousands of students, permitting economies of scale and lower administrative costs.

To highlight this with an example, in the state of Wisconsin school districts with 500 students or less had an average per student administrative cost of $1273 while school districts with over 4,000 students had an average per student administrative cost of $900 (Ashland Current). This indicates that charter schools, because of their size, utilize higher per student amounts towards administrative costs than medium to large traditional public school districts.

Conclusions

The rise of charter schools have impacted the enrollment of traditional public schools, creating fiscal problems for those which experienced large declines in enrollment. The Minneapolis Public School system is a good example. In terms of costs, charter school spend less per teacher than traditional public schools. At the same time, charter schools spend more on administration because their small size.