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May 4, 2007
The direction of the first session of the 105th General Assembly took monumental shift this week as the Governor announced a plan to review the state’s K-12 education funding formula known as the Basic Education Program (BEP). The events of the week have shown that true leadership in the Senate can lead to an awakening by the Governor and the House of Representatives.
In a rare May Joint Convention, Governor Phil Bredesen rolled out his plan. “BEP 2.0” has been made possible because of strong leadership by Senate Education Committee Chairman Jamie Woodson (R-Knoxville), Senate Finance, Ways and Means Committee Chairman Randy McNally (R-Oak Ridge), and Lt. Gov. Ron Ramsey (R-Blountville).
As the Nashville Post reports, the projected changes to the program include the following:
1. Change the way a county's ability to contribute toward the cost of education is measured. Currently, a county's ability to pay for education is determined by a complex statistical regression equation that attempts to calculate a county's revenue.
Under the new plan, a county's ability to pay for education would be based upon measuring two factors: assessable property and sales tax.
2. Eliminate the "Cost Differential Factor," or CDF. The CDF is a mechanism that inflates salary dollars for certain school systems. It attempts to calculate wage competitiveness in a local workforce and is based upon 90+ industry subgroupings. Only 17 school systems benefit from the CDF.
If the new plan is enacted and the CDF is eliminated, funds that have gone into the CDF will be redirected to increasing state's share of teacher salaries.
3. Increase state's share of instructional funding from 65 percent to 75 percent. Funding of teacher salaries represents the largest share of all BEP dollars. The state currently pays 65 percent of a teachers salary with the remaining 35 percent provided by local government.
While the state would assume a larger share of paying teacher salaries, the rules would be intended to keep counties and cities from merely using the new money to replace local dollars. The current "Maintenance of Effort" statute, requiring local systems to keep up their current funding levels as outside funding increases, would still apply.
4. Increase unit cost for teacher pay. According to Bredesen, the current unit cost figures for teachers are not reflective of "real-world costs" and allow for greater disparity in teacher pay among school systems, placing a higher burden on local governments to fund teacher positions not covered by the BEP.
With increased unit costs moved to a higher target, Bredesen said that his plan would more accurately reflect those "real-world costs." The goal would be to migrate teacher salaries from a $36,700 average to $40,000.
Republicans are committed to funding education first with existing revenue. The increase of the state’s share for teacher funding to 75 percent is a cornerstone of the Republican Education Plan. Sen. Woodson stated from the beginning of the legislative session that the Governor had given the General Assembly an important opportunity and that she wanted to go further to “find a cure” as opposed to simply “treating the symptoms”.
Many believe that increasing the state’s share to 75 percent is a significant change that could prevent the state from being involved in costly litigation with certain school districts that are being unfairly treated by the current formula. The plan is also projected to help local governments so that they will not have to raise property taxes.
The BEP has been in place since 1992. Prior to the BEP, the state used the Tennessee Foundation Program (TFP) to allocate state funds to local school districts. In 1988, the Tennessee Small Schools Systems (TSSS) filed a lawsuit against the stage charging that the funding formula resulted in an inequitable distribution of state money to local school systems. The case went all the way to the Tennessee Supreme Court where on March 22, 1993 the Court sided with the TSSS and charged the state to correct the inequities.
Recognizing early on that the state could loose the legal proceedings, the legislature moved to overhaul the TFP. After a number of failed attempts to successfully address the situation, in 1992 the legislature passed the Education Improvement Act (EIA) which established the BEP.
Once the Supreme Court ruled in favor of the TSSS, it remanded the case back to the trial judge to draft an order to correct the funding inequities. On July 26, 1993, the chancery court held hearings and the chancellor concluded that the BEP had resolved the inequities.
According to the Tennessee State Board of Education:
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The BEP has three major categories (instruction, classroom, and non-classroom), each made up of separate components related to the basic needs of students, teachers, and administrators within a school system.
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Student enrollment (average daily membership) is the primary driver of funds generated by the BEP.
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There are 45 BEP components most of which are based on student enrollment (ADM). For example, students per teacher, assistant principals per school, or dollars per student for textbooks.
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Unit cost adjustments (salary, health benefits, insurance) are essential to maintaining a similar level of funding from year to year, due to inflation. For example, in 2006 over 100 million new state dollars were required to maintain full funding of the BEP.
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The funds generated by the BEP are divided into state and local shares for each of the three major categories (instructional, classroom, non-classroom).
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The state and local share for each school system is based on an equalization formula that is applied to the BEP. This equalization formula is the primary factor in determining how much of the BEP is supported by the state vs. the local district.
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The equalization formula is driven primarily by property values and sales tax, applied at a county level. For example, the state and local equalization shares for County System A would be the exact same state and local shares for City System A, within the same county.
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All local school systems are free to raise additional education dollars beyond the funds generated by the BEP.
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