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Review of Alaska's School Funding Program

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Review of Alaska's School Funding Program Review of Alaska’s School Funding Program Prepared for the Alaska State Legislature By Augenblick, Palaich and Associates Justin Silverstein Amanda Brown Mark Fermanich, Ph.D. July 2015 Review of Alaska’s School Funding Program Augenblick, Palaich and Associates (APA) is an education policy consulting firm, founded in 1983 and located in Denver, Colorado. The firm has extensive experience advising policymakers in all 50 states and the District of Columbia on education policy issues, particularly school finance. APA has worked with numerous states to examine statewide school finance systems, to evaluate the equity and adequacy of such systems, and/or to propose significant structural changes to those systems. Legislatures in several states, including Louisiana, Maryland, and Mississippi, have enacted APA recommendations as the basis of their school funding systems. Justin Silverstein, Amanda Brown, and Mark Fermanich, Ph.D. are the primary authors of this report. Additional contributors from APA include: Abby McClelland, Jennifer Piscatelli, Nathan Roberson, Yilan Shen, and Sarah Wool. Suggested citation: Silverstein, J., Brown, A., Fermanich, M. (2015). Review of Alaska’s School Funding Program. Denver, CO. Augenblick, Palaich, and Associates. Review of Alaska’s School Funding Program Executive Summary In early 2015, following a competitive request for proposals (RFP) process, the Alaska State Legislature hired Augenblick, Palaich and Associates (APA) to undertake a review of Alaska’s School Funding Program. APA has extensive experience advising policymakers in all 50 states and the District of Columbia on education policy issues, particularly school finance. Legislatures in several states, including Louisiana, Maryland, and Mississippi, have enacted APA recommendations as the basis of their school funding systems. It is important to understand that this study was focused on reviewing the structure of the current funding system. APA was not tasked with examining the adequacy of the state’s funding formula, meaning the levels of funding deemed necessary to ensure that all students could meet state standards. The study team was only asked to examine the current structure of the formula, considering both funding practices in other states and Alaska’s unique state context. APA was not asked to evaluate, or make recommendations regarding, the specific figures used in the formula, such as the School Size Adjustment (SSA) or the District Cost Factor (DCF). Instead, the study team was tasked with evaluating, more broadly, whether it makes sense to use a size adjustment or a district cost adjustment within Alaska’s system. This report does not assess whether the actual adjustment figures are correct. Key Highlights from Each Report Chapter II. Study Approach Basics of a Strong Funding System A strong education funding system is: (1) equitable, (2) responsive, (3) adequate, (4) efficient, and (5) flexible. These objectives serve as a reasonable starting point in examining the strengths and weaknesses of any state’s school finance system. While adequacy is a key component of a strong education funding system, it was not the focus of this work, and is not a consideration of this study. Methodology APA conducted this study between late February and July 2015. During this time period, the study team: 1. reviewed the structure of Alaska’s current funding structure; 2. conducted interviews with district stakeholders to understand how the current school finance structure affects individual districts; 3. examined other states’ approaches to school funding; 4. examined the equity of the current system, looking at both district and taxpayer equity; 5. analyzed student performance across Alaska, including the relationship between need, funding, and performance; 6. examined the state’s sources of revenues; and 7. developed recommendations for the state to consider moving forward. i Review of Alaska’s School Funding Program School district leaders from 31 districts across the state participated in interviews, either by phone or in person. Alaska’s Department of Education & Early Development (DEED) provided all performance, expenditure, enrollment, and demographic data analyzed for this report. The state-level revenue data analyzed for this report came from the U.S. Census Bureau. III. Overview of Alaska’s School Funding Program Under Alaska’s foundation formula, a district’s funding (Basic Need) is determined by multiplying the Base Student Allocation (BSA), as defined by the legislature, by the District Adjusted Average Daily Membership (DAADM). A district’s DAADM is determined using the following calculation: Average Daily Vocational and Membership, District Cost Special Needs Technical Adjusted by Factor Factor Funding School Size Outside of this funding formula, the state also provides funding for transportation and capital. Overall, interviewees tended to feel that the state’s current funding system works well. Interviewees understood that Alaska has a unique distribution of districts, and that the state’s funding system is challenged to adjust for all the relevant differences in student need and district characteristics. In terms of the foundation formula, most respondents felt that the formula generally included the right type of adjustments. There were concerns about how these adjustments were being implemented, how they affected different districts, and how each adjustment interacted with other adjustments. One theme that came up regularly during the interviews was a lack of understanding of what the Base Student Allocation is designed to provide for all students across the state. Interviewees felt that the funding system resulted in different districts being able to provide very different educational programs for students. These differences in district capabilities were especially evident in smaller communities, which often struggle to offer robust programs. IV. Review of Components in Detail Each component of Alaska’s funding system was examined based on: (1) feedback from interviewees, (2) comparing the component to funding approaches used in other states, and (3) analysis of any relevant data. ii Review of Alaska’s School Funding Program School Size Adjustment Alaska’s current School Size Adjustment (SSA) weights a district’s Average Daily Membership (ADM) based on the size of the schools within that district. In this way, the SSA recognizes that smaller schools may incur higher costs than larger schools to offer the same types of education programs. Currently, the SSA depends on both the size of the community a school resides in and the size of the school. The size adjustment increases as the size of a school decreases. Interviewees felt that the SSA was needed, and that the SSA generally met the needs of schools across the state. Some interviewees noted that the smallest schools in the state struggled to provide programs that went beyond the core program. The SSA includes a number of “cliff” points where the loss of a few students can lead to large changes in funding. A number of interviewees mentioned the large impacts that these cliffs can have on funding. Also, in the current system, when a school is under 10 students it is not funded as a separate site and loses funding. Interviewees from all different sizes of districts expressed that this loss of funding has a significant impact on the school’s local community. It was also mentioned that applying the SSA to all districts, regardless of size, might not make sense. Though no district would like to see a decrease in SSA funding, there was concern that providing more dollars for smaller schools, in settings where those dollars may not be necessary, could influence districts to design schools to maximize funding versus maximizing efficiency and effectiveness. Often, other states fund for size differences at the district level. Only a handful of states provide education funding based on school size. Adjustments in other states differ from adjustments in Alaska, then, because the size adjustments are limited to small schools that have been defined as necessarily small – usually due to isolation. In Alaska, every school is adjusted based on size, regardless of the size of the district it is located in, and regardless of the remoteness of its location. Data modeling illustrated that the community size thresholds, or cliffs, within the formula do create some funding issues for districts. Data showed that the loss of just a few students – or even just one student – can have a disproportionately large impact on a district’s total funding, and can create significant hardships for districts. Hold Harmless Alaska’s current Hold Harmless provision addresses declines in a district’s size-adjusted ADM. For a district that has lost five or more percent of its size-adjusted ADM, Alaska’s Hold Harmless provision effectively increases a district’s size-adjusted ADM for three years (at a reduced rate each year) to cushion districts against the financial impacts of lost enrollment. In this regard, the provision operates most similarly to what traditional school finance terms would classify as a Declining Enrollment adjustment. Few of the interviewees had actually worked in districts that had qualified for the Hold Harmless provision. Many interviewees felt that the large five percent threshold (losing five percent or more of total size-adjusted ADM since the prior year) was hard to meet, especially for larger districts. Interviewees felt that an approach that took into account lesser, but still
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