Why is Minnesota's School Finance Dysfunctional

Why is Minnesota Public School Dysfunctional

A few days ago, I was privileged to meet with a group of school finance experts to discuss why Minnesota's school finance system is broken.    Everybody knows that school leaders complain that school funding is not adequate, and that is certainly true.  But the problem is much more complicated than that.   Here is my own list of school finance dysfunctionalities:

• School Districts are increasingly relying on voter property tax referendums to balance their budgets.   Over 130 school districts have referendums up this year, and many of them are seeking to renew their referendums.  Since 1986, the percentage of school districts with referenda has risen from 47% to over 90 percent.  The average referendum dollars collected per student has risen significantly as well, with more and more districts collecting in the $700 to $1000 per student range.   Because referendum revenue has become so important to school districts, the failure of a referendum can have catastrophic impact on a particular district.  
• State funding formulas are not evidence based.    The legislature does not utilize evidence to determine how much money should be provided to accomplish a designated mission.   Formulas are based on politics and necessity.   We lawyers would describe this state of affairs by stating that the funding formulas lack a rational basis.    Nobody makes even a half-hearted attempt to connect the formula to data.    Funding for schools serving large numbers of students in poverty is not based on research or data showing the amount of money that can provide adquate resources to make up for the additional actual cost of educating those students.  Funding for students who don't speak English is not based on research or data showing the additional cost of educating those students.   Funding for students with disabilities is intentionally and knowingly set at rates substantially less than required to accomplish state mandated objectives.  
• The special education funding shortfall -- the difference between state-mandated spending and total revenues provided has grown to a projected $700 million per year.    
• The state's labor laws and bargaining system inherently produce labor cost increases at a rate faster than funding increases.    As a result, school districts are driven systemically to fund labor cost increases by making crippling cuts in programs, unless they can make up the difference in increased referendum levies.  The cost of these settlements is inadequately monitored and often reported in misleading ways so that policy makers don't focus on their true costs. 
• Many school districts have continuing contract obligations that force up labor costs beyond the revenues provided by the State even without bargaining  Steps, lanes, longevity pay, insurance costs have been driving labor costs up faster than state funding increases.  
• Fundamental changes in state mandates have drastically increased the cost of what school districts are required to do, without proportionate increases in revenue.  Since 1990, Minnesota has transformed its education system so that all school districts must educate all students to high levels of proficiency.   This has dramatically increased the cost of educating disadvantaged students, but funding for education has not recognized this fundamental change in mission.   
• Open Enrollment Has Destabilized School Finance in Challenged Systems.   Different students cost fundamentally different amounts to educate.  At the top of the cost scale are students with disabilities.   At the bottom of the cost scale are advantaged students who receive strong educational support at home.  The cost structure allows school districts to make a profit on the cheaper students and requires them to cross subsidize the more expensive students.    Open enrollment allows and encourages the cheaper students to migrate into the school districts where low cost students predominant, causing an ever worsening financial situation in the districts where high cost students are concentrated.    
• The special education funding formula also destablizes school finance in challenged Systems.   Migration of non-disabled students to charter schools and open enrollment into traditional publics create a situation where urban core districts have high proportions of high cost students. 
• Different school districts have significantly different tax bases.  As a result some districts can raise significantly more revenue with a low mil rate than others which require a much higher mil rate.   Different school districts have very different population demographics and consequently in some districts it is very easy to pass a referendum while in others it is virtually impossible.  
• Funding Pressures are bleeding down critical capital and capital-like assets.  School districts are increasingly cannibalizing their textbook resources, school libraries, staff development in order to make ends meet.   The State's system of assuring that these necessary components of education are provided is abysmal.   
• The State has mismanaged the funding of pension systems and forced school districts to increase contributions without compensating revenue increases