Today the state income tax and, to a lesser degree, the lottery provide about 70% of the operating revenue for K-12 schools with the local property tax providing the bulk of the rest. The legislature distributes state funds using formulas that have largely erased the differences in resources among districts. For some districts this has meant increases in budgets. For others it has meant belt-tightening and cuts in programs.
Oregon has 198 school districts enrolling about 541,350 students. Each district has its individual story of the impact of shifting demands and resources. This report relates the history of the shift in school funding from local to state control and the consequences for schools. It also describes some of the resources that school districts and individual schools use to supplement the funding levels set by the state. Finally, this report looks at how demands on schools have changed during the 1990s, focusing on the mandates of school reform.
School districts, seeing a reduction in their revenue, began using a strategy of requesting local voters to approve bond measures for "improvements" (which some districts interpreted as general maintenance items) and new technology needs. The law at that time allowed bond measures for items with a useful life of more than a year.
Measure 47. Voters passed Measure 47 in 1996. This further reduced property taxes placing pressure on the state legislature to fund schools more fully. It included requirements that property tax measures be passed with a majority of registered voters voting and with a majority of those approving the increase (the "double majority"). The measure also limited what school districts could finance with bond measures to items that were most likely to last for 20 years. This prohibited using bonds for general maintenance and for supplies like computers and desks.
Measure 50, a modification of Measure 47, clarified that the property tax system was to shift from a tax base system to a tax rate system. Through a complicated formula, state revenue officers calculated the assessed values of all taxed property, implemented the statewide 17% reduction required under the measure, and established a permanent tax rate per $1,000 assessed value (NOT real market value) for each taxing district and each property classification.
Prior to Measures 5, 47, and 50, voters approved a specific tax base (dollar amount) which local districts would receive. If the total value of all properties in the district increased but the levy amounts did not, then the amount assessed (tax rate per $1,000 value) on each property decreased. With the new system, local districts may collect more total local property taxes as the property values increase, because the permanent tax rate is applied across the board on a per $1,000 basis. There is no limit on the total amount of taxes collected. The limit is on the amount of assessed value which can be taxed; there can be no more than a 3% annual increase in that value except for new construction which is taxed initially at real market value.
However, for K-12 school districts, the statewide school distribution formula requires that any increase in local property tax revenue be offset by a decrease in state funding. The amount that the state distributes to K-12 districts is determined by the amount the state legislature approves in its biennial K-12 budget. This allocation also includes the amount distributed to Education Service Districts (ESDs).
ESD Funding. ESDs provide school districts with services including instructional materials, teacher training, and special education support. The type and level of ESD services varies widely among the 21 ESDs. Measure 5 reduced ESD property tax funding as well as that of local schools. The legislature replaced only 71% of ESD property tax losses the first biennium, increasing that to 75% in the 1997 legislative session. A state formula was created to deal with state distribution of ESD funds, based on their previous funding levels. With Measures 47/50 ESDs received the same reduction in local property tax collections and were also switched to a tax rate system. Because their state funding formula was based on Measure 5, a new state funding formula will need to be developed during the 1999 legislative session.
Equalization. The legislature now determines the amount of state funds available to K-12 schools using the equalization formula below. Equalization is the process used to attempt to distribute resources equitably among Oregon's K-12 school districts. This does not mean that all districts get the same funding per student. Districts face different costs that may justify different funding levels. Thus defining equity is to some extent a matter of policy about which reasonable people could, and do, disagree. Each district is allocated funds consisting of a general purpose grant, a transportation grant, and facility grant. (The facility grant is scheduled to begin in 1999-2000.)
State School + Local = Students X $4500 adjusted by + Transportation + Facility
Fund Grant Revenue (ADMw) Teacher Experience Grant Grant
and to Total Funds
General Operating Revenue General Purpose Grant Transp Grant (Begins 1999-00)
Number of Students. Student count is measured by average daily attendance rather than enrollment on some given date. Extra weight is assigned to students in special categories such as special education or English as a second language. Extra weights are also assigned to small schools distant from other schools, and an adjustment is made based on the proportion of students in poverty as measured by the 1990 census.
General Purpose Grant. Once the student count is derived, each district begins with the same general purpose grant per student, from a combination of state and local revenues. The target amount of the grant was arbitrarily set at $4,500 per student. The basic amount is adjusted to take into account the level of teacher experience (because most salary schedules recognize experience with higher pay) and the total funds budgeted for schools.
Transportation Grant. Next the formula adds a transportation grant equal to 70% of approved transportation costs. These costs vary with the geography of each school district. Urban districts where many students walk to school have much lower costs than most districts in rural Oregon. At the extremes in 1997-98, 23 larger districts and a few small ones had transportation costs of less than $225 per student while nine small districts in Eastern Oregon had costs of over $2,000 per student.
Facility Grant. A facility grant is scheduled to be added to the formula in the 1999-2000 school year. This grant, if funded, will help districts equip new schools by providing 6% of the district's costs, not including land, for new buildings, additions, and portable classrooms. Except for the new grant, capital costs remain the responsibility of local school districts. New buildings and additions are funded by bond measures approved by district voters.
Phasing In Equalization. The equalization formula was gradually phased in after the passage of Measure 5. If the 1991 Legislature had implemented the equalization formula immediately for all districts, those districts that have historically spent higher amounts per student would have experienced sharp reductions in revenue. Instead since 1995, the legislature has constrained the loss in revenue for these districts with flat funding or stop-loss formulas. Additional state revenue allocated to schools has been used to bring up the funding of districts that previously had low per pupil expenditures using the equalization formula. Over time, more and more districts have become equalization districts, that is, districts funded according to the equalization formula. In 1992-93 funding for 71% of Oregon's students was provided through the equalization formula. By 1998-99 that had increased to 92%.
State and Federal Mandates. Some educational costs are the result of state and federal requirements that must be met by local districts. Three of the federally mandated programs are:
School Reform. In 1991, the Oregon legislature passed the Oregon Educational Act for the 21st Century (amended in 1995) which established a content standards-based education. These content standards specify what students must know and be able to do to be considered proficient in specific academic areas. This act requires that school districts award Certificates of Initial Mastery (CIM) to eligible 10th graders beginning in the school year 1998-99, and Certificates of Advanced Mastery (CAM) to eligible 12th graders beginning in the year 2004-2005. The act calls for state testing in the 3rd, 5th, 8th, and 10th grade levels to measure students' progress toward attainment of state-established academic content standards for the CIM. The CAM will be awarded to students who meet the 12th grade standards on state tests, classroom assignments, and career-related learning standards.
To meet these standards school district staff must align curriculum with statewide student performance standards, become proficient with the scoring guides, and define the process for collecting student work samples. Local districts must also develop performance standards and assessments for the arts and second languages, because the state has given these responsibilities to the districts. The state is responsible for standards and assessments in English, mathematics, science, and social sciences.
The infusion of private money into public K-12 education is a small but growing source of off-budget funds for some schools. Such money, which schools may receive from one of the many forms of corporate partnerships or from locally organized education foundations, is being put to many uses. Some school repairs are privately funded as are some teachers' salaries. Private donations have funded the implementation of reform plans and the acquisition of computers and lab equipment. This money is being used to replace, in part, lost public funds, and the benefits to recipients are apparent.
Where there are broad-based local contributions, such funding may be seen as an alternative to the local option taxing authority. In communities once willing and able to fund public schools generously such funding may help to stem student flight to private schools. On the other hand increased reliance on private rather than public funding sources may have effects detrimental to the public interest. Without public oversight and regulation, local and regional inequities among schools could grow. There is concern that some private donors will attempt to influence what is taught, and to whom.
Business Partnerships. Businesses contribute materials, volunteers, and funds to schools. They provide work experiences and help schools with other career-related activities. Corporate reasons for involvement include attracting employees to the area, enhancing public relations and profitability, and insuring an educated future work force.
Inequities in corporate support exist within the state, since schools closer to corporate centers benefit more. When corporate decision-makers also happen to be parents of students there is much more incentive to instigate partnership programs. However, it is difficult to quantify the contributions to school districts from a monetary standpoint, since for the most part contributions are in the form of enrichment materials and experiences which are not reflected in a school district's budgetary needs.
Education Foundations. The number of K-12 education foundations has grown from just a few in the early 1980s to over 2,000 nationwide today. These foundations are largely a response to various state ballot measures that have constrained school funding. Consistent with this trend, the number of foundations has grown in Oregon's more populous regions since the passage of Measure 5. Large geographical areas of Oregon, however, are not served by any established foundation.
Private, non-profit, tax-exempt and accountable primarily to their boards of directors, the foundations pursue different goals and have diverse relationships with the schools they support. Some are staffed and housed by local school districts; some are linked to local school boards through foundation membership; some are wholly independent of the local school management structure.
Gifts and other revenues currently administered by foundations in Oregon range from less than $100,000 for small, start-up foundations to well over $1 million annually. The approach a foundation may select to achieve equity in the distribution of funds—if that is one of its goals—is necessarily limited to the geographic area the foundation is established to serve. Some foundations have implemented guidelines requiring funds be distributed proportionately to the schools served. Others require that some fixed percentage of donations to individual schools be redistributed by the umbrella foundation to ensure a measure of equity among recipients. Still others rely on a belief that balance will be achieved over time without mandated equity provisions.
While most foundations view themselves as filling a few of the painful gaps in operating budgets today, many hope in the long term to establish endowments not unlike those at public universities and at private schools at all levels. It seems possible that the endowment approach may, over time, succeed in creating pockets of significant, stable (but privately administered) funds for some public schools.
PTAs, Booster Clubs and Other School Organizations often provide both volunteers and funds for activities at local schools. The data collected from 16 pilot districts in the state's Database Initiative Project indicates that volunteer hours vary widely between districts and among the schools within a district. For example, in the Bend-LaPine schools, annual volunteer hours in elementary schools ranged from 2.1 to 18.5 per student. In middle schools the number ranged from 0.2 to 1.1 hours per student and in high schools from 0.05 to 5.8. The National Association of Partners in Education has estimated that each volunteer hour is worth $14.58, but volunteers can't be counted on to provide the day-to-day necessities of instruction.
Other Public Funding. In a few districts, a city or special (recreational) district has levied property taxes to fund school athletic and activities programs. For example, the Heppner Recreational District in Morrow County was formed to fund school sports, extracurricular activities, and community cultural programs. In these cases, the property tax levied is inside the $10/$1,000 limit for "other government" (cities, counties, and special districts) rather than inside the $5/$1000 school limit. This option is available only where a city agrees to fund the programs or a special district can be formed and funded within the "other government" property tax limitations.
The Oregon Association of School Executives School Funding Coalition published a report in June, 1998 that identified five areas for potential improvement in funding related to the implementation of the Oregon Education Act for the 21st Century. They also attached related costs to help with the budget process.
Their recommendations to help assure that schools can meet the requirements of the 21st Century Act include:
The Governor's Tax Review Technical Advisory Committee was established to review Oregon's tax structure. This committee concluded that the substitution of state sources of revenue for local revenues changed "spending incentives in two fundamental ways: 1) local officials are spending state money rather than taxes from local taxpayers; and 2) the amount of revenue and services available in each local area reflect the state's idea of a fair distribution of funds rather than local choices to pay for a self-selected level of service."
The Tax Review Technical Advisory Committee also concluded that "The education funding base is more unstable than it was in 1980. Measure 5 and Measure 50 have made K-12 school budgets far more dependent on unstable income taxes. This means that school funding is more exposed to revenue shortfalls." In addition, the committee posed the following questions in its June, 1998 report:
General Issues. There is a continuing discussion about the adequacy of K-12 school funding. A variety of school interest groups have raised the issues of class size, teacher quality and training, learning time (length of day and year, summer school, etc.), school safety, and infrastructure needs.
Currently, Oregon law does not allow K-12 school districts to ask local voters to approve levies to supplement the funding they receive from the state. Schools do supplement their state-allocated budgets with volunteers, fundraising through school foundations, business partnerships, and supplementary funding from cities, counties, and park districts that agree to pick up some of the costs of educating students. These efforts, plus the unequal resources that ESDs provide, distort the legislature's efforts to equalize the resources available to each student.
During this same period, schools have faced new requirements from the state and federal government. Every district must alter its curriculum and retrain teachers to meet the requirements of the state's reform plan.
There continues to be considerable debate about whether the current school funding system provides an equal and adequate education for each student, which Oregonians consider the ultimate goal of K-12 education.
Devin, Rene, Treasurer, City of Heppner.
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Junior Achievement—Columbia Empire, Inc. Annual Report. 1998.
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———. State Equalization Fund: Permanent Equalization Formula. Nov. 1, 1997.
———. The State School Fund: Oregon's New School Finance System. Jan. 1, 1995.
"Mentor Graphics Honors School Volunteers for Their Dedication." The Wilsonville Spokesman, Nov. 4, 1998.
Meyer, Steve, Economist, Legislative Revenue Office.
Oregon Assoc. of School Executives School Funding Coalition. Keys to a Quality Education. Jan. 1997.
———. School Improvement Fund: Recommendations for the 1999-2001 Budget. June 1998.
Oregon Dept. of Admin. Services, Office of Economic Analysis. Oregon Economic and Revenue Forecast. Sept. and Dec. 1998.
Oregon Dept. of Ed. "About the Project," Database Initiative Project. http://dbi.ode.state.or.us (11/21/1998).
———. "Annual Volunteer Hours," Database Initiative Project Reports. http://dbi.ode.state.or.us (11/21/1998).
———. "Facts and Figures about Oregon Public Schools." http://www.ode.state.or.us/stats (10/26/1998).
———. "Transportation Expenditures per Student." Database Initiative Project Reports. http://dbi.ode.state.or.us (11/21/1998).
———. Oregon Standards. Sept. 1998.
"Providence and Laurelhurst School (PALS), A Partnership." A publication of Providence Portland Medical Center and Laurelhurst Elementary School.
Tektronix web site, http://www.tek.com
Wheeler, Maureen, Volunteer and Business Partnerships, Beaverton School District.
Editoral Assistance was provided by Patricia Braun, Beverly Deguc, Janet Markee, and Margaret Noel.
Outside Readers were Annabel Kitzhaber, League of Women Voters; Walt Koscher, Coordinator, School Finance and Data Information Services, Oregon Department of Education; and Frank McNamara, Director of School Service Bureau, Confederation of School Administrators.