Review of Education Funding in 2013-14 Budget

Overview

The Pennsylvania Legislature has approved a 2013-14 state budget (House Bill 1437, PN 2198) that spends $28.376 billion, roughly $645 million (or 2.3%) more than in the 2012-13 fiscal year. Governor Tom Corbett signed the budget into law late in the evening of June 30, 2013. Overall, the plan is $64 million less than the Governor proposed in February, reflecting nearly $113 million in reduced spending for public school pensions and school employees’ Social Security payments along with a shift of $90 million in General Fund spending off budget to other funds.

The plan includes a small increase to basic education funding, $122.5 million overall, with $30.2 million allocated to 21 school districts through a supplemental allocation, on top of the $90 million increase in the Governor’s proposal.

After many years of cuts, most programs received small increases in the Governor’s proposed budget, which remained in the final plan.

2013-14 General Fund Summary

Changes to pension benefits for current employees, the cornerstone of the Governor’s original budget proposal, did not occur. The Legislature does not seem inclined to tamper with benefits for current employees. A proposal to move to a 401(k)-style retirement plan for new employees gained traction later in the session but was not adopted. This proposal may return in the fall.

Also abandoned was an $800 million education initiative to be funded through the sale of state liquor stores. While the privatization vs. modernization debate held center stage until the last week of the session, the school funding component was quickly abandoned and was not part of legislative proposals. Privatization is likely to be considered in the fall, as well.

Public K-12 Education

Basic Education

2013-14 Education Funding TableThe 2013-14 budget plan adds $22.5 million in funding to the basic education subsidy line over the House proposal and $32.5 million over what Governor Corbett proposed in February. The total General Fund allocation for the basic education subsidy will increase by $122.5 million, or 2%, from 2012-13 to $5.526 billion. The Fiscal Code bill, which is still pending before the House, gives the state authority to spend an additional $7.4 million in unused state funds to increase the basic education subsidy by a total of $129.9 million.

While the funding increase is welcomed, it is still less than the approximately $160 million needed for mandated pension cost increases at the school district level in 2013-14 – meaning fewer dollars for classrooms. Overall, the plan retains 81% of the state cuts to public school classrooms enacted in 2011.

A quarter of the basic education increase, the $30 million added by the General Assembly, will be distributed to only 21 school districts, while the rest of the increase will be allocated to all 500 school districts.

2013-14 Basic Education Funding Supplements

Of the total increase in the Basic Education Subsidy, nearly $11 million will go to the state’s eight fiscally distressed school districts.

2013-14 Distressed School Funding

Read PBPC’s overview of the School Code Bill to learn more.

Other Classroom Programs

Funding for Accountability Block Grants (providing support for pre-kindergarten and full-day kindergarten programs, class size reduction, and tutoring) remains flat at $100 million, still well below the 2010-11 level of $254.5 million.

State support of special education remains flat at $1.027 billion, where it has remained since the 2008-09 budget, forcing districts to pick up a growing share of this continually escalating cost. A commission has been established to recommend a new special education formula and is expected to issue a report late in the fall.

Funding for Pre-K Counts is increased by $5 million (5.4%) from 2012-13 to $87.3 million, and the Head Start Supplemental gets a $2 million (5.1%) increase to $39.2 million – consistent with the Governor’s proposal.

Career and technical education is flat funded at $62 million, while $3 million added by the House for an equipment fund for technical high schools remains in the final budget. For the first time in years, adult literacy programs get a small funding increase of $400,000 to just over $12 million.

A new initiative adds $8 million to the Office of Safe Schools, for a grant program for public and private schools to add safety equipment and funding for police officers in schools.

School Employee Pensions

The budget spends $63 million less on public school employee pension benefits and $49.5 million less on school employees’ Social Security than the Governor proposed. These savings are the result of deep cuts to education that have reduced the ranks of teachers, reading specialists, counselors and other school staff.

Overall, the commonwealth’s contribution for school employees’ pensions increases by $161 million from the amount paid in 2012-13, accounting for about 60% of the increase in PreK-12 funding and in the entire Department of Education’s appropriation. These contributions will continue to increase in the coming years as the commonwealth copes with the effect of an extended employer contribution holiday and recession-related investment losses.[7]

Passport for Learning

The Governor had proposed using proceeds from the sale of the state liquor store system to fund a temporary “Passport for Learning” block grant program. Although both the Governor and Legislature made privatization a high priority, this part of the proposal was dropped relatively quickly. The privatization proposal is likely to be brought up again when the Legislature reconvenes in September.

Higher Education

The commonwealth’s higher education institutions — including the 14 campuses of the state system, Penn State and the state-related institutions — saw their funding slashed by 22% in 2011-12. State-related institutions received a modest increase in state funding in 2012-13, but the State System of Higher Education and community colleges were flat funded in 2012-13.

The 2013-14 budget finds modest gains for higher education overall, increasing $5.2 million, or 0.4%, from 2012-13. The four state-related universities — Penn State, University of Pittsburgh, Temple and Lincoln University — and the University of Pennsylvania's veterinary and infectious disease programs will get $4.3 million, or 0.8%, in additional funding. The Governor's proposal funded these institutions at the same level as in 2012-13.

Penn State’s College of Technology and Lincoln University each receive $2 million in additional funding, with smaller increases for the University of Pittsburgh’s rural education outreach and Penn. The state’s general support for Penn State, Pitt, and Temple were not increased from either the Governor’s plan or 2012-13 levels.

The State System of Higher Education universities have been funded at $412.7 million since 2011-12 and remain unchanged in 2013-14. The Pennsylvania Higher Education Assistance Agency (PHEAA), which offers financial assistance to students in the form of grants, scholarships and work-study awards, is essentially flat funded at $386.5 million. PHEAA has allocated $75 million from business earnings to supplement state grants, bringing the total available to $420 million.

PHEAA is contributing an additional $10 million in business earnings into a new initiative, a five-year distance learning pilot program that will provide grants to students who pursue a degree online.

Endnotes

[1] 2010-11 state funding including federal ARRA Fiscal Stabilization dollars.

[2] This is for the preferred and non-preferred appropriations under the Department of Education only. Does not include education-related funding (State System of Higher Education or PHEAA) but does include funding for Penn State, Pitt, Temple, and Lincoln.

[3] Includes Basic Education (BEF), Basic Education Formula Enhancements, Accountability Block Grants, Educational Assistance Program, and Charter School Reimbursement.

[4] Includes community colleges, state-related universities (PSU, Pitt, Temple, and Lincoln), the State System of Higher Education, and Thaddeus Stevens College of Technology. The last two are not included in the other Department of Education totals.

[5] The Reading School District’s Basic Education Funding (BEF) levels in this table include the district’s share ($1,500,000) of the $30.2 million allocated as BEF Supplements.

[6] The York City School District’s Basic Education Funding (BEF) levels in this table include the district’s share ($5,448,286) of the $30.2 million allocated as BEF Supplements.

[7] This accounting shortfall was created by a combination of investment losses during the recession and nearly a decade-long employer “holiday” where the state and school districts paid less into the fund than was expected.