Task Force on School Cost Reduction

PASBO Annual Conference Thursday, March 6, 2008

Task Force Background

 Established by Special Session Act 1 of 2006 to:    Examine spending trends Evaluate budgetary pressures driven by external mandates and cost factors Identify options and recommend change  Composed of:      School Board leaders Teachers’ union leaders School Business officials Other experts and professionals Appointed by Governor and General Assembly

School Costs

 School spending during 2004-05 reached $20.8 billion

2004-05 Allocation per Student

Operation of Noninstructional Services, $197.93

Facilities Acquisition and Financing, $1,114.47

Support Services, $3,217.05

Instruction, $6,322.27

Cost Drivers

 Costs have outpaced the CPI across all major categories

Increase in Major Expenditure Categories by ADM as Compared to the CPI

100% 80% 60% 40% 20% 0% 49% 45% 52% 45% 78% CPI

Cost Drivers

 Instructional Expenditures – responsible for 54% of total cost growth since 1995-96     Special and Gifted education – 97% increase Regular education – 35% increase Employee Benefits – 132% increase Charter Schools - $364 million statewide annually 100% 80% 60% 40% 20% 0%

Increases in Instructional Expenditures as Compared to CPI

97% 44% 35% 32% CPI

Cost Drivers

 Support Services – responsible for 30% of total cost growth since 1995-96    Student Transportation – 58% increase Administrative Services – 42% increase Tax Collection - $78.8 million statewide  Facilities and Financing – responsible for 14% of total cost growth since 1995-96  Debt Services - 90% increase  Non-instructional Services – responsible for 2% of total cost growth since 1995-96   Increased by 48% increase Largely driven by student activities  Federal and State Mandates   NCLB IDEA

Task Force Focus

        Tax Collection Health Care School Construction and Green Building Special Education Transportation Charter and Cyber Charter Schools Shared Services Mandate Waivers

Tax Collection

 Currently...

 560 tax collectors  DCED estimates $237 million earned income taxes never collected; $127 million would be available for schools

School District Expenditures on Tax Assessment and Collection Services over Time

$80,000,000 $78,000,000 $76,000,000 $74,000,000 $72,000,000 $70,000,000 $68,000,000 $66,000,000 $64,000,000 $62,000,000 $60,000,000 19 95 -9 6 19 96 -9 7 19 97 -9 8 19 98 -9 9 19 99 -0 0 20 00 -0 1 20 01 -0 2 20 02 -0 3 20 03 -0 4 20 04 -0 5

School Year

Tax Collection

Recommendations

 Consolidate collection of Earned Income Tax, employing fewer tax collectors and clarifying withholding rules for employers      Consolidate to 66 countywide tax collectors Uniform rules, regulations, forms and codes All EIT would be withheld by the employer Businesses would only need to remit to the county in which their payroll operation is located Estimated Impact - $127 million

Health Care

 PASBO estimated that health care premiums rose by 24% between 2003 and 2005  PEBTF premium increases averaged 5.6% between 2003 and 2006

Health Care

Recommendations

 Establish a statewide system for all school districts to jointly purchase health care benefits  When school districts maximize their purchasing power, the commonwealth will use tax dollars more efficiently while protecting the health care benefits that teachers and other school district employees receive  Estimated Savings – believed to reach hundreds of millions of dollars according to some analysts

School Construction

 In 2006: 53 school construction projects  Approx. 80% alterations and additions

2006 Average Construction Costs/Sq. Ft. by Project Type

$200.00

$180.00

$160.00

$140.00

$120.00

$100.00

$80.00

$60.00

$40.00

$20.00

$0.00

Cost Per Sq, Ft.

Number of Projects Addition $81.76

3 Addition/Alteration $101.18

33 Alteration $80.41

6 New Build $176.99

11 5 0 15 10 35 30 25 20

School Construction

 PDE provides reimbursement through the Plan Con process  Act 34 of 1973  20-year rule  Contracting Thresholds  Prevailing Wage  Multiple Prime Contracting

School Construction

Recommendations

 Increase and index limiting thresholds for construction related expenses in line with original intent    Work done by school personnel from $5,000 to $25,000 Projects not done by school personnel and costing between $10,000 and $25,000 would require three quotes (n0w $,000-$10,000) Projects of $25,000 or more require schools to advertise and solicit bids (now $10,000)  Provide school districts with flexibility related to prime contracting

School Construction

Recommendations

 Increase assistance to school districts to more strongly encourage green building  Increase PDE technical assistance to districts throughout the many phases of the construction process, including releasing information on actual school construction costs

Special Education

 Represents 15% of the 1.8 million children enrolled  4% classified as gifted  Spending has grown by 83.4% since 1996-97

Special and Gifted Expenditures vs. Total Instructional Expenditures

10% 8% 6% 4% 2% 0% Percent increase in Instructional Expenditures Percent increase in Special Educ Expenditures 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 4% 2% 3% 4% 5% 5% 5% 3% 6% 7% 5% 8% 8% 8% 8% 9% 9% 9%

Special Education

 State Special Education Funding  Base Supplement   Inflation Index Supplement Minimum 2% increase  Additional Funding   Contingency Funds Core Services  Institutionalized Children’s Program

Special Education

Recommendations

 Alter the state special education formula to provide funding on a tiered system based on the services a student receives  Provide increased state funding for high quality early childhood education in the elementary grades  Develop best practices in transitioning students from special education programs  Redo the charter school special education formula to enable the resident school district to better align funding with charter school special education costs

Transportation

 Approximately $1 billion annually (5% of the total statewide expenditures)  Increased by 58%

Year

1995-96 1996-97 1997-98 1998-99 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05

Average Transportation Expenditures Per Student Transported

Public Transportation* Non-Public Transportation Average Per Student** Non-Public as % of Average

$485.21

$501.20

$516.52

$533.72

$548.16

$578.50

$625.84

$653.74

$688.25

$728.01

$566.56

$535.13

$533.69

$523.66

$549.03

$566.70

$612.65

$647.37

$827.02

$971.49

$495.64

$505.58

$518.72

$532.44

$548.27

$576.99

$624.16

$652.95

$704.85

$756.04

117% 107% 103% 98% 100% 98% 98% 99% 120% 133%

Transportation

Recommendations

 Eliminate the requirement to bus students outside district boundaries and only require districts to transport on days when public school is in session  Optimize fuel cost management to slow long term growth costs  Encourage district to adopt transportation best practices

Charter and Cyber Charter

 Now 117 charter and cyber charter schools in PA  $364 million in 2004-05

Rising Statewide Charter School Expense

$400,000.00

$350,000.00

3.18% 500 450 400 $300,000.00

2.65% $250,000.00

350 300 2.19% $200,000.00

1.68% 250 200 $150,000.00

$100,000.00

$50,000.00

1.16% $0.00

2000-2001 2001-2002 2002-2003 2003-2004 2004-2005 Total Charter School Tuition districts paying charter school tuition $106,584.00 $160,957.00 $221,388.00 $286,505.00 $364,052.00

167 449 483 482 495 0 150 100 50

Charter and Cyber Charter

  Traditional student tuition for charter and cyber charter students Special Education student tuition for charter and cyber charter students

Non-Special Education Cyber Charter School Tuition

100 80 60 40 20 0 200 180 160 140 120 38 187 1 $5,000.00

$6,000.00

$7,000.00

159 64 $8,000.00

$9,000.00

26 13 3 2 0 1 1 $10,000.00

$11,000.00

$12,000.00

$13,000.00

$14,000.00

$15,000.00

$16,000.00

Tuition Range

Charter and Cyber Charter

 Additional concerns  Truancy  Competitive Grants

Charter and Cyber Charter

Recommendations

 Primarily Brick and Mortar  Change charter school law to include grants in the list of items exempt in calculations of charter school tuition rate   Permit school districts to weigh fiscal impact as a criterion when considering new and expanded charter schools Align the budgeting process of school districts with enrollment planning for charter schools

Charter and Cyber Charter

Recommendations

 Primarily Brick and Mortar  Provide best practices and guidance to school districts that will support them in creating effective truancy monitoring partnerships with their charter schools  Increase guidance to school districts throughout the charter drafting process to ensure a high-quality charter agreement

Charter and Cyber Charter

Recommendations

 Cyber Charter  Establish a single, statewide tuition rate to be applied to all cyber charter schools.

 Continue to collect and analyze data on the cost of cyber education

Shared Services

 Approximately $314 per student on administrative costs  50% increase  $210 million statewide on central services

Growth in Central Service Expenditures

$250,000,000 $200,000,000 $150,000,000 $100,000,000 $50,000,000 $0 19 95 -9 6 19 96 -9 7 19 97 -9 8 19 98 -9 9 19 99 -0 0 20 00 -0 1 20 01 -0 2

School Year

20 02 -0 3 20 03 -0 4 20 04 -0 5

Shared Services

Recommendations

 Expand the approach of shared services to include a variety of entities including districts, intermediate units, counties and other local governments  Draft a report of best practices that shows districts how cost savings can occur through consortia

Mandate Waivers

 Education Empowerment Act, Act 16 of 2000  Effective for three years  Districts must submit an evaluation  Annual report from PDE to the chairmen and minority chairmen of the House and Senate Education Committees

Mandate Waivers

 Decreasing number of requests  Construction changes

Mandate Waivers by Category

40 30 20 10 0 90 80 70 60 50 2000 2001 2002 2003 2004 2005 2006 Alt. Ed Certification Construction Purchasing Special Ed.

Unclassified VoTech

Mandate Waiver

Recommendation

 Increase the quality of PDE communication regarding Mandate Waivers  Include more strategic information about the experiences of school districts in achieving cost savings

For More Information



www.pde.state.pa.us

 Pre K – 12  Finances  Task Force on School Cost Reduction

The Rendell Administration’s Strategy for Driving Down the Local Burden



A new school funding formula that will invest $2.6 billion over the next six years to help school districts move towards their adequate funding targets.

 All homeowners will receive property tax relief in July – an average of $185 for every household – and total property tax relief will reach $854 million in 2008-09. Older Pennsylvanians have already received nearly $115 million in the program’s first year, and first-ever controls on local tax increases are keeping school property taxes in check.

 Legislation to create a statewide school health benefits system will bring down the cost of health care for school districts – addressing a leading cost driver while preserving the quality of benefits for educators.

 The state is encouraging voluntary consolidation of school districts that choose to combine their efforts to boost achievement and save taxpayers money.

 “Common Cents” makes it easier for school districts to share services to improve efficiency and avoid costly duplication of back-office, instructional, transportation and other expenses.