Education Funding in South Carolina - SCRG Foundation

Education Funding in South Carolina
Education Funding in South Carolina
2011-12
Figure 1: Funding for public schools, illustrated per student
Each bubble represents an individual source of school revenues. The money is calculated, allocated and regulated through 214
different programs or “revenue streams.”

Education Funding in South Carolina
Education Funding in South Carolina
executive Summary
Total funding levels have risen
rapidly over the last fifteen years, far
outpacing growth in enrollment and
inflation. Only twice in that period,
from 2002 to 2003 and from 2007
to 2008, was there a year-to year
decline in total district revenues.
Overall, total funding for the state’s
traditional public schools has soared
from $3.4 billion in 1995 to $8.7
billion in 2010.
Total district revenues dropped by
8.2 percent in 2008. A decline in
revenues from capital sources –often
one-time bond issues or land sales–
was the largest single factor. In other words, the school-building spree brought on by Act 388 skewed year-to-year revenue
averages for school districts. This coincided with a downturn in state revenue collection.
Both absolute and per-student funding
totals began to rise again in 2009; by
2010 they nearly reached their predownturn
levels. In context, the oneyear
drop was negligible. Across the
last fifteen years, total funding has
risen by 155 percent while enrollment
has nudged up a mere 6.3 percent.
Operational funding, which excludes
money for buildings, suffered less
from economic downturn and has
recovered more quickly. Per-student,
the dip was just $84 from 2008
to 2009. By 2010, the operational
funding of public schools reached an
all-time high of $11,140 per-pupil.
The most significant budgetary
change in recent years has been a shift in the way state funding is allocated to school districts. Total state allocations per-pupil
have risen steadily for many years, but the portion of that money appropriated through the Education Finance Act (EFA) has
dropped; while funding through other state programs has risen.
Much of the growth has come in the form of state allocations in lieu of local taxation; though such offsets have not been paired
with declines in local revenue collections. This adjustment, and confusion about the public reporting of school finances, has led
many to falsely believe that all public schools are suffering long-term, drastic funding cuts.
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Act 388, which brought about a shift in local and state tax collections for school funding, has further confused public and
legislative perceptions. While the 388 “swap” was intended to slow the growth in local tax collection, total district revenue from
local sources has not dropped since 2007. In 2010 they were $329 million above their pre-Act 388 levels. State funding in-lieu
of local taxes, intended to offset an anticipated drop, has nearly tripled. These state offsets will surpass $1 billion in 2011. The
rush to fund capital projects after the passage of Act 388 also distorted long-term school funding and spending trends through
large one-time revenue collection (bonds), and the ensuing annualization of associated building and staffing costs.
Funding levels have grown rapidly for years but the percentage of the school districts’ budget allocated for student instruction
has declined. The number of classroom teachers has dropped slightly statewide but only 3.5% of the annual teacher turnover
can be traced back to reductions in force over the last two years. There has been a small uptick in teacher retirements during
the same period, but the rate is only five percent above the ten-year average. Despite increases in funding levels, and deliberate
adjustments in funding design, there remains no consistent relationship between total or state funding levels and either district
wealth or student performance.
the baSicS
Statewide, public schools will be funded at an average of $11,754 per child for operations in 2011-12. This money comes from
taxes assessed by local, state and federal governments. The figure excludes revenues from bonds, investments, and transfers
between funds and government agencies.
This $11,754 figure is a projection published in the state budget. Traditionally, these estimates have been very accurate. Over
the last six school years, the difference between legislative projections and final revenues collected per-student has varied by an
average of just nine dollars across the state. For 2010, the legislature’s projection of $11,242 in per-pupil funding for operations
was off by just $102, or less than one percent, when compared to the final district receipts published by the
South Carolina Department of Education.
Schools collect another $1,500 per child from bonds, investments, property management and other so-called “non-operational”
or “capital” sources. Those collections are
regularly excluded from public reporting
on school budgets. All told, the 85 public
school districts in South Carolina will enjoy
an average of $12,670 in total public funding
per student in 2011-12, excluding transfers
and other inter-governmental revenues.
FuNDiNg grOWth
While parents have been told about
“massive cuts” the fact remains that public
schools have enjoyed major long-term
budget growth. From 1995 to 2010, total
revenue for South Carolina’s traditional
public schools rose by $5.3 billion in real
dollars while student enrollment increased
just 6.3 percent.
During the FY 1994-95 school year, the
85 public school districts received $3.4 billion in public revenues for their operations. If this level of funding had grown in
proportion to the rise in student enrollment and growth in the Consumer Price Index (”CPI,” the change over time in prices
actually paid for consumer goods and services), total revenue would have risen to $5.1 billion in 2010. Instead, the school
districts received just over $8.7 billion in public funding during the 2009-2010 budget year, more than $3.7 billion above the
natural growth driven by changes to the student population and the cost of delivering services to them.
Many state officials, school board members, and district administrators characterize “cuts” as the difference between actual and
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*
*
Projected Per-Pupil Funding for South carolina Public Schools, 2011-2012
(base Student cost of $1,788)
* Dillon Districts 1 and 2 will consolidate into Dillon District 4

*
*
Projected Per-Pupil Funding for South carolina Public Schools, 2012-2013
(base Student cost of $1,788)
* Sumter Districts 2 and 17 will consolidate into Sumter School District

Education Funding in South Carolina
Education Funding in South Carolina
projected (or requested) funding levels within a single year, rather than a year-to-year difference in total funding.
Even in the deepest depths of the statewide budget crisis (from FY 2007 to FY 2008), the actual per-pupil operational revenues
collected by school districts remained over $11,000 – a drop of just $85 per student from FY 2007-08 levels when fund transfers
and capital sources are excluded.
Adding to the confusion are month-to-month adjustments that occur in the levels of transfers made from the State Department
of Education to the individual districts. Certain state programs for public school funding are closely tied to student enrollment
or state revenue collections. If, for example, student counts reported on the 45th and 135th day of school indicate membership
below anticipated levels in a
certain districts, local officials
tend to characterize the ensuing
adjustments as “cuts” despite
the fact that both total and perstudent
funding levels may have
grown since the last school year.
Making sense of the growth in
public spending on public schools
can be a challenge. One useful
gauge of these funding levels is a
comparison with private school
tuition. A 2010-11 statewide
survey of 308 independent schools
found the median tuition charged
by private schools in South
Carolina is just $4,400 for grade seven and $4,500 for grade ten. In other words, the average private school’s tuition fees are
less than half of the operational funding received by public schools for each student, or just one third of the total per-student
revenue.
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Another point of reference is public school spending levels in other states. A report issued by the United States Department
of Education in 2010, and citing FY 2008 data, found South Carolina spent $11,045 per student. South Carolina’s per-pupil
expenditures were ranked 23rd highest among the 50 states, well above the $10,889 reported national average. The figure was
$9,682 in North Carolina. While South Carolina was ranked among the top half of states for public school spending, it remains
in the bottom half (37th) for per-capita income levels of residents.
buDget rePOrtiNg
Public school districts and the State Department of Education have often under-reported K-12 spending levels to the public.
This has led to confusion among parents, media and state lawmakers. Nearly all school officials “back out” or subtract revenues
from, or spending on, school buildings, legal fees, land purchases, and other areas they don’t characterize as “operations.” Others
point to single sources of state allocation, most notably the Base Student Cost, and claim or imply this single indicator represents
the totality of state or public aid to local districts.
The Base Student Cost is the greatest source of confusion because it has been termed a “foundational funding formula,” leading
observers to assume it is the core (or extent) of public support for districts. In reality, it is just a calculator. State funding for public
schools is actually allocated through 119 distinct programs, provisos, regulations, “pass-throughs,” transfers and allocations.
That’s down from a peak of 129 in 2008, when lawmakers also began to offer districts some modest but short-term flexibility
in spending the money. Funding for the “Base Student Cost” comes from both the local districts and the state government, and
is just one small part of the larger
state funding picture.
baSe StuDeNt cOSt (bSc) and the
eDucatiON FiNaNce act (eFa)
Part of the confusion revolves
around the fact that state funding,
per-pupil, has remained steady or
grown in recent years while the
level of the Base Student Cost
(BSC) has dropped drastically.
Adding to the complexity is the
fact that funding for the Base
Student Cost, comes from a
mixture of both local and state
allocations, with the local districts
funding nearly the entire BSC
in certain districts and the state
funding almost all of it in others.
On average the ratio is 70 percent
state and 30 percent local.
The Base Student Cost is called
a foundational funding formula,
or calculator, because it was
intended to represent a theoretical
bare minimum of per-student
funding a district would receive
for a pupil, before considering the
relative costs associated with all
the specific characteristics of that student (e.g. grade level, instructional needs, socioeconomic background).
Other state programs, such as the Education Improvement Act (EIA), are calculated and allocated separately from the EFA,
further diminishing the role of the Base Student Cost as a true “foundation” funding formula. Over the last seven years, funding
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Education Funding in South Carolina
Education Funding in South Carolina
from the Base Student Cost has ranged from just 14 to 23 percent of the revenue collected by districts.
The size of total state aid has no necessary relationship with the level funding for the Education Finance Act. While the Base
Student Cost fell from $2,334 to $1,630 in just one year (FY 2010 to FY 2011), the total projected state aid per-pupil rose from
$4,153 to $4,485 in the same period. In other words: more money but from different sources. Still, frustrated parents hear about
funding of schools at levels of “$1,600 per student” or “about $8,000 per child,” or even “at 1995 levels.” The basis for these uncontextualized
claims has to do with changes in the way schools are funded, not the levels of funding. Additionally, the way
that lawmakers and school administrators choose to report their budgets may add to the confusion.
Understanding how state aid is steady, or has grown, despite fluctuations in the Base Student Cost is important because only
portions of the funding from the state to districts are “student-based.” Half of federal and all local funding is allocated without
regard to the specific number of students attending a certain school or enrolled at a specific district. Estimates of the percentage
of state aid that is directly tied to (or calculated by) the number of students enrolled in a public school district range from 59
to 61 percent. All local funding, and roughly half of federal aid is not tied to the student through allocations. In other words, of
the $11,754 in total funding per-student in 2012, fully 69 cents per dollar is not tied to the student.
Just 31 percent, or a mere $3,643, of total public school funding in South Carolina is allocated through, or calculated with, the
individual student. The remainder is not tied to student counts or specific students’ characteristics. Of the funding from state
sources, 60 percent is student based.
Understanding how state aid is steady, or has grown, despite fluctuations in the BSC is important because parts of the funding
from the state government are truly “student-based,” while most federal and all local funding is allocated without regard to
the specific number of students attending a certain school or enrolled at a specific district. Estimates of the percentage of state
aid that is directly tied to (or calculated by) the number of students enrolled in a public school district range from 49 to 61
percent. In other words, when considering all levels of government funding, of $11,372 in total funding per-student, just 19 to
24 percent is student-based.
reveNueS “iN Lieu” & act 388
Another point of debate, and often confusion, is
the impact of Act 388. The measure was passed by
the South Carolina General Assembly in 2006.
The legislation was designed to provide tax relief
to families paying school operation taxes assessed
on their homes by the local school districts. In
response, state lawmakers raised portions of the
state sales tax, and pledged to provide revenue
to the 85 local districts “in-lieu” (to offset, or in
substitution) of the “lost” income provided by
the local taxes on single family homes. In theory,
local property taxes were supposed to decline in
return for a corresponding increase in state sales
tax.
Local revenues for schools have actually risen
since the implementation of Act 388, thanks
to huge growth in taxation on other types of
property (such as commercial buildings and
second homes) and a rush to raise taxes assessed
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on single family homes before implementation of 388 by increasing millage rates. That local growth has been in addition to
the increase in state revenue
provided through “in-lieu”
arrangements.
Lawmakers also promised to
provide multi-million dollar
minimum in-lieu offsets, or
“buy-outs,” to a number of
politically powerful but small
districts with limited local
property tax collections. This
further drove up the cost of
a swap that was intended
to be fiscally neutral. In the
year between passage and
implementation of Act 338
school districts increased
local revenue collections
by $293 million, increasing
their baseline for state
transfers.
Education Funding in South Carolina
Education Funding in South Carolina
Following implementation, local collections for schools nudged downwards by $167 million to $3.08 billion in fiscal year 2008.
The same year districts collected $511 million in state reimbursements (dubbed “Tier 3” by lawmakers) and the $2.5 million
minimum “bonuses” for smaller districts with limited local property values. These allocations were intended to strictly offset the
impact of reductions in lost local revenues but the so-called “swap” provided public schools with a net increase of $443 million
in its very first year.
By 2010, local source revenues for schools reached $3.29 billion, $329 million above the absolute pre- Act 388 levels of 2006
that spurred passage of the program. That same year, 2010, local revenues also surpassed their level from 2007 by $36 million,
the year in which districts across the state maximized millage and assessment in order to set high baselines for the Act 388 state
transfers. The state pitched in a further $584 million in Tier 3 and bonus reimbursements for local property tax relief in 2010.
The state allocations designed to offset the impact of Act 388 are just two of the seven programs providing schools with state
revenues in lieu of local tax collections. Each program was intended to reimburse districts for the loss of school tax revenue
resulting from some state action. They cover exemptions from taxation on manufacturer’s depreciation, merchant inventory and
motor carrier vehicle taxes, as well as residential property relief granted by the state to homeowners over sixty five years of age
or on the first $100,000 of a family’s primary home’s value.
Local revenues for public schools and state revenues provided in lieu of local revenues have risen from $3.3 billion before Act
388 to $4.2 billion in 2010. In 2010, $997 million, or 30 percent, of state funding for South Carolina’s public school districts
was allocated in the form of state revenue in lieu of taxes. A decade earlier, the transfer programs constituted just twelve and a
half percent of state aid.
SchOOL SPeNDiNg
There are also significant disagreements about how the $11,754 in district revenues per student are actually spent. In years past,
the State Department of Education has claimed that public schools in South Carolina spend an average of 71 cents per dollar
on “instruction.”
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Education Funding in South Carolina
Education Funding in South Carolina
The figure is published in their statewide
and district level “In$ite” tables. The
Department describes In$ite as a way
consistently organizing expenditure
information in a manner that translates
financial data from a regulatory
reporting format to a management
reporting format. In$ite assumes that
activities such as “in-service and staff
training,” “guidance and counseling,”
“program development” and
“extracurricular support” are actually
forms of classroom instruction. Even
when so-called “instructional support”
programs are removed, the figures from
In$ite still suggest that 57 cents on the
dollar flows to the classroom.
That figure is still contentious, as it
flies in the face of generally accepted
accounting practices and the reporting
of other state agencies. Money spent on
school construction, legal obligations,
and other costs associated with the
financing of school buildings and property are excluded from In$ite’s instructional spending calculations. When those dollars
-money raised from public sources and spent by school districts- are included, instructional spending drops down to 44 cents
per dollar.
The Budget and Control Board’s “Local Government Finance Report,” also reports the 44 cents per dollar figure. The raw
numbers in that report come from the State Department of Education, but unlike In$ite, there are no categories of spending
that are wholly excluded from the calculations. According the Budget and Control Board that instructional spending percentage
has steadily declined in recent years, even as the total budget for public schools has risen.
In 1993, the Budget and Control reported 50 percent of public school spending was allocated for instruction; by 2009 it had
fallen to just 44 percent, or $3.8 billion from an $8.8 total budget. Data from the Federal Government reinforce the argument
that public schools in the state are financially inefficient. In a 50-state comparison, the US Department of Education ranked
South Carolina 44th in the nation for “instruction and instruction-related expenditures” as a percentage of total K-12 spending.
One of the fast growth areas in school districts’ budgets has been debt service, drawing resources away from instruction. Across
South Carolina, 16 to 20 percent of the locally collected school revenues are now allocated to debt service. Much of that financial
obligation was incurred just prior to the implementation of Act 388. The spending binge on buildings and land just before the
economic downturn (especially right after the passage of Act 388) helps to explain why per-pupil operational revenues are now
at an all time high while total per-pupil revenues are not.
teacher hiriNgS aND FiriNgS
School and district staffing is another indicator of funding and spending priorities, one to which parents are particularly
sensitive. Statewide, there were over 48,700 public school teachers in 2010. The total was 50,900 in 2009, leaving to reports
in the media that over 2,000 classroom teachers had been lost to budget cuts. That assumption is incorrect. Since 2001, there
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Education Funding in South Carolina
Education Funding in South Carolina
has been a net increase of 7,700 public school teachers in South
Carolina (or one for each 18 additional students enrolled) and an
annual turnover rate of ten to fifteen percent.
Over the last decade, an average of 5,300 public school teachers left
the classroom each year in South Carolina. New teacher hirings
averaged 6,100 per-year in the same period. The most commonly
reported reasons for leaving are retirement, resignation, hiring
by another public school or district, “personal” (e.g. maternity or
an illness in the family), and family relocation, which collectively
account for two-thirds of the losses each year.
The 2008-09 school year was the first since reporting began in
2001 that new hirings did not outpace the total number of teachers
leaving. In both 2009 and 2010 there were 1,000 more teachers who
left than new teachers hired. Since 2009, 333 of the public school
teachers who left the classroom did so as a result of reductions in
force. They constitute just 3.5 percent of all teacher departures.
Another 2,500 teachers retired or concluded their post-retiree employment with the schools. These retirees and “working
retirees” comprise 28 percent of the 2009 to 2010 departures, just slightly above the ten-year trend of 23 percent. Some districts
have mischaracterized these losses through this attrition as “cuts” in recent years, though the decade-long data indicate this is
modest expansion of a long-term trend. Meanwhile, the schools reported hiring 157 district level administrators during those
same two years. As of December of 2010, there were 190 teacher vacancies statewide, roughly half the average number of
annual reported vacancies throughout the last decade. In late 2010 the state reported one teacher for every fourteen students
enrolled.
POverty, PerFOrmaNce & FuNDiNg
No hard-and-fast relationship exists between school funding levels and the incidence or severity of poverty within a school
district. Neither state funding nor total levels of local, state and federal funding calculated per-pupil are directly correlated
with the index of poverty across the 85 traditional public school districts in South Carolina. Some districts serving low-income
areas do enjoy higher than average per-pupil receipts. Statewide, however, there is no statistically significant relationship
between funding and poverty, despite the fact that many funding sources, and particularly the Education Finance Act (EFA),
were intended to reduce or overcome inequalities in the taxable wealth of the district.
Consider, for example, that Marion School District Seven has a poverty index of 97.4 percent and is projected to receive over
$16,600 per-pupil in FY 2010-11. Dillion District Two, on the other hand, reports 93.6 percent poverty with anticipated
funding of $8,592 per student. Both of these districts receive over 80 percent of their BSC funding from the state, while
Calhoun, with 90 percent poverty, receives closer to 50 percent due to a larger local tax base. The total number of these massive
revenue disparities has diminished statewide in recent years, despite the fact that the percentage of state aid delivered through
the Base Student Cost mechanism (a program specifically designed to equalize funding across South Carolina) has dropped
both in absolute terms and as a percentage of total state aid. In other words, funding of school districts in South Carolina has
“equalized” significantly in recent years, even as the role of the EFA (designed to equalize inputs) has diminished.
Similarly, there is no consistent relationship between levels of student achievement and funding. There are a range of state
programs specifically geared toward providing underachieving schools and districts with additional resources, and even a few
state allocations that reward higher achieving or improving schools, but neither state aid nor total funding levels correlate with
student test scores.
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Key Points
Education Funding in South Carolina
FuNDiNg LeveL
-Schools are projected to collect $11,754 per-student for operations in 2011-12.
-Another $1,500 per student is anticipated for building projects.
-Projections are up $382 per-student from last year.
-Final audits show $11,140 in operations, and $12,600 in total per-student spending in 2009-10.
FuNDiNg mechaNiSm
-Money comes from local, state and federal sources; as well as “other” revenues for building projects.
-There are 214 separate revenue streams for schools.
-69% of the money is not allocated on a per-student basis.
-Base Student Cost (BSC) is just one part of the Education Finance Act (EFA), which is just one part of overall state funding.
-BSC level dropped in 2010, but total state funding is up and still rising. BSC also up for 2011-12.
act 388
- The plan to swap certain local taxes for state revenues hasn’t led to a drop in total local funding for schools.
-Districts raised $300 million in additional local revenues between the bill’s passage and enactment.
-Growth in other local source revenues surpassed “lost” property tax revenues within two years.
-State funding to districts “in- lieu” of owner occupied property taxes has tripled since passage.
-Revenues in-lieu now total $997 million (30%) of annual state funding for schools.
FuNDiNg grOWth & chaNgeS
-Increased funding levels correlate with decline in share of spending on instruction.
-Classroom spending accounts for just 44 cents per total K-12 dollar.
-Number of classroom teachers down slightly after ten years of high growth.
-Only 3.5 percent of teacher loss is due to reductions in force.
-Funding levels still have no correlation with district characteristics.
LearN mOre
Funding Projections:
www.scstatehouse.gov >> Current Legislation >> Budget Bills >> Fiscal Year >> As Ratified >> Part IB >> Section 1
School Revenues:
www.ed.sc.gov >> Agency >> Offices >> Finance >> Historical Data >> District Revenue Information
School Spending:
www.ed.sc.gov >> Agency >> Offices >> Finance >> Historical Data >> District Expense Information
www.ors.sc.gov >> Economic >> Local Government Finance Report
www.ed.sc.gov >> Agency >> Offices >> Finance >> In$ite
Coding and Accounting:
www.ed.sc.gov >> Agency >> Offices >> Finance >> Instruction Manuals, Handbooks, and Guidelines >> Financial Accounting Handbook
www.ed.sc.gov >> Agency >> Offices >> Finance >> Instruction Manuals, Handbooks, and Guidelines >> Funding Manual
School Enrollment:
www.ed.sc.gov >> Quick Data >> Membership and Attendance
Staffing:
www.cerra.org >> Research >> Supply and Demand Survey >> Report
The author, Neil Mellen, is Research Director at the South Carolinians for Responsible Government Foundation (SCRGF). Nothing
in the foregoing should be construed as an attempt to aid or hinder passage of any legislation.
Post Office Box 12646 | Columbia, SC 29211 | www.scrgfoundation.org