Creative measures states are taking to find extra funding
For the first time in close to two years the Dow has hit 10,000, unemployment rates are edging down and the manufacturing sector is posting gains. "The recent positive news on state budget performance is good not only for K-12 education budgets but particularly good news for other areas of state budgets that have carried a heavy share of the budget balancing measures in recent years," says Arturo Perez, program principal of the Fiscal Affairs Program for the National Conference of State Legislatures.
While the economy is beginning to show early signs of a turn-around, it will take a while for these benefits to trickle from state budgets to local budgets to actually increasing school districts' budgets. In meantime, educators have been working hard over the past fiscal cycle to find ways to bring bucks to their budgets. In fact, districts have been so hard hit with budget cuts, some have been forced to entirely deplete rainy day funds, raise property taxes and share superintendents among rural districts.
The seriousness of the problem may be no clearer than in Yonkers, N.Y., where the district faced hundreds of layoffs and the cancellation of all athletic and extracurricular programs. In early December,
Mayor John Spencer was relieved to learn that the state would be putting together a collection of city and state funds to close a $21 million budget shortage. At a press conference, the mayor reported expectations to receive the money, although the district will be borrowing some of it from next year's funds.
So while signs of a rebounding economy is welcome news to education leaders, many have already taken action to find recovery methods of their own. Here are a number of examples of what educators across the country have been doing to bolster their economic landscape.
Ah, the Internet. Think how it's changed our lives over the past decade: now you can order a new wool blazer from Land's End and have your virtual model try it on before you click into commitment; you can log-on to Orbitz and choose to connect in Chicago instead of Atlanta on your next flight from New York to San Francisco, and you can get rid of that old school building on eBay. That's right, there are a few creative districts out there who are using the power of online auctions to sell unwanted items.
For example, after trying to give away its former middle school building to more than 40 charities, the rural La Crosse School District in western Kansas turned to eBay. The school board was hoping to receive $5,000 for the 43,000-square-foot building that was no longer in use. To their amazement, 23,000 people clicked on the listing and one interested viewer won the bid, paying $49,500 for the building. The winning bidder is a businessman in Phoenix who plans to relocate his business to Kansas.
The rural, 225-student Elm Valley School District in South Dakota also found themselves in the situation of having an extra school building. After posting the building online, the district was paid $49,000 for the aging elementary school.
Over in Minnesota, the 1,333-student Pipestone Area district hung an electronic for sale sign on the circa-1911, 58,000-square foot Jasper School, as well as the 200,000-square-foot Pipestone School, starting at $1 each. The district's aim was to jump-start a local business to bring in jobs. In the end, 500 individuals inquired on the listings with several dozen serious bidders. The winning bidder for the Jasper School was a Midwestern businessman who plans to build apartments for senior citizens. The Pipestone School listing was taken off eBay after local officials didn't find a likeable business plan.
And districts aren't just selling buildings online--smaller items can also be found for sale. The private Central Christian Schools in Omaha, Nebraska sold more than 400 items on eBay in September, raising $20,000. Due to low enrollment, the district was able to sell off desks, musical instruments, football pads and microscopes.
Also in Kentucky, the 33,000-student Fayette County School District has raised $49,000 selling 30 school buses and other vehicles in the past year. The district is looking into selling another batch of buses soon.
Meanwhile in North Carolina, the 425-student Wilkesboro Elementary School leveraged its affiliation with Canadian pop singer Avril Lavigne to raise money. The district gained popularity when Lavigne wore the school's green-and-yellow T-shirt in a music video. School administrators were inundated with calls to get replicas, contracted with a printing company and started selling the shirts for $30 each. With 4,000 T-shirts sold on eBay over several months, the district has netted more than $20,000.
Raising State Taxes/Fees
It's one of the two things that can't be avoided and as most states deal with revenue shortfalls, many are raising fees and taxes to help make up budget shortfalls. A 2003 report from the National Conference of State Legislatures shows that 34 states have raised fees, adding $2.8 billion in extra money for fiscal year 2004. Massachusetts leads the pack with $500 million in new fees.
Some of the revenues simply go back into states' general funds, leaving educators to reap benefits from the trickle-down effect. In New Jersey, for example, the state raised fees for nursing homes, hotel lodging and casinos in order to generate additional general-fund revenue. Illinois, for instance, has imposed new riverboat-gambling taxes and fees and will allocate a portion of the proceeds to education.
Over in Maryland, the state raised cigarette taxes to cover a new funding package for its public schools. While in Ohio, lawmakers voted to increase the state sales tax by a penny and restore the $70 million they had planned to cut for primary-secondary education.
And in Pennsylvania, the House of Representatives passed a package of bills to provide for education funding. For example, one bill increases the state personal income tax from 2.8% to 3.25%, effective January 1, 2004, and then reduces the rate to a permanent 3.1% on July 1. The increase is expected to raise $600 million in the first six months and $750 million annually.
On the corporate end of the equation, states are looking for revenues from big business. In Texas, for example, legislators are currently debating a revision to the state's corporate-tax structure that would raise taxes on some businesses while bringing property-tax relief to homeowners.
Meanwhile, in Arkansas, Gov. Mike Huckabee has proposed a small increase in sales taxes to meet the state Supreme Court's ruling to increase education spending in Arkansas. The governor also is championing a plan to reduce the number of school districts to make teacher pay increases and curriculum upgrades among other improvements more affordable.
And in Virginia, Gov. Mark Warner has called on lawmakers in his state to review tax rules so that education funding, which he called "our most compelling need," could be bolstered.
Dipping into Trust Funds/Lottery
Have you ever dreamed of having a personal trust fund to fall back on if times got tough? Well, a number of states are dipping into their funds and finding relief.
According to the National Conference of State Legislatures, 38 states have revenue sources specifically earmarked for education. A handful of states, including Michigan and Utah provide all or nearly all their education funding through specific education reserve funds.
In Alabama, spending for both K-12 and higher education comes entirely from a $4 billion education trust fund established in the 1930s that relies on sales and income taxes. Expenditures cover teacher salaries and textbooks, among other education programs.
In 1986 the state of Louisiana won a settlement from the federal government about a battle over oil and gas revenues. To date, the Education Quality Trust Fund has distributed $842 million for a number of education programs.
Elsewhere, monies earned from a public-land trust in Arizona has resulted in that state receiving close to $1 billion in its school fund since the early 1990s.
Also in Montana, 5 million acres of state-managed land has generated income for education and other state programs since the 1880s. Last year alone, $45 million was earmarked for K-12 education.
During his State of the State address in 2003, Gov. Gary Locke of Washington announced the establishment of the Washington Education Trust Fund. If approved by the House, the fund would be initially supplied with at least $100 million. It's the governor's intention that, "as new revenue sources to meet education improvement goals are approved, those funds [would] go directly into the trust fund. Such resources will then only be available for improving education." The trust fund would be used for early learning, reducing class size and teacher salary raises, among other programs.
And by setting up an education endowment fund which serves as a depository for a share of lottery proceeds in 1997, Oregon has been able to finance a number of education programs.
Another winner in the lottery game has been Florida. When the largest unclaimed prize in the history of the Florida Lottery was finally distributed, it was the state's school systems who came out the winners. In October, Gov. Jeb Bush, along with lottery secretary Rebecca Mattingly, announced the Florida Education Finance Program would be the beneficiary of the $50 million prize.
Also a lottery winner, K-12 educators in Vermont will receive an estimated $3 million in proceeds from the state's Powerball monies.
Restructuring the Law
In California, lawmakers are looking for ways to help close a budget shortfall of more than $30 billion over the next year-and-a-half. One leading consideration is easing the class-size mandate in K-3 classrooms.
Citing the receipt of some unexpected federal money, Gov. Bob Holden of Missouri recently released $83 million that had been held back from Missouri's public schools and colleges because of budget concerns. According to the Associated Press, the money amounts to a little more than one-third of the $222 million the governor withheld from education at the July start of the state fiscal year.
Holden claims the budget lacks enough revenue to fulfill its spending commitments. But he said the state Department of Social Services is receiving $83 million more than was budgeted from the federal government, which will help that agency pay for rising costs in the Medicaid health care program for the poor and disabled. That, in turn, will free up existing money to go toward education, Holden says.
For a few years cash-strapped districts in Colorado have been saving both energy and money. Energy conservation is the key. Districts have been doing energy-performance contracting that allows building owners to launch renovations with no upfront payments.
The Mapleton School District in Adams County recently completed a $4.4 million energy-efficiency makeover and enjoyed a savings of $174,000 in utility bills the first year alone. The savings over 15 years is expected to repay a Wells Fargo loan that funded the improvements.
Since performance contracting in Colorado public buildings began in 1995, $34.5 million in improvements have been completed, with resulting annual energy savings of $3.9 million, according to the state's energy office.
While it may not be a possibility for all states, declining enrollment and stagnant budgets are leading some districts in Iowa to share superintendents. According to the School Administrators of Iowa, this school year, 40 districts are sharing superintendents. In 1986 Iowa lawmakers approved legislation providing school districts with financial incentives to share top administrators. In the 1991-92 school year, 119 districts shared superintendents. However, when the incentives expired in 1998, the numbers began to decline.
Making Corporate Deals
New York City could change its nickname to the "Big Snapple." At the beginning of this school year, officials in New York inked a $166 million deal with Snapple to allow the company exclusive rights to sell its beverages in the city's 1,200 public schools. Under the five-year contract, the Education Department will receive a minimum of $8 million a year in commissions and sponsorship for athletic programs. The city will receive at least $13 million a year based on sales in municipal buildings. While many districts have renounced these types of deals, because of concerns about students' health, like it or not, this deal works out to about $8 a year per New York City student.
Similarly, in Indiana district administrators have formed a partnership with Pepsi Cola for exclusive selling rights in Warren Township schools. Under the five-year contract, Pepsi gives the district $110,000 annually which is split among the district's 18 schools. In addition to the lump sum, each school profits 40 cents from each bottle of Pepsi sold. If the vending machine is located in a hallway, that money is contractually required to be spent on the students. Besides that rule, each school principal has the right to decide on where their school's money goes.
Laura K. Dianis is editor.