WHY THE WEALTH ADJUSTMENT 

NEEDS TO GO AWAY

One of the many elements of the new proposed funding formula is the so-called "wealth adjustment".  If the "money should follow the kids", as several formula committee members have opined, then this factor SHOULD NOT be a part of the k-12 funding formula. This is not a student-based factor - instead, it's an adjustment based on the property value in the district divided by the district's enrollment.

Here are several reasons that this factor needs to disappear:

We Already have a Factor Dedicated to Poverty

The "wealth factor" factor is not a proxy for free/reduced lunch rates, which are a legitimate weighting factor. In fact, as we referenced in our first series of blogs on this topic, districts with similar free/reduced lunch percentages may have wildly different market value assessments. A great example is the comparison between Coeur d'Alene and Bonneville.

In this case, the money does not follow the kids. It follows the market value. The Coeur d'Alene District has proportionally as many free/reduced students as does Bonneville. 

The Wealth Adjustment Penalizes School Districts with Robust Economies

The Spreadsheet Data

• The values used in the funding formula spreadsheet by the consultant from the Education Commission of the States were old. In fact, the consultant used Market Value data from 2016-17 and enrollment data from 2017-18! Here is the story those data tell.

As we noted previously, the idea of the "wealth adjustment" is that districts that are below the state average (<1.0) get the adjustment and those that are above do not. The lower the  ratio compared to the state, the more the adjustment. 

So Boise (1.53), CDA (1.62), LPO (3.55), McCall (5.57), and Teton (1.93) were well above the state average and would not receive the adjustment. Conversely, Bonneville (0.45), Poky (0.41), and Cassia Cty (0.47) are well below the average. West Ada (0.94) and Post Falls (0.94) were just below the average.

The New Data (from the State Department of Education)

But what happens when you update the model with new data? Luckily, the Idaho SDE provided us with updates to market value and enrollment for the 18-19 school year so we could see how things changed.

Though there are some other changes that we will mention a little later, the major difference here is that West Ada's market value has changed dramatically since 2016, and, using 2018-19 market value, the district no longer receives the "wealth adjustment", and goes from an overall loss of $809k to a loss of $9.4 million.  Post Falls stayed just under the state average, and so maintained its wealth adjustment.

So, if West Ada is affected just by using current data, what do the trends say about what might happen to the "wealth adjustment" for other districts whose market value is growing. 

The Trend Data

We had access to the Market Values for 2016 and 2018, and so looked at the trend data for the districts we used in the comparisons above. Understand that the trend analysis we have done is quite simplistic and assumes no major glitches in the economy (which there surely will be).

The statewide market value has grown by 19% since 2016. Districts that have had more growth than the state are either moving toward the state average or moving farther above it.

Almost every Treasure Valley district is growing at a faster rate than is the state, led by Vallivue, which is followed by West Ada, Boise, Kuna, and Nampa. In the north, market value growth in CDA, Lakeland, and Post Falls is outpacing the state, as it is in the Twin Falls District in south-central Idaho. In other words, at current rates of growth, the fast-growing districts will likely lose the "wealth adjustment" at some point.

School Districts have Limited Options in Dealing with the Revenue Losses

Districts that lose funding in the new model will be "held positive" for several years;  they will gain at least 2% in each of those years, according to the newest version of the legislation. But after that, all bets are off. Legislators have intimated that there will be increased funding, but with other pressing priorities, we really can't be sure what the future will hold. 

As a matter of course, District leaders can prepare for the "cliff" that will come with decreased funding by:

• shortening the school year/day
• cutting staff
• asking taxpayers to pick up the lost revenue

Shortening the school day and year have not worked in the districts that have tried these "solutions" in Idaho, and they've not saved the money they thought they would.

Of course, almost all of the districts that are "losers" in this formula already have levies; charters that lose have no way to recoup their losses, other than to appeal directly to their patrons. 

For districts, it's a matter of planning for how to deal with the loss. Lewiston, for example, already has a $15 million levy. Coeur d'Alene has $16 million, Lakeland has $9 million, Teton $3.4 million, West Ada $14 million.

For large, successful charters like Sage (5% cut), Coeur d'Alene (9%), North Star (4%), Meridian Medical (7%), Meridian Technical (9%) Charters, the prospects would be bleak.

Could West Ada up their levy request by $9.5 million to keep from cutting 180 teachers and maintain  class size? For CDA it would be 50 teachers and an increase of $2.5 million. Maybe so, but it's a tough sell when districts increase their requests to offset monies sent to other parts of the state. 

Moving Forward

The "wealth adjustment" will make budget-setting unpredictable for many school districts, and make for a volatile funding atmosphere. We believe that it should be eliminated from the proposed formula. In fact, in our next post, we will recommend going back to the original intent of the new formula, and eliminating all but the weights that provide for money following the students.

New Spreadsheet (Again)

A new spreadsheet (version 9?) was posted to the Interim Committee website yesterday (February 1). Once again, the committee leadership has insisted on comparing apples to oranges in their projection of the effects of the formula, by comparing 17-18 old formula monies with 18-19 new formula monies. And once again we have provided those who want to see a fair comparison with data comparing 17-18 old formula with 17-18 new formula. The 17-18 vs. 18-19 version denotes 45 losers; the "apples to apples" 17-18 vs. 17-18 version shows that the true number is 72, just under half of the charters and districts in the state.