Letter to the Editor...

Montana Business Quarterly

Bureau of Business and Economic Research

The University of Montana

Missoula, MT 59812

Dear Editor:

I am writing in response to the article "The Battle for Equity" by Ernest Jean published in your Summer 1999 edition.

In his article, Dr. Jean states that "HB667 also followed the state's original 1950 school financing model by establishing an 80 percent state funding level as its benchmark." He then goes on to cite an "ominous" trend of a declining state share of funding. He concludes by relating this trend to a predicted coming lawsuit on sufficiency of state aid. I believe he errs in saying an 80 percent state funding level was established and the state is therefore failing to meet its target, and is unduly alarmist in his analysis of state aid sufficiency.

My review of the HB667 history indicates the bill did not establish the state funding level at 80 percent of state-local resources. The state funding level under HB667 is 40 percent of a district's maximum budget plus a share of the next 40 percent based on the relative taxable value per student of the district vis-a-vis the state. HB667 did set a minimum spending level for a district at 80 percent of its statutory maximum level and provided that 80 percent of the district's general fund resources would be equalized.

The state share in the second 40 percent ranges from no state share in property rich districts to nearly full state funding in property poor districts. For the total of all districts the state pays 41 percent of the second 40 percent, which is 16 percent of maximum budget. If all districts spend at the maximum (100 percent) level, the state share would be approximately 56 percent--40 percent full state funding plus 16 percent state shared funding. On a statewide basis, the state share would only approach 70 percent if all districts were spending at the mandatory minimum (80 percent) level. When HB667 was passed, the maximum level was set sufficiently high that few schools exceeded it and many schools were below the minimum mandatory level (80 percent of the maximum). The bill allowed these low spending schools five years to raise their spending level to the required minimum. Given the high initial levels and the expected phase-in of low-spending districts, it is obvious that the state share would decline as the program matured. This is, in fact, the history of the program to date. The state share of district general fund budgets was 63 percent in FY1999. I would expect the state share to hover around 63 percent in a mature program as the minimum levels force low spending districts to raise budgets and the maximums act as a drag on 'would be' high spending districts to maintain equalization targets. For individual districts, the state share will range from 40 percent to over 90 percent.

The question of sufficiency of school spending and state aid is certainly open to many opinions, which could vary widely. When compared with other states in 1997 (the most recent year for which I have comparative statistics) Montana ranked 31st in spending per pupil while at 46th in per capita income, and 12th in per capita spending on elementary and secondary schools. These figures would seem to argue that public schools are a priority and the state is making a significant effort to provide "sufficient" funding.

Curtis Nichols

Office of Budget and Program Planning

Helena, MT