Task Force on School Cost Reduction

Prepared for the EPLC Finance SymposiumFriday, November 16, 2007

Task Force Background

Special Session Act 1 of 2006 to: Evaluate spending trends Budgetary pressures driven by external

mandates and cost factors Composed of members of

School Boards Teachers’ unions School Business Officials Other Experts

School Cost Categories, Trends and Mandates

School spending during 2004-05 reached $20.8 billion

2004-05 Allocation per Student

Instruction, $6,322.27

Support Services, $3,217.05

Operation of Noninstructional

Services, $197.93

Facilities Acquisition and

Financing, $1,114.47

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 School - $364 million statewide annually

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

49% 45%52%

45%

78%

0%

20%

40%

60%

80%

100%

Tot

alE

xpen

ditu

res

Inst

ruct

ion

Sup

port

Ser

vice

s

Ope

ratio

n of

Non

inst

ruct

iona

lS

ervi

ces

Fac

ilitie

sA

cqui

sitio

n an

dF

inan

cing

Incr

ease

s 19

95-9

6 to

200

4-05

CPI

Cost Drivers (continued)

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

$60,000,000

$62,000,000

$64,000,000

$66,000,000

$68,000,000

$70,000,000

$72,000,000

$74,000,000

$76,000,000

$78,000,000

$80,000,000

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

School Year

To

tal

Co

mm

on

wea

lth

Exp

end

itu

res

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 Savings - $127 million

Health Care

PASBO estimated that health care premiums rose by 24% between 2003 and 2005.

PEBTF’s 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 Approximately 80% are alterations and

additions

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

$0.00

$20.00

$40.00

$60.00

$80.00

$100.00

$120.00

$140.00

$160.00

$180.00

$200.00

0

5

10

15

20

25

30

35

Cost Per Sq, Ft. $81.76 $101.18 $80.41 $176.99

Number of Projects 3 33 6 11

Addition Addition/Alteration Alteration New Build

School Construction (continued)

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 their original intent. Work done by school personnel from $4,000 to

$25,000 Projects done by school personnel and costing

between $10,000 and $25,000 would require three quotes

Projects of $25,000 or more require schools to advertise and solicit bids

Provide school districts with flexibility related to prime contracting

School Construction Recommendations (continued)

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 Represent 15% of the 1.8 million children enrolled 4% classified as gifted Spending grew by 83.4% since 1996-97

Special and Gifted Expenditures vs. Total Instructional Expenditures

0%

2%

4%

6%

8%

10%

Pe

rce

nt

Inc

rea

se

fr

om

ye

ar

to y

ea

r

Percent increase in InstructionalExpenditures

4% 2% 3% 4% 5% 5% 5% 3% 6%

Percent increase in Special EducExpenditures

7% 5% 8% 8% 8% 8% 9% 9% 9%

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

Special Education (continued)

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 moving students out of 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%

Average Transportation Expenditures Per Student Transported

YearPublic

Transportation*Non-Public

TransportationAverage Per

Student**Non-Public as % of

Average

1995-96 $485.21 $566.56 $495.64 117%

1996-97 $501.20 $535.13 $505.58 107%

1997-98 $516.52 $533.69 $518.72 103%

1998-99 $533.72 $523.66 $532.44 98%

1999-00 $548.16 $549.03 $548.27 100%

2000-01 $578.50 $566.70 $576.99 98%

2001-02 $625.84 $612.65 $624.16 98%

2002-03 $653.74 $647.37 $652.95 99%

2003-04 $688.25 $827.02 $704.85 120%

2004-05 $728.01 $971.49 $756.04 133%

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

Currently 117 charter and cyber charter schools in PA

$364 million in 2004-05

Rising Statewide Charter School Expense

1.68%

1.16%

2.19%

2.65%

3.18%

$0.00

$50,000.00

$100,000.00

$150,000.00

$200,000.00

$250,000.00

$300,000.00

$350,000.00

$400,000.00

Am

ou

nt

in T

ho

usa

nd

s

0

50

100

150

200

250

300

350

400

450

500

Nu

mb

er o

f sc

ho

ol

dis

tric

ts

Total Charter School Tuition $106,584.00 $160,957.00 $221,388.00 $286,505.00 $364,052.00

districts paying charter schooltuition

167 449 483 482 495

2000-2001 2001-2002 2002-2003 2003-2004 2004-2005

Charter and Cyber Charter (continued)

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

1

38

187

159

64

2613

3 2 0 1 10

20

40

60

80

100

120

140

160

180

200

$5,000.00 $6,000.00 $7,000.00 $8,000.00 $9,000.00 $10,000.00 $11,000.00 $12,000.00 $13,000.00 $14,000.00 $15,000.00 $16,000.00

Tuition Range

Nu

mb

er

of

Sc

ho

ol

Dis

tric

ts

Charter and Cyber Charter (continued)

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 (continued)

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 (continued)

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

$0

$50,000,000

$100,000,000

$150,000,000

$200,000,000

$250,000,000

1995

-96

1996

-97

1997

-98

1998

-99

1999

-00

2000

-01

2001

-02

2002

-03

2003

-04

2004

-05

School Year

Shared Services Recommendation

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 (continued)

Decreasing number of requests Construction changes

Mandate Waivers by Category

0

10

20

30

40

50

60

70

80

90

2000 2001 2002 2003 2004 2005 2006

Nu

mb

er R

equ

este

d

Alt. Ed

Certification

Construction

Purchasing

Special Ed.

Unclassified

VoTech

Mandate Waiver Recommendation

Increase the quality of the Pennsylvania Department of Education’s communication regarding Mandate Waivers, to include strategic information about the experiences of school districts in achieving cost savings.

Next Steps

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