A Primer About Education Finance in Connecticut

January 14, 2014 • Invest Intelligently

This year, it will cost about $11 billion to educate the half a million students in Connecticut’s K-12 public education system. That covers teachers, principals, and building costs (including debt service), as well as the payments for employees’ health insurance and future pension costs.

The cost of public education in each state is usually split between three major sources: local governments, state governments, and the federal government. In most states, state governments pay for just under 50% of the costs, local governments pay for just over 40% of the costs, and the federal government pays almost 10%. However, in Connecticut–unlike in the majority of states around the country–most public education costs are paid for by local property taxpayers. State taxpayers pay about 40% through state income (sales and other taxes) and the federal government picking up about 4%.

While many point to the burden local property taxpayers bear here, things used to be a lot worse. When the Horton v. Meskill lawsuit was decided in 1977, local communities were paying for about 70% of the cost of public education in their towns. After the Horton plaintiffs prevailed, Connecticut created a new education funding system. This funding system was based on an education formula grant that was designed to give less wealthy communities more state funding so their children would not be disadvantaged educationally by the communities’ lack of resources. Over time, this grant has been revised, replaced, and revised over and over. Today, this grant is known as the Education Cost Sharing (ECS) grant. At almost $2 billion, the ECS grant is the state General Fund’s largest municipal grant and its third highest General Fund expenditure.

The Problems with ECS

Due to its size and importance to local communities, ECS is the most visible part of the $11 billion education finance puzzle.  Since 1999, there have been at least four state task forces created to try to improve ECS and make its allocation more equitable.  But since ECS is a relational formula, changing its elements would mean that there were always both winners and losers. As no legislator wanted to return to his or her constituents with less ECS funding, each of the last two iterations of the ECS formula made sure that no town would lose any ECS funding.

“No Town Ever Loses”

The problem with the “no town ever loses ECS” ethos is that it inhibits real reform. The 2008 ECS changes ensured that the wealthiest communities got a guaranteed minimum grant percentage that was fairly high (9%). In the 2013 version of ECS, this guaranteed minimum was reduced–which is more in line with the spirit of the ECS formula. Still, since no community got less funding, there was little impact from this equity-based change.

Communities Don’t Get All of What the Formula Awards Them

Additionally, the last two ECS task forces created formulas that were woefully underfunded—by about $700 million. The latest (2013) formula promised a phase-in of full funding that could last decades for most of the state’s districts.

This is how the phase-in works.  Connecticut communities are divided into three:

  1. 10 lowest performing (Education Reform Districts). In FY 2015, they will get about 22% of the difference between what they got in FY 2013 and what they should get in the new formula.
  2. 20 next lowest performing (Alliance Districts). In FY 2015, they will get 14% of the difference between what they got in FY 2013 and what they should get in the new formula.
  3. All other districts. They will get less than 2% of the difference between what they got in FY 2013 and what they should get in the new formula.

The way this plays out for the third category of Connecticut communities can be somewhat shocking. For a community like West Hartford, which is not one of the 30 lowest performing districts, “phase-in” is a gloriously optimistic term. Here is how West Hartford’s FY 2015 ECS formula works out:

Granted, this is an extreme version of how the ECS “phase-in” is not working, but it is illustrative of the substantive issues of this newest ECS formula.

The New Formula Does Not Resolve Inequities in Funding

As a final note, the Horton case was about resolving some of the spending issues between wealthy and poor communities. But even with all of the ECS changes over the years, wealthy communities are still spending more on a per pupil basis than low-income communities:

The wealthiest communities still spend the most per pupil; they have the most financial resources, and they use them. There continues to be a glaring gap between the resources of the wealthy and the extremely poor communities in the state.

ECS is a big part of Connecticut’s ever changing education finance story. The latest ECS version retained mistakes from prior ECS formulas, failed to make meaningful progress to a fully funded formula, and did not equalize spending between wealthy and poor communities.  Despite the many tries over the years to fix the formula, the ECS formula is still substantively flawed. That’s why Connecticut needs to consider a complete overhaul of its education finance system. Next week, we’ll discuss how schools of choice are funded in Connecticut.