Pennsylvania budget calls for lumping much school aid into block grants

The biggest change in Gov. Corbett's proposed education budget for the 2012-13 school year is his plan to use block grants to dole out a large portion of the state's public education payments to school districts.

He proposes setting aside $6.5 billion for the grants, which would cover basic education funding - an all-purpose state subsidy to school districts - and state reimbursement programs for local Social Security payments and transportation costs.

The grant program would make up more than 70 percent of the state's proposed $9.05 billion allocation for K-12 public education.

The basic education money is divided among districts based on a number of factors, including their size and wealth. Transportation and Social Security payments are based on actual expenses. The new block grant could be spent for any educational purpose.

Corbett seeks an increase for 2012-13 that averages less than 1 percent over last year's combined allocations. No district would get less than it did last year.

"The rationale here is clear," Corbett told the legislature in his Feb. 7 budget address. "Local districts know better how to spend and allocate resources than do bureaucrats in Harrisburg."

The deadline for passing a state budget is June 30; it is not clear whether the legislature will approve the proposal.

The plan has its critics, who fear it would make it easier for the state to leave local districts responsible for future increases in transportation and payroll tax costs.

The state currently reimburses school districts for a portion of those costs each year before getting final expense figures. If the costs wind up higher than anticipated, the state covers the difference.

Districts spend more than $1 billion a year on transportation and the same amount on Social Security taxes. State reimbursement for Social Security costs averages about 50 percent; it averages about 40 percent for transportation.

If Corbett's block grant becomes law, next school year, districts would still be reimbursed for actual transportation and Social Security expenses.

But it is widely expected that for following years, block-grant funding would be based on a percentage increase over the previous year's amount, not on transportation and payroll figures, said Jay Himes, executive director of the Pennsylvania Association of School Business Officials.

"There is a concern that increases in costs would not be reflected in the grants," Himes said.

That might mean, for example, that if gasoline prices spiked, the districts, not the state, would be on the hook for the extra cost. And if teachers get raises or if enrollment expands, districts would pay the salary increases and all the additional payroll tax cost.

Pennsylvania Department of Education spokesman Tim Eller said he would not speculate about what form the new block grant would take in future years. In an e-mail, he wrote only that it would "provide a block of funding to a district and the district would need to make the necessary decisions to manage their expenditures."

Covering transportation and Social Security costs with block grants could also have the unintended consequence of building inequity into the funding formula.

That's because some districts, especially poorer ones, have cut staffing and transportation in recent years, reducing their state subsidy amounts. Future percentage increases in the block grants would be based on the lower amounts districts now receive.

"The biggest danger with the block-grant proposal is the movement away from using formulas to distribute funding that are based on real numbers that reflect the real needs of students," said Baruch Kintisch, a lawyer with the Education Law Center in Philadelphia and a school-funding expert. "When that happens, the neediest school districts don't get their fair share."

The proposed block grant may not lead to much new spending flexibility, because the basic education fund is already an all-purpose allocation, and districts don't have a choice about paying Social Security taxes. Student transportation is not required by state law but in many districts, it is regarded as a necessity because the distance from home to school is substantial or walking would be dangerous.

Paperwork would not change much for Social Security because districts have to calculate it anyway.

Time and expense in figuring the transportation subsidy would be cut. Calculating transportation costs "is a paperwork nightmare," Himes said. Not having to do that, he said, would be "a significant reporting relief."