RIPEC Reports on Changes to State Education Aid in FY 2024 State Budget

Providence, R.I. – The Rhode Island Public Expenditure Council (RIPEC) released a policy brief analyzing changes to Rhode Island’s education funding formula in the fiscal year (FY) 2024 state budget today. For FY 2024, the General Assembly established an enrollment loss transition fund and poverty loss stabilization fund, and made changes to the poverty measure and state share ratio. They increased categorical spending for multilingual learners and high-cost special education, and directed the Rhode Island Department of Education to study several aspects of the formula to inform future years.

RIPEC found that some changes adopted by the Assembly for FY 2024 are positive in bringing more equity to funding allocations, particularly for the urban core districts. These districts, which have by far the greatest concentration of multilingual learners, receive most of the additional funding for such learners, with Providence alone receiving more than half of the new money. RIPEC recommends that this additional funding would represent a more predictable revenue stream if incorporated into the funding formula instead of remaining as a supplemental funding item. It is also unclear whether this funding is adequate given the state’s large and growing population of multilingual learners.

The report also found the transition fund established by the Assembly for lost enrollment to be a positive change given the challenges faced by school districts to reduce costs when students leave a district. However, the changes adopted by the Assembly for FY 2024 may have gone too far in continuing to insulate school districts from the need to respond to enrollment declines and other reasons for declining state aid. The report notes that excessive hold harmless policies allow school districts to avoid reasonable efficiency measures such as reducing classrooms and administrative overhead to respond to smaller student populations, and consequently results in less funding being available for needier districts.

In its report, RIPEC found most troubling that changes to the funding formula reversed progress made toward more equitable funding. Five urban core districts—Central Falls, Pawtucket, Providence, West Warwick, and Woonsocket—represent about one-third of student enrollment and received less than half (49.5 percent) of all new funding from FY 2021 to FY 2024, as compared to receiving 59.3 percent of increased funding over the ten-year phase-in period of the funding formula (FY 2012 to FY 2021). This retreat from more equitable funding is illustrated by the fact that some of the state’s most affluent districts received the greatest percentage increases in state aid per pupil over the past three years, while none of the five urban core districts were among the eight districts receiving the highest percentage increase in state per pupil aid. The percentage increase for Providence (16.6 percent) was less than the average increase for all districts (19.7 percent).

“State funding for K-12 schools in Rhode Island is of fundamental importance to the state’s students, parents, and communities, accounting for about a quarter of the state’s total general revenue spending,” said Michael DiBiase, President and CEO of RIPEC. “Ironically, the first year in which the funding formula became fully phased in was the last year in which the formula operated as intended. While the General Assembly made some positive changes, the FY 2024 funding formula consists of a multiplicity of modifications that are complicated and fail to reflect a coherent or consistent policy. The result is a patchwork of funding allocations that appear to make little sense when comparing funding outcomes for communities that are similar in terms of student demographics and their relative ability to raise local revenue for their schools,” DiBiase added.

Based on this analysis, RIPEC offers the following recommendations:

The General Assembly should pursue comprehensive reform of the funding formula. The General Assembly should establish a legislative commission and engage stakeholders and experts with the objective of enacting comprehensive reform of the funding formula. The last three years of hold harmless policies have reversed some of the modest gains toward equity delivered over the first ten years of the funding formula.

The state should provide adequate funding for multilingual learners and incorporate such funding into the funding formula. While the Assembly responded to a significant need to provide more funding for educating multilingual students by greatly increasing multilingual categorical funds, it is unclear whether this increased funding is adequate. Funding for multilingual learners should be incorporated into the funding formula to provide for greater permanence and predictability.

State policymakers should improve the method of calculating students in poverty. The new counting method adopted in the FY 2024 budget resulted in a significant undercounting of poor students overall, and wide disparities in counts among districts, as compared to the prior method. The calculation method should incorporate more means tested programs to improve accuracy.

The state should adopt a constitutional right to education. The General Assembly’s allocation of state education aid over the past three years constitutes a reversal of years of modest progress to make the state’s system of education finance more equitable. This experience serves as strong evidence that the adoption of a constitutional right to education is necessary to ensure that education funding is adequate and equitable for all students, and especially for students in the state’s poorest districts.

An executive summary is available here and interactive data sets related to the briefing are available here.

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