Loans won’t fix rural schools (copy) (copy)

South Carolina's education funding system has become less stable and less equitable over the past 25 years, as the state has drifted away from distributing money based on school districts' needs and what it costs to educate a child. File/Grace Beahm Alford/Staff

South Carolina set out four decades ago to pay for its schools more fairly by lifting its poorest communities and divvying up money based on what it actually cost to teach a child.

But that system is now adrift, pushed from its moorings by lawmakers who have piled a litany of one-off programs onto the schools and put a smaller share of state money into a program meant to balance rich and poor regions.

It has been transformed by changes to the state’s tax code, which stopped asking homeowners to pay for schools and funneled money into the wealthy counties that had the most property tax money to lose. The balance of the state’s education money became less equitable, and richer school districts weren’t even made whole.

The state didn’t put much money toward property tax relief 25 years ago, but now it makes up a quarter of the state’s education funding. For every $5 lawmakers have added to education funding since the early 1990s, $2 has chased property tax cuts — money that mostly benefits wealthier areas such as Charleston and Beaufort.

At the same time, lawmakers have put almost as much new money into special programs like reading camps and career counselors as they have for basic school operations. That money comes with strings attached, meaning that educators are increasingly required to follow the Legislature’s mandates instead of deciding how their schools should run.

And the state hasn’t met its own requirements for covering schools’ basic costs, shortchanging a funding method that both conservative and liberal education advocates agree would make the system fairer. That method isn't perfect, either: It was drawn up in 1977, and its assumptions about what it costs to run a school haven’t been updated since.

“That’s basically the Legislature assuming how school districts should operate,” said Rebecca Sibilia, chief executive of EdBuild, an advocacy group that studies state funding systems. “And when you have a funding formula that is 41 years old, all you’re doing is layering on top of assumptions that are already outdated.”

The result is a byzantine system that has made education funding unpredictable year to year, harder to understand and less fair, advocates say. And it’s one that lawmakers insist they’re eager to fix, four years after the state Supreme Court gave them a mandate to repair the state’s deep inequities in education.

Overhauling South Carolina’s patchwork funding system is expected to be a major focus for the Legislature next year. That debate is expected to drop into a larger push for better schools, spurred in part by The Post and Courier’s five-part series “Minimally Adequate.” The newspaper found profound disparities among South Carolina’s schools that have made the state’s education system one of the nation’s worst, threatening its newfound economic prosperity.

'Minimally adequate': SC’s persistent failures in education leave students unprepared

Sen. Greg Hembree told a group of school board members last week that the pressure mounting on lawmakers had brought them to the verge of unleashing change after failing to update the funding system for decades.

“If we’re not there on the funding formula, we’re very near there,” said Hembree, who is expected to become the chairman of the Senate Education Committee. “It’s not that it’s a terrible formula. It’s just not been updated and really reviewed in a very long time.”

‘Largely disequalizing’

South Carolina began carving up its property tax system in the 1990s, but its transformation wasn’t complete until 2006.

That’s when the Legislature let homeowners off the hook for the day-to-day operations of their communities’ schools and limited how much school districts could raise taxes on everyone else. They increased the sales tax to make up for the lost income, but the extra penny per dollar never covered the gap — even before the Great Recession hammered sales tax collections.

The state had been moving in that direction already: Lawmakers approved a smaller property tax cut for homeowners in the 1990s, expanded a program that gives most new manufacturers a lower tax rate and then cut rates for car owners.

The piecemeal transformation has plenty of opponents. Fast-growing school districts in bedroom communities say the changes have kneecapped their ability to raise money. Businesses say they’re expected to shoulder too much of the cost of running schools. And education advocates say the changes have funneled more money to districts that least need help from the state.

All the while, the Legislature has failed to find enough money to pay for schools’ basic costs, a pool of money that helps poor districts the most. Lawmakers this year fell $500 million short of the minimum set by state law, but they sent out more than $1 billion in property tax relief.

“The fact is that property tax relief went up, and at the same time, funding for the base student cost went down. We shifted, therefore, from something that was largely equalizing ... to something that is largely disequalizing,” said Holley Ulbrich, a retired Clemson University researcher who has studied the funding system for the state.

Every state has a system that’s meant to balance poor districts and rich ones. But no state gives its balancing system a smaller share of its education money than South Carolina does, according to Ulbrich’s analysis of federal data.

Groups on both sides of the aisle say the state should come back to that notion of equity. At least four studies of education funding in the past decade — by the state, a school board group and a conservative think tank — have called for a fairer, more streamlined distribution plan.

“The recommendations are truly not new,” said Rebecca Gunnlaugsson, an economist who studied the system for the conservative Palmetto Promise Institute. “They really do reinforce a lot of previous studies and task forces that have come and gone in the past.”

But lawmakers are now in a bind.

School taxes for homeowners have become a third rail of South Carolina politics. And while they agree on some big-picture points — like how the funding system has gotten too complicated and how more money should go to classrooms — they face a complicated stew of details to hash out. What’s more, any updates to the funding system would create winners and losers, making change politically fraught.

“How do we protect children and educators in less populated areas and areas that need assistance? At the same time, how do we help areas that are fast-growing like York County and Charleston that can’t keep up with demand?” said House Majority Leader Gary Simrill, R-Rock Hill. “All of those components must come together to make sure the child is first and the teacher teaching that child has the support necessary.”

Reform talks

Talk of an overhaul has been percolating through Columbia for at least a decade. It has been the focus of state-funded studies, legislative task forces and think-tank reports.

They have roundly found that the system is far too complicated — so complex that many lawmakers don’t understand it themselves. They have recommended that the state tie its education funding to what it actually costs to run a school in the 21st century. And they have suggested a return to the ideas that guided lawmakers in the 1970s, their ambition of a system that gave schools enough money, spread it fairly and kept funding stable.

Lawmakers have taken some of their recommendations. They have paid to expand kindergarten programs, for instance, and given schools more money to teach poor children. But new money tends to come with strings attached, meaning educators don’t have as much flexibility to design their own programs and have their own visions for the schools they run.

“There’s been some progress, but not nearly enough,” said Karen Woodward, a retired superintendent in Lexington County who led a state task force on funding a decade ago. “There’s got to be a lot of work done.”

Growing frustrations with the state’s tax code might open the door for a more ambitious change, said Ted Pitts, chief executive of the S.C. Chamber of Commerce. The business group is calling for an overhaul of a tax system it says is “broken,” and it has floated a series of reform measures that it says would put schools on “firmer footing.”

“Tax relief and education funding are two conversations that are so intertwined,” Pitts said. “I think legislators are going to want to look at them at the same time.”

That’s partly because the growth of the economy alone won’t close the gap between what state law says the government should put toward schools’ day-to-day operations and what the state actually pays. Next year is expected to be a robust year for the state budget, but education will have to fight for money against a host of other needs.

The state needs new voting machines. It needs to spend money on hurricane relief. It needs to improve its foster care system and cover the rising costs of state workers’ benefits.

Lawmakers will have an additional half-billion dollars in recurring money to work with, but they could easily spend it all without addressing the core issues in the state’s education system. And its funding program could stay adrift.

Seanna Adcox and Jennifer Berry Hawes contributed to this report.

Reach Thad Moore at 843-937-5703. Follow him on Twitter @thadmoore.