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Issues: Education Funding

The individual and public benefits of education are indisputable and understood to be critical to the future of our State.  This importance is clearly reflected in the Missouri state budget where education is one of the top priorities comprising 44% of the general revenue budget. State appropriations are critical to funding our schools providing about 42% of cost of colleges in Missouri and approximately 45% of the cost of elementary and secondary education.

Elementary and Secondary Education Funding

State funding for elementary education is divided into two very general categories. The largest amount of state funding, about $3 billion is in the so called state formula funding. This is one big pool of money that is distributed to the various school districts with the only restriction being that at least 75% must go to teacher salaries. A formula is used to try and distribute the funds to provide more assistance to poorer school districts. The other category of general revenue funding from the state takes the form of program specific appropriations like: early childhood special education, transportation, vocational education and the career ladder (professional development) for teachers.  These two categories are viewed differently since they constitute program specific appropriations were often started as enhancements to basic education as compared to the formula funding which goes to funding basic classroom teacher salaries and educational supplies for K-12 education.

The following table shows the formula and categorical funding for elementary education for the current and two preceding years.

                             History of Appropriations to Elementary Education
Funding Category FY 2009 FY2010 FY2011 FY’12
Equity Formula $2,956,219,738 $3,004,388,410 $3,004,388,410  N/C
Formula Totals $2,956,219,738 $3,004,388,410 $3,004,388,410
Transportation $167,797,713 $183,603,843 $152,797,713* -$ 50
Early Childhood Special Ed $98,811,209 $123,564,281 $135,210,376 + $ 9.5
Special Ed (cut $0 $0 $0
Remedial reading $0 $0 $0
Gifted $0 $0 $0
Vocational Schools $52,880,428 $52,930,428 $50,069,028
Career Ladder $37,467,000 $37,467,000 $37,467,000
Parents as Teachers $36,304,651 $30,874,186 $13,000,000
Virtual Schools (new in ’08) $6,200,000 $4,800,000 $390,000
Categorical Totals $399,461,001 $433,239,738 $388,934,117


Budget Actions in Elementary and Secondary Education

In response to the funding cuts enacted from 2002 to 2004, the State Legislature implemented a major revision of the state’s funding formula for elementary education in 2006.  This revision promised a six year implementation with significant increases in state aid each year. As state revenues declined from the great recession in 2008, the Legislative commitment of substantial increases in the state’s funding formula disappeared. While they have worked to protect elementary education relative to other budget areas, the increase for 2010 was only 1.6% and for the current year there was no increase in the foundation formula. Additionally, in the current FY2011 year there was a significant cut (from $30 to $13 million ) in funding for the Parents as Teachers program and a $35 million withholding of transportation funds by the Governor (originally $70 million but $35 million was released as the revenue picture improved).


FY 2012 Budget Proposal for Elementary and Secondary Education

The Legislature is currently considering the appropriations for the next fiscal year which begins July 1. The Governor has recommended some reshuffling of the funding sources for FY2011 but no cuts in the states foundation funding. The $70 million withholding in transportation funds has been partially offset in the FY2012 budget with a modest $7.5 million dollar increase but this is a reduction when compared to FY2011 because part of the $70 million withholding was restored but the increase was added to the lower base. In effect, there was a $35 million cut last year and then an additional $20 million for the coming year. In Early Childhood Special Education there was a small increase bringing the proposed  budget to $144 million.

In our opinion, the Governor’s recommended reductions will not do significant harm to the basic elementary education system in Missouri. The transportation reductions will squeeze the local school budget but should not results in significant disruptions. Some of the prior year reductions for special programs have been significant and disruptive to those individual programs but it will depend on the groups involve in these programs to build support to replace those lost funds in future years when more revenue is available.


Higher Education Funding

Funding for higher education in the state budget of Missouri has three distinct elements:  The basic appropriation directly for the operating costs of our four-year universities which is the largest piece, assistance to the two-year community colleges around the state and student assistance programs providing scholarships and grants directly to the students to help pay tuition costs.

For the four-year institutions in Missouri, state funding together with student paid tuition cover the ongoing costs of teacher salaries and the operating costs of the facilities. When considering the “cost” of a college education, the extent to which a university receives a higher portion of its costs from state appropriations usually means the students will pay lower tuition.  Funding for community colleges is also supported by the property taxes of the community college district, but the overall relationship between state appropriations and tuition is similar.

The final component of the cost of college that state appropriations may affect is the amount of certain scholarships. There are numerous scholarships and loans that help support eligible students. There are about five scholarship programs that are funded from state appropriations. When state appropriations to these programs are reduced, either the number of scholarships awarded is reduced or the amount awarded to each student is reduced.

The following table shows the total state funding for higher education in Missouri for the current and two preceding years.

History of Higher Education Funding  
Category   /   Year FY2009 FY2010 FY2011 FY 2012
4-Years Colleges $807,901,766 $807,901,766 $765,832,004 $712 m (-7%)
2-Years Schools $148,377,417 $148,377,417 $140,661,608 $139.8m (-7%)
Linn St Technical $5,236,620 $5,236,620 $4,964,309 $4.6m (-7%)
Total $961,515,803 $961,515,803 $911,457,921 $856,712,000
Bright Flight $16,359,000 $16,359,000 $12,359,000 $14.3 (+$2m)
Access MO $91,458,137 $90,827,307 $62,827,307* $64.8 (+$2m)
A+ $25,336,524 $25,336,524 $22,413,326 $30 (+$*m)
Others $575,000 $553,750 $553,750 n/c
Total $133,728,661 $133,076,581 $97,153,383



Budget Actions to Higher Education

Higher Education and Scholarships

Given the important role higher education plays in our State’s future, the Governor and the Legislature have tried to minimize cuts in higher education and the state’s scholarship programs. In FY2010, core operating funding for colleges and universities was held constant while in FY 2011 it was reduced by 5.2%.  During this period, colleges and universities agreed not to raise tuition.  This agreement was partly in recognition that, given the state’s fiscal crisis, cuts could have been deeper and also a desire to keep higher education affordable during the poor economic times.

Scholarship funding also suffered substantial reductions in the current year but a semiautonomous group called the Missouri Higher Education Loan Authority committed $30 million to partially offset the reductions. In total there were $56 million in cuts to the scholarship programs but after the outside assistance, the impact was about $27 million in scholarship reductions in the current year.


FY 2012 Budget Proposals for Higher Ed

Based upon revenue and expenditure projections in January 2011, the Governor faced a $700 million shortfall in the FY2012 budget. To address this shortfall, the Governor recommended an across the board 7% reduction in operating funds for higher education but was able to recommend some small increases in the scholarship programs. The last column of the table above shows the recommended appropriated amounts after the proposed reductions.

With more than a $ 50million reduction in their operating budgets, Colleges in Missouri will be forced to take action. While it is certain many schools will increase tuition, it possible some of the reductions will be offset through internal cost cutting. The student assistance portion of the state’s budget took a major reduction last year and to a small degree, the modest increases proposed for the coming year try to help some of the students offset the tuition increases that are almost certain to come.

In our opinion, education funding represents an investment in our children’s future and the state’s economic future.  When budget cuts are necessary, it is difficult to know which approach that will cause the least harm to our students’ educations. If universities can continue to find ways to absorb cuts without affecting classroom instruction, the impact on the student will be minimal. However, reductions to the scholarship programs are directly impact students’ ability to attend college.  The proposed FY 2012 reductions are focused on the schools operating budgets and provide the most options to minimize the impact on student education. It might have been better to look for ways to increase state revenues and help prevent the need to make the cuts. Please see our papers on Fiscal Impediments for a more complete discussion of state revenue issues.