Is North Dakota's K-12 funding formula fair to both growing and shrinking school districts?
WEST FARGO — Imagine if your school district grew so fast it had to build a new building every year to handle growth, but it essentially wouldn’t see funding for the students taught in the new building until the following year.
That’s the situation West Fargo Public Schools has faced for the last six years. The district that enrolled 10,799 students this past fall has gained 2,338 children since the 2013-14 school year, averaging growth of almost 400 students per year, North Dakota Department of Public Instruction figures show.
But because of a law passed by the 2013 Legislature, school districts have been funded using a formula based on the previous year’s enrollment.
For example, West Fargo opened Willow Park Elementary School in August because of the increase in students. Funding for those students won’t be seen until next school year.
“That means we are not really able to spend $10,000 per kid,” said Mark Lemer, West Fargo Public Schools business manager.
On the other end of the spectrum, smaller districts with declining numbers can receive the per-student funding amount they got in 2012-13, or they can go by the formula if it provides more money. This option exists because of a so-called "hold harmless" clause in the formula meant to help shrinking districts.
For example, Sawyer School District in north-central North Dakota has lost 80 students since the 2013-14 school year, the most of any district in the state, and reported an enrollment of 39 children in 2018-19.
Sawyer’s total formula funding would be $599,982 for the 2019-20 school year. But because the district goes by the 2012-13 baseline, its state and local payouts for next school year total $1.7 million, including $1.3 million in state aid.
But that baseline is set to lapse in the 2021-22 school year if legislators don’t adjust it, said North Border Public Schools Superintendent Paul Stremick, who oversees schools in Walhalla and Pembina.
“Basically, that safety net that’s been there for small schools that have been declining (will) eventually disappear,” he said.
Some advocates, including Gov. Doug Burgum and DPI Superintendent Kirsten Baesler, pushed the Legislature to give schools on-time per-student payments based on current enrollment. However, lawmakers this year ultimately decided to switch to 50% on-time payments beginning in 2020-21 and increase those payments 10% each year until they reach 100%. The Legislature also plans to study the per-student formula.
Legislators cited a high price tag in their reasoning for not immediately switching to 100% on-time funding. Also, legislators may have been hesitant to change the formula if a district is in danger of consolidating or closing because of the change, Baesler said.
For schools in West Fargo, Williston, Bismarck and Watford City, which have grown by hundreds of students in some years, the current formula can leave funding gaps for administrators.
“A school district can absorb 15 students, 30 students even,” Baesler said. “When you start talking about absorbing 2,300 students over a six-year period, that’s an incredible amount of money to ask a school district to carry.”
How the formula works
The idea is to pay schools based on the students who were educated rather than pay for “phantom students,” Baesler said.
A lawsuit from counties with low property values, Baesler said, claimed the state was not paying districts enough. With the state covering a larger share of school funding, the state needed to devise a new formula to pay districts, she said.
“It was a need to become better at forecasting and budgeting for the number of students,” she said. “It’s easier to budget for something and make sure that you are paying only for what you are paying for if you are a year behind.”
The state uses a formula to determine the average daily enrollment of each district, she said. Other factors are weighted to adjust the number to come up with the amount of weighted student units, which is then multiplied by the amount allocated for each student — $9,839 for next school year.
Based on this formula, West Fargo is expected to get $120.4 million next school year. That money includes $98.1 million in state aid, plus local property taxes and other local contributions.
Fargo Public Schools has not been growing at the rate of West Fargo — the former has gained about 400 students in six years, with a 2018-19 enrollment of 11,373, according to the DPI.
Formula funds are used to pay for salaries and benefits for teachers and staff.
Stretching its money over a larger number of students, West Fargo has had to make tough decisions in the past to balance its budget, from pulling funds from reserves to deciding whether to hire more teachers or pay teachers more. It also can’t expand programs or provide items staff say they need, according to district officials.
Fears of closing
Although legislators said it would have been too expensive to switch to on-time payments right away, Lt. Gov. Brent Sanford said such a switch in the second half of the 2019-21 biennium was possible, adding it would have cost $17 million.
“What is happening now is there will be a six-year tail on this,” he said. “When you talk to the normal general public, they shake their heads and say, ‘Why would you not pay for the kids that are there?’”
Legislation passed this year creates a new baseline for schools with declining enrollments — they can’t make less than the 2017-2018 level. About 80 districts are not on the formula system, meaning they are held harmless and don’t see a drop in funding because of declining enrollment.
North Border, which consists of schools in Pembina and Walhalla, has lost 45 students in the last six years, though enrollment has been up and down. It reported 319 students this school year.
Under the formula, the district would receive $3.6 million next school year. But it's not on the per-student formula system, so it will get a total of $5.9 million, including $4.2 million in state aid.
The “hold harmless” clause has been beneficial because schools with dipping enrollment still need to pay enough teachers to educate children, Stremick said.
“At some point, we have to draw a line and say, ‘What size school is the minimum size school we need?’” he said.
Schools aren’t losing large amounts of students in North Dakota for the most part. But in the case of Sawyer, the loss of 80 students over six years means a student body decrease of 37%. Sawyer school officials did not respond to requests for comment on this story.
Sanford said the state has to come up with an efficient way to pay districts. But he noted that communities want to do everything they can to keep their schools open, especially as enrollment declines.
“There’s a component to this that’s super important: to not be closing schools all over the state,” he said. “You don’t want to have it where kids are driving 100 miles to school, so it is a balancing act.”
Lemer said the change in funding is appreciated and gives a glimmer of hope the formula will improve.
“The fact that we actually got to 50% in the second year makes me somewhat hopeful that the Legislature would move that up,” he said.