School finance decisions of public school districts originate at the state level.  State revenues are distributed to local school districts based on the “foundation formula funding.”  Currently, budget shortfalls in Missouri and Illinois threaten the amount of funding school districts receive.  Illinois, facing a $13 million budget shortfall has not (as of May 30, 2010) yet announced budget cuts, but some amount is expected to be cut from education funding.

In Missouri, several major school finance issues loom for districts in the next three years.  State revenue shortfalls make it unlikely that schools will receive the full amount as dictated by the foundation formula.  In February of 2010, Gov. Jay Nixon announced a 2% mid-year reduction in the amounts school districts were to receive.  Future revisions to school funding are likely, as Gov. Nixon is expected to constrain state spending in response to the shortfall.

Foundation Formula Funding

According to Quality Counts 2010, Education Week’s 14th annual report card on American Public Education, Missouri spent 3.7 percent of state taxable resources on public education in state fiscal year 2007, ranking 31st out of the 50 states.1 With the decline in state revenue, the Consensus Revenue Estimate for fiscal year 2011 is $7.22 billion for fiscal year 2011.2 At the same rate of 3.7 percent, spending on Missouri public education in FY2011 would be 9.4 percent less than the 2007 budget allocation.  MO HB 2002 provides at least $3.004 billion for the foundation formula in 2010-2011.

Funding levels in the state of Missouri are currently less that the amounts dictated by the foundation formula.  Several civil court cases have been filed to press the state to fund public school in accordance with the full amounts, but there has been no judgment in favor of full funding.  The budget shortfall may cause MO DESE to relinquish some of its accreditation power.  A clause in states “that in fiscal years 2011 to 2013 the Department of Elementary and Secondary Education cannot penalize a school district on its Missouri School Improvement Program accreditation review for failing to achieve resource standards if the school funding formula or transportation categorical is underfunded as specified and the district cannot be penalized in the following fiscal year if the Governor withholds funds.”

Charter Schools & the St. Louis Public School District

A growing number of Charter Schools have developed in the St. Louis metropolitan area as a means of offering choice to the residents, of offering specialized curricula, and also as a means of addressing the urban core’s issues of poverty and socioeconomic strife.  From a financial standpoint however, charter schools have diverted revenues away from the struggling school district.

Charter schools in 2010-11 enrolled 9,507 students, a number that is expected to increase to 10, 458 in 2011-12.  As the funding formula is based on average daily attendance (ADA), the St. Louis Public School (SLPS) lose millions of dollars when students leave SLPS to enroll in charter schools.  The Missouri Department of Elementary and Secondary Education (DESE) in February decided that SLPS owes a St. Louis Charter School funds from prior years.³ If DESE’s decision holds in the forthcoming legal proceedings, other charters are ready to file for similar settlements.  The SLPS may owe a projected $20 million if the state judicial system upholds DESE’s analysis.

¹Education Week, January 14, 2010, p. 48. 
²Ron Levy, Director, Missouri Department of Social Services, at Missouri Budget Forum 2010 State Budget: Impact and Response, February 5, 2010, St. Louis, Missouri
³David Hunn, “City charter school is owed $1.5 million”, St. Louis Post-Dispatch, February 19, 2010, p. A1.

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