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School funding in Pennsylvania

Many Pennsylvania school districts face a financial crisis
that will only get worse unless action is taken.

Two key problems:

Inadequacy —  A University of Pennsylvania study in 2014 found Pennsylvania schools need an additional $3.55 billion to fully meet state adequacy standards. Yet school districts have been losing financial ground as their expenses — especially those they can't control like pension contributions, and special education and charter school costs — rise faster than their revenues.

Inequity — Pennsylvania schools have been cited as the most inequitable in the nation. Total per-pupil spending rates range from about $12,000 up to more than $37,000, according to 2016-2017 expenditure data. (If facilities and construction costs are stripped out, the gap narrows a bit, from $10,800 up to $29,200.)

In 2016, the state Department of Education implemented a Fair Funding Formula to steer money to the districts that need it most. But less than 10 percent ($539 million) of the $6.1 billion in state basic education funding is put through the formula. The rest is allocated through an older formula because of the hold-harmless provision, which guarantees that each school district continues to receive whatever its highest level of funding was between 1991 and 2014 — even if its enrollment has declined and even at the expense of growing and struggling districts.

Why is school funding important? 

The quality of local schools is one of the most important factors for potential buyers. Consider these articles and reports:

What are millennials looking for when searching for a home? (PARJustListed, January 28, 2019): "A safe neighborhood is most important, followed by a good school district and a short commute."

Schools influence the majority of buyers (PARJustListed, July 31, 2018): "Seventy-three percent of recent buyers said that schools were a top factor in their home search."

Home near a good school? Its value increases by 77 percent (PARJustListed, August 12, 2016): "In zip codes with a good school, homes have seen an average return on investment of 32 percent, or $74,176"

Real Estate Markets Thrive When PA Schools Work (Council for a Strong America, February 2018): "How equitable school funding can boost student performance and home values"

More broadly, well-performing schools are an indicator of the health of a community and a clue as to its future.

School Funding Overview

Property taxes are the main source of funding for most school districts in the commonwealth. The average school district draws revenue in the following proportions (according to 2016-2017 revenue data):

  • 57% — Local sources, predominately property taxes but also earned income taxes, local service taxes, facility rental income and other revenue streams
  • 34% — State sources, predominately Basic Education Funding from the Department of Education
  • 6% — Other revenues, such as bond issues, sales of assets, and insurance recoveries
  • 3% — Federal sources, such as block grants

This reliance on local property taxes can leave many districts vulnerable.

  • Low tax base: While economically depressed communities often tax themselves at higher percentages of income than wealthier communities, their low property tax base means they can’t generate enough local revenue. In these districts, K-12 students attend schools that can barely provide basic classroom resources, and have lower math and reading proficiency scores. As the Council for a Strong America report put it, "Poorer school districts often struggle to fund their schools adequately — no matter how high they raise taxes — because of depressed property values."
  • Act 1 Index: The local property tax rate (millage) can only be raised a few percentage points each year under a law called the Taxpayer Relief Act of 2006, better known as the Act 1 index. The state sets a base index (a limit), then makes adjustments for poorer districts, allowing them to raise taxes slightly higher above the base. 

The Fair Funding Formula — The beginning of a solution

The Fair Funding Formula, implemented in 2016, was state lawmakers' attempt to address the inequity of school funding that left residents in poorer districts spending a higher percentage of their income on school taxes — and sending their children to under-resourced schools — compared to residents in wealthier districts. 

The formula starts with a district's average enrollment over three years ("Average Daily Membership"), then makes adjustments for poverty levels, non-English speakers, charter schools, geographic sparsity, and the local capacity to generate revenue. The result is a weighted and adjusted student count that determines a school district's share of state funding.

Hold-Harmless provision: Protecting some districts, harming others

Why is only a small percentage of state funding put through the fair formula?

State education officials realized that if the Fair Funding Formula were fully implemented, many districts would lose a significant amount of funding. They decided to include a provision called "hold-harmless," wherein districts were guaranteed never to receive less funding than they did in the "base year" of 2014-2015. That's why only funds added after 2016 are allocated through the new Fair Funding Formula. 

In fact, those base-year values were carried over from a previous hold-harmless provision dating back to 1991, which guaranteed districts never received less than they did in the previous year. Consequently, some districts saw their enrollment numbers decline over the course of decades, but their funding never decreased.

On the flip side of that equation, many school districts are losing out because of hold-harmless — seeing increases in enrollment and/or other factors incorporated into the weighted and adjusted student count, without a commensurate funding increase.

In Delaware County, 12 of the 15 districts are receiving less money due to the hold-harmless provision. Upper Darby School District, for example, would receive a whopping $16.2 million over its current state allocation of $38.6 million if hold-harmless were abandoned and all state funding went through the Fair Funding Formula.

In Chester County, 7 of the 12 districts are receiving less money due to hold-harmless. 

In Montgomery County, 18 of the 22 districts are receiving less money due to hold-harmless.

In Bucks County, 6 of the 13 districts are receiving less money due to hold-harmless.

What if all $6.1 billion was put through the fair funding formula today?

The map below, from the state House Appropriations Committee, shows how districts are being affected by the "hold harmless" provision. 

Blue school districts are receiving more than 150% of their "fair" allocations, so they would lose money if "hold harmless" were abandoned and the Fair Funding Formula was fully implemented.

Red school districts — including many in the Philadelphia suburbs are currently receiving less than 80% of their "fair" allocations, so they would benefit substantially if the Fair Funding Formula was fully implemented. 

Gray districts would be less impacted than either the red or blue districts. 


William Penn lawsuit could upend the status quo

In 2014, William Penn School District in Delaware County joined with other districts, associations and parents to file William Penn School District et al. v. Pennsylvania Department of Education et al. They argue that the state is failing in its constitutional duty to provide adequate public education and is discriminating against students based on geography.

If all of the $6.1 billion was put through the Fair Funding Formula, William Penn would receive an additional $2.92 million dollars, about $530 more for each of its roughly 5,500 students, according to a 2018 report by the House Appropriations Committee.  The lawsuit, which was dismissed but then reinstated on appeal, is expected to go to trial in 2020, and it could result in major changes in state education funding.


School Funding graphics:











More resources:

PA’s Fair Funding Formula Explained (PDF) (2018) — State Rep. Joe Markosek (D-25), Minority Chairman, House Appropriations Committee

Basic Education Funding Commission Final Report (PDF) (2015) — The report that led to the implementation of the Fair Funding Formula

Pennsylvania Coalition for Children and Youth — Nonprofit child-advocacy group 

How Pennsylvania Divides School Funding Per Pupil (2016) — The interactive map from WHYY shows the inequity in state funding to school districts: 

"Across the Line" — A 2015 documentary created by Lower Merion students to examine the funding disparity between affluent suburban schools and adjacent embattled Philadelphia schools.


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