Oregon funding formula shortchanges schools, biennial report says

Oregon spends far too little to achieve the education system that students deserve, the Quality Education Commission reported again last week. This year’s report adds that the Legislature’s method of calculating current school spending compounds the problem.

The 2022 Quality Education Model estimates that Oregon needs a 2023-25 State School Fund of $11.9 billion — $2.6 billion more than the last biennium. The commission calculated that the new figure, in addition to other sources of education money, is necessary to provide a high-quality K-12 education for all Oregon students.

The governor appoints commissioners to provide education policy guidance, including creating the model. They identify research-based best practices and estimate the cost to implement them statewide.

Since the first model in 1999, the closest the Legislature has come to the spending target was a 19.7% gap in 2019-21. The gap widened in 2021-23, and the model is projecting it will widen again next year. 

“The amount we are shorting our students will grow again unless we change how we are funding schools,” said Lori Sattenspiel, OSBA interim deputy executive director. 

For the coming legislative session, OSBA and other education advocates will be sharing concerns with legislators and state agency officials about how the current service level is calculated. The CSL, the starting point for the State School Fund discussion, is the estimated amount of money it takes to maintain school districts’ staff and programs. School business officials contend the state’s CSL formula artificially lowers that starting point, which compounds the damage over the years as each new State School Fund comes in lower than it should be. 

This year’s Quality Education Model report largely agrees, calling the state’s methodology in recent years “flawed.” The report identifies four major ways the state underestimates the cost of maintaining current services. 

The Department of Administrative Services starts its calculations from the assumption that the State School Fund appropriations are split 50/50 over the two years. In fact, the Oregon Department of Education splits the allocations 49/51 to account for inflation in the second year. By using the 50/50 assumption, DAS starts its calculations from a lower floor than actual school budgets. 

DAS also uses cost assumptions for health care, Public Employees Retirement System payments and personnel that don’t match actual expenses, according to the report.

The Oregon Association of School Business Officials creates a current service level estimate from the actual expenses of a sampling of Oregon’s school districts. For 2021-23, the OASBO estimate was $9.6 billion. The DAS estimate was $9 billion, a $2.5 million reduction from the previous biennium. 

“In the commission’s analysis, the current calculation methodology understates the true cost of delivering the same level of services in the next biennium,” said John Rexford, commission chair and a retired High Desert Education Service District superintendent. 

The report calls on the Legislature to return to a collaborative budgeting process abandoned in 2014 that includes school district representatives. 

The report lauds the 2019 Student Success Act for helping to close the overall funding gap as well as its focus on best practices and equity. It warns against the Legislature using that money to backfill the State School Fund.  

“We’re thrilled that those resources are becoming available, but the reality is it still does not get us to the kind of resource level we believe is necessary,” Rexford said. 

The report also said it is time for the Legislature to invest in updating how the model is calculated to better capture regional needs and changes in the education world. Rexford encouraged school board members to advocate with the Legislature because they have the best knowledge about the local education environment. 

“We have a pretty good understanding of what we need to do to help kids be successful and change the arcs of their lives,” Rexford said. “I’m just hopeful that in my lifetime we can step up and provide resources for the K-12 system so we can deliver on that promise.”

- Jake Arnold, OSBA
jarnold@OSBA.org