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Study of WEIC plan's financial impact creates more questions

Delaware Public Media

With the state’s $350 million budget crunch putting in jeopardy approval of the Wilmington Education Improvement Commission’s plan to improve opportunities for low-income students and English-language learners, a nearly-complete study of the proposal’s fiscal impact muddies the financial waters even further.

The WEIC plan, narrowly approved last year by the State Board of Education and subsequently endorsed by the General Assembly, but without the funding needed for it to move forward, calls for moving eight buildings and up to 4,357 students in Wilmington from the Christina School District into the Red Clay Consolidated School District, and for creating a weighted funding formula to finance supplemental programs for low-income students, English-language learners and children in kindergarten through third grade with special education needs. WEIC wants the weighted funding initiative to be implemented statewide, starting with Red Clay, Christina and pilot programs in two downstate districts. Former Gov. Jack Markell put $7.5 million in his draft budget for the coming fiscal year to help launch this effort, but there is no assurance the money will remain in the budget proposal Gov. John Carney is expected to present to the General Assembly next week.

WEIC’s ad hoc Fiscal Impact Committee is now putting the finishing touches on a “follow the money” analysis requested by the General Assembly of what happens if and when those Wilmington schools and students move from Christina to Red Clay.

The latest draft is 74 pages long, and a facilities assessment that should be completed by the end of the month will likely add another 25 to 30 pages to the report, says Christopher Kelly, an assistant policy scientist at the University of Delaware’s Institute for Public Administration, which is providing support services for the commission.

The completed report should be delivered to the full commission later this month and then forwarded to the General Assembly in early April, WEIC chair Tony Allen says.

“We’re not making any recommendations. We’re not spinning in any way. We’re a fact finding committee and we’re reporting what we found,” says Joseph A. Pika, the UD professor emeritus and former State Board of Education president who is chairing the Fiscal Impact Committee.

The numbers of the greatest interest to state lawmakers are easy to explain. An estimated $1,855,135 in federal funds would move, dollar for dollar, with the students from Christina to Red Clay. State funding would move in virtually the same fashion, with Christina losing $19,900,507 from the state and Red Clay gaining $19,917,932. That small difference – $17,425 – is the result of fractional changes in calculations within the state’s unit count funding system, Kelly says.

When the focus shifts to local funds – the tax dollars the districts collect and how the districts spend that money – the picture becomes more confusing, and potentially more contentious.  

That’s because the legislation that has gotten WEIC this far in the process gives both Red Clay and Christina the power to pull the plug on the redistricting if either doesn’t like the way the arrangements are being carried out. But the numbers the committee has come up with show that Red Clay’s cost of educating Wilmington students who are now in the Christina district would exceed the additional revenue Red Clay would receive from federal grants, state support and local property taxes. Red Clay residents, district officials and lawmakers all said last year that they feared that redistricting could have a negative financial impact on the district.

The expectation all along has been that the state would be asked to pick up the tab for these expenses, so that no district would be harmed financially by a realignment, Pika says, noting carefully that this decision will be up to the General Assembly, not the commission.

“The commission’s assumption is that nobody would be a winner or a loser. That would be unfair,” says Jill Floore, Red Clay’s chief financial officer.

On the taxes and expenses front, lots of questions accompany the proposed move of real estate in Wilmington with an assessed value of $1,089,729,413 from Christina to Red Clay.

According to Kelly, the fiscal impact study assumes that Christina students who would move into Red Clay would receive the same level of educational services as are currently provided to Wilmington residents enrolled in Red Clay schools. Two years ago, following heated negotiations with the state Department of Education, Red Clay began assigning additional teachers and other staff members, using a combination of state and local funds, to its schools in Wilmington that had been designated “priority schools” because of subpar performance on the state’s standardized tests, Floore says.

The fiscal impact study found that providing these services for as many as 4,357 additional students would cost Red Clay as much as $10.6 million more than the additional revenue it would receive from property taxes on the Christina portion of Wilmington that would move into Red Clay.

The actual figure would likely be lower, Pika and Kelly say, because Wilmington residents who now attend Christina middle and high schools in the suburbs would have the option of remaining in their current schools, thus driving down the additional cost to Red Clay. Also, Floore notes, about 1,800 of those identified Christina students are currently enrolled in charter schools or in other districts through the state’s choice program.

On the other hand, as Christina loses students to Red Clay, the district would show a net revenue increase of $2.38 million, and possibly more, because the cost of educating these students would be greater than its loss of property tax revenue.

The additional cost related to the day-to-day education of current Christina students is not the only additional expense Red Clay could incur, the committee found.

There are also a number of transition costs that carry a “to-be-determined” price tag. For example, Red Clay would have to acquire textbooks and instructional materials that presumably would be consistent with what is in use in the district’s other schools.

It would also have to make changes in the technology equipment used in current Christina buildings. That’s because the most recent referendum approved by Red Clay residents provided funding to provide Chromebook laptops for students in third grade and up, Floore says. The assumption is that the laptops would be provided to Christina students entering the district, and former Christina schools would need new wiring to support use of the laptops. Also, all of Red Clay’s classrooms have their own telephone lines, but some of Christina’s buildings do not, Pika says.

In addition, Red Clay has uniform security standards for entrances to its schools and the Christina schools would require modifications to match the Red Clay standards.

Two other reasons for the “to be determined” note on the price tag are that the still-unfinished facilities assessment will identify what upgrades are required to bring the eight buildings up to current operating standards and that, until it sees the report and has a better handle on how many students it will actually be receiving, Red Clay will not know how many of the buildings it will keep in use and what grade levels they might serve.

While those uncertainties might run up Red Clay’s tab during a transition, there’s a potential cost that could tap into Christina’ s coffers. The issue here is how many of the Christina teachers affected by the shift would be hired by Red Clay, and whether there would be openings for the others at other schools in Christina. Depending on students’ grade levels and any new programs Red Clay might establish, it’s possible that some Christina teachers wouldn’t find jobs in Red Clay, Pika says.

The number of displaced teachers, if any, is likely to be low, but it is too early to make an estimate, he says.

Taken together, the realignment proposed by WEIC creates three layers of potential funding issues for the state: the $7.5 million or so proposed in new funding for programs for low-income, English-language learners and special education students; possible support to Red Clay to cover what could be as much as $10.6 million, but likely significantly less, in new operational costs not covered by property tax revenues; and still undetermined sums for textbooks, technology and building improvements.

The sum, right now, is a big question mark – another reason for lawmakers to hesitate on moving the WEIC plan ahead.

“It’s a very tough budget year, with or without WEIC,” Floore says.

And there’s still more detail that concerns WEIC, the two districts and, ultimately, the General Assembly.

For example, Delaware has something called a “match tax,” a small piece of school property taxes that districts can increase without going to a referendum when the state requires districts to raise money of their own to pay for services mandated by the state, like math and reading specialists and minor capital improvements. In the Christina-Red Clay redistricting, Red Clay, with a larger tax base, would take in more money than the current cap on this tax allows, even if it kept the same tax rate. A change in state law would be needed to fix that.

Then there’s the question of tax rates. Christina residents now pay at a rate of $2.38 per $100 of assessed valuation, while the Red Clay rate is $2.174. Pika says that lawyers have told the committee that people who are forced into another school district cannot be required to pay at a tax rate they didn’t have an opportunity to vote on. But, he adds, he doesn’t think Wilmington residents forced from Christina into Red Clay would complain about not having had the chance to vote on what amounts to an 8.6 percent tax cut.

The committee, Pika says, has also gotten conflicting legal advice on who is responsible for paying the debt service on bonds issued to pay for construction projects on Christina schools that would move to Red Clay. Does the responsibility stay with Christina, which authorized the debt, or with Red Clay, which would take over control of the buildings? State law doesn’t address the issue directly.

In the same context, there was some discussion about a “differential tax rate” with former Christina residents paying the Red Clay rate for all school tax components except for debt service, for which they would pay the Christina rate. Again, Pika says, state law doesn’t address the issue.

The deeper the committee digs, the more complex the seemingly lesser issues become.

And, ironically, the more the committee works on the details, the less likely the state’s budget shortfall makes implementation of the WEIC proposal appear.

Pika remains philosophical about the outcome.

“In the short run, we might not accomplish very much, but ultimately I think it will prove beneficial,” he says.

“The Wilmington education problem isn’t going way. It’s not getting better,” says.

And, whether it’s this year, next year or some later date, he says, “we have looked at the elements, and we’ve determined how you assemble a portrait of the financial dimensions of the problem.”

Larry Nagengast, a contributor to Delaware First Media since 2011, has been writing and editing news stories in Delaware for more than five decades.
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