Kotek proposes changing State School Fund calculations: Eugene/Springfield districts react

Gov. Tina Kotek on Wednesday released a proposal to increase the State School Fund’s current service level estimate for the 2025-27 biennium by $515 million.

The State School Fund provides the majority of funding for K-12 public schools. In 2023, the state budgeted $10.2 billion for Oregon schools. The current service level is the state’s estimate of the amount needed to continue existing programs.

Leaders of Oregon’s largest school districts, including Eugene School District 4J, have called on Kotek and state leaders to increase funding for public education, saying their systems are in crisis.

Districts across Oregon have had to lay off employees and are facing larger class sizes.

The estimated increase could change before the Oregon Legislature approves the State School fund during its 2025 session. It will not impact the upcoming school year.

“Across the country, school districts are facing budget shortages caused by the expiration of federal pandemic relief dollars, declining enrollment, increasing costs due to inflation, and many other factors,” Kotek said in a news release. “We are working to be a stronger, more accurate and predictable funder of K-12 public education across Oregon.”

How Kotek plans to boost the State School Fund

Kotek is directing agencies to take three steps to increase the current service level estimate.

First, she is changing the two-year budget distribution split.

For the last decade, Oregon has budgeted State School Fund distributions to districts on a 50/50 split over a two-year period, meaning districts received 50% of thefunds in year one and 50% in year two.

The proposal changes the distribution to a 49/51 split. That increases the current service level calculation for the next biennium because the level is built off the funding available in the second year, which increases when districts receive 51% in the second year, compared to 50%.

The change is estimated to increase the current service level by $217 million for the 2025-27 biennium.

Second, she is changing the way compensation cost increases are calculated.

The state currently looks back at 20 years of data to estimate compensation costs, a method that has historically been within two percentage points of being accurate.

Kotek is making a one-time change to close the gap between projected and actual compensation costs over the last 10 years, increasing the current service level. The change would not roll forward into future budget cycles.

The change is estimated to increase the current service level by $240 million for the 2025-27 biennium.

Third, she wants to change local property tax revenue estimates.

The State School Fund is a combination of state revenue and local property tax revenue.

Historically, the state has not accounted for fluctuations in local property tax revenue in the second year of the biennium, limiting its ability to accurately estimate resources available for schools.

Kotek has directed agencies to account for projected local revenue annually.

The change is estimated to increase the current service level by $55 million for the 2025-27 biennium.

Eugene School District 4J: "A more realistic approach"

Eugene School District 4J Interim Superintendent Colt Gill said the district would receive an additional $14.1 million over the biennium if the proposal goes through the legislature. These funds would go directly into the district's general fund.

Since the COVID-19 pandemic, Gill said schools' funding needs have increased in three major ways:

• costs of goods and services, such as materials, electric and gas fueling for HVAC systems and gas for school buses.

• student support services, as students have needed additional interventions to address learning loss as well as mental and behavioral health needs. Many schools have added after-school services and hired more counselors and psychiatrists.

• cost of living for school staff is increasing, so schools need to raise salaries to retain educators. 4J is in the early stages of contract negotiations with the Eugene Education Association teachers' union.

"It's a more realistic approach to keeping up with inflation and kind of ensuring that we can keep up with rising costs of goods and services," Gill told the Register-Guard.

Gill said he and others in the district are excited about the proposal. He said the funding increase would allow 4J to maintain its programs and staffing without having to make cuts in other areas.

Without funding to supplement the COVID-19 relief funding, Gill said the district would likely need to make tough decisions in its next budget. Gill said 4J's newest initiatives such as summer programs and bringing a licensed librarian into each of 4J's elementary schools could be first on the chopping block, but these would need to be longer discussions with the school board and community members.

"Our hope is really that the legislature comes through and accepts the calculation in the (2025) session, and really thinks that that is a baseline to maintain current programs," Gill said. "Frankly, I hope they take it a step further and think about what additional funds they could invest to improve programs ... Over the last several years, we've been able to offer pretty significant summer school programs for both enrichment to keep kids engaged and academic achievement, to improve that, and those have all been paid for with these federal COVID relief dollars.

"We would really love to see the legislature step up and make this as a baseline investment."

Gill said 4J is part of a coalition of the dozen largest districts in Oregon that have been advocating for more substantial funding from the state. He said, in particular, Kotek's second adjustment to the calculation will now be looking at the 10-year data rather than 20-year data much more accurately reflects funding needs.

"We're being a better steward of public dollars," Gill said. "In some biennium, it could be that the 10-year lookback based on more recent activity in the economy is actually less of an increase. So it's just a more accurate way to do it than trying to balance over 20 years, when you're looking at multiple recessions or what have you over that time."

Springfield Public Schools: Growing need for funding

Springfield Public Schools, which serves over 9,000 students, stated it was thankful to Kotek's efforts.

"While Springfield Public Schools utilized pandemic relief dollars for one-time investments like improved HVAC systems throughout the District, we recognize a growing need to update the funding methods for schools throughout our state," SPS stated via email.

SPS has not yet generated an estimate for how its funding would increase, but stated it will "continue to look for ways to bolster student success if additional funds are allocated."

Bethel School District: "Significant step in the right direction"

Bethel School District Superintendent Kraig Sproles appreciated Kotek's willingness to seek input from educators and said the new calculation could have a positive impact.

He stated that the proposed adjustment would mean an additional $2.2 million each year for Bethel, which serves 5,000 students, in the 2025-27 biennium.

"This increased funding would allow us to continue to provide a well-rounded education for all of our students and also continue to provide the mental and behavioral health supports that have become essential," Sproles stated via email.

He added that the COVID-19 relief funds helped Bethel maintain basic services during the pandemic and provide the extra staffing necessary to ensure that our students and staff were safe during the pandemic. Sproles said Bethel devoted the bulk of those funds to addressing interrupted learning during school closures, offering more tutoring, summer programs, family navigators, teacher training and more.

"To be clear, the proposed adjustment would not completely address Bethel’s anticipated budget shortfall, but it is a significant step in the right direction," he stated.

Governor’s plan is part of a larger effort to improve school funding

Pooja Bhatt, Kotek’s education initiative director, presented the governor’s proposal at a meeting Wednesday of the Legislature’s Joint Task Force on Statewide Educator Salary Schedules.

That group has been exploring new ways to pay school staff, including possibly setting statewide salary minimums. It will present a report to the Legislature by Sept. 15.

Staff costs account for around 85% of district budgets, but the state doesn’t control local contracts or have the data to estimate future local compensation decisions. And, often, the two-year budget is set before local contract negotiations are complete.

Bhatt told the committee she also is considering creating a schedule of minimum salaries to be used in calculating the State School Fund current service level. That probably won’t happen in the next biennium, she said.

“This is a great achievement but it’s really just setting us up for more hard work,” said Sen. Michael Dembrow, D-Portland, co-chair of the committee. “Half a billion dollars is not chopped liver. It’s going to be hard to find that. That’s on top of what was already expected to be the (current service level).”

Tracy Loew covers education at the Statesman Journal. Send comments, questions and tips: tloew@statesmanjournal.com or 503-399-6779. Follow her on X at @Tracy_Loew

Miranda Cyr reports on education for The Register-Guard. You can contact her at mcyr@registerguard.com or find her on Twitter @mirandabcyr.

This article originally appeared on Register-Guard: Eugene/Springfield districts react to Kotek's school funding proposal