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How Much Do We Really Spend on K-12 Education – Part 2
This series aims to give you the basics of how Alabama funds its schools. It’s up to you to read it, ask questions, and do whatever you need to do to better understand how we currently fund schools.
By the time you finish reading Part 2, you will learn a few more things about how money is spent on education in Alabama’s K-12 schools. Right now, legislators and educators are the ones making decisions about how Alabama funds our K-12 schools. If we ever want to have a voice in this discussion, we must become knowledgeable about school finance. At least knowledgeable enough to engage in the discussion.
Did you know that nearly 40% of all of Alabama’s monies were budgeted for K-12 education in FY12 (remember, that’s fiscal year 2012, which runs from October 1, 2011, to September 30, 2012)? 38.55%, to be exact. The next closest percentage was for Medicaid, at 14% of total spending for FY12. [Source: Alabama’s 2012 Tax Guide, page 380, numbers were valid on October 1, 2011, but may have had a few changes once the legislature voted on it.]
Funding dictates everything about a school district: from the number of teachers it hires, to the quality of its superintendent, to the materials it provides its students, to the extracurricular opportunities it affords its students. Without public money, there is no public education. This begs the next question:
Does Spending a Lot of Money on Education Equal a Quality Education?
To date, no reliable relationship can be plotted out between how much money a district spends on PPE and the quality of the education provided to that student. This is an excellent blog post about the relationship between school funding and the quality of an education.
What You Will Learn in This Series
In Part 1, you learned about the two different budgets, the Education Trust Fund (ETF) and the General Fund (GF) that Alabama uses to direct how money is spent. You learned that the ETF is where monies are collected and spent for K-12 education in Alabama. You learned that the fiscal year for Alabama runs from October 1 to September 30, and that FY13 refers to the fiscal year ending in 2013. You learned that receipts and expenditures from the ETF peaked in 2008 (when normalized using 2005 as the base year). And you learned what the Rainy Day Account and the Rolling Reserve Act are. You also learned about proration and what a difficult situation proration puts school systems in when it is declared.
In Part 2, you will learn about the three main sources of revenue (income) for our K-12 system in Alabama. You will see some big numbers for revenue and expenditures. You will get familiar with the State Foundation Program, the way the Alabama State Department of Education (ALSDE) divvies up state monies for Alabama’s 132 school systems. You will also learn about “local money” and how important it is for school systems to have “local money” to spend on education for their students. You will get a brief look at how federal money is allotted and what role federal money plays in a local school system’s budget.
The Three Sources of School Revenue
The three main sources of school funding are state, local and federal. These represent the three different levels of government in our country. A fourth source of revenue exists: private donations, partnerships with businesses, fundraisers. Those numbers will not be discussed here as they are not well-delineated in available school funding reports from the ALSDE and thus difficult to grasp.
Revenues and Expenditures – Generally and Specifically
Looking at revenue (monies coming into our school systems) for FY11 (the fiscal year that ran from October 1, 2010, to September 30, 2011 which is the latest full year that we have data available):
- State – Revenue from state sources, such as the Foundation Program, other state grants; totaled 48.36% of school budgets in FY11 overall.
- Local – Revenue from local sources, such as local property taxes, local sales taxes; totaled 27.92% of school budgets in FY11 overall.
- Federal – Revenue from federal sources, such as Title I, School Improvement Grants, and special education funds; totaled 15.66% of school budgets in FY11 overall.
“Other funding” totaled 8.07% of funding in FY11. We’ll talk about “other” another time. Basically, these are donations, privately-funded grants….anything received from a source “other” than state, local, or federal tax revenues and grants.
For FY11, the total amount of revenue from all sources that school systems across Alabama received is $7,896,614,662.50. With 744,696.25 students counted for FY11, that makes $10,603.81 in revenue per student.
Revenue per student is NOT the same as expenditures per student.
Looking at expenditures for students:
- State – expenditures of state monies totaled 62.23% of school budgets in FY11 overall.
- Local – expenditures of local monies totaled 16.57% of school budgets in FY11 overall.
- Federal- expenditures of federal monies totaled 21.2% of school budgets in FY11 overall.
Total expenditures for Alabama’s students totaled $6,507,020,259 for FY11. Again, with 744,696.25 students, that amounts to $8,737.82 per student. That per student amount is overall, not by system.
Revenue by School System
Each system has its own blend of state, local, and federal revenue (income). Some systems receive more state money than others because of the various factors the state uses to parcel out state monies (part of the Foundation Program, to be discussed further down the page). Some systems receive more federal money than others because of various factors the federal government uses to disburse money based on special populations (free and reduced lunch populations, children with special needs). Some systems receive more local money because their communities have chosen to pay additional taxes for use by their school system, or perhaps their local government contributes money for the local school system’s use.
Here is a spreadsheet showing how much revenue each school system received for FY11, broken down by state, local, and federal revenue received. The Excel spreadsheet has a number of worksheets which sort the data in various order, including by rank based on the source of revenue. This table is a part of the ALSDE’s annual report card. ALSDE lists county school systems on one table and city school systems on another. Pay attention to the mix of state, local, and federal monies.
State revenues range from 25% to nearly 63% of a system’s total budget. Local revenues range from 9.6% to 63% of a system’s total budget. Federal revenues range from a little more than 5% to more than 40% of a system’s total budget. This blend of the three sources of revenue are often indicative of a school system’s success with its students.
Expenditures by School System
Each system spends a different blend of state, local and federal money per pupil. Expenditures are broken down by state-dictated categories and include the following and their official definition, if indicated by quotation marks (“”):
- Instructional services – “Instructional activities dealing directly with the interaction between teachers and students. Teaching may be provided for pupils in a school classroom, in another location such as a home or hospital and in other learning situations such as those involving co-curricular activities (Co-curricular includes such activities as field trips, athletics, band and school clubs.)”
- Instructional support services – “Those services or activities providing supervision and/or technical and logistical support to facilitate and enhance instruction. Such services will include student support, instructional staff support, educational media and local school administration.”
- Operations and Maintenance – “Activities concerned with keeping the physical plant open, comfortable and safe for use and keeping the grounds, building and equipment in effective working condition and good state of repair.”
- Transportation – Expenditure related to transportation
- Food services – Expenditures related to food services
- Administrative services – “Activities concerned with establishing and administering policy for operating the school system.”
- Capital Outlay – “Activities concerned with acquiring land and buildings, land and building improvements, building additions, and construction and architecture and engineering services”
- Debt Service – “Activities involved in servicing the long term debt(s) of the school system. These include payments of principal and interest on bond and warrant obligations, payments of principal and interest on lease-purchase agreements and payments of other related debt service charges incurred such as handling charges from lending institutions.”
- Other (the ubiquitous “other”) – “Activities involving the operations of programs other than those normally considered “day school”. These include activities dealing with Adult/Continuing education programs, nonpublic school programs and services, and community services”
Don’t get caught up in worrying about memorizing any of this. Again, this is only for you to get familiar with the language of school finance.
Here’s a table of the systems ranked 1 through 20 in the state based on their per pupil expenditures (PPE). ADM refers to Average Daily Membership, or enrollment in the system. Here’s an Excel spreadsheet with all school systems’ PPE. Or you can look at the Alabama Education Report Card for 2010-2011.
| TOP 20 | ADM | PPE | RANK |
| Lowndes County | 1,859.75 | 12,868.83 | 1 |
| Homewood City | 3,557.35 | 12,007.58 | 2 |
| Mountain Brook City | 4,496.10 | 11,612.38 | 3 |
| Linden City | 493.5 | 11,351.76 | 4 |
| Sheffield City | 1,060.50 | 10,985.02 | 5 |
| Wilcox County* | 1,926.75 | 10,678.40 | 6 |
| Birmingham City | 25,795.40 | 10,593.22 | 7 |
| Hoover City* | 13,170.70 | 10,481.79 | 8 |
| Sumter County* | 2,066.15 | 10,402.73 | 9 |
| Conecuh County | 1,651.30 | 10,375.41 | 10 |
| Anniston City* | 2,319.90 | 10,269.70 | 11 |
| Greene County | 1,330.45 | 10,173.43 | 12 |
| Barbour County | 1,029.90 | 10,140.61 | 13 |
| Vestavia Hills City* | 6,285.30 | 10,138.31 | 14 |
| Decatur City | 8,544.60 | 10,085.68 | 15 |
| Athens City | 3,135.20 | 10,034.20 | 16 |
| Jasper City | 2,641.95 | 10,002.64 | 17 |
| Florence City* | 4,236.60 | 9,930.39 | 18 |
| Macon County | 2,668.80 | 9,920.78 | 19 |
| Marengo County* | 1,496.20 | 9,900.59 | 20 |
[The asterisks (*) indicate the numbers were taken from as-yet-unaudited financial statements.]
Earmarking and How It Affects How School Districts Spend Money
Typically, school districts are told exactly how to spend federal and most state monies. We refer to this as “earmarked” money. Alabama has a love affair with earmarking, presumably because of a low level of trust, though some say it is simply an unwillingness to change the way things have been done.
Whatever the reasons, the fact is that the only real control (also called discretion) that school districts have over how they spend their money is for “local money”. Local money is money that is raised in the local school district, either through property taxes or donations (although some donations are earmarked) or perhaps a sales tax (although sales taxes can be earmarked, too).
State Money – The Foundation Program
Here is a link to theState’s Guide to Allocations for FY12 (the one we’re currently in). The ALSDE uses the Foundation Program to calculate the specific amounts that it allots (gives) to school districts. It’s a bit complicated, to say the least. The Guide does a great job explaining the calculations and is worth looking at if you want to know how the calculations are performed.
The Foundation Program uses a number of factors, mostly based on ADM (enrollment). You will commonly hear the term “unit“, which for purposes of the Foundation Program means a teacher unit, which is based on the number of children in a particular grade. The divisors used to calculate units for FY12 are:
Grade Divisor
K-3 = 14.25
4-6 = 21.85
7-8 = 20.45
9-12 = 18.45
Page 10 of the State Guide has an easy-to-follow calculation of teacher units, including allowances for special education and career technical education.
The Foundation Program calculates teacher units, special education money, and career technical education money based solely on average daily membership (ADM). The ADM is the average number of students enrolled during the first 20 days after Labor Day of the preceding school year for that system. Note that the ADM figure that is used is from the prior year. For example, the ADM used for calculating Jefferson County Schools’ earned teacher units for the 2011-2012 school year was based on the 2010-2011 school year. For growing school districts, using the prior year’s ADM can negatively affect them financially. For shrinking school districts, using the prior year’s ADM ends up being a reward for shrinking. However, consideration for growth from one year to the next is given in the state’s “Other Current Expense” calculation (more later).
For principals, counselors and librarians, ADM is used as well. Here’s the page from the guide showing the parameters for earning these units. The calculation is based on whether the school is elementary, middle, high or some combination thereof:
Those calculations are then used to calculate salaries for those units the state awards money for. (Confused yet?) The state uses a minimum state salary schedule to calculate salaries that is based on the number of years the teacher has been teaching and the type of educational degree the teacher has attained. Remember this salary schedule when we talk about local money a little further down the page.
The essence of the Foundation Program is that it provides money for:
- teachers (based on units calculated by divisors by grade level),
- administrators (based on the number of students in a school),
- librarians (based on the number of students in a school),
- counselors (based on the number of students in a school),
- school nurses (based on the number of schools),
- student materials (per unit, FY12 figure was $134.78 per unit)
- technology ($0 for FY12)
- library enhancement, which means materials for libraries ($0 for FY12),
- professional development ($0 for FY12),
- common purchases ($0 for FY12),
- textbooks ($15.88 per student for FY12)
There are additional ways for school systems to earn state money, including monies for students considered at-risk and something called “Other Current Expense”, which considers the growth in a school system from one year to the next.
The State Guide is chock full of calculations if you really want to dig in to the numbers.
The Importance of Local Money, Generally
Local money allows school districts to do things like seek International Baccalaureate accreditation, add career academies, even offer enrichment activities. It allows school districts to purchase additional materials for classrooms, supplementary learning materials (like science experiment materials). It allows school districts to hire additional teachers beyond how many the state requires them to hire, which can lower class sizes in a school district. It also allows teachers to be paid for supplemental duties like being an athletic coach or a math team coach. Local money is what pays for all athletic programs, period. Many therapies for student in special education are paid with local money as well.
The Importance of Local Money for Teachers (and Thus Students)
Local money is often used to pay teachers more than what the minimum salary schedule requires. If a district chooses to pay teachers more than the minimum salary schedule, then the difference between what the local district wants to pay and what the state gives them to pay a teacher is the sole responsibility of the local district.
For example, Mountain Brook City Schools’ salary schedule shows that a teacher with a Bachelors’ degree in their first year of teaching will be paid a minimum of $36,531. The state’s amount for the same teacher is $36,144. That’s only $400 difference. But if that teacher has 27 years of experience, and has a Bachelors’ degree, Mountain Brook will pay the teacher $53,746, while the state only provides $45,997 of that amount. Mountain Brook will be responsible for the difference of $7,700 for that teacher for one year.
What if the district wants to hire more teachers than the Foundation Program awards them monies to hire? The local district provides the full cost of hiring the teacher: salary plus benefits plus classroom materials, etc.
For example, check out Hoover City Schools’ overall allotment from the Foundation Program for FY12.
In the grid at the bottom of the page, you see the columns labeled “State Earned”, “Other State”, “Federal” and “Local”. They are linked to rows labeled “Teachers”, etc. For FY12, you will see that Hoover City Schools provided 165 additional teachers over and above what was “earned” from the Foundation Program. They also provided 13.5 administrators over and above what was “earned” from the Foundation Program. This document is prepared and shared with the public during required budget hearings each year.
If you want to know how many teachers and other employees that your school district funds over and above what the Foundation Program gives them money for, find your school district’s FY12 budget. Many districts keep their budget online. Here’s a listing of all of Alabama’s school district web sites. Usually budgets are posted under Finance or Financials or Finance Department or Required Reports….something like that. If you can’t find it online, call your district’s Central Office and ask if you can have/see a copy of the budget document that was presented at the required public hearing (which would have been in July, August, maybe September of last year). Or maybe you can just ask the question: “How many local teacher units and administrators does our school district pay for this year?” and get a simple answer.
Does Having More Local Money = More Quality Education?
Local money is often the key to additional opportunities for students, but no studies have been conducted to look at the real effect of local money on the quality of a student’s education. The average percentage of revenues coming from local monies is 27.9% across Alabama.
Some districts have a high percentage of funding from local sources. In only six of Alabama’s 132 school systems did local monies make up more than 49% of a school system’s budget in FY11:
| SYSTEM NAME | STATE % | LOCAL % | FEDERAL % | OTHER % |
| Mountain Brook City | 31.65% | 62.86% | 5.38% | 0.11% |
| Vestavia Hills City* | 37.02% | 54.35% | 7.11% | 1.52% |
| Hoover City* | 37.41% | 53.61% | 8.36% | 0.63% |
| Homewood City | 24.99% | 50.55% | 6.33% | 18.14% |
| Baldwin County | 35.93% | 49.75% | 11.67% | 2.66% |
| Auburn City | 39.30% | 49.58% | 10.39% | 0.73% |
Generally speaking, each of those school systems has a reputation for providing a high-quality education to its students. Whether that has to do with the high proportion of local money available to them or whether it has to do with the district having more discretion over how local money is spent has yet to be studied.
Federal Money and Why It Matters
Federal money always comes with strings attached. It is earmarked for spending on specific projects or for specific populations. “Title” programs are the ones most folks are familiar with, including Title I (monies provided to improve education for children in poverty). Special education is funded in large part by the federal government as well, although many districts use additional local money to provide services to children with special needs as well.
The table below list the top 20 recipients of federal monies as a percent of their total budget. The state average percentage of federal monies to total revenues is 15.66%. Generally speaking, the greater dependency on federal monies means a lower amount of local monies. NOTE: Lowndes County received nearly $5 million in a school improvement grant for FY11, which may account for the large amount of federal revenue per student.
| SYSTEM NAME | 20 DAY ADM | % FED to TOTAL | RANK |
| Lowndes County | 1,859.75 | 43.90% | 1 |
| Barbour County | 1,029.90 | 29.23% | 2 |
| Wilcox County* | 1,926.75 | 28.00% | 3 |
| Anniston City* | 2,319.90 | 25.61% | 4 |
| Coosa County | 1,263.70 | 25.36% | 5 |
| Dallas County | 3,943.35 | 25.15% | 6 |
| Macon County | 2,668.80 | 24.47% | 7 |
| Pike County | 2,322.65 | 24.25% | 8 |
| Perry County | 1,794.85 | 23.39% | 9 |
| Butler County | 3,378.05 | 23.13% | 10 |
| Daleville City | 1,223.15 | 22.96% | 11 |
| Marengo County* | 1,496.20 | 22.92% | 12 |
| Lanett City | 811.2 | 22.83% | 13 |
| Tarrant City | 1,294.40 | 22.23% | 14 |
| Marshall County | 5,791.30 | 22.03% | 15 |
| Midfield City* | 1,189.30 | 21.90% | 16 |
| Bullock County | 1,576.40 | 21.63% | 17 |
| Bessemer City | 4,554.90 | 21.36% | 18 |
| Sumter County* | 2,066.15 | 21.25% | 19 |
| Sheffield City | 1,060.50 | 21.18% | 20 |
So Now You Know
Part 2 is complete. You’ve learned a few more things about school finance in Alabama. As promised, you read about the three main sources of revenue (income) for our K-12 system in Alabama. You learned about Alabama’s love affair with earmarks. You saw big numbers for revenue and expenditures. You learned the basic of the State Foundation Program. You learned about “local money” and how important it is for school systems to have “local money” to spend on education for their students. You took a very quick look at how federal money is allotted.
And you learned that no studies exist that draw a clear conclusion that more money equals a better education.
You also learned just how much—nearly 40%—of all monies spent from state sources are spent on our K-12 education system. And this does not take into account local monies, which accounted for $2.2 billion more in revenue for Alabama’s schools.
With that much money being spent, more of us need to understand the funding mechanisms in place and how priorities are set by decision-makers….and who those decision-makers are.
When you consider that Alabama’s 132 local school boards have a say in how $2.2 billion of our tax dollars are being spent, and that nearly $8 billion were actually spent on Alabama’s nearly 750,000 schoolchildren in FY11 alone, you must recognize the need for more of Alabama’s school community to enter the discussion.
Part 3 – Accountability and Reporting…and How You Can Engage!
Part 3 will delve a little more into financial reports that are available and just how you can step to the table of the school finance discussion. Budget hearings are coming soon (beginning as early as July!), and we will help you prepare your questions for your school district’s finance folks.
Proper oversight by the public is the best way to ensure accountability and efficiency in our public schools.
