On Wednesday, the Nevada Senate passed Senate Bill 543, the much-anticipated bill that revamps and replaces Nevada’s 52-year-old education funding formula (the Nevada Plan) with the Pupil-Centered Funding Plan. The introduction of the Pupil-Centered Funding Plan was met with some controversy. Many expressed frustration with the lack of broad input throughout the process, followed by significant delays and, most importantly, the absence of new funding.
Before evaluating the merits of the new plan, it is helpful to clarify what it does (or does not do). The new plan does not appropriate additional money to Nevada’s K-12 system. And despite the guidance of several state-commissioned (and funded) studies, it does not address adequacy. And likely, it will not have any impact on Nevada’s ranking (49th) among national comparisons of K-12 systems given that many of these assessments consider per-pupil funding in their calculations.
But its chief virtue is that the bill fundamentally changes the way we do business in Nevada when it comes to our approach and method of funding education. First, it streamlines and simplifies our accounting of how much our state spends on education. It eliminates the somewhat artificial distinction between local and state funding and consolidates dozens of different education accounts into a single bucket of money from which a “base” per-pupil amount is calculated.
Second, the Pupil- Centered Funding Plan proposes a new way to allocate money from the state to school districts based on the needs of students. The Nevada Plan was created in 1967 when there were only 74,000 students in the state, most of whom were white and spoke English and less than 10 percent of whom were living in poverty. Today, we have more than 480,000 students. More than 40 percent are Latino, 17 percent are English language learners and almost 60 percent live in poverty. While the Nevada Plan differentiated funding based on the school district, the Pupil-Centered Funding Plan moves to a “weighted funding system,” whereby students with greater needs (gifted and talented, at-risk, special education, etc.) are given additional resources. This weighted funding system is better aligned to the needs of today’s Nevada student.
Third, the Pupil-Centered Funding Plan establishes guardrails to ensure that money dedicated to education goes toward its intended purpose. Currently, Nevada’s K-12 education bucket, the Distributive School Account (DSA) is funded by general fund contributions and other sources (for example, the out-of-state local school support tax, the room tax, etc.). In the past, when new revenue sources were added to our education bucket (the DSA), the state subsequently reduced the general fund contribution, leaving per pupil funding relatively flat. To illustrate, over the period of fiscal 2010 to 2019, revenues to the DSA increased from 11.7 percent to 25.5 percent, but the general fund contribution to the DSA decreased from 88.3 percent to 74.5 percent. While revenues from other sources have increased by 13.8 percent, the general fund contribution has decreased by the same amount. Overall education funding has increased only 17 percent, largely driven by enrollment growth.
Moving forward, the new funding plan would prevent future general fund contributions to the K-12 education funding bucket from being supplanted by other revenue sources. Indeed, one of the most critical pieces of the Pupil-Centered Funding Plan is the language that separates specific funding streams from general fund sources. This creates legislative floors on general fund contributions to education that are separate from other, specific funding sources.
While we believe the Pupil-Centered Funding Plan reflects an inflection point that could change the trajectory of how our leaders approach and fund education, we have two primary concerns (one more serious than the other).
The more serious concern relates to the district-level impact of the new Pupil-Centered Funding Formula and a lack of clarity around the intent of “hold harmless.” In its current form, the bill states that if a school district were to receive less money under the Pupil-Centered Funding Plan, the district would receive no less money than it did in the previous year. Despite this language, rural school districts and their senators have expressed concern that rural children are likely to become “losers” in this new system, as the current “hold harmless” provision does not account for potential enrollment growth or inflation in these districts. This means that, as rural districts potentially increase enrollment, many will have to make do with the same dollar amount as they did in the prior year — educating more students without additional funding. The argument made in support of the current language is that, even with inflation and enrollment growth, if the district would receive more money under the old formula than the new, they are still receiving a benefit and are thus “held harmless.” As we transition to this new plan, we encourage our decision-makers to clarify the intent of what it means to hold a school district “harmless.”
The second concern is more cosmetic. The proposed bill creates a new, voluntary 11-member Commission on School Funding that would “provide guidance … on the implementation of the Pupil-Centered Funding Plan, monitor the implementation of [said] plan,” and review the statewide base per- pupil funding amount and weights. Perhaps not unlike many states, our state has a history of creating numerous commissions that have little impact. While efforts have been made to restrict membership on the commission to real subject matter experts, the posturing and lobbying for these coveted positions has already begun. We would propose a smaller, truly technical advisory committee of subject matter experts (appointed by the governor and superintendent of public instruction) that sunsets no later than 10 years after implementation of the Pupil-Centered Funding Plan.
In short, the Guinn Center applauds the efforts of legislators to modernize the more than half-century old K-12 education funding mechanism to one that better aligns with the needs of current Nevada students and fundamentally changes the way we do business and approach education. Lawmakers must oversee rigorous and vigilant work to ensure proper implementation. By doing so, the Pupil-Centered Funding Plan is well-positioned to change the trajectory of Nevada’s K-12 education system.
Nancy E. Brune is the executive director of the Kenny Guinn Center for Policy Priorities. Kenneth J. Retzl is the center’s director for education policy.