STATE BOARD OF EDUCATION – ADMINISTRATIVE RULE SUMMARY

Title/OAR #: Calculation of Extended ADMw for Charter Schools; 581-023-0106

Date: 4-19-2012

Staff/Office: Michael Elliott, School Finance, ODE; Cindy Hunt, Superintendent’s Office, ODE

New Rule Amend Existing Rule Repeal Rule

Hearing Date: ______Hearings Officer Report Attached

Prompted by: State law changes Federal law changes Other

Action Requested:

First Reading/Second Reading Adoption Adoption/Consent Agenda

PROPOSED/AMENDED RULE SUMMARY:

Changes the definition of extended ADMw. Requires calculating a separate ADMw for charter schools and non-charter schools in a given district. Implements HB 3417 passed by 2011 Oregon Legislature.

BACKGROUND: Oregon K-12 Public Schools are funded through a combination of local revenues and money appropriated by the Legislature. The Oregon Department of Education (ODE) first totals all available funding for school districts and then distributes the money appropriated by the Legislature to school districts—not individual schools—through the State School Fund Formula (Formula). The Formula’s goal is to equalize funding across the state. The Formula achieves this goal by dividing the total revenue available by the number of weights in the state to get a funding per weight amount. The weights are often expressed as “ADMw” which means Average Daily Membership Weighted. Each district counts the number of ADMw it has and multiplies that by the per ADMw amount to determine how much funding it will receive under the Formula. The current average statewide per ADMw spending is $5,825.

The Legislature uses ADMw for funding rather than students for two reasons. First, the Legislature wanted to equalize funding across the state. Some students do not attend school full time and so their part time attendance needs to be taken into account. A per student formula would over fund part time programs. Secondly, some students take more resources to educate. Example of the types of students who may take additional recources are students on an Individualized Education Plan (IEP), students living in poverty, or students enrolled in a qualifying ESL program. The Legislature assigns additional ADMw for these students so that districts receive additional funds for those students under the Formula. For example, an IEP student counts as two weights in the Formula.

In addition to providing districts with additional funds for specific types of students, the Formula also attempts to stabilize funding from year to year. The Legislature provided that each school district would receive the ADMw from either the current school year or the previous school year, whichever was greater. By creating this extended ADMw, the Legislature ensured that relatively small changes in ADMw would not result in large swings in funding to a specific district. An additional benefit is that the Legislature enabled those districts facing declining enrollment to have more time to plan for the loss of revenue.

Charter schools, whether sponsored by the district or by the state, receive their funding based on a contract with the district. Under state law, a K-8 charter school must receive a minimum of 80% of the funding generated by its ADMw from the district. Charter high schools receive 95% of their ADMw funding. (State board-sponsored charter schools must receive a minimum of 90% and 95%, respectively.)

The current Formula includes a charter school’s enrollment with the rest of the schools in a district and pays the district based on the overall enrollment. This presents a problem for districts. If a district’s enrollment declines then a district loses funding. However, if a charter school’s enrollment increases then a district must provide additional funding to the charter school. A district could see a situation where it loses funding because of decreased enrollment but still must provide additional funding to charter schools. This may exacerbate funding problems for a district.

An example may better illustrate this situation. A district last year had an enrollment of 1,000 ADMw. This year, however, its enrollment declined to 900 ADMw. The district receives $6,000 per ADMw. Using extended ADMw, the district would receive $6,000,000 in total funding because last year’s ADMw was greater than this year’s ADMw. Now, this district also has a charter school with 100 ADMw enrolled last year. The district paid the charter school based on those 100 ADMw while receiving 1,000 ADMw worth of funding from the state. This year, however, the charter school increased its enrollment to 150 ADMw. The district must now pay the charter school on 150 ADMw but is still only receiving money for 1,000 ADMw based on extended ADMw. This means the district is losing an additional $300,000 worth of funding even though enrollment in public schools increased through the charter school. A lack of additional funding for these new students could be a disincentive to districts to sponsor new charter schools given the limited resources facing school districts.

The Legislature passed HB 3417 to address the problem of district losing more money even though charter school enrollment increases. HB 3417 provides that an extended ADMw number is calculated for charter schools and a separate extended ADMw number is calculated for the rest of the schools in a given district. The two numbers are then combined. To illustrate consider the example above. The extended ADMw for the charter school would be 150. The extended ADMw for the rest of the district would be 1,000. Added together they give the district an extended ADMw of 1,150 which forms the basis for payment from the Formula.

The problem is HB 3417’s language is ambiguous in certain areas. Specifically, HB 3417 does not indicate which weights should be assigned to charter schools and which weights should be provided only to the rest of the district. The proposed rule clarifies how the weights will be assigned to charter and non-charter schools. The basic premise of the proposed rule is that if a weight can be assigned to a specific student or a specific school, then the weight should be assigned to that student or school. Examples of weights that can be assigned to a specific student include students enrolled in a specific ESL program, or in a pregnant and parenting program. Weights that can be assigned to specific schools include the remote small school correction. If a weight can only be assigned to the district level, then the weight will remain with the district. Examples of these weights include students in poverty, students in foster care, students on an IEP, and additional weights for special education above the 11% cap.

ODE has presented the ideas behind the proposed rule at two state-wide conferences for School Business Officers. Additionally, School Business Officers and other school district officials have been notified that the rule is available for public comment and been encouraged to comment.

ISSUES/CONCERNS THAT SURFACED DURING RULE WORK:

The following changes to the rule have been made since the rule was last before the Board:

·  The small school correction was separated into the remote small elementary school correction and the small high school correction;

·  To comply with ORS 338.165 the weights provided for students on an IEP and students on an IEP above the 11% Cap are only calculated for the noncharter schools in a district; and

·  Charter school extended ADMw will be calculated on an individual charter school basis.

Below is a table summarizing public comments received since the first reading of this rule:

Table 1 Public Comments on OAR 581-023-0106

Commenter
Comment Topic / Sauvie Island Academy / Kings Valley Charter School / Redmond School District / Scappoose School District / Oregon School Boards Association
Require Small School Correction funds to go directly to the small school which qualifies for the correction. / 39 / 1
For calculations of the 11% cap on IEP student additional weighting that district ADMr be calculated to include both charter and non-charter schools. / 1
Supports passage of HB 2558 / 1
Clarify that Small School Correction does not pass through to qualifying small school / 1
Do not pass Small School Correction Funds directly to small school. / 1

Below each of the topics are addressed and action or inaction explained.

Passing through Small School Correction Funds to Charter Schools

Most of the comments we have received on this proposed rule center on this issue. A vast majority of those comments request that the rule be amended to require that funds be passed directly to a charter school that qualifies for the additional weighting as a remote small elementary school under ORS 327.077.

It does not appear that the State Board has the authority to pass the requested amendment. A statute directly addresses how State School Funds are to be passed to the charter school. ORS 338.155(1)(b)(C) provides “[a]ll amounts to be distributed from the State School Fund to public charter schools shall first be distributed to the school district in which the public charter school is located.” Incorporating the requested amendment would put the rule in conflict with ORS 338.155(1)(b)(C). A rule is invalid when it exceeds statutory authority. See 183.400(4).

This is not to say that charter schools that qualify for the remote small elementary school correction will not receive any part of the money. Instead, a charter school should receive a portion of the district’s State School Fund Grant based on the weights assigned to that charter school. ORS 338.155(2) provides that a district shall contractually establish provision of payments to the charter school for the educational services the charter school provides. ORS 338.155(2) specifically provides that the

payment shall equal an amount per weighted average daily membership (ADMw) of the public charter school that is at least equal to:

(a) Eighty percent of the amount of the school district’s General Purpose Grant per ADMw as calculated under ORS 327.013 for students who are enrolled in kindergarten through grade eight; and

(b) Ninety-five percent of the amount of the school district’s General Purpose Grant per ADMw as calculated under ORS 327.013 for students who are enrolled in grades 9 through 12.

The actual calculation of the payment is as follows. First, the number of ADMw at the charter school is determined. ORS 338.155(1)(b)(A)(i) states that a charter school gets all of the ADMw weights under ORS 327.013 for which it qualifies. A charter school can qualify for the following weights: number of students attending the charter school; the number of students that are on an IEP (up to 11% of the charter school’s ADMr); the number of students receiving services through an official ESL program; the number of students in poverty (based on district’s percentages); the number of students receiving services through a qualified pregnant and parenting program; and whether the charter school qualifies as a remote small elementary school. ORS 327.013(1)(c)(A). Thus, a charter school should receive money for each of its weights, including the remote small elementary school correction.

The amount of money the charter school receives is equal to either 80% (elementary school) or 95% (high school) of the district’s general purpose grant per ADMw multiplied by its ADMw.

Table 2 demonstrates how ADMw would be calculated for the charter school. Table 3 gives the funding calculation for the charter school using the ADMw. These are hypothetical examples.

Table 2. Charter School ADMw calculation

School / ADMr / ESL Students (0.5 weight) / Pregnant and Parent Students (1.0 weight) / Poverty Students (0.25 weight) / Small Elementary School Correction / ADMw
Elementary / 80.00 / 0.00 / 0.00 / 1.74 / 40.00 / 121.74
Secondary / 150.00 / 10.00 / 3.00 / 3.27 / 0.00 / 166.27

Table 3. Charter School Funding based on ADMw in Table 1

School / ADMw / General Purpose Grant/ADMw / Funding Percentage / Total Funding
Elementary / 121.74 / $ 5,978.00 / 80% / $ 582,209.38
Secondary / 166.27 / $ 5,978.00 / 95% / $ 944,263.96

As is shown, even though OAR 581-023-0106 cannot be amended to require a direct pass through of remote small school correction funds to the charter school, the charter school should still receive the bulk of those funds.

Clarifying OAR 581-023-0106 to Reflect ORS 338.155(2)

One of the comments we received indicated that OAR 581-023-0106 is not clear that it will not require a school district to pass remote small school correction funds directly to a charter school. To increase the clarity of the rule the following language is proposed to be added:

(5) Pursuant to ORS 338.155(1)(b)(C) all funds to be distributed to charter schools based on charter schools’ ADMw will first be distributed to the district where the charter school is located. The funds will then be distributed to the charter schools pursuant to ORS 338.155(2),(3) or (7).

Calculating ADMr for 11% Cap on IEP Weights

One of the comments requested the rule be modified to use total district ADMr, both non-charter and charter school ADMr, when calculating the 11% Cap on IEP student weights under ORS 327.013(1)(c)(A)(i). The proposal works by first calculating charter school ADMr and then determining 11% of that ADMr to determine the cap on charter school IEP weights. Then the district ADMr would be calculated by combining the charter school ADMr with the non-charter ADMr. That combined number would be used to calculate the 11% cap for the non-charter schools of the district.