At Last: A More Equitable BEP


After years of waffling on the issue, Gov Phil Bredesen has recommended fundamental changes in the state's formula for funding public schools. The formula, known as the BEP, has been riddled with inequities that have disadvantaged some county school systems, with Knox County high on that list.

Under Bredesen's planned BEP revisions, which are getting a good reception from state legislators, Knox County would get an additional $10.1 million in state funding in the fiscal year ahead as a stepping stone toward a $26.6 million increase as the plan is fully implemented over two or more years, depending on the pace of subsequent state revenue growth. These totals include $3.3 million in additional funding for â“at-riskâ” students that the governor had previously recommended as well as teacher salary increases that probably would have been forthcoming in any event. So it's hard to pinpoint how much of the extra money would be derived from revisions to the BEP per se.

Bredesen gave Sen. Jamie Woodson, chairman of the Senate Education Committee, much of the credit for getting him on board for fundamental BEP revampment. When he recommended $120 million in additional statewide funding for at risk students in his state-of-the-state address, Bredesen went on to say that â“While there have been calls for a radical overhaul of the BEP, I don't think this is wise.â” After that address, he related last week, â“Sen. Jamie Woodson came to me with concerns about putting more money into a flawed BEPâ I agreed to take a fresh, more fundamental look at itâ and it turned out to be much simpler [to change] than I had thought it would.â”

The other impetus for making revisions at this time is that state revenue growth is proving even stronger than projected when Bredesen formulated his original budget for the fiscal year ahead. â“We've got significant new revenues coming in in excess of $150 million,â” he said, and much of it will go toward covering the $139 million statewide price tag that he placed on the recommended BEP revisions for the year ahead (out of an eventual total of $331 million). â“Unless you put significant new money in, this doesn't work because you would have some big losers and nobody wants to be taking away large amounts of moneyâ When you have a rising tide, everybody's a winner.â” (But some counties including Knox are much bigger beneficiaries than others.)

The biggest infusion of new money will result from raising the state's share of instructional costs to 75 percent from 65 percent presently. The statewide cost of this increase is $223 million, of which Knox County would receive a little less than $16 million. Under Bredesen's phased approach, the state share would only go to 70 percent in the school year ahead, but Woodson has a different phase-in plan that would yield Knox County schools an extra $2 million by raising the state share to 71 percent this coming year.

Partly offsetting this increase is recommended elimination from the BEP of what's known as the Cost Differential Factor (CDF) that puts a multiplier on salaries in counties where prevailing wages exceed the state average under a dubious set of measurements. Three counties (Davidson, Shelby and Williamson) get the lion's share of about $100 million in CDF payments, and these would be cut in half next year for starters. â“Whatever rationale it once had has long since disappeared, and we should just get rid of it,â” Bredesen said last week.

The most fundamental change proposed is in the method for calculating each county's fiscal capacity as a basis for determining its respective share of state BEP funding. The higher a county's fiscal capacity, the larger the proportion of total BEP funding it must bear with local revenues.

The present convoluted formula for calculating fiscal capacity involves plugging several factors into what's known as an â“ordinary least squares multiple linear regressionâ” model. And, as Bredesen put it, â“The formula is a monster, and nobody outside a very narrow group has the faintest idea how the numbers are arrived at.â”

For the sake of understandability as well as equitability, Bredesen has recommended a vastly simplified way of calculating fiscal capacity for which he and his staff deserve high plaudits. The formula is based on the two measures that are truly indicative of a county's ability to pay for its schools: the county's property tax base and its sales tax base. The sum of these tax bases is then multiplied by the number of students in a school system that's then divided into the statewide total of same to get what's called its fiscal capacity index, which represents the percentage of the statewide local portion of total BEP funding each system must bear.

Under the new formula, Knox County's fiscal capacity index would decline, and that's part of the reason why the $26.6 million that Knox County eventually stands to gain (by Bredesen's calculations) exceeds that of any other county in the state except for Shelby.

Implementation of the Bredesen plan depends not only upon legislative approval of the BEP revisions and their funding but also the 40-cent-per-pack increase in the state's cigarette tax that the governor has dedicated to increased funding for at-risk students and other education enhancements. To judge by the bipartisan support the plan is getting, though, Tennessee would appear to be well on its way to much needed improvements in its public school funding.

â" Joe Sullivan


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