Wither the BEP? Tennessee Public School Funding Must Be Made More Equitable and More Sufficient

Tennessee's Basic Education Program can be viewed as a $6 billion pie that feeds the state's K-12 public schools. The state provides about two-thirds of the money in the aggregate, and localities are expected to cover the rest.

However, the way the pie gets sliced varies widely from county to county. Their respective shares depend upon their fiscal capacities as measured by a convoluted set of BEP funding formulas. The state's share ranges from a high of 91 percent in poor little Union County to a low of 39 percent in Sevier County whose prodigious tourism-driven economy more than makes up for a lack of indigenous wealth.

In 2007, then-Gov. Phil Bredesen got the state Legislature to mandate a reformulation of the BEP on a much more understandable and seemingly equitable basis. Each county's fiscal capacity was to be based solely on the combination of its property tax base and sales tax base per student. These are, after all, the two sources of revenue localities have to draw upon, and Bredesen turned to UT's Center for Business and Economic Research (CBER) to accurately measure their ability to fund their schools.

By contrast, the model then in use, as devised by the Tennessee Advisory Commission on Intergovernmental Relations (TACIR) in the early 1990s, also included per capita income (even in the absence of an income tax) and other anomalies such as a Cost Differential Factor (CDF) that boosted the state's allotment for teacher pay almost exclusively in three counties: Shelby, Davidson, and adjoining Williamson. As one anomalous result, Williamson—demonstrably the wealthiest county in the state—was getting more state funding per student than heterogeneous Knox and Hamilton counties.

To cushion any counties that might get their slices cut, Bredesen's BEP 2.0, as he called it, also called for increasing the size of the pie by raising the state's overall share of instructional costs to 75 percent from 65 percent. But he only had enough funding, derived primarily from a cigarette tax increase, to go halfway to 70 percent. Then the Great Recession hit, and BEP 2.0 has been stuck there ever since with an abominable fiscal capacity admixture that's half TACIR and half CBER, with half a loaf of CDF thrown in for bad measure.

It would now cost about $150 million to get the state instructional share all the way to 75 percent, which is roughly the equivalent of a six percent teacher pay raise—albeit distributed somewhat differently. But given the state's revenue weakness of late, Gov. Bill Haslam didn't even have the money to deliver on the 2 percent raise that he had proposed. Still, in looking to the years ahead and in making good on his vow to make Tennessee the fastest-growing state in the country for teacher compensation, I believe he should aim for a staged BEP 2.0 implementation rather than pay raises under the present cockamamie scheme of things.

The rub is that raising the state instructional share to 75 percent isn't the rising tide that would lift all boats the way Bredesen may have thought it would. According to the State Department of Education's calculations, 39 of Tennessee's 95 counties would actually lose money under a CBER-based BEP 2.0—except for a provision called Stability that would maintain their state funding for a year. (The department's spokesperson, Kelli Gauthier, never responded to my repeated question: Then what?) Most of these "losers" are smaller, more rural counties whereas the seven counties that would share almost $100 million of the gains are the largest metropolitan ones—Davidson, Hamilton, Knox, Madison, Montgomery, Rutherford, and Shelby.

Predictably, Haslam has been getting a lot of pushback from pretty much the same set of counties that banded together as the Tennessee Small Schools for Equity in a successful court challenge of inequitable funding that led to the enactment of the BEP in 1992. In January, he appointed a BEP Task Force chaired by Education Commissioner Kevin Huffman to address the issues. "The last significant revision of the BEP was seven years ago, and education in Tennessee has changed a lot since then," Haslam said. "It's the appropriate time to take a fresh look at the formula, identify its strengths and weaknesses, and determine whether or not changes should be made."

After attending the most recent of three meetings the task force has held over the past six months, I didn't come away with a sense that it's making much progress toward any conclusions. The representative of School System for Equity on the panel, Larry Ridings, suggests that "The more variables you can use [in a funding formula] the better." But the one on which he and the other advocates of a change from BEP 2.0 place the most emphasis is the restoration of an income component.

Yet in his presentation to the task force, CBER director Bill Fox circulated an analysis showing that, counter-intuitively, adding an income component to his model would tend to raise the fiscal capacity of poorer counties, such as Union and Granger, and lower it for more prosperous counties such as Knox. That's because their income disparities are relatively less pronounced than their disparities in property and sales tax base.

When I decided to undertake a column on the BEP, I'd hoped to be able to propose a modification that would reduce both the gains and losses on the theory that the best solution is the one that doesn't make anyone happy. But the only conclusion I have to offer is that the real source of unhappiness is a lack of political will to make Tennessee public school funding not only more equitable, but also more sufficient. The $6 billion BEP amounts to about $6,000 per pupil for the roughly 1 million public school students, and that is less than half the national average.