There are
currently around 6500 kids attending schools in Tumwater School
District(TSD). About 375 of those students do not reside within the TSD
boundaries. TSD identifies these students as Interdistrict Transfer
students(IDT), so that is how I will refer to them in this blog. This
blog entry goes through an analysis of, in general terms, the impact
enrolling IDT kids has on the TSD budget. *Disclaimer—I realize there
are many non-financial considerations(class size, opportunity, diversity,
reciprocity with other districts, etc) for accepting IDT kids.
However, this article takes into consideration only the financial
impact. *

I tackled this project because we received multiple inquiries about the topic, and there have been some statements made by TEA and TSD that IDT students may have positive or negative impact on the budget. I conducted dozens of hours of research(including public records requests from TSD), met with TSD employees and reviewed applicable OSPI data in coming up with this information herein.

Ultimately,
I came to the conclusion that, under the current basic education funding model,
in almost all instances, **the acceptance of IDT students negatively
impacts the budget and increases the deficit between revenue and expenses.**
Further, because IDT students do not bring with them any local levy money, yet
receive the benefit of local levy money Tumwater citizens pay, t**he
share of levy money received by students residing within the TSD boundaries is
greatly diluted**. In total, from my estimation, enrolling the **375
IDT students costs TSD** **an additional $700,000 to $1.5 million
dollars**.

**REFRESHER ABOUT THE BASICS OF SCHOOL FUNDING**

To understand the impact IDT students have on the budget, a basic understanding of how school funding works is helpful. I went through a detailed discussion of how school funding works in two of my prior blogs. Is TSD in a Budget Crisis? and Can TEA and TSD agree on a Budget?. If you read those blogs, or have a good understanding of the current funding model, you can skip this section.

McCleary legislation requires the State to pay for Basic Education(BEA). The state funding model is based on per staff needed criteria, which is based on student to staff ratio. For example, the State says any given District needs one teacher for every 17 K-3 students, one teacher for every 27 4th-6th students and roughly one teacher for every 28.5 7th-12th students.

The same
type of funding model is used for principals, counselors, nurses, custodians,
etc. **The key point is that, at least for state funding
purposes, how many employees a District needs is dependent on
enrollment. **The same rationale, although the formula is a little
different, applies to Special Education(SPED) Funding. Instead of counting
the number of SPED students, the state SPED
funding model presumes 13.5% of students(same ratio across the State)
are in need of SPED funding, and doles out SPED money on a per student basis,
similar to the staffing funding described above.

Since the staffing allocation and SPED funding are done on a purely per student basis, calculating the revenue is done by determining the amount received per student and then multiplying that figure by the number of enrolled students.

*HOW MUCH
MONEY DOES TSD RECEIVE FROM THE STATE TO FUND BASIC EDUCATION*

At the end
of the day, TSD, like all other Districts, receives around $8,000 per student
from the state based upon the current funding model as a baseline amount.
*This is a rough approximation and * *I appreciate that number
may be a little high, or a little low, but it is close and any
difference is not overly important for purposes of this blog.*

Notably,
whether a student lives inside or outside of the boundaries of TSD, **TSD
receives the same allocation for BEA—roughly $8,000 per student**.
The headcount captures all kids who are attending TSD schools. So, if we
accept this premise, assuming TSD has about 6500 students, TSD is getting
roughly $52 million($8,000 X 6500) from the State to fund basic education.
If TSD had 6800 students, TSD would get roughly $54.4 million.

*LOCAL LEVY
MONEY IS WHOLLY UNRELATED TO ENROLLMENT. *

Local levy money is acquired through voter approved property tax collection based upon a percentage of tax assessed value of real property located within the TSD boundaries. TSD residents have routinely approved school levies. Under the new funding model, the State capped the amount local school districts could collect at 1.5% of tax assessed value.

So, in
simple terms, TSD collects 1.5% of the tax assessed value of every piece of
real property located within the TSD boundaries. The revenue received by
TSD on this front is somewhat variable, depending on assessed values, but is
somewhere around $8 million. **This revenue is wholly unrelated to, and
is not affected by, enrollment. **TSD gets the same amount of money
whether it has 700 students or 7000 students. Levy money does not follow
students, and there is no provision to allow for any compensation from one
district to another when a student is not attending school within his or her
assigned boundaries.

*OTHER
INCOME*

For the most part, and with some exceptions, the balance of revenue received by TSD is either pass through, pretty close to revenue neutral or relatively small so no real impact on the district vs. out of district analysis. The aggregate amount of these categories is probably about $2.5 million or so. I did find about $500,000 of revenue received by the District that is not pass through, and is not tied to any specific expense or program. TSD receives the same in these categories regardless of enrollment so I would add this amount to the local levy category when looking at in district vs. out of district funding.

*SUMMARY OF
FUNDING*

TSD
receives **about $8,000 per student** attending TSD schools.
In addition, TSD also receives whatever is collected from taxpayers
within TSD boundaries, currently around **$8 million per year**. For
the analysis within this blog, the balance of other income is not overly
important.

**WHAT IMPACT DO IDT STUDENTS HAVE ON THE TSD BUDGET**

At last
count,** TSD had 375 students who do not live within the TSD boundaries** and
were attending TSD schools, which equates to about 6% of all TSD
students.

*IDT
STUDENTS DILUTE THE LOCAL LEVY MONEY. *

We can
tackle the easy part first. **No extra local levy money is received with
the IDT students. ** Tumwater has about $8 million to spread
amongst all of its students, regardless of how many students attend TSD
schools. With 6500 students that is about $1230 per student.

However,
if TSD did not have any IDT students, the $8 million would be spread amongst
6125 students, which equates to about $1306 per student. Not a
huge sum on an individual basis. However, because of the IDT students,
each TSD resident student is denied the benefit of the extra $76 that is
coming from local levy money. $76 multiplied by the
6125 resident students equates to $465,500. **In simple terms, were
TSD inclined to deny all IDT requests, it would be able to spread around
$465,500 across the resident students**, instead of spending it on IDT
students.

*IF TSD IS
GETTING $11,000 PER IDT STUDENT, DOESN’T ADDING MORE OF THEM HELP THE
BUDGET. *

In most
instances,, the answer is a resounding “no.” This is primarily due
to the fact that the **BEA funding TSD receives is woefully insufficient
to fund TSD’s staffing expenses. ** As noted above, TSD receives about
$8,000 per student, including IDT students. You would think more revenue
is good, but in this instance the opposite is true. Adding more IDT
students actually increases the deficit. In simple terms, it costs
more than $8,000 per year to educate each student, so, at least from a
financial perspective, TSD would be better off without the student and the
$8,000 that comes with him or her.

More students requires more teachers, principals, counselors, nurses, para professionals, etc which creates an even larger gap between the revenue TSD receives and the salaries it needs to pay to TSD staff. Maybe TSD factors this in as TSD reported that it denied 95 applications for IDT students in 2018/19 school year.

I will use
teachers salaries for illustrative purposes as they comprise about 60% of
the TSD workforce. **However, as noted earlier, the deficit
between what the state funds and what TSD pays is not unique to teachers, and
is present pretty much across the board with TSD employees**(See
staffing analysis chart below).

TSD employs roughly 291 teachers, who are charged with educating the 6500 enrolled students. That is roughly 22.3 students per teacher. On average, the state funding TSD receives to pay teachers is about $16,000 per teacher short of what TSD actually pays the average teacher. If TSD did not have the 375 IDT students, it would, presumably, employ about 16 fewer teachers(375/22.3), thus narrowing the deficit in funding by at least $256,000. The same logic applies to principals. TSD has 18 principals, which is about 1 principal per 361 students. If TSD had 375 fewer students, at least according to the current funding model, it should be able to get by with 1 less principal. TSD currently pays it principals about $118,000 per year, while the state funds principals at $96,000 per year. Reduction of students to a point where we need one less principal actually saves TSD $22,000 it would otherwise “lose”($118,000-$96,000) in having more students.

As the chart above shows, TSD employs more staff than that which is allocated for by the State, and pays its staff more than the State allocates on a per employee basis. This results in TSD operating at a “loss.”

Assume TSD
educating students equates to a business building widgets. Currently, the
cost to build those widgets(educate students) is greater than the revenue TSD
is provided(BEA funding from the State) to build the widgets.
So, because TSD is building each widget at a loss, selling more
widgets(bringing in more students) will only increase the deficit at which TSD
operates. **TSD adding students is just widening the deficit when comparing
its revenue and expenses. **

I appreciate TSD is not a business, and should not be run like one. However, TSD is required to operate within its means. At present, the expenses associated with adding students exceeds the revenue TSD receives when adding those students, thus adding students is not a productive solution.

**Just to be
clear, I am making no judgment in this blog as to whether TSD has too many/few
employees and whether those employees are over/under compensated. **I am merely pointing out that, under the current funding model,
TSD adding students impacts the budget in a negative manner—with one
exception(see below a few paragraphs for Strategically placed IDT
students).

*ADDING
IDT STUDENTS IS EVEN MORE PROBLEMATIC WHEN DOING SO PUTS CLASSROOMS AT
IMPACT LEVELS*

The contract reached between TSD and TEA also provides that additional resources will be devoted to classrooms that are above impact(specific enrollment levels). Impact level for K-1 is 22 students, which increases to 27 students in grades 5-12. This is a very common provision in education related labor agreements. The concept is logical as the parties acknowledge effectively educating students with larger than acceptable class sizes requires more resources. This also provides some incentive for TSD to maintain smaller class sizes—which I think everyone would agree is a primary goal.

The additional resources are generally in one of two forms, (1)extra compensation for those teachers who have classrooms above impact levels or additional para professional time provided to those classes above impact level. As an example, an elementary school teacher can opt to receive either $22 per day per student above impact or 2.5 extra hours of paraprofessional time to help.

In any event, the additional resources come at a cost to TSD as TSD must pay paraprofessionals or teachers additional compensation with no additional revenue stream. Obviously, expending additional resources as a result of accepting IDT students negatively impacts the budget as there are expenses, but no additional revenue.

*STRATEGICALLY
PLACED IDT KIDS CAN ACTUALLY HELP THE BUDGET*

I can envision a situation where strategically accepting IDT kids could positively impact the budget. As noted above, TSD receives about $11,000 in funding for each IDT student. If TSD can educate that IDT student without significantly adding to its expenses, accepting the student may have a positive impact on the budget.

Lets assume Peter G has a 5th grade class with 24 students and the impact level is 27 students. Putting 3 more IDT kids in that class adds $33,000 to the budget, with very little staffing cost. There are obviously other expenses associated with any student but it is safe to assume that these 3 IDT students will not create $24,000 of non-staffing expenses. However, a big problem arises when another 5th grader moves into the Peter G boundaries. This student, who must be enrolled, puts the class at impact, thus triggering the additional resources noted above.

This happens everyday in many industries. Think about it as if you were an airline carrier. Maybe there are 100 seats on a flight, and the airline has sold 95 of those seats to paying customers. The flight is going to depart with the 95 passengers whether the final 5 seats are sold or not. However, the airline would like to find 5 more passengers willing to pay for one of the unoccupied seats as the costs to conduct the flight will be almost the same whether the plane is carrying 95 or 100 passengers.

If the airline sells the last 5 seats, it gets extra revenue at very minimal additional costs(maybe the price of a soda and a bag of peanuts) as the flight was going to occur whether completely full or not, and adding the new passenger really is no additional expense. However, if the airline sells an extra 10 seats, it has to bump 5 previously booked passengers(probably at an additional cost–maybe an extra free flight) or maybe the airline needs to schedule another flight, at great cost, to fulfill its obligation to get 105 passengers to the destination.

One could
argue that, from a purely budgetary facet, TSD should only accept IDT students
where classrooms are well below impact. In order to do this, TSD would
have to wait until it had a pretty good idea how many students are in each
classroom. **At the elementary school level, 26 of 128 classrooms
are at impact**. I have yet to obtain the data for the secondary
schools.

CONCLUSION

Setting aside policy considerations, and non-economic reasons to accept IDT students, there can be no dispute that doing so comes at a significant financial cost to TSD, in addition to diluting the resources available to the students residing within TSD boundaries.

The BEA
funds allocated to TSD by the State are insufficient to cover the actual costs
associated with educating students attending TSD schools, with **TSD likely
experiencing a loss in providing basic education to IDT students in the
neighborhood of at least $500,000**. Increasing the number of
students increases that deficit.

Moreover,
the approximately 6125 students who reside within TSD boundaries are
seeing about $465,000(6% of the $8 million collected from TSD taxpayers)
being spent on IDT students, when **that same $465,000 would be available** **to
spend on TSD resident students** if TSD did not have any IDT
students.

**Accordingly,
I estimate the negative financial impact of TSD accepting 375 IDT students to
be about $965,000, **and certainly between $700,000
to $1,500,000 range.

COMMENTARY

As someone who is very involved with TSD schools, I have witnessed many instances where IDT kids and families have made very positive contributions to the Tumwater community. For various reasons, TSD is a desired location for students throughout the local community.

That being said, the primary focus of TSD should be to educate students residing within TSD boundaries. There is no dispute that the manner and quantum in which TSD currently enrolls IDT students negatively impacts the budget.

I would think, at the very least, TSD should only accept IDT students where the impact on TSD, and the students who live within the boundaries, is positive in the grand scheme of things, appreciating the financial component is but one factor.

*We
are always looking for feedback, suggested topics or guest articles. Feel
free to email me at **scottkee@citizensfortumwaterschools.com*