Kotek proposes changing State School Fund calculations

Gov. Tina Kotek on Wednesday released a proposal to increase the State School Fund’s current service level estimate for the 2025-27 biennium by $515 million.

The State School Fund provides the majority of funding for K-12 public schools. The current service level is the state’s estimate of the amount needed to continue existing programs.

Leaders of Oregon’s largest school districts, including Salem-Keizer Public Schools Superintendent Andrea Castañeda, have called on Kotek and state leaders to increase funding for public education, saying their systems are in crisis.

Districts across Oregon have had to lay off employees and are facing larger class sizes.

Castañeda did not have time to comment on the proposal Wednesday evening or Thursday morning, district spokesman Aaron Harada said.

The estimated increase could change before the Oregon Legislature approves the State School fund during its 2025 session. It will not impact the upcoming school year.

“Across the country, school districts are facing budget shortages caused by the expiration of federal pandemic relief dollars, declining enrollment, increasing costs due to inflation, and many other factors,” Kotek said in a news release. “We are working to be a stronger, more accurate and predictable funder of K-12 public education across Oregon.”

How Kotek plans to boost the State School Fund

Kotek is directing agencies to take three steps to increase the current service level estimate.

First, she is changing the two-year budget distribution split.

For the last decade, Oregon has budgeted State School Fund distributions to districts on a 50/50 split over a two-year period, meaning districts received 50% of the funds in year one and 50% in year two.

The proposal changes the distribution to a 49/51 split. That increases the current service level calculation for the next biennium because the level is built off the funding available in the second year, which increases when districts receive 51% in the second year, compared to 50%.

The change is estimated to increase the current service level by $217 million for the 2025-27 biennium.

Second, she is changing the way compensation cost increases are calculated.

The state currently looks back at 20 years of data to estimate compensation costs, a method that has historically been within two percentage points of being accurate.

Kotek is making a one-time change to close the gap between projected and actual compensation costs over the last 10 years, increasing the current service level. The change would not roll forward into future budget cycles.

The change is estimated to increase the current service level by $240 million for the 2025-27 biennium.

Third, she wants to change local property tax revenue estimates.

The State School Fund is a combination of state revenue and local property tax revenue.

Historically, the state has not accounted for fluctuations in local property tax revenue in the second year of the biennium, limiting its ability to accurately estimate resources available for schools.

Kotek has directed agencies to account for projected local revenue annually.

The change is estimated to increase the current service level by $55 million for the 2025-27 biennium.

"This is a gigantic leap in the right direction. I appreciate the Governor's quick action and willingness to address this critical issue so our Salem-Keizer community and other Oregon communities can work together to find common ground and understand why there is a funding crisis," said Edie Buchanan, president of ASK ESP, which represents Salem-Keizer Public Schools' classified employees.

Governor’s plan is part of larger effort to improve school funding

Pooja Bhatt, Kotek’s education initiative director, presented the governor’s proposal at a meeting Wednesday of the Legislature’s Joint Task Force on Statewide Educator Salary Schedules.

That group has been exploring new ways to pay school staff, including possibly setting statewide salary minimums. It will present a report to the Legislature by Sept. 15.

Staff costs account for around 85% of district budgets, but the state doesn’t control local contracts or have the data to estimate future local compensation decisions. And, often, the two-year budget is set before local contract negotiations are complete.

Bhatt told the committee she also is considering creating a schedule of minimum salaries to be used in calculating the State School Fund current service level. That probably won’t happen in the next biennium, she said.

“This is a great achievement but it’s really just setting us up for more hard work,” said Sen. Michael Dembrow, D-Portland, co-chair of the committee. “Half a billion dollars is not chopped liver. It’s going to be hard to find that. That’s on top of what was already expected to be the (current service level).”

Tracy Loew covers education at the Statesman Journal. Send comments, questions and tips: tloew@statesmanjournal.com or 503-399-6779. Follow her on X at @Tracy_Loew

This article originally appeared on Salem Statesman Journal: Kotek proposes changing State School Fund calculations