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Changes proposed in the way South Carolina funds our public schools

Under the new Education Funding Formula, the winners and losers in the equation aren't as predictable as you'd think.

COLUMBIA, S.C. — Big changes could be coming to the way the state funds South Carolina's public schools.

South Carolina has used the same funding formula for over 40 years. That formula determines how much money our school districts get from the state.

While it seemed like a good idea many years ago, state leaders say it's now time for an overhaul.

"South Carolina has one of the oldest and most outdated formulas in the country. So it's time we make some changes," said State Representative Jerry N. Govan, Jr., of District 95 in Orangeburg County.

RELATED: Touring the oldest, newest schools in the Midlands

News 19 is taking a look at the proposed revisions and finding out how they could impact schools in your community.

The state of education in South Carolina is making headlines in 2019.

In 2020, education will remain at the forefront with significant changes being proposed in the way the state funds our public schools.

In January, Governor Henry McMaster, along with House Speaker Jay Lucas and Senate President Harvey Peeler sent a letter to Frank Rainwater, the Executive Director of the Office of Revenue and Fiscal Affairs. In it, they asked the office to create a new education funding model.

They call it "...a necessary step to ensure more equitable distribution of dollars to South Carolina's school districts." They say "The [current] primary funding formula...has become outdated and fails to provide sufficient measures of accountability in student outcomes."

State Superintendent of Education, Molly Spearman, says the current education funding formula was set up with the Education Finance Act of 1977.

She says it's based on an old economy that no longer exists.

"We do need a new funding formula in South Carolina," said Spearman. "In the 70s, every little town had a textile mill and there was revenue coming in, so each local education district had some source of revenue that they could use to build buildings or to fund their local needs in education. That's not true anymore."

Right now, South Carolina distributes $4.2 billion dollars in state funding to schools using a variety of different formulas.

We can break it down into three larger categories:

  1. Education Finance Act - the state provides 70% of the support, taking into account the wealth of a district's tax base
  2. Education Improvement Act - funding is more based on the number of teachers or students in a district
  3. Property tax relief - based on millage rates and home values among other factors

A millage rate is the tax rate used to calculate local property taxes. 

Each category has a different impact and doesn't necessarily take into account the wealth of the local tax base.

State leaders say that's the problem.

"We issue out money based on a base student cost, but the other part of that state formula is redistribution of the funds that are coming back through the property tax relief," said Govan, who is also a member of the state's Education Committee and the K-12 Subcommittee.

"That formula hasn't been able to keep up and address the disparities that exist, for example, along the I-85 versus the I-95 corridor," said Govan.

I-95 is commonly known as the "Corridor of Shame". The name describes the rural areas of South Carolina along I-95, known for inequitable school funding and poor student achievement.

"We're dealing with grave disparities based on where you live geographically in the state," said Govan. "The more metropolitan or developed areas, of course, have a greater tax base and are able to afford more."

The new education funding model* aims to level the playing field so all students get the same level of services.

It puts everything under one formula and would still distribute $4.2 billion, but on an equity basis, based on local property tax wealth. The rest is the responsibility of local communities.

Ideally, the richer the district, the less state funding needed. For those on a lower property tax base, they'll need more state support, state officials say. With the new proposed formula, the winners and losers in the equation aren't as predictable as you'd think.

Under the proposed plan, 55 school districts will get more funding and 26 would get less.*

"What is best for all students in South Carolina is not always what's best for students in my area," said Spearman about the new formula. "It may be that if I'm voting for the state, my district might lose some money. So that's a very difficult discussion and certainly a difficult vote for lawmakers to have to take."

As an example, let's take a look at how the new proposed funding formula would impact Richland County School District Two:

  • Right now, the district gets $185,006,747 in state funding
  • Under the new model, they'd get $179,016,439 or $5,990,308 less

Now, let's see how the formula would impact Richland County School District One:

  • The district's $154,298,341 would drop to $128,131,680, for a difference of $26,166,661

In Lexington County, let's take a look at how the districts with the most and least funding would be affected:

  • Lexington County School District One gets the most state funding with $174,147,062
  • Under the new model, they'd receive $165,663,745, or $8,483,317 less
  • Lexington County School District 3 gets the least amount of state funding with $14,088,111. But they, too would lose money with the way the formula works
  • They'd drop to $13,886,528 in funds, for a difference of $201,583

State Representative Jerry Govan says discussion over the new formula is a great start.

"I think we need to put everything on the table," he said. "I don't think you can have a real discussion about addressing educational disparities in this state unless you put everything, no sacred cows, but everything on the table. That includes Act 388."

Govan was one of the few who voted against Act 388. He says the legislation has not only had a negative effect by taking money off the table, but it has widened the disparities of education funding.

"Act 388 of 2006 was passed by the SC General Assembly to provide property tax relief for homeowners.  Among other things, it exempts real property with the 4% legal residence tax rate from property taxes for school operation purposes.  In substitution, the State of South Carolina provides school districts with the proceeds of a one cent statewide sales tax." (Source, County of Lexington)

This isn't the first time lawmakers have tried to adjust education funding, but Superintendent Spearman believes this time state leaders mean business.

"I think this is the most serious attempt that has been made so far," said Spearman. "So I hope we will see legislation introduced and discussions start in January."

Once state leaders iron out the details, a bill must be formed then passed through the House and Senate before it's reflected in our school system.

"If we figure out that it's important and it's a priority to South Carolina, we'll figure out the fact that a rising tide will lift all boats," said Govan.

In the RFA's report, they also presented five alternative funding formulas, but those would remove equity.

In the past, the state has set aside funding to help build or renovate schools. The most recent funding from the state was for cameras and metal detectors.

"The last time the state issued a statewide bond bill for building new schools was in the late 90s in which we issued a billion dollar bond referendum to build new schools because most of the schools were approximately 75 years old or older," said Govan.

Right now, money in the budget can go to building new facilities, but it's only for the smallest schools in the state if those districts consolidate.

Keep in mind, funding for new schools and additional pay for teachers all comes from the local level - generally in the form of bond referendums.

*In the RFA report, the new education funding model can be found on page 6. To view the estimated financial impact on local school districts, those tables begin on page 54.

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