What is “hold harmless?”

In 1990 the state of Pennsylvania adopted a funding mechanism to ensure that no school district would receive less funding than it had the previous year. The mechanism, known as “hold harmless” was intended to prevent school districts with declining populations from falling into economic collapse. However, over the intervening thirty years since hold harmless was enacted, school districts like Greencastle with increasing populations have effectively received less of an increase than those with shrinking populations because hold harmless mandates that all school districts receive a portion of their basic education state funding based on their 1991 student census.

How are schools funded?

School districts in Pennsylvania, by design, raise a significant portion of their revenue from the local district itself. The governing concept is that local districts elect their own school board members, establish their own educational policies, negotiate their own contracts and vote on their own budgets. Corresponding to these powers, the locally elected officials are also empowered to levy their own taxes from the same community which the school district serves. In Greencastle the local portion is primarily funded through property taxes, although earned income taxes and other local revenue streams also play a part. Greencastle funds approximately 65% of its annual expenses through local taxes, the remaining 45% comes from state and federal funding.

Will the state ever adopt a fairer formula for school funding?

Actually, it already did. In 2014 the governor established the Basic Education Funding Commission which was charged with hammering out a new formula to distribute state education funding more fairly. The Commission’s formula was presented to the public in 2015 and became law in 2016. The new formula accomplished what the hold harmless formula no longer could, in that it began by using annually adjusted enrollment figures. However, the complicated new formula also makes broad allowances for other factors which may impact each district’s budgets. Adjustments are made for the number of students who are not native English speakers, the district’s concentration of poverty, rural dispersion of the district’s population, etc. The result for Greencastle is that the new formula makes no appreciable difference over the old formula in the amount of state education dollars to which the district is entitled. Of the basic education dollars which Greencastle receives from the state each year the new formula accounts for about 10% with the hold harmless formula making up the remaining 90%.

Districts also receive funding from the state for special education and other programs which are not part of their basic education allotment. For example, in the current budget year Greencastle received $7,032,013 from the state in basic education funding (using a combination of the two formulas) and $2,541,761 in other state and federal funding which is unrelated to either hold harmless or the new formula. In total 64% of the total money which the district receives from the state government comes through the basic education funding formulas and 36% is unrelated to either formula.

Would Greencastle receive more if state money were channeled through the new formula rather than hold harmless?

No, not as the new formula is currently written. If all basic education funding from the state were channeled through the new formula Greencastle would see a 3% reduction in the current year’s allocation that would have amounted to a $207,222 reduction in money received from the state. When most people in Greencastle say they want to end hold harmless they generally don’t realize that the result would be to receive basic education dollars run through the new formula, which is even less favorable for Greencastle at the current time. Most people are unaware that there is a new formula.

Can the new formula ever be changed?

Yes. The advantage of the new formula over hold harmless is that is can be changed. First, the formula accounts for annual changes in enrollment. Although Greencastle saw a significant increase in enrollment from 1990 – 2008, enrollment has increased only 4% since that time so the modest growth has not been a significant benefit as concerns the new formula. However, were Greencastle to see another rapid increase in enrollment, the new formula would automatically give the district a commensurate bump in funding.

Another advantage of the new formula is that it is reviewed every five years and adjusted. The review process can recommend adjusting the variables by giving more or less weight to each variable. For example, greater weight is given based on the number of students living below the poverty line. The weight given to that variable could be decreased, which would result in a district with few poor students, like Greencastle, receiving more basic education dollars. Of course, that also means that poorer districts would receive less.

The formula is scheduled to be reviewed this year; however, as a result of the COVID issue the review is likely to be pushed into next year. Even though we are disadvantaged by the new formula more than hold-harmless, the new formula offers greater promise for Greencastle because it can be changed every five years whereas hold-harmless will never change.

Why is it so difficult to fix this funding problem when it is so obviously inequitable?

The answer is simple math. Of the state’s 500 school districts, 67% currently benefit under hold harmless whereas only 33% are harmed by it and 64% benefit under the new formula whereas only 36% are harmed by it. A minority of school districts lose under either one formula or the other and an even smaller minority, like Greencastle, lose under both formulas. State education dollars are like a pie, for one district to receive a larger slice other districts accept smaller ones. Elected state officials are sent by their local communities to represent the interests of their districts in Harrisburg, what official will ever vote to give his district a smaller slice of the school funding pie?

Do elected officials from districts which benefit from hold harmless agree that it is unfair?

Yes. Lawmakers and executive branch officials know about hold harmless and are aware that is hurts some school districts.

Will elected officials from districts which benefit from hold harmless help to fix the inequity?

No. Consider this example. Grove City school district benefits from hold harmless. Do the residents of Grove City (which neither of us represent) think that it is a good idea for their schools to receive less money so that Greencastle can get more? Do people living in Grove City want their state representative or state senator to go to Harrisburg and vote for their schools to get less money? If you are not sure about the answer, go to Grove City and ask around.

Can’t we just put more money into the system to help the minority of school districts which are harmed?

The state has put over $500 million additional dollars into basic education funding over the last five years. It is estimated that we would have to put over $1 billion into the system to “equalize” the inequity caused by hold harmless. There is neither the money nor the will to do that to help a minority of school districts. Since the law prohibits the state from being arbitrary when funding, Pennsylvania would face a legal challenge if it singled out some of the districts impacted by hold harmless for additional funding but not others.

What are you doing to fix this problem?

Paul
My own children attend Greencastle and I was aware of and concerned about the inequity of the state funding formula when I first took office five years ago. It is among the reasons why I ran for office. As a new legislator I assumed that other officials would want to find solutions to the inequity if they were aware of the plight of districts like Greencastle. Together with Dr. Hoover, and later with Dr. Trail, and with various school board members, I arranged meetings with the Pennsylvania Secretary of Education, the chief of staff to Gov. Wolf, chairman of the House Education Committee as well as other stakeholders such as the state teachers’ union, school business officials association and similar interest groups. I discovered that all were well aware of the problem presented by both hold-harmless and the new formula; however, because of the competing interests of other school districts which benefit from either or both formulas, as mentioned above, nobody was interested in finding a workable solution.

Over the years since hold-harmless went into effect Greencastle has been represented by three different state representatives and four different state senators. Each, in his or her own way, has tried to find a solution. The lack of results is not for want of trying.

I am now working with other legislators who have districts in the same situation as that of Greencastle-Antrim and we are talking through strategies for the upcoming review of the new formula. I believe that adjusting the new formula presents our best opportunity for success at this time. Still, for the reasons explained above, that adjustment will be an uphill battle.

Judy

I first began representing Greencastle just last year. Although I am new to the specific funding issues experienced by Greencastle, I have met with school officials and I am well aware of the problems which we face. Like Paul, I am beginning to plan for the review of the new formula. In addition, I do look for opportunities for other allocations which may become available through the appropriations process. Sometimes the Senate has an advantage in allocations which the House does not. However, these opportunities are rare and can present other legal challenges, so I do not want to give false hope but I am searching for any opportunity which might benefit Greencastle should it arise.

What about the immediate budget crisis Greencastle is facing?

The inequity with Greencastle’s basic education allocation has been a problem which has been with us for 30 years and the district administration and school board knowns about it and factors it into its budget each year. We don’t like the allocation or believe that it is fair, but it is also not a surprise and the district budgets accordingly. If the formula were more favorable Greencastle would have more state dollars to include in its budget each year or it would have built up a greater reserve. However, the current crisis is caused by expenses and an anticipated decrease in local tax revenue related to COVID-19. Nobody saw the complete shutdown of schools and the economy coming, and the result has been a financial crisis at all levels of government. It is not possible solve Greencastle’s immediate financial crisis by fixing an intractable 30-year funding problem at the state level.

We have been working closely with Greencastle’s administration to seek solutions which will help in the immediate situation. Greencastle has asked for two things from us. First, its has asked us to help its effort to obtain an extension on the PlanCon funds which it would have received from the state in aid of the construction project which had been planned at the middle and high school. Without and extension, Greencastle will lose those funds. We have made available the waiver to request the extension and are supportive of it. The decision will ultimately be made by the Pennsylvania Department of Education, which is under the authority of the governor.

Greencastle has also asked that we find a way to delay, by one month, the district’s obligation to report its budget to the state. The administration believes that a one-month delay will help it to have a better grasp on the financial demands which COVID-19 may place on the district going into the fall semester. If the impact is less than feared, it may not need to take some of the more draconian measures which have been proposed. We are both working with the House and Senate Appropriations Committees to evaluate if we can bring about the delay requested in time for it to be relevant. This may require changing multiple code sections of the law. Preliminary discussions with some of the stakeholders at the state level also reveals that a delay may encounter some opposition. Despite these challenges this is the avenue which we are working to move for Greencastle.

Is there anything people in Greencastle can do to help?

All help is valuable and appreciated. We hope that this explanation reinforces that we are aware of the hold harmless issue and that we are working to find both short and long term solutions. Although We will always encourage and respond to every sincere comment and inquiry which we receive from our constituents, responding to dozens of emails explaining that Greencastle has a problem caused by hold harmless does not tell us something which we do not already know. We know this well and want to find solutions. We also work closely with the administration to identify other ways which we can help.

Greencastle-Antrim statistics for the last ten years (2008-2020)

• Total state funding increased by 31%, from $10.4 million to $13.6 million
• Enrollment increased by 4%, from 2,956 to 3,085
• Total state funding per student increased by 25%, from $3,522 to $4,416
• Total expenditures of the district increased by 33%, from $30.6 million to $40.6 million
• Total expenditures per student increased by 27%, from $10,374 to $13,168
• Ordinary rate of inflation over the same period was 18.1%

*Full financial data from before 2008 was not available when we drafted the above; however, total enrollment in the district increased by 40% from 1991 to 2020. Based on the information above, nearly all the increase in the district’s enrollment occurred in the decades prior to 2008.