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IMPACT AID AND EQUALIZATION

Impact Aid was created to partially relieve the burden placed on local property taxpayers when "federally connected" children are educated in local public schools. While federal activities influence local and state economies, it must be remembered that the taxes that are increased are sales and income taxes that are not directed to support education at the local level. Since the Federal Government facilities pay no property tax, the simple justice of providing direct assistance to "impacted" school districts is obvious and is the basis of a program that has lasted twenty-six years.

In 1974, Congress amended the former prohibition in the Impact Aid law to allow states to consider P. L. 874 payments in state equalization programs. The provision for exemption from the strict prohibition was enacted because of testimony that Impact Aid would be disequalizing in states that had achieved Serrano-type equalization. Therefore, legislative history clearly shows that Congress intended that a high standard of equalization and close control be maintained to prevent detrimental loss of funds to those school districts that are providing education for federally connected children without corresponding increases in the local tax base. Un1933 a high degree of equalization is achieved, then the local property tax base remains a major determinate of the resources available for the individual student's education.

Equalization that meets the requirements of the Serrano opinion
Simply stated,

is a desirable goal and morally cannot be opposed.
the quality of a student's education should not be dependent on
the local property wealth of his community.

Therefore, equaliza

tion means that each student should have equal support for his or her education, any variation should be uniformly applied, and should be based on the student's individual needs (for example, special needs are created by a physical handicap or other identifiable characteristics). Another set of justifiable variations in student support could be based on educational program differences such as vocational, academic, and career programs. The assumption is that any programmatic variation would be uniformly applied and available to any qualified student. In recognition of the desirability of allowing local communities to establish their own priorities, the position can be amended to provide that students should have equal access to resources. The basic principle is that equal effort by the local community should provide equal benefit to the individual

student.

Regulations that carry out the intent of Section 5 (d)(2) as amended in P. L. 93-380 should be relatively brief and focused on results. The law assigned the responsibility for defining the terms "equalized expenditures" and "state aid" to the Commissioner through regulation; therefore, the regulation should begin with clear, concise definition of the two terms. Once the terms are defined the regulation-writing process should simply establish a system for overseeing the implementation of the definition and monitoring its operation. The unique problems arising from the interrelationship of three levels of government and the interests of the local taxpayers do require some basic considerations in the regulations.

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Since the intent of equalization programs is to produce
a fair, rationally explainable school support system,
the only effective method of judging a program's qual-
ity is by examining the results of its application in
comparable dollar figures.

Since school districts usually lack the resources for the
development of statistical data and analyses, results in
support per student should be shown on a district-by-
district basis in any state plan with any variations
explainable by category of student need and program and
not by irrelevant factors such as school district size
or tax structure.

Since Impact Aid is basically a vested property right
of the local property taxpayer and its loss would be
damaging to him unless there were true equalization,
school districts should be entitled to due process,
prior to any change in their financial condition.

Since a state will be utilizing an exception clause,
the state should have the burden of proof by applying
for approval.

5. Since the state governments have allowed the gross
inequities in public school finance for so many years,
the assurance of good performance in the future cannot
be accepted without yearly monitoring after implemen-
tation of qualifying equalization programs.

The Office of Education after three years has reached the final steps of the regulation development on Section 5 (d)(2) as amended in P. L. 93-380. The narrow exception intended for the few states that have achieved a high degree of equalization has been enlarged to an estimated twenty-five percent of the states. The estimate and any knowledge of immediate effect are very tentative as the regulations do not require a prior approval before a state clains coverage under the exemption and takes action.

The failure to follow Congressional intent was evident throughout the regulation-development process by the Office of Education. Specifically the regulations and the development process include the following deficiencies:

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School districts were not adequately consulted in the
process.

Arbitrary qualifying percentages were established and
then expanded in both tests to qualify more states.

Two tests were provided for qualifying state equaliza-
tion programs and then the Commissioner provided an
exception for states that could not meet the liberal
test requirements in the first two standards.

The Office of Education did not develop or publish any
data showing the effect of the proposed regulations.
(A contract to provide information was given to an
organization that had been and is actively engaged in
lobbying on the issue.)

No effective system of mandating prior application or
monitoring is provided.

The most serious flaw in the regulations as now written is that there is no protection of funds for education.

Impact Aid school districts can lose income while other school districts will not

necessarily gain. Instead the state can replace state funds with federal funds. There is no assurance that the qualifying equalization programs will meet the high standards of Serrano equalization.

Dr. FISH. We are very seriously concerned about the problem of equalization. Our groups, when we meet together, have decided true equalization is a positive good and a necessary justice in our society. The problem is that there is a long process to determine what this is and there are many opportunities for the funds to disappear in the process. Most seriously there is an opportunity here for the states to absorb impact aid funds and the funds to be lost to education. We believe that any change in equalization regulations, or providing the opportunity for equalization is significant not just for impact aid, but for establishing a model, a standard for the Federal cognizance in this area. What is done here is a precedent. Even the process that has been followed here is a precedent, and unfortunately in some espects.

First of all, we don't really consider the problem of writing regulations extremely difficult if you operate on the premise that equal means equal, and it makes it particularly difficult because of a long history of neglect in this area by the states as evidenced by many of the court decisions that have recently occurred. My own. state of California is an example.

Equal, under equalization terms means for the student in the regular program, an equal amount of resources. It is very simple. Or even an equal access to resources.

The problem that has happened here is that this has been approached from the position of people writing equalization regulations, equalization plans at the state level. That is the problem of the Office of Education. The Office of Education's problem is very simple, to come up with measuring devices, monitoring systems and a method for appeal in regard to equalization in the regulation.

We believe the standard is not that strict. We believe that the congressional intent of having a high standard with limited exceptions to that general prohibition has been exceeded.

In the words of the regulation, 25 percent of the states are considered now to qualify for equalization.

In the words of most of the people-I believe most of the people have examined the Serrano opinion used as justification for this, very, very few states reached that standard. Therefore, we consider what has happened to be in excess.

Specifically, we can point to a particular aspect of the program. For example, a "disparity" standard. The "disparity" standard would allow 25 percent variation, or disparity in expenditures after you remove the bottom five percent of the school districts. In other words, the Federal government is now saying that five percent of the students in a state would be removed from the protection of the equalization requirement. We can't even consider this.

The 25 percent in school districts now spending around $1300, $1400 as a national average, a 25 percent disparity would allow enough funds going into a single classroom to provide $9,000 or $10,000 in that classroom. That is enough for a teacher's aide, the first thing teachers want when it comes to providing additional resources for their classroom. In each classroom, it would be quite a substantial range of acceptable variation.

We have several elements which concern us about the other programs. Those will come out in the testimony that follows.

I would like to say this about the requirements for the Federal regulations in several points. Since the intent of equalization programs is to produce a fair, rational, explainable school support system, the only method of judging the quality is by qualifying the results of the application in comparable dollar figures and in terms of benefits available to the local school system to spend on education of the students.

You are going to hear a lot about millage figures, required programs at the state level. That is not the Office of Education's problem or business. The results are.

Secondly, since school districts lack the resources of the development of statistical data, analysis should be shown on a district by district basis with explanation of student need and program and not by_development factors such as school district size or tax structure.

I would like to indicate this morning in a rumor passed around the group prior to our entry here, we found that South Carolina has enacted a law discounting impact aid payments. I am wondering what monitoring occurred at the Office of Education prior to the passage of that law. What statistical support, what statistical data was made available and looked at on a district by district basis? Third, this is a very interesting one. Since impact aid is a vested property right of the local property taxpayer and its loss would be damaging to him, unless there were two equalizations school districts, should be entitled to due process prior to any change in their current financial position. As a matter of fact, we interpret the wording of Section 5(d)(2) to mandate that. However, the regulations say-paraphrasing my recollection of the quote-nothing in this section shall preclude a state from considering impact aid prior to requesting a determination.

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