Oregon school funding is complicated. We try to break it down

Oregon’s two largest school districts say they’re in trouble.

In Portland, a three-week teachers strike brought learning to a halt, as school officials insisted they did not have the money to meet educators’ demands. Meanwhile Salem-Keizer schools say they are bracing for at least $70 million in budget cuts in coming months, as the district attempts to craft a new labor contract of its own.

Announcing those steps earlier this week, Salem-Keizer Superintendent Andrea Castañeda mirrored a complaint made by Portland leaders: She said the state’s system for funding schools is woefully broken.

“Oregon’s state K-12 public education funding system is archaic and inequitable,” she said in a video statement announcing cuts Wednesday.

Lawmakers bristled in early November when Portland school officials blamed threadbare state funding for the district’s labor woes. After all, they’d just passed a budget that included much of what school districts had demanded.

But now it appears the state is in for a reckoning.

The budget complaints in Portland, Salem and other parts of the state have now prompted Gov. Tina Kotek to pledge more action. Kotek announced this week that she would look at a possible overhaul of the state’s K-12 budgeting system.

“We know there are challenges. We are going to step up and have a different conversation in the coming year,” the governor said in a press conference in Salem this week.

What changes might look like remains unclear. Kotek signaled she is interested in the possibility of a minimum statewide teacher salary, a concept currently being studied by lawmakers. There are rumblings that cities could be allowed to raise more money locally for schools without taking a hit to state funding, a move that could raise concerns about creating an era of haves and have-nots. And many people agree that schools need more money to address student behavioral challenges that have grown more complex post-COVID.

Kotek’s initiative is just the latest turn in a decadeslong struggle to appropriately fund Oregon schools — a struggle she participated in over the course of a decade as the speaker of the House.

“This is not a new discussion,” said state Sen. Lew Frederick, a Portland Democrat who plays a lead role in writing the K-12 budget. “We’ve been trying to find some way to get [enough] resources for education.”

School funding conversations can be difficult because they are complicated.

Here’s an attempt to simplify it.

Who’s supposed to pay for K-12 anyway?

Public schools have long been jointly paid for by state taxes — think income taxes — and by local governments that collect property taxes. But in the 1990s, a series of anti-tax ballot measures fundamentally changed the school funding equation.

Measure 5, passed by voters in 1990, created a new limit on what proportion of local property taxes could be spent on schools. And Measure 50, passed seven years later, further limited how quickly local property taxes could increase. The upshot is that the state Legislature became the primary source of funding for schools statewide.

Prior to Measure 5, local governments paid for around 70% of their school budgets, and the state picked up the rest. These days, the state covers around two-thirds of K-12 funding, doling money out to districts largely based on how many students they enroll. That means that schools compete with all of the state’s other budget priorities — things like health care, social services, courts and housing — for a piece of the budgetary pie.

“There is a terrible dynamic of competition, of K-12 elbowing the public university system and corrections and housing,” said former state Sen. Mark Hass, D-Beaverton, a former chair of the Senate Revenue Committee. “It’s just the Oregon way. I wish it wasn’t like that.”

Schools account for a huge chunk of spending from the state’s general fund — around 28% in the latest budget. But the state has never spent what its own modeling says is the appropriate amount (more on that in a bit).

Didn’t the state just pass a new tax for schools?

Sure did. In 2019, the Legislature passed the Student Success Act, which created a new tax on business sales in order to raise around $1 billion a year for primary schools (it’s actually generating closer to $1.5 billion a year). The Student Success Act was heralded as a watershed moment for solving the state’s long-running school funding dilemma.

“There was thinking that passing the Student Success Act was going to be the solution,” said state Sen. Michael Dembrow, D-Portland, the chair of the Senate Education Committee.

Others saw the new money as merely a step in the right direction.

“There was a particular narrative that said we had turned the corner completely,” said Frederick. “We had not. We kept saying that to people.”

Even so, there’s no doubt that Oregon’s school funding picture is better off today because of the 2019 bill.

“The SSA [Student Success Act] did go a long way to right the ship from Measure 5 and 50,” said Hass, who was key in crafting the education package in Salem.

The state passed record school funding this year. Why isn’t that enough?

This is a question that sparks conflicting answers. It’s true that the $10.2 billion K-12 budget lawmakers passed is the largest in state history — and nearly identical to the amount school districts were demanding to avoid budget cuts.

Yet we’re hearing an awful lot about budget cuts.

Previewing $70 million in cuts this week, Castañeda, the superintendent of Salem-Keizer schools, said the budget lawmakers passed was fundamentally out of step with the reality of running schools filled with students whose needs have grown more acute after COVID.

“The assumptions that were part of this biennium’s funding are not really holding up in the current labor market,” Castañeda told reporters this week. “That is true for Portland. It is true for Salem-Keizer. It will be true for the 70 districts that are bargaining this year.”

Lori Sattenspiel, legislative services director for the Oregon School Boards Association, said the funding requests made by school districts could not keep pace with demands made in bargaining.

“We get our number, then all the sudden we have asks like we had [from Portland teachers],” she said.

But many in Salem point to more than $1 billion in federal funding that went out to schools to help them navigate the COVID pandemic as part of the American Rescue Plan Act. That money — known as ESSER funding — is no longer available.

Dembrow and others believe part of the pinch school districts are feeling comes from ongoing programs they set up with the one-time federal money.

“I know Portland created some really good programs using that money and they would like to continue those programs,” he said. “I think all the districts are struggling with that to some extent.”

Why can’t anyone figure out what schools will actually cost?

Because different people come at the issue armed with very different information.

As the Legislature prepares to pass a budget in odd years, budget staffers come up with a dollar figure they say will pay for “current service levels,” or CSLs — basically the amount lawmakers must plunk down in order to avoid cuts in Oregon schools.

But school districts and teachers unions also create their own projection of the amount of state funding needed to maintain the same level of education, and the two figures are almost always very far apart.

This year, for instance, Kotek proposed a budget in January that included $9.9 billion for K-12 schools, a number the governor said represented a healthy jump from the state-calculated current service level amount of $9.5 billion. The Oregon School Boards Association protested, arguing $10.3 billion would be necessary to avoid cuts.

The problem, observers say, is that the two sides consider fundamentally different things when calculating costs. School districts, teachers unions and some lawmakers believe that the state’s figure is overly simplistic, treating the state’s 197 school districts like an agency rather than the more complex patchwork that they are.

According to Sattenspiel, the Oregon School Boards Association arrives at its number by considering salary agreements, insurance rates and other nuances of school budgeting.

The challenge for lawmakers is figuring out who is actually right.

“Many of us are equally frustrated with the [state] CSL process,” Dembrow said. “But for us as legislators, we can’t just use the CSL as being whatever each district has committed to through its local bargaining.”

It hasn’t always been this way. For a time, under Gov. John Kitzhaber, different stakeholders in the K-12 arena would meet with budget officials before the budget process began to hash out an appropriate CSL number. Dembrow says Kotek should explore a similar process as she looks to rethink school funding.

Asked this week whether she had confidence in the CSL number created by state budget staffers, Kotek would only say that the process “might need to be modernized.”

“It is complicated when you have [197] school districts who compensate differently and so it’s hard to establish current service level,” she said.

Isn’t there some kind of unbiased metric that shows what K-12 schools really need?

Sort of. Brace yourself, because we’re not done getting wonky yet.

In 1999, the state Legislature created an 11-person panel called the Quality Education Commission. The commissioners are charged with continually refining what’s known as the “Oregon Quality Education Model.”

The QEM, as education insiders call it, is a mathematical model that tries to estimate how much money would sufficiently fund K-12 schools.

The model basically comes up with the ideal scenario if every classroom had a manageable class size, a librarian and a mental health specialist at each school. There are more than 400 data points the QEM considers, even drilling down into how much it costs to keep the lights on in the schools and keep them warm.

In fact, the state constitution stipulates lawmakers must fund schools in line with the QEM. But that’s never happened. A 2009 Oregon Supreme Court decision found that when lawmakers fail to meet their constitutional funding duty, they are off the hook as long as they publish a report explaining why.

There is usually a pretty significant gap between what the QEM calls for and the degree to which schools are funded.

For example, in the 2019-21 biennium, the percentage difference between what the QEM called for and what the Legislature spent was 19.7%, or a $1.7 billion difference. For the current two-year budget cycle, the 2023-25, the gap was 12.5% or $1.46 billion.

“The thing we do is give just enough,” said state Rep. Emily McIntire, R-Eagle Point. “You have an expectation of perfection, but you’re putting in a mediocre amount.”

Most believe it’s time for a QEM update. If the calculation misses some expenses, they are simply skipped and do not become part of the big picture. Right now, for example, the model considers one computer for six students to be sufficient, while most public schools in the state use one computer per student.

What’s next?

After the lengthy teachers strike in Portland Public Schools, the governor said she wants to spearhead a statewide conversation about school funding.

At a press conference in Salem, Kotek expressed gratitude that the strike was resolved but nodded to other school districts across the state in the midst of their own labor negotiations.

“I also want to send a signal to those districts to say, ‘We hear you,’” Kotek said.

The governor said she plans to create a new office within the Oregon Department of Education to make budget information easier to understand and more transparent. Kotek also said it’s time to consider whether Oregon needs a minimum statewide teacher salary. The average teacher salary in the Portland school district now is in the mid-$80,000s. The starting salary is closer to $50,000.

The governor, a Democrat, also said it was time to take a “deep dive” into how the state funds schools and review the methodology, so the Legislature has a better understanding of what the needs are.

What solutions the governor comes up with are not likely to arrive anytime soon. Kotek says she wants to have a plan ahead of 2025, when the Legislature will pass its next two-year budget.

Dembrow, who has spent his legislative career tackling education issues and will retire this year, says he’s ready to get moving.

“There are things that we really need to get started on,” he said. “They’re not going to be solved overnight.”

Editor’s note: An earlier version of this story misspelled Lori Sattenspiel’s name. OPB regrets the error.