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Arkansas Panel Recommends Changes in Finance Formula

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In response to a judge's finding that Arkansas' method of financing schools is unconstitutional, a specially appointed commission has recommended 24 measures to minimize inequalities between wealthy and poor districts.

The report of the Arkansas Commission for Public Elementary and Secondary School Finance, issued on Dec. 1, contains few radically new ideas, but instead borrows what commission members believe to be some of the best equalizing mechanisms adopted by other states in the past decade. Nonetheless, its members feel confident, they wrote in an introduction, that the proposals "can begin a new era" for public schooling in a state where many districts spend barely $1,000 per pupil, while others spend in excess of $3,000.

Kai L. Erickson, executive secretary of the Arkansas Education Association and a member of the commission, referred to the report as "timid, but a good step forward."

Most of the individual revisions would require only legislative approval and a higher appropriation for education. But the entire plan would also require three amendments to the state constitution.

'Reasonably Uniform System'

If it is adopted and approved by the courts, Mr. Erickson said, the plan "would achieve a reasonably uniform system financially. It would be very helpful in terms of upgrading and improving the system of education in the state."

The commission was authorized by the legislature in November 1981, a month after Judge Harrell Simpson of the Pulaski County Chancery Court found in Alma v. Dupree that the current system violates students' right to equal protection and to the "general, suitable, and efficient'' education guaranteed by the state constitution. The commission's 15 members, representing school boards, teachers, businesses, and civic groups, were appointed in February by Gov. Frank White.

Three school districts that could lose state support if the plan is enacted have ap-pealed Judge Simpson's decision to the Arkansas Supreme Court. Some observers predict that the legislature will not act on the commission's recommendations until the high court has decided the case, which could be as early as March.

The commission's plan will be presented to the legislature's joint interim committee on education on Dec. 16. "If they don't sponsor the legislation, it has no chance," said W. Earl Willis, the state department of education's former finance chief, who acted as the commission's coordinator.

The commission recommends four major revisions of the current system:

Development of better ways of measuring local wealth. Half of the $385 million annually in state aid to school districts (the Minimum Foundation Program, which provides general aid) is based on the relative property wealth of the districts. Commission members, however, found that property values do not accurately reflect local citizens' ability to pay for schools. Furthermore, property-valuation practices vary widely from county to county.

The state is currently undertaking an overhaul of its property-valuation practices, which, the commission's report says, may correct some of the disparities beginning in the late 1980's. In the meantime, the commission recommended that local wealth, for purposes of state aid, be measured by accounting for a number of factors, including local incomes and business receipts. This method, the commission said, would provide a more accurate picture of a district's ability to pay.

Elimination of "disequalizing" programs of state support. About half of state aid currently is based on the number of children enrolled in a district, regardless of special needs, local economic conditions, and unusually high costs. The commission recommends that these so-called "flat grants" be eliminated and that the money be put instead into a formula that allots money based on need.

Similarly, the commission has urged that the state abandon its "hold-harmless" provision, which guarantees each district at least as much state aid as it received in the previous year, regardless of need or declining enrollment. The "hold-harmless" provision has worked to the relative disadvantage of poor school districts.

Addition of a "second tier" of state aid for the poorest districts. If a minimum local property-tax levy failed to yield a certain amount of revenue per pupil, the state would make up the difference.

Increasing state aid by $110 million annually--nearly one-third more than the state is distributing this year to its 370 school districts.

Severe Budget Problems

Mr. Willis and Mr. Erickson said they considered it highly unlikely that the legislature would add the full $110 million to the state-aid budget unless specifically ordered to do so, because the state has severe budget problems and faces the prospect of a third spending cut in this year's appropriations.

One novel feature of the commission's proposal would reward districts on a sliding scale, according to their financial need, for employing teachers and counselors who hold master's degrees.

"There was no way we could put that in with any degree of equity without doing it [on a sliding scale]," said Mr. Willis. "If we put in a flat amount for master's degrees, wealthy districts would get the same amount as poor districts, which is inequitable in itself."

Another unusual item is a provision for student transfers that could increase academic competition between districts. The plan would enable any student to transfer out of his home district, free of charge, if a neighboring district offers courses not available in his home system.

Although the commission did not recommend mandatory consolidation of small school districts--and, in fact, recommended that the state maintain its current extra subsidies for such districts--its proposal does provide for new financial incentives for voluntary consolidation. The incentives, along with higher minimum standards to be developed by the state board of education, are expected to promote district mergers.

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