Key Groups Differ on Changes Sought for Impact Aid

The two major groups representing schools on issues involving the federal impact-aid program are gearing up for a debate over potentially major changes to the $1.2 billion-a-year program when Congress reauthorizes the No Child Left Behind Act.

The National Association of Federally Impacted Schools and the National Council for Impacted Schools have considerably different proposals for how lawmakers should revamp the complicated formula for compensating districts. They also disagree on how local assessors should calculate the tax value of federal land within a school district’s borders.

Established in 1950, the impact-aid program helps make up for property-tax revenue lost to districts that enroll a high number of students whose parents are in the military or work as civilian employees on military bases, as well as American Indian students and students living in low-rent federal housing.

Also, the program compensates districts for the loss of tax revenue from some lands that have been taken off local tax rolls because they belong to the federal government, such as national parks, Indian reservations, and military bases. Districts can use the money for construction, salaries, supplies, and other expenses, unless prohibited by state law.

NAFIS, which is based in Washington and represents some of the most heavily impacted districts in the nation, is seeking to keep largely intact the program’s current system for calculating how much aid a district is eligible to receive.

Crafted during the 1994 reauthorization of the Elementary and Secondary Education Act, that formula targets more aid to the most heavily impacted districts. The No Child Left Behind Act, signed into law in January 2002 as the latest version of the ESEA, is scheduled for reauthorization this year.

The NCIS, based in Kinta, Okla., represents many districts with a smaller percentage of federally impacted students. It aims to change the formula considerably, in part so that impact aid is more evenly distributed to all eligible districts. Some school districts belong to both organizations.

The impact-aid program calculates a district’s claim through a complex formula that takes into account the number and type of federally impacted students it enrolls.

Different types of students carry different weights under the formula, depending upon how much their presence is likely to affect a school district’s bottom line. For instance, American Indian students are given the highest weight, 1.25 per student, while children who live in federal lowrent housing are given a weight of 0.10.

The formula also considers the amount of local revenue lost to schools because of a federal presence in the district. That figure, called the local contribution rate, is typically based on 50 percent of the state or national perpupil expenditure for K-12 education.

‘Poseidon’ Formula?

Since Congress doesn’t provide enough money for the impact-aid program to fully fund every district’s claim, districts must calculate their bare-bones needs under a formula known as the learning-opportunity threshold, or LOT. A district’s LOT is based on its percentage of federally impacted students compared with its total enrollment, and the percentage of a district’s claim compared with its operating budget.

Districts that have a high LOT percentage receive a larger share of additional impact aid after every district has been funded up to its percentage under the formula.

The National Council for Impacted Schools argues that the formula unfairly steers the lion’s share of federal dollars to the most heavily impacted districts at the expense of districts with a smaller percentage of impacted students. To make sure the dollars are spread out more evenly and to more accurately reflect school financing trends, the NCIS advocates lowering the local contribution rate for some districts.

When the impact-aid program was created, districts generally relied on local property taxes to cover about 50 percent of the cost of educating each student. But now, that proportion is considerably lower in most states, said Richard Knott, who was the chief financial officer of the 133,000-student San Diego school district until 2003, and is now a member of the NCIS board of directors.

For instance, in the federal 2003 fiscal year, districts nationwide covered an average of 34 percent of their expenditures using propertytax revenue. NCIS has proposed allowing districts to use the national average of property-tax reliance, or their state averages, in calculating the local contribution rate, whichever is higher.

Mr. Knott acknowledges that approach would result in less money for some districts, but he believes the available money would be spread out more evenly. He also proposes to allow districts to get an equal share of any additional money left over in the program, after each district has been fully funded up to its LOT percentage.

But John B. Forkenbrock, the executive director of NAFIS, said the proposal to lower the local contribution rate would result in heavy reductions in aid to many districts that serve large numbers of impacted students, which he said are “some of the neediest districts” in the nation. He called the NCIS proposal “the ‘Poseidon’ formula” after the capsized ship in the 1970s movie, and he said it would cause a major disruption to the program.

“It would affect so many schools in such negative ways, I’d have a revolution going on,” he said.

While districts may no longer receive 50 percent of their funding from property taxes, Mr. Forkenbrock said, the use of that proportion in the impact-aid formula was intended to compensate districts for other local revenue sources diminished by a federal presence, such as sales-tax revenue.

He also argues that lowering districts’ local contribution rate might make the impact-aid program— which has received virtually flat funding since fiscal 2004—a possible target for cuts, since lawmakers may assume that districts don’t have as great a need.

But Mr. Forkenbrock said he was open to figuring out a way to allocate a greater portion of the money remaining after each district has been funded up to its LOT percentage on a more equitable basis. He said he thinks the two organizations will be able to work out a compromise proposal on that issue.

“NCIS has a legitimate issue here.We totally agree that needs to be addressed,” Mr. Forkenbrock said.

Land Value

But other disagreements between the two groups may prove more difficult to resolve. For instance, 28 districts with especially high percentages of impacted students that meet certain tax and spending requirements are allowed to use a slightly different formula to calculate their needs, significantly boosting their share of federal funds. For instance, heavily impacted districts are allowed to use 80 percent in calculating their local contribution rate, instead of 50 percent. The higher a district’s local contribution rate, the more money they are eligible for from the federal government.

Such districts include the 9,500-student Bellevue, Neb., district, which is home to Offut Air Force Base.

The NCIS would like to get rid of that benefit, as well as provisions that steer more dollars to the smallest and largest districts. NAFIS would like to keep those provisions, but would put some caps on payments to the heavily impacted districts.

The two organizations also disagree on how assessors should calculate the value of federal land within a school district’s borders.

NAFIS has proposed keeping the process for determining how much money a district receives to compensate for lost property taxes largely similar to current law. Under that system, a local assessor determines a federal property’s value by looking at the value of the land immediately adjacent to it.

That system works well since the land closest to the federal property is most likely to be similar in character to the federal land in question, said Chester Gannett, the assistant superintendent of the 3,800-student Fallbrook Union High School District in Fallbrook, Calif., which is a member of NAFIS.

Influencing Congress

But NCIS officials say that process leaves too much leeway for error and manipulation. Mr. Knott said the system allows local assessors to “cherry pick” which adjacent properties to use in calculating their estimates, so that local school districts will be eligible for a larger share of impact- aid dollars.

Mr. Knott would like to see the language changed to require assessors to determine the value of federal lands by basing it on the average value of land in local districts.

In response, Mr. Gannett noted that the federal Department of Education audits a district’s claims, which he said prevents officials from manipulating calculations.

Federal lawmakers will have to decide which system works best. NCIS advocates in Congress are working to persuade their colleagues to make changes. Rep. Susan Davis, D-Calif., a member of the House Education and Labor Committee whose district includes parts of the San Diego school district, wrote to Rep. George Miller, D-Calif., the panel’s chairman, to outline the NCIS’s reauthorization proposals to fund schools on a “sound and equitable basis.”

Aaron K. Albright, a spokesman for Rep. Miller, said the panel is reviewing the details of the proposals with the groups and interested members.