House Bill 1369: MAEP Funding Formula Changes

March 1, 2023March 30, 2023 Bill Tracker

Latest Action

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The conference committee for HB 1369 failed to file a conference report by the March 27 deadline. The bill is now dead.

Explanation of Changes to MAEP

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As amended by the Senate, HB 1369 would make three critical changes to the MAEP formula. The first change increases the local contribution cap from 27% of the base student cost to 29.5%. The other two changes affect all districts and reduce the impact of the inflation rate applied to the base student cost in years when the full base is not recalculated. These changes would ultimately reduce the cost to fully fund MAEP, though they would impact districts in different ways.

Inflation Adjustments

A key component of MAEP is the “base student cost” (BSC), which is the minimum amount required to provide each student with an adequate education. In years in which the entire BSC is not re-calculated from scratch based on the process in law for doing so, the BSC is adjusted for inflation by multiplying the annual inflation rate (as determined by the State Economist) by 40% of the BSC, and then adding this figure to the BSC:

((Annual Inflation Rate) X .4(Old BSC)) + Old BSC = New BSC

Under HB 1369, there would be two changes to how inflation is considered when calculating the BSC. First, the 40% multiplier would be reduced to 25%, meaning that only one-quarter of BSC would be subject to the inflation rate adjustment. Second, a 20-year average of the inflation rate would be used instead of the annual inflation rate. The impact of this change would be different every year (depending on the annual rate of inflation), but in the short term—due to sky-high inflation this year—this would result in using a much lower rate (the 20-year average is 2.5%) than the current rate of inflation (8%).

To compare these changes, let’s examine how the “fully funded” FY23 BSC of $6,532.20 would be adjusted for inflation in FY24 under the current formula, and under the HB 1369 formula–without the inclusion of last year’s teacher pay line item dollars: 

Current Formula	HB 1369
((.08) X .4($6,532.20)) + $6,532.20= $209.03 + $6,532.20=	((.025) X .25($6,532.20)) + $6,532.20= $40.83 + $6,532.20=
FY24 BSC: $6,741.23	FY24 BSC: $6,573.03

As shown above, going from FY23 to FY24, the changes to MAEP would result in a BSC increase about five times less than the increase would be under the current formula. However, the legislature did not appropriate enough funds to reach “full funding” of the MAEP formula (BSC plus add on programs) inFY23. Since the actual state allocation for all of MAEP was 10.5% lower, the actual BSC for FY23 was also lower. However, these calculations demonstrate that, in most years, the amount required to “fully fund” MAEP would increase at a much lower rate under HB 1369, cutting the gap between what the legislature has appropriated in the past and what it would need to appropriate going forward to reach “full funding.” 

PLEASE NOTE: These calculations do not account for two important changes that the Senate made to the appropriations bill, which affect what the FY24 BSC could actually be. First, the Senate rolled the FY23 teacher pay line item–$240.8M–into the MAEP line items, which means that those funds will be allocated as part of the base student cost and will necessarily increase the FY24 base student cost over last year’s by hundreds of dollars even with a lower inflationary increase. Secondly, the Senate has proposed an additional $198.5M for MAEP over last year’s total funding to account for the inflationary increase, though smaller. Together, these changes mean the FY24 BSC would be larger than even the “fully funded” BSC calculated above. The Senate proposal estimates the FY24 BSC in their proposal to be $7,124.51, an effective increase of at least $1,000 over the actual FY23 BSC, at least half of which (and maybe more) is the teacher pay increase from FY23. Unfortunately, without more data, we cannot confirm the accuracy of $7,124.51 or how much of its increase is due to the FY23 teacher pay raise. Because of the appropriations changes, though, all but a handful of districts will experience some amount of increase over their FY23 allocation, although the amount varies greatly as a result of two factors: local contribution changes and the teacher pay raise distribution, as explained below.

Local Contribution Changes

Under MAEP, local districts are required to contribute a portion of annual funding. This contribution is the equivalent of 28 mills ($28 dollars of every $1,000 in assessed property value), unless the revenue generated from 28 mills exceeds 27% of the program cost. This is known as the 27% rule. Because some districts have much more property wealth than others, the 27% rule essentially allows property-rich districts to tax themselves at a lower rate.

Under HB 1369, districts would be required to contribute the equivalent of 28 mills unless that revenue exceeds 29.5% of the program cost, essentially changing the 27% rule to a 29.5% rule. This would increase the local contribution for some wealthier districts, meaning there would be less funding required from the state to “fully fund” MAEP. It is important to note here that this change to MAEP would only impact these wealthier districts. With enough additional funding in the MAEP budget as proposed by the Senate in HB 1613, most of these districts will still receive more money over FY23 (even without the teacher pay raise inclusion), even though they are paying a larger share of the BSC.

Teacher Pay Raise Distribution

As we state above, moving the teacher pay raise line item into the MAEP line items is not in HB 1369. Rather, this is an appropriations bill change. However, it will affect the distribution of teacher pay raise funds, changing how much more in total state funding some districts receive under the total Senate plan when considering both HB 1369 and the budget bill, HB 1613.

The first part to understand is that the legislature appropriated the funds for the teacher pay raise in a separate line item from the FY23 MAEP line items. The legislature often does this to “get credit” for funding a pay raise because when it goes into MAEP it is simply part of a much larger sum. However, when money is appropriated outside of MAEP, the Mississippi Department of Education (MDE) comes up with a separate methodology for how to distribute those funds. In the past, including last year, this methodology looks at the teachers districts reported having in the 2021-2022 school year and their years of experience and credentials (the basis of the teacher pay scale), then calculates the districts’ share of the pay raise according to amount of funds those teachers’ pay would increase. This type of methodology means that districts which employ more experienced, more credentialed teachers receive a larger share of the pay raise. These districts are often wealthier, whiter, and/or higher performing.

In the second year after a pay raise, the legislature often puts the pay raise into MAEP. Districts complain this is a way to “underfund” the pay raise because it is harder to see whether the second year’s cost of a pay raise (which is higher because teachers get more money with each additional year) is funded. Some districts also experience a sort of double-whammy because putting the money into MAEP means distributing it solely based on the number of students in attendance in each district, not teachers’ credentials. This is more equitable than the MDE allocation process, and lower-performing, lower-income, often majority-Black districts are likely to benefit as they are getting a share exactly equal to all other districts, regardless of whether they can recruit and retain more experienced, more credentialed teachers. However, those districts which benefited from the MDE methodology will now get a lower share. If these districts also are affected by the move to the 29.5% rule, they will receive a lower overall share of the increase proposed in HB 1613 and may experience a much lower increase over last year’s total state funding than if the money was allocated through the current MAEP formula and if the pay raise was again line itemed.

Explanation of the Bill (as initially filed)

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As introduced, House Bill 1369 would revise the Mississippi Adequate Education Program (MAEP), the state’s school funding formula, to use Average Daily Membership for funding calculations. The current MAEP formula uses Average Daily Attendance.  

Average Daily Membership (ADM) is measured by averaging student enrollment during the second and third months of the school year. In contrast, Average Daily Attendance (ADA) is measured by averaging attendance during this time period. Inevitable student absences mean that attendance numbers are lower than enrollment figures, which in turn means that school districts would receive more funding under the proposed funding formula than the current formula.

School districts with a reported ADA that is 90% or less of the district’s ADM would continue to use ADA for MAEP calculations. The state auditor would be required to verify the enrollment and attendance “in as many local districts as practical” during the second and third months of the school year to ensure compliance. 

In addition to revising MAEP funding calculations, HB 1369 would remove a current provision of the law that requires a student to be considered absent if they miss more than 37% of the instructional day. Presumably, the local school board would be left to determine the portion of the school a student must miss to be considered absent, though the bill does not specifically assign this responsibility.

(Please note that the current version of the bill, as amended by the Senate Education Committee, no longer contains these changes.)