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Audit: W.Va. Dept. of Education underfunded districts by $30M

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Audit: W.Va. Dept. of Education underfunded districts by $30M
By Ryan Quinn, Education Reporter, Charleston Gazette-Mail

A new audit says the West Virginia Department of Education has been miscalculating school district appropriations for the past seven years, underfunding 36 districts by a total of $51.7 million and overfunding 19 by $21.6 million during that time frame.

That means districts statewide were underfunded a net $30.1 million due to the department’s misreading of state law regarding how it was supposed to distribute dollars through the state aid funding formula, according to the report, which the Legislative Auditor’s Office presented to state lawmakers Sunday during interim legislative meetings.

Over the seven years, Kanawha County was underfunded the most of all West Virginia counties with a loss of about $5.3 million, or about $187 less per student than it was due. Last school year, Kanawha received $100,000 less than it was owed; in 2008-09, it received $2.5 million less.

The audit recommends the department start following the law in calculating the aid distributions, but also suggests the Senate Education Committee work with the rest of the Legislature to clarify the rules. Department officials, who also spoke to lawmakers Sunday in response to the audit, also say they want the Legislature to clarify the issue. The Legislature has already approved appropriations for the current fiscal year based off the department’s now-questioned calculations.

“We don’t agree that it’s a misinterpretation,” Joe Panetta, chief operations officer for the department, told the Gazette-Mail. “The law is not clearly written.”

“My four lawyers say the statute is plain English,” Legislative Auditor Aaron Allred told the newspaper, referring to the Legislative Services attorneys he said back up his office’s interpretation of the statute.

He said state law required his office to audit the education department to see whether it was following laws, and the state aid formula — which determines more than $1 billion in funding annually, and determined over $8 billion across the seven years inspected — was the natural first area to analyze.

Heather Hutchens, the department’s general counsel, said no one from school districts, nor anyone from the Legislature, had voiced disagreements with the department’s interpretation of the formula before the audit. Allred said districts not disagreeing didn’t surprise him.

“County school boards have their own problems,” he said. The audit found the largest net statewide underfunding occurred in academic year 2008-09 — to the tune of $18.4 million, with 45 counties underfunded and the remaining 10 overfunded.

During the 2008 legislative session, the report says, lawmakers “significantly amended” the state aid formula “to more equitably distribute funding based on population and enrollment.” “Multiple amendments were made to the calculation of the State Aid formula beginning in [fiscal year] 2009 which required significant revisions to how the formula was calculated,” the audit states. “These changes, as well as the complexity of the calculation, resulted in a high risk for error.”

Net underfunding continued until 2012-13, when the department first overfunded districts by a net $8.3 million. Last school year, the overfunding totaled $3.9 million, with three counties underfunded and 52 overfunded.

Besides Kanawha, Cabell, Berkeley and Wood counties were underfunded the most over the seven-year timeframe, at about $2.8 million each. Fayette and Jefferson counties were the next most underfunded, each at about $2.5 million. Putnam County lost about $200,000 over all seven years. The audit says the underfunding may have had greater impact on what the formula considers “sparse” population density counties than “high” density counties, like Kanawha and Putnam.

Though the $1.3 million that Pocahontas County was underfunded over seven years was much lower than Kanawha’s $5.3 million total loss — Kanawha is currently running off a $236.1 million annual budget — Pocahontas’ loss represented the largest per-pupil underfunding in the state.

Pocahontas — the lowest density county in the state, with about one pupil per square mile — received $1,103 less per student than what legislative auditors say was owed. Another sparsely populated county, Gilmer, had the next largest underfunding on a per-pupil basis: $864 less per student.

Monongalia County was the most overfunded district over the seven years, at $1.4 million, followed by Hardy County, at $1 million, and Hampshire County, at $900,000. Hardy was the most overfunded on a per-pupil basis, at about $436 per student.

The state aid funding formula, also called the Public School Support Plan, represents the bulk of school funding in counties where voters haven’t passed an excess levy to support schools. The formula mostly pays for a certain number of teachers and other positions for each district based on enrollment.

The audit says the education department was supposed to phase in the results of the 2008 amendments to the state aid funding formula over five years in order to gradually increase school funding without overly stressing the state budget, but the department messed up applying a growth cap that limited funding increases over previous years.

Education department officials said that in working with the Legislature to develop the 2008 legislation to change the state aid formula, former Gov. Joe Manchin indicated he wanted the phase-in to the new method to cost no more than $6 million per year — or he might veto it. Hutchens said the department’s method of using the formula fit that goal, and the audit’s method of interpretation could’ve cost double.

The department’s written response to the audit states that it “strongly feels that the phase-in was implemented in accordance with the intent of both the Legislature and the Governor and the financial projections developed during that period.”

She told lawmakers it was a “more conservative approach that cost the state less.” She stressed the $30.1 million in net underfunding didn’t stay with the department — that money just wasn’t requested from Legislature to spend. Among other things, the audit also concludes that, statewide, the department funded 28 fewer school service personnel — a category that includes custodians, cooks, bus drivers and others — than it was required to in the 2009-10 school year, 13 fewer in 2010-11, and more than it was required to in every school year since. That includes 54 more service personnel last school year.

When asked about the underfunding, House Speaker Tim Armstead, R-Kanawha, said lawmakers are still gathering information on the issue, and he wants to ensure school dollars are fairly distributed