Opinion ID: 2312018
Heading Depth: 1
Heading Rank: 1

Heading: The Subsidy Formula

Text: Proper decision here requires careful analysis of the Public School Code's subsidy formula. Section 2502(d) of the Code provides: For the school year commencing the first day of July [of 1968] and each school year thereafter, each school district shall be paid by the Commonwealth on account of instruction of the district's pupils an amount to be determined by multiplying the aid ratio times the actual instruction expense per weighted average daily membership or by five hundred fifty dollars ($550), whichever is less, and by the weighted average daily membership for the district. For the school year 1973-1974 and each school year thereafter each school district shall be paid by the Commonwealth on account of instruction of the district's pupils an amount to be determined by multiplying the aid ratio times the actual instruction expense per weighted average daily membership or by seven hundred fifty dollars ($750), whichever is less. Thus for the school year in question section 2502(d) makes a district's state subsidy the product of three factors: (1) the district's aid ratio, (2) the district's weighted average daily membership, and (3) the district's actual instruction expense per weighted average daily membership or $750, whichever is less. [1] The first factor aid ratio approximates the market value of property within a district relative to the market value of property in school districts throughout the Commonwealth. [2] The greater the district's relative wealth, the lower the aid ratio and, hence, the less the subsidy. The second factor weighted average daily membership (WADM), as its name suggests, is defined as the district's average daily membership, weighted in a manner reflecting the grade levels of district pupils. [3] It is agreed that average daily membership in a district where no strike and no reduction of instruction occurs is the district's daily enrollment added together over the full 180 day school year, divided by 180 days to obtain an average. Expressed as a formula, average daily membership where no reduction in the number of days of instruction occurs is as follows: (Sum of daily enrollments for Average Daily = 180 days of instruction) _____________________________ Membership 180 days The third factor, the lesser of actual instruction expense per weighted average daily membership (AIE/WADM) or $750, reflects the extent of the Legislature's willingness to subsidize district spending per pupil. [4] Districts spending less than $750 per pupil (as determined by weighted average daily membership) will be subsidized according to their actual instruction expenses. Those spending more than $750, however, will be subsidized according to the $750 ceiling. Stated in terms of a formula, state subsidy is as follows: [(AIE/ ] [ WADM) ] [ ] Subsidy = (Aid Ratio) × [ or ] × (WADM) [ ] [($750), ] [whichever] [ is less ] where AIE/WADM = actual instruction expense per weighted average daily membership and WADM = weighted average daily membership. Operation of the subsidy formula can best be understood by considering four hypothetical school districts, all of equal daily membership and equal wealth, which have provided 180 days of instruction. For purposes of illustration, each of the four hypothetical districts has an aid ratio of 0.5 and a daily membership of 1000. Each differs only in spending District No. 1 spending $600 per pupil, District No. 2 spending $750 per pupil, District No. 3 spending $900 per pupil, and District No. 4 spending $1,050 per pupil. Applying the Code subsidy formula, each hypothetical district's subsidy is as follows: AIE/WADM or $750, District whichever is less Aid Ratio WADM Subsidy No. 1 [($600) ($750)] × (0.5) × (1000) = $300,000 No. 2 [($750) ($750)] × (0.5) × (1000) = $375,000 No. 3 [($900) ($750)] × (0.5) × (1000) = $375,000 No. 4 [($1,050)($750)] × (0.5) × (1000) = $375,000 As this illustration demonstrates, even though Districts No. 3 and No. 4 spent more than $750 per pupil, each receives the same subsidy of $375,000. Each district's subsidy compares with spending as follows: Dollar Subsidy Per Dollar Spent District Subsidy Spending (Rate of Subsidy) No. 1 $300,000 $ 600,000 0.5000 No. 2 375,000 750,000 0.5000 No. 3 375,000 900,000 0.4167 No. 4 375,000 1,050,000 0.3571 Thus Districts No. 1 and No. 2, spending no more than $750 per pupil, receive subsidy at the same rate. Districts No. 3 and No. 4, however, spending more than $750 per pupil, receive a subsidy which amounts to a decreasing percentage of actual expenditures. In this case there is no dispute that appellee district's aid ratio is a constant 0.2852. Nor is there any question that appellee district's actual instruction expense per weighted average daily membership is $1080.29. Because this figure exceeds $750, for purposes of the subsidy formula $750 is to be employed. The controversy centers upon the proper determination of the average for purposes of weighted average daily membership. Appellee district would arrive at the average by dividing the sum of daily enrollments for the 173 days of instruction actually provided, by 173 days. In terms of a formula, appellee district's view of weighted average daily membership is: (Sum of daily enrollments for Weighted Average Daily 173 days of instruction) Membership = ______________________________ 173 days Using this formula, appellee district calculates its weighted average daily membership for the 1975-76 school year to be 71,113.396. On this calculation, appellee district contends it is entitled to a state subsidy of $15,211,155, computed as follows: Weighted Average Aid Ratio Daily Membership $750 Subsidy _________ ________________ ____ _______ (0.2852) × (71,113.396) × ($750) = $15,211,155 The Department, on the other hand, maintains that appellee district's weighted average daily membership must take into account that appellee district provided less than 180 days of instruction. The Department thus divides the sum of daily enrollments for the 173 days of instruction actually provided not by 173 days, but by Code section 1501's 180 day instructional mandate. The Department's formula compares with appellee district's formula as follows: Weighted Average Daily (Sum of daily enrollments for Membership = 173 days of instruction) _____________________________ 180 days Thus, according to the Department, appellee district's weighted average daily membership is 173/180th of the district's figure of 71,113.396, here agreed to be 68,359.131. On this weighted average daily membership, the Department calculates appellee district's subsidy as follows: Weighted Average Aid Ratio Daily Membership $750 Subsidy _________ ________________ ____ _______ (0.2852) × (68,359.131) × ($750) = $14,622,018.