Education funding in TN reaches breaking point as BEP lawsuit advances

In a legal maneuver that flew under the radar last year, a coalition of small school districts in Tennessee quietly joined the lawsuit brought by Shelby County and Metro Nashville schools over the adequacy of the state’s public education funding.

It was a major development since Shelby County and MNPS had been going it alone in their lawsuit originally filed in 2015. The Tennessee School Systems for Equity represents 84 small school districts across the state.

By joining the lawsuit, the small school districts underscored the argument that the problem with Tennessee’s education funding is not just that it is inequitable for the urban school districts, which educate a disproportionate percentage of poor students, English-learning students and disabled students. Tennessee’s funding formula, the basic education program, is inadequately funding all public schools, plaintiffs say, burdening the finances of local governments and leaving educators vastly underpaid.

The current BEP lawsuit has been an odyssey. Originally filed in 2015, the case has been gridlocked in recent months in a contentious discovery phase, including the depositions of public officials and a bevy of document requests. The lawsuit was finally headed for trial in October, until an unexpected twist: Republican lawmakers sought to remove Chancellor Ellen Hobbs Lyle because of their disagreement with her ruling last year allowing all voters to request an absentee ballot during the COVID-19 pandemic. As a result of the push to remove her, which failed, Lyle recused herself from the BEP lawsuit. The case was reassigned last week by the Supreme Court to state Senior Judge Don Ash. It is yet to be determined if the October trial date will remain on track.

The debate over increasing education funding has ratcheted up in recent weeks with grassroots groups, including the Nashville Public Education Foundation and the League of Women Voters in Tennessee, joining the push for dedicating more money to the BEP.

At stake is hundreds of millions of dollars annually in Tennessee, which routinely ranks among the bottom states in the nation for education spending per pupil.

“TSSE believes it is important to provide sufficient funding for Tennessee’s schools to prepare our next generation,” the Tennessee School Systems for Equality executive director Wayne Qualls said. “TSSE joined this effort to seek intervention of the courts yet again, this time to provide an adequate level of funding, in order to preserve and protect the gains obtained through the Small Schools decisions in the 1990s and 2000s.”

Small school districts helped establish BEP through litigation

The entry of the Tennessee School Systems for Equity, or small schools association as it is commonly referred to, was a legal battle unto itself. The small schools, represented by attorney Jonathan Cole from Baker Donelson, which is also the law firm hired by Shelby County and MNPS, entered the legal fray last summer.

It was unclear in initial filings if the small schools would formally join the lawsuit or merely file briefs in support of the plaintiff districts. When the small schools sought to join, attorneys for the state fought tooth and nail, throwing down a legal gauntlet to try to keep them out of the lawsuit.

After a series of competing filings, Lyle ruled in September that the small school districts could in fact join the lawsuit as plaintiffs.

The small school districts explained their decision in an initial complaint filed a few weeks later. The small schools’ argument is essentially the same as the two large urban school districts’. They say the state is underfunding the BEP and placing a disproportionate burden on local governments to pick up the slack. The issue is nuanced. The funding formula relies heavily on a city or county government’s ability to raise taxes and generate local tax revenue. This means that the amount of state money dedicated to MNPS in Nashville where the economy is thriving is less than the amount committed to Henry County, where the government’s ability to raise taxes is limited. The state funds about 35 percent of the MNPS budget, but as much as 75 percent of some small school districts’ budgets under the fiscal capacity index.

“There comes a point in time when the local districts are simply incapable of covering the expenses and costs associated with providing an adequate and equal education to their students because the state is failing to appropriately calculate their fiscal capacity,” the small school districts claimed in a legal filing last year.

The genesis of the BEP was in fact a lawsuit filed by the small school districts in the 1980s over the equity of education funding. The small schools claimed at the time that the state’s funding strategy was unfair for rural schools. It’s a common argument in the world of public education funding. In some instances lawsuits have sprung up over the equity of education funding: are rural schools or urban schools being favored by the government’s education spending?

While those lawsuits stem from how the proverbial education funding pie is divided up, the most recent lawsuit is over the issue over adequacy. There isn’t enough pie to go around, the school districts claim in the lawsuit.

“However, it has been the experience of many of (the small school districts) that in addition to the BEP failing to incorporate the actual cost of providing an adequate education, the fiscal capacity determined by the state is not an accurate reflection of the local funding the member district can reasonably expect to raise or receive,” the small school districts argued in a recent filing.

Will Pinkston, the former Nashville school board member and policy adviser to former Gov. Phil Bredesen, played a critical role in the decision by MNPS to sue the state over education funding. Pinkston said the Bredesen administration recognized the BEP as a policy that needed to be updated regularly.

“The BEP is like any other piece of policy that’s part of state statute. It lives and breathes and changes based on changes in the economy, based on changes in student demographics,” Pinkston said. “It requires, just like anything else, maintenance here and there to keep it in step with the times. There are moments when the pendulum will swing too far in favor of rural systems as it relates to how money is distributed. The issue now is the entire system is woefully underfunded.” 

The Tennessean reported in 2014 that Pinkston convened stakeholders from across the state to discuss the possibility of such litigation, though he feared at the time the small school districts would stay on the sideline and leave the large urban school districts to lead the fight. 

Pinkston said the Bredesen administration updated the formula at the end of its term in 2010 with the expectation that future administrations would continue to step to meet the obligation of the so-called BEP 2.0, which dedicated more money by raising the state’s tobacco tax.

“I fought for years to number one, get us into court, which eventually happened. And, number two, to make sure when we did go to court we weren’t going to accidentally end up at war with rural school systems, because that would have been a losing proposition. The litigation is adequacy litigation not equity litigation.”

Teachers underpaid and formula doesn’t account for enough classroom staff, plaintiffs say

The crux of the BEP litigation is that the state’s current $4.8 billion public education budget is inadequate. Independent watchdog groups seem to agree.

The 2020 Education Week Quality Counts’ report gave Tennessee an F grade for overall spending and an A- grade for equity, which measures how fairly funds are spent. Tennessee ranks 43 in education spending per pupil at $9,544, according to the most recent rankings by EducationData.org. Virginia, which came in 25th in the rankings, spends $12,216 per pupil and New York, which was first, spends $24,040 per pupil.

Chris Henson, the chief operating officer for MNPS and member of the state’s BEP review committee, pointed to two areas where districts take issue with the current formula.

State law sets the elementary school per-pupil ratio at 20 students per teacher. But, local districts are often forced to hire more teachers in one school to compensate for disproportionate enrollment. As Henson explained, students don’t enroll in neat 20-child bundles, leaving the district to need more 3rd grade teachers at one school than another.

Tennessee districts employed 11,433 more instructional positions than the BEP funds, as well as an additional 1,285 assistant principals. The necessity of school nurses became clear during the pandemic, but the BEP only funds 354 school nurses across the state, while districts employ 1,394. The gap in each of these areas is made up by local school districts that must pay the difference.

A critical argument made by plaintiffs in the case is that state leaders have failed to recommend adjustments to the BEP formula recommended by the BEP review committee, on which Henson serves, to account for factors like classroom ratios.

“I think the adequacy discussion really started generating some steam when statistics come out to show comparisons of state funding per student,” Henson said. “And then, I think people have become a little more understanding of the formula just by becoming more interested in it to note several of the inadequacies that stand out, that just don’t make sense.”

By far the biggest issue, according to the plaintiff school districts’ filings, in regards to education spending is teacher pay. The BEP allocates an average salary of $48,330 per teacher, principal and assistant principal.

But local school districts, especially in Nashville and Memphis where the cost of living is higher than rural parts of the state, are paying significantly more than that. MNPS’s average teacher salary was $51,893, according to data cited in the lawsuit.

An opaque component of the dispute over education funding is that critics don’t offer a firm annual dollar figure for how much the state ought to be spending. A key argument made by the state in objecting to claims that more should be committed to education is that advocates are effectively demanding a blank check.

But, there are clues available for how much more state dollars should be dedicated.

Last year, Democratic lawmakers filed legislation to update the BEP’s average teacher salary to align with the actual average salary that districts were paying. The legislation was affixed with a fiscal note of over $406 million, and the bill failed to advance.

“Parts of the BEP are complicated, but parts are real simple,” said state Sen Jeff Yarbro, D-Nashville, who sponsored the bill to increase teacher pay funding in the BEP. “The problem we have is a real simple screw up. It’s just that it’s out of date. The hard part of BEP is figuring out what the state and local portions are going to be relative to local governments’ ability to pay. The simple part is there’s just not enough money in it, because it assumes teachers make as much money as they made a decade ago, and it assumes we have fewer teachers than any reasonable school would have.”

Gov. Bill Lee’s administration committed to 4 percent raises for teachers, but even that increase didn’t approach the average salary districts are already paying teachers.

“The state’s method of funding staffing needs for the Districts is completely inadequate in all regards,” the plaintiff districts claimed in their recently updated complaint. “The funding formulas use salary amounts well below what the Metro and Shelby districts actually pay staff and, for the reasons explained herein, the staffing formulas fail to allocate enough teachers to actually cover classrooms with the required student to teacher ratio. Thus, BEP adequately funds neither the salary amounts that the districts’ pay nor the number of staff that the districts’ actually hire. These inadequacies create dire consequences for the districts.”

State argues adequacy issue is a political question, not a legal one

In a series of filings during the nearly six years of litigation, attorneys for the state have repeatedly argued that the lawsuit originally brought by Shelby County and MNPS should be dismissed because those districts are not suing over the equitability of the BEP, but over its adequacy. Attorneys have used a technical legal argument in several motions to dismiss the lawsuit that the Chancery Court lacks jurisdiction “because the claim raises a nonjusticiable political question.”

The state has argued that similar lawsuits in other states over the adequacy of education funding have been dismissed on the grounds of “justiciability.”

In a memo filed in support of an earlier motion to dismiss the lawsuit, the state claimed that a trial would be lengthy and expensive – perhaps several months long. 

“Of course, the burden and expense of litigation and trial would be for naught if this court’s denial of (the state’s) motion to dismiss is reversed after final judgment,” state lawyers argued in a 2018 memo. “And (the state) respectfully maintain(s) that the probability of such reversal is real. Numerous other states have dismissed similar adequacy claims on justiciability grounds. And the Tennessee Supreme Court has indicated, at least for teacher salaries, that the judiciary has no role in determining the level of funding for public education.

“Furthermore, (the plaintiff school districts) equity claim is inconsistent with (Small Schools I, the original lawsuit that prompted the creation of the BEP), which was focused on reducing funding disparities among school districts, and not ensuring that funding levels are comparatively higher in plaintiffs’ districts.”

Whether the case continues on track for trial or not, the state has laid the legal foundation for appeals to the mostly-Republican appeals court system that the lawsuit should be dismissed.

Momentum builds for more funding

While it’s unclear when the case will head to trial, the push to increase education funding has extended beyond the litigation.

In this month alone, influential nonprofit the Nashville Public Education Foundation released research outlining how inadequate funding is impacting MNPS and advocating for more money. Public Education Foundation President and CEO Katie Cour said she senses the “moment” is arriving for stakeholders to push for investing more in the BEP. She said the issue is especially vital in Nashville, where the district educates a high percentage of students who require additional resources.

“The big thing for us in an urban district is the BEP underestimates everything across the board, but really underestimates what it takes to educate certain groups of students,” Cour said. “For instance we have more English learners than many districts. We have more special education students than many districts… because we have such a high property tax and are considered to have a high fiscal capacity, the burden is falling on us at the local level to make up that difference.”

Last week, the League of Women Voters of Tennessee also joined the chorus of those pushing for better education funding.

“This goes beyond how you slice the pie to provide varying amounts of funding to the diverse counties of our state – the pie itself is simply not big enough,” said Debby Gould, president-elect of LWVTN. “The League’s position on education is that the state’s coverage, implementation, and funding of the Basic Education Program should be adequate to assure a high standard of public education.”