Thursday, August 27, 2009

The Economic Engine of Maryland, Part Seven

Montgomery County, the economic engine of Maryland, depends on its public schools to compete with Fairfax County. How much does the state contribute to Montgomery’s schools?

In absolute terms, the state contributes quite a bit to Montgomery County’s schools – over a half-billion dollars in direct aid in the last fiscal year. But in relative terms, the state’s investment is quite modest. Consider the following chart comparing the state’s per-pupil aid to public schools by county in FY 2009:

The above data illustrates that the state spent $3,943 per pupil in aid to MCPS in the last fiscal year. That ranks third from the bottom among the state’s 24 jurisdictions and is only 60% of the state average. MCPS aid accounts for only 10% of the state’s school aid despite the fact that Montgomery County has one-sixth of the state’s population. That is largely driven by a wealth formula that steers money away from “wealthy” school districts. One effect of the wealth formula is that MCPS derived just 19.9% of its budget in FY 2009 from state aid. Prince George’s County schools received 54.9% of their budget from the state.

What of the Geographic Cost of Education Index (GCEI), a state formula that gives more aid to school districts with a higher cost of education? The chart below shows (among other things) the amount of GCEI funding allocated by county in FY 2009:

For all its recent attention in the media, GCEI funding is a very small part of state aid to schools. In FY 2009, the state spent $5.3 billion on school aid. Only $75.8 million of that came from the GCEI program. Furthermore, Prince George’s County (at $23.6 million) was the biggest beneficiary of GCEI, not Montgomery (at $18.4 million). Baltimore City, by far the biggest recipient of state school aid in per-pupil terms, receives $13.0 million from GCEI.

The state does make one substantial school investment that disproportionately benefits Montgomery County: covering the cost of teacher pensions. Last September, we published the pension costs in both absolute and per capita terms by county. Montgomery led the state in total pension obligation spending ($131 million) and was third in per-capita terms behind Howard and Calvert Counties.

The reason the state spends more on Montgomery’s teacher pensions than on any other county is that Montgomery pays its teachers more than elsewhere in Maryland. Montgomery does that because of its high cost of living and its fierce competition for talent with Fairfax and other school systems. Excellence in education costs money. Montgomery figured that out long ago and has been delivering quality schools to its residents for decades.

We will conclude tomorrow.