In a new Reason Foundation policy brief, Public Education Without Boundaries, our team analyzes how school finance systems can get in the way of dollars following students across school district boundaries. Advocates of backpack funding should also pay attention to how dollars follow students between individual public schools, between public and private education environments, and how the whole education funding system ultimately ties together. In each case, backpack funding hits new roadblocks and requires different policy solutions.

1.       District-to-District Backpack Funding

An important subset of backpack funding concerns how education dollars follow students when they attend public schools outside of their residentially-assigned school district boundaries. Without strong funding portability mechanisms, school districts have weak financial incentives to welcome transfer students via cross-district school choice. The recent policy brief, Public Education Without Boundaries, tackles this problem and identifies three primary culprits preventing funding portability between public school districts.

First, most states have a group of school districts that are “off-formula,” meaning the districts can raise more than all the funding they are entitled to under their state’s main funding formula from local tax sources alone. Put simply, off-formula school districts create funding portability problems because they often don’t lose or gain funding when students transfer out or transfer in.

A second problem for funding portability between school districts is local education funding, which often comes from local property taxes. These taxpayer funds are often raised to support public school operations and finance construction projects, but because these local taxpayer funds aren’t raised based on student enrollment in schools or the district, they again don’t follow students when they transfer out of a school district.

The third funding source that doesn’t follow students easily is any state funding stream that’s not based on current enrollment figures or is not based on enrollment at all. To illustrate, in 2018, Missouri’s K-12 funding system funded 194 school districts based on past revenue amounts rather than current their student counts. Again, this means that a student transferring into any of those Missouri school districts doesn’t generate new funds for the district and that a student transferring out doesn’t take any funding away from the district if they leave.

Achieving backpack funding between school districts means finding ways to make these kinds of education funding sources—which don’t typically follow students—portable. 

One model for how to do this is in Wisconsin, which sets a single, statewide per-student funding amount that follows each student to their new school when they transfer to a new district. That calculated amount accounts for state and local funds–including some dollars that are not portable–which are then deducted from a sending school district’s state revenues. While this amount doesn’t include all funding devoted to a student in their home district, it exemplifies a way that other states can factor in education revenues from different sources and ensure that they come out of a sending district’s budget and follow transfer students out and to their new schools. 

2.     School-to-School Backpack Funding

Importantly, even if policymakers follow examples like Wisconsin to ensure education dollars are portable across school district boundaries, ensuring that funding follows students within school district boundaries when students transfer to a new school within the same district is a separate challenge. While all states have funding formulas ensuring that at least some education dollars follow students across district boundaries, none have statewide policies requiring that districts implement backpack funding at the school level. Therefore, implementing school-to-school backpack funding is a district-level decision that only a small subset of school districts across the country have implemented to some degree.

The standard method most school districts use to allocate dollars within their boundaries is to allot staffing and program-specific funding to each school. Under this common model, school resources aren’t usually thought of in terms of dollars. Budgets are largely administered at the district level, so school principals aren’t directly dealing with the financial effects of students transferring in or out of their schools.

This widespread practice of districts allocating staffing and programs to individual schools has several negative effects on within-district school choice as well as overall funding fairness. When dollars don’t automatically follow children between schools, districts might not be willing to allow for within-district choice because it can complicate budgeting for each individual school. 

Additionally, it’s long been noted that this budgeting practice based on staff positions leads to large per-student funding disparities between schools within the same school district due to differences in staff salaries between campuses. And as new state reports on federally mandated school-level spending data show, this practice often shortchanges schools serving high-need students. 

Achieving backpack funding within districts requires a different toolkit than what’s required to get backpack funding between districts. At the local level, school district leaders need to commit to a weighted student funding mechanism to fund individual schools and implement it with fidelity so that schools are funded solely based on the individual needs of the students they serve. 

Similarly, state policymakers could also advance legislation that requires districts to fund their schools on a weighted funding model and that gives students the option to choose schools within their boundaries. While these efforts would require substantial cultural shifts whereby districts place more budgeting responsibility on individual schools, they would lead to school-to-school backpack funding that fosters both public school choice and funding fairness.

3.       Public-to-Private Backpack Funding

Another definition of backpack funding expands the previous definitions to include non-public education environments. An example of public-to-private backpack funding would be universal education savings accounts (ESAs)—like the accounts recently implemented in states like West Virginia, Iowa, and Arizona. Universal education savings account programs are for all students in a state, regardless of their income or whether they are currently enrolled in public schools, private schools, or homeschooling.

In most cases thus far, students only qualify for an education savings account once they have withdrawn from the public school system. Also, ESAs and private school vouchers are often tied to the per-student amounts under the state’s education funding formula. When a student withdraws from a public school district to utilize an ESA or voucher, that state per-student amount generally leaves the district and follows the student. 

However, the problems that occur with district-to-district backpack funding also apply to public-to-private backpack funding. Local funds outside of the formula and state grants outside of the formula don’t typically follow ESA students, and off-formula school districts won’t typically see a reduction in funding when a student leaves to use an ESA. 

4.       Universal Backpack Funding

Finally, having a universal ESA is not all that’s required to have universal backpack funding. To achieve true universal backpack funding, policymakers need a single mechanism that allows for district-to-district, school-to-school, and public-to-private education choices. Education savings account amounts would need to be calculated similarly to how the per-student funding amount is calculated in the Wisconsin example above so that non-portable education funds become portable. 

Coming up with a single mechanism that accommodates all forms of backpack funding requires policymakers to make the public K-12 funding system more compatible with ESAs. When public school funding mechanisms have a mixture of portable and non-portable dollars, it’s difficult to have ESA amounts that are similar to the per-student funding levels in the public schools without costing the state extra money to make up the difference between the education dollars that follow students out of a school district and the dollars that are left behind in the district losing the student. 

As more universal education savings account bills make their way through legislatures and to governor’s desks across the country, policymakers should also consider how universal backpack funding can help streamline their education funding mechanisms so that all students are funded the same way, regardless of the schools they attend or the environments they are educated in.

Universal backpack funding would help break down the divide that exists between students being educated in public and private environments and ensure that all education funding follows students wherever they go to learn.

The post Clearing up definitions of backpack funding appeared first on Reason Foundation.

This assistance is grounded in years of experience developing effective, bipartisan policy solutions that address the complex needs of government employers, employees, retirees, and taxpayers. The Pension Integrity Project work demystifies complicated retirement policies with advanced actuarial modeling, built by a team of experts and backed by industry-leading actuarial consultants.

To advise on the immediate and long-term effects of policy decisions, the Pension Integrity Project uses custom-built actuarial and employee benefit models that are tailored to reflect each unique retirement system. While Reason Foundation does not have access to individual participant-level data—accounting of the behavior of each individual participating member—given its proprietary nature, that level of data is not necessary to develop highly accurate models that allow for forecasting the factors most relevant to policymaking: general projections of liabilities, assets, and employer/employee contributions.

Highly accurate actuarial models require only the assumptions used by the pension system, which are publicly available and reported in the annual actuarial valuation and other common reports. The Pension Integrity Project uses the public pension system’s current assumptions to develop advanced and dynamic actuarial modeling to provide valuable context on the near and long-term fiscal and financial impacts of various policy options.

The Pension Integrity Project’s team of policy experts frequently carries out checks and calibrations—holding findings up to official actuarial reporting—to ensure the accuracy of the models used. Reason also subjects forecasts and outputs to rigorous review by policy experts and licensed consulting actuaries.

Reason Foundation’s experts are particularly proficient at delivering intricate and plan-specific analyses in a way that is easy to understand and applicable to policymakers. Reason also develops interactive tools that put the wide possibilities of modeling directly in the hands of policymakers.

The Pension Integrity Project develops several different types of modeling to address the various policies that affect the overall success of a public retirement plan:

• Funding models project the liabilities of a plan as well as the short and long-term costs associated with policies.
• Employee benefit models calculate the utility of a retirement plan over time, illustrating how well a plan delivers on benefits offered to public workers at different ages and years of service.
• Return probability analyses evaluate the likeliness of specific plans achieving different market results.

Reason Foundation Pension Integrity Project’s actuarial modeling and analysis have contributed valuable, decision-relevant information to the policymaking process in several states that have successfully implemented bipartisan public pension reforms, including Texas, Michigan, Arizona, Colorado, New Mexico, and Florida.

The Pension Integrity Project’s Modeling Methodology and Approach to Analysis of Public Retirement

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Seven years after legalization, many Alaskans are still saddled with criminal records for low-level marijuana possession. Twenty-four other states have already adopted reforms that facilitate the expungement or sealing of marijuana-related criminal convictions. 

House Bill 28 is a small but necessary step toward justice in Alaska.

The post Alaska House Bill 28 would help provide justice for those harmed by marijuana prohibition appeared first on Reason Foundation.

HB 22/SB 35 costs are dependent on a flawed discount rate: The claim that the proposed changes will not require any additional funding relies on the pension’s current investment return assumption. Alaska PERS would need to achieve overly-optimistic 7.25% annual returns on investments for decades to avoid additional costs to the state.

• Overly-optimistic investment return assumptions were a major contributor to Alaska’s $5.1 billion debt still owed on the legacy pension plan.
• The average assumed return used by public pension systems around the country is now just below 7%, so Alaska PERS’s current assumption is rosier than peers.
• Capital market forecasts suggest returns closer to 6% for the next 10-15 years.

HB 22 and SB 35 could cost the state an additional $800 million: Actuarial analysis of Alaska PERS that anticipates realistic market stress and multiple recessions over the next 30 years shows HB 22/SB 35 likely expose the state to significant potential costs.

Bottom Line: HB 22 and SB 35 could cost Alaska upwards of $800 million in the coming decades. Since public safety employees make up only about 10% of PERS members, this could be a very costly move that only benefits a relatively small group.

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• Holds $1.8 billion in unfunded liabilities;
• Is structurally underfunded by legislatively set contribution rates;
• And is expected to become insolvent around the turn of the century even if all its actuarial assumptions are met (faster if they do not).

This backgrounder examines claims the North Dakota Public Employees Retirement System is making about North Dakota House Bill 1040.

Scrutinizing NDPERS’ cost claims on House Bill 1040

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Policymakers and the public have expressed concerns about road user privacy in mileage fee systems, especially those that involve a location-based component. Fortunately, protecting the privacy of location-based mileage fee customers is a solvable problem with practical technology and policy solutions. 

How the Global Positioning System (GPS) Works

• GPS satellites broadcast radio signals that transmit their locations and the precise time from onboard atomic clocks.
• A GPS receiver detects these signals and uses the time of arrival to calculate its distance from a GPS satellite.
• Using the distance calculations from at least four GPS satellites, a GPS receiver can determine its position (longitude, latitude, altitude) and time.
• Because GPS signals are sent one-way from the satellites and location is calculated by the GPS receiver using multiple satellites, GPS by itself cannot be used to track the location of a GPS receiver.
• Privacy concerns only arise when a GPS receiver is paired with a secondary wired or wireless communications system that can transmit location information computed and stored locally on a GPS receiver.
• Privacy and data security considerations should thus be focused on those secondary communications systems.

Addressing Location-Based Mileage Fee Privacy Concerns

• In location-based mileage fee systems, policies should be implemented that ensure customers’ personally identifiable location data are protected. These include:
• Storing all location data onboard vehicle computers, transmitting only mileage-count information for revenue-collection purposes. 
• Strict data retention policies that destroy stored onboard location data after a set interval, upon completion of any customer billing disputes or audits.
• The use of trusted third-party payment processors that operate as intermediaries between customers and government revenue agencies.
• Requiring a court order based on probable cause in an authorized criminal investigation before granting law enforcement access to onboard location data.

Recommendation: Customer privacy protection and data security should be thoroughly investigated during mileage-based user fee pilot programs.

Protecting customer privacy in mileage-based user fee collection

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Express Toll Lanes Reduce Congestion

• The variable toll adjusts based on traffic congestion.
• Most express toll lanes are managed to keep traffic flowing at 45 miles per hour or more during rush hours.
• Today, 60 express toll lane projects across the country are providing commuters with faster and more reliable alternative to congested highway lanes.

Express Toll Lanes Are Sustainable

• Variable tolling is able to offer drivers and transit vehicles a congestion-free travel option even when traffic volume in the general lanes increases.
• Since ETLs handle more vehicles per hour during peak periods than regular lanes do, regions with express toll lanes need to add fewer regular highway lanes.
• The same gas-powered vehicle going 45 miles per hour in a toll lane generates fewer greenhouse gas emissions than it does in stop-and-go traffic in general lanes.

Express Toll Lanes Are an Important Transit Solution

• Express buses using ETLs offer faster, more reliable service than buses in congested lanes.
• ETLs provide a semi-dedicated right-of-way that buses use free of charge.
• Transit agencies operate more buses that transport more passengers in corridors with express toll lanes than in corridors without ETLs.

Express Toll Lanes Are Optional

• No one is required to use an expres toll lane.
• No one is required to pay a toll unless they choose to use the toll lane.
• Most commuters tend to use ETLs for time-sensitive trips, such as going to the airport or picking up a child from daycare before late fees begin.
• People choose ETLs when they believe the value of their time savings exceeds the toll.

The post How express toll lanes benefit drivers appeared first on Reason Foundation.

HOV Lanes Are Either Too Full or Too Empty

• Most HOV lanes suffer from “empty lane syndrome,” where the lane is underutilized.
• In other cases, HOV lanes are nearly as congested as regular freeway lanes during peak periods.
• This is the “Goldilocks problem”: HOV lanes are too crowded or too empty, but never just right.

Most People in HOV Lanes Are Not Carpooling

• As many as three-quarters of people using HOV lanes legally are either family members traveling together (fam-pools) or a parent driving kids to school (school pools) but neither situation removes vehicles from the roadways in the way that carpool lanes were intended to remove cars.

Large Fractions of HOV Lane Users Don’t Belong In the Lanes

• Enforcement of HOV lanes is difficult and costly.
• Solo drivers or cars with fewer than the required number of passengers add to traffic congestion in large urban-area HOV lanes.
• A 2018 study found 84% of the vehicles in Tennessee’s HOV lanes were violators.

As States Kept Adding HOV Lanes, Carpooling Declined

• Between 1995 and 2005, HOV lane miles doubled from 1,500 to 3,000 lane miles, but carpooling plummeted from 19.7% of commuters in 1980 to only 8.9% in 2019.

Changes in US Commuting Mode, 1980-2019 (percent of total)

HOV lanes have failed to stimulate carpooling or reduce congestion and emissions. States are increasingly converting the lanes to high-occupancy toll (HOT) lanes, where pricing keeps traffic flowing smoothly, reducing tailpipe emissions.

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• Clarify Fiduciary Rules and Responsibilities

Require pension and state trust fiduciaries only base investment decisions on pecuniary factors like investment performance and risk, not nonpecuniary factors like politics, ESG, etc.

• Require Advance Proxy Vote Notice and Annual Reporting

Surface activism in proxy voting by allowing the public to view proxy votes well in advance of being cast, as well as requiring a compiled annual report of all proxy votes annually. 

• Require Limited Partner Status Reporting

Help mitigate activism through alternative asset managers like private equity and hedge funds by requiring the annual reporting of limited partners and all committed and allocated capital.

• Require Investment Fee Reporting

Reporting of investment fees will allow for more transparency around the cost and benefit of generally higher-risk alternative investments like private equity and hedge funds.

• Require Pension/Trust Board Meeting Transparency

Ensure taxpayers and stakeholders have access to major planning and investment decisions by requiring materials and meetings are broadcast, published and granted open access to all stakeholders.

Step #2: Set Up Systemic Oversight

• Institute a Pension Oversight Board

Creating a dedicated agency or center of excellence to oversee all public retirement systems in your state, both state and local, regarding their actuarial soundness and compliance with state reporting requirements.

• Require XBRL Reporting Standards

Because government financial reports are mostly published in PDF format and are hard to analyze, compare and aggregate, transitioning to a more data-friendly XBRL format would make government finance more transparent.

• Require Public Trustees to be Insured

Unlike in the private sector, public pension trustees are not required to carry liability insurance. Requiring coverage against claims brought alleging a wrongful act in relation to their role as fiduciaries ensures the appropriate amount of accountability.

Step #3 – Install Protective Policies

• Remove Investment and Actuarial Management Privileges

Return important fund management duties to taxpayers by suspending management privileges until sound funding policies and metrics are achieved.

• Mandate “Excess Value” Consultant Compensation

Pioneered by the Public Employees Retirement Association of New Mexico, this limited partnership compensation method replaces the widely used carried interest compensation formula with one based on absolute returns, completely removing any consideration of the risk associated with such an asset.

Steps to protect public finance from ESG activism

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Unfortunately, wrongful convictions occur in death penalty cases at an alarming rate. Since 1981, 10 people in Oklahoma have been exonerated while on death row awaiting execution.

The Death Penalty Information Center maintains a database of death row exonerations in the United States. The database only includes cases where individuals were acquitted of all charges, had all their charges dismissed, or received a complete pardon based on evidence of their innocence. It provides very conservative estimates and likely understates the true number of innocent people who have been sentenced to death in America.

Death Row Exonerations Nationwide

• Since 1972, over 185 Americans have been exonerated while awaiting executions on death row.
• 68% of exonerations involved perjury or false accusations.
• 69% of exonerations involved misconduct by officials.

Death Row Exonerations in Oklahoma

• Since 1981, 10 individuals have been exonerated while on death row awaiting execution in Oklahoma.
• Six of those cases involved perjury or false accusations.
• Seven cases involved official misconduct.
• Oklahoma County, Oklahoma, has had the 4th highest number of death row exonerations among all counties in the US. Four of the five death row exonerations in Oklahoma County involved misconduct by officials.

Full document: Abolishing Oklahoma’s death penalty would be good for justice and for taxpayers

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Since 1979, 11 people in Ohio have been exonerated while on death row awaiting execution.

The Death Penalty Information Center maintains a database of death row exonerations in the United States. The database only includes cases where individuals were acquitted of all charges, had all their charges dismissed, or received a complete pardon based on evidence of their innocence. It provides very conservative estimates and likely understates the true number of innocent people who have been sentenced to death in America.

Death Row Exonerations Nationwide
• Since 1972, over 185 Americans have been exonerated while awaiting executions on death row.
• 68% of exonerations involved perjury or false accusations.
• 69% of exonerations involved misconduct by officials.

Death Row Exonerations in Ohio
• Since 1979, 11 individuals have been exonerated while on death row awaiting execution in Ohio.
• Nine of those cases involved perjury or false accusations.
• Ten cases involved official misconduct.
• In Ohio, for every 6.2 executions, one innocent person on death row has been exonerated
• On average, exonerees in Ohio had been on death row for 20 years.
• The longest sentence served by a death row exoneree was 39 years.

Full document: Abolishing Ohio’s death penalty would be good for justice and for taxpayers

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1. A mileage-based user fee has advantages compared to the gas tax:

• Fairness: MBUFs ensure that the drivers who use highways are the ones who pay for them.
  • Choice: MBUFs give users more options over how and when they pay the fee.
  • Transparency: Most people don’t know what they currently pay in fuel taxes. MBUFs are much more transparent to users. Drivers see what they pay and what they get for their money.
  • Better Incentives: MBUFs can give better information and incentives to drivers and state transportation departments on the efficiency, quality, and costs of roadways.
  • Flexibility: MBUFs allow states to properly prioritize and adjust highway expenditures as conditions, consumer demand, and technology change.

• A mileage-based user fee pilot can examine common concerns:
  • Privacy: Pilot programs typically use private account managers to test MBUF options and policies and ensure drivers have privacy and control over their data.
  • Double Taxation: MBUFs should be a replacement for fuel taxes, not a supplement to them.
  • Diversion: MBUFs can be dedicated to roadways, unlike gas taxes and other infrastructure funding sources, which have been diverted away from their primary purposes.  
  • Costs of Collection: These costs are currently higher than the gas tax but decrease with scale.
  • Equity: Fuel taxes can be regressive. They impact low-income families, who tend to have less fuel-efficient vehicles. MBUFs charge for road use, not fuel use, and are less regressive than gas taxes.
  • Rural Drivers: Rural drivers already typically pay more in fuel taxes due to the longer distances and less fuel-efficient vehicles they tend to drive. Thus, rural drivers can benefit from MBUFs.

• Mileage-based user fees are already widespread in the United States:
  • Twenty states and two multi-state coalitions have conducted MBUF pilot programs.
  • Closer to Georgia, North Carolina and Virginia have already run MBUF pilot programs.
  • Virginia, as well as Oregon and Utah, have moved ahead with permanent MBUF programs.
  • The Federal Highway Administration provides grants to states to test MBUFs.

The post Testing mileage-based user fees as a replacement for Georgia’s gas tax appeared first on Reason Foundation.

Ways To Change Transit Service Design for the Better

• Adjust geographic coverage by redesigning existing bus routes to serve population centers, adding service on weekend days, and reducing it during off-peak periods.
• Improve bus-run times by consolidating stops and using technology to speed up trips, such as transit signal priority.
• Take a holistic approach that integrates fixed-route services, on-demand services, private services, bike-sharing, ridesharing, and (eventually) automated vehicles.

Improving Transit Governance

• Transition most transit agencies into mobility management agencies that coordinate services across public, private, non-profit, and contracted transit entities.
• Contract with quality private and non-profit operators wherever possible, as other developed countries do.
• Eliminate laws that prevent competition and protect transit monopolies.
• Improve accountability and transparency by setting performance goals to be met by all transit providers.

Changing Transit Funding

• Eliminate federal transit subsidies for capital projects and provide subsidies for operations and maintenance in ways that reward transit agencies that provide high-quality, low-cost services.
• Provide user-side subsidies to transit-dependent customers that allow them to use the vouchers or funds on whichever transit service is best for them.
• Charge transit-choice riders—those with access to another transport mode—the full price of providing the transit services to them.  

21st Century Transit: Free Market Transit Policy

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The key advantages of a long-term DBFOM P3

• Long-term financing up-front, so the project gets implemented sooner.
• The private partner, rather than taxpayers, takes on the major financial risks, including cost-overruns and late completion.
• It minimizes the project’s life-cycle cost instead of just choosing the option with the lowest initial construction costs.
• It offers potential design innovations.
• There is guaranteed maintenance due to long-term stewardship of the asset.

The alternative ways to finance a long-term P3

Revenue Risk (RR)

• Financing is based on user fee revenues from the project.
• The P3 company finances the project based on “investment-grade” revenue projection.
• RR financing is “non-recourse”—the state is not responsible for the private company’s debt service or bankruptcy.
• The P3 company has a direct customer-provider relationship with project’s users.
• RR project adds to total infrastructure investment due to new revenue source.

Availability Payments (AP)

• The state agrees to make annual payments linked to performance measures.
• The P3 company finances the project based on the state’s commitment.
• Generally, the state draws on existing revenues for the annual payments.
• The AP commitment is a liability on the state’s balance sheet.

When is revenue risk the better financing choice for the state and taxpayers?

• If direct user fees are feasible for the project.
• If the AP model is not allowed, due to state policy.
• If the state prefers non-recourse financing.                                  
• If the state sees value in a direct customer-provider relationship.

For further information: “Availability Payment or Revenue-Risk P3 Concessions? Pros and Cons for Highway Infrastructure,” Reason Foundation, Nov. 2017

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Paying Down Pension Debt Faster Is Prudent Fiscal Policy

• Paying down debt associated with promised, constitutionally-protected public pension benefits faster is a time-tested way to save taxpayers money over the long-term by avoiding interest costs.
• A payment into NHRS would also immediately lower the annual operation costs of funding the system by reducing debt servicing payments.
• States that have fully funded their pension obligations (e.g., Wisconsin, South Dakota, etc.) are better positioned to face future recessions and budget challenges.

Takeaway: A “catch-up” payment toward the New Hampshire Retirement System’s unfunded liabilities would benefit taxpayers by reducing pension debt and yielding long-term cost savings.

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