During a 7-hour marathon hearing on May 21, 2019, the issue of Senate Bill 543, or the new Student Based Funding Formula, was introduced. In the presentation provided by Applied Analysis, the impacts of the new formula demonstrated that 14 out of Nevada’s 17 school districts were slated to have a reduction in funding starting July 1, 2019. Humboldt County School District is one of these 14, with a projected loss of $4.8 MILLION dollars. 

Recognizing that no district can withstand such dramatic reductions, the proposal outlined a “hold harmless” provision. This simply means that districts would be frozen at their current funding levels until such time that the identified reduction level has been met. For Humboldt County School District, this is potentially 7 years. 

As a result, the rural school districts have rallied, and during the hearing testified in opposition to the bill. During the testimony that I was able to provide, I addressed three primary areas of concern for Humboldt, as well as other rural districts: Net Proceed of Minerals, Economies of Scale and the Hold Harmless provision. 

Net Proceeds of Minerals

For rural communities, Net Proceeds of Minerals (NPM) becomes a key life blood in meeting our financial obligations as a district. Calculations of NPM for all 17 districts shows a total of $22.6 million dollars, or approximately 0.45% of the total education budget. It seems unproductive to fight over 0.45%, however, when the impact is closer to 10% for the counties that benefit from these revenues, including HCSD, it becomes a clear line in the sand.  

The ability to maintain the NPM for many rural counties would help offset and alleviate these adjustments, while having virtually no impact on the overall education budget. In addition, we believe that the ability to leverage the NPM is inconsistent with the Nevada Constitution. Specially, Article 10 Section 5, subsection 2 addresses the disbursement of revenues from Net Proceeds of Minerals:

Article 10, Sec.5(2).Tax on proceeds of minerals; appropriation to counties; apportionment; assessment and taxation of mines.

 2.The legislature shall appropriate to each county that sum which would be produced by levying a tax upon the entire amount of the net proceeds taxed in each taxing district in the county at the rate levied in that district upon the assessed valuation of real property. The total amount so appropriated to each county must be apportioned among the respective governmental units and districts within it, including the county itself and the school district, in the same proportion as they share in the total taxes collected on property according to value.

Economies of Scale

A key component of the new bill is a desire to create equality across districts. This was particularly noted when the superintendent for Clark County, as he testified in support of the bill, stated that it was his position that Clark County had supported the rest of the state for far too long and was due for their share of the money.  However, equal is not the same as ensuring equity.

Attempts at equality fail to consider issues of economies of scale. Simply stated, the larger the concentration of students, the less revenue is required to operate, while conversely, the smaller the concentration of students, the more funds are required to provide the same opportunities. 

As a result of the benefit of economies of scale, Clark and Washoe are able to fund services the rurals can only dream of. Examples include: legal, grant writing, law enforcement, professional development, and equity departments, etc. Additional revenues to support choices made by urban districts should not come at the expense of the rurals. 

Hold Harmless

The Hold Harmless provision is designed to protect districts from losing revenue during the transition to the new formula. However, as noted above, such a position will only place districts further behind. 

This “hold harmless” fails to recognize that operating costs are not flat. These increases include general COLA’s (Cost Of Living Adjustments), increase in PERS rates, increased insurance expenses, not to mention the Governor’s adamant position that a 3% pay raise for all educators has been included in the funding formula create a situation where districts immediately incur harm. 

Ultimately, the new funding formula clearly favors Clark and Washoe Counties at the expense of the other 15 districts. In the absence of addressing adequacy of funding, any changes will simply create a series of winners and losers, with the rurals the clear losers.

Dr. David Jensen is the Superintendent of Schools for Humboldt County School District. He can be reached at 775-623-8218 or at djensen@hcsdnv.com.