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August 11, 2016

Baltimore Education Coalition Challenges MuniCap on Analysis of Port Covington's Impact on State Education Aid

City's experts significantly underestimate the potential loss of school funding

Baltimore, MD - After several days of analysis, the Baltimore Education Coalition (BEC) is challenging the report produced by MuniCap that examines the impact of the Port Covington development on State education aid to Baltimore City Schools. MuniCap's analysis shows City Schools could lose more than $315 million in State funding over the life of the Port Covington project. While significant, this estimate falls far short of the amount of funding City Schools would lose due to the development.

According to the State education funding formula, when the assessed property wealth of a jurisdiction goes up, State aid goes down. MuniCap attempted to assess how much education funding could be at risk. MuniCap took certain factors into account but their analysis failed to examine the impact of the City's wealth increases on the full State education funding formula, including three major programs (State Compensatory Education, Limited English Proficiency, and Special Education).

City Schools receives nearly as much aid annually through those three component measures combined as it does through the Foundation Program, which MuniCap exclusively focused on in their analysis. Reductions in State aid to those programs could double MuniCap's estimated impact of $315 million. This is important because if the impact is double, then the City will not have enough money in its General Fund to cover the loss of State aid to City Schools each year, as a City finance official noted at a July 27 hearing before the Baltimore City Council on the proposed Port Covington Tax Increment Financing (TIF) deal.

Members of BEC testified to these concerns, at an August 3 hearing before the Baltimore City Council. Along with pointing out flaws with the MuniCap analysis, we warned that State education aid losses could be much higher. Based on the last two years of available Baltimore City data, the State legislature's Department of Legislative Services (DLS) estimates for every $100 million gain in assessed property value City Schools loses $1 million in State education aid. Using DLS's rule of thumb, Port Covington could cumulatively cost City Schools up to $1.6 billion in State education aid over the life of the project.

BEC demanded the City Council take immediate action to ensure that City schoolchildren do not suffer one dollar of lost funding due to the Port Covington project. These actions include:

  • Requiring MuniCap to correct their initial analysis on the effect of Port Covington on City Schools' State education aid;
  • Obtaining an immediate guarantee from the Governor and State legislative leaders that State legislation will be passed to ensure that TIF- and other City-subsidized-related wealth gains do not lead to any reduction in state education funding for low-wealth jurisdictions like Baltimore City; and,
  • Adding language to the Port Covington legislation that mandates the City refund City Schools for any loss of State education funding until the State education funding formula is fixed.

These demands are reiterated in a letter BEC sent to the full City Council today along with a chart showing the potential impact the Port Covington project could have on State education aid for City Schools as far as we currently understand it. Both pieces, plus a more detailed account of the flaws of the MuniCap analysis, are attached to this press release.