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Tennessee Gov. Bill Haslam talks about education and his budget to the editorial board Thursday at the Times Free Press.

Gov. Bill Haslam has given up on trying to create a new state school funding formula that keeps both rural and urban schools happy and instead plans to push a measure that largely keeps the current hybrid formula intact with some controversial tweaks.

And as a result, the Republican governor's solution now has him at odds with House Majority Leader Gerald McCormick, R-Chattanooga. McCormick said he thinks the deal adversely impacts the Hamilton County school system and he doesn't feel he can carry the bill.

Haslam's amendment would stop phasing in a nearly nine-year-old reform of Tennessee's massive Basic Education Program funding formula. The 2007 reform is known as BEP 2.0 and it was intended to benefit urban school districts like Hamilton County, which had threatened to sue the state.

The governor's measure would eliminate a requirement directing the state to continue implementing the BEP 2.0 with available funds until it becomes the entire formula.

Tennessee's original BEP was enacted in 1992 in response to smaller systems, which had sued the state charging unequal treatment. They eventually won victories in three separate suits.

Right now, the $4 billion school funding formula is split 50/50 between the original BEP, which was funded by a half-cent sales tax increase, and BEP 2.0, which was partially funded with a cigarette tax hike. And, thus, it would remain under Haslam's proposal.

The main difference between the two formulas is over how they gauge local systems' ability to fund their share of educating Tennessee's estimated 1 million students.

"He [Haslam] is concerned about a small schools' lawsuit coming in front of the state, and he feels like we need to recalculate the amount," McCormick said in an interview Thursday.

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State Rep. Gerald McCormick
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McCormick said Hamilton County Schools and some of the state's other large school systems would be adversely impacted by the change. Hamilton County and six nearby systems last year sued the state, charging among other things that because BEP 2.0 has never been implemented, schools are being shortchanged.

"The issue is that under current law we're supposed to do 2.0," said McCormick, who voted for the cigarette tax increase in 2007. Shortly after, the Great Recession struck and then-Gov. Phil Bredesen never fully funded BEP 2.0.

Haslam hasn't increased its proportion of the formula since he took office, and now he'd like to get rid of the provision.

Asked whether he would carry the governor's bill, McCormick responded, that's a good question.

"I think I have an obligation to the governor to make sure his bill gets a fair hearing," he said. "That doesn't necessarily mean I need to personally carry it. And I think this would be a situation where I would not personally carry it and would try to affect the outcome of it, but in a way that does not harm Hamilton County and some of the other large counties."

The lawmaker added, "I would rather [BEP 2.0 implementation mandate] not change. I think a lot of work went into 2.0. A lot of people voted for a tax increase to fund 2.0 and we never funded it [fully]. I'm in favor of funding it."

Haslam appeared somewhat taken aback when informed of McCormick's opposition later Thursday as he met with Times Free Press reporters and editors.

On Monday, Haslam released his proposed 2016-17 budget, which calls for $261 million in new education spending, most of which would be recurring money that would go into the BEP.

"Remember in this budget, here's what we're doing for school systems," Haslam said. "There's an additional $104 million for teacher salaries. A 12th month of health insurance" funding for school workers.

The latter provision costs an estimated $45 million and helps all local education agencies which previously covered the entire amount of the 12th month themselves.

Haslam also noted the budget doubles the amount of money spent on technology, makes it recurring, and adds money to help with English-language learners.

But observers and critics say that in addition to eliminating the requirement that BEP 2.0 be fully implemented, the governor's amendment also would eliminate a Cost Differential Factor in BEP 2.0. The CDF is aimed at providing more money mostly to urban systems that have higher expenses in areas ranging from hiring teachers to immigrant children who don't speak English well or at all.

Haslam spokesman David Smith said if fully implemented, BEP 2.0 itself "would have eliminated CDF completely."

He said when the formula went to the 50/50 hybrid, CDF was dropped to 50 percent.

"Our bill drops it going forward to 25 percent," Smith said, insisting "systems receiving CDF don't lose anything they've been getting, and [also] says that it should be eliminated entirely as teacher salaries continue to improve.

That already has a number of officials and — at least one expert — concerned.

"Eliminating the CDF is a part of BEP 2.0," agreed Andy Spears, who wrote his doctoral dissertation on the ins and outs of Tennessee's school funding formula. "But full funding of 2.0 would benefit urban districts. The CDF protects urban districts now, and 2.0 would have provided recurring revenue to meet the special challenges."

He said a "number in the $70 million range seems like a reasonable estimate of what urban districts could lose with this change."

Smith said the CDF provision affects five districts but does not impact Hamilton County schools. It would impact Shelby County and Metro Nashville schools. Shelby, meanwhile, filed its own lawsuit against the state last year, charging the current formula not only is inadequate but treats them unfairly.

At this point, Haslam finds himself in much the same position as former governors Ned McWherter, Don Sundquist and Phil Bredesen, battling education lawsuits filed by unhappy districts and with attempted solutions always angering one side or the other.

Haslam said he's perplexed by what's happening.

"If you look overall at what we're putting into the budget — and this is a plan where everybody comes out ahead — I just find it hard to see," he said. "No matter what we come up with there are going to be people who will say, 'We wish you would do this instead of that.' But this is a system where everybody's getting considerable more."

Contact Andy Sher at asher@timesfree press.com, 615-255-0550 or follow via twitter at AndySher1.

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