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Introduction and Overview

School Finance: A Policy Perspective, 4e

Chapter 1

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“School finance concerns the distribution and use of money for the purpose of providing educational services and producing student achievement.”

Odden and Picus (2004) p. 1

What is School Finance?What is School Finance?

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School Finance Focus

• Equity (most of 20th century)– Variation in per-pupil expenditures– Uneven distribution of property tax base

• Productivity (1990s)– Linkage between level and use of funds and

student achievement

• Adequacy and Accountability (now and in the future)

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Today

• The scope of school finance– Nationally, Regionally, Locally

• School finance adequacy

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School Finance Simulations

• 20 district and state simulations available• http://www.mcgraw-hill.com/odden4e/ • You must have Excel to run• Download and run

– If it does not operate properly, delete and download again

– If you have a problem, I can e-mail it to you– Special consideration for Mac users

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Education and the Fortune 500

Rank

Organization

2006 Revenue ($ Billion)

Public K-12 Ed. ~500.0 1 Exxon Mobile 351.1 CA Public K-12 Ed.* 55.5

25 Dell 57.1 LAUSD 7.5

310 Starbucks 7.8 *Does not include Federal Revenue

RI State Budget 6.9 BillionRI State Education Budget 690 MillionRI Education Spending Total 2.5 to 3 Billion

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Annual Public School Enrollment: United States—1919 to 2005

21,576

25,678 25,434 25,111

35,182

45,550

41,65140,543

44,111

46,85747,746 48,375

-

10,000

20,000

30,000

40,000

50,000

60,000

1919-20 1929-30 1939-40 1949-50 1959-60 1969-70 1979-80 1989-90 1994-95 1999-00 2003-04 2004-05

Year

En

roll

me

nt

(x 1

,00

0)

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Share of Revenue: 1919 to 2000

0

10

20

30

40

50

60

70

80

90

1919-20

1929-30

1939-40

1949-50

1959-60

1969-70

1979-80

1989-90

1994-95

1995-96

1996-97

1997-98

1998-99

1999-00

Year

Pe

rce

nt

Federal

State

Local

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Pupil/Teacher Ratio: 1955 to 2001

10.0

12.0

14.0

16.0

18.0

20.0

22.0

24.0

26.0

28.0

30.0

Y ear

Pu

pil

/Te

ac

he

r R

ati

o

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Key School Finance Issues• Until recently, money per pupil, after inflation

adjustment, has risen ~ 3.5% annually for 95 years

• But this money is distributed very unequally across states, districts, and schools

• When it gets to schools, some argue that it is not used as effectively or productively as it can be

• This in the context of student performance measures which haven’t been as hoped particularly for kids with special needs

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And So THE Challenge:• Accomplish the goals of standards-based

education reform, by employing “evidence-based” practice in everything we do

• Which means at least to double education performance over the next decade

• We must improve the productivity of our actions and boost student performance with the money we have and the limited/ or no additional money we will get

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School Finance Background• SF issues have shifted in two ways:

Equity shift:• Old equity problem: low wealth, low

spending with high tax rates, versus high wealth, high spending with low tax rates

• New equity problem: low wealth, average spending with lower tax rates, versus high wealth, high spending with higher tax rates

Catalyst for Prop 2 ½ and S 3050 (Paiva-Weed) type legislation

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• New equity problem harder to fix and the fix is different from the fix for the old equity problem– And most individuals—school leaders and

policymakers—are still focused on the old equity problems

(In part why RI has struggled with adopting Education Funding Formula)

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Second Major Shift

• Equity has taken a back seat to adequacy— is there enough or an adequate amount of money to have educators teach students to new high performance standards– If not, what is the adequate expenditure level

that is required?

Is there enough money in the system? Critics argue yes, and point to collective bargaining and teacher compensation as misdirecting Resources.

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What Is Adequacy?

• Adequacy requires provision of sufficient fiscal resources to enable all students to perform at high levels

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Costing Out Adequacy

• Defining adequacy

• Establishing a system to achieve the educational standard or goal

• Measuring costs and expenditures

• Concerns and other issues

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Four Approaches to Defining Adequacy(chptr 3 pp 77-81)

• Cost function (chptr 3 p 79)

• Expenditures in districts/schools that meet performance benchmarks (chptr 3 p 78)

• Professional judgment (chptr 3 p 78)

• Evidence-based approach (chptr 3 p 80)

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Implementation

• How prescriptive should the model be? – Who controls spending decisions?

• Simple, transparent, and easily understood – Establish a base “foundation” level – Adjust for:

• Student characteristics (eg poverty)• District characteristics (expectations and

involvement)• Price differences (“gold coast” Ct)

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Funding Adequacy• If we can identify an adequate spending level,

how do we fund it?– By taxing the rich, and if so, who are the rich?

– By tapping “progressive taxes,” which the tax- paying public does not want

– By tapping more “regressive taxes,” like sales taxes, which if more taxes are needed, the tax- paying public will swallow?

– And how “regressive” are the so-called regressive taxes? (so in an economic recession like now when spending is less then revenue base is diminished)

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What Does This Mean for a State?

• School spending

• School operations

• Tax rates

• Other implications?

• School finance reform – What would you recommend?

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Reform of School Finance • Need for comprehensive reform of the finance

system• System must be simple, easy to understand, and

transparent • Should it be based on a measure of adequacy?

And if so, how would that impact equity?• Recent evidence (Odden, Goetz and Picus, 2007)

suggests that relatively little additional money is needed overall to reach adequacy – part of the problem is the distribution across states