REL 2002 Policy Forum
Spending for performance: Current topics in school finance policy and practice

Sept 25-27, 2002
Little Rock, AR


Networking exercise

Participants completed a networking exercise in their state groups to identify and discuss the individuals and organizations that comprise key contacts for K-12 education policy issues. Each state group developed lists of their key contacts and discussed the lack of representation from some stakeholders. Each group also talked about the ways that education networks communicate in the state, and the supports and barriers to effective communication.

A list of key contacts for each state will be developed by SEDL and distributed to forum participants.

Overview of school finance policy and practice
Presenter: John Augenblick, President of Augenblick and Myers, Inc.

This opening presentation provided the audience with an overview of school finance history, introduced three approaches to school funding, and discussed ways that states are addressing school funding equity and adequacy. Dr. Augenblick explained that in the past ten years standards-based reform has guided state policymaking in education and has raised the question of whether states are spending enough to ensure that all students can achieve state standards. This focus on outputs is a divergence from previous attention to inputs. The current lack of research data on the relationship between spending and outputs creates a challenge for policymakers to decide on appropriate funding levels.

Three approaches for estimating the funding needed to support schools in this era of standards-based reform are proposed by Dr. Augenblick. A professional judgment approach brings together experts in education issues to decide what resources (teachers, materials, etc.) are necessary for a school to succeed. The successful schools approach examines the spending level of those schools judged to be successful to determine a base cost for the state’s funding formula. In the whole school reform approach, decision makers choose a reform approach for schools and estimate the cost of implementing the initiative.

The three approaches have strengths and weaknesses. The professional judgment approach, for example, can provide estimates on funding for special needs students, while the successful schools approach is based on actual school and district spending levels instead of a hypothetical model. These approaches are not without challenges, such as in instances where a successful schools analysis finds few or no differences in funding between low and high performing districts. As evidenced by the use of these models in a number of states, however, the approaches can guide policymakers in better understanding the appropriate input levels for an adequate education.

Presentation: Litigation on educational resources
Presenter: David Long, Attorney/Consultant

David Long provided an overview of education finance litigation activity nationally and in the five-state region. He examined the relationship between education inputs and outputs in recent court activity and advised policymakers on how to avoid litigation in their states.

The education finance issues addressed by the courts include inequalities in spending and opportunity, inadequate educational opportunity, and over reliance on unequal school district tax bases to fund education. Litigation in education usually has a constitutional basis in either definitions of state provision of education or in state equal protection provisions. Also, plaintiffs may show that harm has been done to children as a result of current school finance structures. All of the states in the region have seen some litigation activity, however, in New Mexico no cases have reached the state supreme court. Mr. Long’s advice for states was to address the equity in current finance structures and the demands of accountability systems as a proactive step to avoiding litigation. Litigation is a costly and inefficient way to reform education.

Panel: Current state education finance activities in the region
A school finance expert from each state presented on current policy activity. Panelists included Tristan Greene, Arkansas Dept. of Education; George Silbernagel, Louisiana House of Representatives; Sharon Ball, University of New Mexico; Claudia San Pedro, Oklahoma State Senate; and Rhonda McCullough, Texas Senate Education Committee. Panelists were asked to discuss state policy challenges and successes related to one or more of the following issues:

  1. School funding for adequacy and equity
  2. Fiscal concerns related to teacher compensation and quality
  3. Role and impact of the courts
  4. Relationship between school funding and accountability

Arkansas. The courts have been active in Arkansas education finance in the last 25 years. In an effort to respond to a recent lawsuit, the legislature created a fiscally neutral system in which all schools are guaranteed at least 80% of the funding of the wealthiest district in the state. However, the courts recently ruled the system of funding unconstitutional according to an adequacy provision. Presently a number of reform plans are being considered and a final court ruling is expected later this year.

Louisiana. In 1991, litigation prompted reforms in the state’s funding system and a new foundation formula was created. Currently the legislature is working to increase the availability of fiscal information in order to make better decisions regarding funding schools. State policymakers want to know how much money schools receive and they want to better understand how the money is spent with the goal of linking the funding formula to accountability outcomes.

New Mexico. The state’s funding formula is considered to be equitable and an equity court case has never reached the supreme court. While some criticize the formula as being too complicated, it is based on three simple philosophical ideas. Adequacy remains a challenge in New Mexico because state education revenues are low and highly dependent on fluctuating state economic conditions. Capital outlay funding is currently being challenged in the state.

Oklahoma. Currently the foundation funding system is based on a residual budgeting strategy in which available state funds are distributed to schools and districts. Although the distribution system is considered equitable, the state is concerned with the conflict between the level of resources available for education and the increases in accountability expectations.

Texas. Policymakers have been reforming the funding structure in the state since a lawsuit brought about by the Edgewood School District prompted an equalization program and a facilities funding program. Currently policymakers are considering a voluntary income tax, and looking at ways to close franchise tax loopholes. Compensation for teachers is a challenging issue.

No child left behind legislation: Update
Presenter: Susan Bonesteel, Secretary’s Regional Representative, U.S. Department of Education

Susan Bonesteel briefly introduced the U.S. Department of Education Regional Office in Dallas to forum participants. The office houses a number of federal activities for the region, including civil rights, special education, Pell grants, and the Inspector General’s office. The office of the Secretary’s Regional Representative is charged with assisting state policymakers in implementation of the No Child Left Behind legislation. Currently, staff at her office are working to respond to questions and concerns regarding details of the act posed by policymakers. Ms. Bonesteel recommended that participants with specific questions about implementation send them to the regional office in writing.

A framework for considering school finance and student performance
Presenter: Bruce Baker, Associate Professor, University of Kansas

Dr. Bruce Baker helped participants understand the concept of efficiency in the education finance system. The process of educating students is a production process in which inputs and environmental factors are managed and allocated in order to achieve student outcomes such as achievement and earnings. That production process is efficient when inputs/costs are minimized while at the same time outputs are maximized. However, efficiency is difficult to measure and predict since the relationship between inputs and outputs in the education production process is unclear. Variability of environmental settings affect outputs in unpredictable ways and a range of immeasurable variables in the production process affect efficiency.

Dr. Baker explained that statistical methods could help estimate how inputs affect outputs, identify variables that change that effect, and ultimately support policymakers in creating greater efficiency in education spending. Benchmarks of efficient spending could be set through the creation of a statistical model that considers input, expected outcomes, and demographic or environmental variables that impact efficiency (such as size of district). Dr. Baker cautioned against using national averages to build models for state spending benchmarks due to regional, state, and local differences in what might create inefficiency in an education system.

While this statistical method of estimating the most efficient spending patterns for states and districts is complex and is currently being refined, Dr. Baker suggested that the approach is relatively inexpensive to implement. Also, as inexact as the method is due to the effect of immeasurable variables, it arrives at a more precise estimate of the cost of a desired educational outcome than intuitive estimates currently used by states.

Moderated topical discussion groups
Legal aspects in school finance. Expert: David Long

Some common themes discussed in this session included:

  1. The fiscal impact of litigation on facilities. District lawsuits over unequal or inadequate facilities are becoming more prevalent. David Long shared the idea of establishing and using trust funds to enable the funding of facilities over time.
  2. The varied definition of adequacy in court cases. Participants addressed the question of how states should determine a definition of adequacy in order to comply with court mandates. Constitutional language varies from state to state, posing further challenges to defining adequacy from the court’s perspective.
  3. Future challenges. Participants discussed what might be part of the litigation landscape for the near future such as legal implications that stem from the implementation of No Child Left Behind legislation, further complexity developing in the concept of adequacy due to accountability requirements, and the lack of/need for community support for schools.

Adequacy. Expert: John Augenblick
In this session, most participants agreed that some assessment of the adequacy of school resources should be undertaken by states. Typical ways of funding schools involve a residual approach in which whatever money is available for education in state revenues is divided among districts. Participants also recognized that adequate levels of resources would be different depending on the needs and circumstances of each particular district.

Participants discussed the role of the state in district spending. The state should collect data on spending that will help assess whether resource issues are part of the problems faced by failing schools. Also, while districts should have the freedom to decide on spending priorities within broad guidelines set by the state, failing schools should receive more direct guidance and assistance with spending and allocating resources. In the areas of teacher pay, districts also might benefit from deciding on pay scales based on local economies, although states need to establish a minimum salary schedule.

Accountability and school finance. Expert: Bruce Baker
States are currently focused on establishing school funding formulas that address issues such as equity and legal definitions of adequacy, and at the same time are creating standards for expected student outcomes. However, as participants discussed, there is a lack of integration between school finance and accountability.

A number of reasons for this disconnect were offered. First, little is known about the linkage between inputs and outputs in education. This problem is compounded by the fact that each school may need different levels of resources to achieve defined outcomes for its students. Another challenge is that in order to integrate funding and state standards, spending will probably need to increase—especially to bring disadvantaged students to performance standards. Revenue sources, however, are limited and may not fully support the integration.

Statistical models are one way to measure funding levels and efficiency of spending linked to accountability expectations. Other ways that states can begin to integrate accountability and funding is to break down communication barriers to change the way policymakers think about funding systems. Participants foresee court involvement in the relationship between funding and accountability as the definition of adequacy expands to include state standards for achievement.

SEDL resource allocation in the Southwest region research results

Diane Pan and Zena Rudo from SEDL and Cynthia Schneider and Lotte Smith-Hansen from the Charles A. Dana Center presented findings from current research on resource allocation and student performance. Major findings from a statistical analysis of fiscal, demographic, and performance data of four states revealed that spending in instructional areas was different for low and high performing districts. A number of these differences, however, change or disappear when demographic factors are considered in the analysis. Major findings from the teacher survey and interviews with administrators at “improvement” school districts indicate that successful districts use a wide range of resource allocation strategies to improve student performance. These strategies are accompanied by decision making and management structures that allow resource allocation to support student performance goals. For further details regarding this presentation, see the attached slide collection.

Panel: District perspectives on resource allocation to support student performance improvement

Representatives from the improvement districts that participated in SEDL’s resource allocation study discussed resource allocation and student improvement. Panelists included: Mark Rector, Superintendent of Mountain View School District in Arkansas; Ellen Terry, Comptroller, Fort Smith Public Schools in Arkansas; Gwile Freeman, Instructional Supervisor, Catahoula Parish Schools in Louisiana; Daniel Flores, Superintendent, Santa Rosa Consolidated School District in New Mexico; and Mike Seale, Chief Operating Officer, Galena Park ISD in Texas. The districts represented were identified in SEDL’s research study as having achieved continuous improvements in student achievement within a five-year period.

Each district representative described his/her district in terms of size, demographics, and location, and explained the performance improvements made in the last few years. Panelists then talked about some key strategies that helped to achieve student improvement gains in their districts:

  • The use of student achievement data was critical to all districts to identify student needs and guide instructional planning. Panelists described using student test results that are provided by the state or collecting and compiling local data for specific needs. In Texas, the state provides test scores in the summer so districts and schools can do planning before the school year begins.
  • When asked how districts make efficient use of available dollars, two strategies were apparent. First, by working to obtain outside grants to support certain programs (technology, facilities, at-risk programs, etc.), district resources that might have gone to these efforts can be shifted to support other needs. Second, districts are careful to choose useful programs that support instructional goals and existing programs are evaluated regularly and dropped if no longer useful.
  • Participants were interested in how districts contend with the spending restrictions of categorical funding programs. Panelists shared that some categorical funds are a challenge to incorporate into existing improvement plans; however, most agreed that with a clear understanding of the spending limits of the funds and some creative budgeting, the restricted funds can be well spent.

Roundtable on current education issues
Participants were asked to share information regarding current and upcoming education policy issues (fiscal and non-fiscal). Below is a summary of what was reported:

Arkansas. Currently, state policymakers are addressing a court case that has challenged the adequacy of education in the state. In response, at least six plans for education reform have been presented, each with a range of recommendations. Creating higher standards and greater accountability are common themes in the reform plans. Four specific recommendations from three entities related to small high schools have been presented to the General Assembly. See the handout provided in the materials packet for details on those recommendations.

Louisiana. The legislature has recently updated the funding formula, resulting in an increase in funds for education. The No Child Left Behind legislation is posing an obstacle to the state’s implementation of its own accountability system. Public opinion regarding Louisiana’s accountability system has been positive so changes would be difficult to support. The state is looking for ways to continue the current system without penalty from federal regulations. Early childhood programs will gain $30 million committed from TANF program funds. Education funds from the tobacco settlement, however, will drop this year due to a sell-off 60% of the proceeds. A school finance committee has been in existence for three years and their activities could result in a move towards integrating funding and accountability.

New Mexico. The Accountability and Government Act of 1999 required all state entities to move towards performance-based budgeting. Two school districts so far have fully implemented this system. A three-tiered licensing ladder for teachers may be upcoming, which will be very costly for the state. There is also a push to clarify the state’s charter school legislation in an attempt to enforce district/charter compatibility and to hold charter schools accountable to finance statutes. Education revenues are considered flat and the state does not seem to have suffered the decreases other states are experiencing.

Texas. Recent fiscal initiatives have included ways to use the funding system to support instructional priorities (e.g. Student Success Initiative, pre-K and K programs, reading and math focus). These initiatives have included funds that are outside of the foundation formula and usually have been in the form of special grants. Currently, policy is focused on trying to maintain the state’s current revenue levels and continued support to improve test scores of failing students. There is a need for more flexibility in spending in order to address the implementation of No Child Left Behind.

2002 Policy Forum evaluation results

SEDL Evaluation Services staff distributed evaluation forms, conducted observations, and engaged in conversations with participants at the forum to assess impacts of the event. According to preliminary analysis of survey results, 83% of respondents rated the overall quality of the forum as good to excellent. Also, 89% said that the forum “somewhat” to “very much” provided them with the opportunity to learn new information that they will apply to their current work; 94% responded that the small-group discussion formats provided them with the opportunity to learn new information, to exchange ideas and information, and to strengthen contacts with others. Nearly 90% of respondents indicated that they learned new information from the speaker presentations. Some participants recommended changes for next year’s forum, including maintaining a focus on information that has practical application to current policy issues, involving a stronger presence from school and district representatives, and making more time for cross-state discussion and topical discussions led by experts.