COMPONENTS OF A STATE SHOOL FINANCE SYSTEM

1. COMPONENTS OFA STATE SHOOL FINANCE SYSTEM Bob Palaich and John Myers Augenblick, Palaich and Associates Michael Griffith Education Commission of the States June 7, 2011

2. Assumptions • The major components the school finance system will be discussed today • The first component covers categorical funding. • The second component provides a base level of support to school districts and/or schools based on their needs, i.e., weights. • The third component provides additional state aid by providing incentive funds to school districts and/or schools that meet specific criteria.

3. The First Component • Categorical aid is money that the state gives school districts to be spent for specific purposes. • Transportation • Capital (some of which could include BEST funds). • Could include weighted factors that are not wealth equalized (such as special education)

4. Categorical Aid • Most states make use of between six and twelve categorical programs • California has the most categorical programs with approximately 100 - these programs account for over 40% of education funding in the state • Several states, like New York and North Carolina, are providing districts greater freedom in spending categorical fund dollars during this recession

5. The Second Component • The second component is aid that is sensitive to uncontrollable cost pressures faced by school districts and/or schools. • Individual student characteristics • And the characteristics of schools and districts the individual students attend • The second component is composed of several elements including a base cost plus weights. • All elements in the second component are typically wealth equalized.

6. The Second Component • The cost pressures school districts face are typically categorized as being associated with students and districts/schools. • “Weights” are used to indicate the relative cost impact of a set of cost factors. • Weights are numbers (such as .35 or 1.75) that are applied to all students or subsets of students. • Weights reflect the added cost of serving students with special needs attending districts/schools in special circumstances.

7. The Second Component • Student needs might include the following factors: • Participation in special education programs (possibly by disability or by level of service) • Classified as an English-language learner (ELL) • Classified as being “at-risk” based on family socio-economic characteristics • Shown to be behind on student growth measures • Classified as Gifted/talented • Participating in a special program, such as a vocational-technical program. • Grade level weights

8. The Second Component • District/school needs might include the following factors: • Enrollment (district and/or school) • Change in enrollment (district and/or school) • Rural or isolated schools and districts • Cost-of-living (district or region) • Organized in a special way, such as a magnet school (school)

9. State Funding Formulas • While each of the fifty-states funds their schools in different ways there are two types of funding formulas that most states use: • Foundation formulas • Positions Allocation Systems • Both of these types of formulas make use of weights for students

10. Foundation Programs (39) (38) PositionAllocation Systems (6) (6) Other (5) (6) School Funding Formulas

11. What do we know about weights • At-risk funding • Density matters • Special Education • Make use of tiered funding • Regional Cost Adjustments • Take cost of hiring/retaining teachers into account • Rural and Isolated school • Take into account that some districts can not be consolidated

12. The Third Component • Significant incentive or performance funding is a recent addition to the school finance discussion. • A certain portion of school funding is set aside for districts and schools based on achieving certain results or for deploying resources in a particular way. • To set this up, several questions must be answered? • Can funding be earned for partially meeting a target? • What types of performance should be rewarded? • Does data exist to measure the desired performance? • Should any districts or schools be treated differently?

13. The Third Component • Incentive or performance funds can be thought about in three different categories: • For progress toward meeting or exceeding a specific “outcome” goal related to student learning (e.g., achievement growth, attendance, earning transferrable college credits, earning certification in a workforce-related area, etc.) • For providing specific “inputs” thought to be related to specific outcomes (e.g., student to teacher ratios, supplies and materials requirements, etc.) • For adhering to specific “processes” thought to be related to specific outcomes (e.g., implementing new teacher compensation systems, establishing professional learning communities, etc.)

14. The Third Component • What types of performance should be rewarded? • Should performance associated with the state’s existing accountability system be rewarded? • Examples of outcomes associated with the Colorado accountability system that could be incented. • Growth in student learning • Documentation of students prepared for next level • Certification of workforce preparedness • Documentation of college preparedness

15. The Third Component • Whatever outcomes, inputs or processes are incented, does valid and reliable data exist at the appropriate level (student, school or district) on which to base the decision about whether a school or district has met the criteria for the incentive? • Much data exists concerning students, teachers, administrators, parents, schools and districts. • Does the information exist for all cases? • Is it collected in a reliable manner? • Is it a valid measure of the concept? • Is it updated regularly (at least annually)?

16. The Third Component • Are there cases when certain districts or schools should be treated differently? For example: • Should all districts and schools be able to earn financial incentives for “outcome” measures? • Should a portion of the incentive be earned for “partially” achieving an “outcome?” • Should resources be set aside to help districts and schools that miss “outcome” targets significantly? • For how long should these resources be available? • Should these resources incent particular “inputs” or “processes?”

17. Incentive/Performance Funding • Use the experience of other states/districts • Denver • Iowa • Texas • Florida