Chapter 9 The Structure of School Finance Systems

1. Chapter 9The Structure of School Finance Systems

2. Education Is a State Responsibility • States have the responsibility to plan for and deliver a system of free, public education • States also have the duty to equalize funding based on the localities’ fiscal capacity to pay for educational programs

3. Political Financial Control Direction Whoever funds schools controls its direction and practices. School Finance Relationships

4. Localities Operate Schools • Although education is a state function, virtually every state, except Hawaii, has delegated the school systems’ operation to the localities • The states, for the most part, maintain an oversight and compliance role in the local school systems’ operation

5. Consolidation for Efficiency • Once local oversight was relegated to neighborhood schools and school boards • The trend over the last 60-70 years has been to decrease the number of school districts in the United States • This consolidation has made for greater efficiency. It has, however, depersonalized to some extent schools’ operation & administration

6. Consolidation for Efficiency, cont. • Gradually over the 20th century, the states assumed more responsibility to oversee education • In 1937-38, the first year keeping such statistics, the U.S. had 119,001 school districts • In 2000-01, the total number of school districts totaled 14,859

7. Consolidation for Efficiency, cont. • More school districts brought together more communities representing a wider geography supporting the school • While school consolidation may have provided greater efficiency, it also negatively impacted citizens’ perceptions of their public school ownership • In fact, this ownership issue has resulted in some calling for replacing school boards with local school councils

8. Consolidation for Efficiency, cont. • While this trend decreases resource duplication and waste, it likewise decreases community feelings of pride and investment in their local schools

9. 1939-40 1999-2000 Total School Enrollment 25,434,000 46,857,000 Number of School Districts 117,108 14,928 Students per School District 217 3,188 Number of Students per School District, 1939-40 and 1999-2000

10. The federal share of public school revenue has increased each decade from less than 1% in 1919 to a high of 9.8% in 1979 Revenues and Expenditures

11. School Year Federal % funds State % funds Local % funds 1919-20 0.3 16.5 83.2 1939-40 1.8 30.3 68.0 4.4 1999-00 7.3 49.5 43.2 1959-60 39.1 56.5 1969-70 8.0 52.1 39.9 1979-80 9.8 46.8 43.4 1989-90 6.1 47.1 46.8

12. Region & State Federal State Local 50 states and DC 7.3 50.2 42.5 New England 5.3 48.1 46.6 Mid East 6.7 37.9 55.5 South East 9.1 55.0 35.9 Plains 7.2 47.3 45.6 Far West 8.4 61.0 30.6 % of Revenue by Source

13. The New England states have the lowest percentage of federal revenue source at 5.3% Federal Revenue Sources

14. The Southeast states, on the other hand, have the highest revenue percentage from federal sources at 9.1% Federal Revenue Sources, cont.

15. The Mid East states have the lowest percentage at 39.9% while the Far West has the highest percentage of state revenue at 61% State Revenue Sources

16. The Far West has the lowest percentage at 30.6% Mid East region has the highest percentage of local revenue sources at 55.5% Local Revenue Sources

17. Local Funding • Local funding is at the heart of schools • The range in local revenue percentages ranges from a low of 12.6% in New Mexico to a high of 64.9% in Nevada 12.6% Local revenues 64.9% Local revenues

18. Federal Responsibilities • 1867 - Congress established the United States Department of Education • Later downgraded to an Office of Education • Became part of the Department of Housing, Education, and Welfare. • 1980 – Reestablished as the Department of Education

19. Federal Responsibilities, cont. • The federal education functioned primarily providing grants & guidance for states and school systems under various programs • Title V of the Elementary and Secondary Education Act of 1965 strengthened the State Departments of Education by providing funding for increased state education personnel as well as for training, equipment, research and development

20. State Responsibilities • The State Education Agencies (SEAs) are generally empowered by the state legislature to coordinate and oversee the local education agencies (LEAs) • State Boards of Education date back to 1784 • The first State Superintendent was appointed in New York in 1812

21. State Responsibilities, cont. • State superintendents have the responsibility for providing leadership to the State Department of Education and carrying out the duties with which the agency has been charged • In that process, state superintendents have been in the position to become eloquent spokespersons for education with the general public and with the legislators, as was the case with Horace Mann

22. The Department of Education is generally responsible for carrying out the state’s education legislation The Governor influences education through their campaign platforms, whom they appoint in leadership positions once elected, and their position’s sheer bully pulpit State Responsibilities & Politics

23. The federal No Child Left Behind legislation of 2001 focuses on states’ accountability to meet academic standards What takes place at the federal, state, and local levels varies depending upon how the grant legislation is written Federal, State, Local $$$ Interaction

24. The Federal Department of Education announces the latest authorization of the ABC Act once Congress approves the legislation DOE makes legislative details available to the public State Education Agencies (SEAs) are authorized to submit applications for funding Federal, State, & Local Funding

25. Federal, State, Local Interaction • The SEAs make the application process available to the Local Education Agencies (LEAs) • The SEA usually provides technical assistance to the school districts in completing the grant application package • The grant will usually have a list of assurances with which the local school district must comply to obtain the funds

26. Federal, State, & Local Funding • The SEA collects LEA grant applications & assures the Federal Department of Education that they have met grant provisions • The Federal Department of Education reviews applications and awards grants to the states • The SEA, in turn, is allowed to take a percentage of the grant for administration and divides remaining funds to the localities • Occasionally, the states audits local funds and the federal office audits state funds.

27. Advantages of “Layered” School Financing • Equalization due to fiscal capacity of the states and the localities • Equitable& adequate distribution of educational services • Efficient provision of educational services • More decentralized decision-making authority to meet the states and localities’ needs

28. 1st Advantage of “Layered” School Financing • Some school districts lack the local capacity to raise revenue and require a larger level of government to spread the fiscal effort over a larger base • The “poor” locality can draw on outside resources • The resources available at the smallest level of government, therefore, do not determine the quality of education

29. 2nd Advantage of “Layered” School Financing • States can determine what level of adequate services will be mandated and at what levels this will occur • With the increased layers of government and funding that come from a broader tax base, states can devise different approaches to meeting needs within the state

30. 3rd Advantage of “Layered” School Financing • In the multiple layered approach to providing services, the state or the federal government may use its influence to consolidate school operations or the services delivery within school districts • By encouraging efficiency, schools reap the economic and instructional benefits of increasing the achievement impact at a lower cost

31. 4th Advantage of “Layered” School Financing • Allowing individuals the opportunity to select the services that match what they feel they need and want is a powerful psychological phenomenon that ties the all three prior advantages together • Communities tend to coalesce around areas that offer public services matching their personal preferences

32. With fiscal layering & funding, the interplay of the federal, state, and local services provides distinct advantages for individuals to select the type of environment in which they wish to live and what services are important to them. Advantages to Layered School Financing

33. Local Equalization • Usually, the local level does little to equalize for funding • Studies show that, within the same school district, schools in wealthier locations receive a greater funding share than poorer schools • School demographic, achievement, & other data make it necessary to fund schools based on their individual needs for meeting district goals

34. State Equalization • States have a responsibility to equalize funding based on the localities’ capacity to pay for services • States use a formula to determine how the equalized funds are determined • These formulae vary in complexity and effectiveness

35. 1st - States Determine the Floor Level of Educational Services • This is a basic, “no frills” level of services and not what most educators would consider as a program that “meets everyone’s needs” • This floor level funding of services usually consists of computing a dollar figure for professional education positions for a given number of students, technology, special weightings for students, and the like • What states consider in this floor level of services varies

36. 2nd - State Determines the Localities’ Fiscal Capacity • States use a wide variety of factors in determining this wealth formula • Every state uses a different formula • Usually, property values, income tax, and an estimate of locally generated business revenue become a proxy for determining the locality’s ability to fund services • Designing a workable funding formula becomes an increasingly difficult process

37. Urban locations with a large business and industry tax bases tend to have more, different, and much more expensive social, economic, & educational problems than suburban or rural locations with fewer business and industry

38. Rural areas have problems that other areas do not have, including isolation, difficulty attracting teachers, and too few students to afford many high quality educational offerings

39. Coming to a consensus on community values for educational results, the relative weighing of various factors associated with wealth, and the weighing the varying needs within a state can “tax” even the brightest and most eloquent politicians Coming to Consensus

40. 3rd – State Must Decide the Basis for Distributing Funds • Some states believe that the poorest localities should pay nothing towards the floor level of educational services • Instead, they believe the wealthiest localities should pay the entire cost of providing these basic services • Other states believe that every locality should pay something towards the cost of providing these basic services

41. The poorest localities have a composite index of .2 and the richest have a composite index of .8 A poor locality with a .2 composite index would be required to raise 20% of the funding for the Standards of Quality through local sources with the state funding 80% A mid-range locality with a composite index of .5 would fund 50% of the Standards of Quality with local funds and 50% state funds A wealthy locality with a composite index of .8 would fund 80% of the Standards of Quality with the state paying only 20% An Example:Equalization in Virginia

42. Current School Finance Structures • Forward-thinking individuals who saw the need for equalizing school funding, had the ability to “sell” their new ideas to progressive states and localities • These pioneers included Ellwood Cubberley, Robert Haig, Henry Morrison, Paul Mort, George Strayer, and Harlan Undegraff

43. The Next School Finance Leaders • A 2nd generation of school finance scholars, including Roe Johns and Edgar Morphet (around 1940), refined and extended the effort to establish state equalization formulae throughout the country

44. The Next School Finance Leaders, cont. • The 3rd generation of school finance scholars (late 1970’s through today) include Kern Alexander, Richard Salmon, Allan Odden, Lawrence Piccus, and others • They keep working to implement the democratic ideals at the most basic level of education – its financing

45. Current U.S. State School Finance Systems • Flat grants • Foundation plans • District power equalizing • Full state funding

46. Flat Grants • This program distributes state aid to localities based on a flat amount of money on a per-pupil basis or on a defined personnel basis (funding x number of teachers for y number of students) • It does not factor in student attendance or how much additional funding the locality is able to raise independently above and beyond the flat grant

47. Flat Grants Model Amount of state aid per pupil = Total State Revenue Number of Pupils in the State

48. Example of Flat Grants

49. Flat Grant Comparison • In School District A, the state provides 50% of the total per pupil expenditure or a 100% match to what the locality can afford to pay • In School District E, the state provides only 8% of the locality’s total expenditure • While this model does have a large %age impact on the poorest localities, it does very little to equalize revenue • School District E spends more than six times what School District A spends on a per pupil basis

50. Flat Grants Advantages • It can be used in conjunction with other models • Every district receives a uniform per student appropriation. Wealthier localities can supplement • If the state provides sufficient funding in the flat grant for a truly adequate level of education, certain advantages exist for poorer localities