5/6/2015 public school finance 1 a framework for assessing equity and adequacy in school finance

04/18/23 Public School Finance 1

A Framework for Assessing A Framework for Assessing Equity and Adequacy Equity and Adequacy

in School Finance in School Finance


• Defining and measuring equity and adequacy in school finance

Today’s LectureToday’s Lecture


First, Some Basic TermsFirst, Some Basic Terms

• Revenues for public schools derive primarily from local (42%) and state (51%) sources, with about 7% from the federal government

• State revenues derive from a variety of state taxes—income both personal and corporate, sales, and fees. States rarely dedicate any tax or portion thereof to education. Sometimes that happens, but for only small amounts.


Basics, Continued…Basics, Continued…

• Local revenues derive largely from local property taxes

• Local property taxes are a result of a property tax rate—%, dollars per hundred, mills—levied against a property tax base

• The local property tax base is assessed value of property

• Revenues or yield is the product of the rate times the base—see Chapter 3


More Basics…More Basics…

• Sometimes assessed value is only a percent of market value—in Wisconsin, it is supposed to be market value

• Since local assessments vary in their ability to identify the precise value, states often adjust local evaluations to a common base, using assessment–sales ratio studies, and use the “equalized” valuation in the school aid formula


BasicsBasics——RevenuesRevenues• Revenues are identified as from

local, state, federal, or other sources and whether for general purposes or restricted or “categorical” purposes, such as aid for disabled students, transportation, the federal Title I program for students coming from families with low incomes, etc.


BasicsBasics——ExpendituresExpenditures

• Expenditures are divided into total, which includes capital, and operating, which excludes capital (buildings, buses, computers?)

• Current operating expenditures are reported by:– Object: salaries, benefits, etc.– Function: instruction, instructional support,

administration, operation and maintenance, transportation, food, debt service, etc.


BasicsBasics——Expenditures, Expenditures, ContinuedContinued

– Program—regular education, special ed, bilingual ed, comp ed, gifted & talented, instructional support (which could have a professional development program), central admin, site admin, transportation, operations and maintenance, etc.

• “Educational” expenditures are generally instruction, instructional support, and administration, and exclude transportation, operations and maintenance, food, etc.


BasicsBasics——Expenditures, Expenditures, ContinuedContinued

• Beginning to report expenditures by numbers, types, and deployment of professionals—core academic teachers, instructional facilitators/mentors, noncore teachers (art, music, PE, library), tutors, resource room teachers, inclusion teachers, counselors, instructional aides—and how deployed


BasicsBasics——Pupil CountsPupil Counts• Enrollment—students enrolled as

measured on a day, month, or whatever• ADM—average daily membership—closer

to an enrollment figure• ADA—average daily attendance—measure

of number of students who attend school• Weighted pupil counts—WADA or WADM—

give extra “weight” to students with special needs who require more help and thus expenditure


School Finance AnalysisSchool Finance Analysis• Ex ante or ex post• The unit of analysis

– District, but moving towards the school– Statistically weight for number of kids

• Objects– Fiscal and physical inputs– Processes– Outcomes or results


ObjectsObjects• Usually operating on current

expenditures• Total current operating? Or some

subset excluding items like transportation, food, etc.

• If revenues, just state and local, or from all sources: local, state, and federal?

• Some movement to class size, numbers and quality of teachers, actual class size (i.e., not pupil–staff ratios)


Data SourcesData Sources

• Always indicate data sources after the above decisions—where data came from, what specific data one has, etc.


The GroupThe Group

• Students, taxpayers, teachers, parents, etc.

• Taxpayer equity analyzed within a public finance, tax framework

• We focus on equity for students– Equal spending– Equal spending plus adjustments for

needs– Spending not linked to local “wealth,”

(i.e., property value per pupil)


Four Equity ConceptsFour Equity Concepts

• Fiscal neutrality—equal opportunity in first edition

• Horizontal equity• Vertical equity• Adequacy


Fiscal NeutralityFiscal Neutrality• Educational objects (resources, etc.)

cannot be a function of local wealth• Measure connection between

property wealth per pupil (or family income) and object

• Measures– Correlation coefficient– Simple wealth elasticity

• Standard is less than or equal to 0.1


School Finance Structure School Finance Structure Linked to Fiscal NeutralityLinked to Fiscal Neutrality

• Guaranteed Tax Base or Power Equalizing– The “solution” to varying levels of

property tax base per pupil– But, this structure lowers the price of

educational services, so it stimulates education spending

– And, today we know this type of system exacerbates fiscal differences when the “new” school finance problem characterizes the data—as it does in WI


Horizontal EquityHorizontal Equity

• Object, such as spending per pupil must be equal across all districts or schools

• Measured by– Range, restricted range—problems

with these measures– Coefficient of variation (<0.1)– McLoone Index—bottom half (>0.95)– Verstegen Index—top half


School Finance Structure School Finance Structure Linked to HorizontalLinked to Horizontal

• Uniform, state-determined spending per pupil for all districts and schools

or maybe• Very high foundation expenditure

level with a modest amount of local spending discretion


Degree of Horizontal Degree of Horizontal InequitiesInequities

• Two-thirds of all spending differences across districts are caused by between rather than within-state disparities

• If eliminate all within-state spending differences, 2/3 of all differences would remain (50% if adjust all numbers for geographic price differences)

• Need for cross state approach to reduce fiscal disparities, which would be a federal initiative


Vertical EquityVertical Equity• Caused by varying student (low

income, disability, English proficiency), district (large or small size, price differences), or school needs (size, etc.)

• Former can be addressed with pupil weights that indicate degree of additional need, or by categorical programs—we can make size adjustments but controversial; we do have geographic price indices, but…


Measuring Equity with Measuring Equity with Vertical Equity Vertical Equity AdjustmentsAdjustments

• Exclude state and federal categorical programs when calculating fiscal neutrality or horizontal equity statistics

• Include state and federal categorical programs but then weight the students– Use actual state weights OR– Use weights from research (GAO; Odden,

Busch, and Kucharz, WI research)—2.3 for disabled, 1.25 for low income, and LEP are the common pupil weights


Educational AdequacyEducational Adequacy• Sufficient programs and services to

teach students to state and district standards – PLUS additions for students with special

needs

• Determining the cost• Implement through a foundation

school finance program


Measuring AdequacyMeasuring Adequacy• Odden–Picus Adequacy Index• Based on the adequate spending level• 100 minus the Adequacy Index times

the adequate spending level indicates how much more money per pupil is needed to bring all students up to an adequacy expenditure—this extra would only be for students now with an inadequate expenditure level


Determining AdequacyDetermining Adequacy• Identifying inputs and costing them

out, professional consensus—Washington, Resource Cost (Chambers), and now Guthrie

• Linking spending levels to performance levels—successful district approach of Augenblick and cost function research of Reschovsky, Duncombe

• Identifying research findings and elements of a comprehensive school reform model: state of the art—Odden

5/6/2015 public school finance 1 a framework for assessing equity and adequacy in school finance

Documents

public school finance

school finance slide

school aid formula slide

local revenues

public schools

deployed slide

school weighted pupil

local property tax base