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  • Exploring Alternatives for School-Based Funding 109

    Exploring Alternatives forSchool-Based Funding

    Catherine Clark and Laurence ToenjesTexas Center for Educational Research

    Austin, Texas

    About the Authors

    Catherine Clark is the director of theTexas Center for Educational Research(TCER) in Austin, Texas. She specializes inelementary and secondary education financeand research on school management and gov-ernance. She has recently co-directed a studyof program weights and adjustments in theTexas school funding formula, and has beenco-director of a study of Texas open-enroll-ment charter schools.

    Prior to joining TCER, Dr. Clark servedas a senior research associate at the South-west Educational Development Laboratory,and prior to that as an educational specialistat the Texas State Property Tax Board. Shehas been an adjunct professor at the Univer-sity of Southern California and the LBJ Schoolof Public Affairs. She is a former middleschool teacher.

    Dr. Clark serves on the editorial board ofthe Journal of Education Finance and servedon the Board of Directors of the AmericanFinance Association from 1993 to 1996. Dr.Clark is a graduate of Stanford University witha doctorate in education (1978).

    Laurence Toenjes is a research facultymember of the University of Houstons De-partment of Sociology. His current work isfocused on the disparities in student perfor-mance among Texas campuses of comparablesocio-economic characteristics.

    Dr. Toenjes has been an active participantin school finance analysis in Texas during thepast decade, and has also participated, as aprivate consultant, in school finance policyanalyses in several other states. He has cre-ated computerized school finance models forthe states of Illinois, Texas, Missouri, and Ne-braska.

    A primary interest of Dr. Toenjes is thedevelopment and use of interactive computergraphics software to display and analyzeschool finance and student performance dataand to use of such techniques to communicatefindings to policymakers.

    Dr. Toenjes has received his doctorate ineconomics from Southern Illinois University.

  • 110 Selected Papers in School Finance, 1996

  • Exploring Alternatives for School-Based Funding 111

    Exploring Alternatives forSchool-Based Funding


    Papers in



  • 112 Selected Papers in School Finance, 1996

  • Exploring Alternatives for School-Based Funding 113

    Exploring Alternativesfor School-Based Funding

    Catherine Clark and Laurence ToenjesTexas Center for Educational ResearchAustin, Texas

    pectations. Experts argue that because exist-ing financing mechanisms focus on inputsrather than outcomes, they exacerbate the prob-lems arising from the disconnection of deci-sion making and school purposes. For ex-ample, larger districts allocate resources tocampuses using mathematical formulas thattake into account grades served, school size,class size, and attendance.3 In most large dis-tricts, teacher positions are allotted to schoolsaccording to enrollment and class-size require-ments rather than academic strengths andweaknesses of students.4 Counselors andnurses may be assigned on the basis of totalenrollment. Supply and material budgets maybe allocated based on enrollment by grade,rather than on the basis of program need. Thepractical effect of this approach is that mostschool principals have their input units identi-fied and purchased for them before school be-gins in the fall. Many administrators and edu-

    Recent studies report that school financeand governance mechanisms in large schooldistricts are weakly linked to effective opera-tions of modern schools.1 Central offices andboards of education determine budgets, hir-ing policies, textbook purchases, curriculum,hours of operation, personnel evaluation sys-tems, and student assessment policies. Indi-vidual schools respond to central policies anddirectives, with the result that decision mak-ing authority for those closest to students islimited and direct accountability for results iscompromised.

    A similar conclusion set forth by schoolfinance and governance experts is that districtresource allocation is inappropriately alignedwith areas in which decisions should be madeto improve student performance.2 Allocationformulas fail to consider current and past per-formance or state and local performance ex-


    1 See Twentieth Century Fund Task Force on School Governance (1992); Chubb and Moe (1990); and Bimber (1994).2 See Guthrie (1996); Odden (1993); and Wohlstetter and Van Kirk (1996).3 See Kehoe (1986) and U.S. Department of Education (1989).4 See Mosteller (1995).

  • 114 Selected Papers in School Finance, 1996

    proach is to establish law or policy requiringschool districts to allocate a fixed percentageof revenue directly to schools.9 If a fixed per-cent were allocated to schools, districts wouldpass along all but a fraction of total revenueto the schools.

    This study examines the practical appli-cation of targeting a large percentage of schooldistrict resources for direct pass-through toschools. A background section sets the con-text for the study and describes the datasources. We use data from Texas school dis-tricts and campuses to explore expenditurepatterns among districts and campuses undercurrent law. Then, again using Texas data,we simulate the results of pre-established al-location percentages. The study also exploresthe relationship between teacher salaries andexpenditures to test the hypothesis that teachersalaries are the major driver of resource dif-ferences. The final portion of the study de-scribes two approaches to school-based fund-ing in Texas. We conclude with a summary ofthe issues and problems related to the school-based funding approaches.


    Micro-level School Finance

    Numerous studies have explored the lev-els and uses of resources directed toward theschool.10 Micro-level studies examine the eq-uity of resource distribution across campusesand analyze the efficiency of resource use atthe site level. Using data from the 198788Schools and Staffing Survey and the U.S. Bu-reau of the Census, Census of Governments,1987, Picus (1994) examined district as wellas school spending patterns. He found spend-ing patterns to be similar across districts, re-

    cators view this approach as an even-handedway to share resources, but the end result isthat campus administrators have very few re-sources with which to respond to unique cam-pus needs. Further, the situation creates anenvironment where central decision makersmay decide to respond to educational needsby increasing spending and responsibility atthe central level, for example, by adopting areading program for all elementary schools inthe district rather than providing resources di-rectly to schools to respond to instructionalneeds.

    According to Guthrie (1996), the problemof disjuncture in decision making and schooloperations is most acute in large school dis-tricts which rely on formulas to distribute re-sources and services to schools.5 And despitethe belief that formula funding is fairer, thereare wide disparities of per-pupil resources re-ported among schools in large districts.6

    Guthrie suggests that the major source of dis-parities is the teacher salary system. A schoolwith experienced and higher-paid teachers getsmore resources in the typical system than aschool with many inexperienced teachers. Ifteachers with seniority can select where theywork, the least desirable schools will be leftwith less experienced teachers and fewer totalresources. To improve equity and instructionalefficiency as well, Guthrie (1996) recommendsthat districts allocate a higher percentage ofresources to schools directly in dollars, not instaffing positions and allotments keyed toschool size characteristics.7 Schools will thendetermine what inputs are needed and specifythe quantity they want to purchase, includingthe number and expertise of the teachers. Oneapproach could be a funding system where ahigh percentage of state resources flows di-rectly to schools in block grants.8 Another ap-

    5 Guthrie (1996) p. 10.6 See Hertert (1996).7 Guthrie (1996) pp. 1011.8 See Odden (1993).9 See Guthrie (1996) and Odden (1993).10 See Cooper (1993); Monk (1992); Rossmiller (1983); and Odden (1993).

    To improve

    equity and


    efficiency as well,

    . . . districts

    [could] allocate a


    percentage of

    resources to

    schools directly

    in dollars, not

    in staffing

    positions and

    allotments keyed

    to school size


  • Exploring Alternatives for School-Based Funding 115

    gardless of other characteristics, but patternsamong individual schools were different.11

    Overall, he found that when real per-pupil re-sources increased, the additional revenueswere spent primarily at the school level. About40 percent were allocated toward reducingclass size (with more teachers) and 10 percentto increasing teacher salaries. The remaining50 percent provided more services for schoolsand students. Additional studies underway atCornell University (Monk), Fordham Univer-sity (Cooper), and the University of Wiscon-sin (Odden and Busch) will add to understand-ing of resource distribution across schoolswithin districts or systems.

    Micro-level school finance has become aproductive field of study for enhancing ourunderstanding of where and how dollars makea difference in producing educational out-comes. Better use of limited resources for im-proving educational attainment for all studentswill require administrators and teachers toknow the most productive and effective ap-plication of resources.12 Studying school-based funding


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