Clearinghouse on Educational Policy and Management College of Education · University of Oregon
	"Search Help" Note that this is a web site search and will not search our databases ("Directory of Organizations", "In-Process Abstracts", the ERIC Database, "Publications").	Trends and Issues: School Finance Discussion Links References Resources Future Policy and Research Directions Reinventing School Finance Participants at a seminar sponsored by OERI's National Institute on Educational Governance, Finance, Policymaking, and Management (1997) identified four research areas needing special attention. At the top of the list were issues related to educational inputs and outcomes, especially the quest for innovative and stable educational-finance models. The report stated: As they redesign their finance systems, policy-makers want to know how such systems may be linked to performance; how states can finance the costs of designing and implementing new assessment systems; how states and local districts can accommodate rising enrollments, finance repairs of aging facilities, and fund equitable access to technology; and how special-education costs have affected general-education budgets. A couple of years earlier, Odden and Clune (1995) put together a list of strategies for reinventing school finance. They suggest that states set fiscal-policy targets for improving equity and that fiscal-equity targets be structured around an appropriate foundation plan, a tax base keyed to the 90th percentile of statewide wealth per pupil, and an additional compensatory amount to provide services for poor children. New Directions in Public-Sector Accounting According to Cooper and associates (1999), school leaders could learn much from trends in managerial accounting, particularly its methods "for relating costs to improved productivity." Educational productivity (as in other fields) "requires good information on the quality of results (as measured by tests, portfolios, graduation rates, and other indicators) that can be related to programs and their costs." To accomplish this goal, accounting practices must make several necessary shifts: from regulatory to managerial accounting (useful to end-users as well as government agencies) from separate to integrated reporting systems (relating fiscal data to teaching and learning functions and their results) from general to focused/activity-based accounting from centralized to decentralized accounting from control-driven to mission-driven accounting (Cooper and others) In another article, Cooper and two other finance experts (2001) tout the arrival of the "techno-revolution in the world of school business officials." They discuss four effects of technology on budgeting and financial management of schools: enhanced strategic planning and mission building; budget standards without standardized spending; a movement from system to student; and integration of multiple reporting systems. Advanced budget technology (ABT) is a promising development, they say, since it combines updated accounting methods, best management practices, and the latest Internet linking capabilities. ABT will assist reform-minded educators in several areas: mission directedness, efficiency and cost-effectiveness, data accessibility, assessment and feedback, and improved accountability for revenue and expenditures. Lack of data comparability and of sophisticated budget reporting could hinder development and implementation of ABT systems. Strategies for Enhancing School Productivity To improve productivity, states may want to provide additional adjustments to augment organizational teaching capacity, reward exceptional teaching performance, and develop and administer a statewide student-achievement test, accompanied by strategies for helping struggling students succeed. Greater productivity would also result from decentralizing educational finance. States could require districts to transfer at least 85 percent of the budget directly to schools or bypass districts entirely, as is done in Australia and as has been recommended by the Chicago Panel on School Reform. Since any move to decentralize school management calls into question the single-salary schedule, more research is needed on how to align teacher compensation with standards-based reforms and how to make beginning teachers' salaries more competitive and veterans' remuneration more knowledge-oriented (Odden and Clune 1995). Pay-for-performance plans are promising approaches that need further research. Seeing resource re-allocation as the key to "teaching all students to high standards," Odden and Archibald (2000) advise school-district leaders to create new, more effective sets of educational strategies that match students' needs and staff members' capabilities; cooperate with unions to make teacher contracts more flexible; provide schools with lump-sum, zero-based budgets; and create a "pot" of professional-development money from reallocated resources. Meanwhile, Odden and Archibald advise state leaders and education policymakers to create initiatives that encourage schools to develop schoolwide strategies for educating students to high standards; develop a student-performance and school-level accountability system dispensing both rewards and sanctions; and require districts and schools to create a "funding pool" (totaling up to 3 percent of the operating budget) for intensive, ongoing professional-development activities. Odden and Archibald recommend that federal leaders and education policymakers retrain state and local officials to shift their emphasis in using Title I funds from fiscal tracking to implementing "key programmatic elements of effective schoolwide strategies. They should also continue the Ed-Flex program, which encourages schools to pool dollars from several different categorical programs and use them for more effective, schoolwide strategies; continue and expand the Comprehensive School Reform Demonstration Program that provides schools with grant money to fund such programs; and "enhance accountability programs that focus on student performance results." Programs such as Success for All, Accelerated Schools, and the New American Schools designs are worthy examples (Picus 2001). Creating a Federal Equalization Role In ordering more equitable spending among school districts within states for the past thirty years, state courts may have ignored an even greater inequality--the difference in how much is spent on education in rich versus poor states (Rothstein 2001). Existing federal-aid programs such as Title I may actually exacerbate this problem, as states with high per-pupil spending receive more federal dollars per pupil than lower spending states. Richard Rothstein sees equalization of per-pupil spending among states as a unique and necessary federal role—despite the inevitable political ramifications. Any subsidization plan for low-spending states, however, would have to consider relative purchasing power among states and regions, differentials involved in teaching disadvantaged and advantaged children, and the problem of creating incentives for states and communities to reduce their own equalization efforts. A Laundry List of School Finance Challenges During the next several years, both educators and policymakers will face several challenges: Balancing concerns for equity and quality in state/local financial and academic accountability systems. Finding and/or lobbying for new monies (from state and local sources) and obtaining federal aid (such as Impact Aid, and Qualified Zone Academy Bonds) for financing school construction and renovation projects to satisfy court mandates and provide a more wholesome physical learning environment. Funding the full costs of educational technology equipment, infrastructure, and training, possibly by adopting total cost-of-ownership analytical tools (Bolton 2001) while increasing access to technology. Resolving clashes among competing reform strategies (such as standards versus school choice) and deciding which are genuinely worth funding. Balancing fiscal decentralization efforts (like school-based budgeting) with re-centralization trends driven by court-mandated school-finance reforms and the standards movement. New-found budgeting freedom for principals and teachers is being eroded by governors' and legislators' demands for heightened oversight. Seeking more stable and equitable funding sources for athletic programs and other co-curricular activities. This means addressing the current public policy of assessing student fees to support activities that previously were publicly funded (Statz 2000). Advocating/partnering to improve economically disadvantaged children's neighborhoods and living conditions so that public monies can be used more productively and students can realize their full learning potential. Considering the actual effects of lotteries, local fund-raising practices, and corporate tax incentives on school revenues. Using categorical funds (such as Title I and IDEA) and "adequacy" funding creatively and responsibly to reallocate educational resources to benefit the most disadvantaged and needy students (Odden and Picus). According to WestEd researchers (2000), western states face special challenges, including lower school-funding levels than other regions, soaring enrollment, and growing student diversity. Experts advise practitioners and policymakers to consider the national median as the minimally adequate funding base, increase spending to support school and teacher capacity, and seek federal assistance in exchange for increased accountability. The Mission of Education Finance As the OERI Institute's (1997) participants observed, "education finance is the foundation that enables schools to exist and teaching and learning to occur." For desired outcomes to be fully realized, school finance must never be considered in isolation, but "must be viewed as an essential part of any major reform plan" (Hirth 1996). As Denny Bolton (2000) notes, states must do more than provide a major share of funding; what's needed is "a coherent direction or philosophy in their school finance systems" so that money truly matters in public education.