1. Chapter 8 Equity and Adequacy

2. Two other sides of Fiscal Effort:
Equity &
Adequacy.

3. Equity Should Not be Confused with Equality
Equality means treating everyone the same under the law
Equity involves giving people the treatment they need

4. Spending Equality ?
If equality governed school spending, everyone would receive the same level of funding
Everyone cannot be treated the same because needs differ
Equality cannot be the sole principle to govern school finance.

5. Spending Equality ?, cont.
Inherent inequities exist within school districts, schools, and within classrooms
Staffing a special education classroom costs more than
staffing a general education classroom

6. Equity: A Medical Model
A patient suffering with a rare form of cancer costs more to treat than
the well one who
needs only a flu shot
No one would expect both patients’ bills to be the same. One will necessarily cost
more than the other
So it is with education. Some of our patients’ needs will cost more to care for than others.

7. 2 Hypothetical School Systems
1st - Urban school system with:
25% of its students identified as eligible to receive special education services
50+% of the student body reading more than two years below grade level
90% of the students eligible for free or reduced-price lunch

8. 2 Hypothetical School Systems, cont.
2nd -Suburban school system with:
99% of its students reading on or above grade level
2% identified as eligible to receive special education services
0% eligible for free and reduced-price lunch

9. 2 Hypothetical School Systems, cont.
To provide funds necessary for each school systems to be successful will be more costly for the first school system
For both to be funded equally, at some arbitrary level, would be inherently INequitable
The second school system has much greater needs and subsequently greater costs.

10. School Finance & EQUITY
School finance must be concerned with equity – providing what students need
Measuring equity becomes
complicated & requires
sophisticated statistical procedures
Measuring equity has also been the basis of legal challenges of many states’ finance formulae

11. Equality Is an Important Principle
When schools or school systems are considered equal, their funding should be equal

12. Schools A & B Both schools have similar facilities and programs
Both secondary schools in the same school district.
Both have 1,500 students.
Both have the same % of students:
On free and reduced lunch
Eligible for special education
Going on to higher education upon graduation
Both schools have similar facilities and programs

13. Schools A & B, cont. If the funding for School A were 20%
higher than for School
B, we would consider
there to be a fundamental
unfairness in the funds
allocation.

14. Horizontal Equity
Students who are alike should receive equal shares (of funding)
Horizontal equity is measured by calculating the dispersion, or inequality, in the distribution of funds
When there is no dispersion in funds, one can assume there is perfect horizontal equity

15. Horizontal Equity, cont.
When this occurs, there are equal expenditures in funding levels such as in per pupil expenditures, student/teacher ratios, equal teacher resources, and the like across various measures.

16. Horizontal Equity, cont.
Horizontal equity can be applied broadly in comparing large and similar subgroups of students
For example, we can compare:
All vocational students at the high school level
All full-day kindergarten students
All students in general education elementary classrooms
In this case, we would expect spending, or resource allocation, to be substantially similar for each of these rather large subgroups.

17. Research Trends Unclear
One 50-state study revealed that between 1970 and 1975,spending disparities among states increased
Another study showed that several states involved in school finance reform improved horizontal equity & fiscal neutrality,
A 1997 General Accounting Office study found substantial improvements in equity over time
Other studies show that significant financial disparities still remain in horizontal equity among the states
[1] Brown, Lawrence. (1977). School finance reform in the Seventies: Achievements and Failures. Washington, D.C.: US Department of Health, Education, and Welfare, Office of the Assistant Secretary for Planning and Evaluation and Killalea Associates, Inc.
[2] Odden, Allan, Berne, Robert, and Stiefel, Leanna. (1979). Equity in School Finance. Denver: Education Commission of the States.
[3] General Accounting Office. (1997). School Finance: State Efforts to Reduce Funding Gaps between Poor and Wealthy Districts. Washngton, D.C. Author.
[4] Hertbert, Linda, Busch, Carolyn, and Odden, Allan. “School Financing Inequities Among the States: The Problem from a National Perspective.” Journal of Education Finance 19(3),

18. Vertical Equity
Vertical equity recognizes that students and schools are different and that the treatment of unequals requires appropriate unequal treatment
While horizontal equity is rather easy to quantify, vertical equity choices are based on value

19. Vertical Equity, cont. “Appropriate treatment”
varies from one school division
to another.

20. “Appropriate Treatment”
Legitimate factors must be identified that can be used to allocate resources differently based on:
The characteristics of the students
The characteristics of the schools or the school districts
The characteristics of various programs

21. Legitimate Factors Include:
Percent of eligibility for free and reduced lunch
Percent of students speaking English as a second language
Percent of students involved with special education services
Most educators would agree that serving these students’ needs requires additional services if they are to meet the challenges of high-stakes testing programs such as No Child Left Behind.

22. Fiscal Neutrality
Equity is achieved when the distribution of services is determined by the taxpayers’ preferences for education and not by the fiscal capacity of the locality or state
This is also known as taxpayer equity or wealth neutrality

23. Reconciling Fiscal Neutrality & Equity
How do states provide for fiscal neutrality while assuring equity?
By calculating a lower cost for services to those who can least afford to pay for the services =
Equalization of
Funding.

24. Equalizing Funding
Each state provides some method for equalizing the funding within its boundaries
More than 2/3 of the 50 states have had their state funding formula contested in court
The equalization concept is a continuum that ranges from total equalization to no equalization

25. Absolute & Approximate Fiscal Equalization
Absolute fiscal equalization is more of a theoretical goal than a practical achievement
While it is possible in theory, it is virtually impossible to achieve politically

26. Absolute Fiscal Equalization
Absolute fiscal equalization is achieved whenever the following three objectives are achieved:
Variance in fiscal position among local school districts has been neutralized
Variance in fiscal effort among local school districts has been eliminated
Variance in educational needs due to incidence of clients has been accommodated

27. Absolute Fiscal Equalization, cont.
Absolute fiscal equalization is achieved whenever the following three objectives are achieved:
Local school divisions have equal resources to fund schools
Local school divisions make equal effort to fund schools
Schools spend what is needed to educate students with special learning needs

28. Absolute Fiscal Equalization, cont.
This definition achieves fiscal neutrality and addresses the issues of horizontal and vertical equity
This is a theoretical and not a practical concept

29. Approximate Fiscal Equalization
Approximate fiscal equalization is achieved whenever the following three objectives are achieved:
Variance in fiscal position among local school districts has been neutralized
Constrained variance in fiscal effort among local school districts is permitted
Variance in educational needs due to incidence of clients has been accommodated

30. Approximate Fiscal Equalization, cont.
Approximate fiscal equalization is achieved whenever the following three objectives are achieved:
Local school districts have equal resources to fund schools
Local school divisions have some leeway in how they raise & spend money for schools
Schools spend what is necessary to educate students with special learning needs

31. Absolute & Approximate Fiscal Equalization
The two definitions are similar except:
The 2nd condition allows for constrained or controlled spending by the local school districts
Neutralized fiscal position and meeting clients’ educational needs in spite of the local capacity are still required

32. State Aid Grants to Districts
Each state equalizes for the fiscal capacity of local districts through its method for funding localities
This funding usually comes through grants of various types

33. State Aid Grants Continuum
Inequity Equity
Non Matching Flat Equalization Full State
Equilization Grants Grants Grants Funding
Grants

34. Nonequalization Grants
Non-equalization grants make no attempt to equalize funding for the capacity of local school districts
Grants may be categorical aid to school divisions allocating a constant dollar amount on a per pupil basis based on an application process
Poorer school divisions may not have the personnel to write the grants enabling them to qualify for the funds

35. Flat Grants
Flat grants provide a fixed amount of funding per pupil to each school district in the state
This funding is not based on the locality’s fiscal capacity
Most states do not use flat grants as the primary vehicle for distributing funds to localities

36. Examples of Flat Grants
California’s Constitution requires $120 of state funding per pupil to each locality – regardless of the locality’s fiscal position
Virginia’s Constitution requires that
the locality fund
no more than
80% and no less
than 20% of
state standards,
regardless of
the locality’s capacity

37. Equalization Impact of Flat Grants
School Local Local Flat Grant Total Spending
District Property Revenue Amount Per Pupil
Value
A $ 5, , ,050
B $ 50, , ,500
C $250, , ,500
D $500, , ,000

38. Flat Grants with Increased State Support
School Local Local Flat Grant Total Spending
District Property Revenue Amount Per Pupil
Value
A $ 5, , ,025
B $ 50, , ,250
C $250, , ,250
D $500, , ,500

39. Flat Grants with Increased State Support, cont.
Greater burden placed on the state to provide for education services reduces the disparity in total per pupil spending, increasing equalization.

40. Equalization Grants
Equalization grants provide for greater state funding for the localities with less capacity to raise their own funds and
provide for less state
funding for the localities
with greater capacity

41. Foundation Programs
Foundation programs are a means of providing equalization grants to school systems
A foundation program establishes some minimum level of per-pupil funding that must be met with a combination of local and state funding
No district can fall below this foundation level

42. Foundation Programs
Once the foundation level has been met, local districts are free to supplement funding, called leeway funds, to achieve a higher level of per-pupil spending if they so elect

43. Foundation Grants
Local State Foundation Local Total
Capacity Aid Level Leeway Funding
A $ 1, , , ,000
D $ 7, , , , ,500
E $ 10, , , ,500

44. Foundation Grants Equalize Funding
In this scenario, school district E has ten times the capacity of school district A, yet spends only 25% more on a per pupil basis
Where the capacity differential was initially 10 to 1, the spending differential due to the foundation formula is now only 1 to 1.25

45. What This Means for Students
The poorest school district (A) now has the financial means to provide the state’s the minimum foundation level – regardless of their capacity to fund education services
This enables school district A to compete with district E in terms of programs, in effect raising the education bar for all students in that state

46. “Minimum” Funding?
State legislatures frequently see the word minimum as the spending limits
Too often “minimum” becomes the target level of funding and does not advance beyond the minimum

47. “Minimum” Funding?, cont.
Localities may elect not to add sufficient leeway funds (based either on values or available resources) while higher capacity systems may add substantially higher dollar amounts, exacerbating the per pupil spending disparity

48. “Minimum” Funding?, cont.
State governments may be reluctant to set adequate levels of spending for a foundation program because elected officials cannot agree on what is “adequate”

49. Guaranteed Tax Base Programs
A second type of equalization grant is the Guaranteed Tax Base program (GTB)
GTB programs guarantee that each locality can operate as if all school districts had an equal per pupil property tax base

50. Guaranteed Tax Base Programs, cont.
The state determines its share of spending for the total cost of education
The formula then provides a means for deciding how much funding would come to each locality, based on a measure of their wealth
More state funding goes to low capacity systems while less aid goes to high capacity systems

51. Guaranteed Tax Base Programs, cont.
Once the state aid is calculated, the tax rates are equalized so the same tax yield is achieved for rich or poor districts

52. Guaranteed Tax Base Programs, cont.
A recapture clause provides that the state recaptures extra funds generated by wealthy localities and dispenses them to poorer localities, effectively increasing the state’s floor level of services

53. Combination Programs
Other equalization formulae exist as hybrids between foundation programs and equalization programs
These programs take the best of other formulae and apply those components to their particular conceptual framework

54. Calculating Vertical Equity
Vertical equity means providing what people need
Vertical equity recognizes that students and schools are different, and that the treatment of unequals requires appropriate unequal treatment

55. Weighted Pupil Approach
Determining a base cost for various categories of students
Once the lowest base cost is determined it is given a weight of 1.0

56. Weighted Pupil Approach Example
Florida bases a weighting of 1.0 for the students in basic programs in grades 4 through 8
Kindergarten and grades 1 through 3 are weighted slightly higher with high school grades being even higher
Weightings for vocational and special education are significantly higher ranging up to a factor of 15

57. Determining Adequacy by “Costing Out”
After determining a “weight” for different services and learning needs, many school districts established means for “costing out” related services with state and federal funds
Method used to determine the “costing out” of services can vary from state to state, district to district

58. Example: “Costing Out” Special Education Services
Special Education Category Weighting
Emotionally Disturbed
Socially Maladjusted
Deaf
Specific Learning Disability (part time)
Visually Disabled (part time)
Hospitalized and Homebound (part time) 15.0

59. Fiscal “Adequacy” is a Value-Driven Concept
What is “enough” money to fund a school district?
To what standard of academic
excellence for all pupils?
For what unique learning needs
of this student population?
With which academic elective,
extra- and co-curricular offerings?

60. Fiscal Adequacy
Attempts to quantify “adequacy” and how much a state or school district needs to spend for its students remains ambiguous.
The “adequacy” concept has been challenged in court since the 1990’s.

61. Fiscal Adequacy, cont.
Recent legal challenges have shifted from disparities in school funding to adequacy issues.

62. A Definition of “Adequacy”
“…providing sufficient funds for the average district/school to teach the average child to state standards, plus sufficient additional revenues for students with special needs to allow them to meet performance standards as well.”
Odden, A. and Piccus, L. (2004). School Finance: A Policy Perspective,
3rd ed. New York: McGraw-Hill.

63. Fiscal Adequacy School finance experts refer to four methods for
discussing the concept of fiscal “adequacy”:
     
Economic cost function
Successful school district
Professional consensus
Cost of effective school-wide strategies (also known as state of the art or best practices)

64. Economic Cost Function Approach
This statistical approach is used more frequently in business than in education
Economic cost function tries to answer how much money per pupil is needed in a given school district to produce a certain level of student performance

65. Economic Cost Function Approach, cont.
The result demonstrates the per pupil expenditure necessary to achieve certain levels of student performance given the student and district characteristics

66. Economic Cost Function Approach, cont.
This model reflects certain values in determining adequacy
Some individuals or community values play a role in deciding how much a community is willing to spend to achieve a certain level of student achievement

67. Research Shows Wide Variation in Adequacy Levels
The adequacy spending levels ranged from 49 % to 460 % of the average in Wisconsin & 75 % to 158 % in Texas.
In Wisconsin and Texas, the adequate expenditure level for large urban school districts ranged from three to four times that of the average district.

68. Successful School District
This method identifies school
districts which have had success
in bringing student performance
to state proficiency standards
This approach then sets the adequacy spending level to the weighted average of the expenditure level of the successful districts

69. Problems with Successful School District Approach
This method omits outliers (atypical districts) from the equation
Unfortunately, virtually all large, urban areas, very wealthy and very poor districts, as well as small, rural systems are eliminated
It also may inaccurately represent the actual costs of delivering adequate services in the atypical districts

70. Limitations: Successful School District Method
Districts that have been identified as successful are generally average in size, non-urban, with little diversity in their student make up
These districts also tend to spend less than the state average

71. Limitations: Successful School District Method, cont.
Omitting schools that must address the major challenges that one finds in the “real world” artificially lowers the level for achieving success, raising questions about its usefulness and validity

72. Professional Consensus (“Judgment”) Approach
Educational professionals identify the components of a “prototype” school they believe would enable the staff to teach students to some predetermined performance level
The costed-out factors (number of professional and support staff, technology, instructional resources, etc.) add up to determine a school’s adequate financial base (that can be adjusted for varying student demographics)

73. Limitations: Professional Consensus Approach
Provide little differentiation
for the average school and
one with a high concentration
of at-risk students
In spite of this drawback, the professional consensus approach is gaining interest at the state level

74. State-of-the-Art Approach
Selects research findings on student achievement, frequently seen in high-achieving schools
Identifies all ingredients needed for those research-identified teaching and learning strategies
Determines a cost basis for each of the strategies
Determines what an adequate base of spending for the school should be

75. State-of-the-Art Approach, cont.
Funding determination is made for the school level and not as an average for the school division
This approach allows the school to use a number of school-wide strategies that state-of-the art researchers and practitioners claim are most effective