2Two other sides of Fiscal Effort: Equity &Adequacy.
3Equity Should Not be Confused with Equality Equality means treating everyone the same under the lawEquity involves giving people the treatment they need
4Spending Equality ?If equality governed school spending, everyone would receive the same level of fundingEveryone cannot be treated the same because needs differEquality cannot be the sole principle to govern school finance.
5Spending Equality ?, cont. Inherent inequities exist within school districts, schools, and within classroomsStaffing a special education classroom costs more thanstaffing a general education classroom
6Equity: A Medical Model A patient suffering with a rare form of cancer costs more to treat thanthe well one whoneeds only a flu shotNo one would expect both patients’ bills to be the same. One will necessarily costmore than the otherSo it is with education. Some of our patients’ needs will cost more to care for than others.
72 Hypothetical School Systems 1st - Urban school system with:25% of its students identified as eligible to receive special education services50+% of the student body reading more than two years below grade level90% of the students eligible for free or reduced-price lunch
82 Hypothetical School Systems, cont. 2nd -Suburban school system with:99% of its students reading on or above grade level2% identified as eligible to receive special education services0% eligible for free and reduced-price lunch
92 Hypothetical School Systems, cont. To provide funds necessary for each school systems to be successful will be more costly for the first school systemFor both to be funded equally, at some arbitrary level, would be inherently INequitableThe second school system has much greater needs and subsequently greater costs.
10School Finance & EQUITY School finance must be concerned with equity – providing what students needMeasuring equity becomescomplicated & requiressophisticated statistical proceduresMeasuring equity has also been the basis of legal challenges of many states’ finance formulae
11Equality Is an Important Principle When schools or school systems are considered equal, their funding should be equal
12Schools 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 lunchEligible for special educationGoing on to higher education upon graduationBoth schools have similar facilities and programs
13Schools A & B, cont. If the funding for School A were 20% higher than for SchoolB, we would considerthere to be a fundamentalunfairness in the fundsallocation.
14Horizontal EquityStudents who are alike should receive equal shares (of funding)Horizontal equity is measured by calculating the dispersion, or inequality, in the distribution of fundsWhen there is no dispersion in funds, one can assume there is perfect horizontal equity
15Horizontal 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.
16Horizontal Equity, cont. Horizontal equity can be applied broadly in comparing large and similar subgroups of studentsFor example, we can compare:All vocational students at the high school levelAll full-day kindergarten studentsAll students in general education elementary classroomsIn this case, we would expect spending, or resource allocation, to be substantially similar for each of these rather large subgroups.
17Research Trends Unclear One 50-state study revealed that between 1970 and 1975,spending disparities among states increasedAnother 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 timeOther studies show that significant financial disparities still remain in horizontal equity among the states 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. Odden, Allan, Berne, Robert, and Stiefel, Leanna. (1979). Equity in School Finance. Denver: Education Commission of the States. General Accounting Office. (1997). School Finance: State Efforts to Reduce Funding Gaps between Poor and Wealthy Districts. Washngton, D.C. Author. 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),
18Vertical EquityVertical equity recognizes that students and schools are different and that the treatment of unequals requires appropriate unequal treatmentWhile horizontal equity is rather easy to quantify, vertical equity choices are based on value
19Vertical Equity, cont. “Appropriate treatment” varies from one school divisionto another.
20“Appropriate Treatment” Legitimate factors must be identified that can be used to allocate resources differently based on:The characteristics of the studentsThe characteristics of the schools or the school districtsThe characteristics of various programs
21Legitimate Factors Include: Percent of eligibility for free and reduced lunchPercent of students speaking English as a second languagePercent of students involved with special education servicesMost 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.
22Fiscal NeutralityEquity 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 stateThis is also known as taxpayer equity or wealth neutrality
23Reconciling 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 ofFunding.
24Equalizing FundingEach state provides some method for equalizing the funding within its boundariesMore than 2/3 of the 50 states have had their state funding formula contested in courtThe equalization concept is a continuum that ranges from total equalization to no equalization
25Absolute & Approximate Fiscal Equalization Absolute fiscal equalization is more of a theoretical goal than a practical achievementWhile it is possible in theory, it is virtually impossible to achieve politically
26Absolute Fiscal Equalization Absolute fiscal equalization is achieved whenever the following three objectives are achieved:Variance in fiscal position among local school districts has been neutralizedVariance in fiscal effort among local school districts has been eliminatedVariance in educational needs due to incidence of clients has been accommodated
27Absolute Fiscal Equalization, cont. Absolute fiscal equalization is achieved whenever the following three objectives are achieved:Local school divisions have equal resources to fund schoolsLocal school divisions make equal effort to fund schoolsSchools spend what is needed to educate students with special learning needs
28Absolute Fiscal Equalization, cont. This definition achieves fiscal neutrality and addresses the issues of horizontal and vertical equityThis is a theoretical and not a practical concept
29Approximate Fiscal Equalization Approximate fiscal equalization is achieved whenever the following three objectives are achieved:Variance in fiscal position among local school districts has been neutralizedConstrained variance in fiscal effort among local school districts is permittedVariance in educational needs due to incidence of clients has been accommodated
30Approximate Fiscal Equalization, cont. Approximate fiscal equalization is achieved whenever the following three objectives are achieved:Local school districts have equal resources to fund schoolsLocal school divisions have some leeway in how they raise & spend money for schoolsSchools spend what is necessary to educate students with special learning needs
31Absolute & Approximate Fiscal Equalization The two definitions are similar except:The 2nd condition allows for constrained or controlled spending by the local school districtsNeutralized fiscal position and meeting clients’ educational needs in spite of the local capacity are still required
32State Aid Grants to Districts Each state equalizes for the fiscal capacity of local districts through its method for funding localitiesThis funding usually comes through grants of various types
33State Aid Grants Continuum Inequity EquityNon Matching Flat Equalization Full StateEquilization Grants Grants Grants FundingGrants
34Nonequalization Grants Non-equalization grants make no attempt to equalize funding for the capacity of local school districtsGrants may be categorical aid to school divisions allocating a constant dollar amount on a per pupil basis based on an application processPoorer school divisions may not have the personnel to write the grants enabling them to qualify for the funds
35Flat GrantsFlat grants provide a fixed amount of funding per pupil to each school district in the stateThis funding is not based on the locality’s fiscal capacityMost states do not use flat grants as the primary vehicle for distributing funds to localities
36Examples of Flat Grants California’s Constitution requires $120 of state funding per pupil to each locality – regardless of the locality’s fiscal positionVirginia’s Constitution requires thatthe locality fundno more than80% and no lessthan 20% ofstate standards,regardless ofthe locality’s capacity
37Equalization Impact of Flat Grants School Local Local Flat Grant Total SpendingDistrict Property Revenue Amount Per PupilValueA $ 5, , ,050B $ 50, , ,500C $250, , ,500D $500, , ,000
38Flat Grants with Increased State Support School Local Local Flat Grant Total SpendingDistrict Property Revenue Amount Per PupilValueA $ 5, , ,025B $ 50, , ,250C $250, , ,250D $500, , ,500
39Flat 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.
40Equalization GrantsEqualization grants provide for greater state funding for the localities with less capacity to raise their own funds andprovide for less statefunding for the localitieswith greater capacity
41Foundation ProgramsFoundation programs are a means of providing equalization grants to school systemsA foundation program establishes some minimum level of per-pupil funding that must be met with a combination of local and state fundingNo district can fall below this foundation level
42Foundation ProgramsOnce 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
43Foundation GrantsLocal State Foundation Local TotalCapacity Aid Level Leeway FundingA $ 1, , , ,000D $ 7, , , , ,500E $ 10, , , ,500
44Foundation 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 basisWhere the capacity differential was initially 10 to 1, the spending differential due to the foundation formula is now only 1 to 1.25
45What 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 servicesThis 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 limitsToo 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”
49Guaranteed 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
50Guaranteed Tax Base Programs, cont. The state determines its share of spending for the total cost of educationThe formula then provides a means for deciding how much funding would come to each locality, based on a measure of their wealthMore state funding goes to low capacity systems while less aid goes to high capacity systems
51Guaranteed 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
52Guaranteed 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
53Combination ProgramsOther equalization formulae exist as hybrids between foundation programs and equalization programsThese programs take the best of other formulae and apply those components to their particular conceptual framework
54Calculating Vertical Equity Vertical equity means providing what people needVertical equity recognizes that students and schools are different, and that the treatment of unequals requires appropriate unequal treatment
55Weighted Pupil Approach Determining a base cost for various categories of studentsOnce the lowest base cost is determined it is given a weight of 1.0
56Weighted Pupil Approach Example Florida bases a weighting of 1.0 for the students in basic programs in grades 4 through 8Kindergarten and grades 1 through 3 are weighted slightly higher with high school grades being even higherWeightings for vocational and special education are significantly higher ranging up to a factor of 15
57Determining 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 fundsMethod used to determine the “costing out” of services can vary from state to state, district to district
58Example: “Costing Out” Special Education Services Special Education Category WeightingEmotionally DisturbedSocially MaladjustedDeafSpecific Learning Disability (part time)Visually Disabled (part time)Hospitalized and Homebound (part time) 15.0
59Fiscal “Adequacy” is a Value-Driven Concept What is “enough” money to fund a school district?To what standard of academicexcellence for all pupils?For what unique learning needsof this student population?With which academic elective,extra- and co-curricular offerings?
60Fiscal AdequacyAttempts 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.
61Fiscal Adequacy, cont.Recent legal challenges have shifted from disparities in school funding to adequacy issues.
62A 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.
63Fiscal Adequacy School finance experts refer to four methods for discussing the concept of fiscal “adequacy”:Economic cost functionSuccessful school districtProfessional consensusCost of effective school-wide strategies (also known as state of the art or best practices)
64Economic Cost Function Approach This statistical approach is used more frequently in business than in educationEconomic 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
65Economic 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
66Economic Cost Function Approach, cont. This model reflects certain values in determining adequacySome 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
67Research 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.
68Successful School District This method identifies schooldistricts which have had successin bringing student performanceto state proficiency standardsThis approach then sets the adequacy spending level to the weighted average of the expenditure level of the successful districts
69Problems with Successful School District Approach This method omits outliers (atypical districts) from the equationUnfortunately, virtually all large, urban areas, very wealthy and very poor districts, as well as small, rural systems are eliminatedIt also may inaccurately represent the actual costs of delivering adequate services in the atypical districts
70Limitations: 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 upThese districts also tend to spend less than the state average
71Limitations: 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
72Professional 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 levelThe 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)
73Limitations: Professional Consensus Approach Provide little differentiationfor the average school andone with a high concentrationof at-risk studentsIn spite of this drawback, the professional consensus approach is gaining interest at the state level
74State-of-the-Art Approach Selects research findings on student achievement, frequently seen in high-achieving schoolsIdentifies all ingredients needed for those research-identified teaching and learning strategiesDetermines a cost basis for each of the strategiesDetermines what an adequate base of spending for the school should be
75State-of-the-Art Approach, cont. Funding determination is made for the school level and not as an average for the school divisionThis approach allows the school to use a number of school-wide strategies that state-of-the art researchers and practitioners claim are most effective