Introduction and Overview School Finance: A Policy Perspective, 4e Chapter 1 (c) 2008 The McGraw‑Hill Companies 1

What is School Finance? What is School Finance? “School finance concerns the distribution and use of money for the purpose of providing educational services and producing student achievement.” Odden and Picus (2004) p. 1 (c) 2008 The McGraw‑Hill Companies 2

School Finance Focus Equity (most of 20th century) Variation in per-pupil expenditures Uneven distribution of property tax base Productivity (1990s) Linkage between level and use of funds and student achievement Adequacy and Accountability (now and in the future) Indicate that examples of all of these things will be provided during tonight’s lecture. Do class introductions at this point (c) 2008 The McGraw‑Hill Companies 3

Today The scope of school finance School finance adequacy Nationally, Regionally, Locally School finance adequacy (c) 2008 The McGraw‑Hill Companies 4

School Finance Simulations 20 district and state simulations available http://www.mcgraw-hill.com/odden4e/ You must have Excel to run Download and run If it does not operate properly, delete and download again If you have a problem, I can e-mail it to you Special consideration for Mac users (c) 2008 The McGraw‑Hill Companies 5

Education and the Fortune 500 *Does not include Federal Revenue RI State Budget 6.9 Billion RI State Education Budget 690 Million RI Education Spending Total 2.5 to 3 Billion (c) 2008 The McGraw‑Hill Companies 6

Annual Public School Enrollment: United States—1919 to 2005 (c) 2008 The McGraw‑Hill Companies 7

Share of Revenue: 1919 to 2000 (c) 2008 The McGraw‑Hill Companies 8

Pupil/Teacher Ratio: 1955 to 2001 (c) 2008 The McGraw‑Hill Companies 9

Key School Finance Issues Until recently, money per pupil, after inflation adjustment, has risen ~ 3.5% annually for 95 years But this money is distributed very unequally across states, districts, and schools When it gets to schools, some argue that it is not used as effectively or productively as it can be This in the context of student performance measures which haven’t been as hoped particularly for kids with special needs (c) 2008 The McGraw‑Hill Companies 10

And So THE Challenge: Accomplish the goals of standards-based education reform, by employing “evidence-based” practice in everything we do Which means at least to double education performance over the next decade We must improve the productivity of our actions and boost student performance with the money we have and the limited/ or no additional money we will get (c) 2008 The McGraw‑Hill Companies 11

School Finance Background SF issues have shifted in two ways: Equity shift: Old equity problem: low wealth, low spending with high tax rates, versus high wealth, high spending with low tax rates New equity problem: low wealth, average spending with lower tax rates, versus high wealth, high spending with higher tax rates Catalyst for Prop 2 ½ and S 3050 (Paiva-Weed) type legislation (c) 2008 The McGraw‑Hill Companies 12

(In part why RI has struggled with adopting Education Funding Formula) New equity problem harder to fix and the fix is different from the fix for the old equity problem And most individuals—school leaders and policymakers—are still focused on the old equity problems (In part why RI has struggled with adopting Education Funding Formula) (c) 2008 The McGraw‑Hill Companies 13

Second Major Shift Equity has taken a back seat to adequacy— is there enough or an adequate amount of money to have educators teach students to new high performance standards If not, what is the adequate expenditure level that is required? Is there enough money in the system? Critics argue yes, and point to collective bargaining and teacher compensation as misdirecting Resources. (c) 2008 The McGraw‑Hill Companies 14

What Is Adequacy? Adequacy requires provision of sufficient fiscal resources to enable all students to perform at high levels (c) 2008 The McGraw‑Hill Companies 15

Costing Out Adequacy Defining adequacy Establishing a system to achieve the educational standard or goal Measuring costs and expenditures Concerns and other issues (c) 2008 The McGraw‑Hill Companies 16

Four Approaches to Defining Adequacy (chptr 3 pp 77-81) Cost function (chptr 3 p 79) Expenditures in districts/schools that meet performance benchmarks (chptr 3 p 78) Professional judgment (chptr 3 p 78) Evidence-based approach (chptr 3 p 80) (c) 2008 The McGraw‑Hill Companies 17

Implementation How prescriptive should the model be? Who controls spending decisions? Simple, transparent, and easily understood Establish a base “foundation” level Adjust for: Student characteristics (eg poverty) District characteristics (expectations and involvement) Price differences (“gold coast” Ct) (c) 2008 The McGraw‑Hill Companies 18

Funding Adequacy If we can identify an adequate spending level, how do we fund it? By taxing the rich, and if so, who are the rich? By tapping “progressive taxes,” which the tax- paying public does not want By tapping more “regressive taxes,” like sales taxes, which if more taxes are needed, the tax- paying public will swallow? And how “regressive” are the so-called regressive taxes? (so in an economic recession like now when spending is less then revenue base is diminished) (c) 2008 The McGraw‑Hill Companies 19

What Does This Mean for a State? School spending School operations Tax rates Other implications? School finance reform What would you recommend? (c) 2008 The McGraw‑Hill Companies 20

Reform of School Finance Need for comprehensive reform of the finance system System must be simple, easy to understand, and transparent Should it be based on a measure of adequacy? And if so, how would that impact equity? Recent evidence (Odden, Goetz and Picus, 2007) suggests that relatively little additional money is needed overall to reach adequacy – part of the problem is the distribution across states (c) 2008 The McGraw‑Hill Companies 21