Funding an Adequate Education in Urban Schools: Lessons from New Jersey (US) International Conference on Education Finance and Decentralization World Bank January 13, 2005

Education Funding in the US Education is the responsibility of State governments under the U.S. Constitution – Leads to 50 different school finance systems Sources of revenues (average): 8% federal, 49% state, 43% local – Range in state share: 32% to 72% – Range in local share: 13% to 63%

Education Funding in the US (cont’d) Level of local revenues is related to size of tax base in community. Heavy reliance on local revenues leads to disparities in education resources across school districts. Poor and under-resourced districts have challenged the constitutionality of state funding systems in 45 of the 50 states.

New Jersey Context 8.6 million people 1.4 million public school students (41% non-White students) 4 th highest per pupil education spending in the US Wealthy state, but large differences in wealth, student demographics and education spending across its 600 school districts Source of revenues: 4% federal, 43% state, 53% local

New Jersey Context (cont’d) State Constitution guarantees the provision of a “thorough and efficient” (T&E) education to all children ages Abbott v. Burke litigation focused on spending and resource disparities between state’s poor urban and wealthy suburban school districts.

Abbott v. Burke: Defining “T&E” “Thorough and efficient means more than teaching the skills needed to compete in the labor market.” “Thorough and efficient” education is one that enables disadvantaged children to compete in, and contribute to, the society entered by relatively advantaged students. This sets a high “adequacy” standard for poor urban students

Abbott v. Burke: The Court’s Mandates Applies to 31 poor, urban districts (so-called Abbott districts) Equalizes funding for regular education with property-rich districts – Parity level is $11,300 per pupil in Additional funds to meet special educational needs of urban students

The Court’s Mandates (cont’d) Programs to meet the extra-educational needs of students – Research-based whole school reform designs – Full day kindergarten – Half-day pre-school for 3- and 4-year old children – Off-site coordination/referral for social and health services – Security, technology, alternate school and other programs based on demonstrated need of the school.

The Court’s Mandates (cont’d) State funds to address facilities deficiencies and additional classrooms in Abbott districts Funding must be assured and cannot rely on the budgeting and taxing decisions of Abbott districts.

Children in Abbott Districts Court-Ordered Framework for Educational Adequacy Supplemental Programs Facilities Whole School Reform Standards Based Reform Preschool Source: Education Law Center

Fiscal Impact Funded with new dollars, not redistribution – About $1.1 billion in for parity aid and supplemental programs  An additional $4000 per pupil for Abbott students – About $500 million in early childhood education aid – Together, represents about 18% of total state aid to education – Another $6 billion for facilities Parity plus: Higher per pupil spending in Abbott districts than high wealth districts

Impact: Preschool 40,000 children enrolled in % of eligible universe 70% in community providers $10,000 per pupil Highest quality standards and highest funding level in nation (NIEER)

Language Arts Achievement: Grade % Proficient 2004 % Proficient Difference Abbott Students33.8%75.3% Non-Abbott Students70.4%93.9% Statewide62.8%90.3% Difference between Abbott and Non-Abbott

Mathematics Achievement: Grade % Proficient 2004 % Proficient Difference Abbott Students % Non-Abbott Students73.5%83.1%+ 9.6 Statewide65.8%78.4% Difference between Abbott and Non-Abbott

Fiscal Issues Dual formulas – State aid is calculated separately for Abbott districts – Non-Abbott districts fall under a less generous foundation aid formula Middle-wealth districts are “caught in the middle.” – Spend less than Abbott and high wealth districts – Maintain significantly higher tax rates

Political Issues Public pressure to reduce reliance on local property taxes – Call for constitutional convention to restructure state/local tax system – Pressure to restructure state aid formula Growing cost of Abbott aid in time of budget shortfalls – Parity aid rising about 4-6% a year

Implementation Issues Governance – Power shifted from district to schools and state. – State approved school budgets and programs, although district legally responsible for raising revenues. – Monies reallocated from district to support school budgets. – Concern now about lack of coherent district-wide curriculum and support.

Implementation Issues (cont’d) Resource allocation – Schools lacked capacity to develop school budgets. – Schools lacked true budgetary authority—to hire personnel, to deviate from “model” budget designed by state. – Continued litigation over nature and extent of supplemental services identified by schools and districts (e.g., after school programs, additional security).

Implementation Issues (cont’d) Capacity – State has insufficient personnel to support, monitor, evaluate Abbott schools. – Support by developers of whole school reform models has been uneven. – Implementation was more successful in districts where superintendents managed developer relationships, supplemented training, and supported model implementation.

Implementation Issues (cont’d) Accountability – Fiscal accountability limited to state approval of school budgets. – No clear programmatic accountability. – No local or statewide evaluation of Abbott remedies or of whole school reform models. – Limited outcome accountability due to insufficient student data.

References M. E. Goertz and M. Edwards (1999). “In Search of Excellence for All: The Courts and New Jersey School Finance Reform” Journal of Education Finance 25(1): B. A. Erlichson and M. E. Goertz (2002). “Whole School Reform and School-based Budgeting in New Jersey” in C. Roellke and J. K. Rice (Eds.) Fiscal Policy in Urban Education, pp (Greenwich CT: Information Age Publishing). G. W. Ritter and S. C. Lauver (2003). “School Finance Reform in New Jersey: A Piecemeal Response to a Systemic Problem,” Journal of Education Finance 28(4): Education Law Center: