Opinion > Commentary

Vast inequality lurks behind mind-numbing data on school spending


Arun Ramanathan

Arun Ramanathan

School finance has the power to bring tears to my eyes. Sometimes, when I am reading the latest School Services of California bulletin, I start squinting. Then I start yawning. Then, before I know it, I’m squinting and yawning simultaneously, causing my eyes to water.  When I see the words “revenue limit,” I begin looking for a pillow. The explanation of the difference between a “Test 1” and a “Test 2” year for calculating Proposition 98 funding can actually cause my brain to melt out of my ears.

Despite these disturbing effects, my organization, the Education Trust-West, is focusing our attention on education finance. Earlier this year, we released “The Cruel Divide,” looking at the difference in funding between wealthy and poor districts. After running the numbers, we found that the poorest districts in California actually receive $620 less per pupil than the wealthiest districts. Around the time that we released that paper, the “Occupy” protests were in full swing, and the issue of income inequality was in the media spotlight. To this day, I wonder if I shouldn’t have taken our finance briefs to the Occupy encampment in downtown Oakland and given a detailed explanation of the impact of Proposition 13 on unrestricted school district revenue. My speech would have given protestors something useful to attack – or saved downtown by turning them catatonic.

Last week we released our second finance paper, “Tipping the Scale Towards Equity,” using a new set of school finance data collected by the U.S. Office of Civil Rights (OCR). This paper examines differences in spending on teachers and schools inside California’s 20 largest school districts.

Having worked at the district level, I find this stuff interesting. But I understand why it might not thrill a normal person.

Take our first finding – the presence of large teacher salary gaps between the highest- and lowest- poverty schools in most of the 20 districts. Why should a parent, community member, or teacher care?

Well, as a district administrator, I spent a lot of my time staring at spreadsheets in order to staff schools and central office departments. These spreadsheets contained thousands of FTEs (Full-Time Equivalents) – the term that finance people use when they’re referring to human beings. One of the strange things about these spreadsheets was that each type of FTE cost the same exact amount of money, no matter how many years someone had worked for the district. A first-year teacher costs the same as a teacher with 30 years of experience.

It turns out that most districts use a practice called “salary averaging” when staffing their schools. Even though employees with more seniority cost more money, every teacher at a school site is assigned an identical salary. Unfortunately, because high-poverty schools tend to have a lot of turnover, they are typically assigned younger and less expensive teachers. As a result, they receive a lot less funding than wealthier schools with more senior teachers. If the average salary gap between a poor and a wealthier school is $5,000, a higher poverty school with 30 teachers would be shortchanged $150,000 a year.

This funding gap has a huge impact during a budget crisis. Poor schools get hit with a double whammy. They get less funding for personnel because they have lower-cost teachers. Then, those teachers are the first to get laid off because layoffs are based solely on seniority (not teaching effectiveness or any other factor). The only way to correct this problem is for districts to use real salaries when staffing schools and for state lawmakers to allow districts to base personnel decisions on job performance instead of just seniority.

Connect funding, student needs

This leads to our paper’s second finding – that there is no clear connection between school funding and student need. Fixing the teacher spending gap would go a long way toward solving this problem. But if we want to really fix school funding inequities, we have to provide high-poverty schools with additional dollars based on student need. Low-income students and English learners often enter school academically behind and need additional supports to catch up. Unfortunately, when we looked at the data from California’s 20 largest districts, it wasn’t clear that poor schools were getting more funding than wealthier schools.

Some folks argue that Gov. Brown’s weighted student formula proposal would fix this problem. They’re right that his proposal would provide poor districts with a lot more funding. But if those same folks spent more of their time at school board meetings, they might be less sanguine about the impact of the governor’s proposal on students.

The fact is, there really is no rhyme or reason to district spending. The numbers are twisted by precedent and politics. Without strong state-level requirements, districts could use the extra dollars they would receive through a weighted student formula – money intended for low-income students and English learners – for other purposes. They could even divert the extra dollars generated by poor students to supplement the higher salary costs of more experienced teachers in wealthier schools.

Make reporting uniform and transparent

This leads me to our report’s third finding – that there are big gaps between the per-pupil funding that districts receive from the state and the funding they spend on schools. This finding gave me some serious flashbacks to my budget-cutting days at the district level.

Back then, I was once asked to separate out my $350 million budget for Students Services into central office and school-level FTEs. The goal was to identify more district employees in order to satisfy the school board members who wanted more central office cuts (heads on stakes). To comply with this order, I spent weeks working with department administrators trying to parse out who was working at the district or school level. It’s pretty clear cut with some employees, but not so easy for others who provide direct and indirect services. Without a clear set of rules, we came up with our own.

California lacks a common set of accounting rules covering district- and school-level expenditures. If we had these rules and required districts to use them, we would know exactly how much districts were spending at the central office and at the school level. We would also know what they were spending their dollars on, and be able to compare them against each other.

Requiring that districts follow the same set of accounting rules is no easy task. District lobbyists would wail about mandates and increased costs. But if district leaders thought about it, they might see the benefits of financial transparency. After all, the people who speak at school board meetings are generally saying three things: “Cut them, not me,” “Cut the district, not the schools,” and “The district is hiding money.” If a school district gets $8,500 per student, its leaders should be able to tell every school community exactly how much they’re getting, as well as what’s being spent at the district level and on what. It should be able to tell state policymakers how much money for high-need students is actually reaching their schools.

This level of transparency would empower folks at all levels. Stakeholders could actually check to see whether districts were prioritizing school sites or holding onto dollars intended for high-need students to spend on other obligations such as pension and benefit increases (as critics often claim). Schools and stakeholders would actually see the impact on their budget of failing to implement efforts to reduce inappropriate special education referrals or the extra costs of maintaining under-enrolled sites. They could also compare their expenditures and performance results to those of other schools.

The lingo and rules of school finance might be boring, but their impact isn’t. Funding equity and financial transparency are more than just tweaks to our school finance system. These changes would finally level the playing field for our underserved students and allow us to have adult conversations about how, where, and why we are investing our education dollars at the local level. They could begin to transform our education system in California.

 Arun Ramanathan is executive director of The Education Trust–West, a statewide education advocacy organization. He has served as a district administrator, research director, teacher, paraprofessional, and VISTA volunteer in California, New England, and Appalachia. He has a doctorate in educational administration and policy from the Harvard Graduate School of Education. His wife is a teacher and reading specialist, and they have a child in preschool and another in a Spanish immersion elementary school in Oakland Unified.

Filed under: Commentary, High-Needs Students, Local Control Funding Formula, School Finance, State Education Policy

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17 Responses to “Vast inequality lurks behind mind-numbing data on school spending”

  1. navigio said

    on November 5, 2012 at 8:40 am

    Believe it or not, I agree with everything in this article except for one sentence.

    That said, I am surprised it took weeks to differentiate site-level student services costs from district-level ones. To me, if this is true, that makes it understandable why some district administrators blindly say no to transparency as a concept.

    Regardless, I dont understand why it should be a problem to require all districts to use similar accounting rules. They already have to report to the state using SACS and if their process made these distinctions from the outset, I dont believe it would be that much more difficult or time-consuming.

    It is somewhat ironic that the implication is the only way we can figure out if we are spending our money effectively is to spend more money to assess that. Again, if its true, it puts districts in a pretty much indefensible situation wrt cost efficiency. Not a good place to be when you’re arguing for increased funding.

  2. Carl Cohn said

    on November 5, 2012 at 8:42 am

    Kudos to Arun for tackling a complex problem and attempting to reduce it to “kitchen-table talk.” No small accomplishment!

  3. David B. Cohen said

    on November 5, 2012 at 11:03 am

    I’m confused by this: “After running the numbers, we found that the poorest districts in California actually receive $620 less per pupil than the wealthiest districts.” Is this a comparison only involving revenue-limit districts, rather than all CA districts (including basic-aid)?

    About 18 months ago I was invited to address the Education Excellence and Equity Commission of the U.S. Dept. of Education, and I used Palo Alto and Oakland as comparison districts. The difference in spending was closer to $6,000 per pupil than $600, and that was not counting donations from the district’s non-profit foundation.

  4. navigio said

    on November 5, 2012 at 11:46 am

    The $620 referenced gap is for revenues from three sources: Revenue limits (which can include basic aid amounts), Other local revenue (which can include parcel taxes) and Other state revenue (mostly categoricals, intended to offset these inequities?). When excluding the last one and only including revenue limits and other local revenue, the gap is closer to $1500 per student. Also, small districts (less than 100 ADA) were excluded.
    In addition, I feel it is helpful to look at unrestricted revenue sources when making such comparisons since that is what districts have discretion over. Including the impact of encroachment would also have been addressed by looking at expenditures instead of revenues (in our district, of unrestricted revenues, even 10% of those were used for categorical programs) .

    • Manuel replied

      on November 8, 2012 at 2:18 pm

      As Navigio, I agree with the points made except for that particular pesky sentence.

      For a while, I’ve been looking at LAUSD’s budgets and I thought I had a handle on certain things but no more. LAUSD uses “revenue limits” to define its “school-site” budget (salaries, educational supplies and janitorial supplies, and labeled as “unrestricted expenditures”) and treats it as the ADA.

      If I understand what Navigio has written, it appears as if “revenue limits” (what is in the “alligator chart”) is the “basic aid” given to Districts and is “unrestricted.” But the “other state revenue” is conceivably included by the state in their ADA reports at http://www.cde.ca.gov/ds/fd/ec/currentexpense.asp. Is this correct?

      Given that the ADA reported by the state varies from district to district and if the “revenue limits” are constant across districts, then I’d say that the system is totally unequal and subject to manipulation by the likes of Superintendent Deasy, who claimed, in his “state of the district” address (http://lausd.wistia.com/medias/douylpe31y) that LAUSD only gets “5,221 pathetic dollars” while New York spends $17k. He is not telling the public what he gets from the “other state revenues” which used to be mostly categorical but have not been since 2009.

      So what is a citizen to do if we cannot trust what the Superintendents tell their Boards? I voted for 30 because there was no other choice to avoid a funding crisis. But there is no way I’ll vote for any more money unless there is transparency I can trust.

      • navigio replied

        on November 8, 2012 at 2:48 pm

        Sorry for the very quick reply, will follow up. But revenue limits can be both unrestricted and restricted. My point about unrestricted is that it may be a better indication of what things a district or school is ‘free’ to spend on (even though even some of that is encroached on). More later.. meeting.

      • navigio replied

        on November 9, 2012 at 9:13 am

        Long meeting.. ;-)

        Manuel, do you have an example of an LAUSD site budget? Or are you referring to the number put in the SARC? The amount put in the SARC is supposed to be those same SACS codes you listed in your link (by the way, those are essentially all cost codes with the exception of capital outlay, food services, facilities, shuffling money around, and things like that). The current expense of education spreadsheets on that page are district-level ones so they include all salaries, etc, not just site-level ones. They are also general fund only, which the SARC should also be (but I think many people do SARCs wrong, so who knows).

        But the answer to your first question is yes, the alligator chart is generally considered revenue limit only. I’ve seen districts make their own versions of this chart and since the point is to show the deferral, that is what’s highlighted (but in theory it could be any combination of revenue). If you go to ed-data, and choose financial reports, you’ll see that everything is broken down by source type. Revenue limit by district is shown, including how much of it is unrestricted or restricted.

        Yes, Deasy’s statement seems misleading at best. This is what districts do when talking about finance though. Education has become so political (not necessarily education’s ‘fault’) that selectivity is used to try to make a point (common in politics).

        What you can do when you dont trust what you hear is to challenge it. Board meetings are required to include public comment, both on agendized and non-agendized items. To be honest, given the size of LAUSD, I’m not sure how that is achieved, but questioning these things either there or in print (letters to the editor, etc) is absolutely valid, and in fact something I see as a responsibility of the community. In LA, Steve Lopez (latimes) is a good resource for education issue awareness. Since his children (child?) started attending public schools he has been writing a lot about education. And he seems fairly open to communication. Usually there are some board members who want to press the issue of transparency and clarity. They can be good resources for understanding and challenging these things.

        If I’m not mistaken, LAUSD actually does a pretty good job on its budget documents (even though they are large. :-) ) but its been a while since I really read one so maybe things are changing.

        And btw, revenue limit is revenue, which is different than expenditures. People tend to mix those up in ‘serendipitous’ ways as well when talking about budgets. I seriously doubt LAUSD restricts its site expenditures to revenue limit sources since that revenue limit amount is less than some schools actually get in per student costs (though for other schools its greater than that amount). I expect trying to do that, assuming I am correctly interpreting your comment, would probably mean having to do some funky stuff with their restricted revenue. Again, if you have an example, maybe it would help clarify.

        • Manuel replied

          on November 14, 2012 at 1:13 pm

          Navigio, thanks for the reply. It is much appreciated.

          In answer to your question, yes, I do have the LAUSD budgets (they are all available at http://tinyurl.com/a4vswpb) and have spent considerable time rooting through them. But I got something better as an example: a “training” document on how to calculate a school’s site budget: http://tinyurl.com/bfzm5pd (it’s a 7.9 MB pdf file).

          Page 13 defines “base revenue” as “revenue allocated by the State based on ADA.” Thus, in budget-speak, “ADA” refers to “base revenue”. Once “encroaching” and “district-wide programs” are subtracted, the total resources to be allocated per pupil to a school is obtained. Please note that no restricted funds are included. (This breakdown was reflected in pages 21-22 of a presentation made to the LAUSD Board on October 26, 2010. It is available at http://tinyurl.com/cjxxn6h and is a 2 MB pdf file.)

          These funds are then used to arrive at a school site operational budget (p. 16), which, as I already stated, does not include any restricted funds. (Pages 42 through 44 repeat the same information but pages 45 through 49 are very informative as they detail what LAUSD considers “District-wide programs”.) Hence, the ADA reported by LAUSD (around $6k in 2010-11 but whittled down to less than $4k) is not the same ADA reported in that CDE link I gave (around $9k).

          The District is moving towards presenting school site budgets that include restricted funds but they bury that information deep within the web page they maintain describing each of their schools. For instance, you can look up my kids’ former high school at http://tinyurl.com/aaqdqn . Once there, click on “Please select from here” under “School Budget Summary” and you’ll retrieve a pdf file with the budget information. But who has the time to track each and every school?

          The upshot is that a gigantic shell game gets played. The public is told that LAUSD only gets “$5,221 pathetic dollars” per kid while it gets maybe half as much from restricted funds, the expenditure of which is not defined anywhere accessible to the average citizen. (And, yes, we all know that special education is not funded at the proper level.) At the same time, it keeps funding things from the unrestricted fund like the “rubber rooms” and a very large police department while calling it “school site resources”. Did I mention it also runs a TV station?

          Anyway, no, there is no real way of getting accountability out of LAUSD. They stonewall you and if you manage to speak to the Board in open session they will most likely olympically ignore you. I’ve seen it happen. Steve Lopez may seem like a good avenue, except that I and others have already tried it and did not work out. In fact, it backfired in an interesting way (get me your email address and I’ll tell you the gory details). Talking to Board members has been done but the issues are too political for a couple of mere citizens to make an impact. But we are still trying.

          The bottom line is that the “funding losses” LAUSD claims (based on the alligator chart, mostly) are bogus because it has been losing enrollment (ADA!) at a rate similar to its budget revenues. Yet, LAUSD brass has been telling people that it lost $2.5 billion during the last 5 years.

          So, gotta keep the faith while still watchdogging…

  5. Eric Premack said

    on November 5, 2012 at 1:24 pm

    Arun:

    Your general points (1) California school finance is needlessly complex and(2) weighted, per-pupil funding, by itself, won’t fix intra-district funding inequities are spot-on.

    Your prescription, however, may be overkill and may prove ineffective absent additional changes.

    First, California does have a uniform accounting system for school districts and schools. It’s mind-numbingly detailed and suffers from the same problems you note above. This so-called “SACS” system, detailed in California’s 600+ page School Accounting Manual, offers a great deal of data for those who are prepared to wade through it and the financial reports that one can generate using it. Each transaction is coded with a 22-digit numerical code allowing one to track that transaction 8 ways to Sunday.

    One major problem with the current system is that districts have the option as to whether to use the last three digits int he 22-digit string–and these are the key digits that track transactions to the site level. Making use of these last three digits mandatory could, at least in theory, fix the transparency problem you note.

    In practice, however, SACS and similar accounting systems are subject to creative manipulation. The sheer complexity of the system, combined with the complexity of the customized software packages needed to run it, ensure that the system will never be fully transparent. School district business staff are often masters at burying transactions and using creative accounting rules to shift costs. No accounting system is genuinely transparent without a shift in key budgeting powers to the component unit level (e.g., schools) AND making the accounting staff accountable to unit level management (e.g., school site principals).

    If you really want this to work, you also need to shift key budget, personnel, and related controls from the district to the site level.

    • Arun replied

      on November 8, 2012 at 10:00 am

      Yes. SACS is complex. And I would never underestimate the ability of district finance folks to engage in creative manipulation. The hiding and failure to spend-down EIA funds (while districts were cutting services to ELs) that was exposed by Senator Padilla is one example of that. However, the very complexity of the system begs for simplification, rationalization and broader public understanding. We highlight systems that are doing just that. People will never trust the system and invest more in it unless we can show them where the money goes. And I agree that the bulk of it should go to the site level with strong accountability for results.

      • navigio replied

        on November 8, 2012 at 2:44 pm

        Actually, my opinion is the complexity is not in the accounting system itself, its in the lack of appropriate and consistent use of the system/tool. I see no reason that the full, site-level codes could not be used (in fact, I’d be willing to bet they already are) and more importantly, published. I see no reason that a full, itemized disbursement list could not be generated with a single push of a button. Not in a chopped off excel format or a scanned PDF of an image thats hard to read and impossible to search on. I remember doing the ‘books’ for a construction firm when I was in my teens. And being able to do this…. um, decades ago? On a TRS-80. The fact is, its possible to say a lot of things about being transparent, but if community members cant easily get information that should be public (and without having to rely on the PRA), then transparency does not exist. Its pretty simple. I also made the point earlier that transparency is an issue independent of the site-level one. And apologies for my tone, but this is something that I really see as inexcusable in this day and age. Admittedly, I have high expectations, but I think I have that right for something we call public education.

  6. Bill Younglove said

    on November 5, 2012 at 1:53 pm

    And how about that 1997 figure cited by William Ouchi in Making Schools Work that just 42% of those responsible for instruction in our schools are actually doing it? That means that 58% are doing something else. Must cost a bit. No?

  7. Bea said

    on November 5, 2012 at 2:29 pm

    There are districts that engage in site-driven funding. Some use perfunctory practices like zero-based budgeting, but others empower site leaders and community members to engage in thoughtful planning and budgeting guided by the actual needs of the particular flesh and blood students enrolled at each school.

    It happens when trustees, district leaders, principals and parents want it to work that way.

  8. Paul said

    on November 5, 2012 at 10:22 pm

    Using actual rather than average teacher salaries in site-based budgeting would not solve the problem highlighted in the report, namely, that disadvantaged schools are staffed by cheaper, less-experienced teachers who leave quickly, keeping salary spending low (and inequitable).

    Instead, the proposed change would provide disadvantaged schools with a direct incentive to continue their hiring practices.

    Whereas it might (absent intervention by a district’s personnel director) be possible for the principal of a disadvantaged school to hire a “high-cost” teacher today, the principal would not be willing to do so if the extra cost were going to come out of the principal’s own budget.

    • Arun replied

      on November 8, 2012 at 10:08 am

      Schools should not receive funding based on the salaries of their teachers but the dollars generated by their students. School communities should be responsible for making hiring decisions based on school needs and demonstrated skills not imposed mandates from the district or Sacramento. The district is reponsible for holding the school accountable for those decisions.

      • navigio replied

        on November 8, 2012 at 1:02 pm

        Just to make clear, this means that the school site will need to make a tradeoff decision between ‘quality’ and ‘cost’. Even though those things don’t need to be mutually exclusive–and without starting a huge political argument about what those things mean in the educational environment–I would simply point out that there is huge incentive to choose against quality in the name of reducing cost. ESPECIALLY, in a budget-constrained environment. That is worth keeping in mind and is probably why freedom by itself is not sufficient to ‘improve’ things.

  9. el said

    on November 6, 2012 at 9:52 am

    I think the issue of a revolving door of less experienced teachers is itself a problem for learning, and indicates a problem with teacher satisfaction at the school site. Teachers generally seek other sites in a district because they don’t enjoy working at the existing site, because it is a long commute, or because they fear for their job security.

    I think the idea that seniority is solely by district with no site considerations is problematic. But again, the real problem isn’t in the way we allocate seniority, it’s that teachers don’t enjoy their work in the original schools. Each of those schools probably has its own reason – icky administration, poor facilities, less accomplished/prepared students, fewer resources. Every time a teacher leaves, the question of why needs to be asked and contemplated. How can you make those high turnover schools professionally rewarding places to work and teach and make a long term career?

    A salary bonus is the most typical answer people think of, but usually the amount is not large enough to make a big difference in the quality of life. Those teachers may be also interested in having more aide support, smaller classes, a new HVAC system, a large classroom budget, a hands-on science lab, more counselors, or an inviting and wonderful library. Small kindergartens may make all the difference for the later grades.

    At the end of the day, most professionals want to be able to pay their bills and feel like they’ve made a positive difference, and that their work is appreciated. Figure out how to create those factors, and I think they’ll be likely to stay.

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