Research

Owings, W. A., & Kaplan, L. S. (2019). American Public School Finance (3rd ed.). Taylor & Francis. https://bookshelf.vitalsource.com/books/9781351013772

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Chapter 8: Structure of School Finance Systems

FOCUS QUESTIONS

1 Identify the federal, state, and local roles in providing, overseeing, and financing education.

2 Describe how and why the number of school districts in the United States changed over the past 100

years.

3 Explain what has happened to federal, state, and local funding of school budgets in the past 100 years.

4 Discuss how states equalize school finances to prevent the rich states and localities from having all the

resources and the poor states and localities from having virtually none.

5 Describe how states provide a “fair” level of funding so that equalization occurs.

This chapter examines basic concepts of how schools are structured—financially and politically. Education is a

federal interest, a state responsibility, and a local operation.1 States must plan for and deliver a system of free,

public education. Chapter 8 integrates previously discussed topics as it reviews the political, financial, and

control relationships for education among the federal, state, and local governments.

Federal, state, and local treasuries finance public education. Naturally, school funding greatly impacts

education’s direction and practice. In this chapter, we examine how the structure of schools and their finance

systems have changed, how these changes affect funding practices, and the fiscal and political problems we

must address today.

Although states maintain an oversight and compliance role in the local school systems’ functioning,

historically, school management and operations have been primarily community-based. Neighborhood schools

and school boards once assumed local oversight, but the trend over the past 70 to 80 years (since formal

public record-keeping began) has been to decrease the number of school districts in the United States. This

consolidation has accomplished greater fiscal and operational efficiency. It has also depersonalized the

operation and administration of our schools to some extent.

At the same time, throughout the 20th century, the states gradually have accepted more responsibility

to oversee education. Federal government statistics on the number of public school districts in the United

States illustrate this. In 1939–40, the first year such statistics were recorded, the United States had 117,108

school districts.2 Each succeeding year, the number of districts has decreased. In 2015–16, the number of

school districts totaled about 13,600.3

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As the number of school districts decreased, their size increased. Fewer school districts brought

together more communities, representing wider geographic areas and more diverse populations. While this

trend decreases resource duplication and inefficiency, it also decreases community feelings of pride and

“ownership” in their local schools. Neighborhood schools gave way to larger schools made up from multiple

neighborhoods with their administration further removed from local control. In fact, this ownership issue has led

to some calling for replacing school boards with individual school councils to return public school governance

to the “grassroots.”4 Table 8.1 lists the number of school districts by state in 2014–15.

The average number of students per school district has increased more than 12-fold in the 66 years

between 1949–50 and fall 2015. Table 8.2 shows that the number of students enrolled in elementary and

secondary schools, 1949–50, the “Baby Boom” and the increase to fall 2015. Table 8.2 shows that school

districts averaged only 340 students in 1949–50, but by the fall 2015 school year, the number of students per

district had increased to slightly over 4,000.

Understanding the structural changes in schools, such as consolidation of school districts, helps clarify

our current school funding and educational challenges. Reviewing the shifts in school revenue sources brings

additional insights about who pays for, controls, and directs U.S. education.

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A history of public school revenue appears in Table 8.3. As noted during each decade, the federal

share of public school financing increased from less than 1% in 1919 to a high of 9.8% in 1979. Since then, the

federal share of school monies decreased by almost one-third to 6.1% in 1989–90, inched back up to 12.7% in

2009–10, and then dropped to its current level of 8.7%.

In 1919, the states’ contributing share of revenue was relatively low by today’s standards, providing

only 16.5% of the monies for public schools. That portion has increased each decade, and by 2013–14 the

states were contributing slightly more than half of the average district’s funding.

In the same time frame, the local share of revenue to operate public schools has steadily decreased,

from 83.2% in 1919–20 to 45% in 2013–14. Following the federal revenue decline from 9.8% in 1979–80 to

6.1% in 1989–90, the state and local funding sources increased to make up the difference in expanding

schooling costs. Imagine the fiscal burden on local taxpayers today if the localities still had to generate 83% of

the revenue to operate their local schools!

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As mentioned in Chapter 5, a good tax should be spread out over the largest number of people

responsible for using the resource. In other words, the National Park Service should be funded by federal tax

dollars. The state parks should be funded primarily through state tax dollars. Local and municipal parks should

be funded through local tax dollars. This general concept holds true for public education. Because education is

a state function with federal interests and local administration, the largest percentage of revenue should come

from the state with a smaller percentage coming from localities and the smallest percentage of revenue from

federal sources.

Table 8.3 shows the trends in these finance percentages at a national average. Obviously, variations exist

among states. Table 8.4 shows the most current data indicating the percentage of revenue from these three

major sources by state.

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Considering federal revenue percentages, the variance ranges from a low in Connecticut of 4.2% to a

high of 15.3% in Louisiana. State revenue ranges from a low of 26.0% in Illinois to a high of 89.8% in Vermont.

Local revenue ranges from a low of 4.1% in Vermont to a high of 60.4% in New Hampshire. In terms of

equalization, more federal funding tends to go to higher poverty states. This can be seen in Louisiana’s

hardship and Connecticut’s wealth. Other factors, such

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as effort—the amount of state and local funding in relation to wealth—also affect the percentages. Reviewing

state revenue percentages, the variance ranges speak to the state funding formula’s level of equalization. It

may also address the level of local fiscal effort to fund schools.

Local funding, however, is at the heart of school finance. Local funding reflects a community’s

economic, political, and emotional investment in its children’s education and the overall region’s quality of life.

Local revenue percentages range from a low of 4.1% in Vermont to a high of 60.4% in New Hampshire. Given

the high percentage of state funding in Vermont, the lower percentage of local funding could be expected. The

high range in New Hampshire is also associated with a low percentage of state revenue for school funding.

FEDERAL, STATE, AND LOCAL ROLES AND RESPONSIBILITIES

How do federal, state, and local structures work together in organizing and financing education for the end

user—the student? As you will recall from Chapter 2, federal involvement in education preceded ratification of

the first ten amendments to the U.S. Constitution. Not until 1867 did Congress enact legislation to establish the

U.S. Department of Education and coordinate education effort at a cabinet level. Later downgraded to an Office

of Education, it was incorporated with two other federal departments into the Department of Housing,

Education, and Welfare (HEW). President Jimmy Carter re-established the Department of Education in 1980,

and it survived threats to end its cabinet status during the conservative Republican years.

Federal education funding primarily provides grants and guidance for states and school systems under

various programs enacted by Congress. As recently as 50+ years ago, thousands of school districts reported

to and communicated directly with the federal Office of Education. In 1965, Title V of the Elementary and

Secondary Education Act strengthened the state Departments of Education, also known as State Education

Agencies (SEAs).5

Title V afforded states the opportunity to organize and develop their state’s education agency, or

Department of Education, by providing funding for increased personnel, training, equipment, and research and

development. With the SEAs in place and functioning, the federal office positioned itself to deal with 50 state

offices instead of the thousands of local school districts they had overseen previously. This streamlining

enhanced federal policy efforts toward efficiency and effectiveness in state education and reduced federal

administrative and clerical expenses.

Generally, state legislatures empower the SEAs to coordinate and oversee the local education agencies

(LEAs), the local school district office. Already operating schools for many years, the LEAs had more time to

develop and mature than the newer SEAs. State Boards of Education, as we know them today, date back to

1784. In 1812, New York appointed the first State Superintendent of Public Instruction under less than

desirable job security: the job did not become permanent for more than 40 years—until 1854. Similarly, in

1837, Massachusetts appointed Horace Mann to serve as the state’s first board of education secretary,

enabling him to become a national spokesperson for public education. Once New York and Massachusetts had

established and maintained meaningful and stable State Superintendent of Public Instruction positions, other

states quickly followed.

State superintendents are responsible for providing educational and political leadership to the State

Department of Education and carrying out the duties charged to it by the state’s legislative body. As with

Horace Mann, state superintendents have been in the position to become eloquent education spokespersons

with the general public and with the legislators.

In shaping its role, the SEA had to define and develop its relationships with the state’s legislative and

executive branches. The governor is the state’s chief executive officer, and the General Assembly is the state’s

legislative branch. The state Department of Education became responsible for carrying out the state’s

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education legislation. The governor influences education through campaign platforms, individuals appointed to

leadership positions, and the chief state executive’s bully pulpit. These political realities come into play as the

different government levels work to direct and provide education services.

Today education’s political climate focuses on accountability to achieve high standards for all students.

Currently, academic achievement standards reflect the Every Student Succeeds Act (ESSA) of 2015. ESSA

builds on progress in key areas of student achievement to prepare all students for success in college and

careers. It requires all students be taught to high standards, continues statewide academic assessments, and

gives states and localities more flexibility to support and grow evidence-based innovations and interventions.

Federal Grant Legislation Process

How does federal grant funding—such as Head Start or Early Head Start—flow from Washington, DC to the

states and localities? What takes place at the three levels of government varies depending on how Congress

writes—and the federal DOE interprets—the grant legislation. In that context, it is useful to examine how the

roles and responsibilities of the federal, state, and local agencies interact, in general.

To envision this process, let’s consider a grant called the ABC Education Act. First, the federal DOE announces

that Congress has authorized the latest version of the ABC Education Act. Following this announcement, the

government makes the legislative details available to the public. The state education agencies are authorized

to submit applications for the federal grant funding. The SEAs review the federal legislation associated with the

grant and open the application process available to the local education agencies. The SEA usually provides

technical assistance to the LEAs in completing the grant application package. The grant will usually include a

list of assurances with which the local school district must comply to obtain the funds.

Then the SEA collects all the LEA grant applications and submits the state application package to the

federal Department of Education. Each state must provide an assurance to the federal Department of

Education that the state and localities have met the ABC Education Act’s grant provisions. Next, the federal

DOE reviews the applications and awards the grants to the states that are in compliance with the federal grant

regulations. Funds are released to flow through the

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SEA to the LEAs. The grant typically allows the SEA to take a percentage of the monies for administrative

costs, and the state distributes the remaining grant funds to the localities.

Finally, the localities spend the money in compliance with the grant’s purpose. Occasionally, the states

will audit the funds at the local level, and the federal office will audit state funds. Consequences apply if the

funds are used improperly. Although this example oversimplifies the interrelationships among the various

agencies somewhat, it offers a good overview of the process.

Advantages to Federal Financing

Economists Harvey S. Rosen and Ted Gayer believe that financing educational programs through the three

levels of government offers distinct advantages for meeting public responsibilities in education.6 First, this

layered system provides for equalization due to fiscal capacity of the states and the localities. Second, it

permits an equitable distribution of services. Third, it allows for a more economically efficient provision of

educational services. Finally, this process gives states and localities a more decentralized decision-making

method to meet their needs. Let’s consider each factor.

First, helping states provide for equalization based on each state and local school district’s fiscal

capacity makes an important difference in boosting every student’s learning, regardless of their parents’

resources. As the Texas data referenced in Chapter 6 show, significant capacity and effort disparities exist

among school districts within a state. The lack of local capacity to raise revenue in some districts needs to be

addressed by a higher level of government—spreading the fiscal effort over a wider tax base. By itself, it is

impossible for a locality with little fiscal capacity to raise significant funds to service the neediest students. With

fiscal equalization, the local government’s available assets do not determine the quality of its students’

education.

Second, federal grant funding enables states to distribute their education services more equitably and

adequately. With the increased government layers and funding coming from a broader tax base, states can

determine the level of education services they will require as adequate to meet state and local needs. They

determine the type of minimum expenditures, instructional programs, staffing ratios, or other methods to meet

their students’ varied educational needs as best to meet the grant’s goal.

Third, layering of federal, state, and local services is efficient. Economies of scale can cut both ways. In

the multi-layered approach, the state or the federal government may use its influence to consolidate school

operations or the services delivered within school districts. For instance, the grant may require several smaller

school districts to jointly apply and work collaboratively to develop common programs that share the grant

resources. By encouraging efficiency, schools reap the economic and instructional benefits of increasing the

achievement impact at a lower cost. However, this process does result in some degree of lost local control.

Fourth, the decentralized decision-making process allows state and local decision makers to select the

services that match what they believe they need and want, a powerful psychological dynamic that unites all

three prior advantages. Communities tend to coalesce around areas that offer public services matching

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their personal preferences. Localities tend to grow where young families with school-aged children want quality

education services, park and recreation facilities, and safe neighborhoods and are willing to pay for them. In

communities with higher concentrations of retired individuals living on fixed incomes, the desire for services

may be related to other factors.7

With fiscal layering and funding of education, the interplay of federal, state, and local resources

provides distinct advantages for individuals to select the type of environment in which they wish to live and the

services most important to them. In other words, what a community spends on education tells much about that

community’s values, needs, and wishes. How state and local authorities distribute these revenues to address

equity and adequacy merits a closer look.

LOCAL EQUALIZATION

Usually, government officials at the local level do little to equalize funding. In fact, studies show that, within the

same school district, schools in wealthier locations receive a greater funding share than do poorer schools.8

Consider this all-too-frequent example. As teachers build seniority within a school district, they tend to request

transfers from “needier schools” to “less needy schools.” This leaves new hires right out of college or fresh

career-switchers to staff the transfer vacancies. A few years later, the scenario repeats. From a salary

standpoint alone, the higher-dollar teachers tend to work in the less-needy schools, and the lower-salaried

teachers continue walking through the revolving doors in higher-needs schools. A 2010 study by the Education

Trust details this spending gap in teacher salaries.9 The study shows that within the same school district

spending gaps based on teacher salaries between high-poverty and low-poverty schools (Title I versus

non-Title I schools) can be around $500,000 per year. Since research finds that teaching experience is, on

average, positively and often significantly associated with children’s achievement gains in reading and

mathematics as well as better attendance and fewer disciplinary referrals throughout a teacher’s career, with

positive effects to the entire school,10 the children in most need of experienced, capable teachers would

appear to be the least likely to work with them.

As central office and building level personnel examine and use school demographic, achievement, and

other data to drive the instruction process, it becomes necessary to fund schools based on their individual

needs for meeting district goals. Some school systems already do this. Most do not. For that reason and

others, states occasionally provide grants to individual schools based on specific, documented needs. Some

researchers in school finance consider that providing for local needs will be litigated more frequently in the

future.11

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STATE EQUALIZATION

As discussed in the previous chapter, states have a responsibility to equalize funding based on the localities’

capacity to pay for services. States use a formula to establish how to determine the equalized funds. These

formulae vary in complexity and effectiveness. Basically, here is how they work.

First, states decide the floor level of educational services that should be provided to all students within

their jurisdiction. For the most part, this is a basic, “no frills” level of services and not what most educators

would think “meets everyone’s needs.” This floor-level funding of services usually consists of computing a

dollar figure for the number of professional educator positions needed for a given number of students,

technology, special weightings for students, and the like. The factors that states consider in this floor level of

services vary.

Second, the state determines the localities’ capacity to fund this floor level of services. Again, states

use a wide array of variables in determining this wealth formula, and every state uses a different formula.

Usually, property values, income tax, and an estimate of locally generated business revenue become proxies

for determining the locality’s ability to fund education services. Designing a workable funding formula is an

increasingly difficult process for states.

Urban locations with large business and industry tax bases tend to have more, different, and

increasingly expensive social, economic, and educational problems than do suburban or rural locations.

However, rural areas have problems other areas do not have, including isolation, difficulty attracting teachers,

and too few students to afford many high-quality educational offerings (without available funding for technology

and contracting distance learning agreements). Reaching a consensus on community values for educational

results, the relative weighting of the various factors associated with wealth, and the subsequent and varying

needs within a state can “tax” even the brightest and most eloquent of politicians.

Third, once the state ascertains how to measure localities’ wealth or capacity, it must decide the basis

for distributing the funds to the localities. Some states believe the poorest localities should pay little or nothing

toward the state-prescribed floor level of services because education is a state responsibility. These states may

also hold that the wealthiest localities should pay the entire cost of providing these basic services. Other states

believe the poorest localities should pay something and the wealthiest localities should receive something

toward the cost of providing these basic services.

For example, Virginia has established a floor level of education services called the Standards of Quality.

This document describes a minimum level of state-mandated requirements for services such as the number

and type of positions funded per 1,000 students. It also addresses the salaries of professional teaching

positions and other factors associated with the floor level of services. Often these funding formulae

underestimate the true costs of education to the localities.

Virginia has established a composite index for each of its localities, indicating each locality’s relative

wealth or fiscal capacity to fund education services measured by the localities’ property value, income tax

revenue, and sales tax revenue. This composite index has a theoretical range of 0 to 1.0 and a functional

range capped at .8. The poorer the locality is, the lower the composite index number. The higher the locality’s

wealth, the higher the number. Theoretically, a locality with a composite index of 0.0 would not be required to

use any local funds to meet the Standards of Quality—the state would assume the entire cost. By comparison,

a locality with a composite index of 1.0 would be required to fund the state-mandated Standards of Quality

entirely with local funds and no state funding.

Functionally, Virginia has decided that every locality should pay something toward its required floor

level of education. It also holds that every locality should

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receive some state assistance in meeting this floor level of services. Using the state’s formula for 2018–2020,

the poorest locality, Lee County, has a composite index of .1754; and seven localities have a composite index

of .8—the highest allowed.12 Lee County is responsible for funding 17.54% of the Virginia Standards of Quality

through local sources with the state funding 82.46%. A mid-range locality, with a composite index of .5, would

fund 50% of the Standards of Quality with local funds and 50% state funds. The seven wealthiest localities with

a composite index of .8, would fund 80% of the Standards of Quality with the state paying only 20%. Virginia

distributes these equalized funds through the basic aid to the localities.

ACCOMMODATING ADEQUATE FUNDING WITH STANDARDS-BASED REFORM

Which, if any, of these models is appropriate for school finance today? Most of these structures were

developed almost a century ago. The most recent structure, district power equalization, was refined in the early

1970s. Since that time, many school district requirements have changed—not the least of which was the

Special Education Law, 94-142. There are calls for finance reform.13 As Deborah Verstegen states, “There

have been no new approaches developed or used to distribute state aid to school systems since the 1920s

and 1930s.”14

In the last half century, educational demographics have changed. As late as 1950, only about one-third

of the population graduated from high school.15 The graduation rate was 12.6% for black males and 14.7% for

black females.16 Statistics on Hispanics were not collected until 1975 and on Asians until 1989. Since then,

student performance accountability programs that emphasize the need for every student to achieve at high

levels have taken firm root in education culture. The NCLB legislation required all subgroups to make adequate

yearly progress (AYP), and ESSA continues to uphold high academic standards (and annual testing) that

prepare students to succeed in college and careers, along with critical protections for America’s disadvantaged

and high-need students. Despite these overwhelming changes in educational expectations, funding formulae

have not changed. Older funding models assumed that public schools provided a minimum education, not the

high-quality, high-accountability programs that exist today to prepare students for employment and college.

In addition, spending among school districts and within school, the same school district may be too

varied to equitably or adequately meet students’ needs in high-stakes testing climates. Table 8.5 shows the

variance in selected school districts within the state of New York in 2018. For example, the per pupil spending

in Kiryas Joel is more than 11 times that of Kinderhook.

One equity and adequacy issue involves students’ needs. The neediest students tend to live in low-capacity

urban areas where resources are already drained or in low-capacity rural systems where resources are very

limited.

Another equity issue involves the amount of money spent per pupil per state. Table 8.6 shows state

rankings of per pupil spending by state for the year 2018.

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Among the states, New York ranked number 1 in per pupil spending at $23,519. Indiana ranked last

with per pupil spending of $6,673. That amounts to a difference of per pupil spending in the highest and lowest

state of $16,846 per year per student. Examining that investment over 13 years (grade K–12), the difference

per pupil is $218,998. When calculating this per pupil spending difference over one classroom of 25 children,

the difference totals $421,150 per classroom, per year. Examining the difference over an 800-student

elementary school, the difference is $13,476,800 per year. Further calculating this expenditure difference for

those 800 students for their 13-year school career, the difference is a staggering $175,198,400. The difference

in spending in a 5,000-student school district over 13 years totals $1,094,990,000. Are Indiana’s children’s

needs that much less than New York’s children’s needs? What is the variance in district spending within your

state? Is the variance equitable? More important, is spending in the lowest district adequate to meet the needs

of those students? Developing appropriate school finance structures remains a 21st-century challenge for all.

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CONCLUSION

Current school spending structures may be too varied to equitably or adequately meet all students’ needs in

high-stakes testing climates or economic viability in a global economy. School funding reform is, therefore, a

critical national issue.

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CASE STUDY

Your state is considering a wholesale change in the state funding formula for education. As an adviser in

education finance to the state legislative body, you have been asked to write an executive summary of how

your state currently funds education. Make certain to include the sources of revenue for education, how the

state equalizes funding, how the floor of services is determined, and the per pupil spending for a selection of

the highest spending, average spending, and lowest spending localities. Conclude with your “expert opinion”

as to what changes you would recommend to the current state funding structure.

CHAPTER QUESTIONS/ASSIGNMENTS

1. What has happened to the number and size of school districts in your state over the last 100 years? In your

opinion, what impact has this change had?

2. Review the three sources of revenue (federal, state, and local) in your state over the past 50 years. How do

you explain any variances you might see? Can this information be used to demonstrate the need for increased

funding at any level? How would you make that argument?

3. What has happened in your local school district over the past 20 years with local, state, and national

sources of revenue? Can you identify the reasons for these changes in your school district?

4. What advantages and disadvantages would full state funding have if it were seriously considered in your

state? Who would benefit and who would lose? Explain your answer.

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Chapter 9

FOCUS QUESTIONS

1 Summarize the major current demographic trends in the United States that impact school leadership,

teaching, and finance.

2 Explain how student demographics affects teaching, learning, and achievement and identify their

implications for education finance.

3 Identify the student and family educational risk factors and their implications for education finance.

4 Discuss the demographic trends that affect teachers as a professional group and their implications for

education finance.

5 Explain the demographic trends that impact principals as a professional group and their implications for

education finance.

“Improving student learning and ensuring that all children receive an adequate education in the 21st century

will be complicated by the changing demographics of the students to be educated and the adults who must pay

for education through taxes.”1 Demographics is an important consideration in finance planning for public

education. As children from various family and cultural backgrounds increasingly enroll in our schools, they

bring additional learning needs that have a monetary impact on planning, budgeting, teaching, and learning.

Demography describes statistical changes in the population. These data are called demographics. Until

30 years ago, educational demographics usually referred to the number of students entering our schools each

fall and whether they were coming from different neighborhoods than in the previous year. School enrollment

numbers either went up or down, but demographics had limited implications for how education proceeded and

minimal fiscal impact beyond the state aid that school districts received for each student in the school district.

Today, however, demographics impact every school district tasked with assuring that every student—minority,

disabled, limited English proficient, and those eligible for free and reduced-priced lunch—meets expectations

for yearly academic progress and college and career readiness.

This chapter introduces the concept of demographics. We review noteworthy demographic changes

and trends and discuss their consequences—including funding implications—for our communities, students,

teachers, and principals. We also explore issues involved in teacher and administrator demographics as they

affect recruitment and retention related to student achievement and their fiscal implications.

STUDENT DEMOGRAPHIC PROFILES AND TRENDS

Our national demographic profile has changed and will continue to change. Figure 9.1 shows that Americans

are more racially and ethnically diverse today than they were in 1965, and this diversity will continue

increasing. Unlike our nation’s first 250 years, by 2055, the U.S. will have no single racial or ethnic majority. In

the past 50 years, nearly 59 million immigrants have made the U.S. their home, most coming from Latin

America and Asia. Today, nearly 14% of the nation’s population is foreign born. In 1965, only 5% of those in the

U.S. were foreign born.2 The children of these new Americans enroll in our schools.

Table 9.1 highlights the demographic student distribution in public elementary and secondary schools

by race and ethnicity, 2000, 2015 and projects to 2027. Over these years, the percentage of White students

drops from 61% in 2000 to a projected 45% of total enrollment in 2027, and by 2027, the U.S. will not have a

single racial or ethnic majority. Immigration will propel much of this change, with nearly 59 million newcomers

arriving here in the past 50 years. Most come from Latin America and Asia. Students identifying as two or more

races increase to 4% in 2027. During these years, the total enrollment in public elementary and secondary

schools is projected to increase from 47.2 million in 2000 to 52.1 million in the fall 2027.3

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One group—illegal immigrants within the United States—has a population whose numbers are difficult

to obtain. Lacking formal documentation as U.S. residents, these persons may fear census takers and avoid

catching local or immigration authorities’ attention. According to the Migration Policy Institute (MPI), an

independent, nonpartisan non-profit think tank that analyzes the movement of people worldwide, an estimated

11 million unauthorized immigrants resided in the United States in 2014. More than half (54%) live in four

states: California (27%, over 3 million); Texas (13%, almost 1.5 million); New York (8%, 850,000);

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and Florida (6%, 610,000). MPI estimates that 71% of the overall unauthorized population comes from Mexico

and Central America, 13% are from Asia, 6% are from South America, 4% come from Europe, Canada, or

Oceania, 3% come from Africa, and 2% are from the Caribbean.4 More than half the children living in

immigrant families are low-income (below 200% of poverty); 1 in 4 are poor.5 According to the Center for

Migration Studies, approximately 3.5 million, or 81% of U.S.-born children ages three and over of

undocumented immigrant parents are enrolled in school.6 At the projected average $13,000 per pupil

expenditure for 2017–18,7 the estimated costs for educating these children is approximately $45,500,000,000,

annually.

Illegal immigrants have a major impact on school finance. In the early to mid-1970s, Texas spent

millions of state dollars annually educating children of undocumented workers. Texas legislators argued that

since these students were in the country illegally, Texas should not have to spend its tax dollars educating

“lawbreakers.” Accordingly, in May 1975, the Texas legislature revised its laws to withhold state education

funds from school districts that enrolled children who were not legally admitted into the United States.

Responding to a legal challenge in 1982, the U.S. Supreme Court in Plyler v. Doe determined that

undocumented children of illegally immigrated parents could not be denied a public education.8 The court

reasoned that the Fourteenth Amendment defines who is a citizen and also provides that “No State shall . . .

deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its

jurisdiction the equal protection of the laws” [emphasis added].9 Although illegal immigrants are not citizens,

they are persons who cannot be denied equal protection of the law. Texas had to pay its share of the per pupil

cost for educating these children.

The decision had an enormous financial impact on Texas. At the time of this ruling, approximately

50,000 children of illegal immigrants attended Texas public schools. Using a low estimate, the state’s share in

1975 may have been $2,000 per pupil. In that case, total yearly spending could have exceeded $100 million.

Similarly, the decision also required the other 49 states to pay for educating children of undocumented parents.

Clearly, demographics (along with a good understanding of school law) must be considered in planning

education’s financing.

RISK FACTORS AFFECTING SCHOOL SUCCESS

Many Americans believe that public schools are places to equalize social inequities. Through hard work and

achievement, children from all socioeconomic, racial, and ethnic backgrounds can have equal and equitable

chances to fulfill their potential. In this way, public education is the engine of social mobility.

Yet in reality, the achievement gap begins well before kindergarten. Profound risk factors in many

children’s early experiences may greatly compromise their future school attainment. The late Harold “Bud”

Hodgkinson, a noted analyst of demographics and education, identified risk factors associated with poverty

that undermine young children’s school success.10 These include chronic health concerns, lack of English

proficiency at home, and transience. Other demographic issues—such as fragile families, grandparents as

parents, abuse and neglect, and toddlers watching too much television—also compromise school

achievement. The more risk factors present in a child’s life, the more likely that child will experience

attendance, behavioral, and social problems that may interfere with their educational attainment.11

Understanding demographic factors that interfere with school success helps educational leaders

prepare effectively to address them. For example, it is known that a baby’s low birth weight combined with a

mother’s low level of education is a good predictor of a child who may have learning disabilities in school.12

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Knowing the current birth rate demographics from local hospital statistics can help educators, social

service, and civic officials plan and implement strategies to strengthen these children’s preschool learning

experiences and prepare them for productive schooling.

Poverty

Poverty places children at a tremendous educational disadvantage and leaves them trailing their peers in the

foundational basic skills for learning math, reading, and other subjects. In 2018, the federal government

considered a family of four “poor” when their annual income fell below $25,100.13 Poverty is the risk factor that

exacerbates all other risk factors.

Poverty, Income Inequality, and School Success

In 2016, the U.S. held the largest share of the world’s wealth (33%).14 At the same time, more than 13.2

million American children—nearly 20%—lived in families with incomes below the poverty level; nearly 70% of

these children were children of color.15

Even though poverty is a global phenomenon, the U.S. has one of the highest poverty rates in the

industrialized world. Table 9.2 shows wide variations in the poverty rates of children ages 0–17 years living in

households with income lower than 60% of the median in 2014 in selected countries. Only Spain, Mexico,

Bulgaria, Turkey, Israel, and Romania have higher child poverty rates than the United States. Child poverty in

the U.S. is 29.4%, increased since 2008 and above the global country average of 21% (one in five children). In

an unwanted distinction, the World Economic Forum labeled the United States as one of the “worst performing”

nations in terms of child well-being.16

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Table 9.2 illustrates a very strong correlation between income inequality in relation to a population’s

well-being in rich countries.17 Large differences in income have damaging health and social consequences

including decreases in educational attainment, social mobility, and life expectancy and increases in mental

illness, infant mortality, obesity, teenage births, homicides, and imprisonment. The United States has the

highest income inequality and worst health and social outcomes for its citizens than do other developed market

democracies.18 Income inequality has the greatest impact on the poor and those living in society’s most

deprived areas. Children fare particularly badly in societies that have high income inequality, from higher infant

mortality rates to lower levels of participation in higher education. In these societies, children are more likely to

be overweight, to be victims of bullying, and to become teenage mothers. As adults, they are more likely to

have mental health problems, difficulties with drugs and alcohol, work longer hours, and have more debt

pressures on family life. And since social mobility is lower in more unequal societies, it is more challenging for

children to move beyond cycles of intergenerational poverty.19

Communities expect their school leaders to ensure that every student, regardless of demographic,

receives a high-quality education. Planning for the school year’s needs cannot begin in September of the same

year. Local demographics must be considered years sooner and include interventions for children and families

even before formal schooling begins. Without these early active measures, children of poverty will arrive at

public school already significantly behind their peers in learning readiness, vocabulary, and social skills. They

may suffer from health issues that further compromise their ability to attend school and make satisfactory

progress. These conditions and their subsequent mediations affect education finance.

Poverty, Cognitive Development, and School Success

Many studies support the link between poverty, children’s cognitive development, and school success.20

Children in poverty are more likely to experience learning difficulties and developmental delays that complicate

their schooling. The more years a child lives in poverty, the lower their academic achievement relative to other

age peers, with deficits in verbal, mathematical, and reading skills that may be two to three times larger than

that of higher SES children.21 Income poverty

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is also highly correlated with low levels of preschool ability, which is associated with low test scores later in

childhood as well as grade failure, school disengagement, and dropping out of school.22 A 2002 nationwide

study of more than 16,000 children ages 5 and 6 at kindergarten entry found that children from the lowest SES

group arrived at school having had fewer childhood learning experiences, fewer cognitive skills, and 60% lower

achievement scores than children from the higher SES groups.23

Similarly, 50 years of research finds that mothers’ speech (its frequency, elaboration, and verbal

interchanges with children) is closely linked to young children’s vocabulary development; and early vocabulary

development is strongly associated with later school performance. Mothers’ language interactions with young

children were strongly differentiated by social class.24 These socioeconomic language differences begin to

appear by age 18 months when toddlers from disadvantaged families are already several months behind more

advantaged children in language proficiency. By age 3, children from advantaged families had heard 30 million

more words directed to them than children from the poorest families.25 By age 5, on some measures, low-SES

children score more than two years behind on standardized language development tests by the time they enter

school.26

Clearly, a family’s socioeconomic status (SES)—its accompanying parenting practices, lifestyle, and

available resources for early learning (not race or ethnicity)—is strongly related to children’s cognitive skills. It

is the most important factor explaining why some students are not prepared for school success. Additional

years of school only widen the disparities in educational outcomes between low and high SES students, mainly

because of differentiation of school experiences that begin in first grade and persist through high school.27

Chronic Health Concerns

The relationship between SES and health is robust and well documented.28 Children growing up in poverty

tend to have more health concerns than children growing up in affluence. This relationship is reciprocal:

poverty makes it more difficult to stay healthy while poor health detracts from the educational and employment

paths to economic and social mobility.29

In addition, studies affirm that children who do not live in safe, quality housing—whether due to health

hazards (such as lead in paint or toxins in drinking water), housing instability (including homelessness), lack of

enough nutritious food,30 or for other reasons—experience high rates of physical, mental, and emotional

problems.31 Critical issues including low birth weight and its adverse impact on intellectual functioning,

exposure to environmental toxins, chronic health problems, emotional and social health problems, lack of

health insurance, and absenteeism contribute to school difficulties.

Low Birth Weight and Cognitive Impairment

About one in every 12 babies in the United States (8%) is born with low birth weight (that is, less than 5 lbs. 8

oz.). African American women, teen mothers (especially if younger than 15 years old), multiple births, and

mothers in poor health or from lower socioeconomic status (who have poor pregnancy nutrition, inadequate

prenatal care, and pregnancy complications) tend to have low birthweight babies.32

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Premature and low birthweight infants may experience disruptions in their normal brain development,

resulting in impaired cognitive development.33 Experiences during a child’s first three years—including 9

months in the womb and the next 12 months as a baby—can have life-long effects on his/her intellectual

development. This is the period when specialized brain cells are forming connections with each other, creating

the neural networks that make thinking, learning, and feeling possible. In the last weeks of pregnancy, as many

as 40,000 new neural synapses are forming every second.34 Although advances in newborn medical

technology have greatly reduced the number of deaths associated with low birth weight, a small percentage of

survivors are at increased risk for chronic conditions, including cerebral palsy, poor postnatal growth,35 and

long-term abnormalities in brain development (as measured by MRI at age 9 and 12).36

Consequently, investigators have found a strong relationship between a child’s low birth weight and

later identification for special education services, the lowest birth weights having the most and severest

disabilities. One 2001 Florida study found that specific learning disability was the most commonly identified

disability of low birth weight children (56.3%).37 Because special education services are approximately 2.3

times the cost of regular education,38 this growth in learning disabilities identification and other cognitive

impairment placements strains the taxpayers as well as the school systems’ financial and personnel resources.

The good news, however, is studies’ findings that enriched preschool experiences for children at risk for school

failure because of family poverty or low birthweight have been found to reduce the need for school remediation

or special education services,39 and prenatal nutrition programs can reduce the rate of low birthweight

births.40 Of course, these interventions come with costs that those in poverty may not be able to afford.

All these conditions may last into adolescence and adulthood.41 Studies suggest that very low birth

weight is associated with poorer educational achievement and lower rates of college attendance.42 Some

research has found low birthweight to be a significant predictor of future socioeconomic status.43 A 2011 study

following 4,387 children over a 40-year period found that when children born into poverty with low birth weights

became adults, they were significantly more likely to have asthma, hypertension, diabetes, strokes, heart

attacks, or heart disease compared to adults who were not born in poverty and who had normal birth

weights.44

Environmental Toxins

Children growing up in poverty are more likely to be exposed to environmental toxins even while in utero.

Mothers living in poverty were more likely to smoke when pregnant than non-poor mothers, 24% to 15%,

respectively.45 Similarly, children in poverty were more likely to be living in older, substandard housing

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with exposure to lead-based paint. As a result, income-poor children were twice as likely as non-poor children

to have levels of lead in their blood, 30% to 15%, respectively.46 Lead poisoning has been associated with

long-term impairment of neurological function and cognitive deficits leading to lowered school achievement.

In addition, prenatal and early postnatal exposure to inorganic arsenic from drinking water are

associated with cognitive deficits that appear when the child begins school.47 The Environmental Protection

Agency (EPA) estimated in 2000 that nearly 36 million Americans drink water containing arsenic at or above

the level deemed safe; and the National Defense Research Council (NDRC) writes that nearly 77 million

Americans in every state get their drinking water from systems that violated federal protections to limit harmful

chemicals.48 Tainted drinking water often results from outdated, deteriorating water infrastructure, extensive

violations, and weak enforcement.49

Chronic Health Problems

Chronic health conditions during childhood and adolescence—illnesses including asthma, cancer, diabetes,

epilepsy, heart conditions or other health condition in the child or a parent—can have a devastating impact on

educational attainment. This is especially true for students who had a higher number of absences, repeated

grades, or suffered serious depression.50 Income-poor children are more likely than non-poor children to have

been diagnosed with asthma (18% to 13%).51 In addition, the more the chronic disease affects day-to-day

functioning, the more at-risk their brothers and sisters are for cognitive, psychological, and peer difficulties than

children without a chronically ill sibling.52

Emotional and Social Health Concerns

Chronic adversity and exposure to long-term stressors have a negative impact on children’s social-emotional

development. Studies find a higher occurrence of emotional and behavioral problems as well as heightened

feelings of anxiety, unhappiness, and less ability to cope effectively with future stress among children and

adolescents living in poverty than among more affluent peers.53 Moreover, these adversities serve as a

predictor for future physical, psychological, and behavioral concerns.54 As a result, income-poor parents are

more than twice as likely as non-poor parents to report their child has “definite to severe” emotional,

behavioral, or social problems (10% vs. 5%, respectively).55 At the same time, many children in poverty grow

up to show resilience and high levels of social and behavioral health, especially when buffered from chronic

stressors by strong supportive relationships with responsive, dependable adults.

Lack of Health Insurance

The Affordable Care Act (ACA) provides expanded Medicaid coverage to many low-income individuals and

Marketplace subsidies for individuals below 400% of the poverty level. As a result, the U.S. has witnessed a

decrease in the percentage of children in poverty who lacked health insurance, falling from a rate of

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almost 25% in 1997 to 7% in 2016.56 By comparison, children with a household income at or about $100,000

had an uninsured rate of 3.5%.57 Recent attempts to substantially change ACA or Medicaid’s structure may

change this picture for the worse.

Absenteeism

Chronic absenteeism (CA)—missing 10% of more of school days (approximately 18 days of a school year) for

any reason, excused or unexcused—is a proven early indicator of academic risk and school dropout. In

2013–14, about 14% of U.S. students were chronically absent;58 some students miss 30 to 40 days a year.59

Absenteeism becomes problematic as early as preschool and kindergarten.60

According to Johns Hopkins professors Robert Balfanz and Vaughan Byrnes, causes for students

missing school occur in three main categories: those who cannot, those who will not, and those who do not.61

Those who cannot include children with serious health issues (physical, mental, behavioral, vision, dental,

social, and emotional) and environmental stressors (such as caring for siblings or housing and food insecurity).

Those who will not do so to avoid bullying or harassment, unsafe conditions, or embarrassment. Those who do

not avoid attending school because they or their parents do not see the value in being there or they have

something else they would rather do.

Outcomes from this poor school attendance include lower achievement in reading and math, grade

retention, academic failure, more behavioral issues, lower high school graduation rates, increased

achievement gaps, and involvement with the juvenile justice system. Socioemotional outcomes of chronic

absenteeism include greater feelings of isolation, social disengagement, and alienation from school; engaging

in health risk behaviors (such as smoking, alcohol, and drugs), and greater chances of unemployment in

adulthood.62

Chronic absenteeism occurs at rates three to four times higher in high-poverty areas.63 Locations with

the highest rates of chronic absenteeism have experienced intergenerational poverty and residential

segregation, an environment with many factors that make attending school more difficult. But even large

suburban districts with strong academic reputations—such as Fairfax County, VA and Montgomery County,

MD—experiencing an influx of lower income and more diverse families show high chronic absentee rates, 12%

and 16%, respectively.64 One national study of kindergartners found that 21% of poor children were chronically

absent compared to only 8% of their non-poor peers.65 What is more, studies find that the effects of schooling

on cognitive development are stronger for lower SES children,66 mainly because in the United States, the

variability in learning environments is greater between families than between schools.67 Because students

raised in poverty benefit the most from being in school, their high level of absences seriously undermines their

academic progress and future economic well-being.

All these poverty-related factors take a heavy toll on school success. When a child’s weak vocabulary

development, poor health, chronic absenteeism, and additional stressors interfere with learning, they detract

from the ability to master schoolwork and achieve one’s fullest potential. Rather than excuse or rationalize

students’ school failure, however, these issues point to a critical need for larger investments in preschool and

early grades programs and actively supporting students once they are in school. Only with the investment of

needed targeted dollars, people, resources, and time can low-income children make the learning gains and

master the educated performance needed for productive citizenship and employment as adults.

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English Language Learners

Children with limited English skills are one of the fastest growing parts of the school-aged population,

increasing from 9.1% (or an estimated 4.3 million students) in 2004–05 to 9.4% (or an estimated 4.6 million

students) in 2014–15.68 In the United States, almost one in four children (22%, slightly more than 12 million)

speak a language other than English at home, up 2% (1.2 million children) in the last decade.69 By 2025,

limited English proficient students are expected to make up 25% of all public school students.70

Since research finds that English proficiency is the biggest predictor of immigrant students’ academic

achievement,71 students who do not speak or understand fluent English have a difficult time learning in school.

Achievement data suggest that English language learners (ELL) lag about 40 percentage points behind their

non-ELL peers on the 2013 National Assessment of Educational Progress (NAEP) in both fourth-grade reading

and eighth-grade math (essentially unchanged since 2000–13). But former ELL students who received ELL

services within the past two years show meaningful academic progress, especially in fourth-grade reading,

achieving comparably to non-ELLs.72

The increase in English language learners and their school difficulties hold serious implications for our

national well-being. According to U.S. Census Bureau projections, by 2043, the U.S. will become a

“majority–minority” nation; the non-white racial and ethnic groups will make up more than half of the U.S.

population. By 2039, the U.S. working population (individuals between ages 18 and 64) will be people of color,

mainly Latinos and African Americans, groups that today are least likely to have college degrees.73 At the

same time, the white population is aging. In 2043, 60.7% of those under 18 years are projected to be people of

color whereas 64.9% of those over age 65 will be non-Hispanic White.74 With Latino, African American, and

Native American males today showing low educational attainment and fewer qualifications to compete for

high-skilled, high-wage jobs, many states can expect to see reduced tax revenues from consumer purchases

and personal incomes. As a result, states may be less able to meet their obligations for social security

payments to retirees and disabled citizens, medical care for the indigent and elderly, and adequately funded

public schools.

In school districts where enrollments of non-native speakers of English are increasing, educational

leaders cannot afford to play “catch up” with financial planning and recruiting English as a Second Language

(ESL) or dually endorsed (ESL and regular education) teachers. Unless communities and school districts

invest resources to close the “education gap,” the most highly educated generation in U.S. history could be

replaced by a generation with far lower education attainment (as measured by high school and college

completion rates). Many people’s well-being and lifestyles may be lowered as a result.

Transience

Residential mobility in the United States—prized for its association with freedom, opportunity, and

entrepreneurship—can also be highly disruptive to families and school-aged children. According to a 2010 U.S.

Government Accountability Office Report, approximately 13% of children in the United States changed schools

four or more times before enrolling in high school.75 Similarly, a 2015 Colorado state policy report found

mobility rates for students were over 17% for

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students in poverty, more than 33% for migrant and homeless students, and over 50% for all students in the

foster care system.76 Frequent residential mobility in response to family disruption and economic stress—as

compared with families seeking better schools or employment—can have adverse consequences on children’s

academic progress. Its effect on students social and emotional well-being is inconclusive.

Housing instability is a continuing problem for low-income families. Child Trends reports that children in

poor families (with incomes below the federal poverty line, FPL) were more than four times as likely to have

experienced five or more moves as were children in families with incomes twice or more than the FPL (5.5 and

1.2%, respectively). Likewise, young children living in households where no adult held employment for 50 of

the past 52 weeks were twice as likely to be frequent movers as their peers in households with an employed

adult. Studies also indicate that children who move frequently are disproportionately in single-parent (SP)

households.77

With rising housing costs (rents and utilities), stagnant or declining wages among the poor, and a

shortage of federal housing assistance, most poor renting families spend over half (52%) their income on

housing costs, up from 42% in 1991. Although since 1937, national policy advises that families should spend

no more than 30% of their income on housing costs, today almost 25% of households commit over 70% of

their income to pay rent and keep the lights on. As a result, eviction among low-income communities has

become a common reality. In 2013, one in eight poor renting families in the United States could not pay all of

their rent, and a similar number expected eviction. Low-income women, especially single mothers with young

children, are at high risk of such displacement.78

Children’s housing instability, especially with multiple moves, is associated with a lower school

engagement, higher rates of absenteeism, lower grades in reading and math, a higher risk of dropping out of

high school,79 and lower standardized test performance.80 Every time children change schools, they generally

lose about three months growth in reading and math.81 Mobility is especially difficult for children in the early

grades whose physiological, cognitive, and affective domains are developing rapidly. The lack of consistent

attendance means they miss opportunities to learn the foundational skills essential for school and life success.

For children receiving special education services, ELLs, and those from low SES backgrounds, the impact of

changing schools is even greater than for regular education students. Additionally, older children and teens

who frequently change schools have difficulties bonding with teachers and must adjust to new classmates and

curriculum, disadvantaging them socially and academically. And the negative effects increase with each

additional move.82 Many studies confirm these findings.83 Although some studies conclude that residential

mobility, by itself, is associated with few positive or negative effects after accounting for other child or family

characteristics, children’s higher exposure to multiple sources of risk may make them vulnerable to mobility’s

harmful effects.84

Student mobility and homelessness have major implications for school finance. In locations with known

rates of high transience—such as areas with high poverty, concentrations of migrant workers, high

unemployment, and military bases—educators should identify issues that interfere with children’s learning and

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maturation. Working together with available local, state, and national agencies and resources, educators can

better address housing and school mobility concerns for these children and their families.

Fragile Families (Single Parenthood and Premarital Pregnancy)

Fragile families—couples who are unmarried when their children are born—are considered shaky because the

parents have low levels of human capital and weak bonds of commitment. The proportion of children born to

unmarried parents in the United States increased tenfold over nearly a 70-year period—from about 4% in 1940

to nearly 40% in 2007.85 In 2016, the birth rate for unmarried women was 39.8%, the lowest level since

2007.86

Compared with more traditional families, fragile families face greater risks to family stability, economic

security, and child well-being. Research has found that both mothers and fathers in fragile families have low

earnings capacities resulting from low-quality education as well as physical, emotional, and mental health

problems.87 Both single parenthood (SP) and premarital pregnancy contribute to this demographic.

Much of the research on fragile families is discouraging. A 2015 study found 40% of mothers in fragile

families are high school dropouts; another 40% have no more than high school education, and only 1% have

college degrees (as compared with married mothers of whom only 19% have less than high school education

and over one-third have college degrees). Mothers in fragile families are also less healthy, younger, and

disproportionately from racial/ethnic minority groups (almost 50% Black, more than 30% Hispanics, and about

12% White) as compared to mothers in married families. Married mothers’ full income is nearly $80,000, twice

the income of single mothers.88 Fathers in fragile families also have a modest or poor education, very low

earnings, and a higher rate of incarceration as compared to married fathers (40% compared to 8%,

respectively).89 Although 26% of the unwed couples eventually marry by the time the children are 5 years old,

only 16% remained married. In short, fragile families differ from married families not only in their marital status

but in their socioeconomic differences.90

Similarly, a growing consensus of researchers find that children in SP families face a wide range of

cognitive, emotional, and social problems as they mature.91 An extensive body of research also links

single-parent and cohabiting-family structures with higher risk of child abuse and neglect.92 All these factors

play important roles influencing children’s school attendance, academic engagement, and educational

attainment.

Given these data, it is not surprising that research indicates on average, children in single-parent

families score below children in two-parent households on measures of educational achievement.93 Single

parents and parents who have not completed their own basic education often have difficulties encouraging

their children’s academic success. But the relationship between SP households and student achievement is

not clear-cut; it may be partly spurious. For example, it is possible that growing up in poverty increases the risk

of becoming a SP as well as one’s children’s academic failure. In addition, some parents have personal traits

such as low cognitive ability, personality disorders, alcohol or substance use problems, and poor social and

parenting skills that predict the risk of disrupted relationships (and the creation of single-parent households) as

well as poor academic outcomes for their children. Others discuss this debate more fully.94

Although children in SP families face serious challenges, research on SP families often ignores those

households characterized by strength and resilience.95 Many children with an absent father or mother do

achieve well academically. Although children in father-present homes graduate from high school and attend

college at much higher rates than peers raised in a father absent (FA) home, nearly 70% of FA children

graduate from high school, and half of them attend college.96 Moreover, several studies find that factors

beyond the SP family structure—such as income, parent education, parental expectations, the number of

books in the home, family size, a place to study, a daily newspaper, and the quality of the parent–child

relationship—are strong predictors of children’s future

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academic success. Investigators also point to strong parent–child communication, a supportive community

network, and high degrees of adolescent autonomy as strengths that support education in SP homes.97

Nonetheless, taxpayers feel the impact of fragile families. Poverty and other risk factors attendant upon

single parenthood often require schools to provide extra resources—and the expenses they incur—to help

these children succeed. Also, fragile families’ difficult economic circumstances make it more likely that they

depend on government aid in direct cash benefits such as Temporary Assistance for Needy Families (TANF) or

in-kind benefits such as Women, Infants, and Children (WIC) nutrition program, food stamps, Medicaid, and

housing subsidies to help support and educate their children.

School districts with a high percentage of dropouts, especially female dropouts, should proactively

engage community leaders, agency personnel, and politicians to help young undereducated women receive

adequate prenatal care and complete their own education. These young mothers also need to learn parenting

skills that can foster their children’s health and school-readiness. In the end, interrupting the poverty cycle with

increased resources directed at educating young women and men at risk for becoming SP and fragile families

is likely to be a cost-effective investment.

Grandparents as Parents

In 2016, 2.7 million U.S. grandparents were raising grandchildren under age 18, an increase of 7% from

2009.98 About 6% of children (over 7 million) live in grandparent-maintained households.99 One-third of

grandparent caregivers were raising grandchildren without one of the child’s parents present in the home.100

Although abuse, neglect, financial difficulties, parental exposure to drugs and alcohol, and parental

illness or death contribute to this situation, the current opioid crisis, military deployments, and increased

numbers of incarcerated women are also pushing grandparents to take on parental roles. Since the research

indicates that children respond better to living with family than in foster care, child welfare agencies are turning

first to grandparents for help.

But not all grandparents are physically, mentally, or financially able to care for their grandchildren.

About 39% of grandparents raising grandchildren are over age 60, 26% have a disability, and approximately

one-fifth (21%) have incomes below the poverty line.101 Living with and caring for grandchildren may impact

the older person’s health, stress level, and income stability. In turn, their limited physical and financial

resources may affect children’s health and education. These acute family stresses can lead the child to have

academic and social difficulties in school.

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Grandparents are also taxpayers. Raising a child who attends public school increases the elders’

interests in supporting local schools. Educational leaders may garner popular backing by providing this older

population with school and community programs that fit their time, energy, and limited incomes. Scheduling

daytime activities, meeting with teachers for conferences at nearby community centers, and scheduling plays

and concerts for neighborhood venues instead of asking grandparents to travel to school at night shows

educators’ concerns and understanding. This changed approach would cost no more but could gain vital

community and academic collaboration that supports student learning.

Child Maltreatment

Child maltreatment includes abuse and neglect of a child under age 18 by a parent, caregiver, or another

person in a custodial role. Four recognized types of maltreatment—neglect (the most highly reported type of

maltreatment), physical abuse, sexual abuse, and emotional abuse—can occur separately or in combination.

All U.S. states and territories have mandatory child abuse and neglect reporting laws, and education personnel

make most of the referrals.

In Fiscal Year 2016, child protective services nationally received approximately 4.1 million referrals

involving an estimated 7.4 million children; they investigated or responded to almost 3.5 million children.

Nationally, almost 17% (an estimated 676,000 victims) were substantiated, a 9.5% increase from 2012. An

estimated 1,750 children died of abuse and/or neglect.102 Many researchers and practitioners believe these

statistics underreport the true extent of child maltreatment.103

No SES, ethnic, religious, educational, or cultural group is immune from child abuse or neglect.

Caregiver risk factors for child maltreatment include alcohol and drug abuse and financial and housing

insecurity. In FY 2016, 91.4% of victims were maltreated by one or both parents. Children in low SES

households (low income and parents with less than high school education), children with no parent in the labor

force or with an unemployed parent, children living with a SP who had a live-in partner, and families with four or

more children had significantly higher maltreatment rates than other children.104 Most victims are White

(44.9%), Hispanic (22%), and African American (20.7%). Native American or Alaskan Native children and the

youngest children (under age 3) have the highest rate of victimization.105

Hundreds of research studies and agency reports have consistently detailed child abuse and neglect’s

negative short- and long-term outcomes for children’s physical and mental health, cognitive skills, educational

attainment, and behavioral development.106

These outcomes include physical injuries, delayed physical growth, and neurological damage. They are

also associated with psychological and emotional problems such as aggression, depression, and

post-traumatic stress disorder. In extreme cases, child abuse and neglect can lead to death. The likelihood of

abuse

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or neglect undermining a child’s attention, attendance, schoolwork, social interactions, and academic progress

is self-evident.

In addition to its harmful academic impact, child abuse and neglect has important school finance

implications. Education personnel account for 18.9% of the reports, the largest percentage of referrals of all the

professional groups reporting child abuse and neglect.107 This translates into 774,900 referrals to Child

Protective Services (CPS) for the 2016 school year alone.108 Looking at employees’ time, if each referral

involved only a total of one hour of school officials’ listening to students, investigating, contacting CPS,

arranging for on-site interviews, and subsequent calling and visiting with parents, educators’ child abuse and

neglect referrals consume more than 370 person-years of work time, assuming a 40-hour work week for 52

weeks each year.109 Although educators identifying and addressing child maltreatment are important ethical

and legal aspects of their role, they come at a high cost to work productivity.

The fiscal outlays to successfully address the academic and emotional issues that interfere with student

learning are higher still. The weighted pupil approach discussed in Chapter 7 shows the increased expenses

associated with various student classifications. If the lowest weighting for socially maladjusted has a factor of

2.3, the cost for educating a child diagnosed as socially maladjusted costs 2.3 times the base per pupil funding

level ($12,508 in constant 2015–16 dollars).110 If only one-tenth of the 676,000 founded cases are eventually

diagnosed with emotional problems, these 67,600 students would add national yearly education costs of

almost $2 billion.111

Toddlers and Television

During early childhood, the individual’s experiences interact with brain growth to develop vital cognitive and

behavioral skills. Cognitively, the child expands attention and builds the intellectual abilities needed to better

process information, interact with his/her environment, and acquire school readiness. Behaviorally, media

viewing habits learned as toddlers may persist into the school years, influencing dispositions, adjustment, and

preferred activities.

Research consensus holds that excessive TV watching as a toddler is likely to limit the cognitive,112

emotional, and social skills development necessary for learning and school achievement.113 The American

Academy of Pediatrics recommends that children older than 2 years watch no more than 1–2 hours of

television per day; but studies continue to report that children watch more than this recommended amount.114

According to a 2010 Canadian study, more than 1,300 children ages 2 to 5 who watched more

television than their peers when they were toddlers and preschoolers were more likely to have poorer

academic achievement, less mature psychosocial behavior, and worse physical well-being when they reached

fourth grade. For each hour of television above the average that the children had watched, their classroom

engagement fell by 7% and their math achievement by 6%.115 These results affirm similar studies indicating

that children’s television watching during the first 3 years of life increases attention problems in school by age

7.116

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Research also finds that each additional hour watching TV per day increased attention problems by

approximately 10%; toddlers who watched 8 hours of TV per day have an 80% increased risk of attention

problems over a child who watched no TV.117

Socioeconomic level also impacts young children’s TV watching. Studies find negative association

among SES, cognitive skills, and early academic skills in both early childhood118 and in adolescence.119

Economically disadvantaged students begin kindergarten with significantly (60%) lower cognitive skills than

their more advantaged peers.120 Studies also indicate that low SES children watch less educational and

informational programming and more entertainment TV than their higher SES peers;121 entertainment and

developmentally inappropriate TV viewing are negatively linked with the child’s development of early academic

skills.122 Likewise, studies find that although TV viewing at young ages impacts development of the child’s

cognitive skills (executive functions, EF) among children regardless of household income, the lower the SES,

the greater the harm to the child’s educational readiness.123 This, in part, may account for the Economic

Policy Institute’s findings that important attention differences exist between students from the wealthiest and

poorest 20% of families.

In school, attention problems often appear as attention-deficit/hyperactivity disorder (ADHD) and are

associated with negative outcomes for children and adolescents, including inferior academic performance and

increased aggression.124 Because it costs districts approximately twice as much to educate students in

special education as in general education,125 a child identified as having ADHD and qualified to receive

special education services doubles the taxpayers’ fiscal investment in this student’s education. As a result,

school districts with increasing enrollment percentages of children eligible to receive free or reduced-price

lunch and low-quality day care centers (that use TV as a babysitter) can expect this demographic to bring

increased learning costs.

TEACHER DEMOGRAPHICS AND SCHOOL FINANCE

Student learning and achievement are schooling’s ultimate goals. The previous section reviewed educational

risk factors and their fiscal impact on education finance. But since teachers are the most important school

factor in student learning, the demographics of teacher effectiveness are another key factor to consider.

Teacher shortages can be understood as the inability to staff vacancies at current wages with persons

qualified to teach in the fields needed. If the current trend continues, by 2025, the United States could face an

estimated teacher shortage of approximately 316,000 annually.126 Several factors contribute to this situation.

Number 1 is high levels of teacher attrition. Other causes include increases in student enrollment, schools

wanting to reduce class sizes and reinstate programs cut or reduced during the Great Recession, and a

shrinking supply of new teachers as teacher preparation enrollments drop (a 35% reduction in “teacher ed”

enrollments from 2009 to 2014). Actual teacher shortages vary by state, subject area, and student population.

Teacher Turnover

Teacher turnover and attrition are reducing the nation’s ability to provide every student with quality teaching.

Investigators estimate that over one million

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teachers, including new hires, transition into, between, or out of schools annually.127 Over the past decade,

teachers have left the American public school workforce at a rate of 8% a year—a relatively high attrition rate

as compared with high-achieving countries such as Finland and Singapore and provinces such as Ontario,

Canada whose teacher attrition is about 3% to 4% in a given year. Some speculate that if the U.S. reduced its

teacher attrition rate to the levels of those nations, the overall teacher shortages would end.128

Notably, this attrition is not occurring equitably. Rates are much higher for beginning teachers; almost 25% of

new public school teachers leave the profession within the first three years.129 Attrition rates are also higher

for high-poverty schools that lose 20% of their faculty each year (a rate that is 50% higher than in more affluent

schools), and higher for urban than suburban schools.130 High teacher turnover rates are negatively

associated with all students’ achievement, not just those in a new teacher’s classroom.131

A variety of factors prompt teachers to leave their jobs (Figure 9.2). Dissatisfaction with the work

situation, family or personal reasons, retirement, desire to pursue another job or career opportunity, and

financial concerns are key reasons for the “revolving door.” In particular, the data show that inadequate support

from the school administration, isolated working conditions, student discipline problems, limited faculty input

into school decision making, testing and accountability pressures, and to a lesser extent, low and

uncompetitive salaries, are all associated with higher rates of turnover (and the increasing view of teaching as

an undesirable career choice), after controlling for the characteristics of both teachers and schools.132 These

factors vary state-to-state.

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Teacher turnover is related also to the teaching field and experience. Mathematics and science

teachers, special education and ELL teachers, those with 3 or fewer years of teaching experience, and

teachers holding alternative certification typically experience the highest turnover.133 Turnover rates are also

higher in schools serving predominately students of color. Additionally, teachers’ age factors into the decisions

whether to stay or leave the profession; turnover follows a U-shaped curve, with younger teachers and retiring

teachers leaving at the highest rates.134

High teacher turnover significantly impacts school budgets. Teacher turnover is costly (about $20,000

per teacher, on average, who leaves an urban school district),135 carrying an estimated national price tag of

$7.3 billion annually.136 One 2007 study calculated the combined school district costs of first-year teacher

turnover to be between $9,061 and $23,088 per teacher while a fifth-year teacher turnover costs ranged from

$6,766 to $33,403.137 Clearly, teacher turnover represents billions of misspent taxpayer dollars.

Teacher Turnover, Teacher Effectiveness, and Student Achievement

Teacher attrition not only adversely affects school budgets. It also negatively affects a school’s teacher

effectiveness, institutional stability, the learning culture, and student achievement.

Educational research consistently affirms that classroom teachers’ effectiveness is the most important

school factor in predicting student achievement, and its impact on student learning can be considerable. Eric

Hanushek, a Hoover Institution economist, estimates that all things being equal, a student with a very

high-quality teacher will achieve a learning gain of 1.5 grade level equivalents whereas a student with a

low-quality teacher gains only .5 grade level equivalents138—the difference of a full year’s learning growth.

This topic is extensively explored elsewhere.139

Teacher effectiveness is especially important in high-poverty schools. Stanford University education

professor Linda Darling-Hammond found that the effects of well-prepared teachers on student achievement

can be stronger than the influences of student background factors, such as poverty, language background, and

minority status.140 Despite this, the least qualified, least experienced, lowest paid, and often out-of-field

teachers tend to work disproportionately in schools with the highest number of low-income and minority

students. In 2013–14, on average, high-minority, high-poverty schools had four times as many uncertified,

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underprepared teachers as low-minority, low-poverty schools.141 Whether this reality represents a teacher

shortage or a distributional problem within districts and states is unclear. High teacher and student turnover

and a greater percentage of novice teachers working in lowest-achieving, high-poverty schools contribute to

both inconsistent instruction and the neediest learners working with the least experienced teachers.

In addition, schools as organizations depend on members’ continuity, coherence, and cohesion for

organizational effectiveness. Educational researchers have long found the presence of a positive sense of

community among families, teachers, and students as one of successful schools’ most important indicators

and aspects.142 The organizational literature suggests that turnover rates of almost 25% will likely have a

negative impact on organizational performance, especially in schools where staff interaction, commitment, and

stability are essential for success.143 A revolving door of exiting teachers (and principals) inhibits schools’

ability to develop human capital, create strong instructional programs, and build educational climates where

students and teachers can flourish.144 The actual fiscal costs as well as lost productivity and student learning

gains are considerable.

Alternatively Licensed Teachers

Over 1 in 5 (21.3%) teachers enter American public school classrooms through an alternative teacher

preparation and certification pathway.145 Alternative programs enable individuals who hold a bachelor’s

degree a shortcut in time and expense needed to attain a teaching degree or complete a graduate program

and earn a standard, alternative, or provisional teaching certificate. These alternative routes produce teachers

who tend to be older, more ethnically diverse, more minority and male candidates, more willing to teach

wherever the jobs are, and readier to teach high-demand subjects (math, science) than are traditionally trained

and certified teachers (TC).146

Alternative certification (AC) programs and pathways vary greatly within and across states in their

structure, duration, intensity and amount of coursework required, admissions selectivity, average participant

characteristics, the timing of training, and the targeted market.147 Overlap between the two types of

preparation programs occurs frequently. Some streamlined AC preparation programs may actually require a

longer combination of coursework and field experiences than most TC university programs whereas TC

university programs are now integrating coursework and student teaching as do AC programs.148

For the most part, recent studies have found little difference in student achievement between AC and

TC teachers.149 The more rigorous studies generally show that students of AC teachers scored the same or

higher than students of TC teachers; or that they scored slightly lower during their teacher’s first year of

teaching but scored the same by the teacher’s second year.150 Additionally, research suggests that

experience teaching, rather than type of preparation route, tends to be a key factor in increasing student

achievement, especially during the first 3 to 5 years in the classroom—regardless of teacher preparation

route.151 Studies also suggest that existing credentialing systems do not distinguish very well between

effective and ineffective teachers. Wide variation in teacher effectiveness exists within each type of certification

program, with effective teachers coming from both traditional and alternative certification routes.152 Research

also finds that AC teachers tend to leave the profession at higher rates than peers prepared in TC

programs.153

When it comes to AC teachers, it is clear that what was once “other” has become mainstream, and they

come with finance implications. The teaching effectiveness of certain well-prepared ACs benefits school

districts which typically pay teachers according to a single salary scale based on years of classroom

experience and degrees earned. In this context, certain AC teachers’ capacity to produce significant student

reading and mathematics learning gains when

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matched with teachers of similar years teaching experience buys school districts “more bang for the

instructional buck.”154 In an era of competing budget priorities and limited resources at all governmental

levels, this is not a minor consideration.

ADMINISTRATOR DEMOGRAPHICS AND SCHOOL FINANCE

Principals are the second most important school factor—after effective teachers—in generating student

achievement, contributing up to 25% of the school’s influence on students’ academic performance.155

Evidence exists as to which principals’ practices are associated with teaching effectiveness, student

achievement, and high performing schools.156

Table 9.3 provides a demographic profile of principals in the United States, 2015–16. More females

(54%) than males (46%) held principalships. Almost 80% were White, 11% were Black or African American,

8% were Hispanic, and 3% were another race or ethnicity. Principals’ average age was 47 years. Most

principals (61–65%) held master’s degrees as compared with bachelor’s degrees or less (2%). School

principals reported having a major influence on decisions in their schools, including evaluating teachers (95%),

hiring new full-time teachers (87%), and setting discipline policy (75%).157 Trends show that since 1987–88 to

the present, the percentage of female principals is increasing (25% to 54%); the percentage of White principals

is decreasing (87% to 78%) whereas Hispanic principals is increasing (3% to 8%); and today’s principals have

less principal experience than in former years (6.6 years compared with 10 years).158

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Principal Quality and School Finance

Three decades of research provides ample evidence that an outstanding principal exercises a “measurable

though indirect effect” on school effectiveness and student achievement, accounting for about one-quarter of

the total school effects on student learning.159 For an average school, having an effective leader can mean

the difference between scoring at the 50th percentile on a given achievement test and achieving a score 10

percentile points higher.160 Other researchers agree.161

While the principal’s impact on student achievement may be indirect, it is critical. The principal controls

the most important factors affecting a school’s teaching and instructional quality. These include attracting,

selecting, and keeping outstanding teachers; working with the school community to establish a common

mission, instructional vision, and goals; creating a school culture grounded in collaboration and high

expectations for students and educators; facilitating continuous instructional improvement; finding fair, effective

ways to improve or remove low-performing teachers (get them good or get them gone); and producing

excellent academic results for all students as gauged by external tests aligned with state academic standards.

Principals also responsibly, strategically, and ethically manage the school operations and resources to

augment teachers’ ability to meet each student’s learning needs. In addition, principals have increased

responsibilities for traditional areas such as politics, security, public relations, finances, personnel, and

technology.

Attracting and keeping capable school leaders bring the value-added to taxpayers for their school

support. Hiring and keeping effective and efficient school principals is an essential investment in schools that

makes the accompanying taxpayer dollars work more productively.

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Principal Turnover

Across studies, contexts, and measures, research consistently indicates that the rate of principal

turnover—when a principal does not return to the same school from one year to the next—can significantly

impact school performance. According to Goldring and Taie (2014), approximately 22% of principals leave their

school in a given year,162 and nearly 50% leave after the first three years.163 Principal turnover has a direct

negative impact on student and school achievement,164 leads to higher teacher turnover,165 and impairs

school culture.166 The weakened culture undermines the school environment’s capacity to successfully

mediate between turnover and student achievement. Principal turnover also inhibits the large-scale school

improvement that requires leadership continuity for about 5 to 7 years.167 In addition to the academic and

climate costs, principal churn costs schools at least $75,000 to recruit, hire, and install a replacement on the

job.168 A more complete investigation of this issue can be found elsewhere.169

According to the research, reasons for the turnover consistently suggest that school conditions (such as

the increases in disciplinary referrals, work hours, teacher abuse or disrespect, and lower levels of staff

cohesiveness and collaboration) are related to less stability and more principal mobility.170 Several studies

note that whether principals stay or leave also varies by how effective they are at improving student

achievement.171 Similarly, studies consistently suggest that principals are more likely to leave schools with

higher proportions of minority and low SES children.172 Accordingly, principal turnover has a greater impact on

student performance at high-poverty schools than at low-poverty schools.173 Principal turnover has also been

found related to school size174 and level:175 the larger the school, the less likelihood of principal turnover

whereas the relationship between school level and turnover is mixed. Policy issues connected to principal

turnover include principal salary (with school changes linked with salary increases)176 and accountability

policy (with turnover linked to heightened accountability for student performance).177 Despite these consistent

findings, few studies had strong designs to suggest causality.178

Given their key role in school performance, the demand for high-quality principals is expected to grow

6% nationwide by 2022.179 Variations in the availability of capable school leaders can be most reliably

predicted by a school’s geography, community wealth, school characteristics, and student level. Currently, a

shortage of principals nationally is disproportionately affecting rural communities that pay their principals

substantially less than more populated suburban locales.180 The imbalance between the number of open

positions and the qualified principals willing to fill them is due partly to the high number of baby boomers

retiring, fewer college students majoring in education,181 and teachers not viewing principalships as attractive

career options.182

Principal Quality, Salaries, and School Finance

The absence of significantly larger salaries afforded to principals over mid-career teachers in certain school

districts dampens teachers’ enthusiasm for moving into that role. In some school districts, new principals earn

no more than the most experienced teachers,183 sometimes with as little as a 2% difference in their average

salaries.184 The diminishing return for moving from veteran teacher to beginning principal is most dramatic in

urban and suburban areas near large urban centers. In the year 2000, the ratio between real salaries for

inexperienced principals in New York City was lower on average than those of veteran teachers.185 As a

result, school districts have occasionally used resource-rich incentives to attract and retain capable principals.

Offering signing and performance bonuses are one such approach. For example, in 2017, the Chicago

Public Schools offered their principals and assistant principals one-time $15,000 signing bonuses if they

agreed to lead “hard-to-staff” schools; they could keep the bonuses if they stayed for two years.186 Likewise in

2014, the Minneapolis Public Schools offered a $10,000 signing bonus to attract outside principals—and a

like-size incentive to lure principals already working for the district—to lead low-performing schools.187

Similarly in 2015, New York City awarded 330 principals and 660 assistant principals performance bonuses

(ranging from $7,000 to $25,000 for principals and $3,500 to $12,500 for assistant principals) for a total of $6.9

million in performance-based bonuses

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based largely on their superintendents’ and principals’ recommendations, respectively.188

A range of factors complicates districts’ use of fiscal incentives to attract and keep effective principals.

To begin, the principals’ work is extremely challenging. Principals experience high stress from complex

academic, economic, and political pressures and demands. Studies identify three major inhibitors—insufficient

gain or personal benefit (including the small salary differential between teacher and administrator), personal

needs and issues (that compete for time and attention with expansive job responsibilities), and increased job

risks (and stress) associated with entering administrative positions (including heightened public accountability

for standardized test results and possibly no position tenure as principal)—that discourage highly qualified

teachers from becoming school administrators.189

Although findings indicate that salary can make a difference in attracting highly qualified principals to

the role, offsetting other factors that lead to principal attrition and turnover, it appears that the intrinsic rewards

including quality of life and working conditions most strongly influence whether principals will stay.190 In fact,

potential school leaders report that if the working conditions (i.e., the organizational structure of the

principalship) were to dramatically change, many of them would consider serving as school administrators.191

Accordingly, policy makers may have to look beyond direct fiscal incentives alone as a means to recruit and

keep high-quality principals.

CONCLUSION

Demographic changes in students and educators significantly impact school finance. School leaders who seek

out demographic data, understand their trends, and are willing to consider new solutions will need adequate

and targeted funding to fulfill their mandate. Full awareness of local demographic changes in student and

educator populations linked with thoughtful and innovative planning by the school district and its

community—including generating the needed monies and other resources—begin to address these challenges

effectively.

CASE STUDY

You are the new superintendent for Alpha City Public Schools. The previous superintendent had held that

position for 27 years. Over the last 30 years, the community has changed from a small city with a suburban

upper-middle-class community to a connected part of two cities. As the communities grew together to form one

large urban area—a megalopolis—problems associated with urban settings entered the community. Table 9.4

shows the funding sources for the district over the last 30 years. Table 9.5 illustrates the demographics of the

school district.

The city has a relatively strong tax base, but some industries have talked about moving to the suburbs

directly to the north or south for the better school systems. Such a move would severely and negatively impact

the local economy. The local governing body is evenly split about raising additional funds for the local schools.

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The previous superintendent was a “status quo” manager who believed that the five new schools built

during his tenure were his legacy. The central office staff has almost no leadership capacity, initiating virtually

no new curricular programs in the past 15 years. Staff development consists of a motivational speaker to start

the school year. Half the school board and half the city council members want you to lead the campaign to

improve the schools and save the local economy. The other half is complacent, believing that everything is fine

the way it is.

Moreover, you have received information from the local health department that the incidence of teenage

pregnancy has increased from almost zero in 1985 to 114 in 2015 and is projected to include up to 8% of

females in grades 8–12 by 2022 unless an effective intervention is undertaken.

Given these data and your knowledge of school finance and demographics, what plan of action would you

pursue as the new superintendent? Specifically, as you examine the revenue sources for the school system in

Table 9.4, what trends do you see? Has the local revenue share been maintained appropriately?

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CHAPTER QUESTIONS/ASSIGNMENTS

1. What has happened to the demographics in your state over the past 10 years? What population shifts have

occurred? Are there at-risk signs in the demographics? Is what you are seeing reflected in Figure 9.1 in this

chapter? Explain.

2. What demographic changes have taken place in your school district in the past 10 years? What at-risk

signs in the demographics have you seen? What would you do to plan proactively to meet these needs?

3. What proactive planning has taken place in your school district to meet the changing demographics? Has

the planning been effective? Explain. What would you do differently?

4. What has been happening with teacher and administrator turnover in your state and in your school district?

Where are the teacher vacancies occurring in your district, and what is the major cause of the turnover?

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Chapter 10

FOCUS QUESTIONS

1 Explain how a budget indicates the policy ideals that a school system most values.

2 Describe how states differ in allocating education funds to instruction as compared to administration or

operations and maintenance.

3 Compare the percentage of overall state spending that goes to education relative to funding for other

public programs.

4 Discuss the priority of federal education funding as compared with federal spending in other areas.

5 Detail how states and localities keep track of their spending and identify the most effective budgeting

model.

6 Explain the 4-step budget process, the data needed for each step, and how/when principals should

involve other stakeholders (and who they are).

7 Identify the advantages and disadvantages of various types of school budgets.

8 Discuss how state budget cutting undermines education goals.

How we spend our money reflects what’s important to us. This chapter examines how state education budgets

vary and how spending within other state function categories varies. Budgeting models are considered.

President Harry S. Truman used to say that budget figures reveal far more about proposed policy than

speeches. They still do. A budget is a plan for spending one’s financial resources, and no one likes being

constrained by a budget. Think of your family’s budget. Most people think their family’s budget is too small. Too

frequently, folks use funds intended for savings to meet the rising costs of living: visiting the pediatrician to treat

a child’s ear infection, calling a technician to fix a broken air conditioner, or seeing the mechanic to fix the car,

again. Some costs in our family budgets are constant, or fixed, such as the mortgage (assuming you have a

fixed-rate mortgage) and the car payments. These expenses remain the same year after year until they are

paid off. Other parts of our budget are variable, such as the pediatrician’s visit or the car repair. Those areas

that we set for ourselves, discretionary spending, such as how much we choose to spend each month on

entertainment, also represent what is important to us.

If a family of four earning $75,000 spent 50% of its gross income on a home mortgage, one might say

that having a nice home was a priority for this family. If another family spent 30% of its income on a home and

gave 20% to the local church, one might say that both home and church were important parts of this family’s

value system. And a family that spends 20% of its income on meals in “5-star” restaurants rather than mostly

eating at home clearly values fine dining experiences.

A budget is a “snapshot” of what we spend and where we spend it, and this snapshot reflects our priorities at

the time. The same can be said of all budgets, family, corporate, or educational. The difference between

personal budgets and educational budgets is that the former is private with fluctuating levels of organization

whereas the latter is well-organized (usually) public information.

“The management of resources is one of the most important and one of the most controversial areas of

educational administration.”1 Education budgets are controversial because they are public expenditures and

public information and because great variance exists in how the public believes its monies should be

spent—whether for roads, government, or education. The public process of establishing the education budget

reflects and confirms what our elected officials (and we, their constituents) value. That process involves

economics, politics, and the moral standards we hold as a community and society.

BUDGETS DETERMINE EDUCATION PRIORITIES

Society’s priorities for education and other public services become clear when examining how public monies

are budgeted. This can be seen at the federal, state, local, and building levels. William H. Roe’s classic

definition of education budgets is

the translation of educational needs into a financial plan which is interpreted to the public in such a way

that when formally adopted it expresses the kind of educational program the community is willing to support,

financially and morally, for a one-year period.2

Studying educational budgets, therefore, reveals a community’s beliefs and values much more than

what politicians say in speeches.

A Hypothetical Example

Let’s consider the two school district budgets shown in Table 10.1. Funds have been divided into six distinct

categories with the percentages of the budget shown beside each category. Both school districts have roughly

the same number of students from relatively similar geographic and socioeconomic backgrounds. The

communities have been stable, unchanged demographically for more than 30 years. All of the school buildings

in both districts were built within the last 10 years. The budget allocations in the various categories make it

possible for us to infer each district’s priorities.

A cursory examination reveals that both school districts have similarities. They have the same number

of pupils and the same total budget (13,000 students). Both spend the same on

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a per pupil basis ($13,200). And both have the same total expenditure (13,000 students × $13,200 per pupil

expenditure = $171,600,000). All of the schools are about the same age, and the debt service on the school

buildings comprises an identical 3% of the budgets. In addition, the budget for instruction (at 75%) is also the

same for both school districts.

Distinct differences between the two school districts’ budgets also exist. Most obviously, School District

A has 18 schools whereas School District B has 23 schools. Knowing that none of the schools is more than 10

years old, and recognizing that the communities’ demographics have not changed in 30 years, School District

B chose to serve the locale with smaller schools. As a result, School District B has five more schools than

School District A. Five additional schools means five additional principals, more librarians and books, guidance

counselors, secretaries, custodians, and so on. The community’s value for smaller schools has clear

implications for the district’s education budget. For example, the additional principals in School District B will

mean that administration costs will be higher. It is also safe to assume that transportation costs may be

somewhat higher for school bus runs to the district with more schools.

So far, the similarities and differences are rather obvious. Looking at the operations and maintenance budgets

reveals rather large differences between the two districts. School District A spends almost twice as much (11%)

on operations and maintenance as School District B (6%). What might explain this difference? A discerning

observer might note a yellow

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warning flag: School District B may not be maintaining its buildings as well as School District A.

Facilities maintenance engenders an odd phenomenon: delaying roof repairs costs exponentially more

the following year than it does right now.3 Repair costs inevitably increase, as do costs due to damages

caused by the deferred maintenance. In the meantime, the public forms opinions about school quality inside

the school based on how well the buildings are maintained and appear on the outside. A poorly kept building

may have excellent teachers and administrators, but if the public sees leaking roofs, graffitied walls, and

broken windows, they may assume that the instructional quality is declining. Deferring maintenance costs on

two fronts: increased costs later and community relations costs today.

Studying school districts’ budgets is a complex task that requires understanding not only the sums but

also what these sums mean in relationship to each other. Analyzing an educational budget requires that we

read both the fine print and between the lines.

State Data

States, like people, have varying priorities, which can be seen in how they allocate resources within education

budgets. Table 10.2 shows the budget priorities for 15 states and the District of Columbia, which reflect total

per pupil expenditures for the top five, bottom five, and middle-of-the-road five states and the District of

Columbia in education spending. By comparing the proportion of total spending across three categories, we

can discover what each community values. The categories include Instruction, School and General

Administration, and Operations and Maintenance. The percentages have been rounded up to the nearest

whole percentage point.

The average FY 2015 per pupil spending in the United States was $11,454. Per pupil spending ranges

from a low of $6,751 in Utah to a high of $20,744 in New York, a difference of $13,993. Stated another way,

New York spends more than three times the amount Utah spends per pupil. Moreover, the combined per pupil

spending of Utah and Oklahoma at $14,826 (the states with the lowest per pupil expenditures) does not equal

the per pupil spending of the District of Columbia, New York, Alaska, Connecticut, New Jersey, or Vermont.

Although the cost of living in Washington, DC or Connecticut is significantly higher than it is in Utah or

Mississippi and educators’ salaries and operational expenses will likely be higher, the level of per pupil

spending also speaks to the community’s value of education.

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The way each entity allocates funding among the three categories speaks to its civic values without the

confounding cost of living variable. For example, the variance in state percentage spending on instruction

ranges from a low of 54% in the District of Columbia to a high of 70% in New York. Spending on administration

varies from a low of 5% in New York to a high of 15% in the District of Columbia. Spending on operations and

maintenance ranges from a low of 7% in Minnesota to a high of 11% in Alaska, Mississippi, and Oklahoma.

There could well be some variance in how states interpret and report figures in these categories (e.g., are

Directors of Instruction or Instructional Supervisors counted with instruction or administration?), but generally

these differences reflect where the elected officials believe their tax dollars are best spent or where dollars are

allocated in a politically expedient manner.

Other factors come into play when examining education budgets. Some geographic climates are more

temperate than others, and heating and air conditioning costs are lower, reducing the Operations and

Maintenance category’s expenditures. Some states have many more sparsely populated rural areas than

others, greatly increasing the transportation costs as compared to more densely crowded areas. For example,

one bus in a rural area might travel for an hour to pick up 30 students and take them to school. By comparison,

in a densely populated urban area, one bus might be able in one hour to pick up four busloads of children and

drop them off at school. This density factor reduces the need for additional buses and bus drivers, lowering the

percentage of funding required for transportation.

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Competition for State Funds

State budgets must weigh education spending against other public service spending. For anyone living in a

congested area, traffic is a major problem. Traffic speaks to a transportation budget. Higher education is

another important state budget category. Figure 10.1 shows on average the total state expenditures by function

for fiscal 2018, the latest data available.

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After several years of declining fiscal funding, Figure 10.2 shows the percentage change in general

fund spending for each of the states’ seven functional categories. In FY 2018, the National Association of State

Budget Officers (NASBO) estimated a 4.6% growth in fiscal 2018 and 3.8% in fiscal 2017.4

On average, states spend about 20% of their budgets on elementary and secondary education. As

seen in Figure 10.2, NASBO projected that in FY 2018 Medicaid would far surpass elementary and secondary

education (E & S) as the largest state expenditure, a result of increased enrollment brought on by economic

decline and an aging baby boomer generation.5 The competition for state funds is real, and not all states have

returned their education funding to pre-Great Recession levels.6

Table 10.3 shows six major budget categories for the states: Public Education (PK–12), Higher

Education, Public Assistance, Medicaid, Corrections, and Transportation. Other categories not specifically

mentioned here are summed in the “All Other” section. The chart groups the regions and notes the average

public education state budget percentages. Most regional education budgets are similar, in the 20% range.

However, the range in individual state budgets for PK–12 public education is much broader. The two lowest

states are Connecticut (12.7%) and Oregon (13.1%). The two highest states are Vermont (32.9%) and Kansas

(30.4%).

Like most families, states have limited income. Some states may decide to spend more on roads,

responding to the political necessity of appeasing voting commuters and business interests. Others may

choose to have fewer institutions of higher education and concentrate instead on funding a single flagship

university. Still other states may choose to deal more generously with the poor through expanded public

assistance or Medicaid funding. Regardless of the choices, where states place their monies shows what their

people value through the voting process.

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Let’s examine some of the priorities in different states. For higher education, the average state percentage

expenditure is 10.1% with a high of 27.0% in Iowa to a low of 2.9% in Illinois. For Medicaid, an increasingly

larger share of all state budgets, the average state percentage expenditure is 29.7%, with a high of 39.1% in

Missouri and a low of 14.1% in Hawaii. For corrections, the average state percentage is 3.1%, with a high of

5.0% in California and a low of 1.0% in West Virginia. Transportation’s average state percentage is 8.0% with a

high ranging from 14.4% in Alaska to a low of 2.4% in Wyoming. Reasons for these variances are complex as

needs differ from state to state. However, we believe education needs are paramount to the state’s economic

health both now and in the future. Short changing education is short-sighted.

Federal Data

The federal government also allocates funding according to its priorities. Changes in political parties bring

changes in priorities. With limited resources, elected officials must make decisions as to where to place those

assets. As with the local and state budgets, our national values reflect where and how we allocate monies in

the federal budget.

Table 10.4 shows that only 1.62% of the federal budget was allocated for all education in FY 2019—and

considering elementary, secondary, and vocational (excluding higher

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education, research, training and employment, and social services), down from 1.69% in FY 2018. In part, this

reflects that education is a state function, a local responsibility, and only a federal interest. As such, the federal

government is not primarily responsible for education’s fiscal support. Put another way, the percentage of

federal spending on interest in FY 2019 is more than five times what is spent on elementary and secondary

education.

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Knowing what percentage of revenue the federal government assigns to education is one matter.

Knowing the historical trend data puts the information in a different perspective. Figure 10.3 shows the three

main sources of revenue for public education over time. Notice that the federal percentage appears relatively

flat since 1970 (except during the recession when federal stimulus dollars were spent) whereas state and local

percentage shares have converged at least four times since the 1970–71 school year. That controversy is

being played out in courts across the country as localities force states to reconsider their funding levels in

response to high-stakes testing and adequacy issues.

One factor remains relatively constant. Education needs more money—an issue that Chapter 11

addresses. Obtaining increased funding will require political influence—something with which most educators

are unfamiliar.

THE BUDGET PROCESS

Budgets have driven business decisions for a thousand years, but governmental budgets are a much more

recent phenomenon.7 As early as 1314, the British Parliament insisted that the King spend tax revenue for the

purposes for which the taxes had been levied. After the revolution of 1688 and fully effective in 1742,

Parliament assumed the authority to levy taxes, taking it away from the King and his Ministers. The Cabinet

held the responsibility for preparing the budget and presenting it to the House of Commons. By law, the English

people controlled their country’s finances through a popularly elected legislative body.8 In fact, Britain

implemented the first full-fledged government budget in 1822.

Today, virtually all democratic governments use a budget process similar to the one the British initiated.

In this process, the executive branch develops the budget and gives it to the legislative branch, which amends

and approves it. The legislature then levies taxes to support the budget. The executive branch then

administers the budget. The budget is more than a document with many figures arranged in columns.

Ultimately, it is a process by which people govern themselves.

In the United States, however, it was not until 1921—after years of rivalry and petty jealousies between

the House of Representatives and the Senate—that Congress passed the first law requiring a national budget.

Although the law passed in 1920, President Woodrow Wilson vetoed it. President Warren G. Harding signed

the legislation the following year.

School boards also moved slowly to adopt a formal budgeting process. Accurate historical records of

school budgeting are not available. But today, every school district employs some form of budgeting process

with varying levels of effectiveness, efficiency, and understandability.

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Budget Defined

It may seem awkward to define “budget” this late in the chapter; but the background information presented

makes the definition more meaningful. A budget is a comprehensive financial plan that involves four distinct

essential elements:

1. Planning for the school district’s needs

2. Seeking adequate funding for the program

3. Spending the received funds

4. Evaluating the results of the process and program.

Figure 10.4 shows this budget process, with the evaluation component cycling throughout the process

and the program. Both the process and the program are evaluated to refine the figures and assess the

program’s effectiveness.

Educational Planning

As Roe defined it, a school budget is “the translation of educational needs into a financial plan . . . that when

formally adopted it expresses the kind of educational program the community is willing to support.”9As such,

the budget reflects community values. Planning with and for the community is a vital stage of the budgeting

process. People cannot value what they do not know or what they do not understand. Developing this value for

education requires informing the public about the importance of what educators do for their children and for

their community.

Developing these values into a budget involves a four-step planning process of identifying school

district needs, establishing goals and organizing objectives to obtain those goals, building a program to meet

the objectives, and costing out the programs.10 Figure 10.4 illustrates this four-step process.

Identifying schools’ and school districts’ needs involves data analysis. In today’s world, it is impossible

to examine programs without including student achievement data in the decision-making process. Effective

principals and superintendents obtain relevant data and have a wide group of constituents involved in

analyzing and interpreting what these data mean. Parents, business and community leaders, teachers,

administrators, clergy, and other vested groups come together to determine educational needs. They seek

patterns and meaning

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from the data and work to achieve a consensus, identifying the school or school district’s urgent requirements

that promote each student’s academic success and well-being.

Once the needs have been determined through this extensive and collaborative data analysis process,

goals can be established and objectives can be organized. In this step, it is important to maintain community

involvement. Constituent groups need to be “kept in the loop” so they understand the links between

determining needs, establishing goals, organizing objectives, and funding their implementation.

For example, data may show that students in grades 3, 5, and 8 are performing below state and

national norms. Increasing achievement means improving students’ skills in reading comprehension. The

schools need a new reading series, ongoing, intensive staff development for teachers to improve reading in all

content areas, and additional learning time for children at risk of falling behind their classmates. This promising

intervention has a price tag. When constituent groups do not participate in this complete process, all too often

a disconnect occurs between understanding the school or district needs and the goals and objectives (that is,

the programs, practices, and related fiscal requirements) to meet the needs. This lack of meaningful

connections ultimately leads to the community’s failure to support adequate school funding.

When consensus concerning the goals and objectives has been achieved, it is time to build a program

that meets these goals and objectives. This program may be developed in-house by school district staff or

purchased from an outside vendor. Available resources and local priorities affect these choices and actions.

For example, a choice may have to be made either to purchase a new reading series in the elementary grades,

and pre-packaged science experiments in middle school or to have the science teachers develop the

experiments in summer curriculum development workshops. It is vital to maintain community involvement in

this stage. Various programs should be explored until the best fit for the educational needs and fiscal means is

identified.

The final stage in this phase is to “cost out” the program. Given all the relevant data, what will the final

price tag be? Maintaining community input increases the probability that support for the required funding will

increase. The constituent groups involved at the beginning of the planning process should continue during the

costing out phase. This is the final step of the budget construction process wherein various program budgets

are combined to form a total dollar value for the planned programs.

THE “DOUBLE LOOP” BUDGET PROCESS

Most educators believe that the budget process starts somewhere around mid-November and receives

approval sometime in March or April each year. Unfortunately, that is the way it happens sometimes. Figure

10.5 shows budgeting is a year-round bifurcated process expanding the four-step process shown in Figure

10.4.

As seen in Figure 10.5, the “Double Loop” budget process begins with budget planning, seeking the

funds, and spending the funds. The process then splits into two cyclical loops—process and program

evaluations. Program evaluation is needed to ensure that the purchased programs and services meet

expectations for effectiveness. The second loop allows for the underlying assumptions to be examined for

continuous improvement of the budgeting process. Some of the underlying assumptions might include: “Are we

assessing all relevant student

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groups?,” “Would a different methodology provide us with more accurate and complete findings?,” “Were some

vital stakeholder groups omitted from the process?,” “Is the budget document easily understood by the

public?,” “Was the communication clear with the governing body?,” “Is the funding equitable among the

different schools?,” and other issues to help “improve” the process.

Seeking Adequate Funding

Once the total dollar value for the educational plan has been determined, the school district must seek

funding from the appropriate authority. Funding sources vary from district to state. In some locales, the school

board must gain budget approval from the municipal authority or the governing body. In other places, the

community approves the budget. In some locations, the school board sets the school budget funding when the

locality sets the tax rate (sometimes called a school tax). Regardless, a majority of the public must support the

budget. Nothing is more important in seeking funding than open and honest communication with the

community. Integrity matters—a lot!11

Sufficient public sentiment will influence the governing body to approve the school budget. Elected

officials’ first rule is to be reelected. Siding with a vocal majority supporting a school budget virtually assures

reelection for the official and passage for the school budget.

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Maintaining community support and momentum from the budget’s planning stages will help efforts to

secure adequate funding. When school officials and the budget planning team speak at local civic, service, and

religious gatherings, the public has the opportunity to see the community involvement in the budget process.

Involving interested citizens from the start of budget planning saves time and energy; these people do not need

to be “brought up to speed” on the local educational issues or the budgeting process. They can answer

questions knowingly and publicly, assuring their neighbors and legislators that the funding is necessary.

Moreover, seeing influential community members actively endorsing the school budget brings credibility to the

process as well as to the product. One fact is clear, however. The budget document must be understandable to

the public. People tend not to trust what they do not understand.

Once a critical mass of the community has established support for the school budget, the role of the

school board and the superintendent changes from “selling” to “closing the deal.” Expressed differently, it is

difficult to close the budget deal if the public has not accepted the need for the budget. Once the budget has

been approved and the new fiscal year begins, it is time to spend the new budget’s funds.

Appropriating School Funds

States and localities have various methods for appropriating funding to local school boards. In some cases, the

school board receives a “lump sum” appropriation. Even though the school board budget may be divided into

categories (instruction, administration, transportation, and the like), the funding is a total amount and not

assigned to various categories. In this case, the school board is usually free to transfer funds between

categories to meet various needs as they arise during the year.

In other localities, funding may be appropriated by category. In that case, the governing body may

either allow or not allow the school board to transfer funds from one category to another. Not receiving

permission to transfer funds among categories restricts the school district’s ability to meet its needs.

In a worst funding scenario, the governing body may appropriate funds by category on a monthly basis. This

would require the superintendent or designee to attend the governing body’s monthly meeting and request that

the funds already approved be appropriated by category to the school board so the bills can be paid. This

approach tends to be highly restrictive and inflexible in meeting the school district’s needs.

Educational leaders’ awareness of their school division’s funding status is essential. Perhaps this brief

story will illustrate the point.

A superintendent fired a long-standing high school principal on appropriate grounds: the principal

played golf each Friday during school time and did not use vacation time. Unaware that the principal was best

friends with the City Council Chairman and was playing golf with this same City Council Chair, the

superintendent received a phone call from the principal’s golfing partner warning of the principal’s

long-standing ties in the community and the backlash that might occur from the firing. The superintendent

dismissed the warning and proceeded with the dismissal.

This superintendent’s budget was appropriated on a monthly basis by category. At the last City Council

meeting of the fiscal year, the superintendent attended the meeting to request appropriation of the school

board’s funds by category as had been the practice. The Chair told the superintendent that it would be a long

meeting and asked if he were in attendance only for the school board’s appropriation. When the superintendent

responded that there were no other agenda items, the Chair told him, “I will take care of you.”

The superintendent left the meeting, and the City Council Chair intentionally never brought the

appropriations forward for a vote. Meanwhile, the superintendent did not check to

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make certain that the City Council made the appropriation and proceeded to authorize spending funds that

were not officially appropriated to the school district. The Chair later called the State Police to report that the

superintendent had expended funds he did not have—a felony. The superintendent was arrested. Behind the

scenes, a deal was struck for the superintendent to be fired in exchange for the charges being dropped. The

principal was rehired, and the golfing continued.

This cautionary tale shows how important it is to know and follow the spending procedures in a school

division. Failure to do so can be very costly.

Spending the Received Funds

Once the new fiscal year begins, the new budget cycle starts. The purpose of administering the budget is to

spend the funds wisely in accordance with the education plan—not to save money and see how much will be

left at the end of the year. In the public’s eye and/or to the governing body, having a large surplus at the end of

the year may make the school board and the superintendent appear less than trustworthy or competent in the

budget process.

On the other hand, no amount of budget planning will anticipate everything that could happen or be

needed during the school year. For instance, it is impossible to know that a bus engine will have to be replaced

just after its warranty ends or that a boiler in the high school will not last the two more years your maintenance

people assured you it should. Superintendents and school boards do not want to go back to their funding

bodies and request more money for these unexpected occurrences.

Two other ways exist to handle these situations. First, a line item in the budget can be inserted called

“contingencies.” This provides funds for unexpected situations that might arise. The problem with a

contingency line item, however, is that the public may see this as “padding” or “putting fat” into the budget. The

public may also negatively interpret this as the school board’s and superintendent’s insufficient thought into the

school system’s overall operation.

The second way to handle unanticipated expenses is to discretely “expand” another budget area.

Frequently, the budget may “overestimate” the fringe benefit factor for employees’ wages. For example, if the

total cost of fringe benefits (employer’s share of FICA, health insurance, life insurance, retirement, and other

benefits) comes to 24% of the wages, some school leaders budget for a factor of 26%—a spread of 2% on the

entire wage line. To illustrate this, every 2% pad on a $10 million salary and fringe benefit factor budget allows

for an additional $200,000 to be used at the school district’s discretion.

Naturally, it would be unethical to advocate “hiding” funds in the budget.12 The superintendent and the

school board will have to determine an acceptable manner for dealing with unanticipated expenses. One

principle is clear: the funds must be spent appropriately. It is important to know that not all school districts and

states have identical spending procedures.

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Evaluating the Results of the Process and Program

The Great Recession prompted schools to evaluate their spending patterns to determine overall value. In

business circles, this is akin to analyzing the return on investment. Superintendents, as their school system’s

Chief Executive Officers (CEO), are responsible for ensuring that the funds allocated in developing the

education plan are spent effectively and efficiently in accordance with the budget goals. Doing this involves

ongoing monitoring during the year and evaluating the results of the budget’s process and spending program.

Superintendents provide the school board with periodic budget updates—usually monthly. These

updates list budget line items in major categories and the amount and percentage of those funds expended to

date. Additionally, the board should be kept informed about anticipated problems with over- or underfinanced

budget categories in the event that steps need to be taken to shift funds from one category to another. Some

school systems have the authority to transfer funds from one category to another. Others must have these

actions approved by the governing body.

With double loop budgeting, over time, the budget should improve in accuracy and effectiveness in

meeting student achievement needs. Each year’s budget should build on the previous year’s data and allow for

refinements in forecasting needs. One problem with achieving this tweaking is superintendents’ relatively short

tenure length on the job. When a school system makes leadership changes, the new leader reassesses all the

budget practices of the previous superintendent and implements a new system for budgeting that disrupts the

refinement process.

While an accountant, the business manager, or the finance officer can evaluate the process,

instructional leadership is required in program evaluation. It takes an instructional leader to be able to

determine if spending $1 million on upgrading middle school science labs is making a learning and

achievement difference for all students. Initially, it will be necessary to show the school board that the

expenditure is wise and subsequently use assessment data to show that the purchase made a positive

difference in student outcomes. The same can be said of other equipment purchases, such as textbook series,

technology, manipulatives, as well as salary increases.

Good leaders will not only evaluate programs in light of overall student achievement but also assess

achievement for all subgroup populations. Currently, most principals and superintendents disaggregate student

achievement data to determine which students are/are not progressing satisfactorily. The planning process

involves these students’ achievement (or lack thereof) and determines evidence-based interventions that may

improve achievement. Plans are enacted, funds solicited, monies spent, and school personnel use the

formative and summative accountability test results to assess and refine their practices. More and more

frequently, educational leaders assess the impact of their programs on all students—disaggregated by

subgroup—to determine whether spending interventions are showing improved student mastery. And if they

are making a difference, is the cost/benefit ratio satisfactory?

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TYPES OF BUDGETS

Now that we have reviewed the budget process, it would be helpful to know the most commonly used types of

budgets. Budgeting systems explain to the public where their monies go and what achievement outcomes

result. It is vital for educational leaders to explain the evaluation results of the budgeting process to the

community so those who fund the education programs know their investment has made a meaningful

difference.

Various types of budgets exist, and each school district has a formally adopted budgeting process. The

following sections review a few of the most commonly used budgets.

Percentage Add-On Budgeting

Adding a percentage to the previous year’s funding level is the most common budgeting method. Of course, in

fiscally austere times, this type of budgeting could be called Percentage Reduction. If the school district had a

local contribution of $50 million and the local increases for the next year were 5%, the local increase in

revenue would be $2.5 million. If the governing body granted a 5% increase over last year’s funding, the

superintendent would ask staff to make recommendations about what programs should receive additional

funding.

The advantage of a percentage add-on budget is its simplicity for the governing body and the school

board. The percentage is determined and funded. Other budget types demand much more time. The

disadvantage is that simply adding a percentage increase to each budget category may not meet the school

district’s actual needs. For example, if the school district made large technology purchases in one year and

anticipates a substantial state funding increase, a 5% local increase may not reflect real needs. School leaders

should never consider just adding the same percentage to each item in the previous year’s budget without first

conducting a thoughtful review of the school districts’ needs.

Zero-Base Budgeting

Zero-base budgeting (ZBB) has existed for more than a hundred years. However, it was not until Jimmy Carter

declared he would implement zero-base budgeting for the federal budget if elected president that ZBB gained

interest. Basically, ZBB requires that the budget start from zero each year—unlike a percentage add-on. It

makes no reference to the previous year’s funding. No spending category or budgeted amount is sacred.

Everything is re-evaluated annually, and each budget inclusion must be justified.

The advantages of ZBB are the required program evaluation as a criterion for future budget inclusion

and the staff involvement in ranking and selecting alternatives in resource allocation. This tends to foster better

budget decisions and more public confidence in the budgeting process. The disadvantage is the time and level

of complexity involved in

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administering ZBB. Most school districts do not have the staff and time to adequately address this type of

budgeting process.

Planning, Programming, Budgeting, and Evaluation System

Originally developed by the RAND Corporation in 1961 for the U.S. Department of Defense, the Planning,

Programming, Budgeting System (PPBS) is a formal systems analysis process for making resource allocation

decisions that align policy objectives with costs. An evaluation component was added later (PPBES).13

Although similar to other budget planning processes, PPBES was designed to be a more flexible and fluid

series of steps that extended beyond the 1-year budget cycle, often lasting at least 5 years. PPBES has five

goals—as its name suggests:

1. Planning and establishing goals

2. Determining the cost and alternative plan’s costs for achieving the goal

3. Evaluating the results of the plans

4. Modifying and improving the goals

5. Establishing and improving alternative plans to achieve the modified and improved goals.

The advantage of PPBES is its flexibility in allocating resources. It prompts administrators to consider

more cost-effective alternatives; stresses the significance of minor costs over a long time frame, allowing them

to be analyzed; helps relate a program’s cost to its merits; and links teacher aids, supporting activities,

research and development to subject matter in terms of time and cost.14 This approach recognizes that goals

and objectives are not met in a single fiscal year, and modifications may be needed during a fiscal year’s cycle.

The disadvantage is that few school district and governing body budgets are flexible enough to accommodate

this budgeting approach.

Site-Based Budgeting

Site-based budgeting (SBB) decentralizes the process; principals at each building develop their school budgets

with staff and community input. The district allots the school a set amount of funds to cover all school

expenditures. Then the principal and a site team composed of administrators, teachers, parents, students,

community members, and other grassroots stakeholders generate and evaluate ideas to address a particular

school’s needs in meeting district objectives. Effective SBB requires that the school budget address student

needs with financial resources.

This approach allows the school site decision-making latitude for aligning goals with resources. For

example, if the site deemed professional development as a priority, it might decide to forgo substitute teacher

costs by having regular teachers use their planning periods to cover classes when other teachers are ill, saving

the cost of a substitute. These unspent substitute teacher funds would then be rerouted to a professional

development account for the teachers. This particular arrangement may not be possible in some areas where

strict contracts are in place with various professional associations.

The advantage of site-based budgeting is that it involves community input in building support for the

budget. Done correctly, SBB generates trust, collaboration, and fairness, and

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public backing for the budget. The disadvantage involves the time and skills necessary to manage the process.

Education staff are overworked already. Moreover, few principals are trained in how to manage a site-based

budget. Adding more to their plate in an era of high-stakes public accountability can be unduly burdensome.

Performance-Based Budgeting

Increasingly, performance-based budgeting (PBB) is used in education. Also known as results-based

budgeting, outcomes-based budgeting, performance-driven budgeting, and level 4 budgeting, it has some

similarities to site-based budgeting. The Education Commission of the States identified PBB’s characteristics:

1. A concerted effort to link resources (inputs) to specific results (outputs)

2. Performance goals established and resources linked to those goals

3. Informed decisions, including the development and reporting performance indicators

4. Process results in a reallocation (reprograming) of funds as the organization shifts resources to more

effective activities, including considering alternative service delivery

5. Process encourages active “program evaluation” and links these evaluations back to budget discussions

6. Budget process is open and transparent involving stakeholder input.15

Jason Willis and colleagues identify three principles that must drive PBB’s allocation of

funds—identifying, solving, and communicating. They conclude, “school districts can no longer simply

contemplate how much additional money should be allocated, but should ask a more critical question: ‘How

should educational dollars be spent more effectively to achieve the goal of student achievement?’”16 A more

detailed explanation of PBB can be found elsewhere.17

TRENDS IN REDUCING BUDGETS IN DIFFICULT ECONOMIC TIMES

Although the Great Recession (2007–09) is a decade behind us, public investments in education remain

markedly reduced. In 2015, 29 states were providing less total school funding per student than they were in

2008. Similarly, as of the 2017–18 school year, at least 12 states had cut their “general” or “formula” funding by

7% or more per student since 2007. Seven of those 12 states also have cut residents’ income tax rates,

undermining states’ primary revenue source for supporting public schools.18 As compared with 2008, by 2017

the total number of teachers was still down by over 130,000.19

Cuts to PK–12 education can have serious consequences, especially for low-income students both in

school and as adults in the workplace. A long-term study on school financing reform’s impact on 15,000

children born between 1955 and 1985 found that poor children whose schools received an estimated 10%

increase in per pupil spending (adjusted for

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inflation)—started before they began public school and continued over their 12 years in school—were 10

percentage points more likely to complete high school than other low-income children and had 10% higher

earnings as adults, and were 6% less likely to be poor as adults.20

In addition, state budget cuts undermine key education reforms. Research suggests that teaching

effectiveness (teacher quality) is the most important school-based factor in student success.21 Reduced

school budgets make it more difficult to recruit, develop, and retain the high performing teachers needed to

improve student achievement. In fact, between 2010 and 2016, the average teacher’s salary in 39 states

declined relative to inflation,22 and low teacher pay is a crucial factor behind shortfalls of effective teachers in

many schools.23 Similarly, evidence suggests that smaller class sizes in early grades and for low-income

students can increase achievement;24 but smaller classes require additional teachers, rooms, and desks,

none of which can occur with reduced budgets.

Likewise, many experts affirm that more student learning time can improve achievement.25 But since

extended learning time usually costs more, budget cuts make this academic support less likely. For instance,

when Arizona ended funding for full-day kindergarten, some school districts decided to offer only a half-day

program or by requiring parents to pay a fee for a full-day program, probably limiting the number of children,

especially those from low-income families, who can attend.26 And despite many studies supporting the value

of pre-kindergarten or preschool programs to improve children’s cognitive skills, especially for low-income

children,27 the average state preschool spending per child has dropped substantially from 2002 to 2017 in real

dollars; and five states have actually decreased their per child spending (in unadjusted dollars).28 Long-term,

recent savings from PK–12 funding may cost the state more in reduced economic growth from absence of a

well-educated workforce.29

COMMENTS ON ACCOUNTABILITY

A good educational leader promotes the academic success and well-being of each student by understanding,

responding to, and influencing the larger political, social, economic, legal, and cultural context. Sound

budgeting processes and practices are essential aspects of public accountability. Addressing the budgeting

process as described in this chapter, educational leaders demonstrate that they understand, respond to, and

influence these larger contexts.

Accountability is not new to education. A study in 1976—over 40 years ago—cited the political nature of

educational accountability:

Our examination of the accountability movement has led us to conclude that it is not an educational but

rather a political movement fueled by economic concerns. Economic and political forces provide the main

thrust behind the movement that has attracted many who really believe that it will improve education.30

As education is increasingly politically driven toward a marketplace model, good budgeting

knowledge—especially in the area of program evaluation—is essential. It can establish an ethical, transparent,

and professional approach to educational leadership that encourages community support for education

funding. Not doing so exhibits a serious lack of understanding about the larger educational and political

contexts and a disregard for the publics we serve.

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CONCLUSION

With school budgets, taxpayers either pay now or pay later in increased expenses (for academic remediation

and social safety nets) and lost community trust in educational quality. Studying school districts’ budgets is a

complex task that requires understanding not only of sums but also of what they mean in relation to each other.

If budgets reveal more about policy than speeches do, reducing investments in PreK–12 education, higher

education, research, and infrastructure budgets—and not finding ways to increase revenues—threatens to

undermine America’s economic and political future.

CASE STUDY

You are the principal of Omega High School in the scenario that follows. Because of the recession, state and

local funding have been reduced by a total of 15%. The superintendent is requesting an across-the-board cut

to all schools of the same amount which applies to all schools and central office departments. The

superintendent’s instructions also include a stipulation that should extenuating circumstances exist in your

school or department, a justification for less than a 15% cut should be included.

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Your assignment as principal of Omega High School is to examine carefully the two high school

budgets that appear in Table 10.5 (include concepts such as horizontal and vertical equity, adequacy, and the

fairness of using a percentage add-on budget formula or percentage reduction) in this case. What extenuating

circumstances exist for your school that show Omega’s budget should not be reduced by 15%?

CHAPTER QUESTIONS/ASSIGNMENTS

1. Name the people and positions of those involved in the budget planning process in your district. Describe

how this budget process works.

2. Identify who approves the budget in your locality. Describe the approval process and timeline.

3. Explain the process of how your budget is appropriated. Note if it is on a monthly, yearly lump sum,

categorical, or other basis.

4. Describe how your principal, superintendent, and school board evaluate the budget process and product.

5. Identify your school district’s priorities as seen in the budget adopted last year. Do you believe the spending

priorities fit with the needs of the district? Defend your answer.

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