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A WORLD CLASS FINANCE SYSTEM FOR A WORLD CLASS EDUCATION
PART 1. ADEQUACY IN SCHOOL FINANCE

The Master Plan framework envisions a fundamental change from a traditional focus in California on equality of funding – assuring that the majority of schools receive similar dollar amounts – to one of adequacy, where the essential components (personnel, materials, equipment, and facilities) necessary for an exemplary education are identified and provided. With this foundation of adequate resources for a high quality education, schools and students would be accountable for meeting established standards of achievement.

This part of our report explores the recent evolution of school finance policy toward the concept of adequacy, and looks at options for assessing the level of funding needed to provide adequate resources in California for a high quality education for all students.[1]

Background – average per-pupil funding

Funding for the basic K-12 educational program in California is distributed in amounts that are similar for each student in the state. However, from the perspective of individual students, the cost for educational services received varies because the needs of each student are, to a greater or lesser extent, unique. For example, a teacher will spend different amounts of teaching time with one student compared to another. Therefore, the cost of that teacher’s time will be distributed unequally among students.

Nonetheless, as noted above, schools do not receive differing amounts of money for every student. Instead, they receive an amount for each student that reflects an average of the costs of education across many students. This average per-pupil funding is provided at an organizational level appropriate for making decisions regarding the differential distribution of educational resources among students according to their individual needs. In California, the local education agency[2] is the basic organizational level at which most funding is allocated, and this per-pupil average funding level is embodied in the school district revenue limit.

Issues of equity in funding for California’s K-12 school system have focused on revenue limit funding, with both case law and public policy recognizing that average funding provided for the basic educational program should not vary significantly among school districts across the state. However, school district revenue limits, initially established on the basis of historical expenditure levels, may only incidentally relate to the per-pupil amount needed to provide adequate resources for a high quality education. While equalizing revenue limits over time toward a statewide average has established a relative measure of equity, adequacy looks to establish a more absolute measure of the resources necessary for a high quality education.

What is Adequacy?

Consideration of adequacy rather than equity has allowed courts to focus on the concrete question of what resources are needed to provide the opportunity for a quality education to all students, and the extent to which those resources are actually being provided.[3] Lawrence Picus, chair of the Division of Policy and Administration at the Rossier School of Education, University of Southern California, notes that the courts have considered fiscal adequacy as early as 1979 (Pauley v. Kelly, West Virginia). Picus states: “...to be adequate, a school finance formula must provide sufficient money so public schools can teach all students – or at least all but the most severely disabled – to reach standards as established by the state and local districts.”[4] In The Concept of Adequacy and School Finance[5], Heather Rose notes that the concept of adequacy includes two distinct components: 1) school policy geared toward achieving high minimum outcomes for each student, and 2) a finance system focused on providing schools with resources that are sufficient to achieve those outcomes.

Finally, the National Conference of State Legislatures (NCSL) noted that, “State policy makers and the courts should apply the test of ‘adequacy’ as a primary criterion in examining the effectiveness of any existing or proposed state school finance system.”[6] NCSL proposed basic principles for building an adequate education system, including (1) adopting clear and measurable educational goals and objectives; (2) identifying conditions and tools to provide every student a reasonable opportunity to achieve expectations; and (3) ensuring that sufficient funding is made available and used to establish and maintain these conditions and tools.

An effective system of school finance in California, then, must identify and allocate a specific level of funding that is appropriate to assure the availability of resources and tools needed for each student to achieve established academic outcomes.

Approaches to Determining Fiscal Adequacy

The Rose essay on adequacy reviewed the approaches taken recently by three other states to “...attempt to define and price an adequate education.” These states (Ohio, Wyoming, and Oregon) approached the determination of adequacy in education finance in different ways. The Finance & Facilities working group reviewed key elements of the work exemplified by these states, and recommends that the Legislature adopt a specific method, outlined below, to develop a California adequacy model.[7]

A California Funding Model

Our review indicates that a quality education model, such as the one developed by the state of Oregon, represents perhaps the best available combination of research, data, and professional judgment with which to connect state-level spending to state-level improvements in the performance of students and schools. Modeling of this kind helps policymakers to know with greater reliability what level of funding is adequate to provide every pupil with an opportunity to meet adopted content and performance standards. It can also give legislators and others a clearer idea of how school funds are likely to be spent. Moreover, by enabling policymakers to identify and evaluate important trade-offs in the costs of providing statewide educational services, a quality education model can clarify the cost consequences of specific policy proposals. Finally, a quality education model would promote a healthy balance between local flexibility in the use of funds and accountability for results because it establishes a concrete and clear benchmark against which local choices can be compared.

Adoption of such an approach in California would mark a dramatic shift in the way this state has historically approached school finance. Educational resources would no longer be based on a system of relative equity in core funding among schools, irrespective of need, and supplemented by a dizzying array of “categorical” funding programs. Instead, a thorough review of our goals and clear identification of the resources needed to achieve them would put California in the position of developing a world-class financing system that will lead to and support a world-class educational system.

What is a Quality Education Model?

Developers of quality models begin by asking a two-part question: What are the components of a quality education designed to permit students to meet state standards, and what do those components cost? This approach incorporates the professional judgment of expert practitioners and researchers as to what school features and “inputs” are most associated with high student achievement of the kind envisioned by policymakers. Based on the quantities of these inputs and the prices that must be paid for them, the model calculates the cost of operating a hypothetical school meeting all the stipulated conditions for success. Once the costs per student of operating the hypothetical school are estimated, a statewide cost estimate is made by multiplying per student costs by the total number of students in the state.

The prototype schools are built from the ground up as the sum of their component parts: teachers, administrators, counselors, support staff, textbooks, supplies, maintenance, etc. For example, costs related to school-level staff (e.g. teachers, principals, support staff) are estimated as the number of staff multiplied by average salary. Centralized staff costs and non-staff costs are estimated on a per student basis, then multiplied by the number of students in the school.

Some components of existing adequacy models include:

In order for such a model to make reliable estimates, it is important that the costs placed on each component be accurate. Accurate cost estimates depend, in turn, on high quality data, appropriate cost estimation methods, and reasonable assumptions in cases where data are not available or are of poor quality.

Finally, a quality education model is not a prescriptive determination of what each school should look like. Rather, by using a model school approach, it documents a revenue level needed for each pupil in the state to achieve at high levels, while local school districts and schools are provided the flexibility to determine how best to use those resources to meet state standards. Although the revenue level determined by the model is based on the best judgment of the component resources needed to provide a quality education, local districts and schools are free to use that revenue in ways that may differ from the quality education model in order to best meet local needs. This flexibility comes with a responsibility to demonstrate that state standards are met through a system of accountability that links resources with appropriate conditions for learning and student outcomes.

Establishing a Quality Education Model for California

Recommendation 1.1:

We recommend that the Legislature direct the development of a California Quality Education Model, and use that model to determine an adequate level of funding necessary to support a high quality education for every student. In furtherance of this recommendation, we urge the Legislature to establish a 13 member Quality Education Commission, consisting of business, parent and education community leaders from throughout the state.

Replacing the existing school finance model will provide the Legislature with the critical education components, related resources and corresponding costs needed to provide the opportunity for every student to obtain a quality education based upon rigorous state standards. This will allow the Legislature to make more informed annual budgetary decisions about the level of resources available for education, and how those resources will foster a world-class education system. It will also provide the beginnings of a meaningful context for accountability within a framework of local control and flexibility over the use of educational resources.

The California Quality Education Commission will be charged with developing, monitoring and evaluating a prototype adequacy system. The Commission may establish, as needed, advisory teams comprised of successful practitioners, researchers and staff from all levels of the educational system with responsibility to provide the data and information necessary to allow the Commission to execute its charge.

Plan for Development of a Quality Education Model

The following plan is illustrative of one possible structure and set of responsibilities for a Commission that would carry out this recommendation. The work is organized into two phases, one that is completed when a comprehensive Quality Education Model is developed, and a second phase that is ongoing to monitor and evaluate the application of this approach, to assess the adequacy of the resources provided to meet expectations inherent in the model, and to assure continued improvement of the model as part of a dynamic school finance system.

Phase 1: Commission Develops a Quality Education Model Prototype

Timeline: 12 months

Proposed Structure and Scope of Work: The Governor, Legislature, and Superintendent of Public Instruction will appoint a 13-member commission consisting of business, education, parent and community leaders. Appointees will represent industry, practitioners, administrators, researchers, and labor. The Commission is charged to develop a Quality Education Model, to include six parts:

  1. An explicit description of the state standards for students, teachers, and schools that form the basis of the expectations upon which a Quality Education Model will be built.
  2. A description of the components of prototype schools – at least one elementary, one middle and one high school – for which, if implemented, the Commission judges that the vast majority of students will meet state performance standards.
  3. An estimate of costs for each of the components of the prototype schools, and a calculation of total costs per pupil. These estimates form the basis for determining an adequate level of support for public education.
  4. Documentation that the Commission relied upon accurate available cost data, cost estimation methods, and reasonable and expert assumptions to develop prototype schools. The Commission will identify data gaps, modeling assumptions, and recommendations for near- and long-term improvement of the model.
  5. An analysis of how the prototype school components and costs relate to the existing structure of school funding and categorical programs, with recommendations for a transition plan from the current system of school finance to one based on adequate allocations of per-pupil funding, local flexibility in the use of resources, and accountability for meeting state standards.
  6. A description of the relationship among the Quality Education Model, the funding provided to support it, and the development of an effective system of local accountability for meeting expectations implicit in the Model.

The Commission’s work and the Quality Education Model will reflect the policy goals and structure of the Master Plan for Education adopted by the Legislature. The Commission will be authorized to convene and consult expert panels for advice relating to research-based, best practices that are most associated with high student achievement. The Commission will assure that the form of the model fairly captures the diversity of California. A final report, comprising the prototype model and the commission’s findings and recommendations, will be delivered to the Governor and Legislature within 12 months of formation of the Commission.

Phase 2: Monitoring, Evaluation and Refinement of the Quality Education Model

Timeline: Continuous, beginning after the completion of Phase 1 and the adoption of the Quality Education Model.

Proposed Structure and Scope of Work: A Quality Education Commission is established as a standing body, with staggered appointments and ongoing responsibility for monitoring, evaluating and refining the Quality Education Model. The Commission’s five objectives will be:

  1. To continue to test the model’s reliability, by evaluating the accuracy of the cost elements and assessing whether moneys are actually used to desired effect.
  2. To refine the means with which to account for missing elements such as intangible factors or “quality indicators” that affect student achievement and for which data are not readily available.
  3. To clearly identify the model’s assumptions, assess the validity of those assumptions, and improve their accuracy, especially by finding those resources and methods that successful schools embody.
  4. To develop the state’s capacity to estimate and forecast such dimensions as the cost of the model’s implementation given model refinement, the growth of applicable revenues, the pace of implementation, and the effects of the model on student performance.
  5. To generate recommendations for improvement of the state’s data-gathering systems.

Phase 2 puts into place an ongoing mechanism for continuous assessment and refinement of the model.

Conclusion

We believe that a California Quality Education Model can be best realized through an adequacy approach that is well grounded in the practical considerations of determining the components of a quality education while also assuring local discretion to make choices that will meet the needs of students and communities. We believe this will provide a sound base upon which California can rest its future efforts to assure a high quality education for all students. For these reasons, we recommend that the Legislature embrace a fundamental change that moves from the current equity-based school funding system to one that is predicated upon principles of adequacy – an approach that will clearly establish a strong basis for providing the funds necessary to support a world-class education system.


Table of Contents
Summary 1. Finance 2. Equity 3. Community
4. Accountability 5. Facilities Appendices Members