When there is less of it, school funding should encourage innovation

No one denies that Ohio’s economy is in crisis. The state’s current $50.5 billion biennial budget was made whole in 2009 by $8 billion in one-time federal Reinvestment and Recovery Act dollars and $2.4 billion in budget cuts. It is estimated that the state will face at least an $8 billion deficit in 2011 ($3.9 billion in FY2012 and $4 billion in FY2013).

Without new federal dollars the state is going to have to cut upward of 15 percent of its current spending. As K-12 education funding represents about 40 percent of the budget, a sizeable portion of these cuts will likely need to come out of school funding. David Varda, executive director of the Ohio Association of School Business Officials, acknowledged as much in the Columbus Dispatch earlier this month, “Is it realistic that we’re going to get through this biennial budget without cuts? Our school districts have been held pretty harmless compared to their colleagues in other states.”

And the Dispatch echoed his concerns in an editorial Sunday, “Difficult cutbacks are in the state's future and almost certainly in the amount of state aid school districts will receive. What is uncertain is when the state's leaders will acknowledge this and start talking numbers.”

The message seems clear – expect cuts to school funding in the near future. Despite this brutal fiscal reality, Ohio’s system of school funding does little to encourage smart spending decisions. For example, it does not reward district or building leaders for figuring out how to make cuts across their budgets that can improve efficiencies while also improving performance (e.g. rewarding teachers for performance rather than years of experience). Nor does the system encourage cost efficiencies like sharing services across districts or merging smaller districts into larger ones. Both recommendations were shared by a new report from the Brookings Institution Metropolitan Policy Program and the Greater Ohio Policy Center.

In times of crisis, flexible systems work better than rigid, one-size-fits-all, command-and-control systems. This is true across all sectors of human endeavor – combat, business, politics, athletics, and, yes, even education. Like an NFL quarterback barking out changes to the play at the line of scrimmage, leaders closest to the action are in the best position to make the calls about what works.

Instead, Ohio is creating new mandates through HB1 and its dubious school funding model (see here for two powerful critiques). By design, these mandates are the same for all public schools – rich and poor, rural, suburban, and urban, high-performing and low-performing, and large and small alike.

The following mandates are coming online in the coming months and years (note, waivers are serving as a safety valve but they are temporary and are issued at the discretion of the Ohio Department of Education):

  • Universal all-day kindergarten;
  • Class-size reductions for grades K-3, to be phased in through FY2014;
  • Family and community liaisons positions at the building level;
  • New guidance counselors, school nurse wellness coordinators, and non-instructional aide positions in schools; and
  • Assurances that every school will have a principal, clerk, building manager, secretary/administrative assistant, and media services staffer.

These costly new requirements are serious burdens on school leaders and they bulk up the status quo without encouraging reforms, let alone transformation. Consider the substantial costs of just the salary requirements of the K-3 class-size mandate (see table below).

Last school year (2008-09), 509,686 students were enrolled in grades K-3 in Ohio’s public schools. Under the current 25:1 student-teacher ratio, the state requires about 20,347 teachers to serve those students. By 2014, every public school in the state is required to have a 15:1 student teacher ratio at these grade levels. This means an additional 13,565 teachers will be necessary to serve the current number of students in the state’s K-3 classrooms.

Assuming $57,812 per teacher for salary and benefits (based on the FY2011 statewide average teacher salary in HB1), Ohio will need an additional $784 million each year just to pay these new teachers by 2014.

There are additional implementation costs to consider. For example, districts will not only have to hire and pay the new teachers, they will also have to provide professional development for them, find or build additional classroom space, and purchase more instructional materials.

Meanwhile, the evidence that class-size reduction even works is questionable at best. Melinda French Gates recently wrote in the Washington Post, “The country has tried a lot of (outrageously expensive) reforms that don’t improve student outcomes – such as reducing class size by one or two students and paying teachers to get master’s degrees.”

Where’s this money supposed to come from if the state lacks the funds? Local taxpayers are making it clear that they can’t give any more. The Cincinnati Enquirer captured the angst when it quoted a mother of two urging her district not to seek a new levy. “I think you guys need to think about this very hard in these economic times that we have right now,” the parent said. “Every one of you knows…a family where one or both parents have lost their job. Increasing their taxes could be the final straw to them losing their home.”

For Ohio’s schools to innovate while also cutting costs and boosting performance they need a school funding system that rewards local decision making and provides real incentives for changing. To get there, the state should scuttle the evidence-based model of school funding – or modify it seriously – and move toward a weighted funding plan wherein per-pupil amounts “weighted” according to the specific needs of individual students follow the students to the public schools they choose to attend.

By devolving financial decision making to the school level, districts would have to compete for the business of the individual schools as schools could buy services from multiple providers. Those school districts and other providers (e.g., county Educational Service Centers) that provide quality services (such as financial management, transportation, and special education) at the best price would excel, while those that don’t would either have to improve or close. In this fashion, service consortiums, district consolidations, and the like would be driven by market forces rather than political horse-trading.

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