Reason Foundation - Policy Areas > Weighted Student Formula

"Money Following the Child" Working in Baltimore

lisa.snell@reason.org (Lisa Snell) — Wed, 21 Oct 2009 23:49:00 EDT

Today's Education Week reports good news from Baltimore's student-based budgeting efforts. Baltimore's Superintendent Alonso has one of the most aggressive student-based budgeting programs in the nation with close to 90 percent of resources going to principals to control through the school budget. Check out this great story about how student-based budgeting is changing the behavior of school leaders. Baltimore demonstrates how student-based budgeting can introduce real competition into public schools when the money is attached to the backs of children.

The Baltimore schools are seeing steady progress in student achievement and recently were released from 'corrective action' status by the state.

Two years ago, only 150 students attended Holabird Elementary, then a K-5 school in the southeastern corner of this city. Competition from charters and from regular public schools in nearby Baltimore County had drained families from Holabird, a chronic underperformer.

So when Andrés A. Alonso, the chief executive officer of the Baltimore city schools, began last year to allocate money to schools based on their students’ needs, Holabird stood to be hit hard. Achievement had started to rise, but its small roster put the school at risk of losing six teachers unless more students enrolled.

Principal Lindsay Krey, about to start her second year as the leader of the school, decided to knock on some doors.

“We were worried about how much we could lose, but it became a rallying point for our staff and our parents,” says Ms. Krey, now in her third year at Holabird. “We were starting to see some real progress, so our parents went door to door to tell others what was happening.”

Students in grades 3-8 in Baltimore have been making steady gains on the Maryland School Assessment.

Percent of students scoring proficient or advanced in reading:

Percent of students scoring proficient or advanced in math:

Superintendent Alonso has made rapid changes to the Baltimore school district:

Given broad latitude by the appointed school board members who hired him, Mr. Alonso has replaced roughly 40 percent of the city’s principals, eliminated more than 450 positions in the central office, shut down or overhauled failing schools, and opened a variety of schools designed to serve children at risk of dropping out.

I profile Baltimore's student-based budgeting system in the 2009 Weighted Student Formula Yearbook here.

Denver School Closures Improve Outcomes for Students

lisa.snell@reason.org (Lisa Snell) — Thu, 24 Sep 2009 16:00:00 EDT

I profiled the Denver public schools in the Weighted Student Formula Yearbook. The Denver public schools have used school closure as an accountability mechanism in their sudent-based budgeting program. In 2007, the school board approved the closing of eight schools that were under-enrolled and low-performing.

The board projected that the realignment of students from these schools to higher performing schools would achieve projected yearly operating savings of $3.5 million. Those resources were used to improve the education of students that were affected by the school closures, deliver additional resources to under-performing schools and create funding opportunities for new schools and new programs.

In addition to the standard per-pupil revenue that followed students to their new schools, the district reinvested $2 million or 60 percent of the savings from school closures, to follow the students into their schools of reassignment.

A new district report finds that these students have improved their academic scores since moving to their new schools. According to a district analyses reported in the Denver Post:

Students from schools in Denver that were closed two years ago in a reform effort are performing better academically in their new schools, according to a district analysis.

In 2007, Denver Public Schools shut down eight elementary schools and announced the revamping of programs at five schools in a sweeping reform meant to reduce facility costs and improve student achievement.

The analysis of individual student scores from the 2008-09 Colorado Student Assessment Program shows that, at least initially, the effort is working.

The 2,000 affected students made more academic growth in their new schools in reading, writing and math than they did in the schools they left behind, according to DPS.

In New Orleans School Choice and Autonomy Drive School Improvement

lisa.snell@reason.org (Lisa Snell) — Wed, 16 Sep 2009 10:33:00 EDT

In Education Week Leslie R. Jacobs and Paul Vallas argue that autonomy, budget control, and school choice drive school improvement in New Orleans.

New Orleans schools now operate under a decentralized system that is unique. Sixty percent of students attend charter schools, and both charter and noncharter schools have autonomy over staffing and budgets. All schools are schools of choice. The money follows the student, so schools receive funds based on their enrollment. There is no longer a collective bargaining agreement, nor a citywide salary schedule.

The results thus far are compelling. In the four years since Hurricane Katrina devastated the city, New Orleans has shown more growth in student achievement than any other district in the state. The percentage of failing schools is down significantly, and student test scores are up in every grade and subject. Some of the gains are dramatic. The 10th grade math proficiency rate has jumped from 39 percent to 58 percent, and the senior graduation rate from 79 percent to 89 percent. The percentage of 8th graders proficient in English has grown from 26 percent to 42 percent. For context, from 1999 until the state takeover in 2005, 8th grade English proficiency had improved by a meager 3 points.

For a look at several districts that are moving toward charter-like autonomy, budget control, and choice see Reason's "Weighted Student Formula Yearbook."

California School Districts on the Brink

lisa.snell@reason.org (Lisa Snell) — Thu, 23 Jul 2009 12:49:00 EDT

The Los Angeles Times reports:

The state is taking over a Monterey County school district that was facing bankruptcy and lending it $13 million, state officials announced Wednesday. . . .

School districts must file reports showing their financial health to the state, and the latest reports showed that 19 districts, including King City, would not be able to meet their financial obligations for the school year that just ended, or the upcoming school year, without making drastic cuts.

Eighty-nine districts, including big-city school systems in Los Angeles, Oakland, Santa Ana and Sacramento, are in jeopardy of not meeting their financial obligations in the school year that just ended or the next two years.

Here's a modest proposal. Districts that actually are bailed out with state money should have to be the first to decentralize central office power and give the money to the schools through student-based budgeting. Districts that can't manage their resources should have minimal control over resources. These should be the first districts to have the majority of resources follow the students into schools. Alternatively, these districts could be the first to become all charter districts. In this case, each charter school would also receive the money directly from the state without dealing with the central office at all.

Reason Foundation's student-based budgeting work is here.

The Great Charter School Debate

lisa.snell@reason.org (Lisa Snell) — Wed, 10 Jun 2009 19:02:00 EDT

In today's Los Angeles Times I begin The Great Charter School Debate with Cal Poly Pomona History Professor Ralph E. Shaffer.

From my first installment:

Charter schools are based on a premise of school choice, and parents are not compelled to enroll. If the discipline and ideology are too much, parents have other choices available. In fact, charter schools have led to systematic district reforms that have increased the number of high-quality choices for families. Oakland is a case in point.

In Oakland, charter schools accounted for 16.8% of the district's public school enrollment in 2008; there, charter schools are outperforming their district peers at all grade levels. Low-income students, English-language learners and ethnic minority students are sharing in this success. This competition from charter schools has led Oakland to embrace district-wide reforms, including funding schools more like charters and giving principals control of school resources through student-based budgeting. Oakland has also embraced an open-enrollment school assignment policy that allows parents to choose any campus in the district.Even as the Oakland Unified School District is forced to make significant budget cuts because of declining enrollment and California's budget crisis, the district is acting more like a charter school organization. The majority of the district's budget reductions have been made at the central office, and 87% of the district's unrestricted budget will go to schools in the 2009-2010 school year.

Oakland Unified has been California's most improved large urban district, adding 73 points to its Academic Performance Index (California's benchmark for student achievement) over the last four years. In addition, Oakland has seen improvements over a wide variety of indicators: more AP classes, lower dropout rates, more students passing high school exit exams and more rich activities such as debate and chess teams. While Oakland has five of the top-performing charter schools in California, it also saw 21 traditional district schools make double-digit percentage point gains in reading and math scores in 2008.

This story is not unique to Oakland. Charter schools are a stalking horse for real school district reform. The National Alliance for Public Charter Schools reports that in 2008, 12 communities across the country had at least 20% of their public school students enrolled in charter schools, and 64 communities in the U.S. now have at least 10% of their public school students in charter schools. According to the Reason Foundation’s Weighted Student Formula Yearbook 2009, 15 districts have moved to student-based budgeting and open-enrollment school choice policies. In places like Baltimore, Denver and New York City, competition from a large number of charter schools has led districts to begin offering their schools and families some of the same freedom as charter schools enjoy.

New Jersey Supreme Court Backs Statewide Student-Based Budgeting

lisa.snell@reason.org (Lisa Snell) — Fri, 29 May 2009 10:55:00 EDT

As the Philadelphia Inquirer reports:

The New Jersey Supreme Court has upheld Gov. Corzine's school-aid system, backing his plan to reshape education funding in the state and redirect the flow of billions of dollars in aid.

Yesterday's 5-0 decision effectively throws off a series of court mandates that had required enhanced funding to 31 historically poor areas while tight budgets squeezed the state's 585 other school districts. . . .

When Corzine took on the formula, he said many communities with similar needs had been left behind as state aid increases flowed almost exclusively to the districts covered by the court.

By 2006, Abbott school systems got 55 percent of state support while educating 23 percent of the student body. Other schools had become home to half the state's "at-risk" students, but lawmakers and governors facing tight budgets largely shut off aid to communities without court protection.

Corzine's plan directs aid to all districts under a formula based on enrollment and their shares of needy students - those who are poor or have limited English skills.

This ruling essentially gives New Jersey a statewide weighted student formula funding system. Weighted student formula is a policy tool and financing mechanism that can be implemented by Governors, within the confines of existing state education budgets and economic constraints, to create more efficient, transparent, and equitable funding systems across all schools in a state. Weighted student formula is a student-driven rather than a program-driven budgeting process.

It is also an equitable funding system to help support the emergent charter school movement. Because dollars follow students and not programs, it puts every public school, including charter schools, on a level playing field.

For example, in New Jersey in 2008, after years of court-driven, ad-hoc approaches to school funding, Governor Corzine pushed through a weighted student formula school financing reform to create an equitable and predictable mechanism to distribute funding to all children in New Jersey based on individual student characteristics. Governor Corzine’s weighted student funding formula was equitably applied to all school districts and charter schools beginning in fiscal year 2009. In New Jersey charter schools will greatly benefit from the legislation. Under the old system, charter schools received as little as half as much funding as their public school neighbors. Now they will be funded based on the number and type of student that enrolls in the charter school just like every other public school in New Jersey.

New Jersey still needs to work towards other characteristics of school empowerment including local control of funding by school principals and more school choice. However, changing the statewide funding formula to be based on student characteristics and enrollment is a good first step.

Reason's Weighted Student Formula Yearbook and research is here.

Reason Foundation's New Weighted Student Formula Yearbook

lisa.snell@reason.org (Lisa Snell) — Thu, 30 Apr 2009 15:00:00 EDT

Much of our education funding is wasted on bureaucracy. The money never actually makes it into the classroom in the form of books, computers, supplies, or even salaries for better teachers. Weighted student formula changes that. Using weighted student formula’s decentralized system, education funds are attached to each student and the students can take that money directly to the public school of their choice.

At least 15 major school districts have moved to this system of backpack funding. Reason Foundation's new Weighted Student Formula Yearbook examines how the budgeting system is being implemented in each of these places and, based on the real-world data, offers a series of “best practices” that other districts and states can follow to improve the quality of their schools.

In places where parents have school choice and districts empower their principals and teachers we are seeing increased learning and better test scores. The results from districts using student-based funding are very promising. Prior to 2008, less than half of Hartford, Connecticut’s education money made it to the classroom. Now, over 70 percent makes it there. As a result, the district’s schools posted the largest gains, over three times the average increase, on the state’s Mastery Tests in 2007-08.

San Francisco Unified School District has outperformed the comparable large school districts on the California Standards Tests for seven straight years. A greater percentage of San Francisco Unified students graduate from high school than almost any other large urban public school system in the country.

Oakland has produced the largest four-year gain among large urban districts on California’s Academic Performance Index since implementing results-based budgeting in 2004.

In 2008, Baltimore City Schools faced a $76.9 million budget shortfall. But Superintendent Andres Alonso instituted weighted student formula. He identified $165 million in budget cuts at the central office to eliminate the deficit and redistributed approximately $88 million in central office funds to the schools. By the 2010 school year, Alonso will have cut 489 non-essential teaching jobs from the central office, redirecting 80 percent of the district’s operating budget to schools.

The experience with weighted student formula also shows that one of the most important factors in the success of schools is decentralized decision-making. Principals should have autonomy over their budgets and control the hiring of teachers for their schools. This flexibility allows principals to tailor their schools to best fit the needs of their students. Eliminating the top-down bureaucracy lets principals and teachers focus on teaching.

Weighted Student Formula Yearbook 2009 (Full Study .pdf)
Weighted Student Formula Overview (.pdf)
Weighted Student Formula Best Practices (.pdf)

Weighted Student Formula Case Studies Excerpted from the Yearbook:

Baltimore Public Schools (.pdf)
Belmont Pilot Schools, Los Angeles Unified School District (.pdf)
Boston Pilot Schools (.pdf)
Chicago Public Schools—Renaissance 2010 Schools (.pdf)
Cincinnati Public Schools (.pdf)
Clark County School District (Las Vegas) (.pdf)
Denver Public Schools (.pdf)
Hartford Public Schools (.pdf)
State of Hawaii (.pdf)
Houston Independent School District (.pdf)
New York City Department of Education (.pdf)
Oakland Unified School District (.pdf)
Poudre School District (Fort Collins, Colorado) (.pdf)
Saint Paul Public Schools (Minnesota) (.pdf)
San Francisco Unified School District (.pdf)

Reason Foundation's Education Research

Weighted Student Formula Yearbook 2009

lisa.snell@reason.org (Lisa Snell) — Thu, 30 Apr 2009 14:00:00 EDT

Weighted Student Formula Yearbook (Full Study .pdf)
Weighted Student Formula Overview (.pdf)
Weighted Student Formula Best Practices (.pdf)

Weighted Student Formula Case Studies Excerpted from the Yearbook:

Lisa Snell's Bio

Reason Foundation's Education Research and Commentary

Unions Will Not Negotiate: LA Unified Lays Off 5,000

lisa.snell@reason.org (Lisa Snell) — Wed, 15 Apr 2009 12:33:00 EDT

According to today's Education Week, the Los Angeles School Board has voted to lay off 5,000 employees including teachers and support staff.

While Los Angeles Unified is clearly overstaffed and losing enrollment and money, the extreme measures of laying off thousands of employees could be avoided if the unions would just negotiate less radical across the board reductions and short work furloughs.

Cortines said he held meetings with all the district's unions over the past two weeks in a last-ditch effort to gain concessions that would reduce the number of layoffs, including furloughs, salary reductions, and freezes on raises, but no headway was made.

A.J. Duffy, president of teachers' union United Teachers Los Angeles, said he does not support furloughs and salary reductions because "there is still plenty of fat in the LAUSD budget that should be cut, including millions spent on outside consultants."

The union rules also guarantee that the neediest schools are always hit the hardest.

Many teachers who received layoff notices told the board that the inner-city schools are getting disproportionately hit because a majority of their staffs are new hires. State law mandates school districts make job reductions according to seniority.

Ray Cortines, the Superintendent of LA Unified, claims that these cuts are unavoidable because in the past the district has been adding new positions with declining enrollment. Cortines is in a bind, but the district has not looked seriously enough at cutting central office adults that do not work in schools. In both Baltimore and Oakland the budgeting philosophy has been that the money stays at the school level. These districts have forced the bloated central office staff to go back to the schools.

Both Baltimore and Oakland have used a student-based budgeting and weighted student formula-like budgeting reform to prioritize money following students into schools. They have restructured their districts to focus on schools rather than the central office. Therefore, school principals get much larger shares of the district's operating budget and the schools are largely shielded from the impact of budget cuts. These districts prove that, large bureaucracies can change their priorities to focus resources on schools.

In Baltimore, for example, Superintendent Alonso, facing a similar budget deficit for the 2010 school year, has cut 489 jobs from the central office, redirecting 80 percent of the district's operating budget to the schools.
Oakland’s strength is the budgeting discretion it provides to schools as it continues to move larger amounts of unrestricted funds and restricted funds to the school level. For example, even as Oakland Unified is forced to make significant budget cuts because of declining enrollment and California’s budget crisis, the majority of reductions were made at the central office, and the district worked to protect the unrestricted funding that goes to schools so that more than 87 percent of the unrestricted budget would go to schools in 2009-2010.

Secretary Arne Duncan Advocates Mayor Control of Schools

lisa.snell@reason.org (Lisa Snell) — Thu, 02 Apr 2009 13:23:00 EDT

Over at Education Week's Politics-K-12 blog, they report on Secretary Duncan's declaration that city schools "are best left in Mayor's hands."

Mayor control has a very mixed record in the United States. Simply changing administrators isn't enough. It depends on what they do. New York City and to a lesser extent Chicago have been successful examples of Mayor control because these Mayors have empowered school leaders to improve their schools by implementing school financing structures that devolve funding to the school level in exchange for accountability.

In New York City, for example, Mayor Bloomberg has implemented "Fair Student Funding" in which dollars follow students to the school their parents choose. Principals are responsible for school budgets and have autonomy over hiring and school design. This is like a market-based system within a public school system. More than 15 school systems in the United States have done this and all are seeing positive trends in student achievement. Most have done this by implementing agressive school choice and student-based budgeting systems in which dollars are attached to the backs of children in exchange for accountability. These public schools are much closer to charter schools than traditional public schools. The most aggressive districts: Denver, Baltimore, Hartford, and Oakland have all done this without Mayor control and are all experiencing rapid and positive changes in student outcomes. New York has implemented this system aggresively with Mayor control.

The point is that it is not about who governs (Mayor, school board), it is about what kind of school system the governance structure allows. We need school systems that give kids the right of exit to higher quality schools and give principals a financial incentive to improve their schools. Principals need autonomy and control in exchange for accountability. As long as most schools operate from a top-down structure in which central office dictates what happens in schools, little will change. If Mayor control can move us more aggressively to a school system where parents and principals are in charge of schools,then lets have more Mayors in control. Otherwise it is just more of the new boss, same as the old boss.

Under Stimulus Rich School Districts Get Richer

lisa.snell@reason.org (Lisa Snell) — Mon, 23 Mar 2009 17:37:00 EDT

The New York Times reports on how the federal stimulus package is pouring cash into school districts, whether they need the money or not. Complex funding formulas do not target the funding to school districts that actually need the money to backfill their budgets or ensure equal funding for similar students.

Surprise, Surprise, the $95 billion in education money is not necessarily going to schools with the greatest need. In fact, some schools with greater needs will receive less funding. At the very least one would expect that similar students might receive similar amounts of funding. But then you would not be playing in the random world of school finance in the United States. Perhaps not as troubling as big AIG bonuses, but still you would expect some comparability in per-pupil funding amounts from the federal stimulus. The New York Times reports that the federal stimulus package is NOT targeting school districts that actually need the money:

Utah, where a $1.3 billion budget deficit has threatened deep school cuts, will get about $655 million in education stimulus money, or about $1,250 per student, according to the federal Department of Education. Wyoming, which has no deficit and has not cut school budgets in many years, will get about $1,684 per student.

North Dakota, which also has no budget problems, will receive $1,734 per student. California, which recently closed a $42 billion budget gap through July 2010 partly through deep spending cuts, will get $1,336 per student...Democrats in Congress decided to use the formulas to save time, knowing that devising new ones tailored to current conditions could require months of negotiations.

Congress shouldn't just give the money away. If they were going to give schools billions in new resources, they blew a one-time opportunity to revamp school funding and at least make it more equitable and transparent.

The complex federal formulas mean that the same student with similar characteristics is not worth the same from one state to another. This is compounded by the fact that the money eventually flows to school districts and not students. School districts do not allocate the money based on per-pupil characteristics in a transparent manner. Districts fund programs and staff positions rather than students. Therefore, even within a school district, similar students at neighboring schools draw down vastly different amounts of per-pupil funding including federal dollars based on the characteristics of the employees rather than the students. Schools with more senior staff get more money and the school is only charged for average district staffing levels.

Congress missed a chance to rethink school funding transparency and intentionally decided to continue with inequitable formulas in the name of expediency.

Congress could have required this money to be driven-down to the school level on a per-pupil basis--forcing districts to consider within district disparities.

However, for too many districts this will be a government windfall that matches the pattern of the various bailouts and stimulus thinking in other sectors. Spend now and think about it later.

President Obama Visits Model School Choice Program in Los Angeles

lisa.snell@reason.org (Lisa Snell) — Thu, 19 Mar 2009 18:09:00 EDT

The Los Angeles Daily News reports on President Obama's visit today to the Miguel Contreras Learning Complex, a downtown high school that is part of the Belmont Zone of Choice.

President Barack Obama is expected to discuss his proposed budget with more than 1,000 Angelenos today at a downtown high school that illustrates many of his goals for education reform while highlighting the financial pressures facing Los Angeles schools.

Miguel Contreras Learning Complex is touted as a model of urban-education reform for its smaller classes, increased autonomy and innovative programs - ideals delineated by the president in an education speech last week.

The school is also set to lose half of its teachers and a large portion of its administrators next year, and only half of its seniors graduate in four years. The contrast makes it challenging, said Monica Garcia, president of the Los Angeles Unified school board.

"He came to the right place. ... (The area) is the cradle of reform at LAUSD," Garcia said. "There is great challenge here, but also great opportunity."

Opened in 2006, Miguel Contreras is an experiment in creating small learning communities out of large urban campuses. Serving about 2,000 students, teachers work under modified union contracts that give them more decision-making power. The school also has more flexibility on how it spends its money.

Such innovation drew young teachers and administrators who ironically are now targeted for layoff for lack of seniority.

The Pilot Schools represented by Miguel Contreras Learning Complex signify a fundamentally different approach to transforming urban public education: provide schools with maximum control over their resources in exchange for increased accountability, all within the economies of scale of an urban school district. In Los Angeles, by virtue of a unique memorandum of understanding between LAUSD, UTLA, AALA and the Belmont Educational Collaborative, Pilot Schools have charter-like control over budget, staffing, curriculum, governance, and schedule.[i]

In the Pilot model, both the district and the unions agree to allow approved Pilot Schools to be free from constraints in order to be more innovative. Pilot Schools are exempt from district policies and mandates. Teachers who work in Pilot Schools are exempt from teacher union contract work rules, while still receiving union salary, benefits, and accrual of seniority within the district. Teachers voluntarily choose to work at Pilot Schools; when hired, they sign what is called an "elect-to-work agreement,” which stipulates the work conditions in the school for the coming school year. This agreement is revisited and revised annually.

Unfortunately, teachers who work in these schools are still subject to overall district rules when it comes to teacher layoffs. If these teachers and administrators are laid off (which is a big if), they will be victims of the destructive last hired, first fired policy used by the majority of school districts in the United States. Education is probably the only industry around that does not consider any skill, merit, or need as part of the decision and simply downsizes the workforce based on the date the employee was hired. While the flat contract between the district, union, and, the pilot schools represents an improvement over the existing UTLA contract, principals do not have true discretion over their staffs, if they do not have a say-so in which employees will be let go.

[i] Memorandum of Understanding Between Los Angeles Unified School District and United Teachers Los Angeles, Belmont Pilot Schools Agreement, February 22, 2007, http://soe.lmu.edu/Assets/Colleges+$!2b+Schools/SOE/SOE+-+FOS/Belmont+Zone+of+Choice+Agreement.pdf.

Frequently Asked Questions About Weighted Student Formula

lisa.snell@reason.org (Lisa Snell) — Thu, 24 Jan 2008 11:05:00 EST

Indiana Policy Review

Lisa Snell, one of the nation's foremost experts on school reform, answers critical questions about how a weighted student formula could fundamentally reshape school finance and performance in Indiana. Lisa is director of education and child welfare studies at Reason Foundation and has met with Indiana state legislators and others to discuss weighted student formula reforms for Indiana public schools.

1. In a nutshell, what is "weighted student formula"?

The broad concept of weighted student funding (WSF) goes by several names including results-based budgeting, student-based budgeting, "backpacking" or fair-student funding.

It proposes a system of school funding based on five key principles:

Funding should follow the child, on a per-student basis, to the public school that he or she attends.
Per-student funding should vary according to the child's need and other relevant circumstances.
Funding should arrive at the school as real dollars—not as teaching positions, ratios, or staffing norms—that can be spent flexibly, with accountability systems focused more on results and less on inputs, programs, or activities.
Principles for allocating money to schools should apply to all levels of funding, including federal, state, and local dollars.
Funding systems should be as simple as possible and made transparent to administrators, teachers, parents, and citizens.

2. How is this different from funding schools based on enrollment in the current system?

In the current system in Indiana school corporations receive funds based on the number of children enrolled in a corporation and their individual characteristics which are weighted through either categorical programs for education programs or additional funding for student characteristics such as poverty or English learner status.

However, at the district level these resources are not allocated to schools based on individual student characteristics. Schools in Indianapolis, for example, are allocated resources for staffing positions based on the number of full-time equivalent (FTE) salaries the district has calculated that an individual school is entitled to. So when you examine individual school budgets in Indiana you see money flowing to school positions and not children.

Salary averaging across schools means individual schools with similar student populations may receive vastly different real dollar amounts at the school level within a corporation.

New York City public schools are implementing weighted student formula district wide, encompassing 1.1 million students in 1,400 schools. New York City schools begin the transition to Fair Student Funding during their 2007-08 fiscal year. Here is an actual example of how funding would change for the Walter Crowley Intermediate School in Queens, New York, between the 2006-2007 and 2007-2008 budget years.

Under the old approach, Walter Crowley would have received $4 million for instructional programs, $1.2 million for special needs students, and another $1.9 million for "consolidate programs," for a total budget of $7.1 million. Under the weighted, Fair Student Formula approach, Walter Crowley will receive $8.8 million. In short, funding students based on their individual characteristics and not based on a staffing model increases the school's budget by more than $1.6 million.

Since New York City public schools are phasing in the new funding approach, Walter Crowley will only receive a portion of the new formula. However, the new weighted student budgeting also creates transparency by showing what resources each of the 1,400 schools in New York City are entitled to based on the characteristics of their students, not based on a bureaucratic staffing model unrelated to the actual students in the classroom. These numbers simplify the budget process in a way that is transparent to parents and all education stakeholders.

3. Indiana has already experimented with charters schools, and their success has been lackluster. Why should we believe that weight student formula would be any better at improving student performance?

While charter schools have had positive impacts in Indiana, especially in Indianapolis, they are mostly operating on the margins of school reform. The weighted student formula is more robust because it generally includes every public school in a school district, education corporation, or geographic area. It changes the culture of the public school system.

Everyone becomes focused on student outcomes because families have legitimate choices within the public school system. If an assigned, or neighborhood, school is not meeting a child's needs, that child can move to another school within the district and take their funding with them.

Every school in a district becomes a school of choice and the funding system gives individuals, particularly school administrators, the autonomy to make local decisions. This autonomy is granted based on the contractual obligation that principals will meet state and district standards for student performance. It is a system-wide reform that allows parents the right of exit to the best performing schools and gives every school an incentive to change practices to attract and retain families from their communities.

4. How does this program handle children with special needs?

Weighted student formula provides extra resources to support special needs children, another "weight" in the weighted student formula. These resources arrive at the schools as "real dollars," giving principals flexibility to spend those resources in the manner that best supports the needs of those students. In New York City, before Fair Student Funding, special education students were funded based on classroom-support models such as Collaborative Team Teaching (CTT) and self-contained special education classrooms. Now, schools receive funds in real dollars based on the daily number of periods of special education classroom support each student requires. Students who spend a greater percentage of their day receiving special education services are weighted accordingly and receive more money.

5. Can a weighted student formula be implemented within the current collective bargaining agreements? Wouldn't teachers be disadvantaged by this system?

Yes, weighted student formula has been implemented in most districts based on the current collective bargaining contracts. Most critics of weighted student formula fear that giving principals real dollars to spend will create a bias toward hiring less expensive and less experienced teachers. Critics argue that senior teachers with more years of experience will be at a disadvantage because they cost more to hire.

There are two ways that districts have implemented weighted student formula. In the first scenario, districts have given principals real dollars but they continue to charge schools for average district salaries. This is how weighted student formula has been implemented in most districts. Therefore, schools still have more equity because they receive funding for actual students but they are not charged the real costs of their staffing decisions. Therefore, schools with more senior staff continue to receive a hidden subsidy.

The second way weighted student formula is implemented is by charging schools for the actual teacher salaries. New York City, for example, is phasing in charging schools for the actual salaries of their teachers because it believes it will create more equity and it will lead to better use of resources as principals decide how to spend money to improve student achievement.

6. New York City seems to be the district that has been most aggressive with this program. How did they work through their existing collective bargaining agreement?

New York City revitalized the way it hired teachers by adopting an "open market" system. New York ended "bumping" and "force placing," practices that forced principals to hire teachers even if they weren't qualified or a good fit for the school. Now, through a new "open market hiring system," more than 3,000 experienced teachers applied for open jobs and were selected by principals for vacancies across the system.

The New York Department of Education worked with the United Federation of Teachers (UFT) to actually change the contract to make it more supportive of a weighted student formula. The new contract:

Allows the Department of Education (DOE) to recruit and retain the high-quality teachers that New York City students need and increases teacher pay by 15 percent.
In exchange, the contract also gives the DOE the ability to create "Lead Teacher" positions, with a $10,000 salary differential, giving principals a powerful new tool to recruit experienced, talented teachers to high-need schools.

More recently, the DOE and UFT agreed to create a $15,000 housing incentive for experienced math, science, and special education teachers who come to the DOE and agree to teach for at least three years in high-needs schools. The agreement provides struggling students an additional 150 minutes every week in small-group instruction so they get the help they need to catch up during the school year.

Like New York City, several districts that have instituted weighted student formula have negotiated alternative contracts with the unions that keep in place most teacher protections but allow principals more flexibility. For example, both Boston pilot schools and the new Belmont autonomous zone schools in Los Angeles operate on a three page contract that is basically a memorandum of understanding negotiated between the district and the union.

7. Is this a reform that must be implemented statewide to work? What states have reformed their school finance system based on the weighted student formula concepts?

This reform can work on a statewide basis or through individual districts. To date, the majority of school districts using weighted student formula have done so without state legislation. This is a flexible reform that can work at the state level or on a district-by-district basis.

Nevada and Hawaii adopted weighted student formula through state legislation. Hawaii, with one centralized school district, passed this reform statewide in 2005. In 2007 Nevada passed state legislation that offers local schools and districts some financial incentive on a per-student basis to convert to empowerment schools. Several states including South Carolina and Delaware are considering proposals for weighted student formula and school empowerment.

8. Indiana is faced with significant demands on its budget. Wouldn't implementing a system-wide school finance reform simply put more pressure on state and local budgets?

This is a reform that works within existing budget frameworks. It is a reform that more equitably distributes money that is already available. Furthermore, because of savings from reducing the cost of the central office, this reform can free up more money for the local school level and individual classrooms. If categorical programs and other funding streams are collapsed into larger block funding streams it can reduce overall administration costs, directing more money to the school level. This financing mechanism allows policymakers to have a more transparent idea of how existing school resources are distributed.

9. What impact would a weighted student formula have on school efficiency? Wouldn't school administrators feel threatened by this approach to financing their schools?

Weighted student formula can be a threat to district-level administrators. As more money is directed to local schools, a by-product has been a reduction in the number of central-office staff. In New York City, the move to weighted student formula system has been in conjunction with a "rightsizing" of the central education office.

10. Like most state school finance systems, Indiana's school finance system is under legal and political pressure to move away from the property tax. How would a weighted student formula address concerns about equity in school finance?

Weighted student formula works best when all funding is equalized and not based on differences in local property tax allocation. Indiana has already made efforts to equalize funding across districts. Therefore, it already has a culture concerned with school equity and a more centralized funding system than most states. Weighted student formula is the next step to drive that student equity to the school level. Indiana has already done the hard part of aggregating school resources at the state level. It makes weighted student formula a reform that makes sense to continue toward the goal of individual student equity.

11. This seems like a program that works best in a big city school district where there are already lots of schools. What about suburban and rural districts which tend to be smaller?

This strategy also works in suburban and rural districts. If this is done at the state level, students could have access to schools in more than one school district even if they reside in a very small district. However, in extremely small districts with transportation limitations to other schools, school choice may be less important than school autonomy. In a geographically isolated school, weighted student formula still gives principals more control over resources and parents and teachers more input into how those resources are used to meet the needs of individual children.

12. Where does the leadership for implementing a weighted student formula come from? School boards? Administrators? Legislators? Citizens?

Strong state leaders or an individual superintendent can introduce the community to this concept. They can involve all stakeholders including, principals, parents, teachers and community leaders in a transparent process to decide on student weights and other implementation issues from school choice to professional development for principals. This really becomes a group discussion about equity and fairness in education funding that involves the entire community. Still, it takes leadership from individual legislators or school officials who believe in the concept of weighted student formula.

State legislators can be proactive by:

Visiting other school districts that have implemented weighted student formula. A trip to New York City and a review of the New York City Department of Education would offer the most comprehensive view of a large-scale weighted student formula program.
Reviewing existing examples of model legislation for weighted student formula and tailor it to meet Indiana's needs.
Reviewing existing resources in Indiana and proposing a system of weights that would work within the current constraints of state and federal categorical funding. While this proposal would be subject to change, it would give legislators and stakeholders a clear idea of how resources might be allocated under this new financing system.

School administrators and teachers can be proactive by:

Visiting or talking to staff, board members, and other constituents from districts that have already implemented weighted student formula.
Developing a preliminary weighted student formula implementation plan with the school board and holding open meetings to discuss the plan and receive feedback from the community.
Reviewing how current resources are aggregated at the district level and building a preliminary proposal for weighting students to give stakeholders an idea of how weighted student formula would work in practice at the school level.

Weighted Student Formula and School Empowerment

lisa.snell@reason.org (Lisa Snell) — Thu, 24 Jan 2008 00:00:00 EST

Indiana Policy Review

William G. Ouchi is the Sanford & Betty Sigoloff Professor in Corporate Renewal at The Anderson Graduate School of Management at UCLA. Drawing on the results of a landmark study of 223 schools in six cities funded in part by the National Science Foundation, Dr. Ouchi's book Making Schools Work shows that a school's educational performance may be most directly affected by how the school is managed. Now, he may be the nation's leading researcher and proponent of the concept.

Dr. Ouchi was interviewed by Reason Foundation's Director of Education Lisa Snell on September 15, 2007 in his office at UCLA, where he provides an update on his ongoing work on weighted student formula and school empowerment.

How is your current analysis of case studies of weighted student formula progressing?

We are analyzing the data, and it is really interesting. The way you organize a district is hugely important. We've looked at eight districts, all of which are implementing weighted student formula, school choice, and school autonomy: Boston, Chicago, Houston, New York City, Oakland, San Francisco, Seattle and St. Paul.

There is extreme variability in the percentage of resources that principals are allowed to control under weighted student formula. The amount of resources the principal controls makes a difference.

I studied 66 schools in New York City in the year 2000, and I went through with each principal their budget to figure out how much they controlled and on the average it was 6.1 percent. Today, these data show that 85 percent of the budget was controlled by the New York City principals who were part of 42 schools in the autonomy zone in 2003 and 2004. As a result of the success of the experiment, New York has expanded this budget control to all 1,467 schools for 2007.

When you give principals freedom what do they do with their money?

What they should do is reduce the hiring of administrative staff at the school and increase the number of classroom teachers. And then use their freedom over curriculum, schedule, and staffing to further reduce total student load.

Autonomous schools have largely used their autonomy to drastically reduce total student load in high school and middle school classrooms. In New York City, student load is 88. In Boston, it's 76 (in the high school). In New York City, by contract, a teacher may be asked to teach 170 students, five classes of 34 in middle school or high school. In Boston the contract requires 140 and in Los Angeles 225.

The stand out here is New York City. In New York City, although the contractual max is 170, the actual district-wide average is 111, because there are a lot of magnet schools, special schools, and special-ed schools that have much smaller total student loads. In the 42 original autonomous schools in New York City the total student load fell from 111 to 88. That is a big deal.

In some cases the union can be an impediment but that's really not the issue, because New York City has one of the most powerful teachers unions in America. And Randi Weingarten is no pushover. But they have been able to find a way to work together. Clearly, this reducing total student load is in the interest of all teachers and all students. It is in the interest of everybody except for the central office bureaucrats.

How did New York get to smaller student loads and higher achievement?

Under the tutelage of Eric Nadelstern, who had been working with those populations his whole career, and followed the work by Ted and Nancy Sizer, who preached that no teacher should ever have a student load over 80. Eric figured out how to restructure schools. He said, "My gosh, if you could get there, think of all the things you could do that are good for the student."

So now the question is "How do I get below 80?" Through trial and error he figured out how to do it. So Eric has been personally training all these principals in New York City and it has made a huge difference.

About half of getting to 80 is less administrators and more teachers, but the other half is your creative use of curriculum and schedule. If you are a school that uses block scheduling it causes your average student load to rise by 17 students. If you are a school that uses combined courses you combine social studies and language into humanities and you combine math and science into integrated math/science curriculum, on average it reduces your average student load by three. But, if you use both block scheduling with combined courses on the average it reduces your total student load by 23.

What are the most important effects of weighted student formula?

Weighted student formula has a couple of different kinds of effects. It has a fairness effect and it has a governance effect.

The fairness effect is very difficult to implement because it involves income redistribution from the rich to the poor. That's never been easy to achieve in this country or in any other. However, it is not impossible to achieve if you have the political time, meaning several years, and the political will and enough political astuteness.

The governance effect is immediate and easy to achieve. The governance effect is that weighted student formula brings transparency to school finance. It makes it real simple for parents and the public to understand how much money is in the school and what it is supposed to be used for. Therefore, it brings parents and teachers into the argument over how a school spends its money. This is a really healthy thing.

If you are going to give schools money rather than positions you have to figure out how much money you are going to give to each school. When you think about that for more than five minutes, you come to the conclusion that there is no way to allocate money to schools except by allocating money to students. And letting the money follow the student to the school. Now you have got to figure out how much money you are going to allocate to each student, and that's known as weighted student formula.

Once you have done that, you have created autonomy with a financially transparent funding formula. If the next superintendent that comes along tries to take away the autonomy, they will have an immense fight on their hands with all the parents and all the teachers and they will lose that fight. So, if you are a fan of local school autonomy, competition, and transparency then you want to introduce autonomy with weighted student formula because a weighted student formula protects the autonomy.

If you were going to start to implement this, do you have a favorite governance level, should it be started through state legislation, superintendent driven, or started by a local mayor?

I am a fan of the superintendent as the change agent. I think a superintendent who wants to do this can do it with their school board. I also think we now have enough districts who are trying to find their way that we are going to see more successes. I think St. Paul is doing a really good job. Boston is also doing some things right.

Boston pilot schools are a joint venture with the BTU. So there is a lot of union input. The good news is the BTU agreed to a three page contract for those schools. So they do have a lot of flexibility.

Now, why haven't they had a bigger impact? I think one reason is that the other schools, the non-pilot schools, in Boston have been improving which narrows the gap--perhaps because they have been learning from those pilot schools.

I think the other one is that the pilot schools in Boston do not display with consistency what I consider to be the full blown New York model. But they have a lot of it. They are getting down to some good student load numbers with 86. But given the amount of money they have per student perhaps they ought to be down to 70.

The full blown New York model includes in addition to the things we've talked about, having advisories. The advisories are a very important element of the horizontal school. The advisories are typically 12 or 13 students who meet with a teacher for four years. They become very cohesive.

Another element is the teacher grade-level meeting. Teachers meet is another aspect of the horizontal school. The teachers meet usually once a week, it might be twice, or three times a week - all the grade level teachers. And they go through every student who needs special attention. And each teacher has something to contribute, sees some different angle on the student. And they discuss why the student's performance has been declining or why the student has become so superior that they now need additional challenges and then together they figure out a strategy, and then if they need to they engage the student's family and they implement it.

People say education should be personalized, that's what personalization is. That's the real thing.

Urban Schools Scores Rise When Parents, Principals Lead

lisa.snell@reason.org (Lisa Snell) — Sun, 26 Aug 2007 13:35:00 EDT

Indianapolis Star

"Beating the Odds," a May 2007 report by the Council of the Great City Schools, details how urban school districts have closed their achievement gaps in the past six years.

Unfortunately, the report notes that in Indianapolis the most disadvantaged students have lost ground since 2001.

For example, the achievement gap in reading on the I-Step for low-income eighth graders was 36 points in 2001; by 2006 it had grown to 45 points.

Overall, achievement gaps in Indiana are large. About 75 percent of white students passed the English portion of the I-Step exam in 2006, compared with 48 percent of black students and 51 percent of Hispanic students.

Weighted Formula

Some urban districts are making progress closing the achievement gap with the help of a school financing mechanism known as "weighted student formula."

This approach distributes funding more equitably between schools and gives principals and parents more control over school resources.

School districts or state education departments use student characteristics to determine per-pupil funding levels and better match costs with actual student needs.

In each case, schools are given responsibility for managing their own budgets in key areas such as personnel, school maintenance, and learning materials.

In addition, the funding follows the child to each school and is based on the characteristics of the individual child.

Big Time Support

In his 2007 State of the City address, New York City Mayor Michael R. Bloomberg called for the weighted-student-formula plan for all city schools.

One week later, Jim Gibbons, governor of Nevada, echoed Bloomberg's proposal with his own plan. Oakland Unified has seen rapid improvements for disadvantaged students on multiple performance measures under its school empowerment plan.

In 2003-04, for instance, the city's high schools offered seventeen advanced placement classes; last year, the district offered ninety-one.

Oakland students also are taking high-level math and science courses more frequently. About 800 high school students studied first-year physics last year -- nearly triple the number taking the course in 2003-04.

Overall, Oakland had the highest gain of the 30 largest districts in California. Oakland high schools gained, on average, thirty points in one year on California's 2006 Academic Performance Index.

Shrinks Gap

Oakland has also shrunk the performance gap for low-income students in fourth grade reading who qualified for the free lunch program. They went from a 45 point gap to a 25 point gap; shrinking by 20 points between 2002 and 2006.

To test WSF, Indiana wouldn't need to do a statewide program. Instead, it could test the approach by offering school districts a financial incentive to pilot WSF within a school corporation.

This would be the best way to direct more of current resources to disadvantaged kids, give school principals autonomy, and let parents choose which public school is best for their child.

The Weighted Student Formula

lisa.snell@reason.org (Lisa Snell) — Thu, 15 Mar 2007 14:03:00 EDT

Indiana Policy Review

In Indiana, like most states, school funding is not attached to the child; families cannot easily choose between local public schools based on quality. As a consequence, public schools have no incentive to improve because children have no right of exit to a better-performing school.

While some public schools have experienced modest improvement in recent years, thousands of Hoosier children continue to languish in low-performing public schools despite continual reforms that have included funding increases, smaller class sizes, changes in teacher training and staff reconstitution.

Indiana’s children need meaningful public school reform where school financing is attached to the backs of children and public school enrollment is based on choice, not residential assignment. School funding needs to be put into the backpacks of children and follow them into the schools of their choice. Public school principals need to control resources at the local level in order to make informed decisions about how best to spend resources on the unique needs of their own students.

Offering parents and students “buying power” will help inspire excellence in all public schools, especially if they have to compete for students in order to receive funding. The school finance mechanism known as Weighted Student Formula (WSF) could help create more school choice, more equitable school financing and better-performing schools in the state of Indiana.

The Weighted Student Formula has demonstrating results in equalizing funding for all students, closing the achievement gap and improving high school outcomes in a handful of urban school districts across the United States. This school finance mechanism seems especially suited for Indiana where the majority of school funding is already allocated at the state level.

A former superintendent of schools, Arlene Ackerman, introduced San Francisco city schools to the Weighted Student Formula, which requires money to follow students to the schools they choose while guaranteeing that schools with harder-to-educate children (low-income students, English learners, low achievers) get more funds. Ackerman also introduced site-based budgeting, so that school communities — not the central office — determine how to spend their money. Finally, she created a true open-enrollment student assignment system that gives parents the right to choose their children’s schools. And parents are taking advantage of the system; more than 40 percent of the city’s children now attend schools outside their neighborhoods.

With students having the freedom to move, the city’s public schools now have incentives to differentiate themselves. Once cookie-cutter public schools now include Chinese, Spanish and Tagalog language immersion schools; college-preparatory schools; performing-arts schools that collaborate with an urban ballet and symphony; schools specializing in math and technology; traditional neighborhood schools; and a year-round school based on multiple-intelligence theory. Each San Francisco public school is unique. And the number of students, school hours, teaching styles and program choices vary from site to site.

If Indiana is not ready to institute WSF statewide, an interim solution would be to offer school districts a financial incentive to pilot the Weighted Student Formula concept within a school corporation. This financing mechanism would be especially important for those Indiana districts with higher achievement gaps, higher concentrations of school dropouts and a greater need to weight funding toward individual student characteristics.

Indiana could offer waivers to state-level categorical mandates that limit discretionary funding to those districts willing to implement weighted-student formula financing schemes with principal control and public-school choice.

Obviously, creating high standards alone is not enough to solve Indiana’s school performance issues or inequities in school funding. Individual low-performing Indiana schools may need competition from higher-performing schools to give them a financial incentive to either perform better or let the children go.

In the specific case of chronically low-performing schools, students need more than high standards — they need access to higher-performing schools and a right of exit out of their inadequate schools. Indiana needs to reform its school finance system using a Weighted Student Formula to offer public schools the incentive to better serve each child based on individual characteristics.

For Answer to LAUSD's Woes, Look North

lisa.snell@reason.org (Lisa Snell) — Sun, 27 Aug 2006 00:00:00 EDT

Los Angeles Daily News

In California, bad education news gets spun into good news. Test scores are getting better! In reality, years after a supposed "overhaul" of the state education system, just 42 percent of California's students scored proficient or above in English (up from 40 percent last year) and only 40 percent of kids are at grade level or above in math (up from 38 percent last year).

As he moves forward in his bid for control of the Los Angeles Unified School District, Mayor Antonio Villaraigosa isn't getting overly excited about the improving, but still low, test results. With the support of Gov. Arnold Schwarzenegger, key legislators and the City Council, Villaraigosa seems likely to take power of LAUSD soon. And if improving student achievement is his end-game, the latest test scores have given him a map to success: Mimic San Francisco Unified's plan.

San Francisco is one of a handful of public-school districts across the nation allowing education funding to follow students. Former Superintendent of Schools Arlene Ackerman introduced the city to the weighted student formula, which requires money to follow students to the schools they choose while guaranteeing that schools with harder-to-educate kids (low-income students, English learners, low achievers) get more funds.

Ackerman also introduced site-based budgeting, so that school communities - not the central office - determine how to spend their money.

Finally, she created a true open-enrollment student assignment system that gives parents the right to choose their children's schools. And parents are taking advantage of the system: More than 40 percent of the city's children now attend schools outside their neighborhoods.

With students having the freedom to move, the city's public schools now have incentives to differentiate themselves. Once cookie-cutter public schools now include Chinese, Spanish and Tagalog language immersion schools; college preparatory schools; performing-arts schools that collaborate with an urban ballet and symphony; schools specializing in math and technology; traditional neighborhood schools; and a year-round school based on multiple-intelligence theory.

Each San Francisco public school is unique. And the number of students, school hours, teaching styles and program choices vary from site to site.

San Francisco, with 116 schools, and 60,000 students, is now entering its sixth year of weighted student formula reforms, and its test scores now top all the state's urban districts.

In recently released standardized test results, nearly half of San Francisco Unified's students - 48 percent - scored at or above proficient in both reading and math. Those scores are far above the state average and the LAUSD's results of 31 percent at or above grade level in math and 30 percent in English.

In 2005, San Francisco's students posted the highest test scores of any urban district on the Academic Performance Index. The state has set 800 as excellent. San Francisco scored 745; San Jose 737; San Diego 728; Sacramento 700; Los Angeles 645; and Oakland 634. Even San Francisco's low-income students outscored L.A. and other urban districts, achieving 706 on the API.

While it may be difficult to replicate a school-finance method that works for a 60,000-student district and scale it up to L.A.'s 700,000 students, the dramatic achievement gains in San Francisco make it worth a try.

The first step is to hire a superintendent who buys into the weighted student formula concept. San Diego County just hired such a person in Randy Ward. And San Francisco's Ackerman has moved to Columbia Teachers College, but might be available for the right offer.

Next, appoint an independent board to determine the appropriate per-pupil funding amounts and create an open-enrollment attendance system that allows parents to choose schools and leave low-performing schools. The mayor should also consult other large cities that have implemented weighted student formula, including Edmonton, Seattle and Houston.

The mayor's determination to improve our schools is commendable, but simply changing administrators isn't enough. Incentives matter.

When public schools have the incentive to compete for students and the freedom to create distinct curricula, they've proven they can boost student achievement. If he's bold enough to combine mayoral control with the weighted student formula, Villaraigosa could unleash a revolution that dramatically changes L.A.'s public schools for the better.

Lisa Snell is director of education at the Reason Foundation. An archive of her work is available here. Reason's California-related research and commentary is here and education research and commentary is here.

Align Education Funds and Results

lisa.snell@reason.org (Lisa Snell) — Sat, 19 Feb 2005 00:00:00 EST

Riverside Press Enterprise

Public school finance systems are in flux across the United States. In many states, tight budgets have put pressure on education budgets. Several states are involved in lawsuits over the "adequate" financing of public schools. In addition, accountability requirements of the federal No Child Left Behind Act are pressuring states to link their school finance systems to student performance.

Yet in most states, education spending is not tied to student outcomes. The national trend is toward larger education budgets with little regard for student outcomes.

California is no exception.

In 1988 Californians voted for Prop. 98, a constitutional amendment that guarantees that education spending will always go up by at least a small amount, even during economic downturns. California schools always receive at least 40 percent of state revenue or at a minimum the same amount they received the prior year adjusted for inflation and enrollment growth.

In his 2005-06 budget proposal, Gov. Schwarzenegger allocated K-12 education significantly less than it is due under Prop. 98.

He also proposed significant reforms to Prop. 98, arguing that the Legislature needs more control over education spending and that state revenues have not kept pace with the demands of Prop. 98.

The upcoming budget fight over education funding promises to be explosive. However, Prop. 98 reform alone will have little impact on student outcomes in California.

The larger question for California is how to distribute education resources in a way that helps school districts control spending and improve student outcomes.

A number of school districts across the country and abroad have adopted a funding mechanism for schools that gives local schools more control over resources and leads to increases in student achievement. Pioneered in Canada's Edmonton school district in Alberta in the 1980s, "weighted student formula" has been imported to Seattle, Cincinnati, San Francisco and Houston.

The funding structure allows individual schools to compete for students and allows principals to control their budgets and tailor their schools to the needs of their specific school populations.

School districts use student characteristics to determine per pupil funding levels and better match costs with actual student needs. In each case, schools are given responsibility for managing their own budgets in key areas such as personnel, school maintenance and learning materials.

San Francisco, with 116 schools and 60,000 students, is in its fourth year of using a weighted student formula for funding and giving more decision-making power to principals and their school site councils, made up of parents and school staff.

Since implementing the weighted student formula, San Francisco's test scores have improved every year, and it is now the highest-performing urban school district in California.

Several states, including California, Colorado and Hawaii, are looking at implementing the weighted student formula statewide. In his latest budget proposal, Schwarzenegger called for creating a pilot program that would place school resources under the control of each individual school site.

Even if one concedes the questionable fiscal premise of Prop. 98 — that schools should always get more money when state revenues climb (over and above cost of living and enrollment growth) — the current structure of California's funding distribution system ensures that those ever-increasing resources are not targeted toward classroom-level spending.

California should follow San Francisco's lead and create one funding mechanism based on a weighted student formula that would include one base allocation equalized across the state, and additional weighted funds for students with additional needs.

This process would make school finance in California simpler, more equitable and bring significant cost savings by reducing administration costs and central office costs and redirecting some of this savings to increase classroom-level spending.

Lisa Snell is director of education and child welfare at Reason Foundation. She formerly taught speech courses at California State University, Fullerton.

Restructuring California's School Finance System

lisa.snell@reason.org (Lisa Snell) — Fri, 23 Jan 2004 00:00:00 EST

California’s $41 billion education finance system offers schools money through two types of funding streams: “revenue limits” and categorical funds that include 100 different programs. The funding system is complex and results in unequal funding amounts at the student level. In many cases, the amount of money a school district receives depends on how savvy the school district is and the size of its central bureaucracy rather than the needs of individual students. California should create one simple funding mechanism that distributes both categorical and revenue-limit funding based on a “weighted student formula” that would include one base allocation equalized across the state and additional weighted funds for students with additional needs including special education, poverty, and English learners. This process would make school finance in California simpler, more equitable, and bring significant cost savings by reducing categorical administration costs and central office costs and redirecting some of this savings to increase per-pupil funding allocations in California. The Governor’s Quality Education Commission should study how categorical programs have been reformed in other states and how the weighted student formula has been implemented, and devise model legislation based on the best practices from other states and localities.

The Problem

At approximately $41 billion, K12 education spending is California’s largest budget item and accounts for 41 percent of California’s budget. California has one of the most centralized public school systems in the United States. In California, local property taxes are aggregated in Sacramento and then re-allocated to school districts on a per-capita basis. These reallocated funds—both general revenue and categorical funds—flow not directly to schools, but to school district central offices. The central offices then allocate personnel to schools rather than money. For example, a school district would determine the number of teachers and other kinds of personnel based on the district’s student population and characteristics. If a school principal wanted to invest resources in an additional reading instructor to raise reading scores at the school, the school principal would not have the budgetary discretion to hire the reading teacher because employees are assigned at the district level based on the average characteristics of schools in the district.

Finance Problem

Finance Solution

Funding streams & categorical funds

Weighted student formula

1. Complex

2. Unequal funding

3. Bureaucratic

4. Less per pupil funding

1. Simple

2. Equitable

3. Cost savings: $2 Billion

4. More per pupil funding

Both California’s general education revenue, called “revenue limits,” and the $12 billion that goes to more than 100 different categorical funds have complex funding formulas based on historical and archaic data points that generate inequitable funding at the local school level. As a November 2003 report in the Sacramento Bee, highlighted several examples:

Beyond these basic per-pupil amounts are other hidden tiers of revenue limit funding that can boost a school's allotment by as much as $10,000 to $100,000 per student in some places. The Elk Grove Unified School District, for instance, gets nearly $8 million every year through a little-known formula called "Meals for Needy Pupils," while other equally deserving districts in the area get far less, or nothing at all.
Fifteen years ago, a scattering of districts took part in a clever series of mergers and annexations that gave them higher revenue limits. The state closed the legal loopholes, but the schools that pulled off the mergers continue to benefit.
In Plumas County, the sole district receives extra cash from the state to make up for declining federal timber money, even though the U.S. government has been chipping in to make up for the loss. In Santa Cruz County, two districts get extra money for their seventh-and eighth-graders that many other districts don't receive.
And one school system in San Diego County receives public funding for students it doesn't even educate. In this special deal, about 100 students from the Fallbrook Union High School District are allowed to attend school in neighboring Capistrano Unified, because it is closer to their homes.

This system has, literally, a thousand different base funding amounts for children and then adds other, sometimes random, amounts from categorical programs, demanding a large central bureaucracy to navigate and track the paperwork and documentation. The amount each district receives per pupil is irrational and based on too many complex factors. As the Sacramento Bee stated in its recent investigative series on California’s school finance structure, the system “is so convoluted and obscure that not even the people who manage school budgets for a living can explain the finance system to taxpayers, who support it.”

The most significant consequence of California’s complex school finance system is that too much revenue is targeted toward administering school programs and budgets rather than raising student achievement. According to the National Center for Education Statistics, instructional spending in California is only 54 percent of per-pupil spending. For example, the Los Angeles Unified School District spends only $84 per pupil on textbooks (or 90 percent of the state average) but spends $107 dollars per student on Supervisors' salaries (which is 191 percent of the state average and does not include principals or other school level administrators). It is critical to work toward an education budget process that encourages cost-consciousness at the local level, shifts resources from non-instructional budget categories into classroom-level spending, and truly equalizes per-pupil funding based on the individual characteristics of students.

These misdirected resources have had negative consequences for California’s most disadvantaged students. On the 2002 National Assessment of Educational Progress, California's average reading scores for students who were eligible for free and reduced-price lunches were the lowest of any state in the nation, at both fourth and eighth grade. Sixty-seven percent of California's poor fourth-graders scored "below basic" in reading (meaning they could not even demonstrate "partial mastery" of the subject matter for their grade level). In New York, 49 percent scored "below basic"; in Texas 52 percent; Florida, 51 percent. In eighth-grade math, the percentage of California poor children scoring "below basic" was 62; only Alabama and Mississippi had more low-scoring students.

The Solution

California should simplify and equalize per-pupil student funding by offering one simple base revenue stream that includes the money allocated for categorical programs and the current revenue limits and distributes the funding through a weighted student formula. This approach would increase per-pupil spending at the school level, reduce central office and administrative spending, and offer a truly equalized per-pupil spending formula.

The most comprehensive evidence for a “weighted student formula” comes from several studies and a new book by UCLA Professor of Management William G. Ouchi, Making Schools Work: A Revolutionary Plan to Get Your Children the Education They Need.

Ouchi and a team of 12 researchers found, after studying a variety of public and Catholic school systems in North America, that decentralized school systems run more efficiently and produce better student achievement.

Ouchi included three types of large North American school systems in his research sample:

Three very centralized public school districts: New York City, Los Angeles, and Chicago;
Three very decentralized public school districts: Seattle, Houston, and Edmonton, Canada; and,
Three very decentralized Catholic school districts: Chicago, New York City, and Los Angeles.

Ouchi’s research team visited 223 schools, representing at least 5 percent of the schools in each system. In each system the team gathered data about student performance, school centralization, and the amount of money that reaches the classroom. The team focused on school budgets, accountability systems, and the achievement of students.

They found that how a school is managed matters. Schools perform better on fiscal and academic outcomes when there is a) local control of school budgets by principals, and b) open enrollment, which allows the per-pupil funding to follow the child.

Overall, the decentralized public school districts and Catholic schools had significantly less fraud, less centralized bureaucracy and staff, more money at the classroom level, and higher student achievement.

The decentralized public school districts all used the ”weighted student formula” pioneered by Edmonton school superintendent Michael Strembitsky. The formula attaches school funding to the backs of children and in so doing gives budgetary control to each school principal.

For example, in the Seattle system, students are assigned “weights” for supplementary funds for categories such as poverty, limited English proficiency, and special education. The weighting scheme is simple and described on one page in the Seattle district’s budget book. Each child is worth a weight of between 1 and 9.2 depending on the needs of the individual child.

Each school is funded by a basic operating grant from the district plus the weighted funds brought in by each individual child enrolled at the school. The weighted student formula allows individual schools to compete for students and allows principals to control their budgets and tailor their schools to the needs of their specific school populations.

After the introduction of the weighted student formula in Seattle, all principals attended management training programs to prepare them to be CEOs of their schools, with full responsibility for staffing, budgets, scheduling, and marketing.

The weighted student formula is based on five principles that are not currently practiced in California’s school finance system:

Resources follow the student
Resources are distributed in dollars, not full-time-equivalent staff
The allocation of resources varies by the personal characteristics of each individual student
The formula is applied consistently in the treatment of all students and all schools
School principals control the allocation of budget resources

Simply put, the weighted student formula allocation system delivers resources more equitably to students based on their educational needs and increases flexibility for tailoring and funding academic achievement plans at the school level.

The weighted student formula recognizes that the cost of effectively educating a child varies by the type of student and the difficulty associated with educating each individual student. Under current weighted student formulas in other school systems, three factors drive the revenue amount associated with each student: base funding, grade level, and student characteristics. For example, in Seattle for each student characteristic specific weighting has been assigned by grade level. Weighting categories include regular education, special education (4 levels), bilingual education, and free and reduced price lunch.

Student revenue = grade-level weight + student characteristic weight x base funding amount. This formula is the same for every student in every school in Seattle.

In order to simplify California’s school finance system, a weighted student formula that adds the $12 billion categorical program to base revenue and distributes funding to students based on their unique needs would more equitably distribute resources to California schools.

Potential Cost Savings

Collapsing categorical programs and increasing schools’ basic allocation per student would yield state and district savings by reducing the administrative effort entailed in operating multiple categorical programs and a large central office staff. Currently districts must apply for, separately track, and monitor the appropriate use of categorical funds. Research from Reason Foundation’s Citizen’s Budget projects an overall savings rate of at least 15 percent of administrative costs at the district and state level if these changes were introduced. In other words, by simplifying the funding stream and collapsing categorical programs the state could cut the state department of education administrative budget by up to 15 percent and reduce the combined categorical and revenue limit budget to account for administrative savings.

Theoretically, by adding the $12 billion categorical amount to the $29 billion in revenue limits and returning budget control to the local schools, the state could increase the amount of per-pupil allocation while cutting overall education funding by 5 percent resulting from dramatic reductions in central staff and save close to $2 billion.

Other states have reduced overall spending while increasing per-pupil spending by shutting down categorical programs. According to the Sacramento Bee, the state of Maryland went through a comprehensive two-year process to streamline categorical programs. A new system was adopted in the 2002-2003 school year that called for increasing basic per-child "foundation" amounts over a six-year period, from about $4,300 to more than $6,100. One of the most significant changes in Maryland involved ending state categorical programs. Maryland got rid of about 30 of its categoricals and added the revenue to the basic allocations. The elimination of the 30 Maryland categoricals freed up more than $300 million a year that helped boost foundation funding for all students. In other words, more money was targeted to students and less money went to administering programs in Maryland.

Vehicle for Reform

The Quality Education Commission tasked with studying California’s school finance system should examine every current state and local district that has either collapsed categorical programs or implemented the weighted student formula for best practices and model legislation. For example, San Francisco, Santa Monica, Seattle, Edmonton, Houston, Oregon, and Hawaii have all crafted legislation and resolutions detailing the weighted student formula. These unique localities have all taken slightly different approaches to implementing the weighted student formula. A study of best practices and lessons learned with a hybrid of the best weighted student formula and categorical reform legislation should be recommended by the committee. California should not reinvent the weighted student formula but learn from the implementation experiences of other states and localities.

Contacts

Lisa Snell
Reason Foundation
3415 S. Sepulveda Blvd. #400
Los Angeles, Ca 90034
310-391-2245
lsnell@reason.org

Dr. William G. Ouchi
University of California Los Angeles
310-825-5848
William.ouchi@anderson.ucla.edu

J.C. Bowman
(served in Governor Jeb Bush’s Administration with Donna Arduin)
Center for Education Innovation
Florida State University
850-644-3419
jbowman@coe.fsu.edu

Lisa Snell is director of education and child welfare at Reason Foundation. She formerly taught speech courses at California State University, Fullerton.