Money Alone Can’t Buy School Equity

Texas-sized reforms needed in the Lone Star state

Years of legal, political, and bureaucratic wrangling have left Texas with a convoluted school finance system that fails to provide students with equitable funding. Proposed legislation during the current session, including Rep. Jimmie Don Aycock’s HB 1759, do not ensure that resources are used to support children who need them most. The Lone Star state should implement a system that provides equitable funding for students, empowers school leaders, and holds them directly accountable for results. Student-based funding could help Texas accomplish this.

Texas has been engulfed in a school-finance rodeo for decades. In 1993 Senate Bill 7 implemented a so-called Robin Hood mechanism where revenues are redistributed from property wealthy districts to property poor districts. This system largely equalized funding among districts for more than a decade. However, special provisions and legislative changes have since increased disparities markedly.

These inequities, combined with $5.4 billion in budget cuts in 2011, culminated in a lawsuit filed by more than 600 school districts asserting that funding is neither adequate nor equitable. In August District Judge John Dietz sided with the plaintiffs, ruling that Texas’ current system is unconstitutional.

In response to this decision Aycock has proposed a bill that injects $3 billion of funding in an attempt to provide more resources for districts. Without comprehensive reforms, however, the additional funding is not guaranteed to make it to the student level.

Texas uses a weighted-student formula to determine district funding levels. This mechanism promotes inter-district equity by providing a base per-pupil allotment plus adjustments for student characteristics such as special education and bilingual education. Once funds have been distributed to districts, though, they do not necessarily support the students they’re intended to. Even if equity between districts is achieved, equity within a school district is not assured.

Most districts in Texas do not distribute funds to schools in actual dollars. Instead, they adjust for differences in student populations by providing schools with additional staffing positions and funds that are tied to specific programs. A principal’s ability to make localized decisions based on unique campus and student needs is thus limited, resulting in greater inefficiencies and less innovation.

Further intra-district inequities are caused by the use of average salaries in determining school budgets, a problem that is especially prevalent in large districts. In this case, individual schools are all charged the same average salaries for each given position instead of being billed for the actual salaries. Since schools serving more disadvantaged student populations tend to have less experienced teachers and principals they effectively subsidize the schools with more experienced personnel. It is as though an NFL team’s budget were charged the same amount for a quarterback, whether it be Andrew Luck or Brian Hoyer.

To address these inequities, Texas should adopt a comprehensive student-based funding system. First, the current weighted-student formula that distributes money to districts should be pushed down to the school level so that funding is tied directly to specific kids. This ensures that students who require additional resources actually receive them.

Additionally, schools should receive funds in actual dollars and be given discretion over how they’re spent. Reason Foundation’s Weighted Student Formula Yearbook 2013 showed that a one-percent increase in budget autonomy predicts higher proficiency rates for districts compared to others in its state. Empowering principals in this manner will allow schools to be more responsive to the diverse needs of individual students and improve student achievement.

Naturally, budgetary freedom must be accompanied by accountability for results. Ideally, funding should follow a student to his school of choice, simultaneously rewarding effective principals while signaling to ineffective ones that changes are required. Most importantly, this policy provides parents with immediate recourse if a school fails to meet their child’s needs.

Unfortunately, comprehensive reform will not occur during the current legislative session. However, district leaders should not wait for lawmakers to act as student-based budgeting can be adopted immediately at the local level. Houston Independent School District (HISD) can provide a model for others to follow.

For more than a decade HISD has moved toward greater equity and school empowerment in its budgeting. Its weighted student formula addresses the needs of individual students and principals have been afforded autonomy in determining how these funds are used. During this time HISD’s administrative cost ratio has been slashed, decreasing from 6.5 percent in 2002 to 4.0 percent in 2011, allowing more resources to be directed to the classroom. As a result of these and other reforms, HISD was awarded the 2013 Broad Prize for being the top-performing urban district in the country. Broad’s analysis found that their state test results, graduation rates, and college readiness data compared favorably to similar districts throughout the U.S.

Student-based funding combined with school empowerment can provide the structural reforms needed to achieve school-level equity and drive increases in student performance.

Aaron Smith is an education policy analyst at Reason Foundation.