Equity and Adequacy in Education Finance

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i CONTENTS EQUITY AND ADEQUACY IN EDUCATION FINANCE ssues and erspectives I P Helen F. Ladd, Rosemary Chalk, and Janet S. Hansen, Editors Committee on Education Finance Commission on Behavioral and Social Sciences and Education National Research Council NATIONAL ACADEMY PRESS Washington, D.C. 1999

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NATIONAL ACADEMY PRESS • 2101 Constitution Avenue, N.W. • Washington, D.C 20418 NOTICE: The project that is the subject of this volume was approved by the Governing Board of the National Research Council, whose members are drawn from the councils of the National Academy of Sciences, the National Academy of Engineering, and the Institute of Medicine. The members of the committee responsible for the volume were chosen for their special competences and with regard for appropriate balance. This volume was supported by Contract No. RF95194001 between the National Academy of Sciences and the U.S. Department of Education. Any opinions, findings, conclusions, or recommen- dations expressed in this publication are those of the author(s) and do not necessarily reflect the view of the organizations or agencies that provided support for this project. Library of Congress Cataloging-in-Publication Data Equity and adequacy issues in education finance : issues and perspectives / Helen F. Ladd, Rosemary Chalk, and Janet S. Hansen, editors ; Committee on Education Finance, Commission on Behavioral and Social Sciences and Education, National Research Council. p. cm. Includes bibliographical references and index. ISBN 0-309-06563-1 (cloth) 1. Education—United States—Finance. 2. Educational equalization—United States. I. Ladd, Helen F. II. Chalk, Rosemary A. III. Hansen, Janet S. IV. National Research Council (U.S.). Committee on Education Finance. LB2825 .E68 1999 379.1′1′0973—dc21 98-51230 Additional copies of this volume are available from: National Academy Press 2101 Constitution Avenue N.W. Washington, D.C. 20418 Call 800-624-6242 or 202-334-3313 (in the Washington Metropolitan Area). This volume is also available on line at http://www.nap.edu Printed in the United States of America Copyright 1999 by the National Academy of Sciences. All rights reserved.

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COMMITTEE ON EDUCATION FINANCE HELEN F. LADD (Cochair), Terry Sanford Institute of Public Policy, Duke University THOMAS SOBOL (Cochair), Teachers College, Columbia University ROBERT BERNE, Vice President for Academic Development, New York University DENNIS N. EPPLE, Graduate School of Industrial Administration, Carnegie Mellon University SUSAN H. FUHRMAN, Graduate School of Education, University of Pennsylvania EDMUND W. GORDON, Yale University (emeritus) JAMES W. GUTHRIE, Peabody College, Vanderbilt University STEPHEN P. KLEIN, RAND, Santa Monica, California DIANA LAM, Superintendent, San Antonio Independent School Districts LAURENCE E. LYNN, JR., School of Social Service Administration, Harris Graduate School of Public Policy Studies, University of Chicago GARY NATRIELLO, Teachers College, Columbia University ALLAN ODDEN, School of Education, University of Wisconsin, Madison JOHN THEODORE SANDERS, President, Southern Illinois University ROBERT M. SCHWAB, Department of Economics, University of Maryland KENNETH A. STRIKE, College of Agriculture and Life Sciences, Cornell University STEPHEN D. SUGARMAN, School of Law, University of California, Berkeley JOAN TALBERT, School of Education, Stanford University AMY STUART WELLS, Graduate School of Education and Information Studies, University of California, Los Angeles JANET S. HANSEN, Study Director ROSEMARY CHALK, Senior Program Officer NEAL FINKELSTEIN, Senior Program Officer ANNE MARIE FINN, Research Associate THOMAS HUSTED, Senior Consultant PAUL MINORINI, Senior Consultant SHARON VANDIVERE, Senior Project Assistant NATHANIEL TIPTON, Project Assistant iii

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The National Academy of Sciences is a private, nonprofit, self-perpetuating society of distinguished scholars engaged in scientific and engineering research, dedicated to the furtherance of science and technology and to their use for the general welfare. Upon the authority of the charter granted to it by the Congress in 1863, the Academy has a mandate that requires it to advise the federal government on scientific and technical matters. Dr. Bruce M. Alberts is president of the National Academy of Sciences. The National Academy of Engineering was established in 1964, under the charter of the National Academy of Sciences, as a parallel organization of outstanding engineers. It is autonomous in its administration and in the selection of its members, sharing with the National Academy of Sciences the responsibility for advising the federal government. The National Academy of Engineering also sponsors engineering programs aimed at meeting national needs, encourages education and research, and recognizes the superior achievements of engineers. Dr. William A. Wulf is president of the National Academy of Engineering. The Institute of Medicine was established in 1970 by the National Academy of Sciences to secure the services of eminent members of appropriate professions in the examination of policy matters pertaining to the health of the public. The Institute acts under the responsibility given to the National Academy of Sciences by its congressional charter to be an adviser to the federal government and, upon its own initiative, to identify issues of medical care, research, and education. Dr. Kenneth I. Shine is president of the Institute of Medicine. The National Research Council was organized by the National Academy of Sciences in 1916 to associate the broad community of science and technology with the Academy’s purposes of furthering knowledge and advising the federal government. Functioning in accordance with general policies determined by the Academy, the Council has become the principal operating agency of both the National Academy of Sciences and the National Academy of Engineering in providing services to the government, the public, and the scientific and engineering communities. The Council is administered jointly by both Academies and the Institute of Medicine. Dr. Bruce M. Alberts and Dr. William A. Wulf are chairman and vice chairman, respectively, of the National Research Council. iv

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Contents PREFACE ix INTRODUCTION 1 1 CONCEPTS OF SCHOOL FINANCE EQUITY: 1970 TO THE PRESENT 7 Robert Berne and Leanna Stiefel SCHOOL FINANCE LITIGATION IN THE NAME OF EDUCATIONAL EQUITY: 2 ITS EVOLUTION, IMPACT, AND FUTURE 34 Paul A. Minorini and Stephen D. Sugarman THE IMPACT OF COURT-MANDATED SCHOOL FINANCE REFORM 3 72 William N. Evans, Sheila E. Murray, and Robert M. Schwab COURT-MANDATED SCHOOL FINANCE REFORM: WHAT DO THE 4 NEW DOLLARS BUY? 99 Margaret E. Goertz and Gary Natriello THE POLITICS OF SCHOOL FINANCE IN THE 1990S 5 136 Melissa C. Carr and Susan H. Fuhrman EDUCATIONAL ADEQUACY AND THE COURTS: THE PROMISE AND 6 PROBLEMS OF MOVING TO A NEW PARADIGM 175 Paul A. Minorini and Stephen D. Sugarman v

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vi CONTENTS ENABLING “ADEQUACY” TO ACHIEVE REALITY: TRANSLATING 7 ADEQUACY INTO STATE SCHOOL FINANCE DISTRIBUTION ARRANGEMENTS 209 James W. Guthrie and Richard Rothstein PERFORMANCE STANDARDS AND EDUCATIONAL COST INDEXES: 8 YOU CAN’T HAVE ONE WITHOUT THE OTHER 260 William D. Duncombe and John M. Yinger BIOGRAPHICAL SUMMARIES OF CONTRIBUTORS 298 INDEX 305 TABLES 2-1 Overview of Litigation Involving State Education Finance Systems, 41 2-2 Plaintiffs Won at State Supreme Court Level, 42 2-3 Plaintiffs Lost at Supreme Court Level; No Further Complaints Filed or Further Complaints Also Lost, 44 2-4 Plaintiffs Lost in Prior Action; Further Complaints Have Been Filed, 45 2-5 Litigation Is Present; No Supreme Court Decision Has Been Rendered, 46 2-6 No Litigation Is Present or Case Is Dormant, 46 3-1 Summary of States with Court-Ordered Reforms, 1971-97, 73 3-2 Summary of Current Education Expenditures, 1972-92, 76 3-3 Impact of Court-Mandated Finance Reform on the Distribution of Educa- tion Resources, 1972-92, 79 3-4 Summary of Resources Adjusted for Cost of Living Differences, 1992, 85 3-5 Impact of Court-Mandated Finance Reform on Per-Pupil Revenue by Source of Revenue and Distribution of Household Income of Districts, 88 3-6 Impact of Court-Mandated Finance Reform on Per-Pupil Revenue by Source and Race, 89 4-1 Basic Education Funding Formulas in Effect, 1992-93: Kentucky, New Jersey, and Texas, 106 4-2 Changes in State Aid per Pupil, Local Revenues per Pupil, Tax Rates (in mills), and Total Revenues per Pupil, 1989-90 to 1992-93: Kentucky, New Jersey, and Texas, 108 4-3 Distribution of Education Revenues per Pupil and Tax Rates (in mills), 1989-90 and 1992-93: Kentucky, New Jersey, and Texas, 112 4-4 Selected Equity Statistics, Current Revenues per Pupil, 1989-90 and 1992- 93: Kentucky, New Jersey, and Texas,114

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vii CONTENTS 4-5 Changes in Kentucky School District Per-Pupil Expenditure Patterns by Function, 1990 and 1993, 116 4-6 Changes in New Jersey School District Per-Pupil Expenditures, by Cat- egory, 1990-91 to 1993-94, 118 4-7 Spending Increases for Texas School Districts Between 1989-90 and 1992- 93, 120 4-8 Percentage Expenditure Distributions Across Major Functions for Texas School Districts, 1989-90 and 1992-93, 120 4-9 Major New Expenditures in Kentucky, New Jersey, and Texas, 1989-90 to 1992-93, 122 7-1 Increased State Spending on Elementary and Secondary Education, 212 7-2 Wyoming Prototypical Model: Elementary School, K-5; Preliminary Costs, 239 7-3 Wyoming Prototypical Model: Middle/Jr. High, Grades 6-8; Preliminary Costs, 240 7-4 Wyoming Prototypical Model: High School, Grades 9-12; Preliminary Costs, 241 8-1 Education Cost Models (with and without New York City and Yonkers), New York School Districts, 1991, 276 8-2 Comparison of Education Cost Indices for New York State School Districts in 1991, 280 8-3 Correlations Between Education Cost Indices for New York State School Districts in 1991, 283 8-4 Comparison of Predicted Performance Under Different Foundation Formulas Relative to State Average Performance in 1991 for New York School Dis- tricts, 287 BOXES 7-1 West Virginia Supreme Court definition of an adequate education, 215 7-2 The Wyoming basket, 1990-1997, 217 7-3 The Wyoming legislative enacted 1997 basket, 218

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Preface In the mid-1990s, the U.S. Congress requested a major study of the U.S. system of elementary and secondary education finance. In response to this re- quest, the National Research Council (NRC) set up the Committee on Education Finance to undertake the study. The committee was established within the NRC’s Commission on Behavioral and Social Sciences and Education. This volume of background papers was prepared in connection with one part of the committee’s study. The volume includes eight papers commissioned by the committee to inform its discussions about equity and adequacy in education finance, two of the issues it was specifically charged to address. The preparation of this volume and the conduct of the larger study are sup- ported by funds from the U.S. Department of Education that were appropriated as part of the legislation for the Departments of Education, Labor, and Health and Human Services in 1994 (P.L. 103-333). The study is being carried out under a contract with the National Institute on Educational Governance, Finance, Policy Making, and Management, part of the Department of Education’s Office of Edu- cational Research and Improvement. The views expressed by the authors are theirs alone and do not reflect the opinions of the Committee on Education Finance or the U.S. Department of Education. The committee acknowledges the valuable contributions of the authors, who prepared and revised their papers within relatively short time periods, as well as the committee members and reviewers who provided thoughtful advice and criti- cism to the authors. The papers in this volume have been reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with ix

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x PREFACE procedures approved by the NRC’s Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making the published volume as sound as possible and to ensure that the volume meets institutional standards for objectivity and evidence. The review comments and draft manuscript remain confidential to protect the integ- rity of the process. We wish to thank the following individuals for their participation in the review of this volume: John Augenblick, Augenblick & Myers, Denver, Colo- rado; Dominic Brewer, RAND, Santa Monica, California; William Buss, College of Law, University of Iowa; David Figlio, Department of Economics, University of Oregon; Eric Hanushek, Department of Economics, University of Rochester; David Monk, Department of Education, Cornell University; Richard Murnane, Graduate School of Education, Harvard University; Lawrence Picus, School of Education, University of Southern California; Andrew Reschovsky, Robert N. Lafollette Institute of Public Affairs, University of Wisconsin; Julie Underwood, Department of Education, Miami University; and Arthur Wise, National Council on Accreditation of Teacher Education, Washington, D.C. Although these indi- viduals have provided constructive comments and suggestions, it must be empha- sized that responsibility for the final content of this volume rests entirely with the contributing authors and the NRC. Several staff members also made important contributions to this work: Rosemary Chalk, a coeditor, was instrumental in shepherding the papers through the production process and providing oversight and editorial guidance during the preparation of the volume, Anne Marie Finn conducted extensive reference checks for each paper, and Nat Tipton and Sharon Vandivere ably assisted the authors by producing multiple iterations of the papers with technical efficiency. This volume of background papers does not represent the committee’s find- ings and conclusions about the equity or adequacy of school finance in the United States. Those conclusions must await the 1999 publication of the committee’s final report. In the interim, the Committee on Education Finance hopes that the insights and perspectives presented in the following papers will be useful to all who are concerned with the challenges of achieving fairness in school finance and establishing equal educational opportunity for all students. Helen F. Ladd, Cochair Janet S. Hansen, Study Director Committee on Education Finance

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EQUITY AND ADEQUACY IN EDUCATION FINANCE

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