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Making Money Matter: Financing America's Schools Part I Introduction
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Making Money Matter: Financing America's Schools This page in the original is blank.
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Making Money Matter: Financing America's Schools 1 Introduction In 1994 the United States Congress adopted legislation declaring that ''all students can learn and achieve to high standards and must realize their potential if the United States is to prosper" (Goals 2000: Educate America Act, P.L. 103–227, Section 301(1)). Enactment of this legislation marked the culmination of an extraordinary set of events that began with the first-ever education summit between the president and the governors of the nation's states and territories in 1989. For the first time, federal and state leaders joined together to establish common goals for the improvement of American elementary and secondary schools. Ensuring that all students learn and achieve to high standards has posed fundamental challenges to almost every aspect of business as usual in American education. From curriculum reform and the development of national and state standards for learning to the management structures of individual schools and school districts, traditional ways of organizing and delivering education are being questioned and changed. Policy makers and educators are urgently searching for better ways to provide today's schoolchildren with the knowledge and skills they will need to function effectively as citizens and workers in a future that promises to be increasingly complex and globally interconnected. A key component of this quest centers on money. The nation spends roughly $300 billion annually on public elementary and secondary education, the second-largest target of governmental expenditures after national defense. If schools are to meet the nation's high expectations of them, it is imperative that this huge financial resource be invested well. How best to raise and spend money for education is a difficult and conten-
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Making Money Matter: Financing America's Schools tious question, one that bedevils policy makers at all governmental levels. Although the federal government is a junior partner to states and local jurisdictions in financing education, Congress, too, becomes caught up in the complex issues involved each time it considers funding decisions related to new and continuing federal programs. In late 1994, after passing Goals 2000 and then undertaking an especially fractious debate in the course of authorizing the Improving America's Schools Act, Congress included in the appropriations bill for the U.S. Departments of Education, Labor, and Health and Human Services provision for a study to be conducted by the National Academy of Sciences on education finance. CHARGE TO THE COMMITTEE In response to this request from Congress, the National Research Council (the operating arm of the National Academy of Sciences and the National Academy of Engineering) established the Committee on Education Finance to carry out a study under the auspices of the U.S. Department of Education. In fleshing out the brief mandate assigned from Congress, the department charged the committee to evaluate the theory and practice of financing elementary and secondary education by federal, state, and local governments in the United States. The key question posed to the committee was: How can education finance systems be designed to ensure that all students achieve high levels of learning and that education funds are raised and used in the most efficient and effective manner possible? In answering this question, the committee was further charged to: give particular attention to issues of equity, adequacy, and productivity; be sensitive to the legal and constitutional context and constraints surrounding school finance; examine the relationship between incentive structures and education resources; clarify, to the extent it could, the relationships between expenditures and performance; identify data needed to give policy makers a better understanding of resource allocations, expenditures, and outcomes; and consider developing funding models that would display policy options for consideration by elected officials, educators, judges, and other interested parties. The committee translated this key question into three goals for education finance systems, a translation that provides objectives against which to evaluate the performance of existing arrangements and the likely effects of proposed changes:
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Making Money Matter: Financing America's Schools Goal 1: education finance systems should facilitate a substantially higher level of achievement for all students, while using resources in a cost-efficient manner. Goal 2: education finance systems should facilitate efforts to break the nexus between student background characteristics and student achievement. Goal 3: education finance systems should generate revenues in a fair and efficient manner. The first two of these goals speak to different aspects of ensuring that all students achieve high levels of learning. The best way to explain these two aspects is with reference to the current distribution of students along some spectrum of achievement. Goal 1 says that as a nation we are dissatisfied with the existing level of achievement and that we want all students to do better. In other words, we want the entire distribution to shift upward. At the same time, goal 1 acknowledges that raising student achievement is not just (or even necessarily) a matter of increasing the amount of resources devoted to education but also of ensuring that resources are used well and not wasted. Goal 2 says that the nation also is dissatisfied with the differences, or variance, in the distribution of student achievement, especially because the differences are linked to background characteristics like race and wealth that American society does not regard as legitimate explanations for achievement gaps. Goal 3 embraces the belief that in raising revenues for schools, as well as in spending, school finance systems should operate fairly and efficiently. SHIFTING EXPECTATIONS OF SCHOOL FINANCE Goal 1 marks a crucial change in expectations about education finance policies. In the past, finance focused mainly on how and at which levels of government money to support public schools should be raised. Most finance debates in the 20th century have revolved around the extent to which state and later federal aid should be used to overcome the fiscal disparities that have resulted from the 19th century's dependence on local funding of education. School finance in the 21st century faces a more important but more daunting challenge: how to harness the financing system to promote greater student achievement. This challenge is more important because it aims to link finance directly to the purposes of education. It is more daunting because in linking finance with education's purposes it becomes intertwined with an unprecedented ambition: never before has the nation set for itself the goal of educating all children to high standards. Despite the "intense faith in education—almost a secular religion" that Americans have had and their belief that reforming the public schools would improve not just education but society (Tyack and Cuban, 1995:1), it is only in
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Making Money Matter: Financing America's Schools the last quarter of the 20th century that we have truly set our sights on giving all children—including the poor, all racial and ethnic groups, immigrants, those with disabilities, and those who family and neighborhood circumstances pose serious barriers to learning—the opportunity to reach high standards of learning. On some dimensions, the accomplishments of the public education in the 20th century are impressive. At the same time, the achievement of American students appears mediocre by international standards and has not improved despite significant increases in educational spending. The nation's past willingness to tolerate low levels of achievement for many students is no longer acceptable, given the demands that a complex democratic society makes on the knowledge, skills, understanding, and tolerance of its citizens. Moreover, low achievement (whether perceived or real) leaves schools open to attacks that threaten public confidence in and support for public education. The recent and amazingly vigorous and sustained period of educational reform, which has held the attention of policy makers, educators, and the public for almost two decades, attests to the depth of the desire to improve education for all students. The successes, failures, and uncertain results of reform efforts, however, make it clear that educational change is slow (Elmore and McLaughlin, 1988; Tyack and Cuban, 1995) and its ultimate shape and outcome are still very unclear. Figuring out how to improve learning for all students is an evolving story. A key question about education finance is how to design it to evolve alongside and in support of the work in progress of broader school reform. Finance policies not only should address this new challenge but also should face up to past challenges that have gone unmet. The most compelling of these is embraced in goal 2. Almost a century after the first school finance reforms using state aid to reduce fiscal disparities among local school districts, almost 50 years after Brown v. Board of Education, 347 U.S. 483 (1954), made segregated schools illegal, 35 years after the nation launched a "war on poverty" that made equalizing educational opportunities one of its main targets, 30 years after the first successful court cases overturning state education financing policies that made the educational resources available to children dependent on where they happened to live: after all this time and effort, the United States still has an education finance system supporting schools that in many places are separate and unequal. Racial segregation between blacks and whites in metropolitan areas remains very high, especially in older cities of the North and North Central regions (Jargowsky, 1997; Massey, 1998), thus consigning many black children to inner-city urban schools that face enormous bureaucratic and political obstacles in addressing the needs of their students. Basic fairness compels attention to continuing inequities in American education. So does the fact that changes in the relationship between education and work mean that it is no longer possible for the poorly educated to earn a living wage (Jencks and Phillips, 1998; Murnane et al., 1995; Blank, 1997). Finally, social peace may be at stake, given the nation's rapidly shifting racial and ethnic
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Making Money Matter: Financing America's Schools demographics. The Bureau of the Census estimates that if recent demographic trends continue, Asians, non-Hispanic blacks, Hispanics, and American Indians together will approach 50 percent of the population by the year 2050 (Council of Economic Advisers, 1998). These changes are likely to place even more than the usual strain on the challenge of "maintaining a humane, harmonious pluralistic society" (Miller, 1995:xiii), making it increasingly important that justice seems to be done and that we as a society take seriously failures to remedy the race-based inequities of the past. Schools face limits in breaking the nexus between student background characteristics and student achievement. Achievement is influenced not only by the resources provided by the school but also by the resources devoted by the family. Family resources vary widely from child to child, even more than school resources do. Miller (1995), following James Coleman and others, has borrowed the concept of capital from economics to describe the different forms of education-relevant resources possessed by families, schools, and other societal institutions that can be invested in children. Human capital is largely acquired via formal schooling. Social, health, financial, and polity capital are largely the product of broader institutional arrangements and societal conditions. These institutional arrangements and societal conditions constitute an educational opportunity structure; they "heavily influence the ability of groups to acquire and use education-relevant resources to improve their educational performance, both absolutely and relative to other groups over time" (Miller, 1995:96). Disparities (which are correlated with racial/ethnic and socioeconomic status) in the access of children and their families to various kinds of education-relevant resources and capital mean that goal 2 cannot reasonably be achieved by schools alone. Too often in the past, "millennial thinking about schooling has . . . been a favored solution to social and economic problems. . . . [T]he utopian tradition of social reform through schooling has often diverted attention from more costly, politically controversial, and difficult societal reforms" (Tyack and Cuban, 1995:2–3). The fact that this committee, in following its charge, focuses its attention on schools does not diminish our view that it is imperative that society acknowledge the limited role of schools in addressing these larger social and economic problems. At the same time, we wish to avoid the danger of using these larger problems as an excuse for schools to tolerate large differences in the academic achievement of children that are related to characteristics such as race or income. Kenneth Clark warned of this kind of danger over a quarter of a century ago, when he argued that a book like Inequality (Jencks et al., 1972) did a disservice to children from minority and poverty backgrounds because, in stressing the impotence of schools in the face of societal problems, it enabled school officials to shift their responsibility to the society at large (Clark, 1973). We argue in this report that schools can make a difference and, to give ourselves a manageable task, we accept that the main focus of our investigation
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Making Money Matter: Financing America's Schools into goal 2 must be on the school's role in breaking the nexus between students' background characteristics and their academic achievement. Goal 3 complements the first two goals of a good education finance system by focusing attention on how revenues are generated. For historical reasons, the United States has relied much more heavily on state and local revenue sources than have most other countries. While such a decentralized financing system clearly promotes certain values that Americans hold dear, such as the value of local control, the continuing reliance in many states on locally generated revenue may be unfair in a world in which some households are increasingly able to move with ease from one area to another. That middle-and upper-income households can move out of high-taxation areas makes it possible for them to avoid sharing the burden of financing the local share of education for those left behind. In particular, as households and firms have moved out of central cities in search of lower land prices in the suburbs or more favorable business conditions in other states or countries, they have often left behind them smaller tax bases and concentrations of economically disadvantaged and difficult-to-educate students. The result is widening disparities among the capacities of school districts to generate local funds to meet the educational needs of their students at the same time that graduating students are increasingly having to compete for jobs in a national and global marketplace. While assistance from the federal and state governments helps to offset these disparities, large differences remain, both within and across states. Moreover, the property tax has been a mainstay of education finance and historically has been a productive generator of revenue, but many people believe it imposes unfair burdens. The burdens may be unfair because the tax is poorly administered or because a local property tax may end up putting a disproportionately greater burden on low-income taxpayers than on higher-income taxpayers. Ensuring that revenues are raised in a fair way is important not only for its own sake but also to ensure support for education. However, any changes designed to increase fairness must also be sensitive to their impacts on the efficiency with which funds are raised and in how education is delivered. The importance of rethinking how educators can raise and spend money efficiently and fairly as they strive to meet goals 1 and 2 is underscored by the drumbeat of criticism that has been directed at American education in recent years, with its threat of diminished support for public schools. In part the criticism has been motivated by concerns over the performance of the system, in both an overall sense and in terms of how well it meets the needs of particular groups of students. In part it reflects dislike of the main tax (the local property tax) that pays for education. Attacks on public schools (which, it should be noted, have never been absent) seemed to grow steadily louder beginning in the late 1960s—perhaps not coincidentally the same time when the Vietnam War and then Watergate and the economic shocks initiated by the Arab oil embargo punctured the post-World
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Making Money Matter: Financing America's Schools War II bubble of American self-confidence and prosperity. Surely the tendency to see schools as the pathway to societal improvement helps explain why the loss of faith in larger institutions inevitably embraced education as well. But other forces are also at work. For a time, academic achievement as measured by widely publicized test scores did indeed decline. Moreover, international comparisons indicated that American students performed less well on tests than students in many other countries. While concerns over academic achievement (as well as worries about the educational environment, such as drugs and discipline) were reflected in polls showing declining confidence in public education, there also began to be evidence of a "culture of resistance" to existing public schools by groups who saw themselves as oppressed by the dominant society and who opposed subjecting their children to the standards of that society. Ogbu (1978, 1982) documented this phenomenon for certain black subcommunities; Cremin (1989) observed it also among working-class families in some communities and ethno-religious minority families in others. It also became clearer, especially for low-income black Americans, that the existing system of school finance and governance effectively denied them the same degree of choice over their children's education that more economically advantaged and nonblack groups were able to exercise primarily through residential mobility and, to a lesser extent, through the option of paying for private education. These forces help explain the attention being given to a variety of changes in the way American schools have traditionally operated: standards-based reforms attempting to align the entire educational system around common objectives, school-level policies emphasizing greater flexibility in the way services are offered and efforts to give parents the ability to exercise more choice over the kinds of schools their children attend. That such reforms elicit passionate debate and reveal deep divisions can be explained in part because they are taking place at a time in American history when key understandings about how a democratic society can best improve the education and social welfare of its citizens are more than usually in dispute. The downfall of communism, the inefficiencies that have been exposed in European postwar welfare states, and the uneven successes of American social policies in addressing the needs of the disadvantaged have fostered a worldwide debate on the relative role of governments and private markets in meeting society's needs and fostering economic prosperity (Yergin and Stanislaw, 1998). In the United States, policy makers at all levels are examining previously unexamined assumptions about how to deliver publicly financed services and are moving away from an exclusive focus on uniform public provision to public financing with various forms of provision, including private-sector provision. In education, this can be seen across the country as states and districts are experimenting with charter schools, the contracting of educational services, and more parental choice for public and in some cases private schools. The desirability of breaking the virtual monopoly that public schools have had on the provision of publicly funded
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Making Money Matter: Financing America's Schools education for the past century and a half will not be decided on the merits of the education issues alone, nor indeed on the basis of social science evidence, but also in the context of the broader societal debate over the proper balance to be struck in a democratic society between public and private interests and mechanisms. These changes in the social and economic climate in which schools are embedded reinforce both the importance and the complexity of aligning school finance policies with the goals the committee is charged to address. They also explain why, in interpreting these goals, we adopt a broad definition of education finance systems, including within them governance as well as money-raising and resource allocation policies. This definition reflects our view that understanding and evaluating finance arrangements depends on considering them simultaneously with the governance or authority systems within which they are embedded, which in turn reflect political and historical influences that determine how decisions about education in the United States are made and carried out. Understanding these interconnections is crucial to assessing the possibilities for and likely effects of change. EDUCATION, VALUES, AND THE ROLE OF EXPERTISE Education policy making is as much concerned with central public values as it is with schools per se, and central values that Americans hold dear may conflict. Widespread support for equality of educational opportunity masks disagreement over the extent to which high levels of fiscal equality among students or between school districts are required and over the extent to which it is appropriate for parents to spend some of their resources to benefit their own children in preference to others. American political traditions complicate consideration of such issues because of their emphasis on the separation of powers and local government. Any changes in the dispersion of responsibilities for raising and spending education dollars across different levels of government and different jurisdictions, which may be called for to reduce funding disparities, inevitably must disturb the balance between these levels and jurisdictions and the balance between the values each serves. Changing these balances will be difficult and contentious. Americans are also great believers in efficiency, both in the overall sense used by economists that resources should be allocated in line with consumer preferences, and in the sense that education should be provided in a cost-efficient way.1 Efficiency in the first sense provides a strong justification for financing decisions to be made by local school districts so that local communities can make 1 Economists refer to these two concepts as allocative efficiency and productive efficiency, respectively.
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Making Money Matter: Financing America's Schools their own decisions about how much to spend on education. Efficiency in the second sense requires a shared view about the ends of education—which does not always exist. Furthermore, the value placed on efficiency may need to be accommodated to the value placed on legitimate governance, since schools, as public agencies and not private corporations, are expected to be democratically governed and to respond to a variety of needs and views as well as to ongoing public debate. It is thus hard for schools to be both democratic institutions and to have goals that are focused and durable. These cross-pressures explain why decisions about the finance of schools will seldom be clear-cut, but rather must be made against a background of moral and factual ambiguity that frequently engenders passionate debate. Education policy, especially when it concerns matters of complexity such as school finance, raises difficult questions that require both moral wisdom and empirical research. Such questions can benefit from the illumination offered by social scientists examining relevant evidence, but in a democratic society professionals are not policy makers. Rational deliberation and empirical research cannot resolve all disagreements, but they can render some views more reasonable and others less. They can contribute to the resolution of moral as well as empirical disagreements, by clarifying the values and objectives at stake. In a democratic society, public deliberation is essential to the resolution of policy disagreements. Public deliberation is also an educational tool: it is a means by which the rule of the many can also be the rule of the wise. Scientists thus need to conceive of their role not only as one of discovery, but also as a matter of education and of informing a process of public deliberation. Finally, public deliberation is especially important when policy debates are rooted in central public values. In approaching the task of informing a process of public deliberation, the committee undertook as the major objective to review the state of knowledge about how to achieve the goals for education finance systems as specified in our charge. Recognizing that science is only one among a number of sources of authority or knowledge about how a system should go about reaching its goals,2 we acknowledge that in the first instance "social science research can best be 2 Among the diverse sources of authority in education are (1) moral philosophy, ethics, and religions; (2) history, tradition, and precedent; (3) constitutional, statutory, and case law; (4) common sense and professional lore, which are constituted of uncodified and codified ideas about education; (5) the exercise of discretion (individual and group), which may reveal not only the aims of education but also a theory of how to achieve them; and (6) science. As Wise (1976) has pointed out, the problem with most of these sources of authority is that their implicit or explicit hypotheses about how to achieve the aims of education may not be correct. Only science seeks to confirm hypotheses systematically (including those generated by other sources of authority); in doing so it also seeks to make the assumptions and empirical evidence used in drawing conclusions transparent. Its value to policy makers is that it is potentially a way to reduce the uncertainties in decision making.
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Making Money Matter: Financing America's Schools used to frame the issues and their consequences rather than to obtain conclusive evidence on what is right and what is to be done" (Levin, 1976:140). Concomitantly, we have the responsibility, as Levin pointed out, to consider where, along with social science research, aspects of the world that cannot be quantified or analyzed in a social science setting should also be considered. Ultimately, given our charge, we also have the responsibility to advise policy makers—on the basis of both our review of the evidence and our judgment—if and when a strong case can be made for changes in the educational finance system to make it more effective, efficient, and fair. While it is appropriate for a committee such as ours to evaluate school finance in light of the knowledge that can be gained from formal research and the testing of scientific hypotheses, it is important to make explicit our opposition to substituting scientific authority for other forms of authority when circumstances do not justify that response. The danger that a school finance report grounded in scientific authority will be misunderstood or misused is perhaps greater at a time, such as the present, when there is a strong desire to harness finance to the task of improving school performance but uncertain knowledge about how best to accomplish this. Some (e.g., Wise, 1976) argue that a sobering example of what can happen can be seen in the history of school finance in the aftermath of the 1966 report, Equality of Educational Opportunity (Coleman et al., 1966). This famous 1960s presentation of social science research found little connection between school resources and the educational achievement of students and a much stronger relationship between student achievement and family circumstances. As it and subsequent research along the same lines came to be used in the policy and legal arenas, the absence of a relationship between resources and achievement frequently became an argument against putting more resources into schools or reducing the wide disparities in spending on students across and within states and school districts. As Wise (1976:xiv) described it, school finance disputes were "transformed by the use of social science into an educational reform effort. As the school-effectiveness question is raised, it has appeared that school finance reform cannot proceed unless educational reform is guaranteed." Rather than use the results of research as an excuse for inaction, the appropriate response to the absence of clear guidance from science may well consist of invoking other sources of legitimate authority as touchstones for evaluating finance reform proposals—for example, an appeal to ideas about what constitutes basic fairness in a just society. By focusing attention on scientific authority as a guide to education finance reform, we do not intend to prejudge the extent to which the use of this authority is warranted. Indeed, another objective of this report is to inform policy makers and others about how the present state of research can and cannot serve as a useful source of knowledge for action.
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Making Money Matter: Financing America's Schools OVERVIEW OF THE REPORT This report has three parts. Following this introductory chapter, Part I includes a chapter setting the stage for the committee's evaluation of school finance reform by clarifying and elaborating the goals being sought and the nature of the finance system as it exists today. Part II examines efforts to improve the fairness of school finance systems over the last 30 years and explores how the concept of fairness is increasingly and inextricably tied to questions about how to improve school performance. Part III evaluates various ways that the education finance system might be reformed to foster the three goals identified. Needed improvements in data related to education finance are briefly discussed in an appendix.
Representative terms from entire chapter: