JOURNAL OF PHILOSOPHY AND HISTORY OF EDUCATION, VOL. 49

WEIGHTED EDUCATIONAL NEED AS A BASIS FOR

FULL-STATE FUNDING OF SCHOOLS: ONE PROPOSAL

John J. Marshak,

University of Southern Mississippi

Introduction

The Constitution of the United States makes no mention of public education, per se. The Tenth Amendment, however, states all powers not vested in the federal government remain with the states. Thus, school finance is a function of the state. Every state's legislature has the responsibility of devising a system of creating revenue for the support of the public school system and a system for disbursing these funds.

Historically, legislatures have delegated the entire responsibility to local school districts. They have done this by establishing local boards of education which were empowered to hold referendums to determine the extent to which the people within their jurisdictions wished to tax themselves to support schools. The taxes were on private property within the district's boundaries. The unit of taxation was usually the mill, one thousandth of each dollar of assessed valuation of property. The total number of mills approved by the voters times the total assessed property value within the jurisdiction (adjusted based on historically developed collection rates) produced the dollar amount for the running of local schools. Dividing this amount by the number of students to be serviced produced a number representing the dollars supporting each child in the district. This per pupil expenditure is meaningful for comparison purposes. This system served its purpose for many, many years.

The amount of money to support education was thus dependent upon the willingness of taxpayers to support schools and the value of property within the jurisdiction. Over time, the value of local property varied greatly, some included industries, others expensive homes while still others were rural or inner-city. The concentration of students increased in some areas, especially in poor, urban areas. Such poor communities, even if they wanted to, could not tax themselves at a rate high enough to produce the same amount of money per child the rich districts did. Thus, the disparity in financial support per child was created.

State Subsidies

At varying times across the country, states recognized that inequity had crept into their funding programs. In the last twenty years, variations of two basic funding plans have been dominant in legislatures' choice of funding plans, i.e., the Flat Grant and Power Equalization. The flat grant and its variation, Foundation Program, assure every pupil a minimum level of per pupil expenditure. The state determines a dollar amount of support for per pupil units or instructional units. What it does not say is that it guarantees each pupil unit or instructional unit the same level of support. In most of the affluent districts, local effort can, and frequently does, exceed the state-defined minimum level. They are thus not eligible for flat grant funding. They are, however, supporting students at a higher level than those that are.

The Power Equalization model attempts to equalize the dollar amount generated by the locally determined tax rate. Known variously as Guaranteed Tax Base or Guaranteed Tax Yield, they will pay the difference between the dollars generated by local effort and some arbitrary standard per mill. In an ideal world, this would be the rate of the most affluent district and every mill is support in this way. However, states have seen fit to select a significantly lower value. Furthermore, there may be a cap, such as the first twenty-five mills, that will be supported. Again, those districts with significant industry can vote themselves a high millage rate, most of which the industry would be forced to pay. A state subsidy would not be necessary. Their students will be supported above the state supported level.

It would be remiss if mention was not made of one significant exception: Hawaii. They are the only state in the union that has full state funding. It is also a statewide school system. In this way, their schools are funded from a statewide tax.

Current Forces for Change

Mary F. Fulton, Policy Analyst for the Education Commission of the States (April 1997), ascribes the current forces for change to three factors: 1) Obsolete funding systems, 2) Slow growth in state aid, and 3) equity-based lawsuits.

Legislatures are typically monuments to the status quo. As such, financial aid distribution programs have not kept up with the changes in the demographics of the student population. Enrollment in public school has significantly increased and more students have been categorized as eligible for high cost programs (at-risk, vocational education, etc.).

Tax revenues have not grown at a rate corresponding to the demand for state services. The recession of the 1990's greatly reduced the rate of growth in dollars available for distribution by legislatures. Demands for increases in funding for health care and prisons notably compete with schools for dollars. This has allowed local revenue contributions to schools to increase faster than state aid. Subsequently, the gap between the rich schools' and poor schools' spending per child has widened. Courts, in the search for equity, want to see the gap closed and the shift be in favor of greater state participation than local contribution.

Another aspect of legislative reluctance to spend more dollars on education is the public and political attitude toward an education system that does not produce better results. Unless school can demonstrate that they are putting out a better product, the attitude could be described as resisting the temptation of "throwing good money after bad."

The most compelling reason for change is the direction of recent court decisions. There has been a rash of lawsuits in state courts questioning the fairness, specifically the equity and adequacy, of state funding of programs. Since 1989, eleven state funding systems have been ruled unconstitutional based on one clause or another of the states' constitution. Six more have been ruled constitutional. Most recently, courts have sided with the plaintiffs.

Traditionally the courts have returned the problem to the legislature. Within a limited time, the legislature is to come up with a system for court review before it becomes law. Some courts have taken it upon themselves to define equitable and adequate education, as well as set guidelines for improving state funding systems.(Fulton, 1997, p. 1) This may be due to legislatures' propensity to argue and drag their feet in coming up with an acceptable plan.

Attached is a list of fifteen recent states' school finance changes mainly from court decisions or the threat of lawsuits. In some cases, they were prompted by changes in the state's policy objectives.

Origin of weighted pupil plan presented here

In 1968, the State of Michigan was facing a crisis in school finance. At the same time a select committee appointed by the governor was conducting public hears on the matter, a group of professors of school administration met to develop a plan based on the classroom unit. It was their intent to create a plan that could withstand any judicial scrutiny. The product of their deliberations was a publication with a title of the same as their plan: The Equal Quality Plan (Task Force, 1969). Shortly after its publication the governor's committee made its report. It advocated a programmatic approach that contained many features of the Equality Quality Plan.

In October of 1969, then Governor Milliken made detailed recommendations to the Michigan Legislature based on this concept. He did, however, tie it to a statewide property tax. This was quite progressive for the time. The 1970-71 school year was to continue with the prevailing system because time was needed to develop the support necessary to pass a constitutional amendment that would permit the statewide property tax. It was not until November 1972 that a compromise amendment went before the voters. It was soundly defeated by the Michigan electorate. A number of political reasons were assumed to be the cause, one of which was none other than the potential busing of metropolitan Detroit students to the suburbs to address de facto segregation. The classroom unit approach, advocated by the Equal Quality Plan and supported by the Governor was, thus, never implemented.

With the flurry of activity in the field of public school finance today, it is time to show renewed interest in a plan which was designed to withstand the kind of scrutiny being applied today.

Equal Educational Services for Students of Equal Educational Needs

This funding concept has as its basic tenet to provide all school districts in the state with the resources to provide sufficient numbers of classroom teachers, support personnel (professional and nonprofessional), supplies and facilities. In this way each student of the same educational need would be afforded an education commensurate with his or her need. Furthermore the concept provides that these would be the same regardless of the district in which he or she resides. It recognizes that students do not all have the same needs and therefore, apportions educational resources accordingly. This is accomplished by a state supported program budget based on the classroom unit for each district. It establishes that an instructor, plus the necessary supporting staff, materials and facilities, is required for each pupil in regular classrooms. All other areas of educational need are assigned fewer students per unit.

Following an assessment of the educational needs of a district's student body, a count of those qualifying for each need area is made on the basis of full time equivalence. Once this is done, each need area count is divided by the corresponding class size. Summing the classroom units needed for all the need areas produces a number which is the total number of classroom units for the district and also the number of teachers that a district will find desirable to hire.

Based on this number, the program budget for an individual district is developed. First, the number of teachers is multiplied by a regional salary average, including the cost of fringe benefit programs. Twenty percent is added to allow for the salaries of non classroom professionals such as administrators, counselors, diagnosticians, etc. This amount is the Professional Salary Allowance (PSA). All other budget line items are expressed as a percentage of PSA. They are presented in Table 2.

Thus, the total budget for a district would be determined by adding the Professional Salary Allowance and 48% of it or simply multiply 1.48 times the PSA.

The Equal Educational Services for Students of Equal Educational Needs budget is a program budget in that it relates the costs of each item to the purpose it is to serve. Budget categories are closer to being true outputs than traditional object function classifications. It permits cost-utility analyses for measuring the relation of dollars input to educational outputs. Such allocation decisions are subject to revision. Furthermore, as this budgetary system is refined, its logical extension is planning programming budgeting evaluation system (PPBS). Since both business and government make extensive use of PPBS to produce greater efficiency in money management. This is a desirable direction for education in today's accountability-minded times. (Marshak, 1985)

Conclusion

This is a budget-developing strategy. It does not specify how the dollars to support it are to be derived. A combination of state support and local effort, the most common system in use today, is possible. However, as the title of this presentation states, it is best considered in the light of full state funding. In order to withstand the kind of judicial scrutiny that is being applied today, any chance of local support producing inequity would only weaken its viability.

The class sizes and percentages present here were developed in 1985 to reflect the actual expenditures of the State of Michigan at that time. This was necessary to make its adoption politically attractive. Part of the "salesmanship" was to demonstrate, at least at the outset, this new program was not a radical departure from present practice.

Should this program catch the attention of a state's senate or house school finance committee, these would be the basis for a lengthy debate as to what is appropriate for their time and place. Politicians, in their love to debate even the most obvious, would have a "field day" considering the parameters of this plan.

Table 1

The Equal Needs Plan's Suggested Classroom Unit Size

Kindergarten 20 (per half day)

Pre-school 20

Special Education 8 to 15

(based on PL 94-142, etc.)

Compensatory Ed 15

Migrant Ed 15

Elementary 25

Secondary 23

Expressed in students per class

Table 2

The Equal Needs Plan's Additional Budget Line Items

Expressed in Percentage of Professional Salary Allowance

Non-Professional Salaries 20% PSA

Non-Salary Expenses 20% PSA

Community Service 4% PSA

Inservice 1.5% PSA

Research & Development 0.5% PSA

TOTAL 48% PSA

Appendix Current Innovations

Alabama (1996)

*Increased state aid to poor districts and reduced state aid to wealth districts

*The state must still redesign the funding formula to respond to a 1993 court ruling which declared the funding system unconstitutional

Arkansas (1995)

*Imposed penalty of 10% income tax surcharge on taxpayers in districts where voters reject minimum tax rate of $25 per $1000 of assessed property valuation

*Amended state constitution (through voter approval) to establish a 25-mill uniform property-tax rate for schools and allows the state to equalize property tax by redirecting funds from wealth to poor districts

Colorado (1994)

*Increased base student funding level

*Added an at-risk student adjustment (11% above the foundation level)

*Developed a cost-of-living adjustment factor

*Placed strict limits on district spending

Kansas (1991)

*Enacted a statewide property tax of 32 mills and established a single, statewide system for collecting

and distributing taxes for all school districts

*Enacted a provision allowing the state to recapture taxes that districts raise above a specified level and redistribute these revenues to other districts

*Allowed districts to raise local money above the foundation level, but capped excess revenues at 25% above a district's spending level

*Set a minimum per student Finding level of $3.600 and included adjustments for at-risk students, low enrollment, facilities and transportation

Kentucky (1989)

*Increased base student finding level

*Added an at-risk student adjustment (.25 pupil weight)

*Placed strict limits on district spending

*Allowed school boards to go beyond basic foundation level

*tier one does not require voter approval and is equalized

*tier two requires voter approval and is not equalized

*Provided additional dollars for professional development, educational technology and integrated services

*Provide fiscal rewards to schools for performance gains

*Reforms funded by one-cent sales tax increase and changes to federal income tax filing policies

Maine (1995)

*Included local income tax and cost-of-living factors in calculating a district's fiscal capacity (which then determines the state aid level)

*Set aside dollars for property-poor districts ($2 million)

Massachusetts (1993)

*Increased the base student funding level to $5,500 by the year 2000

*Increased the state contribution to education

*Specified a minimum amount that local governments must appropriate to schools in order to participate in the state aid program

*Reforms funded through economic growth, state budget cuts and phasing-in the changes

Michigan (1994)

*Replaced power equalizing funding formula with a basic foundation program

*Set base student funding level at $4,200, increasing to $5,500 after five years

*Provides districts with power to raise additional property taxes with voter approval but places restraints on spending increases

*Beginning in 1997-98, district enhancement levies become a regional enhancement levy, therefore creating a tax-base sharing system among neighboring districts

*Increased state support for education from 30% to 80% of total budget (due to local property tax relief and state tax increases)

*Increased state funding for at-risk student programs by $205 million

*Included a provision that removes accreditation and withholds some state aid from schools that do not meet performance standards

*Reforms funded through: increase in sales tax, cigarette tax, real estate tax and a 6-mill statewide property tax; on average, local property taxes were cut by one-third

Minnesota (1993)

*Increased basic student aid

*Limited the supplemental and referendum levy revenue that districts could add beyond state aid allocations

*Created debt service equalization program to assist poorer school districts with paying the principal and interest on school facility bonds

Missouri (1993)

*Required a minimum local tax effort to participate in state aid program

*Held wealthy districts "harmless" to ensure that no district received less money than the prior year

*Substantially increased state funding for education

*Provided additional dollars for transportation, special education, at-risk students and a teacher career-ladder program.

Montana (1993)

*Required all districts to spend between 80% and 100% of an "optimum" funding level

*Restricted districts from spending more than the standard

*Equalized school building funds and includes a special education component that the state pays to each district

North Dakota (1995)

*Redirected dollars to poor school districts by deducting state aid previously received by wealthy districts, (this will be an annual deduction plan)

*Created a $2.2 million supplemental fund to provide more state aid to poor districts

*Redesigned the special education funding program to provide a lump-sum payment, or block grant, based on special education students they enroll

Tennessee (1992)

*Established a base student funding level driven by the cost of "essential components" for schools factors that are updated annually (rather than a funding level based on available revenue)

*Included adjustments for variation in local cost differences (wage-based) and for variation in local funding capacity

*Allocated funds for educational technology and class-size reduction (especially for at-risk students)

*Authorized incentive funding for schools that exceed performance goals and sanctions for schools that fail to measure up to standards

*More recently, State Supreme Court mandated the equalization of teacher salaries among school districts

*Reforms funded by a temporary one-half cent sates tax increase and a professional service fee

Texas (1993)

*Required wealthiest districts to choose one of five options for sharing their property wealth with neighboring, poorer districts (districts cannot exceed a tax base level beyond $280,000 per student)

*Placed levy cap of $l.50 per $1,000 valuation on school property taxes (exclusive of debt financing)

Wisconsin (1995)

*Imposed revenue caps on all school districts (specific dollar amount or rate of inflation)

*Committed to increasing state K-12 education support from 45 to 67 percent

*Provided property tax relief, without raising taxes (accomplished through revenue growth, cigarette tax increase, reduced spending and an advance on property tax credit)

*Replaced two-tiered guaranteed tax base funding system with three-tiered formula intended to create greater equity and allowing high-spending districts to participate in the formula

REFERENCES

Education Commission of the States, 707 17th St., #2700, Denver, CO 80202-3427

PHO: 303-299-3600 FAX: 303-296-8332 E-mail: ces@ecs.org Internet: www.ecs.org

Fulton, Mary F. (1997). State School Finance System Changes. Education Commission of the States. Denver, Colorado.

Marshak, John J. (1985). Michigan School Finance: A Comparative Analysis. Doctoral dissertation, University of Michigan, Ann Arbor, Michigan.

Task Force on Public School Finance (1969). The Equal Quality Plan. Michigan Department of Education, Lansing, Michigan.