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December 1, 2011
Vol. 69
No. 4

Four Takes on Tough Time$

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In this theme issue of Educational Leadership on "The Resourceful School," we acknowledge the hardships that schools are experiencing both in the United States and in other nations across the world in the wake of a global financial crisis. To explore the effects of this economic crisis on schools, we decided to talk with four experts in the fields of education policy and finance. In phone conversations and through e-mail, we asked them to describe the fiscal situation and suggest ways that schools might not only survive these challenging times, but also, perhaps, find ways to thrive.
You may agree or disagree with our commentators' suggestions. Tough times force us to confront difficult issues that are bound to spark debate.
So here's what the experts had to say about where we're headed and what we must do.
<ATTRIB>—The Editors</ATTRIB>

The Recession—and Students' Rights by Michael A. Rebell

The vast majority of states are experiencing serious cutbacks, and in some places it's quite devastating. So the question is, What's the extent of the cutback, has it been distributed equitably, and what effect is it having?
The Center on Budget and Policy Priorities recently surveyed 24 states that had available data; 21 of them indicated that they're spending less on education in 2012 than they did in 2011; in inflation-adjusted terms, 17 of the 24 are spending less than they did in 2008, even though costs for education and other services have risen.
In California over the last three years, the average amount spent per pupil has dropped by about $1,500, causing many school districts, including Los Angeles, to cut 8 to 10 instructional days from the school year. Last year, average class sizes in Los Angeles bumped up to 30 and were more than 40 in some high schools, and Hawaii furloughed teachers and canceled classes for 17 Fridays in a row. For 2011–12, school districts in California and South Dakota cut back the number of school days to four per week; the Miami, Florida, schools eliminated after-school programs for 4,500 students; Illinois eliminated funding for advanced placement (AP) courses for school districts with large concentrations of low-income students; and Texas terminated preschool services for 100,000 mostly at-risk students.
So the ramifications are getting serious. The research doesn't say it's catastrophic to go from 23 to 24 students in an elementary school class. But going to 40 students makes a huge difference. And certainly, when you start cutting down to a four-day week and eliminating actual school time, that is major, that is catastrophic.
We're also seeing the effects of this crisis in small schools, where they've got few options. AP courses tend to go first, eliminating a significant option for bright kids who are college-bound. It's especially troublesome when you're talking about small rural areas and high-needs schools in minority areas that are striving to overcome achievement gaps.
You'll also find that when schools really get squeezed, they drop things like physics and other courses that tend to get low enrollments, even though they're part of the core curriculum and of crucial importance.
Moreover, there are more subtle effects that you don't see on the surface. For example, we have a number of community schools in New York; Chicago has even more. The community school approach tries to deal with the broad impact of poverty on children's readiness to learn. These schools provide wraparound services that kids need—health services; preschool programs; after-school, summer, and family support programs—and a lot of them have been really successful. But now, because of budget cuts, school districts are cutting back on the hours that they keep the doors to school buildings open. That means that even though a lot of their activities don't come out of the school budget—through various arrangements, they get a lot of services free—they now have to restrict their hours or, in some cases, pay school opening fees. These things begin to eat away at core activities.
It's ironic that the federal government and most state governments are still saying that our prime national education goal is to overcome the achievement gap—that we have to put extra effort into improving low-performing schools—but in the meantime, all the resources that might enable us to do these things are being taken away.
In many cases, these cuts affect high-needs schools disproportionately. For example, the heavy budget cuts that were put into effect last year in New York State fell disproportionately on the neediest districts. High-needs districts tend to depend more on state aid; a theoretically equalizing formula takes into account the fact that a district has low property wealth and can't raise much money through local property taxes.
So, for example, if the state cuts state aid by 10 percent overall, a poor district that gets 75 percent of its money from state aid loses 7.5 percent of its total budget. A wealthy district may get only 10 percent of its money from the state and 90 percent from property taxes, so if this district takes a 10 percent cut on state aid, that's only a 1 percent loss on its total budget. Caps on local property tax increases in states like New York do not allow the local districts to make up for these cuts, even if a majority of their voters might want to do so.
As you may know, we've had litigation around the United States about children's rights to an adequate education. In New York State, where the highest court said explicitly that all children in the state have the right to a sound basic education, litigation resulted in changes in the state formula and a legislative commitment to increase school funding by billions of dollars over a four-year period. The state started doing this, but then the recession came, and they put it on hold, and now they've started cutting the allocations. Clearly the state is now undermining the schools' ability to provide a sound basic education.
Of course, the amounts that the legislature came up with were before the recession hit. So the question is, Are those amounts sacred? Can we go into court and say we're entitled to the exact amount of money they promised us in 2007? Or has something changed?
I take the position that something has changed. Kids still are entitled to their constitutional rights—constitutional rights don't get put on hold because there's a recession—but because of the economic realities, we all have to roll up our sleeves and focus on cost-effectiveness and cost efficiency.
What I'm looking at now is this: What are the crucial services that are constitutionally mandated—and are the kids getting those? A state has an obligation, if it's cutting money, to show what the effect of that cut is going to be and guarantee that it's not going to cut essential services as defined by the state constitution.
With something like class size, that gets tricky. That's where districts can save the most money. In New York State, the court talked about how kids have the right to reasonable class size, but they never defined what "reasonable" is. That's the kind of thing we're wrestling with now. We have these vague phrases—like effective teachers and reasonable class size. It's important to pin these down, to say that this is what you absolutely have to fund, whether there's a recession or not.
Nationwide, whether a state has had litigation or not, you still have No Child Left Behind, which requires schools to make reasonable progress toward eliminating the achievement gap. Even with the waivers that he recently announced, President Obama has reasserted the importance of the ultimate outcomes—all kids being proficient in terms of challenging state standards. Although this requirement for 100-percent proficiency by 2014 will be changed, states are still going to have to come up with accountability systems and assurances that they're on the track to be doing this. I think the clear implication is that the states have to provide the resources to do so.
Some of those states never have provided those resources, but certainly in this time of budget crisis, they've got to show that they're providing sufficient money to keep on course toward achieving the ultimate outcomes that the federal law requires.

Schools Can Still Improve by Allan Odden

For the first time in a century, we face a decade when school funding will, at best, hold at current levels, if not fall.
Our current "Great Recession" is not a typical business cycle recession but rather a financial recession caused by the housing bust and by banks and individuals over-leveraging themselves. It will take several years for normal economic growth to resume.
This slow economic growth has diminished state and local tax revenues. The result for education is that education budgets have been cut in more than 30 states and that per-pupil education dollars are flat or declining in more than half the districts in the United States. These grim fiscal realities will not abate over the next few years and might even get worse as the extra dollars from the federal fiscal stimulus package of 2009 are spent down.
Despite these fiscal realities, pressures to improve student performance continue to bear down on schools. The big question is whether schools can respond positively to these performance pressures in such tight fiscal times. I say yes. Schools can improve by taking the following steps.
First, schools need to resist cost pressures that erode education budgets and do little to improve performance. These include preferences for small class sizes; demands for increased electives beyond the core subjects of math, language arts, science, history, and world language; and automatic pay hikes.
Although both teachers and parents desire smaller class sizes, research shows that small classes make a difference only in grades K–3, and then at great cost. Lowering class sizes in other grades has virtually no effect on student achievement.
Parents also push for more electives. No research shows that taking more electives improves performance in core subjects, but research does show that most high schools spend two to three times as much on electives as on core classes. Although all schools—elementary, middle, and high—should provide a full liberal arts curriculum that includes electives, expanding elective offerings and spending more on them at a time when the goal is to increase student performance in core subjects represent a misallocation of scarce dollars.
Finally, although teachers need to be paid more through performance pay structures, automatic annual pay hikes favor adults over kids because they require further cuts in education programming.
None of these three cost pressures boost student learning, although they certainly boost costs. And that's why funding has risen in the past while performance has remained flat or has just modestly risen.
Second, backed by education and political leaders, schools must set clear goals—particularly for higher levels of achievement in the core subjects of reading, writing, math, science, and history. Such goals should include students' ability to use content to think, solve problems, and address new issues in substantively analytic ways. Most schools that significantly boost performance set ambitious, numeric annual goals; most flat-performing schools have either no goals or unimpressive goals, such as "to improve student performance."
Third, schools must craft a powerful improvement strategy, a plan of action to turn around low-performing schools or boost performance to advanced levels in higher-performing schools. This includes having the effective teachers and principals needed to execute the plan.
Fourth, schools must engage in a strategic budgeting process that targets scarce resources known to boost performance. They must be flexible about class size; pare school schedules to eliminate excessive and expensive elective classes (but not all electives); freeze salaries for the short term; and ensure that the core elements for improving instruction and student performance are in place. Systematically deploying such core elements in all classrooms requires teachers to have access to formative assessment data, have schedules organized so they can work with these data in collaborative groups and hone instruction to student needs, and be supported by instructional coaches.
So collaborative time and instructional coaches have a higher priority than smaller classes. Further, even when core instruction is top-notch, some students will struggle to perform to high standards. The most effective intervention strategy is individual or small-group tutoring (not to exceed groups of five students). So tutoring staff also should be a budget priority. Some combination of extended day and summer academic help should also have priority if the budget dollars are there.
Fifth, schools should tap the power of technology. Florida's virtual schools, like other virtual schools across the United States, cost one-half the price of education in a traditional brick-and-mortar school and are as effective for many students. All advanced placement (AP) classes are now available online, so no student should be denied access to them (and AP classes do not need to be sized at 15 students but can rise to 25 or more students). And many schools across the United States are implementing blended instruction, which combines computer-based instruction with face-to-face instruction and moves more teachers into facilitator roles. When budgets are declining, these student-centered learning approaches should be on the table as new education strategies.
I'm not arguing that declining budgets, salary freezes, large classes, and fewer electives are necessarily good things. But I am arguing that budgets are declining and will continue to decline because of macro-economic conditions, that succumbing to traditional cost-increase pressures on schools will further erode budgets while also eroding achievement, and that options are available for boosting learning even when the budget is tight.
The decisions that must be made, however, require strong school leadership and political support beyond the education community. Political leaders—legislators, mayors, the U.S. Congress—need to help school leaders set clear student achievement goals and support strategic budgeting of resources to attain those goals, especially when those budget decisions may be at odds with the preferences of the general public.

Efficiency and Equity by Anthony Rolle

I'm not sure how "a fiscal crisis" is defined. But given the multitude of state accountability requirements and standards, most education organizations are stretched thin fiscally while attempting to serve their students to the best of their ability.
Apparently there's not much of a limit on what stakeholders are asking or will continue to ask of schools—and therein lies the genesis of any fiscal crisis.
Even though people will continue to disagree on what a fiscal crisis actually is, two primary concerns will emerge: How can we equitably distribute the resources we have? and How efficiently can we use them? These are the two prevailing ideas that face any district or school in financial crisis.
Unfortunately, the vast majority of people interested in the distribution of education resources don't agree on the meaning of the term equity. Equity to some people means we're going to count the number of kids and divide that number into the amount of resources we have. On the other end of the spectrum, someone might say that we need to acknowledge that students are individuals and that learning plans have to be differentiated; therefore, students need differentiated amounts of resources.
A good example is a child with special needs. Imagine the neediest of these children. He or she may receive $150,000–$200,000 worth of education services a year, whereas your regular education student may receive only $10,000 a year. Many will say that the child with special needs requires those services, and that's fair. However, others may say it's unfair because one child is receiving $200,000 whereas another is receiving only $10,000. With schools under accountability requirements to raise student achievement, these individuals may ask whether giving that $200,000 to 20 general education kids instead would give schools more bang for their buck.
Now, that's both an equity and an efficiency argument. Should schools improve the situation of those least advantageously situated and risk not reaching accountability standards? Or should schools focus on generating high test scores, high graduation rates, and high college attendance rates? Or, ultimately, should schools support individuals with high earning potential who can be taxed and whose tax dollars will be reinvested into society?
These types of difficult issues emerge more prominently as budgets get tighter. That's why the concept of fiscal crisis in public schooling gets complex, confusing, and hotly debated in a hurry because all the players—from the governors, to state legislators, to education personnel, to parents, to special interest groups—have different perceptions of the two primary personal values of equity and efficiency.
You can see the reality of these two counternarratives in discussions surrounding the expansion of charter schools. Imagine suburban, white parents who support alternative public schooling options taking this point of view: "If our child is not being served in a particular public school, for us to make a more efficient use of our resources and our child's time, we're going to enroll him or her in an academic charter school because the school's primary focus is on instruction. We know that these education efforts will lead to high test scores, college attendance, and high future earnings."
On the other hand, you also hear these very same arguments in urban areas where greater proportions of low-income families and people of color reside. Some parents here might say, "We really do believe in public education—and we have for a long time. But because of the continued low performance of our neighborhood school, lack of quality teachers, and lack of equitable educational opportunities, we're going to enroll our child in an academic charter school because we know the school's primary focus is on instruction. And we know these educational efforts will lead to opportunities to attain high test scores, college attendance, and high future earnings." These parents support charter schools not because of any efficiency argument, but from an equity perspective—from a desire for increased educational opportunities.
Keeping these types of individual values in the back of your mind, it's also important to look at the structure of the state funding system. You don't have to be a school finance expert to just ask the question, What pieces of this formula are important to the state, and are these same pieces of the formula important to districts, schools, and children?
For example, your district may need to expand the school day because you have lots of single-parent families and there's no component in the state funding (or local revenue) that addresses that issue. By the same token, you may have a program that's been funded for 20 years that's now obsolete and needs to be eliminated. Talk with your state legislators, school board members, and principals and ask why certain things are in—or not in—the formula. Get educated on the issues of interest to you and then ask lots of questions.
Despite the current financial climate, I'm still quite optimistic about public schools. I'm still a strong believer that public schools can provide positive outcomes for the vast majority of children. I believe that most legislators, district personnel, teachers, and community leaders still believe in the primacy of successful public schools even though they may value different approaches.
People begin to walk down political paths to education policy success by having honest and open discussions on issues of equity and efficiency. Discuss how schools can craft equitable opportunities into efficient learning practices for students, teachers, and administrators, ensuring productive education systems.

Fine-Tuning the Cuts by James W. Guthrie

Educators down the road may look into history's rearview mirror and see the present as the "good ol' days" of school finance.
Assumptions and practices that have long been treated as sacred will fall victim to cost cutting. Here's where we're likely headed.
America's public schools have enjoyed annual revenue gains for more than a century. Throughout the industrialized world, only Switzerland spends more per pupil, and no other nation spends as much on schooling in the aggregate as does the United States.
These facts are contrary to conventional educator wisdom, yet confirmed by National Center for Education Statistics data. Only twice in the last 100 years has the nation's average year-over-year inflation-adjusted per-pupil spending stagnated—once in the Great Depression and once in World War II.
These good revenue times are about to come to a painful close. A stuttering economy, reduced tax receipts, sustained housing sector turmoil, senior citizens' competition for government services, daunting public debt, unfunded pension liabilities, and shrinking numbers of households with school-age children all portend less money for schools in the future.
Operational belt-tightening can be a partial fix. However, education's "big money" is in personnel. Over the past quarter-century, labor ratios for U.S. public schools have dropped from 28 students per professional educator to today's 15 students per professional educator. Overall school employee ratios have become more favorable too, from 15 students per school employee to today's 7.5 students per school employee.
Every other economic sector—for example, finance, communication, transportation, agriculture, and manufacturing—has become more productive through deployment of modern technologies. Schools have moved in the opposite direction, with growth of personnel far outstripping enrollment increases. Given such labor intensity, the only way of coping with slowing revenue growth will be reconfiguring how people are paid and augmenting labor with technology.

Practices Under Scrutiny

  • Paying teachers for out-of-field master's degrees. Economists can find little to link added academic degrees with elevated student achievement. Marguerite Roza of the Gates Foundation has calculated that school districts now pay hundreds of millions of dollars annually for such college credits.
  • Salary increases for experience. Eighty-six percent of U.S. teachers receive a salary increase each year as a consequence of having an added year of classroom experience. This is regardless of their having more college credits or performing added out-of-the-classroom duties. This practice has come under intense scrutiny from econometric scholars.
  • Reimbursing districts 100 percent for special education costs. This state practice provides a disincentive to act efficiently. Regardless of the levels of service offered—needed or not, efficient or not—the school district is reimbursed. Full reimbursement is an invitation to buy more or offer more than is needed because, in effect, it's "free."
  • Last in, first out (LIFO) personnel provisions. The conventional practice of honoring seniority in layoff situations is coming into increasing disfavor. Protecting senior teachers at the expense of recently employed instructors is under attack for being dismissive of effectiveness and discriminating against youthful and often minority teachers.
  • Instructional aides. It's difficult through empirical research to determine what contribution aides make to elevated student achievement.
  • Class size. Research regarding the benefits of smaller classes is controversial and, at best, supports smaller classes only for the primary grades.
  • Requiring that spending "supplement not supplant." The federal government and selected states require that financial subventions always be added on top of other general fund spending levels. This practice, although once justified to mitigate fraud and deceit, is now increasingly seen as an incentive for wasteful spending.
  • End-of-budget-year surplus carryover. Where schools and districts are prohibited from carrying over unspent revenues, they are motivated to spend that which they are allocated, regardless of the wisdom of such an action. Inability to carry over unspent revenue encourages waste.
  • Small schools. Small schools frequently are diseconomic to operate and limit students' course options. (The latter need not be true if the district employs distance learning and other digital supplements for instruction.) Added school closures in rural areas will assuredly be on the cost-cutting agenda.

Practices That Can Help

  • Augment labor with capital (technology). Because 80 cents out of every school district dollar is spent on personnel, significant cost saving can only occur if schools identify productive means for augmenting the labor of a classroom teacher, maintenance worker, or clerk with digital technology. Computer software, such as Read 180; distance learning through Kahn Academy; or better use of maintenance worker time through such solutions as SchoolDude, which offers online tools for facility management, are real-world examples of hitching technology to school district instructional and operational practices.
  • Centralize school employees' health insurance at the state level. Most school districts presently arrange for employee health insurance through local vendors. Except in unusually large districts, this practice diminishes the opportunity to gain economies of scale. Purchasing insurance through statewide contracts can reduce per-employee cost.
  • Outsource local services. Few school districts can operate their bus fleet, food service, or reprographics as efficiently as a private-sector vendor. It's highly likely that the practice of outsourcing will spread to various instructional and managerial services as well. Hospitals often outsource patient care components, such as their emergency room operations, to a medical provider company. It's not much of a stretch to imagine a state or large school district contracting with an education management company to take over the operation of its lowest-performing schools. Indeed, Nashville has just entered into such a contract with a firm from the United Kingdom.
  • Adopt activity-based cost (ABC) accounting. To a layperson, this sounds somewhat silly. How can simply adopting a different accounting method save money? It will not save money quickly, but it might in the long run. Currently, school districts seldom know what any course offering or activity truly costs. What does it cost per pupil to teach mathematics in the 3rd grade? How much per pupil does it cost to offer physical education or teach ceramics? In the absence of greater accounting granularity, school districts use meat cleavers instead of budgetary scalpels when they have to reduce costs. They lay off teachers willy-nilly, instead of fine-tuning decisions far more accurately to determine what cost reductions would harm students least. Knowing that a class on ceramics costs twice per pupil than an algebra class might influence decisions about what to keep—and what to drop.

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