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New Report Shows Opportunity in K-12 Budget Shortfalls

Rarely do tight budgets and funding cuts—like the ones states across the country are experiencing—lead to proclamations of opportunity. But a recent report from Education Resource Strategies (ERS) takes that tack. In Restructuring Resources for High-Performing Schools: A Primer for State Policymakers, the authors envision the adoption of serious school reforms in K-12 education, forced by state budgetary constraints and a sluggish national economy.

Using education funds efficiently is an imperative for school districts given state budget cuts and stagnant property tax revenues, not to mention federal stimulus measures that are starting to run dry. To this end, the Education Resource Strategies report outlines four main areas for reform: teacher and structural issues; special education funding; district funding allocation schemes; and data collection requirements. Within each category, the authors suggest policy changes that could increase efficiency and productivity for schools and districts, making each dollar count more.

Many of the report’s recommended reforms closely resemble guidance issued earlier this year by the U.S. Department of Education (ED) that highlighted initiatives for productivity in practice by schools around the country. Both the ED and the ERS report authors urge schools facing budget cuts to avoid the kinds of money-savers that could negatively impact student performance in the long run. And both advocate for flexibility in long-held policies, like those governing maximum class sizes and teacher compensation rules.

Beyond those changes, the report emphasizes rethinking the funding structures of programs like special education. Special education funding, usually off-limits in budget-cutting season thanks to federal spending requirements, could offer opportunities to improve efficiency. The authors say that early intervention programs can limit the number of students diverted to special education, while strategic reform of funding structures can cut the total amount of spending required for special education. Many of these ideas in the document would offer little relief in the short term to numbers-crunchers working to balance annual state budgets; but the report promotes, in some cases, more drastic measures that could have immediate impact.

Federal law requires that states sustain special education spending levels from year to year to remain eligible for federal IDEA Part B funds, but as the authors point out, states can use an exemption process through ED—the maintenance-of-effort waiver—if they are experiencing “exceptional or uncontrollable circumstances” that prevent them from reaching the full funding levels. Alabama, Iowa, Kansas, New Jersey, and West Virginia all received waivers for the IDEA maintenance of effort rules in fiscal year 2010. To be sure, this recommendation could imperil the quality of special education by permitting states to cut programs and reduce services for the neediest students in a district. As a result, it should be left as a last resort strategy.

Resource allocation, another area touched on in the report, offers some room to save money as well. Rigid funding schemes force school spending practices to align with the programs dispersing funds, rather than to meet the needs of students. The authors note that many program requirements disregard school size and can drive up the costs for smaller schools unnecessarily. Local flexibility that allows schools to tailor spending to their needs is both a cost-saving mechanism and enables schools to be more responsive and use student-focused educational strategies.

Finally, the authors suggest that states comb through data reporting requirements for schools and districts to ensure that the information collected is worth knowing. In particular, they promote reporting at the school, rather than the district, level. As we’ve written at Ed Money Watch, this is a major factor in enforcing the spirit of the comparability requirement for federal Title I grant eligibility; when states are permitted to report at the district level, inequitable funding between schools within a district is hidden in the district average. To overcome disparate and unjust funding amounts, reporting requirements should be refined to the school level.

The ERS report makes a number of recommendations that could help states push through the slow and anemic economic recovery. More importantly, the authors acknowledge that changes to education spending frequently harm the neediest students most, and therefore their recommendations aim to ensure transparency and equitability in funding that supports students of different income levels and backgrounds.