How States Can Help Schools Make Smart Budgeting Decisions

The newspapers are full of stories about school districts in financial straits and state budget cuts coming down hard on education spending. Despite the fiscal stress, policymakers still have a lot of opportunities to make good budgeting decisions according to Stretching the School Dollar, a policy brief released last week by the Fordham Institute.

Authors Michael Petrilli and Marguerite Roza outline the common problems with state education policies that lead to harmful cuts and explain how smart policies can blunt the impact of tight budgets. With several states facing lawsuits regarding funding cuts for K-12 education and at least one considering changing its funding formula as a result, Petrilli and Roza’s four recommendations for revamping state funding formulae are particularly interesting.

The first two recommendations related to funding formulae seek to ensure that funds are efficiently distributed to the students that need them. First, the authors encourage states to move toward weighted student funding formulae. Current state education funding formulae are typically more complicated and rely on a staff-based budgeting system where districts receive funds to pay for teachers and other resources based on the number of students enrolled. For example, a district could receive funds for one teacher salary for every 25 students enrolled in its schools. A weighted student funding formula would mean that school districts and schools receive per-pupil funding amounts, with greater resources following students with greater needs.

A second way the authors suggest changing state funding systems is to eliminate excess spending on small schools and small districts. They encourage the use of technology and the sharing of resources, including staff, across districts to reduce spending on specialized courses without having to eliminate them. They note that this can easily be accomplished under a weighted student funding formula.

The second two recommendations attempt to encourage districts to eliminate excessive spending and provide services to students more effectively. The authors suggest changing the way extra funding is distributed for students with learning disabilities. Currently school districts receive extra funding for each they student identify as having a learning disability, creating incentives for school districts to over-indentify students with learning disabilities. Petrilli and Roza encourage states to switch to a system where they allocate funds for students with learning disabilities based on a flat percentage rate of the student population, rather than on individual student identification. This encourages schools and districts to engage in more early intervention activities rather than allow struggling students to fall into special education placements.

Finally the authors recommend limiting the length of time students can be identified as English Language Learners (ELL). This would provide a clear incentive for schools to move students toward English proficiency quickly, instead of encouraging them to keep students in ELL programs for the extra funding.

By creating statewide funding systems that ensure that funds follow the students that need them and provide incentives for schools and districts to work more efficiently, states can save money without drastically changing the number or quality of course offerings to students. Other recommendations the authors make, including changing staffing and compensation policies and scrapping outdated reporting and classroom requirements would create additional savings.

As state policymakers continue to struggle with budget shortfalls, especially in the face of expiring federal funds from the American Recovery and Reinvestment Act, they would be wise to examine Petrilli and Roza’s “smart savings” and reform strategies instead of making the all-to-common and politically expedient “harmful cuts” to education spending that are bound to hurt students far more.