Coming Soon: Transparent School-by-School Spending

Federal law is about to require public transparency of resource allocations to each school
BY MARGUERITE ROZA AND CARRIE STEWART/School Administrator, December 2017

Marguerite Roza (left) addressing school leaders at an Edunomics event at Georgetown University in October.
The headlines could be jarring: The local district has been spending $13,000 per student at Maple Elementary School but only $9,000 at Cherry Elementary. Up until now, school districts have been insulated from such reports largely because the data on school-level spending hasn’t been available. But that’s about to change.

Districts of all stripes likely will feel a big impact from a small provision on financial transparency tucked in the federal Every Student Succeeds Act. Starting in the 2018-19 school year, the provision promises to illuminate school-level financial data that could raise thorny questions for communities across the country around who gets what resources and why.

School district leaders might want to prepare now for this reality.

Publicizing Disparities
To date, what typically has been tracked and reported across the country is district-level spending. But the new federal financial transparency clause calls on states to publicly report spending by school. This will make a slew of never previously available school-level financials easily accessible to communities and school systems, potentially unmasking patterns of fiscal inequities among schools and students in the same district.

In addition, the new financial reporting stipulation will make it much easier to investigate (and understand) the relationship between school academic outcomes and school spending. Parents, school boards, advocates, politicians and building principals — and your local news media, of course — may have questions and concerns for the district’s governing leaders about what the numbers lay bare.

In most states, the 2018-19 data won’t surface until the middle of 2020, so district leaders now have a golden opportunity to poke under their financial hood and take stock. Specifically, school district administrators can run their own school-level financials to assess if their policies and practices wind up doling out dollars equitably and align with their student outcome priorities.

To be clear, the federal financial transparency law does not require districts to remedy spending inequities that surface. But doing a self-assessment is both smart politics and smart educational strategy.

When we and our research colleagues dig into operating budgets in our work with districts, system leaders often seem unaware of the unintended consequences of long-standing spending practices. When one large Midwestern school district ran the numbers three years ago as part of tackling a budget gap, it found it was spending double per pupil on its newly opened science magnet.

When researchers helped a second Midwestern school system do an equity analysis across schools, what surprised district leaders was how expensive its German immersion school was. An advocacy group ran the analysis on a larger district in Illinois and found it was spending less proportionately on its predominately Latino schools. When one of us was working as a fiscal consultant with an urban district in California, we uncovered differences in teacher salaries that shortchanged the lowest-income schools.

Districts would be wise to take time now to ask: Are there ways we can be more deliberate in doling out dollars to schools to avoid an “oops” moment? And how can we help our community understand what we’re doing and why?

Early Exploration
To help school districts do just that, we’ve crafted five questions that local leaders should start asking themselves now to explore their school-level finances in advance of the looming data deluge. Not every school system will be able to fully answer these questions today because they lack access to the school-level data the federal provision is designed to generate and make public. (See related story, “Assembling a First Look at School-Level Financial Data” for how to obtain back-of-the-envelope data today.)

» Do some schools stand out as getting less or more than their share of funds? If so, why?
Not every school gets the same share of funding, and often the differences are deliberate (including extra funding for services for special education, bilingual instruction or other targeted programs).

Some differences can be understood as a function of the district’s staffing allocation practice. For instance, staffing policies that allocate a principal, assistant principal, school counselor and the like to every school regardless of size wind up making small schools more expensive on a per-student basis — in other words, they drive -disproportionate dollars to small schools. Some disparities might simply reflect political concessions or historic arrangements (e.g., a high school with an intensive jazz music program).

In any case, the public likely will see any extra dollar spent at one school as a dollar less at another. We suggest districts start by clarifying these patterns to board members and the community and invite conversation about the expenses and tradeoffs involved in spending more at certain schools.

» Are district allocations for high-need students boosting spending at high-need schools?
As finance researchers, we often find district leaders are convinced their high-poverty schools receive disproportionately more than their schools serving wealthier students. But this is not always the case.

For example, rather than use Title I dollars to augment spending for poor and disadvantaged children (as the law intended), some districts might find through this new reporting requirement that the Title I funds instead work to bring high-poverty school spending up to parity with other district schools — not to drive dollars to high-poverty schools over and above others.

In one large school district, our analysis revealed that the district unintentionally budgeted less state and local funding per pupil to its higher-poverty schools in anticipation of the federal money.

To create more intentional spending on high-needs students, we’ve seen a growing number of districts (including some of those referenced in this article) adopt a weighted student formula or student-based allocation. With this approach, a district sets a fixed-dollar increment per student and allocates resources to schools based on their enrollment. Districts allocate additional per-pupil increments for different types of students, “weighting” resources toward those who need additional services, such as low-income students or English-language learners or students with individual education plans, so each school’s funding aligns with their particular mix of students in the building.

» Are salary patterns driving uneven spending in ways that concern the district or the community?
Urban districts can face patterns where more senior teachers with higher salaries tend to congregate in the more affluent schools, thanks to districts’ salary schedules and seniority-based teacher assignment policies. In the south end of Seattle, Wash., where district data from a few years ago show poverty is greatest, the average teacher at Rainier Beach High School earns $60,673. Traveling north, salaries rise steadily until you reach the district’s northernmost high school, Ingraham, where average teacher pay is $78,898.

In Seattle, like many other cities, more experienced teachers with advanced degrees flock to the wealthier schools and take a disproportionate share of the district’s state and local monies with them. The result? These districts spend a greater chunk of their base salary dollars on schools with the lowest needs. Such patterns can and should prompt local discussion of salary schedules and school-level tradeoffs (e.g., should higher salaried schools forego a vice principal?). Depending on local appetite, some communities might con-sider changes in spending to enable more equitable allocations (including the weighted school funding model).

» Is centralized spending lean and of high value? What share of dollars are centrally managed? Are leaders prepared to help the public understand what chunk of those dollars go to central-office functions versus services to schools?
Most states haven’t decided yet whether to standardize reporting across districts or how they’ll determine school versus central-office expenses. That uncertainty aside, districts can take a hard look at central spending, understanding that the public typically expects the maximum dollars possible to go to schools versus the central office.

It’s not unusual for a school district to have centrally managed services consume 20 percent to 50 percent of the budget. Districts can and should examine spending on central functions and break out and identify per-student costs of appropriate services, such as transportation and food services.

Districts will need to educate the public on the difference between central leadership (including costs for the superintendent office and the accounting department) and services that are centrally managed but still benefit schools (such as itinerant psychologists, facility services and professional development). Districts that don’t do this upfront work run the risk of public backlash to the appearance of a bloated, resource-sucking central office.

» What student outcomes are the district getting at each school in return for its share of public dollars? Are some schools able to leverage dollars to do more for students than others with the same share?
For more than a decade, school districts have been required to track outcomes by school, but spending by school was the missing piece — until now, with the financial transparency provision. School-level spending is critical to understand school-level student outcomes in context.

Two schools with a similar demographic mix of students might seem to be achieving similar outcomes, but if one is operating at double (or half) the public resources of the other, that’s a different thing entirely. Once school outcomes and spending can be matched — and the community will be able to do just that when states make the data public — that information becomes a powerful tool to uncover and support school improvement.

District leaders don’t have to wait for their states’ data release to begin examining spending against outcomes for each school, relative to meaningful peers. To be clear, the goal shouldn’t be to “punish” schools that aren’t beating the odds with their students, but rather to tease out what’s behind the schools that are beating the odds and use that knowledge to improve the lagging schools.

District leaders who get a jump on starting to understand the story behind their school-by-school data are better positioned to proactively and accurately communicate that story to their board and their public.

Honest Acknowledgement
Districts have a window of opportunity to raise the issues addressed by the five questions above and to do so in advance of the public reporting. By working with school district finance staff, superintendents can start the conversation with their boards and their communities about their school allocation patterns that result from intentional action or the unintentional consequences of longstanding practices and policies or both.

We suggest starting this process by honestly acknowledging that examining financial information by school is a new development and not the way most school districts have handled budgeting or accounting in the past. Perhaps even admit that some of the patterns are surprising and invite responses from the community in forming a forward path.

The bottom line is this: Starting with 2018-19 data, every district nationwide will see its school-level spending in black and white. School-level spending inequities likely will be at the top of leaders’ e-mail inboxes and could headline community meetings and school board agendas. Now is the time to self-assess, when there’s still time to identify (and possibly address) an “oops” situation.
MARGUERITE ROZA is director of the Edunomics Lab and a research professor at Georgetown University in Washington, D.C. E-mail: Twitter: @EdunomicsLab. CARRIE STEWART is CEO and co-founder of Afton Partners in Chicago, Ill.