The Sacramento Bee

Finding right mix for school funding

By Michael Kirst and Goodwin Liu - Special to The Bee
Published 12:00 am PST Sunday, January 13, 2008

When Gov. Arnold Schwarzenegger declared 2008 the Year of Education, he didn't expect to be facing a $14 billion deficit. In his State of the State speech, the governor acknowledged the need to reform K-12 education and to "fund those reforms" but said "this is not the year to talk about money."

Grim as this year's budget may be, a better fiscal picture lies ahead for K-12 education. State revenues will eventually rebound, as they historically have, and declining enrollment will make more money available per pupil over the next five years.

Additional dollars won't make a difference, however, if we don't act now to change how California funds its public schools.

California's school finance system is deeply flawed. The state allocates revenue to districts through complex formulas that few people can understand. Revenue allocations bear no relation to what it costs to educate children to state standards. The proliferation of revenue programs, each for a specific purpose, generates costly compliance burdens and onerous paperwork. And program restrictions limit the ability of school officials to shift dollars to meet local needs.

In a forthcoming report, the governor's own blue-ribbon education advisory committee will call for a major overhaul of the finance system. Now is the time to create a more rational, simple and fair system that can be phased in as new money becomes available.

We propose a new approach based on four principles. First, revenue allocations should be guided by student needs. If all students are to meet state learning standards, then the finance system must systematically provide greater resources to districts with more disadvantaged students.

Second, revenue allocations should be adjusted for regional wage differences so that education dollars have similar purchasing power across the state.

Third, the system should be simple, transparent and easily understood.
Fourth, to promote stability and political feasibility, reforms should apply only to new money without reducing any district's current revenue, and Proposition 98 should be left intact.

To implement these principles, we envision a system with three parts:

• Base funding: Each district should receive a base funding level to buy textbooks and materials, maintain safe and clean facilities and employ qualified teachers and other personnel. Base funding should enable an "average" child to meet state learning standards.
• Special education: The finance system should maintain its current approach to special education, with a goal of equalizing funding across the state within five years.
• Targeted funding: We propose a single program of targeted funding to meet the additional needs of low-income students and English learners. Funding should be based on the concentration, not just the number, of those students in a given district because the challenges faced by disadvantaged students intensify as more of their peers are similarly disadvantaged.

All three parts of the system should adjust dollars using a wage index that estimates the cost of hiring equally qualified teachers in different labor markets throughout the state.

In 2004-05, this reform would have cost an additional $8 billion if base funding had been $6,000 per pupil and if targeted funding had ranged from $1,500 to $3,000 for disadvantaged students depending on their concentration. The additional cost, while not insubstantial, is close to current projections of increased education revenue over the next five years.

The base and targeted funding levels are debatable. Policymakers should also examine what rules, if any, should guide funding allocations from districts to schools and whether a new finance system will require new accountability laws. Our reform provides a framework for thinking through these questions. The existing system has become so unwieldy and irrational that basic issues of fairness and institutional design can no longer be addressed from within.

In time, the state budget will improve; it always has. Before it does, let's close the door on piecemeal school funding strategies that exacerbate inequity and incoherence. Let's chart a new path that simply and fairly funds the success of all students.

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