Ensuring All Children the Opportunity
for an Adequate Education: A Costing-Out Primer
(Pdf
version is also available)
An
education adequacy costing-out study determines the amount of money actually needed
to make available all of the educational services required to provide every child
an opportunity to meet the applicable state education standards. A variety of
approaches for undertaking such studies have been used in recent years in many
states, including Illinois, Kentucky, Ohio, Oregon, Maryland, New Hampshire, Wisconsin,
and Wyoming -- in some cases as part of the development of a new funding system
ordered by a state court. This policy brief describes briefly the concept of costing
out and offers an overview of the three methodologies commonly used for this purpose.
Historical Background Historically, most state education finance
systems have purported to establish, as their basic building block, a "foundation
amount" that presumably would guarantee sufficient funding for each child
to obtain an adequate education. In its first incarnation, state aid to local
schools took the form of a flat state grant for each school child. But, because
of the inequity of providing the same amount of funding for students in both poor
and wealthy districts, during the 1920s many states began adopting "foundation"
programs. These required local school districts to levy taxes at a rate aimed
at generating enough revenue to fund a basic education, with the state supplementing
the amount actually raised by poor districts when their tax base did not yield
the predetermined "foundation level."1 From
the beginning, however, no real methodology was used to determine what the foundation
amount should be. Instead legislatures tended to establish the foundation based
on the amount of funding they were willing to allocate for educational services
with little regard for actual needs. Moreover, the foundation amounts that were
established eroded dramatically over time because of budget pressures, competing
political priorities, and inflation. For example, in New York State the current
foundation amount is about $4,000 per-pupil, even though the average expenditure
is $11,040 per-pupil and districts 10% from the bottom are spending approximately
$8,940 per-pupil.2 Costing
Out Methods The significance of the costing-out approach is that it
determines a true foundation amount by identifying the specific resources and
conditions necessary to provide all children a reasonable educational opportunity
and then systematically calculates the amounts necessary to fund each of these
prerequisites. Although a variety of specific methodologies have been devised
in the dozen or so states that have already pursued a cost-based analysis, these
approaches tend to fall into three main categories: successful schools; professional
judgment; and effective strategies.3
The
successful schools method. The successful schools approach, also known as
the empirical approach, seeks to identify those schools or school districts that
have actually achieved a specified level of student performance, such as meeting
state standards. The average actual level of expenditures in these schools or
districts is then used to estimate the level of expenditure that would be required
to achieve a similar level of student performance in other districts throughout
the state. Typically, differences in cost of living and in the numbers of students
with extraordinary needs are also taken into account in these calculations. The
successful schools approach is best illustrated by a system devised by a panel
in Ohio in response to the initial trial court order in DeRolph v. State.4
In its first iteration, the Ohio methodology chose its sample of successful school
districts by reference to six specific measures of student achievement, and eight
input measures such as pupil teacher ratio and average class size.5
Another example of the empirical methodology is the approach used in a report
prepared for the New Hampshire Adequate Education Costs and Municipal Grant Distribution
Commission. It offered four alternative ways of identifying well-performing districts
based on various combinations of input and output factors. One of these alternatives
uses "efficiency factors" that eliminate from the pool of model school
districts those which provide services beyond a specified maximum level.6
An inverse variation is the model proposed by the Council of Great City School
Districts that bases the adequacy amount on the total per-pupil expenditures of
the 10% highest achieving districts in the state.7 The
professional judgment method. The professional judgment approach accepts as
its premise that the determination of an adequate cost basis will involve a large
number of judgments; it seeks to establish a process that will comprehensively
review the range of judgmental factors involved and ensure that those judgments
are made openly, fairly, and independently. Typically this is done by assembling
panels of educators to identify the specific instructional components deemed necessary
to meet state standards and then having economists determine the price of each
of the identified components. The professional judgment approach was first
developed by Jay Chambers and Thomas Parrish for the states of Illinois and Alaska
in the early '80s in order to develop cost-based adjustments to the education
funding allocations school districts received from the state.8
Its most well known recent application was the model utilized by James Guthrie
and Richard Rothstein in Wyoming, in response to the court order in Campbell
v. State.9 The Wyoming model involved extensive meetings
of groups of local Wyoming educators and, then, of educators from surrounding
states who were asked to identify all of the specific components of an instructional
system that could deliver an adequate education. Once the expert panels had identified
such "a basket of education goods and services," economists determined
the cost of obtaining those good and services for Wyoming school districts through
a series of market pricing analyses.10 Professional
judgment was also the methodology used by the Oregon Council on the Oregon Quality
Education Model (QEM) in constructing its funding model. There, the Council, a
23-person body of legislators, educators, business leaders, advocates, and other
community representatives, appointed an expert staff and four separate subject-area
work groups who devised prototype elementary, middle, and high schools. For each
prototype the Council set forth a detailed list of "program elements,"
such as core staff, program staff, additional instructional time for students
to achieve standards, and district administrative overhead. "Tangible assumptions"
having a direct relation to cost, such as class size, age of building, and numbers
of computers per pupil were then determined and specific cost assumptions for
each prototype school calculated.11
In Maryland,
costing-out studies were performed using both the successful schools and professional
judgment methodologies. The empirical study relied on costs in 59 successful schools
identified by the state's department of education and the professional judgment
studies used panels of experienced educators. The Maryland Commission on Education
Finance, Equity, and Excellence ("Thornton Commission") reviewed these
studies and included results from both methodologies in formulating its recommendations
to the legislature to restructure the state's school finance system and increase
annual state funding by $1.1 billion.12 Despite difficult economic
times, the legislature acceded to the Commission's proposals in April 2002, and
the funding increases are scheduled to be phased in over six years. The
effective strategies method. The effective school-wide strategies approach,
also known as the expert judgment approach, draws on the latest educational research
to identify a set of specific educational programs and strategies deemed effective.
It is important in this approach to ensure that each school design includes all
necessary program elements, such as strategies for struggling students and sufficient
professional development, and that the level of service for each element is standardized
across the selected designs. Experts perform these steps, determine the necessary
components to support the strategies, such as staffing needs, and calculate the
price of each component. This approach intends to provide sufficient funding to
enable each school to choose from among a number of effective strategies or programs. The
effective strategies method used recently in Kentucky relied on research results
to identify high quality preschool and full-day kindergarten as pivotal programs
for low-income students and to designate certain school and class sizes, "instructional
facilitators," and professional development as some of the strategies that
should be funded for each school.
Updated July 2003
Endnotes 1 The idea of the foundation program
originated with a proposal to a New York State Educational Finance Inquiry Commission.
George D. Strayer and Robert M. Haig, Financing of Education in the State of New
York 173-74 (1923). See also, James W. Guthrie, Walter I. Garms and Lawrence C.
Pierce, School Finances and Education Policy: Enhancing Educational Efficiency,
Equality and Choice 133-137 (2d ed.1988). 2 The
State Education Department, New York: The State of Learning, A Report to The Governor
and the Legislature on the Educational Status of the State's Schools (2002). Figures
are for 1999-2000, the latest audited school year reported by SED.
3
A fourth approach is a statistical modeling methodology that attempts to determine
through analyses of performance measures and cost indices how much a given school
district would need to spend, relative to the average district, to obtain any
given performance target. See, e.g., William D. Duncombe and John M. Yinger, "Performance
Standards and Educational Cost Indexes: You Can't Have One Without the Other,"
in Equity and Adequacy in Education Finance: Issues and Perspectives (Helen F.
Ladd, Rosemary Chalk and Janet S. Hansen, editors, 1999); Andrew Reschovsky and
Jennifer Imazeki, Achieving Educational Adequacy Through School Finance Reform
(CPRE Research Report, Oct. 2000). Because these models are based on a variety
of theoretical assumptions that have not actually been implemented in any state,
a detailed account of this methodology has not been included in the text.
4 No. 22043 (C.P Ohio Perry County July 1, 1994). 5
See Kern Alexander et al, Proposals for the Elimination of Wealth-Based
Disparities in Public Education, Report to the Ohio Legislature (July, 1995).
A subsequent iteration of this model prepared for the legislature two years later,
eliminated the input variables and changed the achievement standard from a norm-referenced
a criterion-referenced measure (based on the percent of students achieving minimum
competency levels). See John Augenblick, Recommendations for a Base Figure and
Pupil-Weighted Adjustments to the Base Figure for Use in a New School Finance
System in Ohio (1997). 6John Augenblick, John Myers
and Justin Silverstein, Alternative Approaches for Determining a Base Figure and
Pupil-Weighted Adjustments for Use In a School Finance System in New Hampshire
(1998). 7 See, e.g., Council of Large City School
Districts, Adequate State Financing of Urban Schools: An Analysis of State Funding
of the Buffalo Public Schools (1999). 8See Jay
Chambers and Thomas Parrish, "State Level Education Finance" in Advances
in Educational Productivity: Cost Analysis for Education Decision: Methods and
Examples (W. Steven Barnett, ed., 1994). 9 907
P.2d 1238 (Wyo. 1995). 10 The complex methodology
actually used to carry out these tasks is summarized by James W. Guthrie and Richard
Rothstein, in "Enabling 'Adequacy' to Achieve Reality: Translating Adequacy
into State School Finance Distribution Arrangements," 225-226 in Equity and
Adequacy, supra, note 5 . A related approach is the model utilized in the
State of Washington to cost out a "basic education" in response to the
Court Order in Seattle School District No. 1 v. State, 585 P.2d 71 (Wash. 1978).
The legislature, using the average statewide cost of educating "the normal
range ability student" as its standard, defined the costs of a basic education
by reference to ratios of teachers and other employees per 1,000 students, in
accordance with a state salary scale, plus additional compensation for non-employee-related
costs such as books, supplies and utilities. See Diane W. Cipollone, Defining
a "Basic Education": Equity and Adequacy Litigation in the State of
Washington (CFE Studies in Judicial Remedies and Public Engagement 1998).
11 Legislative Council on the Oregon Quality Education
Model, The Oregon Quality Education Model: Relating Funding and Performance (June
1999). 12 Maryland Commission on Education Finance,
Equity, and Excellence, Final Report (January 2002). |
