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Ill. Panel To Consider School-Aid Formula Based on Local Need

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Responding to Illinois Gov. James R. Thompson's call for prompt changes in the state's tax structure, a special panel on school finance has speeded up its deliberations in hopes of turning tax reform to the advantage of public schools--and is considering a novel approach to the issue.

The central idea of a finance scheme currently under examination by a 15-member state advisory committee on school finance is the so-called "Resource Cost Model," a concept that, its advocates say, more closely reflects districts' actual needs than do conventional state-aid formulas.

Developed by Jay G. Chambers and Thomas B. Parrish of Associates for Education Finance and Planning, a consulting firm based in Stanford, California, the model uses a detailed checklist and computer program to determine what programs a district needs, what resources are needed to operate those programs, and how costs vary from one section of the state to another.

Several states followed Florida's lead in the 1970's in developing "cost-of-education indices" that account for local differences in the cost of living, but the Chambers-Parrish model is believed to be the first to specify education costs (rather than overall economic conditions) and to combine such an index with a systematic analysis of program needs.

"If you've really got measures you can believe in, this is absolutely the way to go," commented James W. Guthrie, a professor in the graduate school of education at the University of California at Berkeley and a nationally recognized authority on school finance. "In the evolution of school finance, this represents an effort to tailor financial resources to what the kids ought to have."

The concept, never before applied to a state, has initially been well received in Illinois.

Chicago's superintendent, Ruth B. Love, praised the idea in an op-ed article in The Chicago Tribune. "This document," Ms. Love wrote, "may well represent the most cogent, intelligent document about school financing to surface in years. ... Whereas the existing school-finance formula relies on equalizing dollars, the [Resource Cost Model] focuses instead on services."

"We're treading new ground here," said Suzanne W. Langston, director of the Illinois School Finance Project. "This model enables us to develop specifications for what we describe as an 'adequate education' and to devise a way that kids, regardless of where in the state they live, have access to an adequate education."

Also, unlike many finance schemes now in use, the model does not automatically reduce funds when a program gains or loses a few students. ''It does reflect the lumpiness, realistically, of the way classrooms and programs are managed," Mr. Chambers said.

The method could have benefits in the political arena as well, Ms. Langston noted.

"Every year the legislature determines how much money it has to disburse, and that's plugged into the computer with assessed valuations [for purposes of calculating districts' property wealth], and it spits out a number. There's no relationship at all to the cost of providing those services.

"For the first time, this would give us something to go on--how much a certain service would cost to provide. For the first time, we would be able to give a solid answer when the legislature asks us to justify a request."

The Resource Cost Model, its developers stress, is not in itself a funding formula, but rather a process for arriving at a fair formula. Put simply, a three-step process was used in the "simulation run" for Illinois.

First, committees of educators and policymakers were convened to determine an "appropriate" level of services in each of eight program categories: elementary, secondary, special, gifted, vocational, limited-English-proficient, compensatory, and adult education.

"We were afraid they would specify pie in the sky," said Mr. Chambers, a senior research economist at Stanford University. "We tried to encourage them to concentrate not on what is but on what should be, but at the same time to come up with something that was realistic and reasonable. There was a lot of creativity and new thought."

In some cases, Ms. Langston and Mr. Chambers said, the committees recommended programs similar to those already in place. But they often departed from present practice in describing how programs should be organized and how instructional and services should be delivered.

Resources Identified

The committees then tried to determine what resources--personnel, facilities, supplies, and support services--would be needed in each of the 160 programs identified. These costs were then added to derive a "program cost differential" that recognizes, for example, that handicapped children incur higher costs.

The second step was calculating a cost-of-education index for each of the state's more than 1,000 school districts. Unlike most versions of the index, which reflect the general cost of living in a given area, the Chambers-Parrish plan targets costs directly relevant to operating schools, such as labor and energy. Furthermore, it allows cost vari-ations only for items that are deemed to be beyond the control of the school district.

The third step is to factor the program cost differential and cost-of-education index into each district's enrollment characteristics--and arrive at a dollar figure that, theoretically, enables each district to provide all the appropriate services.

"In a sense, the model itself is the whole ball of wax," said Mr. Chambers. But "the model accounts for all long-run variations related to student-body composition and resource costs differences."

The simulation run revealed that, using the Resource Cost Model based on the committees' "wish lists," Illinois schools would have spent $5.3 billion in 1981-82, or 2 percent more than actual expenditures. ''We were struck by the fact that what they came up with was so close to what was actually spent," Mr. Chambers said.

He attributes this, in part, to the committee procedure, which required that representatives of various interest groups cooperate. "We had the special-ed people and the voc-ed people and the elementary people talking to each other in a way that they never had before," he said.

Further analysis of the data, Mr. Chambers said, is expected to show that some districts would have needed more money in 1981-82 to provide the services called for in the model, while others could provide them for less than they actually spent.

The model, Mr. Chambers said, can be used as a basis for allocating funds regardless of the state-local revenue mix and regardless of the state's method of equalizing spending.

'Account for Local Needs'

"Up to now, state foundation programs have been based on an arbitrary number that came out of thin air and was applied uniformly to all districts," the researcher said. "Here's a way to vary the foundation to account for local needs."

For all the benefits its proponents see, the Resource Cost Model is designed to aid in distributing, not raising, funds. So it does not address the problem of Illinois's extraordinarily complex, intensely political, and often unpredictable system of raising revenue for public schools.

Governor Thompson's advisory panel on tax reform has recommended that half of the local property tax for education be repealed and replaced with increased state taxes. Because some action on statewide tax reform is considered likely in the current legislative session, the school-finance panel accelerated its study by several months.

"There's a historical link between tax reform and school-finance reform," Ms. Langston said. "So we decided that if the state is going to talk about shifting the tax burden, we'd see if we could get some changes made to the benefit of education."

The Resource Cost Model will be among some 26 proposals considered this month by the advisory panel, which is composed of state officials and business representatives. It was appointed in 1981 by state Superintendent Donald G. Gill with the charge of developing a comprehensive school-finance plan.

Once the advisory panel formulates its recommendations, they will be forwarded to the state board of education and the state School Problems Commission, a panel of legislators and citizens, to be fashioned into a final legislative agenda, Ms. Langston said.

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