Education Funding

1980’s Bring New Dilemmas In Reforming School Finance

By Peggy Caldwell — March 30, 1983 7 min read
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The school-finance-reform movement, despite some recent setbacks in the courts, the loss of foundation support, and poor prospects for large infusions of new state funds, is not only surviving but adding the relatively new issues of “adequacy” and “school effectiveness” to its mission, according to policymakers, scholars, and others who have been active in the 15-year-old reform movement.

“I’m surprised at how strong an issue the equity concern continues to be,” said Susan Fuhrman, research associate at Rutgers University’s Eagleton Institute of Politics. “It’s still on the agenda in about a dozen states, whether because of litigation or commissions. The situation isn’t nearly as bad as I would have predicted six months ago.”

Added John Augenblick, who directs the finance center at the Education Commission of the States: “People are still terribly concerned about the equity of the system, particularly in those states that have a lot of school districts. They’re very concerned, especially about special-needs students. The states know what their obligations are and they know what’s right, but they don’t know how to do it as the feds pull out.

See related stories on pages 18, 19

“The overwhelming concern we see today, though, is one of adequacy,’' Mr. Augenblick continued. “The rate of increase in spending at the end of the 70’s and into the 80’s is much different from the way it had been.”

Still operating from the basic premise that the quality of a child’s education should not be a function of the property wealth of his or her community, participants at this month’s annual meeting of the American Education Finance Association pointed to continuing litigation in several states, including Arkansas, where the state supreme court began hearings on a case last week, as evidence that the pursuit of fiscal equity continues.

But in interviews and in presentations at the conference, experts acknowledged a need to respond, to “fine-tune” past reforms, and to seek closer links between school financing and instructional practices.

The idea of “dollar equity” is in disfavor, having been modified or supplanted by the idea that children are entitled to equal or comparable services, the cost of which may vary depending on student needs and local conditions.

Conference participants criticized the plaintiffs’ lawyers’ decision to return to court in California’s Serrano case, saying that disparities in per-pupil expenditures are so small in that state as to be almost irrelevant to the more pressing issue of providing adequate services.

“You can put the right amount of dollars into a school, but you still need homework and all these other things,” said Lorraine M. McDonnell, a researcher with the Rand Corporation in Santa Monica, Calif. “The traditional measure of equity used by school-finance people needs to be broadened to include some of the resources and practices identified by effective-schools research. The past strategies will not pass political muster during a time of retrenchment.”

‘Educational Resources’

She urged reform advocates to think of “educational resources” as not only money, but time, expertise, and effective management. “We’ve tended to follow the dollars only to the schoolhouse door,” she said. “We need to look at how resources are allocated at that ‘micro’ level.”

In one sense, Ms. McDonnell’s views are logical extensions of the turn school-finance litigation took in the early 1970’s, when lawyers began to focus on the education clauses of state constitutions and on equal-protection guarantees. Typically, the education clauses guarantee ''quality,” “thoroughness,” “uniformity,” or similar characteristics.

In cases involving New Jersey, Washington State, and, most recently, West Virginia, judges have ordered states to adopt educational standards consonant with those guarantees, then to find ways of paying for them with some mix of state and local funds.

Although taxation and educational policies have been dealt with separately in the three states, the cases suggest that there must be a rational “fit” between spending and quality--and that spending schemes must address the educational deficiencies peculiar to the state.

Refining that link, researchers agreed, may be technically and politically difficult, but it appears to be the next major item on the agenda. “I think unquestionably we’ll see a more programmatic approach to finance, an approach that may not need the courts and a national network,” said Ms. Fuhrman.

James A. Kelly, who as a program officer at the Ford Foundation was instrumental in forming the national finance-reform network, concurred on the latter point: “There will be some progress through litigation, but it’s not going to depend so heavily on litigation as it has.”

In the short term, a number of analysts agreed, prospects in most legislatures for extensive reforms are dim. As long as the economy remains weak, legislatures are considered unlikely to voluntarily undertake major reforms that require new state funds. (As if to underscore that belief, Gov. Mario M. Cuomo of New York last week abandoned his drive for further equalization; the move has been attributed largely to the fact that the state’s highest court last summer found that reform was not a constitutional imperative.)

But several observers remarked that legislators have “internalized” equity principles and are at least making cuts in a manner consistent with those principles.

“The shortfalls have so overwhelmed the policy process that just coming up with enough money to continue the current level of operation is overwhelming,” said William A. Harrison Jr., senior program director for the National Conference of State Legislatures. “Reform has taken a back seat in the short run.”

“But all in all,” he added, “the vocabulary of school-finance equalization and the values of school-finance equalization have been assimilated in most legislatures by now, although that doesn’t mean they all have equitable school-finance systems or that those that have reformed haven’t backslid.”

Favorable Political Climate

At the same time, however, governors’ and legislators’ concern about science and mathematics, economic, and “human-capital” development may create a political climate favorable to education spending, Mr. Harrison and others noted.

The fiscal problems of some state governments, primarily in the Midwest, have resulted in increased reliance on local property taxes to finance schools--leading to new lawsuits. That phenomenon, observers say, is a “blip"; the state share is expected to pick up again, and possibly increase, as sales- and income-tax collections recover and federal education spending declines.

In fact, Mr. Kelly, who left the Ford Foundation in 1981 to become director of the Spring Hill Center in Wayzata, Minn., predicts that the state share will go from its current average of slightly over 50 percent “into the 60’s within this decade.”

Teachers’ groups, reform activists, property owners who want to keep property taxes low, minority groups, and the handicapped have created “a powerful political combine” in many states that will create pressure for high levels of state support, Mr. Kelly predicted.

However, Esther Tron, a senior research associate with the U.S. Education Department’s School Finance Project, believes that states will be cautious about assuming new financial responsibility for education. She noted that Washington State “passed a very comprehensive law, but they can’t fund it, so they’re back in court.”

Likewise, some of the reforms of the past have not had the intended effect, leading to new legislation and litigation. Several experts cited New Jersey, where districts’ tax bases were substantially equalized after the state supreme court’s 1973 decision in Robinson v. Cahill, but disadvantaged urban districts still lag in the programs and facilities they are able to provide.

The New Jersey finance dispute, which is due to go back to court, illustrates that no single remedy will work in every state. In some states, for example, property wealth may be a fairly accurate basis on which to calculate state aid; in others, high urban or agricultural property values may distort a community’s actual ability to pay, so that a formula designed to direct more money to poor districts will not reach large numbers of disadvantaged children.

“I’m discouraged in the sense that so many efforts were made in the 70’s that didn’t really improve the resources going to kids; they took the form of tax relief instead,” said Ms. Tron. “Also, what happens is that each legislative session comes along and there’s always tinkering with the formula. What might have been a great reform at some point five years ago might not be such a great reform after all the tinkering.”

Some of the “tinkering,” however, has been to the benefit of equity, Mr. Augenblick of the Education Commission of the States noted. For example, he said, at least three states are now using “cost-of-education” indices to compensate for local variations in the cost of such items as labor, energy, and transportation. And a dozen now consider personal income, not just property values, in measuring local tax capacity for purposes of calculating state aid. That change more closely reflects a community’s ability to pay for schools. As one official said, “Property no longer represents wealth for most people. It represents debt.”

“The state has a greater interest in education than ever before,” Mr. Augenblick said. “That’s not going to go away.”

A version of this article appeared in the March 30, 1983 edition of Education Week as 1980’s Bring New Dilemmas In Reforming School Finance

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