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Ky. Finance Study Pinpoints Costs for Schools

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Kentucky officials have taken the first step toward a pioneering system for tying state funding formulas to local school budgets, which they hope will provide both a rationale for spending and a connection to results.

Taking cues from cost-accounting reforms in the health-care industry, researchers have developed a management-accounting system that can break down how budgets are being used at individual schools.

After testing the idea in eight school districts, state officials completed a report on the new system this fall.

The report found that, despite different demographic characteristics at individual schools, the costs of various instructional programs generally hovered near one another.

The information provides a revolutionary view of how schools actually work, officials said.

"This is the Model T, but I am quite sure the Thunderbird will come along,'' said K. Penney Sanders, the director of the Office of Education Accountability, which was created by the legislature to monitor implementation of the state's 1990 school-reform law.

In the Driver's Seat

The report concludes that district budgets can be broken down into costs by class and by student. By apportioning teacher salaries, equipment costs, and overhead expenses, the study found, for example, that science courses cost $556 per student per year in one high school, while music classes cost $470.

"The hospital industry was revolutionized by looking at costs, and now a hospital administrator can ask and know what an appendectomy costs,'' Ms. Sanders noted. "We are saying it is not unreasonable to know what it costs for a student to move through a calculus class with success.''

Officials said their next job is to fine-tune the system and load it onto the state's education-technology system, which is designed to analyze and report school spending. The next step of the costing research will be to try to tie it to performance at the schools studied.

"Right now, we are just looking at what is,'' said Bob Wagoner, the finance-division director in the accountability office. "We would like to overlay the assessment results because that is the only way we are ever going to answer what is adequate or what is sufficient.''

"As we move to decentralized school management, people have to know this,'' Ms. Sanders argued. "We are also beginning to reach the outer limit of how much of the state budget can go to education. At a point of fixed resources, this kind of information is critical to people in school-based decisionmaking--to put them in the driver's seat.''

'What Do We Cut?'

Observers said the study begins to move the school-finance debate past its traditional benchmarks: equity in school budgets and the division between instructional and administrative costs. Instead, it looks at what is happening within individual schools.

"People are starting to ask what is the relationship between how money is being spent and how well kids do,'' said John Augenblick, a Denver-based school-finance consultant. "Legislators and policymakers want to know how much money they need to give people before they can hold them accountable.''

"They ask, 'When can I say I've given you enough money so that I don't have to think or wonder, but I know it is enough?''' Mr. Augenblick said. "That is what some of this work can do.''

While the authors of the Kentucky report acknowledge that they are only beginning to examine a complex topic long avoided in education-policy debates, they issue a stern call for a greater focus on informed local financial management and state efforts to make more sense of school funding.

"People are asking for more information about costs, prices, and results,'' the report notes. "Financing education in the United States is becoming increasingly difficult to achieve. In the 1960's, when local taxpayers were asked for funds to build a new school or expand a program, the answer was, 'How much to you want?'''

"Currently, the dilemma for school districts is, 'What courses, programs, or services do we cut?''' the report adds.

Infinite Flexibility

In studying eight Kentucky districts, the researchers determined the average costs for 17 high school academic areas, ranging from health courses, which cost about $400 per student, to vocational-technology classes, which cost more than $700.

Among middle schools, English costs led the four major subject areas at $523, followed by math at $492, science at $487, and social studies at $473.

In elementary schools, ungraded-primary programs cost about $2,746 per child, while kindergartens cost an average of $1,524. Reading units cost about $960.

The report further scrutinized costs tied to preschool classes, family-resource centers, youth-service centers, gifted-and-talented programs, and extended school services at each of the schools.

"The report points out what is obvious--that smaller classes cost more--but has a philosophical edge to it that says that there are a lot of people in education management who don't manage very much,'' Mr. Augenblick said.

"The trouble in education is that funding increases tend to be incremental, so people just add on to what they already had,'' he said. "This study opens it up and says, 'Suppose we were to start all over again.' It offers infinite flexibility.''

But analysts noted that the report offers little analysis of how best to invest school budgets.

"We want to ask, 'Does money really make the difference?''' Ms. Sanders said. "We have to have a realistic idea of what it takes to move a child through the school program, but we also need to substantiate why when we say that we need more money.''

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