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Published in Print: September 15, 2010, as Where's the Smart Money in a Great Recession?

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Where's the Smart Money in a Great Recession?

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Let’s face it, America’s schools are getting hammered by the Great Recession. Declining budgets have pushed district leaders to lay off teachers, shorten school years, and cancel summer programs. Their cost-cutting gymnastics have increased K-3 class sizes, closed libraries, and deferred maintenance. And while a leaky roof might not affect student performance overall, curricular and instructional losses cut at the heart of the educational enterprise.

The source of all this trouble is no mystery. With recession-driven sales- and income-tax revenues down, states have been hard pressed to meet their obligations. The National Governors Association and the National Association of State Budget Officers recently reportedRequires Adobe Acrobat Reader an approximate 7 percent drop in fiscal 2010 state expenditures nationwide. In the last budget cycle, 40 states made midyear cuts totaling $22 billion. Coming on the heels of nominal decreases the preceding year, these declines led the governors and budget officers to describe the situation as unprecedented.

Relief may be farther away than one hopes. With the economy rebounding slowly and American Recovery and Reinvestment Act funds drying up, state expenditures are expected to drop again in fiscal 2011. Thirty-four states have announced new education cuts for the coming year. Plans are afoot to postpone state payments to school districts, or simply to shift those funding responsibilities to the local level. Some districts already are borrowing—hitting one part of the budget to cover another, tapping county treasuries, issuing tax and revenue anticipation notes. But these tactics will play out. More and more, districts that depend heavily on state funding are signaling that they soon may not be able to meet their obligations.

Decisionmakers can’t defer student learning the way they can building maintenance.

While keeping the lights on is problem enough, it’s only the backdrop for the real challenge: boosting student learning. No resource shortage absolves schools of their responsibility to educate students. Decisionmakers can’t defer student learning the way they can building maintenance. There’s too much at stake for students and families, the economy, and civil society. Thus, regardless of the recession, policymakers and educators have to be asking: How can we invest available resources in ways that maximize student learning?

The truth is, states are unlikely to accomplish ambitious learning goals until they fix the finance systems that support the nation’s schools. These systems were never designed to support ambitious learning goals, and they certainly weren’t designed to manage student learning during fiscal crises. Instead, they set funding levels based on conventions and bargains rather than need, address equity in one place but ignore it in others, spend resources with little regard for results, and focus on compliance rather than student learning. Such practices miss the connection between resources and student learning. They are part of the reason learning lags expectations.

Regardless of how familiar or novel these problems seem, today’s challenge is to do something about them: to redesign resource systems explicitly to support student learning.

It may sound nuts to talk about fixing school finance systems when districts are struggling to make payroll, but actually, a tough recession may be the only opportunity to do it. As state legislators from different regions told researchers in a recent study, it takes a crisis to shake up the equilibrium of policy decisions, budgetary commitments, and interest-group politics that supports education’s business as usual. It takes a crisis, that is, to open the door to new thinking and new opportunities. The Great Recession certainly qualifies.

New thinking begins by judging budgets, collective bargaining, and other forms of resource allocation against a simple, powerful principle: using student learning as the touchstone for resource decisionmaking, top to bottom. This principle alone would help states better figure out how much to spend, who gets what, how resources should be used, and what outcomes to track. It certainly would challenge the conflicting claims, compliance orientation, formula-driven allocations, and compartmentalized responsibilities that typify education finance.

How could states put this principle to work? How could they retool funding systems to make better connections between resources and student learning, and to make better decisions in the face of declining budgets? My colleagues at the National Working Group on Funding Student Learning and I wrestle with these challenges in a recent book, Smart Money: Using Educational Resources to Accomplish Ambitious Learning Goals (Harvard Education Press, 2010).

In brief, we argue that, for educators, a smart-money approach means adopting continuous improvement—the cycle of goal-setting, resource allocation, instruction, assessment, and analysis that tailors resources to school and classroom needs—as a core resource strategy for schools and districts, then making trade-offs that move resources from less-effective to more-effective uses.


For policymakers, a smart-money approach means, first, delivering resources to schools transparently and flexibly, while maintaining the connection between dollars and students. Converting most general and categorical dollars into student-based funding, then depositing these student-based dollars in school-based accounts, would do the job.

Second, focus and enable educators’ work. How? By reconfiguring funding incentives; providing educators with better data that link student learning, finance, human resources, and family information; bolstering teachers’ and principals’ capacities to make good resource decisions; and rethinking the structure of collective bargaining, which alone controls the bulk of local education funds.

Third, invest in resource-oriented R&D, so that the field can expand knowledge of effective resource practices while experimenting with new methods.

Finally, redesign resource accounting and accountability to signal forcefully that student learning matters most.

Tying resource decisions to student learning and effective resource use surely will call into question across-the-board funding cuts, layoffs based on seniority, and other conventions that drive budget-cutting today. In other words, smart-money investments will shake things up. They won’t protect schools from revenue losses or budget cuts, but they can allow those cuts to be made more strategically. They can make smaller budgets more productive, and they can refocus funding decisions on the heart of the enterprise: student learning. And that focus makes sense whether school budgets are going up, going down, or holding even.

Vol. 30, Issue 03, Page 36

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