Ill. Panel Uses 'State-of-the-Art' Approach in School-Finance Plan

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Springfield, Ill--A report from a citizens' panel recommending major changes in the state's method of distributing billions of dollars to local school districts has been submitted to the Illinois State Board of Education.

The fate of those recommendations will be closely watched by school-finance experts across the country because they mark the first statewide attempt to use an experimental new concept for evaluating school districts' level of financial need. The so-called Resource Cost Model, devised by Jay G. Chambers and Thomas B. Parrish of Associates for Education Finance and Planning, a Stanford, Calif., consulting firm, uses a detailed computer program to analyze what programs a district needs, what resources are needed to run the programs, and how costs vary in communities across the state. (See Education Week, Feb. 2 and March 30, 1983.)

Legislative Proposals

The Illinois study, the product of two years of investigation by business and financial experts and state officials, is now being examined by the state board. The board plans to use it as the basis for legislative proposals to revamp the state-aid formula in next year's session of the General Assembly.

The study was initiated by State Superintendent Donald G. Gill to correct what he has described as a "crazy-quilt pattern" of financing education in Illinois.

The present state-aid formula, known as "the resource equalizer," is also being challenged in court by the Rockford School District, a K-12 system that contends the formula favors separate elementary and high-school districts over combined districts.

According to Robert Jamieson, chairman of the Illinois Public School Finance Project, "the changes recommended in this study are state-of-the art in school finance."

Major features of the committee's proposal include:

Development of the Resource Cost Model as a device for determining local districts' fiscal needs and as a basis for distributing state and federal funds. General state aid is currently handed out through a formula that takes into account local-district wealth, local tax rate, and student enrollment.

The Resource Cost Model would contain a cost-of-education index measuring the effects of inflation that are unique to schools. It would also attempt to reflect program costs while taking into account factors--such as district size, type of enrollment, and geographic location--that influence the cost of services and programs offered by local schools.

A new measure of local wealth. Currently, districts poor in assessed valuation receive more state aid. The proposed formula would include the income of a district's residents as an added factor in calculating wealth.

The change is believed to provide a more accurate gauge of the resources available locally for education.

Use of a single formula for allocating $2.5 billion in state and federal funds. Local districts are to receive $1.44 billion in general state aid this year. Another $1 billion will be funneled to local districts to pay for various "categorical" programs such as special education, bilingual education, driver education, transportation, meal programs, and adult and vocational education. The finance project recommends combining the general aid and categorical programs and distributing funds for all services through the single formula derived from the resource-cost model.

Spending lids on local districts. The committee urges that boards of education be prohibited from approving budgets that exceed revenues and cash on hand by more than 10 percent. And it further recommends placing tougher restrictions on the ability of districts to borrow funds in anticipation of tax collections.

New taxing authorities for local districts. The Chicago school district would, for example, be able to impose a tax to pay for student-transportation costs and downstate districts would be able to levy a new tax to buy textbooks.

The panel also suggests accelerated tax collection to improve school districts' cash flow, returning more tax dollars from public utilities to local districts, and a new requirement that the state board notify local school officials and citizens when financial data indicate a district is approaching "severe financial problems."

Using the concepts of equity and adequacy as the cornerstones for the new financing formula, the panel set as its goal a scheme to generate adequate revenue on a basis that would be fair to taxpayers, distribute state funds in a way fair to districts, and encourage local management practices that use resources efficiently.

If the state legislature approves the new finance proposal, Illinois will join the several states that have followed Florida's lead in trying to devise school-finance programs that reflect education's special costs. But the Resource Cost Model, its advocates say, goes beyond earlier formulas in analyzing each district's particular situation. In assessing personal income as well as property value to evaluate district wealth, Illinois would join about 12 other states that already do so, according to the Education Commission of the States.

Says Mr. Jamieson, "We've got to get away from going before the General Assembly every year and putting the educational needs of the state up for auction without taking into consideration the costs and needs of education."

Vol. 03, Issue 02

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