Power of the Purse

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If teachers and principals are to call the shots at their schools, they also need control over the money. But the shift to school-based budgeting hasn't been easy.

Milwaukee

Principal William Andrekopoulos bounds down a hallway of Gustav A. Fritsche Middle School here, proudly showing a visitor how the school has spent its money: Here is the metal shop that is being made into a classroom for students serving in-school suspensions. Over there is the wood shop that will become a high-technology laboratory, and up ahead is the automated media center with full access to the Internet.

In six years, the full-time staff here has grown by an assistant principal, a guidance counselor, a nurse, and a bookkeeper. The schedule has changed to give students fewer, but longer, classes. And the school has sent teachers to visit schools around the country and scheduled hours of staff-development time.

"The district would never have done that for me," Andrekopoulos keeps saying as he introduces the school nurse or waves at a new set of window blinds. "They wouldn't have done it."

The 1,010-student school didn't make these changes because of an infusion of cash. It's simply that educators at the school were allowed to decide for themselves what to do with the money they had.

In many school systems, particularly in big cities, the central office controls the purse strings. It determines everything from the number of teachers and guidance counselors in a school to how much equipment the school can purchase.

"When all is said and done," says Karen Hawley Miles, a school finance and management expert, "many schools have control, really, over their supply budget" and little else. In a large school, she adds, that means that administrators may have a say in spending perhaps $10,000 out of a total annual budget of $4 million.

But here in Milwaukee and elsewhere, that strategy is beginning to change. Funds previously controlled at the district level are being shifted to individual schools.

The assumption is that principals, teachers, and parents, who know their students best, should have the power to use their resources to better match the specific strengths and needs of those students. In return, district officials will hold schools more accountable for results.

"You wouldn't try to run a household without having control over your budget," says Diana G. Lauber, a senior program officer with the Cross City Campaign for Urban School Reform, a national network. "School-based budgeting moves the resources to those who know the needs of the kids."

Such ideas borrow heavily from restructuring in the corporate sector, where some decisionmaking has devolved to workers and managers in the field. Often, experts say, that gives those employees a greater sense of ownership and participation that results in increased productivity.

Similar goals lie behind the move toward budgeting at the school level, where educators have long complained of the futility of creating improvement plans knowing full well they lacked the financial authority to carry them out.

Some also hope that schools will use their money more efficiently if told they can reinvest any savings. Others simply want to trim what they perceive to be bloated central bureaucracies.

But what sounds good in theory has proved enormously complex in practice. Many districts don't even know how much they spend on individual schools, or whether that funding is equitable.

Myriad federal and state regulations and provisions in union contracts limit how dollars are spent.

And central-office administrators often resist attempts to wrest control from them. They may fear that shifting budgeting authority to the schools will cost them their jobs, or distrust the ability of educators in the schools to make competent funding decisions.

Indeed, many principals lack the training and the desire to make budget decisions that they view as peripherally related to instruction.

In districts that have begun the process, it has become all too clear that simply handing each school a checkbook will not automatically send test scores soaring. In addition to control over the money, schools must have a well-defined vision of how they will spend it to enhance teaching and learning.

Knowledge Is Power

Before schools can decide how to spend their resources, they need to know how much is available. In many districts, figuring out how much money each school receives can be a tremendous undertaking.

Many systems do not code expenditures by school. They may have a line item for textbooks, for example, without knowing what share each school receives. And they are often years behind the business world in the use of integrated computer networks.

"Sometimes they'll have one computer system for the general fund, another for the Title I program, and another for special education," says Allan R. Odden, a professor of educational administration at the University of Wisconsin-Madison. "At the school level, you'll have five separate documents. And when you ask how much money the school spends, there's not even a summary document. So it's very difficult for the school to put together an overall budget."

In many school systems, particularly in big cities, the central office controls the purse strings. It determines everything from the number of teachers in a school to how much equipment schools can purchase.

Often, schools do not receive funding information on a timely basis or in a form that enables them to make sound spending decisions.

Last November, Chancellor Rudy F. Crew of the New York City schools released an unusually detailed accounting of how the nation's largest district spends its money.

The 41 volumes of data--which included detailed school-by-school spending--required the merging of information from 19 computer systems, according to Lewis H. Spence, the deputy chancellor for operations.

The results were eye-opening. The school system found that it spent three times more, on average, for a full-time special-education student than for a student in a regular classroom. It spent more, on average, for elementary and middle schools than for high schools.

Funding for students also differed significantly across the city's 32 community school districts.

"I think, all along, people have realized that deep-held financial knowledge is very powerful," says Robert Berne, the vice president for academic development at New York University and a school finance scholar for more than 20 years. "The natural tendency for most central offices has been to keep people--if not in the dark--then less than fully informed about what goes on."

School-based budgeting brings funding inequities, such as those in New York City, to the fore because it clearly identifies how much money each school gets.

Milwaukee, for example, spends less on elementary schools than on middle and high schools. Spending among its elementary schools varies by more than $600 per student.

'A Lot of Constraints'

Some districts have tried to correct such disparities by basing a school's funding primarily on its enrollment and the special needs of its students. But in the end, politics often intervene, with resulting winners and losers.

The bulk of a school's budget goes toward staffing. State regulations regarding class size may determine how teachers are allocated. Laws covering special education and bilingual students often heavily influence teacher assignments, as do union contracts.

How much flexibility principals can eke out of the new system depends on their experience, their skills, and their willingness to take risks.

For school-based budgeting to produce significant results, "you have to have some ability to change what you're doing with your dollars that are spent on staff because that's all your budget," says Ms. Miles, the director of Education Resource Management Strategies, a Dallas-based consulting firm that specializes in issues of resource allocation.

Yet in most cases, schools have been given limited, if any, control over personnel funds.

In Boston, schools receive an allocation for staffing and instructional supplies. Theoretically, they can distribute that money to meet the educational priorities of their school.

"The reality is that there are a lot of constraints on what they can and cannot do," says John P. McDonough, the 65,000-student district's chief financial officer.

'Slow and Tortuous'

Milwaukee began to decentralize its budget in 1991-92, when each of the district's 162 schools was required to involve parents and teachers in decisions at the school site. At the same time, the central office began shifting the control of money out to the schools.

The department of curriculum and instruction, for example, spread $1 million among the schools, based on their enrollment, for spending on professional development. In the past, department officials had determined what training teachers needed and when.

Four years ago, the district shifted control over more than $10 million for building operations to the schools. Principals now oversee the staffing levels and purchasing of supplies for cleaning and minor maintenance. Three years ago, the district decentralized money for guidance counselors.

The school system also created a school budget committee made up of principals and district-level administrators to help compile the districtwide budget and advise the superintendent about the process of decentralization.

This school year, about 72 percent of the district's $813 million budget is under the direct control of schools.

Principals now have some say over the mix of staff positions within their buildings. They decide how many substitute teachers to use and which textbooks and supplies to buy.

But they still have little control over who works in their building. Teachers fill job openings based primarily on seniority provisions in the union contract. Schools have more control over new hires.

Warren D. Braun, the vice president of the school board, describes the massive shift toward school-based budgeting as "slow and tortuous." Once personnel costs are accounted for, he says, there's little money left over for schools to innovate.

'A Possibility Thinker'

Even so, principals say the situation is light years ahead of the way things used to be.

"The empowerment to use that funding in ways that are appropriate to your school is one of the most exciting things that has happened," says Denise Neicheril, the principal of Clarke Street Elementary School.

When she started as principal 12 years ago, she would receive long budget sheets that were determined by the board. Schools could not transfer funds from one line item to another. Anything she wanted, she had to request in writing from the central office. Even if the answer was yes, the process could take months.

"Then there were very arbitrary things that were almost humorous," Neicheril says. "The school would get $2,000 in the budget for a new copier. And if I said, 'I have some money from donations; I want to buy a specific kind of copier,' they'd say, 'You can't do that. Only middle schools can purchase that kind of copier.'"

How much flexibility principals can eke out of the new system depends on their experience, their skills, and their willingness to take risks.

Clark Lovell, the principal of Alexander Hamilton High School, estimates that of his school's $7 million budget, only about $1.5 million is really discretionary money.

"However," he adds, "I can manipulate figures. My staff and I can do things to improve those numbers, so that I can have more money left over at the end of the year."

Last year, for example, the school decided to cover teacher absences internally instead of hiring substitutes. That saved $30,000, which the school poured back into its programs.

"The beauty of all this is that people are making much better decisions that they would never have made before," says Robert C. Jasna, the superintendent of the 106,000-student district.

'Shifting the Blame'

Often, however, schools are given monetary authority only when budget cuts are needed.

Seattle, for example, must reduce spending by $20 million over the next two years, at the same time that it is shifting more control of those resources to the schools.

"One of the ironies is that, in many places, school-based budgeting is being talked about and implemented simultaneously with very controlled spending," says Berne of NYU. "So people at the school level often see this as simply shifting the blame for making cuts."

Union cooperation and participation are often vital in the shift of control to schools.

Unions often worry that school-based budgeting will result in a loss of jobs or privatization of services. In the Edmonton public schools in the Canadian province of Alberta, for example, district officials pushing a decentralization plan had to assure employees that, though their responsibilities might change, they would not lose their jobs.

'The beauty of this is that people are making much better decisions that they would never have made before.'

Robert C. Jasna
Milwaukee superintendent

In Los Angeles, the 192 schools with control over their budgets can purchase some services and supplies from outside vendors, says Henry Jones, the district's chief financial officer. "But when it comes to the big items that may affect personnel," he says, those issues are still being negotiated.

Schools that can spend their money and organize their programs differently often require exemptions from provisions in the union contract that specify everything from class size to release time for teachers.

The Milwaukee Teachers Education Association has approved almost 50 such exceptions over the past three years. Governance teams at 10 schools, for example, can now recruit and select teachers without regard to seniority. Other schools have experimented with longer school days and years as well as with block scheduling.

But the union has refused to give school administrators substantial control over who works in their buildings. The union also put its foot down when the district proposed creating "enterprise" positions within its central office.

Under that proposal, departments such as curriculum and instruction would have allocated some of their monies directly to schools, which could then have decided whether to buy back services such as teacher evaluation and support. If enough schools had wanted the service, the department would have created a position and hired someone to staff it.

The union viewed the proposal as a first step toward privatization.

"Organizationally, we've kind of drawn the line and said that decentralization, as far as it's been implemented, is fine," says Barry Gilbert, the union's assistant executive director. "But we're opposed to the buyback and contracting out and privatization of services, and we've been supported on that by the board."

For the coming year, the school board has agreed to reallocate $1.5 million from purchasing and warehouse services to school budgets. But it specified that schools must use the money to buy services through the department to ensure that no jobs are lost.

Saving Costs?

One frequent assumption is that school-based budgeting will save money.

Under the traditional system, schools that have money left over at the end of the year often scramble to spend it any way they can rather than relinquish it to the central office. When schools are allowed to carry savings over from one year to the next, the theory goes, they have a greater incentive to spend their money wisely.

When the central office controlled the budget for substitute teachers in Milwaukee, for example, it ran a $6 million deficit. Now, it is balanced.

Next school year, the district will reallocate $2.9 million to the schools for maintenance and repairs on instructional items such as computers and copiers. They must allow the department to bid on the work first, before they can seek outside vendors.

In the past, says Larry L. Lenox, the district's director of school and community services, schools perceived such repairs as essentially free. If they requested a carpenter to hang a backboard on a basketball court at $ 21 an hour, or purchased new computers that would require upkeep, they didn't give it a second thought.

"These things are controllable at the school level," he argues. "So we're saying, 'You have that money. If you can save money, you can do whatever you want with it. However, if you go over budget, you're responsible as well.'"

But others caution that shifting spending control to the schools may not bring reductions in either spending or the size of the central office.

"When schools have the resources and accountability, they need more help," says Michael Strembitsky, the former superintendent of the Edmonton schools in Canada.

In other words, the central office doesn't just fade away. Its role must change. The services schools require may be different. For example, the district may need to expand its information-management system or its ability to broker contracts between schools and outside suppliers.

Others fear that school-based budgeting will result in the loss of purchasing power and bring duplication of many tasks best performed in one central office, such as bus transportation or the coverage for long-term sick leave.

Too Slow?

Tensions flared in Milwaukee last month over whether the district has moved fast enough to change the way it operates.

In April, the school board voted to shift $6 million for next school year into the elementary schools. The board also voted to create a task force that will look at a "radical restructuring" of its central administration. (See Education Week, May 7, 1997.)

Board members were concerned that elementary schools are underfunded and need to spend more resources on improving learning in grades K-3. They also complained that the administration has grown, despite the push for decentralization.

Mary Bills, who retired from the board late last month, wanted to go even further. She proposed a complete transfer of all spending authority to the schools.

"I think we've got to stop this trend of the talk of decentralization, yet the money is going centralized," she says. Her proposal to eliminate all central-office positions not required by state or federal law, except for auditing functions, was rejected.

In contrast, the unions representing Milwaukee's teachers and principals think the district should slow down the process.

"I think, perhaps, that it's gone too fast and it's gone too far," says Mike Sonnenberg, the principal of Pulaski High School and the president of the Administrators' and Supervisors' Council. "We need to step back, take a look at what we've done, and see if it's made a difference in meeting the needs of kids. Our principals also have indicated that they're absolutely overwhelmed right now with the task, and they can't do any more."

In particular, principals are wondering whether they should spend time on budget matters that are not directly related to instruction.

Lovell, the principal at Hamilton High, says he is uncomfortable dealing with things like facilities and maintenance. "Do I want it to go further?" he asks. "Sure. But at the same time, I don't want to be put in the situation where, if a motor goes out on an air conditioner, I have to spend dollars on equipment and it's going to affect student learning."

'No Excuse'

The bigger question is whether giving schools control over their budgets improves student achievement.

In Milwaukee, schools have chosen to spend much of their money on support services and personnel. The number of guidance counselors, librarians, nurses, and other support staff has grown from 223 to 306 since 1991-92.

Many schools, such as Fritsche and Clarke Street, initially chose to spend part of their budgets on assistant principals and secretarial help. The number of principals and assistant principals in the school district has grown from 276 to 352 in the past six years. And the number of school-based clerical staff has risen from 403 to 455.

To Bills, the former board member, that doesn't sound like spending that will help out in the classroom.

"I understand it, actually," she says, "but it's no excuse. There seems to be a trend toward specialists and coordinators, and instructional or administrative support, as opposed to focusing that money on direct instruction in the classroom in a way that benefits children."

Principals argue that they need the extra administrative and office help. And, they say, those extra employees are often able to provide direct help to teachers and students.

The year before Fritsche added another assistant principal and a guidance counselor, Principal Andrekopoulos notes, 37 students failed the 6th grade. The following year, only six did. He attributes that success largely to the work of the new employees, who were given the assignment of working with the 6th grade class.

Coherent Vision

Districts such as Los Angeles and New York City are trying to make the connection with learning more direct, by tying a school's budget directly to its school improvement plan.

But many experts admit that school-level educators need help in seeing how they can realign resources to support a coherent vision of teaching and learning.

The University of Wisconsin's Odden says his studies of school-based budgeting in Britain and in Victoria, Australia, have found that once schools receive their budget in a lump sum, principals can cite at least a dozen examples of how they are using resources differently. Usually, he added, there is a strong link between those decisions and the school improvement plan.

"You need a very clear agreement between the district and the school on what the achievement targets are," he says, "so that the school knows exactly why it's getting the money."

Vol. 16, Issue 36, Pages 23, 25-28

Published in Print: June 4, 1997, as Power of the Purse
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