Finance Battles Show Solutions Remain Elusive

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In January, the supreme court in Alabama, a state that provides funding for its schools at some of the lowest levels in the nation, ruled the state's finance formula unconstitutional and gave the legislature a year to fix it.

In February, the Vermont high court ruled that state's funding mechanism unconstitutional, saying it leads to inequities based on a school district's local wealth. In April, the system Ohio uses to pay for its schools went down in flames.

And last month, the New Jersey Supreme Court, for the fourth time in three decades, rejected a plan for the distribution of state education funds.

All in all, it's been a tumultuous year in the world of school finance.

More than a quarter-century after the first battles over the equity and adequacy of state school finance systems, solutions are as elusive as ever. Wide disparities between rich and poor school districts persist, and in state after state, the quality of a child's education continues to be determined by where that child lives.

The problem is easy enough to establish. But exhaustive attempts to do something about the inequities have failed to bring about real and lasting reform, leaving lawmakers jaded and students in the lurch.

Since the early 1970s, more than 30 state supreme court decisions have been issued in school finance cases. Since 1989, more than a dozen finance systems have been ruled unconstitutional by state high courts; six have been ruled constitutional.

Interviews with dozens of experts at universities, in statehouses, and policy circles in recent weeks suggest that, despite years of efforts, there is little consensus about the best way for a state to distribute money for education and guard its funding system against court challenges.

"There is very little evidence about what works," said Mary Fulton, a policy analyst with the Denver-based Education Commission of the States. "And information about what does work is very hard to come by."

A Different Approach

In all the confusion, however, trends are emerging. Some states are beginning to look beyond the money, to link funding problems with larger questions.

"States are beginning to ask themselves: 'Is our funding system fair? Is it enough? And are we spending it wisely?'" Ms. Fulton said. "It's about maximizing the investment in education."

John Augenblick and John Myers, partners in a Denver school finance consulting firm, are proponents of that broader approach.

"Throwing money at the problem has not worked," Mr. Myers said. "Reform is no longer based solely on the availability of money, but on curriculum standards and student performance tied to standards."

But moving beyond the dollar signs isn't easy, Mr. Augenblick said. "It's a different approach to improving schools that's not just about money, it's about outcomes," he said. "But it's problematic. Outcomes are hard to gauge. What does attaining an educational goal cost? How much money do you need to meet goals?"

Those questions have become even more important at a time when more states are demanding that districts show they are putting education dollars to good use.

"Accountability is key," Mr. Augenblick said. "For the first time, states are linking funding systems to educational expectations, and if states assure that schools are provided adequate resources to meet those expectations, the burden is on schools."

Setback in N.J.

In the most recent finance plan proposed for New Jersey, Gov. Christine Todd Whitman sought to do just that: to link funding to statewide educational goals. Hers was the latest in a long line of proposals in the Garden State's struggle for equitable school finance that stretches back to 1973.

The governor had said she believed the plan, which relied on state curriculum standards rather than dollar parity, would finally satisfy the New Jersey Supreme Court.

But the high court ruled last month that spending disparities between rich and poor districts in the plan's funding formula violated the state's constitutional requirement of a "thorough and efficient" education. ("For 4th Time, Court Rejects N.J. Formula," May 21, 1997.)

The state failed to detail how proposed spending would enable poor districts to meet those goals, the supreme court ruled. And the ruling directed the state to measure equity by exactly the formula that Mrs. Whitman and other sponsors of the funding plan were trying to avoid: dollar-for-dollar spending parity between rich and poor districts.

The decision left lawmakers in the state--which spends more money per student than any in the nation--reeling.

"I could not disagree more with the ruling that the funding formula we devised does not provide sufficient funds," Gov. Whitman, a Republican, said last month.

'Money Matters'

So what does the recent flurry of court activity mean to school funding reform?

Some critics maintain that, however earnest and however different, the myriad attempts at reform over the years have been fruitless.

"Tremendous amounts of energies and resources have gone into court cases and reform efforts, but they've done nothing to improve student performance," said Eric A. Hanushek, an economics professor at the University of Rochester in New York. "All kinds of ideas have been generated in the last 25 years, but there's still no experience about what works."

Many others, including plaintiffs in some of the court cases and several of the state supreme courts, remain convinced that finance reform is primarily a matter of spending.

"Inequities persist and will continue to be a problem as long as school systems aren't funded at the level they need be and as long as property-tax-reliant school funding systems are in place," said Terry Whitney, an education policy analyst at the National Conference of State Legislatures in Denver.

Arthur MacEwan, an economics professor at the University of Massachusetts Boston, agreed that adequate and equitable spending is crucial.

"Money matters," he said. "A tremendous amount of evidence shows that money, when effectively spent, does wonderful things to improve schools."

In many of the recent cases, the courts have found that relying too heavily on local property taxes to pay for schools is unfair to students whose communities have little property wealth.

"It's an access issue," said Craig Foster, the executive director of the Equity Center in Austin, Texas, which represents hundreds of poor school districts in the state. Texas, which has adopted high academic standards and broad technology goals, relies heavily on local property taxes to pay for public schools. Yet many property-poor districts cannot generate enough revenue for local schools to succeed, Mr. Foster said.

Although experts acknowledge that school funding formulas that are overly dependent on property taxes are a problem, they are careful to point out that the tax is one of the most reliable sources of revenue for schools.

Property taxes are "not a bad tax," Ms. Fulton of the ecs said. "It's how we use the tax dollars that's unfair."

Relying too heavily on sales and income taxes to pay for schools, she said, can leave education vulnerable to economic downturns.

In for the Long Haul

For their part, lawmakers have learned that solutions to funding inequities come only when there is the long-term political will to buoy reform efforts through the changing political tides.

In Wyoming, the supreme court ruled in 1995 that the state's finance system results in unjustified spending disparities between large and small districts. The high court has ordered the legislature to define a "proper education" and figure out a way to pay for it by next month. (See related story, this page.)

Lawmakers there are struggling to meet the high court's imposed deadline in a special session this month. But they recognize that a reform plan that will pass court muster will require years of oversight and political commitment.

There are "no overnight success stories," said GOP Rep. Bruce A. Hinchey, the speaker of the Wyoming House. "It's a long-term process."

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