School & District Management

Schools Feel Pressure of Efforts to Increase Fiscal Accountability

By David J. Hoff — June 07, 2005 8 min read

With systems of accountability for student achievement now widely in place, state policymakers and others are applying the principle on another front by trying to hold schools more responsible for how they spend their money.

Auditors in some states regularly calculate the percentages that districts spend on classroom resources compared with administration, while other states are scrutinizing school spending for fraud and inefficiency.

Now, a new national group is lobbying states to enact laws ensuring that 65 percent of school budgets are spent on classroom instruction. The organizers of First Class Education contend that schools waste billions of dollars a year on administrative costs.

Proposals for greater financial accountability follow naturally from efforts to improve student learning and close academic gaps between different racial and ethnic groups, one school finance expert says.

“Once you’ve said we need to improve [student] performance,” said Janet S. Hansen, a Arlington, Va.-based senior policy researcher at the RAND Corp., “at some point you have to start thinking about what that means for how you use your resources.”

The attention to the bottom line is also an attempt to get the most for a dollar in a time of fiscal constraints, another expert said.

“School budgets are tightening now, and because of that, people are looking at ways they can squeeze out inefficiencies,” said Michael P. Griffith, a school finance analyst for the Denver-based Education Commission of the States.

Although efforts to spotlight school spending come and go, Mr. Griffith said, such moves have become more intense in the past year. Here are some examples:

• The Washington-based First Class Education, formed earlier this year, has sought legislation in Louisiana, Minnesota, and Texas to reduce administrative spending and send more aid to classrooms. With the endorsement of leading Republican lawmakers in Arizona and Colorado, it is leading efforts to get initiatives on the 2006 state ballots there.

• Arizona and Virginia officials are auditing how districts spend money and finding new ways to help them cut wasteful spending and redirect it to core missions.

• In New York, the state comptroller is pushing a series of changes that would expand school boards’ powers over audits of their schools, and is seeking state funding for his office to audit each of the state’s 350schooldistricts once every five years.

“There’s much more interest in digging into school finance,” said Steven Van Hoesen, the government-relations director for the New York State Association of School Business Officers.

Classroom Dollars

39adams

While efforts to analyze spending and its impact on student achievement are laudable, one school finance expert said, the ultimate solutions aren’t always simple. For example, funneling extra dollars to classroom teachers might not be the wisest course if the teachers don’t have the knowledge and skills they need to use the new resources effectively, said Jacob E. Adams Jr., a research associate professor at the University of Washington, in Seattle.

“If you really want to have an impact on learning, you have to ask how those dollars are spent,” said Mr. Adams, who is leading a multiyear project examining how to improve the way schools are financed. “Just because the [dollars] are in the classroom doesn’t mean it’s going to the right job.”

Classroom Dollars

A new group called First Class Education is lobbying for state laws that ensure school districts spend 65 percent of their budgets on classroom expenses. Here’s how such laws would work:

• Districts would follow existing definitions of classroom and administrative expenses used by the National Center for Education Statistics. Under the definition, classroom expenses include the salaries of teachers and aides, textbooks and supplies, athletics and other activities, and tuition paid for special education students to attend programs outside their districts. Administrative expenses include facility costs, food services, and salaries of librarians, nurses, and other support personnel.

• If a district failed to meet the law’s target, it would need to increase the percentage of classroom expenses by 2 percentage points a year.

• Districts with particular circumstances—such as high transportation costs to serve a rural area—could apply for one-year, renewable waivers of the 65 percent rule. The waiver would be approved by the chief state school officer, or by the governor in states where the top education official is not elected.

SOURCE: First Class Education

But those who advocate redirecting dollars to the classroom argue that putting money where learning takes place is the first step. Schools spent about 61.5 percent of their operating budgets on classroom resources in fiscal 2002, according to the latest data published by the National Center for Education Statistics.

“It’s a two-step dance,” said Timothy F. Mooney, the communications director of First Class Education. “If the money never gets there, it can’t be spent wisely.”

School officials, however, say that argument overlooks the contributions of assistant principals, nurses, cafeteria workers, and others whose salaries are considered to be administrative expenses under the NCES definition, which First Class Education uses in its proposed laws.

“They don’t support the classroom?” said Phil Fox, the deputy director of the Colorado Association of School Executives, referring to such employees. “Hell yes, they do.”

First Class Education hopes to sponsor ballot initiatives in 2006 in Arizona and Colorado to require districts there to spend 65 percent of their operating budgets on classroom expenses. Mr. Mooney said the group plans to announce a similar effort in a third state, which he would not name.

The group’s attempt to get legislative language into a Texas school finance bill failed last month when House and Senate negotiators failed to reach a compromise on their bills. (“Texas Ends ’05 Session Without School Aid Rewrite,” this issue.)

Mr. Mooney acknowledged that First Class Education’s sponsors in Arizona and Colorado are Republicans, but said that the group has co-sponsors in Louisiana who are Democrats, as well.

The group’s chairman, Patrick M. Byrne, is a registered Independent, and is the founder of overstock.com, a Web site that sells merchandise at discount prices.

“This is an issue that can garner bipartisan support, but we’ll take the support wherever it comes from,” Mr. Mooney said.

Mr. Fox, of the Colorado school executives’ group, said First Class Education is a conservative effort to win support among voters while pitting educators and parents against each other. “This is a political effort to cripple the unions and divide teachers and parents against administrators,” he said.

Arizona Audits

For the past four years, Arizona has tried to increase the share of local education budgets that gets to the classroom.

Since 2001, Arizona’s auditor general has tracked administrative spending in every district. The effort began as an attempt to monitor how effectively schools spent new money after voters approved a 0.6-percentage-point increase in the state sales tax to supplement K-12 budgets. Since then, the percentage of dollars going to the classroom has risen by almost 1 percentage point, to 57.7 percent of total K-12 spending, according to the 2005 report from the office of the auditor general.

Gov. Janet Napolitano, a Democrat, has set a goal for districts to spend 62 percent of operating costs on classroom expenses.

But some Arizona school officials suggest that the goal is unfair.

The Dysart Unified School District analyzed its budget and found that the administrative expenses it incurs to carry out competitive federal and state grants distort the district’s figures. If the district didn’t receive those grants—which are often for administrative functions, such as staff development—it would reach Gov. Napolitano’s goal, said Mark S. Maksimowicz, the superintendent of the 15,000-student district, located northwest of Phoenix.

“We’re in essence being punished for going out and getting grant money,” he said.

Efficient and Effective

In addition to publishing reports on district spending patterns, the Arizona auditor general reviews the spending of several districts every year. The reviews track all spending and recommend ways the districts could cut administrative expenses.

Mr. Maksimowicz said the auditor general’s review of the Dysart district’s spending produced helpful suggestions on ways to save on administrative costs. As a result, the district is revising how it solicits bids from vendors for food services, transportation, and other services.

Several states, including Texas and Ohio, have conducted similar audits for several years. In 1999, the Texas comptroller’s office won an Innovations in American Government Award from the Ford Foundation and Harvard University’s John F. Kennedy School of Government for starting the reviews in that state.

In Virginia, state-contracted auditors have conducted similar reviews in seven districts and have recommended more than $9 million in savings over the past two years. The effort started as a way to ensure that the state’s increases in K-12 spending are spent wisely, said Gov. Mark Warner.

Rooting Out Fraud

While many efforts are under way to find inefficient school spending, New York officials are trying to uncover fraudulent spending.

39hevesi

After several indictments of school administrators on Long Island, state Comptroller Alan G. Hevesi is seeking a series of changes to help school board members track their finances.

The Democrat’s bill would require that every school board have a committee to review audits, and that all audits be done under the supervision of that committee, not under the superintendents or other district employees. The bill also would require all board members to attend training sessions on financial oversight. The measure has passed the Senate education committee and is awaiting action by the Assembly’s education panel.

Earlier this year, Mr. Hevesi released an audit of the Roslyn Union Free School District, a suburban district on Long Island, that found 26 school employees had spent more than $11 million in district funds for travel, car and mortgage payments, and other personal expenses.

Former Roslyn Superintendent Frank A. Tassone, a former assistant superintendent, and one other district employee have been charged with grand larceny and other felony counts in the case.

Mr. Hevesi’s proposals are an important step toward garnering the support of voters, said Mr. Van Hoesen of the state association of school business officers. Last month, voters on Long Island rejected the proposed budgets of 62 percent of the area’s districts. Statewide, 90 percent of proposed budgets passed.

“These are reasonable public-policy recommendations to help build the public trust,” said Mr. Van Hoesen, whose group helped Mr. Hevesi craft the proposal.

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