Education Funding Opinion

The End of School Finance as We Know It

By Paul T. Hill & Marguerite Roza — April 29, 2008 7 min read
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A Brief History, and a New Direction

After Arthur E. Wise, in his influential 1968 book, Rich Schools, Poor Schools, suggested that unequal school funding could be interpreted as a denial of children’s equal-protection rights, the Ford Foundation invested millions in a research and litigation initiative. Scholars documented inequalities in spending, particularly between rich and poor districts in the same state, and lawyers filed suits in 45 states seeking changes in the states’ funding policies.

It was all about the money.

Though school finance scholars and litigators hoped that new funding would lead to more-effective schools for poor children, they did not worry about how the money would be used. Such decisions were left to educators.

Decisions about funding, spending, and educational programs all need to be made together, and all based on evidence about results.

Educators, though, regarded issues of funding and spending as purely technical and legal matters, not their concern. Decisions were driven by court orders, regulations, school board politics, fixed commitments to staff members, and collective bargaining. Superintendents had little leverage over spending. Principals handled only small “pin money” accounts. And teachers had no discretion at all.

But in the early 1990s, forces in the field began to eat away at the isolation of school finance. Successful lawsuits led to higher and more-equitable funding for school districts; yet, outcomes for disadvantaged students did not change much in the process. In some cases (Kansas City, Mo., for example), big money was flagrantly wasted. Many urban districts that got extra money continued spending disproportionately on students in higher-income neighborhoods’ schools. Critics noted that school finance lawsuits did little to benefit the poor students in whose names they were brought.

Education leaders came to see the consequences of leaving finance to others. Superintendents in Seattle, Oakland, Calif., and elsewhere lost their jobs because they did not know how much their districts were spending, and had run up big deficits. Superintendents were astounded, too, when research from the Center on Reinventing Public Education showed that spending patterns often undermined announced district priorities. Superintendents could announce new reform strategies, but spending was still driven by local political deals, collective bargaining agreements, regulations, and court orders.

In the late 1990s, pressure to bridge the gap between school finance and efforts to raise school performance grew. Most states, and ultimately the federal government, adopted standards-based reform laws that pledged to hold schools accountable for student learning. School programs and spending patterns were, at least in theory, to be judged on their benefits to children.


Following this line of reasoning, school finance lawyers argued that equity no longer was enough. They invoked a new financial principle, “adequacy.” States, they claimed, have an obligation to spend an adequate amount, defined as whatever it takes to educate all children to high standards. Scholars, in turn, worked up estimates of adequate spending, a task that proved to be very difficult, since no one had ever achieved the outcomes whose costs were to be estimated. Results were chaotic, often varying by billions of dollars for particular states. Yet courts in many states accepted the adequacy principle, and ordered huge spending increases.

Adequacy lawsuits were the beginning of the end for school finance as an independent field. Big-money court orders in such cases raised state spending by as much as 2 percent, and in some cases even higher, but had about the same effects as the earlier, equity-based settlements. Once districts got the extra money, they used it to increase pay for the same employees and buy more of what they were already buying. Some individual schools did find imaginative uses for the new money (thus proving that extra spending could pay off), but such improvements were rare and isolated.

School finance researchers such as Allan Odden tried to rescue the adequacy principle by arguing that court orders should mandate productive uses of the extra money. But the possible mandates identified by Odden’s research, such as lowering class size and spending more on teacher training, did not eliminate existing misuses of money. Although using extra money for such purposes can, under some conditions, measurably improve test scores, none of these reforms comes anywhere near the goal of eliminating racial and income-based gaps in student achievement.

In the early 2000s, people from outside the school finance community realized that reaching the goal of high standards for all would require a rethinking of how every dollar—and everything dollars buy, from teacher work to student time—was used.


Tom Vander Ark, a former superintendent who then headed the Bill & Melinda Gates Foundation’s education initiative, commissioned a study that would totally re-examine the linkages that connect how much is spent, what resources are purchased, and student learning. With Gates support, Jacob E. Adams Jr., a professor at California’s Claremont Graduate University, founded the School Finance Redesign Project, whose charge was to look for ways of ending the separation of school finance and educational improvement.

After five years and more than 30 sponsored studies, the redesign project has confirmed that money is used so loosely in public education—in ways that few understand and that lack plausible connections to student learning—that no one can say how much money, if used optimally, would be enough.

Accounting systems make it impossible to track how much is spent on a particular child or school, and hide the costs of programs and teacher contracts. Districts can’t choose the most cost-effective programs because they lack evidence on costs and results. The system does not support experimentation. So, we know very little about the effectiveness and cost of alternative instructional models.

We do know that schools with greater spending flexibility—in foreign countries and, here at home, in the private and charter sectors—spend more on teaching and less on support services and specialists than do U.S. public schools. Some public school teachers and principals innovate, but many of the innovators hide what they do, fearing charges of noncompliance.

Under these circumstances, how do legislators know how much to spend on public education? And how do educators know how best to spend the money they get?

The only honest answer is that, today, they can’t know these things—not because the answers aren’t there, but because our school finance system has made it impossible to find them. Yes, we can understand the links among funding levels, uses of funds, and student results, but not if the uses of funds are hidden, or hopelessly complicated, or if educators are kept in the dark about costs and trade-offs.

Decisions about funding, spending, and educational programs all need to be made together, and all based on evidence about results.

School finance can no longer be the province solely of scholars and litigators. Teachers, administrators, and principals can no longer be oblivious about the uses of funds. They need to know what other uses could be made of the same funds, and to feel a clear obligation to pursue the best uses possible.

How can we change the ways we fund education to make such things possible? The final reports from the School Finance Redesign Project, coming out this summer, will explain in detail. To summarize, the system must be:

• Transparent about how funds are used, right down to the classroom and student level.

• Open to analysis linking student characteristics, teacher attributes, instruction provided, costs, and student results.

• Flexible in light of needs and results.

• Contingent, with resources going to schools, teachers, and programs that produce student results, and, by implication, being moved away from less effective uses.

• Open to unprecedented experimentation, with new ideas on new uses of time and money, including trade-offs between teacher work and instructional technology.

A financing system based on these principles can discover new and more productive uses of existing funds. Such a system might also discover greatly more productive ways of educating children that may cost a lot more than existing methods. Then, elected officials can make informed decisions about how much to spend on education.

If public education is to accomplish goals that have never been met before, educators must search for new ideas, try out new models of teaching and learning, and always be ready to abandon a less productive practice in favor of a more effective one.

Policymakers must let this happen—not by imposing new constraints, but by eliminating rules that prevent experimentation and adaptation. States must stop attaching funds to things that should be changeable in light of evidence, such as particular instructional programs, administrative units, or teacher slots. State legislatures and school boards should attach money to students, and account for both spending and results at the student level. This means either eliminating categorical programs or turning them into “weights” in a pupil-based funding scheme.

Public officials have a choice: They can control the uses of funds via mandates, or they can learn what instruction actually costs and what options are possible. They can’t do both. The system we have, in which funding decisions and the real work of education are kept separate, might become more expensive, but it won’t get better.

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A version of this article appeared in the April 30, 2008 edition of Education Week as The End of School Finance As We Know It


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