SCHOOL FUNDING MYTHS & STEPPING OUTSIDE THE “NEW NORMAL”

by schoolfinance 101/Bruce B. Baker | http://bit.ly/hITUO8

February 16, 2011 - I’ve been writing quite a bit lately about rather complex state school finance formula issues. That is much the point of this blog.  But it may be hard for some to see how my recent posts on school finance relate back to the broader reform agenda, and to understand the implications of these posts for state policies. Let me try to summarize these posts – posts on spending bubbles, the “New Normal” and school finance PORK.  My overarching goal in these posts is to explain that much of the reformy rhetoric about budget cuts and the “New Normal” is based on myth about how school funding works and what we should be doing in these catastrophic economic times.

Here are the myths and some of the realities.

Reformy myth #1: That every state has done its part and more, to pour money into high need, especially poor urban districts. It hasn’t worked, mainly because teachers are lazy and overpaid and not judged on effectiveness, measured by value-added scores. So, now is the time to slash the budgets of those high need districts, where all of the state aid is flowing, and fire the worst teachers. And, it will only help, not hurt.

Reality: Only a handful of states have actually targeted substantial additional resources to high need districts. See www.schoolfundingfairness.org. And the effort of states to finance their elementary and secondary education systems varies widely. Some states have in fact systematically reduced their effort to finance local public schools for decades. That is, the tax burden to finance public schools in some states is much lower now than it was decades ago. Very few states apply much higher effort than in the past.  See: http://schoolfinance101.wordpress.com/2010/12/23/is-it-the-new-normal-or-the-new-stupid/

Reformy myth #2: The only aid to be cut, the aid that should be cut, and the aid that must be cut in the name of the public good, is aid to high need, large urban districts in particular. The argument appears to be that handing down state aid cuts as a flat percent of state aid is the definition of “shared sacrifice.” And the garbage analysis of district Return on Investment by the Center for American Progress, of course, validates that high need urban districts tend to be least efficient anyway. Therefore, levying the largest cuts on those districts is entirely appropriate.

Reality: As I have discussed in my series of recent posts, if there are going to be cuts – if states really believe that cuts to state aid are absolutely necessary, many state aid formulas include aid that is more appropriate to cut. That is, aid to districts who really don’t need that aid. Aid to districts that can already spend well above all others with less local effort. Aid to districts that will readily replace their losses in state aid with additional local revenues (or even private contributions). That’s the pork, and that’s where cuts, if necessary, should occur.

Reformy myth #3: The general public is fed up and don’t want to waste any more of their hard earned tax dollars on public schools. They are fed up with greedy teachers with gold plated benefits and fed up with high paid administrators. They don’t care about small class sizes and…well… are just fed up with all of this taxing and spending on public schools that stink. As a result, the only answer is to cut that spending and simultaneously make schools better.

Reality: The reality is that local voters in a multitude of surveys rate their own local public schools quite highly and that local voters when given the opportunity, even during the recent economic downturn, show very high rates of support for school budgets – including budgets with significant increased property taxes (the most hated tax). As I noted in a previous post, when New Jersey handed down state aid cuts to 2010-2011 school budgets and when- for the first time in a long time- the majority of local district budgets statewide failed to achieve approval from local voters, it was still the case that the vast majority (72%) of local budgets passed in affluent communities – in most cases raising sufficient local property tax resources to cover the state aid cuts. In another case, local residents in an affluent suburban community raised privately $420,000 to save full day kindergarten programs. Meghan Murphy’s analysis of Hudson Valley school districts shows that New York State districts also have attempted to counterbalance state aid cuts with property tax increases, but that the districts have widely varied capacity to pull this off.  Parents in a Kansas district are suing in federal court requesting injunctive relief to allow them to raise their taxes for their schools (they use faulty logic and legal arguments, but their desire for better schools should be acknowledged!).

Reformy myth #4: None of this school funding stuff matters anyway. It doesn’t matter what the overall level of funding is and it doesn’t matter how that funding is distributed. As evidence of this truthiness, reformers point to 30+ years of huge spending growth coupled with massive class size reduction and they argue… flat NAEP scores, low international performance and flat SAT scores. Therefore, if we simply cut funding back to 1980 levels (adjusted only for the CPI) and fire bad teachers, we can achieve the same level of outcomes for one heck of a lot less money.

Reality: First of all, these comparisons of spending now to spending then are bogus. I address the various factors that influence the changing costs of achieving desired educational outcomes in this post: http://schoolfinance101.wordpress.com/2011/01/12/understanding-education-costs-versus-inflation/. Second, rigorous peer reviewed studies do show that state school finance reforms matter. Shifting the level of funding can improve the quality of teacher workforce and ultimately the level of student outcomes and shifting the distribution of resources can shift the distribution of outcomes. http://www.tcrecord.org/content.asp?contentid=16106 Similarly, constraining education spending growth over the long term can significantly harm the quality of public schools. See: http://schoolfinance101.wordpress.com/2010/04/22/a-few-quick-notes-on-tax-and-expenditure-limits-tels/

An opportunity for states?

I would argue that now… right now… represents a real opportunity for those states who actually want to step up, and really invest in the quality of their education systems and use the quality of their education systems to drive their economic futures.

I stumbled across this article http://www.foxnews.com/us/2011/02/13/states-offer-tax-breaks-guarantee-jobs/ on the Fox News website the other day, and it presents some useful insights for state policy makers regarding tax policy decisions and economic growth. I’ve written about the same point very early in my blogging (that the Small Business Survival Index in particular, misses some big points about location selection). Here’s a short section of the Fox News piece:

But there’s a catch to the anti-tax, pro-business rhetoric: Businesses consider a range of factors when deciding where to locate, including the quality of schools, roads and programs that rely on a certain level of public spending and regulation. And evidence suggests there is little correlation between a state’s tax rate and its overall economic health.

“Concerns about taxes are overstated,” said Matt Murray, a professor of economics at the University of Tennessee who studies state finance. “Labor costs, K-12 education and infrastructure availability are all part of a good business climate. And you can’t have those without some degree of taxation.”

States’ tax rates also do not predict their resilience during an economic downturn.

Arguably, no time is better than now. Other states are jumping on board with the “New Normal” reformy logic that slashing education budgets, increasing class sizes and narrowing curriculum around tested content areas is the only way to go. Yet, educated parents invariably want small class sizes (often topping the list of preferences for private or public schools) and want their children to have intellectually stimulating and broad, enriched curriculum. The current environment presents a great opportunity for some states to step outside the “New Normal” and truly race to the top with real investment in their public schooling systems.