Sunday, February 10, 2013

Budgeting for Education Ignoring Cost

In its recent school finance decision, a Kansas court wrote:
Nowhere in our free market society, absent duress, would any rational individual act on an economic matter without reference to a need versus its cost.
Yet, Minnesota Governors, Republican and Democratic alike, have never submitted budget proposals based on the cost of meeting local school district's assigned responsibilities.  At one point, our legislature asked the Governor to provide cost information, so that the legislature could make rational decisions, but that effort has been abandoned.   In today's legislature, cost is irrelevant, or largely so, to the politics of school funding.    Money is pushed across the table to fund the approaches that legislators support:, but there is no evidence that anyone makes a conscientious effort to determine how much money is necessary to do the job.
Does Minnesota provide enough revenue to public school districts or not? Does Minnesota provide enough extra revenue to school districts that have extra challenges, or not.? How much does it cost, or should it cost, to attain the education goals that Minnesota law requires school districts to attain?
Minnesota now runs a proficiency based public education system, which requires school districts to educate almost all children to a predefined level of proficiency.   If a student comes to school with language skills far behind the norm, we know that it takes more effort to catch that student up and get her to proficiency.   But how much more effort does it require, and how much more should that extra effort cost?   We know that it takes more effort to educate certain students with disabilities to proficiency, and local school districts now spend $700 million per year more than special education revenues provided for that purpose.   We know that students who speak no English are more costly to educate to proficiency, but how much more should it cost to address their need?   (And how should these extra funds be used to produce the greatest result?)    We know that we are failing to reach state goals, especially for disadvantaged students?   How much would it cost to reach those goals--and what would we have to do differently, to reach them?  

One of the great failings of Minnesota's public education finance system is that neither the legislature nor the Governor makes an effort to answer these questions?   As the District Court for Kansas said: Nowhere in our free market society, absent duress, would any rational individual act on an economic matter without reference to a need versus its cost.  To his credit, the Governor is proposing to close a small part of the gap between special education costs and special education revenues.   But conspicuously absent from the Governor's budget message is any recognition that the revenues provided are not based upon a cost accounting of the actual cost of delivering the education product assigned to public education.   The legislature is holding numerous hearings on public education, but the legislature too is making no effort to establish how much it will actually cost to get to where we need to be.

The table below provides revenue information taken from four Minnesota school Districts, Minneapolis, St. Cloud, Sartell and Anoka.   I've provided them to focus attention on the importance of  recognizing that budgeting for different needs should not be based on politics, but rather should be based upon an honest accounting of the true cost of meeting students' needs.   The four districts reflect differing contexts.  Minneapolis is a large urban district with very high rates of poverty, English language learners, and students with disabilities.   St. Cloud is an urban center district in the top seven school districts in the state in terms of students eligible for free or reduced price lunches.  It has a high disability population and a significant growing immigrant population.   Sartell is a neighboring suburban-like school district with low poverty rates, low disability rates, and very few minority or immigrant students.  Anoka is our largest school district, with demographics in between Sartell and Minneapolis.  

Take a look in the table at the revenues provided per ADM (average daily membership) to each of these districts.   Minneapolis receives $327 per student to fund extended learning time, St.  Cloud $101 and Anoka $78.     The theory behind this revenue is that disadvantaged students need more learning time to catch up.  But how much extra learning time do we need to provide?  (And, of course, we need to ask also is the money paying appropriate dividends).  Shouldn't extended learning time funding be based upon a principled cost-based judgment on how much extended learning time we need.   Minneapolis receives $1500 per student in compensatory designed to address the extra educational needs of lower income students.  Where does this number come from?   Is it connected to a measurement of the cost of catching students up; is it connected to a recognized strategy to make up that difference? Or, is it the product of a political deal in which Minneapolis has been able to use its disadvantaged population as an argument for more money.    It seems to me that as long as the compensatory funding is not cost-based, it allows school districts that receive it to deny the responsibility to accomplish the mission assigned for that money, on the grounds that its not enough money.   Connecting cost to funding is not merely a device to get more money.   It is critical to developing accountability and responsibility for achieving the mission.

We have a better answer to the cost-revenue question for special education.   As I stated above, the state provides $700 million per year less to school districts than the state requires them to spend.    The amount that each school district receives is driven by the number of students with disabilities and the level of challenge presented by those students.   If you merely look at the Special Education revenues for each school district, you would conclude that Minneapolis and St. Cloud are really rolling in money.  But actually, their greater revenues actually reflect a greater deficit in special education costs over revenues.  The districts that receive more special education revenues are actually doing worse than the districts who receive less.  If you look at the "cross subsidy" row near the bottom of the table, you will see that Minneapolis has a $905 special education deficit, per student, measured across all students in the district. That is to say, Minneapolis has to transfer $905 out of the funding for each student in the district to cover special education shortfalls for the students receiving those services.  This deficit reduces the amount of money available to do the things that the legislature wants each district to do to address the needs of disadvantaged students.  

In the row labelled "Net Non Special Education Revenues," I've calculated the amount of money per student available for regular education programs of all kinds.  I do this by subtracting special education revenues, and the amount of general education revenues diverted to special education, from total revenues. You can see that the underfunding of special  education significantly undercuts the differential provided to school districts that is supposed to help them attack the educational needs of disadvantaged students.  

Finally, take a look at the role of operating referendums in creating differential in school district funding.   Minneapolis has three times the operating referendum support per student than St. Cloud, and Anoka has more than double the operating referendum per student than St.  Cloud.   Minneapolis' referendum is almost six times as high as Sartell.  Are these numbers reflective of the need of each respective school district, or do they reflect something else altogether.

MSP St. Cloud Sartell Anoka
Enrollment (ADM) 33,087 8,983 3,715 37,185
Basic $5,791 $5,883 $5,902 $5,974
Extended Time $327 $101 $0 $78 (longer school day or year)
Compensatory $1,577 $863 $65 $299
LEP $128 $70 $4 $38
Referendum $1,900 $637 $338 $1,503 (voter approved operating referendum
GenEd Total $10,427 $7,984 $6,724 $8,535
Special Ed Total $2,121 $1,713 $733 $1,411

Revenue per ADM $12,549 $9,696 $7,457 $9,946

Sp Ed Cross Subdsidy $905 $799 $428 $825
Net Non Sp Ed Rev $9,523 $7,184 $6,296 $7,710
Free Red Lunch % 65% 49% 16% 30%
LEP 22% 12% 1% 7%

Other Revenue* $1,360 $34 $128 $315
Integration Rev $544 $150 $100 $150
*2011 numbers