Formula Funding of Schools

Drawing from new policies in Broward County (FL), Cincinnati (OH), Edmonton (Alberta, Canada), Pittsburgh (PA) and Seattle (WA), CPRE researcher Allan Odden has analyzed the school-based funding formulas in five large urban districts in North America. The paper was published as a chapter in a new UNESCO book (Ross & Levacic, 1998) on such formulas in four countries: Australia, England, New Zealand and the above five districts in North America.

The first decision in creating a site-based formula budgeting system is to determine how much of district operating and capital revenues should be budgeted to the school site. Though this often has been just a political decision, the substantive approach is to determine which functions should be centrally provided and which site provided, and which might be provided by either depending on the context. In their book, Odden and Busch (1998) conducted this functional analysis for a typical U.S. state, and suggested quite strongly that each U.S. state, as England has done, should create an overall school-based budgeting framework, which includes this functional allocation, that would guide districts in the processes of decentralizing their finances to school sites. They also suggest that the framework include the macro elements of the district site formula, thus allowing each district to identify the specific formula parameters but having all districts take the same general approach.

Drawing on the formulas in the five districts, Odden shows that once the amount that will be budgeted to school sites has been determined, the formulas for doing so have five general elements:

a base allocation for the "norm" student
adjustments for grade level differences
enhancements for curriculum purposes
adjustments for different student needs, and
adjustments for different and unique school needs.

Overall these elements mirror the general categories of state-to-district funding formulas; the interesting fact is that each of the districts discussed had all of these elements and often times several adjustments for each element. For example, under the curriculum enhancement category, districts provided extra funds for magnet schools, vocational education, drop out prevention, foreign language, and numerous small, targeted curriculum enhancements. In the different student needs categories, each district had multiple, elaborate and extensive adjustments for students from low socio-economic backgrounds, low achieving students, students with disabilities, students with limited proficiency in English and dropouts. Under the special school needs, each district had some type of augmentations for small school size; the most common approach was to provide each school, regardless of size, a flat "lump sum" that was sufficient to provide a principal, office secretary and perhaps even core staffing. In short, the leading edge districts in North America created relatively comprehensive and sophisticated mechanisms for formula funding their school sites, and the formulas addressed not only core educational needs but also additional educational needs related to curriculum, students and school sites.

The most surprising finding for the formulas were the adjustments for different grade levels. The common practice across the world is to provide more funds for secondary than for primary schools, and the typical pattern in the United States is to provide about 25-30 percent more for high schools as compared to elementary schools. Indeed, one of the primary contentions that has emerged as governments have shifted funding to the school site has been the higher funding of secondary students. The formulas in these five districts took very different approaches to this issue. Pittsburgh was the only district to provide such differential funding to secondary students. The other districts either provided no or very small distinctions between elementary and secondary students (Edmonton and Broward), or actually weighted the system in favor of elementary school students (Seattle). In this sense, the grade level weights in the five school districts studied represented quite different resource allocation decisions.

Although the grade level weights adopted by these five jurisdictions cannot be taken as indicative of practice across North America, they nevertheless reflect a major fiscal value shift in the basic allocation of resources for these districts, away from the traditional bias toward higher funded secondary students and toward a new bias of greater funding for elementary students, particularly elementary students in grades K-3. The rationale for this shift in resource allocation is to develop the basic skills early in the elementary career of a child, under the assumption that if students can read, write and do mathematics proficiently by grade 3, then teachers at higher grades have virtually an unlimited horizon for student achievement. Of course, this also reflects the obverse of this proposition -- that late intervention for secondary students who have not developed good literacy and numerical skills is not only inefficient but also very difficult to make effective.

There is another approach to resourcing schools that represents a strategy in between current practice, in which districts essentially provide schools with a variety of different staff, and the budgeting described above. This strategy allows the district to play a role in reallocating school resources. This approach also reflects some of the strategies now being deployed in San Antonio, in which more than 50 percent of schools have selected different comprehensive school designs. As an example of this approach, consider an elementary school with 500 students. The district could provide the following resources:

1 principal
1 instructional facilitator
20 regular classroom teachers for an average class size of 25
4 more teachers for planning and preparation time
1 reading tutor
$1000 for each child from a low income family (combination of any state compensatory education money and federal Title 1 dollars)
$50,000 for professional development, not to be spent on permanent staff
$100,000 for additional school design costs
a sum appropriate for supplies, materials, etc.
funding for its disabled students.

Some of the rationale for this resourcing configuration derives from common ingredients in several new, high performance school models. First, each school is provided a full-time instructional facilitator in addition to the principal. This position is a part of nearly all comprehensive school designs and provides ongoing instructional leadership. This kind of position is rare in schools, and so it so represents a clear reallocation of resources.

Second, the budget includes a total of 24 undesignated teacher professional positions, which is sufficient to have an actual class size of 25 plus an additional 20 percent of teachers to provide all teachers with at least one planning period a day. If a district's overall expenditure level would allow for a more generous staffing (for lower class sizes) that would be fine, but such a staffing is what the average American school is provided. The teachers for the planning and preparation time could be used for any purpose selected by the schools; in the Modern Red Schoolhouse design, for example, at least two of these teachers would be art and music teachers.

Third, each school is provided a full-time reading tutor, under the assumption that all elementary schools will have some students who need intensive early intervention in order to learn to read by the third grade. The funds from the $1,000 per low-income child category could be used to hire additional tutors for schools with poverty concentrations above 25 percent to provide a reading program that includes more tutors, such as the Success for All program. The professional development amount is high, but it is the level required to implement a higher standards curriculum program that is part of nearly all comprehensive school designs. Both of these latter two elements are also rare for a school budget, and therefore represent substantial resource reallocation from traditional practice.

Finally, alternative school designs have different specific needs, which largely could be met with some combination of the $100,000 provided for school designs, additional compensatory education funds, or funds for students with mild disabilities. Again, such a use would represent additional resource reallocation.

The point of the second example is that providing schools with a lump sum dollar budget is not the only viable way to provide schools with resources and the ability to reallocate them to the needs of higher performance school strategies. A more mixed model, that fits the general needs of many school designs, is also a possibility, and might even be more feasible as a first step towards moving more resources and decision-making about use of those resources to school sites.

For more information on the topics discussed above, please refer to the following publications:

"Case Study 3: North America (USA and Canada). School Based Financing in North America: Broward County, FL, Cincinnati, OH, Edmonton, AL, CT, Pittsburgh, PA, and Seattle Washington"
By Allan Odden
Book chapter in: Kenneth Ross and Rosalind Levacic, Ed. Needs-Based Resource Allocation in Schools via Formula-Based Funding . Paris: UNESCO, International Institute for Educational Planning.

"A Better Financing Framework."
By Allan Odden and Carolyn Busch
Chapter in: Allan Odden and Carolyn Busch. Financing Schools for High Performance: Strategies for Improving the Use of Educational Resources .