Equity and Adequacy in Educational Finance. ERIC
by Hadderman, Margaret
Since establishing educational systems in the 1800s, most states have
experienced problems in trying to equalize education funding from school
to school and district to district. Wide-spread dependence on local property-tax
revenues has "meant that students living in school districts with high-priced
residential or commercial property continued to have substantial-ly greater
resources available to support their education" than students residing
in poorer districts (Rebell 1998).
WHAT IS THE EXTENT OF FINANCIAL DISPARITY?
Twentieth-century efforts to offset inequities via taxation-equalization
measures (foundation plans, legislative caps, and redistribution schemes)
have been only partly successful, benefiting taxpayers more than students.
During the 1960s, "affluent districts routinely spent twice what nearby
poorer ones did, and sometimes four or five times as much" (Miller 1999).
Moreover, wealthier communities can afford to spend more per pupil while
taxing themselves at lower rates.
Today, after nearly three decades of litigation (beginning with California's
famous 1971 "Serrano" decision), financial disparities among districts
and among states remain high. In New Jersey, 1995-96 per-pupil expenditures
ranged from a low of $5,900 to a high of $11,950. The range for the same
year in Illinois ($3,000 to $15,000) was even more inequitable (National
Conference of State Legislatures 1996). In 1998-99, per-pupil spending
varied from $10,140 in New Jersey to $3,632 in Utah (National Center for
Education Statistics 1999).
IS THERE HOPE FOR REMEDYING FISCAL EQUITY PROBLEMS?
The 1990s have witnessed some promising developments building on several
decades of educational initiatives and a landmark Kentucky Supreme Court
The first involves a policy shift from horizontal equity (equal distribution
of resources in an absolute sense) to vertical equity (distribution of
revenue in pursuit of equality while considering differences among types
of districts) and equal opportunity/fiscal neutrality (elimination of unjust
differences among expenditures) (Arnold 1998). These latter two conceptualizations
of equity are manifested in the first and second "waves" of fiscal equity
litigation (1971-73 and 1973-89), which considered interpretations of equal-protection
clauses in state constitutions (Rebell).
Second, a movement focused on school- and student-level equity rather
than district-level equity is occurring, thanks to administrative decentralization
and school-based management reforms. This movement's success hinges on
drastic improvements in school-level data collection and fiscal oversight
at all levels.
However, the most promising development is the shift from equity to
educational adequacy, which is the attainment of sufficient funding levels,
in absolute terms, to produce the likelihood that students will achieve
at acceptable, specified levels. Adequacy has played a key role in court
litigation deciding the constitutionality of state school-finance systems,
beginning with Kentucky in 1989. Instead of focusing solely on monetary
inputs, courts and policy-makers are stressing attainment of high minimum
outputs as a primary goal in school finance (Clune 1994). Suddenly, an
equal share of too little is becoming unacceptable in many states.
According to Allan Odden (1999), the shift to educational adequacy requires
development of a new finance system linked to strategies for improving
both average and special-needs students' performance. The adequacy movement
offers educators and policy-makers an unprecedented opportunity to blend
equality concerns with ongoing school-improvement efforts stressing quality,
accountability, and higher academic standards.
HAS GENUINE PROGRESS BEEN MADE IN THE COURTS?
Although some experts believe school-finance litigation's overall scorecard
has been mediocre, others see a more positive trend during the 1990s. According
to Rebell, "Since 1989, plaintiffs have won 15 of 22 major court decisions."
Terry Whitney predicts an unending number of future lawsuits, noting that
Delaware, Hawaii, Iowa, Mississippi, and Nevada are the only states that
have not been sued.
A few noteworthy cases suggest that progress is being made. In Kentucky,
Massachusetts, Tennessee, and New Hampshire, "school finance litigation
prompted wholesale review of the way the state provides public education
to its citizens" (DeMitchell 1999).
Longstanding adequacy suits in New Jersey, Texas, and Louisiana have
been resolved in favor of plaintiffs. Vermont's Equal Opportunity Act of
1997 (Act 60) will transform the state's entire tax system via a statewide
property tax (Whitney 1998). In July 1998, the Arizona Supreme Court upheld
lawmakers' latest school-facilities finance plan, ending a seven-year lawsuit
Despite political and economic complexities, litigation has been effective
in many states (Reed 1998, Ward 1998). Reed notes that five states with
winning litigants achieved an average equity gain of 29 percent; three
with losing plaintiffs experienced an average equity decline of 9.2 percent.
WHAT ARE SOME PERSISTENT CHALLENGES TO FISCAL EQUITY/ADEQUACY?
One issue is whether education is a fundamental right. Because state
constitutions vary widely, not all courts will view education as a fundamental
right (Ward). A federal precedent was set by the 1973 "Rodriguez" decision,
in which "the U.S. Supreme Court held that education was not a fundamental
right under the U.S. Constitution" (Ward).
Another set of problems plague state-aid funding formulas. Two experts
view such formulas as "fatally flawed" unless they include several components:
an equitable, student-centered cost-accounting system; efficiency and performance
incentives; facilities maintenance provisions; a strong accountability
provision; and a committed community tax effort (Solomon and Fox 1998).
Determining the correct mix of tax revenues is equally challenging.
A blend of targeted funds, higher state aid, and adjustments of taxes may
be needed in most states to reduce disparities. Factoring in external (fund-raising)
revenues and cost differences for educating groups of special-needs children
adds to these complexities (Arnold).
Districts' inefficiencies in allocating additional funds and maintaining
the same spending patterns regardless of monies allocated are two interrelated
obstacles to garnering public support from skeptical taxpayers (Solomon
Disrepair of school facilities is a pressing problem. Arizona, New Mexico,
and Colorado won lawsuits based on inadequate funding for facilities (Whitney).
State differences (population density, stability, poverty, minority
composition, and other demographic factors) also affect equity considerations
and make interstate comparisons difficult (Hodgkinson 1999).
Finally, legislatures' provision of "adequate" amounts for a decent
education may be based more on politics and available funds than on what
is required to achieve targeted student outcomes (Picus 1999). Recent budget
surpluses in many states may mitigate this problem. However, court-mandated
schemes are no substitute for political will. Defining and achieving educational
adequacy for all students remains an elusive goal for states.
WHICH FINANCE POLICIES AND PRACTICES FAVOR EQUITY AND ADEQUACY?
District and state policy-makers can rely on several strategies in their
pursuit of greater equity in school finance. Augenblick and associates
(1997) cite a U.S. General Accounting Office report that concluded "the
most important factor contributing to district-to-district equity" was
poor districts' willingness to tax themselves at over "twice the rate of
wealthier districts." State policies also matter. The larger a state's
contribution to K-12 funding, the greater the equity among districts. Targeting
state funds to poorer districts also increases equity.
Augenblick and associates identify four options for converting adequacy
to a funding formula: historical-spending (based on a district's actual
expenditures in a prior year), expert-design (based on anticipated needs
and prices for a model district), econometric (based on the spending/pupil-performance
relationship), and successful-schools approaches. The last method may be
preferable, they say, since it is based on examining actual expenditures
in several demographically "typical," but highly successful, districts.
For Clune, implementing true adequacy would require each district to
adopt a set of high minimum goals, identify needed resources for achieving
them, and devise a long-range investment plan for deploying resources and
developing instructional programs. The price tag would be $5,000 per disadvantaged
pupil, or $25 billion nationwide.
Odden wants nothing less than a new structure that aligns school finance
with proficiency-based policy system goals. There would be five elements:
a base spending level considered "adequate" for the average child; an extra
$1,000 for each child from a low-income background; an extra 130 percent
for each disabled student; an (undetermined) extra amount for each English-as-a-Second-Language
student; and a price adjustment ensuring comparable spending power.
A report by the National Conference of State Legislatures identifies
three building blocks of an adequate school-finance system: articulating
educational objectives for students; identifying and acknowledging the
educational capacity needed to accomplish these objectives; and supporting
that capacity with sufficient funding.
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