ERIC Identifier: ED474305
Publication Date: 2003-05-00
Author: Siegel, Dorothy
Source: ERIC Clearinghouse on
Educational Management Eugene OR.
Performance-Driven Budgeting: The Example of New York City's
Schools. ERIC Digest.
School-based planning for instructional improvement has been a major national
education reform focus for more than two decades. School-based management, the
idea of putting schools in charge of some of their own instructional operations,
first emerged in the U.S. during the 1970s. However, most school-based
management sites received only limited power over issues central to
instructional improvement, and were rarely granted any autonomy in budgeting
(Siegel and Fruchter 2002).
Two decades ago, districts across the country began to experiment with
school-based budgeting. For example, in the mid-'80s, the Chicago Public Schools
began allowing local schools to make a range of budgetary decisions, and Seattle
schools began handling their own budgets in the late '90s. The idea was to allow
the people who are closest to the classroom-primarily the principal, teachers,
and parents- to decide how to spend their school's money. However, few districts
explicitly linked control over budgeting to efforts to improve student and
school performance (Lauber and Warden 1995). These efforts usually yielded
greater discretion over mostly marginal expenditures, not greater autonomy.
In Canada, the Edmonton, Alberta, public-school system began an experiment in
school-based planning in 1976. Today, approximately 92 percent of the revenue
that the district has the discretion to allocate (or about 80 percent of the
district's total budget) is "planned directly by the schools with input from
staff, students, parents, and the community."
Performance Driven Budgeting (PDB), a 1997 initiative of then-Chancellor
Rudolph Crew of the New York City public-school system, is modeled on the
Edmonton experience. PDB explicitly links school-level budgeting and school
planning; that is, decisions about resources must be aligned with
school-developed instructional-improvement plans.
In 1997, New York University's Institute for Education and Social Policy
began an independent three-and-a-half-year evaluation of the implementation of
PDB's pilot phase at all three levels of the NYC school system: central office,
community school district (hereafter "district"), and school (Siegel and
Fruchter). A companion impact study assessed the effect of that pilot project on
student test-score performance (Stiefel and others).
This Digest highlights how PDB came about; its primary goal; how it was
operationalized; what major changes it brought at the central office and in
pilot schools; and what has been learned from the experience in New York.
HOW DID PDB ORIGINATE?
In mid-1996, a planning team of key
central-office administrators, district representatives, education researchers,
school reformers, and teachers' union officials traveled to Edmonton, Alberta,
to attend a conference on school-based budgeting, where they learned about
Edmonton's decentralized school system. A few months later, Chancellor Crew
articulated a vision of a performance-driven school system that "focuses its
energies on the sole goal of improving performance in teaching and learning" by:
* Defining clear standards for student learning
Identifying educational strategies for all students to meet these standards
Aligning all resources, policies, and practices to carry out these strategies
Using the data to drive continuous improvement and holding the entire system
accountable for student performance (Siegel and Fruchter)
The chancellor invited New York City's thirty-two semi-autonomous districts
and schools to pilot PDB, a key component of a performance-driven system. Their
task, Chancellor Crew explained, was to design and develop innovative strategies
for eventual systemwide implementation, and to identify "legal, contractual,
accepted practice, or other constraints which limit local flexibility and
discretion over the use of resources."
While the districts were responding to the chancellor's invitation, a school
governance law was passed in late 1996 that transferred control over those
districts and their schools from local elected school boards to the chancellor,
and simultaneously made school-based planning teams and school-based budgeting
Chancellor Crew launched PDB in early 1997 in sixty-one pilot schools in four
of New York City's districts. One year later, leadership of PDB was transferred
from the central office to a Core Group of directors of operations, primarily
from the participating districts. The Core Group's chief task was to develop
Galaxy 2000, a new school-budgeting and financial-management system. By the
2002-03 school year, almost all elementary and middle schools and their
districts were on the Galaxy system.
WHAT IS THE GOAL OF PDB?
PDB's goal, according to Crew, is
to "provide local educators with increased control and flexibility over the use
of resources so that they [can] engage in more creative program development,
more effective problem solving, and more efficient use of resources to improve
Achieving this goal requires a systemic focus on improving classroom
instruction. Decisions about improving instruction must be made at the school
level, involve all school constituencies, and be supported by the district and
the central office.
Further, Crew explained, making decisions at the school level necessitates
redefining "relationships and decision-making authority so that decisions about
the use of resources are directly linked to effective
HOW WAS PDB OPERATIONALIZED?
Implementing PDB in New York
City was intended to be a fluid process. Each district was allowed to determine
the broad priorities and level of flexibility for its schools, based on local
conditions and preferences. The Galaxy 2000 computerized budgeting and financial
management tool was designed to accommodate considerable variation from district
to district and school to school.
When the central office gave its annual funding allocation to the districts
in the late spring or summer, the PDB districts, in turn, allocated those funds
to their schools. PDB schools were able to make many of their own instructional
decisions, and budget accordingly, unlike other New York City elementary and
middle schools, whose budgets were determined by their districts.
PDB schools aligned their budgets with comprehensive educational plans that
their school-leadership teams had developed. Galaxy allowed the schools to see,
budget, and manage all their money, both tax levy and reimbursable, for almost
all personnel and nonpersonnel services. Purchases were made and paid for
online, with expenses reflected immediately in the school's budget. PDB schools
moved their money from category to category, and program to program, as students
enrolled or left, as needs changed, as estimates proved inaccurate, and as
allocated funds were cut or increased.
WHAT CHANGES WERE INVOLVED AT THE CENTRAL OFFICE AND IN PILOT
Over time, the central office began to move away from traditional
forms of hierarchically mandated allocations, procedures, and operations toward
a more flexible, user-friendly, response-driven support and provision system. By
2000, the central office had made major changes in its policies and practices.
Transferred authority for instructional planning and budgeting decisions to the
Established the school planning team as the key decision-making unit
Created a framework and tools for school-based instructional planning built on
analysis of student data
Developed Galaxy 2000, a computerized budgeting and financial management system
built on school planning decisions
*Began to develop the capacity to make this performance-driven system work
During this period, the central office introduced systemwide content and
performance standards, a universal requirement for school and district
instructional-improvement plans based on analysis of student data, a school
self-assessment instrument, and a set of accountability tools focused on student
achievement. It also published comprehensive school expenditure reports, made
business practices more efficient, improved its technology and data systems, and
installed School Leadership Teams with responsibility for planning and budgeting
in every school.
The central office greatly increased the districts' control and flexibility
over resources. It decentralized fiscal responsibility to the districts, using a
differentiated approach to determine which districts were capable of more
autonomous operation. The central office also decentralized some functions to
the districts, increasing districts' and schools' control over system resources
by more than 8 percent. Once operationalized, the Galaxy system drove change
upward through the district and central fiscal systems.
Similarly, the PDB pilot schools were able to budget and spend their
allocations with much greater flexibility, "matching dollars to needs," as one
principal described it. With complicated funding rules and efficiency measures
built into Galaxy, schools had the incentive, and the tool, to budget and spend
wisely. Many became effective financial managers, combining multiple funding
sources to split-fund staff; hiring staff full-time, part-time, per-session, and
per-diem; and moving money effortlessly among a variety of personnel and
nonpersonnel categories, activities, and programs, efficiently scraping together
and reapplying scarce dollars to their instructional programs.
It is likely more could have been accomplished if some of the system's
chronic problems had been addressed: a high turnover of teachers and principals,
especially in high-needs districts; a high turnover of system leadership;
inadequate and inequitable state funding; misallocation of teaching resources
that results in the least qualified teachers serving the most needy students;
and a state budget that has always arrived too late for efficient budgeting
(Siegel and Fruchter).
WHAT HAS BEEN LEARNED AND HOW IS PDB FARING TODAY?
pilot schools implementing PDB, the impact study found a small, but
statistically significant, increase in student academic outcomes. Students in
the sixty-one schools that adopted PDB had slightly higher test scores than
their counterparts in their own districts and in the city as a whole (Viadero
2002). Schools that had greater control over their planning and budgeting did
better academically than those that did not.
To improve student achievement, schools must have the capacity to plan,
budget, and respond with agility to students' needs. This requires a tremendous
commitment to developing those capacities at the school level by establishing a
framework for school decision-making; training school personnel and parents in
their decision-making, planning, and budgeting roles; and moving responsibility,
personnel, and infrastructure to the schools to support it (Siegel and
Creating school-level capacity also requires replacing a hierarchical
instruction and budgeting system with a school-level decision-making system that
integrates schools and their districts through reciprocal accountability
For now, at least, the PDB experiment has come to an end. New York City's
current mayor is recentralizing the school system after seeking and being
granted more control over the schools in mid-2002 by the state legislature. He
and the new chancellor plan to eliminate local districts and their staffs,
bifurcate instructional and operational functions, and institute a standard
curriculum throughout the city.
Even so, the PDB pilot program survived long enough to confirm its core
hypothesis: Student achievement does improve when schools have significant
control over their resources and instructional planning. The lessons learned
from the PDB experiment in New York City Schools can help to pave the way for
other districts that want to make the transition to performance-driven
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