ERIC Identifier: ED321342
Publication Date: 1990-00-00
Author: Crampton, Faith E.
Source: ERIC Clearinghouse on Educational Management Eugene
Fiscal Policy Issues and School Reform. ERIC Digest
Series Number EA 50.
At the dawn of a new decade we look back on the 1980's as a period of
major education reform in areas ranging from restructuring curriculum to
parental choice. These ambitious initiatives advocate changes not solely
for the sake of improving education but to assist the nation in recapturing
its competitive edge (Bernstein 1988). Yet policymakers have rarely analyzed
the fiscal dimensions of reform on schools.
This digest is intended to help school district leaders understand the
most important fiscal policy issues generated by education reform and to
help them respond to those issues with sound fiscal management and an emphasis
on cost-effectiveness and accountability.
WHAT IMPORTANT FISCAL POLICY ISSUES FACE SCHOOLS?
Contemporary fiscal policy issues are tied to the educational policy
issues that emerged over the past several years of education reform. Beginning
with A Nation at Risk in 1983, reform initiatives spread state by state
leaving few untouched. Although reform efforts varied greatly across and
within states, they centered on five major areas: restructuring curriculum,
the teaching profession, student outcomes, school management, and parental
Many schools have returned to a traditional curriculum emphasizing core
subjects, increased graduation requirements, and longer school days and
years. Teacher reforms have centered on upgrading compensation through
direct across-the-board increases, incentive pay plans, and career ladders.
For student outcomes, reforms have placed greater emphasis on testing,
from kindergarten through college.
Reform in school management has focused on school sites where principals
have responsibility for planning, instruction, and budgeting often in collaboration
with school councils. Choice programs allow parents to select schools either
within a district or across district lines but are generally limited to
All these reforms may be synthesized into two critical fiscal policy
issues: How is education reform to be financed, and do the dollars spent
on education reform make a difference?
The first question speaks to the appropriate balance in the local/state/federal
partnership, an unresolved policy issue. The second focuses on student
outcomes, more specifically, increased student achievement. (For a sobering
discussion of the results of twenty years of research on the relationship
between expenditures and student performance, see Eric Hanushek's 1989
WHY SHOULD SCHOOLS BE CONCERNED WITH THESE ISSUES?
Reforms cost money; they require either an infusion of new dollars or
a redistribution of current revenues. Reforms mandated at the state and
federal levels, if not fully funded, increase the fiscal burden on school
districts or cause a shift in funding from other programs. Locally based
reforms have the same fiscal impact since they necessitate either an increase
in local taxes or a reduction in spending on existing programs. Here are
examples of potential costs from each of the reform areas:
Restructuring curriculum. Increasing graduation requirements starts
a "domino-effect" on costs, the largest expenditure being additional staff
salaries. More rigorous graduation requirements may also translate into
a longer school day and increased costs for utilities and maintenance.
The teaching profession. Compensation reform to retain current teachers
and attract talented newcomers, incentive pay plans, and career ladders
are the costliest of education reforms, because salaries and benefits consume
over half of the district operating budget (Fox 1987).
Student outcomes. Implementation of districtwide competency-based testing
may appear to entail minimal cost, but small costs snowball. They include
startup costs, purchase or development of tests, scoring, inservice education,
and staff release time.
School management. Moving the level of decision-making to the school
may appear to be cost-free, but substantial hidden costs exist. Increased
clerical demands come with site-level planning, budgeting, and school councils.
Inservice education for administrators, teachers, and school council members
is essential to prepare them for the transition from centralization to
decentralization (White 1989).
Parental choice. Choice programs vary widely in cost. Even small-scale
indistrict plans involve administrative coordination costs. Also school
districts generally spend resources in educating parents as to the choices
available, for example, through mailings.
With regard to the second fiscal policy issue, schools need to ask whether
education reform dollars are making a difference, because a watchword for
the 1990's will be accountability. After a significant infusion of state
funds in the 1980's, policymakers and taxpayers want results. Cost-effectiveness
is also emerging as an important concept; that is, are schools making the
best possible use of all resources? Schools must demonstrate in tangible
terms efficient use of resources and a larger bottom line in terms of test
HOW CAN SCHOOL DISTRICTS PRACTICE SOUND FISCAL MANAGEMENT?
Schools can successfully meet these challenges with two major strategies.
First is practicing sound fiscal management, and second is an emphasis
on cost-effectiveness and accountability, which are addressed in the next
Gilbert Hentschke (1988) noted that a shift in authority must occur
with site-based fiscal management. A prerequisite for assuming this new
authority is mastery of these skills: Budget literacy, budget construction,
costing out alternatives, monitoring revenues and expenditures, and computer
literacy. School-based management becomes a meaningless exercise unless
all participants are fluent in fiscal management.
Budget literacy involves reading, understanding, interpreting, and analyzing
a budget. Participants tie educational objectives to expenditures at the
program (grade/subject), school, and district levels.
Also necessary are budget construction skills. The principal and school
council synthesize program budgets into a school budget, and so they must
be able to construct program and school budgets. Classroom teachers need
skills in developing program budgets.
Costing out alternatives means calculating the costs of different means
to reach educational goals. "Packages" containing different mixes of personnel,
materials, supplies, equipment, and facilities are developed for comparison
A budget represents a blueprint for revenues and expenditures, often
requiring modifications during the school year. In a school-based management
environment, the principal has responsibility for monitoring school revenues
and expenditures regularly--monthly, quarterly, annually.
Computer literacy on an electronic spreadsheet enables all participants
to easily construct a budget, cost out alternatives, and monitor revenues
HOW CAN SCHOOL DISTRICTS ACHIEVE COST-EFFECTIVENESS AND ACCOUNTABILITY?
Sound fiscal management provides the foundation for cost-effectiveness.
In layperson's terms, it means selecting the best alternative at the least
cost, not necessarily the cheapest one. For example, in purchasing student
desks, durability is an important consideration. The cheapest product may
cost more in the long run because it is of poor quality. Requiring those
making expenditure requests to cost out alternatives is one method to ensure
Accountability, defined as responsibility for results, builds on the
base of sound fiscal management and cost-effectiveness. If a district practices
sound fiscal management and consistently selects the most cost-effective
options, school officials will be comfortable justifying their fiscal decisions
before any audience.
Where can school districts find those with expertise to assist them
in honing these skills? District personnel, such as the central office
administrator in charge of budgeting, welcome the opportunity to share
their knowledge. State education departments frequently offer inservice
education. Also, professional organizations at the local, regional, state,
and national levels provide expertise or maintain a "bank" of qualified
individuals. Finally, textbooks such as Hartman's (1988) constitute a useful
resource for practitioners.
WHAT CRITICAL FISCAL POLICY ISSUES LIE BEYOND THE 1990'S?
As wave after wave of reform crashes over schools, it may be difficult
to find time to reflect on and plan for critical educational and fiscal
policy issues only glimpsed on the horizon. If the U.S. wishes to regain
its competitive edge in the world economic market, a rethinking of the
federal role will be necessary particularly in the funding of student equity
issues and technological innovations in learning.
Student equity issues address the health and welfare of at-risk children
so that they will be successful learners and earners. In spite of valiant
efforts by schools to meet the needs of at-risk students, the rates of
high school dropouts and teen pregnancy remain high. Coordination of services
provided by federal, state, and local agencies is essential, and the federal
government is in the best position to implement and fund such a system.
While student equity issues often center on urban areas, equal access
to a quality education is an issue for students in rural areas. Distance
learning offers these students the possibility of a broader curriculum.
This technology is in the early stages, however, and requires large investments
that are beyond the capabilities of individual states. The federal government
is in a strategic place to invest in development and assist states in implementation
of this technology (Piele 1989).
Bernstein, Aaron. "Needed: Human Capital." BUSINESS WEEK (September
Candoli, I. Carl; Walter G. Hack; John R. Ray; and Dewey H. Stollar.
SCHOOL BUSINESS ADMINISTRATION: A PLANNING APPROACH. Third edition. Boston:
Allyn and Bacon, Inc., 1984. 421 pages. ED 281 322.
Corona, Peter. "How Strong Medicine Saved Our Schools from Financial
Ruin." THE EXECUTIVE EDUCATOR 11,9 (September 1989): 20-21,37. EJ 395 048.
Fox, James N. "An Analysis of Classroom Spending: Or, Where Do All the
Dollars Go?" PLANNING & CHANGING 18,3 (Fall 1987): 154-61. EJ 371 987.
Hanushek, Eric A. "The Impact of Differential Expenditures on School
Performance." EDUCATIONAL RESEARCHER 18,4 (May 1989): 45-51,62. EJ 390
Hartman, William T. SCHOOL DISTRICT BUDGETING. Englewood Cliffs, NJ:
Prentice Hall, 1988. 262 pages.
Hentschke, Guilbert C. "Budgetary Theory and Reality: A Microview."
In MICROLEVEL SCHOOL FINANCE, edited by David H. Monk and Julie Underwood.
311-36. Cambridge, MA: Ballinger Publishing Company, 1988.
Piele, Philip K. THE POLITICS OF TECHNOLOGY UTILIZATION: FROM THE MICROCOMPUTER
TO DISTANCE LEARNING. Trends and Issues Series. Eugene, OR: ERIC Clearinghouse
on Educational Management, University of Oregon, 1989. 14 pages. ED number
not yet assigned.
White, Paula A. "An Overview of School-Based Management: What Does the
Research Say?" NASSP BULLETIN 73,518 (September 1989): 1-8. EJ 396 494.