School Finance

If you live in New York City, a quarter of the money ostensibly spent on your child's education goes to fringe benefits and pension costs, according to the New York Post:

Why have costs continued to skyrocket while performance lags?

A major cause is pensions. New York City doled out $4,822 for each child in its public schools on fringe and retiree benefits for teachers and other education employees in 2008-09 (the latest available) ? a whopping 27% of the total spent per kid.

That's more than twice the $1,493 cost of health care and pensions per kid in the 1999-2000 school year, and double the 13.4% of $11,121 in per-pupil spending back then, data by the Independent Budget Office show. ?Unlike the increases in salaries and staffing, this isn't something that was planned or desired,? said Charles Brecher, research director for the Citizens Budget Commission. ?It's proven to be very difficult to manage and control.?

New York's retirement system for teachers mandates 8% returns and taps taxpayers whenever the market fails to deliver. This puts kids on the hook for market risk instead of workers; if the retirement plan's investments don't perform well, more resources get sliced out of classroom budgets. Teachers, meanwhile, pay only 3% of their salaries for that risk-free 8% return.

Practically every other profession is able to attract high-quality workers without Ponzi-scheme retirement benefits, yet traditionalists decry any attempt to reform teacher pensions on the basis that it will turn...

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A few weeks ago, we at Fordham released a short analysis, Shifting Trends in Special Education. We noticed that some states, like Massachusetts and New York, identified almost twice as many students as needing special education as those in other states, like Texas and California. We tried to make sense of these findings but noted that we couldn't find any statistically significant relationship between the demographics of a state and its special ed ID rate. In particular, the poverty rate of a state didn't seem to matter; some poor states have high ID rates, other have low ones, and others are in between. Same with rich states.

Still, I couldn't help but wonder if school spending (adjusted for cost of living) was driving the differences. After all, you don't have to be a rocket scientist to notice that Massachusetts and New York spend a ton of money on their schools and California?similar to them in so many other ways?spends a fraction as much.* Perhaps a sense of scarcity in resource-starved states like California encourages school districts to avoid identifying lots of kids for pricey special education services.

So I asked our new research intern (and Koch Fellow) Josh Pierson to run a regression and here's what he found:

I then asked my friend Marty West, assistant professor at the Harvard Graduate School of Education, to...

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Stop me when this sounds unfamiliar: You flip through the pages of the latest Economist (or parse through the articles online), looking for interesting material, chuckling to yourself over the risible article titles and amusing photo captions. Then you settle on a number of pieces to read?the majority of which are on topics you know little about. This week, for example, you may have assailed yourself (as I did) of a piece on the cooling of the sun (eerie) or on counterfeit wine (an oddly high-end black market), or of a book review of the chronicles of a Polish dissident (fascinating). About 90 percent of the time, you relish in the magazine's witty and cogent articles that seem to outline complex issues so smartly.

But then the other 10 percent of the time, you read an article about which you actually know something. And in that moment, the magazine's sparkle fades. The article lacks nuance, regurgitates trite ideas, and conflates relevant arguments to string a coherent thought.

This week, one such article appeared on school funding in the States (page 34 for those with a hard copy handy). From Austin, the author explains that ?many cities and states, struggling to make up budget shortfalls, have put schools on the chopping block.? These cuts will add up to billions of dollars and will be ?readily apparent when schools reopen in the autumn?among those that do re-open, that is.?

This melodramatic proclamation?both unjust and only a bit ignorant in...

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Pennsylvania is trying to fix a thorny problem with virtual schools. If two kids attend a virtual school, one from a high spending district that sends along $10,000 in their backpack to the virtual school, and another from low spending district that sends $6,000, the former child's district is subsidizing the latter's education. It's a tough issue.

The solution proposed on Monday by Rep. James Roebuck (D-Phila.) is extreme, however. He proposes that the state pay the entire bill for virtual-school students, as well as youngsters in traditional charter schools, leaving more resources to educate fewer kids in district schools. Since there's on a finite amount of money available for public education in the state, this short-changes children who attend schools of choice.?The proposal also defeats one of the purposes of school choice: competition for students and the resources to educate them.

Virtual schools present some unique governance and school-finance challenges, but rewarding districts for failing to serve kids effectively is not a good solution. Instead, Pennsylvania legislators should develop a financing system where the state steps in to correct disparities but still allows as much local funding as possible to follow a child wherever he or she goes in the education system. Pennsylvania's citizens are taxed to provide resources for all children in public schools, not to preserve buildings and jobs in the traditional system of district schools.

?Chris Tessone...

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The Washington Post this weekend lobbed some serious accusations at the Montgomery County Board of Education, calling recently revealed health care savings a "slush fund." This is the latest development in a battle between the school board governing this high-spending, wealthy suburban district and the County Council that exercises putative control over the county's budget.

In this go-round, the council cut $25M from the schools budget, after which the school board suddenly found $21M in health care savings, which it promptly used to reverse an expected increase in the proportion of health care costs paid by teachers. The Post, a vocal parents' group, and others are unhappy the savings weren't used more directly in the classroom.

The whole thing reveals one of the thorniest problems of traditional "marble cake" school governance. Both the council and the school board are agents of the taxpayers of Montgomery County. They are each serving others sets of interests as well, however: students, parents, teachers, public workers other than teachers, business owners, etc. The present system of governance in Montgomery County doesn't seem to be succeeding at working out the conflicts among those groups in an orderly and transparent way.

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It goes without saying that school officials are doing everything in their power to cope with the quickly dwindling budgets of their districts. But a certain policy enacted by the New York City DOE leaves me scratching my head. The policy in question forces principals who have lived within their means to give back 30 percent of any school-budget surplus to the general coffers of the DOE at the end of the year.

The old system allowed principals to save money for future years; last year a total of $80 million was rolled over. Not surprisingly, this penny-pinching policy is having an inverse effect on school spending. Since enacting the policy, only $32 million was carried over. As the New York Post reported on Sunday, principals are now deciding in favor of year-end shopping sprees rather than forking over a percentage of their savings. Midwood High School's principal just went on a $400,000 bender, picking up high-tech digital pens, four iPads, a $40,000 science lab and a high-powered electron microscope.

We have long been proclaiming the importance of ?doing more with less,' and this policy couldn't be driving principals farther from it. Instead of punishing fiscally conservative principals hoping to use surpluses to prevent a teacher from being laid off or continue to staff after-school programs the next year, the NYCDOE might consider finding their extra funding from the budgets of principals spending recklessly, not responsibly....

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Our recent study on trends in the special education population was only able to get at the costs of special ed obliquely. But with some states spending two or three times as much per student as others, it seems clear that districts and states could find savings in this $110 billion-plus slice of overall school spending without negatively impacting kids. Some districts are now turning to private companies to provide services at a lower cost.

The role these businesses can play seems to be twofold. First, they are more flexible than districts at providing services where and when they're needed, reducing the amount of time kids are pulled out from their normal classrooms and getting past rigid staffing formulas. Second, because they are a level removed from the difficult politics of special ed, they may have more power to say no to services that are not effective.

Outsourcing these services is no walk in the park, of course. Shady operators will have every incentive to overcharge and underdeliver. Districts must consider which services they're outsourcing, and to whom. The need for careful oversight is a given.

However, serving a population of students with very diverse needs using a variety of outside providers with narrow specialties and an incentive to help children overcome their challenges for good (if possible) is a worthy approach to try. It could both save money and provide a path to more individualized instruction for all youngsters.

- Chris Tessone...

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New Jersey's Supreme Court ordered Chris Christie to cough up another $500 million in funding for the state's schools in a 3-2 ruling today. Very few people (aside from the three justices in the majority and Mark Zuckerberg) would argue that NJ's worst-performing schools can be fixed with more money, however.

So-called "Abbott districts," which get more money under another NJ Supreme Court ruling that deemed education in those locales inadequate, are among the highest-spending districts in the country. Newark, which is one of them, tops out at $23,000 per student using the state's new accounting method. Education in these districts is indeed inadequate and horribly shortchanges the youngsters who live there, but after 25 years of receiving extra resources, it seems clear that the problem goes deeper than money. Unfortunately, the question of what constitutes an "adequate" education in New Jersey has largely revolved around funding issues rather than processes and outcomes for children.

Nevertheless, I agree with Bruce Baker that the court's rather narrow decision was the correct one. (This may be one for the record books.) Bruce found in a recent analysis that while New Jersey's funding system is fairly progressive, giving more state aid to poorer districts, Gov. Christie's recent cuts hit high-poverty districts the hardest. Today's decision is a perfect example of checks and balances functioning correctly, with the court restoring support to the poorest and most challenged residents of New Jersey.

Hopefully these restored funds will be...

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