Equity & Adequacy. Two other sides of Fiscal Effort:
Equality means treating everyone the same under the law Equity involves giving people the treatment they need Equity Should Not be Confused with Equality
Spending Equality ? • If equality governed school spending, everyone would receive the same level of funding • Everyone cannot be treated the same because needs differ • Equality cannot be the sole principle to govern school finance.
Spending Equality ?, cont. • Inherent inequities exist within school districts, schools, and within classrooms • Staffing a special education classroom costs more than staffing a general education classroom
A patient suffering with a rare form of cancer costs more to treat than the well one who needs only a flu shot No one would expect both patients’ bills to be the same. One will necessarily cost more than the other So it is with education. Some of our patients’ needs will cost more to care for than others. Equity: A Medical Model
1st - Urban school system with: 25% of its students identified as eligible to receive special education services 50+% of the student body reading more than two years below grade level 90% of the students eligible for free or reduced-price lunch 2 Hypothetical School Systems
2nd -Suburban school system with: 99% of its students reading on or above grade level 2% identified as eligible to receive special education services 0% eligible for free and reduced-price lunch 2 Hypothetical School Systems, cont.
To provide funds necessary for each school systems to be successful will be more costly for the first school system For both to be funded equally, at some arbitrary level, would be inherently INequitable The second school system has much greater needs and subsequently greater costs. 2 Hypothetical School Systems, cont.
School Finance & EQUITY • School finance must be concerned with equity – providing what students need • Measuring equity becomes complicated & requires sophisticated statistical procedures • Measuring equity has also been the basis of legal challenges of many states’ finance formulae
When schools or school systems are considered equal, their funding should be equal Equality Is an Important Principle
Both secondary schools in the same school district. Both have 1,500 students. Both have the same % of students: On free and reduced lunch Eligible for special education Going on to higher education upon graduation Both schools have similar facilities and programs Schools A & B
If the funding for School A were 20% higher than for School B, we would consider there to be a fundamental unfairness in the funds allocation. Schools A & B, cont.
Students who are alike should receive equal shares (of funding) Horizontal equity is measured by calculating the dispersion, or inequality, in the distribution of funds When there is no dispersion in funds, one can assume there is perfect horizontal equity Horizontal Equity
When this occurs, there are equal expenditures in funding levels such as in per pupil expenditures, student/teacher ratios, equal teacher resources, and the like across various measures. Horizontal Equity, cont.
Horizontal equity can be applied broadly in comparing large and similar subgroups of students For example, we can compare: All vocational students at the high school level All full-day kindergarten students All students in general education elementary classrooms In this case, we would expect spending, or resource allocation, to be substantially similar for each of these rather large subgroups. Horizontal Equity, cont.
Research Trends Unclear • One 50-state study revealed that between 1970 and 1975,spending disparities among states increased • Another study showed that several states involved in school finance reform improved horizontal equity & fiscal neutrality, 1970-75 • A 1997 General Accounting Office study found substantial improvements in equity over time • Other studies show that significant financial disparities still remain in horizontal equity among the states
Vertical Equity • Vertical equity recognizes that students and schools are different and that the treatment of unequals requires appropriate unequal treatment • While horizontal equity is rather easy to quantify, vertical equity choices are based on value
Vertical Equity, cont. “Appropriate treatment” varies from one school division to another.
“Appropriate Treatment” Legitimate factors must be identified that can be used to allocate resourcesdifferently based on: • The characteristics of the students • The characteristics of the schools or the school districts • The characteristics of various programs
Legitimate Factors Include: • Percent of eligibility for free and reduced lunch • Percent of students speaking English as a second language • Percent of students involved with special education services Most educators would agree that serving these students’ needs requires additional services if they are to meet the challenges of high-stakes testing programs such as No Child Left Behind.
Fiscal Neutrality • Equity is achieved when the distribution of services is determined by the taxpayers’ preferences for education and not by the fiscal capacity of the locality or state • This is also known as taxpayer equity or wealth neutrality
How do states provide for fiscal neutrality while assuring equity? By calculating a lower cost for services to those who can least afford to pay for the services = Equalization of Funding. Reconciling Fiscal Neutrality & Equity
Equalizing Funding • Each state provides some method for equalizing the funding within its boundaries • More than 2/3 of the 50 states have had their state funding formula contested in court • The equalization concept is a continuum that ranges from total equalization to no equalization
Absolute fiscal equalization is more of a theoretical goal than a practical achievement While it is possible in theory, it is virtually impossible to achieve politically Absolute & Approximate Fiscal Equalization
Absolute fiscal equalization is achieved whenever the following three objectives are achieved: Variance in fiscal position among local school districts has been neutralized Variance in fiscal effort among local school districts has been eliminated Variance in educational needs due to incidence of clients has been accommodated Absolute Fiscal Equalization
Absolute fiscal equalization is achieved whenever the following three objectives are achieved: Local school divisions have equal resources to fund schools Local school divisions make equal effort to fund schools Schools spend what is needed to educate students with special learning needs Absolute Fiscal Equalization, cont.
This definition achieves fiscal neutrality and addresses the issues of horizontal and vertical equity This is a theoretical and not a practical concept Absolute Fiscal Equalization, cont.
Approximate fiscal equalization is achieved whenever the following three objectives are achieved: Variance in fiscal position among local school districts has been neutralized Constrained variance in fiscal effort among local school districts is permitted Variance in educational needs due to incidence of clients has been accommodated Approximate Fiscal Equalization
Approximate fiscal equalization is achieved whenever the following three objectives are achieved: Local school districts have equal resources to fund schools Local school divisions have some leeway in how they raise & spend money for schools Schools spend what is necessary to educate students with special learning needs Approximate Fiscal Equalization, cont.
The two definitions are similarexcept: The 2nd condition allows for constrained or controlled spending by the local school districts Neutralized fiscal position and meeting clients’ educational needs in spite of the local capacity are still required Absolute & Approximate Fiscal Equalization
State Aid Grants to Districts • Each state equalizes for the fiscal capacity of local districts through its method for funding localities • This funding usually comes through grants of various types
State Aid Grants Continuum InequityEquity Non- Matching Flat Equalization Full State Equilization Grants Grants Grants Funding Grants
Nonequalization Grants • Non-equalization grants make no attempt to equalize funding for the capacity of local school districts • Grants may be categorical aid to school divisions allocating a constant dollar amount on a per pupil basis based on an application process • Poorer school divisions may not have the personnel to write the grants enabling them to qualify for the funds
Flat Grants • Flat grants provide a fixed amount of funding per pupil to each school district in the state • This funding is not based on the locality’s fiscal capacity • Most states do not use flat grants as the primary vehicle for distributing funds to localities
California’s Constitution requires $120 of state funding per pupil to each locality – regardless of the locality’s fiscal position Virginia’s Constitution requires that the locality fund no more than 80% and no less than 20% of state standards, regardless of the locality’s capacity Examples of Flat Grants
Equalization Impact of Flat Grants School Local Local Flat Grant Total Spending District Property Revenue Amount Per Pupil Value A $ 5,000 50 2,000 2,050 B $ 50,000 500 2,000 2,500 C $250,000 2500 2,000 4,500 D $500,000 5000 2,000 7,000
Flat Grants with Increased State Support School Local Local Flat Grant Total Spending District Property Revenue Amount Per Pupil Value A $ 5,000 25 4,000 4,025 B $ 50,000 250 4,000 4,250 C $250,000 1250 4,000 5,250 D $500,000 2500 4,000 6,500
Flat Grants with Increased State Support, cont. Greater burden placed on the state to provide for education services reduces the disparity in total per pupil spending, increasing equalization.
Equalization Grants • Equalization grants provide for greater state funding for the localities with less capacity to raise their own funds and provide for less state funding for the localities with greater capacity
Foundation programs are a means of providing equalization grants to school systems A foundation program establishes some minimum levelof per-pupil funding that must be met with a combination of local and state funding No district can fall below this foundation level Foundation Programs
Once the foundation level has been met, local districts are free to supplement funding, called leeway funds, to achieve a higher level of per-pupil spending if they so elect Foundation Programs
Foundation Grants Local State Foundation Local Total Capacity Aid Level Leeway Funding A $ 1,000 9,000 10,000 0 10,000 D $ 7,500 2,500 10,000 2,500 12,500 E $ 10,000 0 10,000 2,500 12,500
In this scenario, school district E has ten times the capacity of school district A, yet spends only 25% more on a per pupil basis Where the capacity differential was initially 10 to 1, the spending differential due to the foundation formula is now only 1 to 1.25 Foundation Grants Equalize Funding
What This Means for Students • The poorest school district (A) now has the financial means to provide the state’s the minimum foundation level – regardless of their capacity to fund education services • This enables school district A to compete with district E in terms of programs, in effect raising the education bar for all students in that state
State legislatures frequently see the word minimum as the spending limits Too often “minimum” becomes the target level of funding and does not advance beyond the minimum “Minimum” Funding?
Localities may elect not to add sufficient leeway funds (based either on values or available resources) while higher capacity systems may add substantially higher dollar amounts, exacerbating the per pupil spending disparity “Minimum” Funding?, cont.
State governments may be reluctant to set adequate levels of spending for a foundation program because elected officials cannot agree on what is “adequate” “Minimum” Funding?, cont.
Guaranteed Tax Base Programs • A second type of equalization grant is the Guaranteed Tax Base program (GTB) • GTB programs guarantee that each locality can operate as if all school districts had an equal per pupil property tax base
The state determines its share of spending for the total cost of education The formula then provides a means for deciding how much funding would come to each locality, based on a measure of their wealth More state funding goes to low capacity systems while less aid goes to high capacity systems Guaranteed Tax Base Programs, cont.