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USING A BASE COST FIGURE IN A SCHOOL FINANCE FORMULA

USING A BASE COST FIGURE IN A SCHOOL FINANCE FORMULA. Bob Palaich and John Augenblick APA August 9, 2011. How Do School Finance Formulas Work?.

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USING A BASE COST FIGURE IN A SCHOOL FINANCE FORMULA

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  1. USING A BASE COST FIGURE IN A SCHOOL FINANCE FORMULA Bob Palaich and John Augenblick APA August 9, 2011

  2. How Do School Finance Formulas Work? • Formulas are mathematical procedures that use parameters in combination with school district information to calculate how much state aid a district should receive. • Example • The state will provide $2,000 per student • Parameter is $2,000 • District information is number of students • If a district had 4,800 students it would receive $9.6 million as state aid

  3. The Most Common Type of Formula • Almost every state uses some version of a “foundation” formula to accomplish two objectives: • Provide some aid to most, if not all, districts • Equalize state support relative to district wealth • State aid = Foundation Level – Expected Local Tax Contribution • There are lots of ways to calculate the Foundation Level but the simplest is to set a foundation amount (parameter) and multiply by a student count (district information)

  4. Setting a Foundation Level • The foundation level could be a dollar amount per student that represents: • The amount of revenue the state is willing to make available (the state works backwards to specify the foundation level so that only the available amount of revenue is spent) • Specify the resources districts should have at some minimum level (based on pupil-teacher ratios, teacher salaries, etc.) • Specify how much a district needs in order to meet state requirements/expectations • Specify an increase over some prior figure that had some meaning in the past.

  5. The Foundation Level May be a Base Cost • When the foundation level represents what a district needs to meet state requirements and expectations and • it is set for a student who has no special needs (such as having an IEP or being an ELL student), • attending school in a district that faces “average” cost pressures that are beyond its control (e.g., size or regional cost-of-living), then • it becomes a “base cost.” • Weights are then used to adjust the base cost for student-based special needs and district-based cost pressures.

  6. Philosophical Meaning of a Base Cost • It is consistent with “standards-based” reform, under which a state sets performance expectations, measures how well districts are doing, and holds them accountable. • The base cost answers the question: How much does it cost to help a typical student in an average district to meet the standard? • If funds are assured (state and local), it eliminates the excuse that districts lack the resources to meet state standards.

  7. Calculating a Base Cost • States have considered three approaches to calculate a base cost: • Professional judgment approach • Successful school district approach • Evidence-based approach • A number of states have used the approaches to set the base cost including – KS, MD, MS, NJ, NY, OH, PA, and WY • Each approach has strengths and weaknesses. • Each approach addresses efficiency in its own way.

  8. Professional Judgment Approach • Requires a “standard” • Asks panels of educators to estimate the resources (people, time, supplies and materials, etc.) needed to meet the standard • Can get very specific about professional development, technology, etc. • Costs out the resources independently • Can use evidence-based information as a starting point with PJ panels • Is perceived by some people to be open-ended

  9. Successful School District Approach • Requires a “standard” • Examines the spending of districts or schools that meet the standard • There may not be any districts/schools that meet the standard • Need to eliminate spending for all special needs that will be weighted later, which may not be easy to do • Can be divided into components, such as instruction and plant M&O, which can be added together • Can include statistical ways of eliminating “outliers.”

  10. Evidence-Based Approach • Attempts to gather information from the literature • Literature is pretty spotty • No literature on non-instructional expenditures • Makes assumptions about a standard delivery system that do not reflect actual conditions • Can be a useful starting point for discussion

  11. Applying a Base Cost Figure • A base cost figure is constant across all districts in a state • It is usually expressed as a dollar amount per student • It can be adjusted by cost factors related to district/school characteristics such as size or regional cost-of-living. • It can be adjusted for student characteristics (low income, special education, ELL, etc.)

  12. Other Things to Think About • Non-Instructional Expenditures • Administration • Plant M&O • Transportation • Extracurricular activities • Requiring that revenues be spent in a specific way

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