Presentation to the Senate Education Committee

1. Presentation to the Senate Education Committee John Augenblick & Justin Silverstein Augenblick, Palaich and Associates, Inc. Denver, CO APA

2. Mandate for THE STUDY • Under Act 114 of 2006, the Pennsylvania State Board of Education requested a contractor to conduct “a comprehensive statewide costing out study to arrive at a determination of the basic cost per pupil to provide an education that will permit a student to meet the State’s academic standards and assessments.” • The contractor was also to consider whether the resources spent in Pennsylvania on public schools are distributed in such a way that all children have an equal opportunity to succeed in school. • After a competitive bidding process, APA was awarded the contract in December 2006.

3. APA BACKGROUND • Founded in 1983. Located in Denver, Colorado • The firm has worked in all 50 states • Examined the equity of state aid formulas • Reviewed the structures of state funding systems • Designed state aid allocation procedures • Has undertaken costing out studies in 20 states • We have worked in Pennsylvania previously, e.g.: • Legislative Budget and Finance Committee (April and June, 2002) • Allentown School District (October, 2005) • APA staff who are here today: John Augenblick and Justin Silverstein

4. SIMILAR STUDIES AROUND THE COUNTRY • What have states asked for? • To determine the expenditure level school districts are likely to incur so all students meet state education standards • Examples of other states • The stimulus for such studies has been “standards-based reform” which began in 1990 in Kentucky and has spread across the country. • Studies have been undertaken by state legislatures, state agencies, a variety of education organizations, and civic groups. • Kansas, Maryland, and New Jersey are examples of states that changed their funding systems based on similar studies

5. STANDARDS-BASED REFORM • State focuses on student outcomes, not specific programs and services. • State sets goals/objectives. • State measures performance. • State holds students (and possibly schools, school districts, and teachers) accountable, with consequences if expectations are not met. • State assures that sufficient revenue from state and local sources is provided so that success is possible and money is not an excuse for failure.

6. THE PENNSYLVANIA STUDY • In order to estimate costs for each school district in the Commonwealth, it is necessary to identify the following parameters: • A base cost figure for educating a student with no special needs attending school in a district with no unusual cost factors • Several student-based cost adjustments for students with special needs (to address poverty, special education, English language learners, and gifted students) • Several district-based cost adjustments (to address uncontrollable cost differences between districts such as size, cost of living, and enrollment change)

7. Standard used in the study • All costing out studies are based on districts accomplishing a set of state education standards • The Pennsylvania Accountability System’s key goals were that 100 percent of students: • Master state standards in 12 academic areas • Score proficient or above on reading and math assessments by the year 2014 • APA’s summary of this standard was reviewed by the Pennsylvania State Board of Education

8. ANALYTIC PROCEDURES/METHODOLOGIES • Pennsylvania’s RFP required APA to use three research approaches that other states have used: • Professional judgment (PJ) • Successful school district (SSD) • Evidence-based (EB) • The study focused on current operating expenditures and excluded food service, adult education, community services, and capital. • APA also undertook a variety of other work, including a cost function analysis, a review of transportation funding, and other meetings around the Commonwealth.

9. APA Team • APA put together a team that included a variety of people with recognized expertise in education, education finance, economics, and public policy, including: • APA staff (Dr. Amy Anderson Dr. John Augenblick, Amanda Brown, Dale DeCesare, John Myers, Dr. Bob Palaich, Dr. Doug Rose, and Justin Silverstein) • Pennsylvania academic institutions: Muhlenberg, Penn State, and Temple • Education Policy Improvement Center (Oregon) • NYU

10. SUCCESSFUL SCHOOL DISTRICTS APPROACH • The successful school district approach examines the base spending (excluding spending for special needs) in those school districts already considered to be high performers in terms of their student results on statewide standardized tests. • APA examined spending for instruction, administration, and plant maintenance/operation. • We also conducted interviews with schools in high performing, low spending districts.

11. SUCCESSFUL SCHOOL DISTRICTS APPROACH • We used two methods to identify districts that were “successful”. • Absolute standard: districts that in 2005-06 met the 2012 requirement that 81%/78% of all students be proficient or above in reading/math • Growth standard: cohorts of students (5th-8th-11th grade) whose average performance was increasing so 100 percent of students would be projected to be proficient by 2013-14. • Districts included: • 67 districts that met the absolute standard and 21 districts that met the growth standard -- 82 unduplicated districts (see p. 8 in the December 2007 final report).

12. SUCCESSFUL SCHOOL DISTRICTS APPROACH • APA compared the 82 districts based separately on: (1) numbers of teachers per 1,000 weighted students; (2) numbers of administrators per 1,000 weighted students; and (3) spending per student for plant M&O. • After eliminating outliers (high and low), we identified districts that were deemed to be “efficient” by spending area – Instruction, Administration and M&O • We also conducted interviews with several schools in seven high performing, low spending districts to identify the kinds of programs and services that were viewed as contributing to student performance.

13. PROFESSIONAL JUDGMENT APPROACH • The professional judgment approach relied on the expertise of Pennsylvania educators to identify the resources that school districts needed in order to meet the education standard. • APA met with multiple panels of Pennsylvania educators at the school, district, and statewide levels. • Additional panels included ones for: special needs students, Intermediate Units, Career-Tech Centers, and a panel to examine needs specific to Philadelphia. • Panel members: APA provided criteria (job title, experience, awards, and work in multiple districts) and selected participants from nominees solicited by the State Board of Education.

14. PROFESSIONAL JUDGMENT APPROACH • Representative districts: < 1,000, 1,000-2,499, 2,500-4,999, 5,000-9,999, and >10,000 • Panels provided numbers of personnel by type for programs and services, supplies and materials, technology, substitutes, professional development, and other costs (security, insurance, facilities M&O, etc.) • APA applied prices to quantities. Only the statewide panel ever saw total cost information. • Panel instructions clearly stated that panel members were not to build “dream” schools and APA staff were present to ask questions about resources.

15. EVIDENCE-BASED APPROACH • The evidence-based approach uses educational research to identify strategies that have been shown to have an impact on student performance. • A literature review was conducted by the Education Policy Improvement Center (EPIC) at the University of Oregon. • Pennsylvania educators and business leaders participated in an online simulation that linked research-based improvement strategies with cost.

16. STATISTICAL ANALYSES • Cost function analysis • Researchers at NYU analyzed district spending , demographics, and performance data • The fiscal impact of enrollment change over time • Change in enrollment over time affects per student cost • Geographic cost of living analysis • Analyzed differences in housing and other costs by county

17. TRANSPORTATION • APA conducted a review of Pennsylvania’s current student transportation funding system to identify whether changes were warranted to either improve service delivery or overall efficiency. • APA’s conclusion was that Pennsylvania already had in place a rather precise and sophisticated system for measuring transportation costs; it had evolved effectively over time; and it appeared to be working reasonably well in allocating resources. • For costing out purposes, transportation spending is excluded.

18. FINDINGS • APA examined all results and employed several criteria to make decisions including: • How strongly costs were associated with meeting performance goals • The level of confidence in generated data • The degree to which data took into account efficiency in resource delivery • How well data could be applied to recognize existing district and student cost pressure differences • Given a choice, APA always selected the lower cost option.

19. FINDINGS • Base cost of $8,003 in 2005-06 • Adjustment factors for students • Poverty (.43) • Special Education (1.30) • English language learners (varies by district size between 1.48 and 2.43) • Gifted (varies by district size between .20 and .66)

20. FINDINGS • District Adjustments • Size • Factor = (-0.05 X (LN of 2005-06 enrollment)) + .483 • If enrollment = 5,000, size factor = 5.7% • If enrollment = 2,000, size factor = 10.3% • Enrollment Change • Enrollment in each of five years weighted by: .52 (current year); .26 (prior year); .13 (two years ago; .06 (three years ago); and .03 (four years ago) • Example: a district with the following enrollments would use 2,978 in 2005-06 based on having: 3,000 in 2005-06; 2,960 in 2004-05; 2,940 in 2003-04; 2,950 in 2002-03; and 2,980 in 2001-02

21. FINDINGS • District Adjustments • Regional Cost of Living • County factors that range from .93 (e.g., Fulton) to 1.16 (Pike) with an average of 1.00 (e.g., Butler) • The figures can be implemented in several ways: • As is • By using a factor to raise the lowest figure to 1.00 and raising all other figures accordingly • By only using figures that are at least 1.00 (and setting all below 1.00 to 1.00)

22. DISTRICT EXAMPLE • Suppose a district has 3,200 students (400 in special education, 85 English-language learners, 925 from families in poverty and 120 gifted students). In addition, suppose the district were in a county with a 1.03 cost of living factor. • Costs would be calculated as follows without considering change in enrollment over time: • Base cost: $8,003 x 3,200 = $25,609,600 • Size adjustment: 7.95 percent x $25,609,600 = $2,035,963 • Special education: 400 X 1.30 X $8,003 = $4,161,560 • Students in poverty: 925 X .43 X $8,003 = $3,183,193 • ELL students add $1,290,240. • Gifted students add $415,644. • The total is $36,696,200 x 1.03 (LCM) = $37,797,086, or $11,812 per student.

23. STUDY RESULTS • In 2005-06, state and local revenue would have needed to provide $21.6 billion, or $11,926 per student (excluding transportation, food services, community services, adult education, and capital expenditures). • This amount was $4.38 billion above comparable spending for that year.

24. HOW DISTRICTS MIGHT USE NEW FUNDS • Using evidence-based research, the work of professional judgment panels, and APA’s examination of schools that were achieving high results in relatively low spending districts, school districts might spend new funds to: • Reduce class size, especially in early grades, and add instructional facilitators, tutors, and counselors • Implement full-day kindergarten • Improve professional development for teachers • Expand the use of technology and associated training for teachers • Provide professional development for principals • Expand the school day and summer school, particularly for low performing students • Add nurses and security personnel

25. EQUITY ANALYSIS – FROM REPORT • State aid was sensitive to need differences among school districts. It also was sensitive to district wealth. • The local revenue picture was much less desirable from a public policy perspective: • Pennsylvania’s lowest wealth districts generated the lowest amount of local revenues per student while making the highest tax effort. • Districts with the highest relative needs generated the lowest local revenue per student.

26. EQUITY ANALYSIS • Because local revenue was almost twiceas much as state revenue, disparities in how local revenues were generated overwhelmed the positive aspects of the way Pennsylvania distributed state aid. • In the end school districts with higher wealth and lower needs spent more than lower wealth districts – and did so while making lower tax effort.

27. EQUITY ANALYSIS

28. CONCLUSION • The purpose of the study was to determine the cost that school districts would incur in meeting state student performance expectations. • The parameters used to estimate cost for each district could be used as the basis of distributing state aid to school districts. • The state used the results to create a state aid formula based on recent data that should promote inter-district fiscal equity immediately and appropriate revenue over time.