Costing Out the Resources Needed to Meet Pennsylvania’s Public Education Goals

1. Costing Out the Resources Needed to Meet Pennsylvania’s Public Education Goals Prepared for the Pennsylvania State Board of Education By Augenblick, Palaich and Associates, Inc. Denver, CO APA

2. Mandate for COSTING OUT 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 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 • APA has undertaken costing out studies in 20 states • We have worked in Pennsylvania previously • Half of APA’s staff is here today: John Augenblick, Robert Palaich, Justin Silverstein, Dale DeCesare, and Amanda Brown

4. Costing Out Studies Around the Country • What is a costing out study? • Determines the level of funding all school districts need to meet state education standards • Costing out studies in 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 • Maryland and Mississippi are examples of states that changed their funding systems based on costing out studies

5. THE PENNSYLVANIA COSTING OUT STUDY • APA needed to identify the following parameters in order to assure that we could develop a specific cost for each school district in the Commonwealth: • A base cost figure for educating a student with no special needs • 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)

6. 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 are 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

7. ANALYTIC PROCEDURES/METHODOLOGIES • Pennsylvania’s RFP required APA to use three research approaches that other states have used (not always together) • Professional judgment (PJ) • Successful school district (SSD) • Evidence-based (EB) • The costing out focused on current operating expenditures, excluding food service, capital, adult education, and community services. • APA also undertook a variety of other work, including a cost function analysis, transportation review, and a variety of other meetings around the Commonwealth.

8. PROFESSIONAL JUDGMENT APPROACH • The professional judgment approach relies on the expertise of Pennsylvania educators to identify the resources that school districts need in order to meet the education standard. • We met with multiple panels of Pennsylvania educators at the school level, district level, and statewide level. • Additional panels included ones for: special needs students, Intermediate Units, Career-Tech Centers, and a panel to examine needs specific to Philadelphia.

9. SUCCESSFUL SCHOOL DISTRICTS APPROACH • The successful school district approach examines the spending 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 and operation. • We also conducted interviews with schools in high performing, low spending districts.

10. EVIDENCE-BASED APPROACH • The evidence-based approach uses educational research to identify strategies that are likely to produce desired student performance outcomes. • 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.

11. 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

12. TRANSPORTATION • APA conducted a review of Pennsylvania’s current student transportation 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 appears to be working reasonably well in allocating resources. • For costing out purposes, transportation spending is excluded.

13. 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

14. FINDINGS • Base cost of $8,003 in 2005-06 • Adjustment factors for students and districts • Student Adjustments (added per-student cost weights above the base cost): • Poverty (.43) • Special education (1.30) • English language learners (varies by district size with a minimum of 1.48) • Gifted (varies by district size with a minimum of .20) • DistrictAdjustments • Size (cost factor increases as district size decreases) • Enrollment change over time (cost weights decrease going back in time) • Regional cost of living differences (county weights vary around 1.00)

15. HYPOTHETICAL 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: • 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.

16. STATEWIDE COST • In 2005-06, the Commonwealth would have needed to provide $21.63 billion, or $11,926 per student (excluding transportation, food services, community services, adult education, and capital expenditures). • This amount is $4.38 billion above comparable spending for that year. revised December 2007

17. STATEWIDE COST • The total cost includes: • $2.7 billion for special education, • $2.0 billion for students in poverty • $580.2 million for ELL students • $205.8 million for gifted students • $783.8 million for regional cost differences • $837.2 million for small school districts revised December 2007

18. 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 would be expected to: • Target funding for students with special needs • Reduce class size, especially in early grades, and add counselors, nurses, instructional facilitators, tutors, and security personnel • Implement full-day kindergarten • Expand the school day and summer school for low performing students • Target professional development, including training for principals • Expand the use of technology and associated training for teachers

19. EQUITY ANALYSIS • State aid currently recognizes need differences among school districts. It also is sensitive to district wealth. These are good characteristics. • The local revenue picture is much less desirable from a public policy perspective: • Pennsylvania’s highest need districts generate the least amount of local revenues while those with the lowest need generate the most • The poorest districts have the highest tax efforts, while the wealthiest have the lowest effort • The wealthiest districts generate more local funds with less tax effort.

20. EQUITY ANALYSIS • Because local revenue is almost twiceas much as state revenue, disparities in how such revenues are generated overwhelm the positive aspects of the way Pennsylvania distributes state aid. • In the end school districts with higher wealth and lower needs spend more than lower wealth districts – and do so while making lower tax effort.

21. EQUITY ANALYSIS • State and local taxes collected in Pennsylvania are comparable to the national average, but are 6 to 12 percent lower than those collected in six nearby states, depending on how tax burden is measured. • When compared to the simple average tax effort of the six nearby states, Pennsylvania could have collected between $3.17 and $6.02 billion more revenues in 2004, depending on how tax burden is measured.

22. ACKNOWLEDGMENTS APA wishes to recognize: • The Pennsylvania State Board of Education and the Pennsylvania State Department of Education for their assistance in gathering essential data for this work. • The numerous panelists who gave their time and energy. • The contributions of: Dr. William Hartman, Penn State University; Dr. Michelle Moser Deegan, Muhlenberg College; and Dr. C. Kent McGuire, Temple University. • The many contributions of Bob Feir who served as liaison between APA and the Board.