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Education Finance Seminar
February 17, 2007
School Finance 101, Part 1                             

HOW DO YOU KNOW A "GOOD" SCHOOL FINANCE SYSTEM WHEN YOU SEE ONE?
     

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Prepared by Augenblick, Palaich and Associates, Denver, CO, 2007

 1)  THE ALLOCATION OF STATE AID IS SENSITIVE TO THE NEEDS OF SCHOOLS DISTRICTS.

• THE BASE AMOUNT IS RATIONALLY DETERMINED.
• THE BASE IS ADJUSTED TO REFLECT COST PRESSURES BASED ON PUPIL CHARACTERISTICS, PROGRAM COSTS, AND DISTRICT CHARACTERISTICS BEYOND THE CONTROL OF SCHOOL DISTRICTS.

 2)  THE ALLOCATION OF STATE AID IS SENSITIVE TO THE FISCAL CAPACITY AND TAX EFFORT OF SCHOOL DISTRICTS.

• THERE IS A PROCEDURE TO DEFINE AND MEASURE THE FISCAL CAPACITY OF SCHOOL DISTRICTS AND TO ASSURE THAT THE DISTRIBUTION OF STATE AID TAKES THE RELATIVE FISCAL CAPACITY OF DISTRICTS INTO CONSIDERATION.
• THE STATE EITHER LIMITS THE TAX EFFORT OF DISTRICTS ABOVE THE BASE AND/OR RECOGNIZES THAT EFFORT THROUGH THE ALLOCATION OF STATE SUPPORT.

 3)  THE VARIATION IN SPENDING AMONG SCHOOL DISTRICTS CAN BE EXPLAINED PRIMARILY BY DIFFERENCES IN THEIR NEEDS AND TAX
      EFFORT.

• ALL DISTRICTS ARE SPENDING AT SOME "ADEQUATE" LEVEL.
• DISTRICTS THAT SPEND AT HIGHER LEVELS HAVE HIGHER TAX RATES.

 4)  SCHOOL DISTRICTS HAVE A REASONABLE AMOUNT OF FLEXIBILITY TO DETERMINE HOW MUCH THEY WANT TO SPEND (PERHAPS NOT 
     UNLIMITED FLEXIBILITY) AND ALL DISTRICTS HAVE THE SAME OPPORTUNITY TO GENERATE REVENUES AT THE LEVELS THEY SELECT.

 5)  SCHOOL DISTRICTS HAVE A LOT OF FLEXIBILITY IN HOW THEY CAN SPEND FUNDS AND ARE HELD ACCOUNTABLE FOR THE RESULTS THEY
      PRODUCE.

• THE STATE CAN IDENTIFY WHAT IT WANTS SCHOOLS TO ACCOMPLISH AND HAS A PROCEDURE FOR ASSESSING HOW WELL SCHOOL DISTRICTS ARE DOING.
• THE STATE DOES NOT DICTATE HOW FUNDS SHOULD BE SPENT (PUPIL-TEACHER RATIOS, AMOUNTS FOR ADMINISTRATION, ETC.) UNLESS DISTRICTS DO NOT MEET STATE OBJECTIVES.
• THE STATE MAY PROVIDE ADDITIONAL, UNEQUALIZED FUNDS TO DISTRICTS THAT MEET OR EXCEED STATE OBJECTIVES BASED ON ABSOLUTE STANDARDS, CHANGE OVER TIME, OR ACTUAL PERFORMANCE IN RELATION TO PREDICTED PERFORMANCE.

 6)  ALL TYPES OF EXPENDITURES ARE CONSIDERED BY THE SCHOOL FINANCE SYSTEM, INCLUDING OPERATING, CAPITAL/DEBT, AND 
      PERSONNEL BENEFITS.

 7)  STATE AID THAT IS NOT SENSITIVE TO WEALTH OR NEED (FOR EXAMPLE, INCENTIVE FUNDS OR HOLD HARMLESS FUNDS) IS LIMITED.

 8)  THE STATE REQUIRES DISTRICTS TO DEVELOP RATIONAL PROCEDURES BY WHICH TO DISTRIBUTE FUNDS TO SCHOOLS IN THE DISTRICTS.

 9)  TAXPAYERS ARE TREATED EQUITABLY.

• PROPERTY IS ASSESSED UNIFORMLY.
• LOW INCOME TAXPAYERS ARE RELIEVED OF SOME OF THE OBLIGATION TO PAY PROPERTY TAXES.
• THE BURDEN OF PAYING FOR SCHOOLS IS SHARED EQUITABLY AMONG HOMEOWNERS AND BUSINESSES.

10) THE STATE HAS SOME PROCEDURE TO DEFINE AND MEASURE BOTH ADEQUACY AND EQUITY AND PERIODICALLY EVALUATES THE STATUS
       OF THE SCHOOL FINANCE SYSTEM.