Finance

Ordinance of 1785 Set aside $ from sale of 16th twp. to be distributed to states for education
NW Ordinance of 1787 Land sale with proceeds used to fund education
Surplus Revenue Deposit Act $28 million distributed to states to fund education
Morill Act established agricultural and mechanical colleges
1867 Fed. Dept. of Ed. established
2nd Morill Act provided funding for agriculatural and mechanical colleges
Smith-Hughes Act vocational and technical training for returning WWI vets
Vocational Rehabilitation Act vocational and work training to disabled WWI vets
Congressional Act for Educational Facilities allowed sale of surplus equipment for 15% of its original cost
Smith-Bankhead Act state grants to provide voc. ed. training
Agricultural Adjustment Act Basis for today’s hot lunch program
Lanham Act Amendments provided federal funding for education in areas impacted by the federal gov’t (military bases, etc.)
2nd Vocational Rehabilitation Act vocational and work training to disabled WWII vets
G.I. Bill paid education and living expenses for returning WWII vets
National Defense Education Act Response to scientific gains by Russia; funding for data/reporting, guidance/counseling, testing, voc/tech programs, higher ed student loans/fellowships, foreign language study/training, new teaching media
Elementary and Secondary Education Act Funded all Title ProgramsTitle I – basic and concentration grants for schools serving low SES studentsTitle II (Dwight D. Eisenhower) – Media CentersTitle III – Media Centers, Ancillary Services for parochial schoolsTitle IV – regional resource and training agenciesTitle V – funds to improve state education agencies
Handicapped Children’s Early Education Assistance Act established educational standards for disabled children
Education for All Handicapped Children Act provided funding and established Least Restrictive Environment (LRE) standards
Office of Education Appropriation Act provided funding for desegregation of schools
DARE Act funding for Drug and Alcohol Resistance Education
Handicapped Children’s Protection Act allowed for parents to collect attorney fees for suits brought under Ed. for All Handicapped Children Act
National Assessment of Education Performance (NAEP) Federal Ed. Standards
Contract with America strengthened the rights of parents in their children’s education (vouchers?)
4 Issues shaping school finance Taxation, 14th amendment, state/federal constitutional language, adequacy (vs. equity)
Fed involvement in school finance 14th Amendment (equal protection)LegislationCourt Cases
Shapiro and Burrus Not all districts expected to have equal wealth/resources
Serrano v Priest 1 Education is a fundamental right; wealth creates a suspect classification
Serrano v. Priest 2 Cal. legislature did not limit disparities in wealth (reduced to less than $100)
Rodriguez Education is a state function, quality of education should not be affected by a locality’s wealth
3 Judicial Tests for equity 1. Rational relationship (must prove rational reason to treat individuals unequally)2. Intermediate Test (must prove rational relationship + “substantial government interest” in unequal treatment) 3. must prove compelling/overriding need to treat individuals differently and prove that no other solution exists that would accomplish the same end)
State Prerogative for Taxing 1970s – County Allocation BoardsPost-1990s – few county allocation boards remain in MIProperty taxes – primary revenue source for schools
Education is a broad-based service –> Broad-based funding
School Funding Sources Primarily Property TaxAlso income, sales, Michigan State Education Tax (SET) – 18 mills
5 Characteristics of Taxes Basis (wealth, income, consumption, privilegeCapacityYieldEase of AdministrationCompliance Monitoring
Tests of Equity Proportional, regressive, progressive
Test for progressive tax Impact and incidence
Bases of taxes wealth, consumption, income, privilege
impact immediate effect
incidence shift of tax impact to a 3rd party
elasticity % change in yield/% change in tax rate
elasticity <1 inelastic
elasticity >1 elastic – good for government growth
Michigan Foundation Allowance Estimate FTE Students State Foundation per Pupil + Non-homestead taxable value .018 (18 mills)
Effort = revenue (expenditures)/tax base
Capacity and Effort Chart HC&LE – HC&HELC&LE – LC&HE
6 factors influencing funding effort 1. Public interest/attitude about schools2. Public attitude about taxes3. Citizens’ feeling about local schools4. % of citizens with kids in public vs. private schools5. % of pop with kids/grandkids in local schools6. Advocacy for public ed goals by trusted & supported leaders
fiscal effort Local spending related to capacity
3 Operational Questions about Funding 1. Is it right to have only a minimal level?2. Are “caps” a good mechanism when it comes to measuring adequacy?3. Considering Q1and2 and local capacity, is it reasonable for schools to meet NCLB standards?
Equity and Adequacy –> Fiscal Effort
Equality treating everyone the same
equity giving people what they need to succeed
horizontal equity equal situations –> equal funding(measured by dispersion/disparity)
vertical equity attempts to “level the playing field,” measured by value-based decisionsNeutralizes student, school, and program characteristics
Fiscal Neutrality equity achieved when public preferences are met, and education is not limited by local or state fiscal capacity
Absolute Equity Ideal, but impossibleOccurs when variance in fiscal position has been neutralizedvariance in fiscal effort among local districts is elminatedvariance in educational needs accommodatedFiscal neutrality, horizontal & vertical equity
Approximate Equity Occurs whenvariance in fiscal position has been neutralizedconstrained variance in fiscal effort among local districs is achievedvariance in educational needs accommodatedLocal districts have equal resources, have ability to raise/spend additional $, and spend necessary funds to educate special needs students
Flat Grants Provide a fixed, per-pupil rate – not based on local capacity
Foundation Programs Establish minimum funding level combining local and state funding; state provides balance beyond local capacity Local districts can supplement beyond capacity (“leeway funds”)
Guaranteed Tax Base (Recapture Provision) All local capacity funds are measured and tax rates adjusted so that local tax meets capacity to fund state contribution; additional local funds then redistributed equally to all districts through “capture” clauseRaises “floor” level of all services
Adequacy Sufficient to Meet Standards
Weighting of students to approach adequacy Lowest need student = 1.0
Methods of Determining Adequacy Costing Out (student weighting)Economic Cost FunctionSuccessful School DistrictsProfessional ConsensusState-of-the-Art Approach
Costing Out Weighting of students –> funding
Economic Cost Function Attempt to statistically calculate per-pupil funding needed in each district to meet minimum state standards
Successful School Districts Find schools meeting state standards and set aid at that level (often fails to address “real world” urban issues
Professional Consensus Professionals set up model prototype school that they believe will meet state standards, and adjust real school funding accordingly (limited understanding of at-risk student needs, gaining state-level popularity)
State-of-the-Art Approach Provides funding for programs, services found in high-achieving schools, funding determination made for school level
Recent Demographic Shifts Larger % of students in private schoolsLarger % of Latino students in some regionsShrinking school population in RustbeltLarger numbers of illegal immigrants, who must not be denied education (14th amendment)
4-Step Budget Process 1. Plan for Student Needs 2. Seek funding3. Spend funds4. Evaluate budget process and programs
Budget triangle Find in notes
Budget Formats Incremental (each line same % change)ProgramZero-BasedSite-Based (building/community-based)PPBS – Planning, Programming, Budget (Evaluation) SystemPerformance-Based
Key Concepts in Planning a School-Based Budget 1. Planning with and for the community2. Avoiding disconnect between school and/or district needs3. Budget purpose – spend funds wisely in accordance with education plan4. Over time, improve in accuracy and effectiveness in meeting student achievement needs

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