Introduction

California will spend almost $34 billion on schools and the services provided at them in the 1996-97 fiscal year. Well over a third of the State's General Fund is dedicated to elementary and secondary education. Yet despite the enormity of this commitment of public dollars, the number of people is tiny who will understand -- accurately and completely -- how the funds are parceled out to districts, school sites and individual classrooms. The funding system for education is complex and grows more so annually with each new tweak and adjustment.

Does it matter that the education finance scheme is largely incomprehensible? After all, California is huge, its population is diverse and the needs of its students are varied. Perhaps a sophisticated, multi-layered funding formula is to be expected.

Unfortunately, the intricacies appear to have less to do with sophistication than with expediency. And the results of the complexity undermine public confidence in and support for the State's public schools in many ways, including the following:

  • Lack of meaningful accountability: It is very difficult for consumers and taxpayers to get straight answers about what is going on financially with schools. If a parent complains that his child has no textbooks, the teacher points to district procedures that delay purchasing and the district points to the State for failing to provide adequate funding -- and the State points to the district for making poor choices on how to use its resources. If a taxpayer wonders why the school in his neighborhood is falling apart, acting as a magnet for vandalism and depressing his property value, the principal tells him about the long wait for maintenance services, the district talks about uncooperative voters and underfunded state assistance, and the State argues that locals have to pay a share of costs because the State cannot afford to underwrite all of the facilities for a rapidly expanding school-age population. Blame is continually shifted, both upwards and downwards, and any desire on the part of the public to help resolve school financial problems soon evaporates.

  • Public/parent dissatisfaction: There is a widespread perception that more and more dollars are poured into education but that the results are less and less satisfactory. There are rising tensions over the various special interest groups that "encroach" on general education funding and diminish the resources for other students -- special education students, English learners, impoverished children. There is corrosive distrust of school boards, whose decisions often do not appear to be child-oriented and academically focused but instead appear to be driven by labor negotiations and the desire to leverage more state funding through program choices. None of these feelings often expressed by the public and parents are assuaged by a financing system that is difficult to explain and largely disconnected from the concerns of consumers.

  • Questionable equity: There is frustration that some schools find the wherewithal to provide a broad range of desirable opportunities while others struggle but fall short of offering even plain-vanilla services. There is no straightforward answer to why one district has more discretionary funds than another. And being told that California's school system is equitable as adjudicated in court does not change an intuitive conclusion that some schools have more and many have less. The courts have required basic per-pupil funding to be within a $300 range. But in a typical 600-student elementary school, that could be a swing of $180,000 -- enough to hire several more teachers and buy lots of books. Adding on other types of funding that are purposefully targeted to some schools and not others increases the imbalance of resources, sometimes justifiably but often not.

  • Lack of results-oriented leadership: Presumably policy makers aspire to have their decisions driven by the State's educational goals for all students. But with a complicated web of constitutional directives and statutory mandates, the competing interests for state dollars and the constraints imposed by limited resources, state policy makers rarely have the luxury or the ability to make outcome-focused decisions. Instead, there is often a wink and nod at goals while innovative ways are found to modify formulas to give the most vociferous players incremental gains. Small parts of the elephant may be examined and voted on -- the trunk elongated, the ears expanded -- but never is the whole beast subjected to scrutiny, understood in context and pummeled into some more rational form.

  • High process costs: Millions of dollars are spent on process rather than product. Dollars that never make it to the classroom and arguably do nothing to teach a child to read or do arithmetic include the salaries for: an attendance clerk at school so that per-pupil daily revenue based on daily attendance counts can be captured and justified; an accountant in the district office to fill out state forms proving that transportation funds have not been diverted to pay for chalk and paper clips; a specialist to tell the district how to align its programs to gain a bigger share of categorical funding; and an auditor for the State to ensure paperwork compliance -- not that schools are doing their job of educating but that they are following procedures. Multiply these individuals many times over and it begins to be clear that the cost of complexity is high and largely irrelevant to the task at hand -- educating children.

    The price for the complicated system and the problems it brings is paid by the children. Disenchantment with public schools translates into lack of taxpayer support -- and without such support, schools deteriorate further and engender even less confidence in the population they serve and the public they should be accountable to.

    For almost 30 years, the Little Hoover Commission has examined California's education system, pinpointing problems and urging solutions. In the past decade alone, the Commission has examined the flow of dollars to the classroom, the dropout rate, governance issues, construction needs, bilingual education and charter schools.

    A troubling common thread throughout all of these Commission reports has been the lack of meaningful ways to hold the system accountable for educating children. Accountability, instead, is almost always focused elsewhere: on the types of teachers employed; the time and place that student head counts are taken; the pedagogical methods used; the precise way funds are spent; and the chain of command for state decision-making.

    Many of the Commission's past recommendations have focused on clarifying who is accountable and shifting what accountability should be linked to. But reform has been slow in coming and improvements have been on the margin rather than wholesale.

    Acting on the premise that the root of accountability may well lie in how dollars are allocated, the Commission decided to examine the financial structure that California has built for schools. Among the questions that arose were:



    To conduct its study, the Commission sought the advice of a broad range of experts and education practitioners. Using an advisory committee that numbered more than 100 people (please see Appendix A for a listing of participants), the Commission explored a variety of financing issues over a seven-month period, with dozens of people meeting in more than 40 hours of round-table discussions. The advisory committee focused on five topics: adequacy of funding, equity of educational opportunity, state versus local control, base and categorical funding and Special Education.

    In addition, the Commission conducted three public hearings, two on general finance issues and one on Special Education (please see Appendix B for agendas of witnesses). The Commission also reviewed documents from the Internet, materials from education think tanks, professional journals, textbooks and other sources.

    The Commission's findings and recommendations are contained in this report, which begins with a transmittal letter to the Governor and the Legislature, an Executive Summary and this Introduction. Remaining sections include a Background and five findings: two on simplifying the system, two on redirecting accountability and one on the issue of adequate funding. The report ends with a Conclusion, Appendices and Endnotes.

    No amount of fancy rhetoric about standards and goals, even when enshrined in statute, will cause schools to act differently if they continue to be rewarded financially for filling out forms instead of educating children. Understanding what message the financing system gives schools is a critical first step for reshaping education to produce the classroom results California is looking for.

    The Commission believes the following report provides the foundation for that understanding and offers pragmatic policy choices to reach a system that will be focused on student achievement.



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