Per-Unit Costs Make Stakeholders Examine Tradeoffs
By: Daniel H. Bowen
While charter schools are supposed to have greater autonomy in their operations, providing opportunities for innovation, charters often just replicate some of the same dysfunctional practices found in district schools. One area ripe for more innovative reform is school budgeting. The current financial crisis provides an opportunity to demonstrate that money is not a panacea for education. It is really how we use the money that matters most. This disconnect is already fairly well known in education policy circles. However, it still currently serves as an education myth deeply embedded in the public mindset.
So, how do we take advantage of this opportunity? I do not believe that the long-term solution is found where budget cuts are made but, rather, in the process used to make the cuts. Adopting a per-unit cost budgeting system provides a better long-term solution because it improves the abilities of stakeholders to comprehend the trade-offs involved in financing education.
In Educational Economics: Where Do School Funds Go? Marguerite Roza proposes to scrutinize school budgets in terms of per-unit costs. This practice should produce three vital, sustaining benefits to education policy: greater levels of transparency, honesty, and innovation. Per-unit costs increase district, LEA, and charter school transparency, facilitating the possibility for public scrutiny of current budgetary allocations. Currently, allocations get lumped into major categories, and this practice prevents the public from knowing the finer details of where their tax dollars go. Public scrutiny of budgetary allocations opens doors for more innovative policies, such as weighted student funding, equitable distribution of teacher talent, and a reexamination of values placed on teachers’ credentials.
Transparency directly ties into honesty. Making very visible cuts is a commonly used tactic. School districts, LEAs, and charter schools often leak stories on how students lack pencils, air conditioning, paper, textbooks, desks, etc., to generate public sympathy. Making per-unit costs public keeps the public aware of where budget cuts really could take place. A district, LEA, or charter school that leaks a story on students not having textbooks for the upcoming year would now likely have to justify purchasing all those Promethean Boards over the summer.
Finally, the widely used practice of incremental budgeting continues to stymie innovation. Per-unit budgeting would lead to itemized spending, preventing blanket cuts and raises to programs and resources. Instead of eliminating all after-school programs, school districts, LEAs, and charter schools could examine areas of inefficiency and make targeted cuts. Roza provides the example of a school district that, after itemizing its budget, identified that eliminating a full-time employee hired to coach cheerleading decreased expenditures while keeping the squad intact.
Unfortunately, the current financial crisis does not guarantee a transition toward per-unit budgeting. First, there needs to be a sense of panic. Peng and Guthrie have documented that education budgets remain relatively immune to market cycles. Going back to the end of World War II, per-pupil expenditures have continued to increase monotonically even in the midst of recessions.1 An explanation for this phenomenon could be due to a “rockets and feathers” market reaction. In other words, spending shoots up rapidly when the tide rises. But, when times get tougher, policymakers hold off on education cuts, permitting expenditures to “float” above market downturns long enough until the market recovers.
Should the current financial crisis produce a great enough panic to shift toward a per-unit budget approach, political hurdles still loom. Berry and Gersen have shown that the frequency of off-cycle school board elections leads to very low voter turnout, which in turn permits special interests (e.g., unions) to become overrepresented in education policymaking.2 Breaking down per-unit costs improves public information, but without the power to effectively act on that information, reform efforts could substantially grind to a halt.
In addition to conflicts with special interest groups, the current federally mandated accountability regime – No Child Left Behind (NCLB) – is designed so that outputs receive far greater attention than effective and efficient use of inputs. NCLB rewards improving student growth without much concern for cost efficiency.3 Therefore, NCLB mandates could directly undermine many of the intermediate outcomes of per-unit budgeting if policymakers pay no heed to cost-benefit analyses.
Despite the looming setbacks and obstacles, shifting to per-unit budgeting provides a formula for lasting change. Itemizing budgets is a practice that should become increasingly appealing to schools in the midst of financial woes. Moreover, this fresh outlook on how to finance education could possibly stick around even in times of prosperity.
More importantly, the elimination of incremental budgeting will force stakeholders to think more in terms of trade-offs when it comes to policy decisions. For example, if a household shifts from blindly allocating $200 per week on food to itemizing receipts on food purchases, then this household will more likely start to examine trade-offs. Knowing how much is spent on eating out, gourmet foods, name brands over generics, etc., should facilitate discussions on more effective and efficient ways to budget food expenses.
A per-unit cost approach to budgeting would force schools to share its receipts with stakeholders. Forcing schools and districts to show receipts should facilitate public scrutiny and accountability measures that ultimately improve the efficiency and efficacy of education spending both in times of financial hardship and prosperity.
References
1. Arthur Peng & James Guthrie, “The Phony Funding Crisis,” Education Next vol. 10, no. 1 (2010): 12-19.
2. Christopher Berry and Jacob Gersen, “The Timing of Elections,” The University of Chicago Law Review 77 (2010): 37-64.
3. Martin R. West, “Overcoming the Political Barriers to Change,” in Stretching the School Dollar: How Schools and Districts Can Save Money While Serving Students Best, eds. Frederick M. Hess and Eric Osberg, 263-287. Cambridge: Harvard Education Press, 2010.
Daniel H. Bowen is a Distinguished Doctoral Fellow studying education policy in the Department of Education Reform at the University of Arkansas – Fayetteville. He can be reached at dhbowen@uark.edu.
But Politically, District Schools Can’t Do It
By: Jennifer W. Ash
Education reformers on the sidelines – researchers, philanthropists, activists – often dream up “silver bullet” reforms that disregard the political factors that will make these reforms impossible to implement. Marguerite Roza’s argument for per-unit cost budgeting in Educational Economics: Where Do School Funds Go? is no exception. Roza makes the pragmatic proposal that all education budget items be expressed in per-unit costs and explains in detail the benefits of this budgetary reform. Yet she underestimates the likely political opposition these reforms will meet due to her implicit assumption that the major players in education will act rationally.
Roza argues that converting aggregated costs, like teachers’ salaries, to more specific per-unit costs (like the amount of money spent on science per student), will allow the people reviewing the budget to compare the costs of various services. This comparison should enable them to justify cutting costs in nonpriority areas and to communicate to stakeholders the trade-offs of different budgetary cuts, perhaps even allowing stakeholders to participate in the budgetary process.
She gives an example of a school district that expressed their budget in per-unit costs and subsequently realized that they were spending $1,348 per cheerleader and $217 per golfer. After this gross disparity was brought to light, the district restructured the activity so that cheerleading was offered only after school, instead of as a regular class that required a salaried teacher. This is an ideal – and not necessarily likely – scenario.
Consider if the mothers of the cheerleaders caught wind of this projected cut. They would likely storm school board meetings in droves, monopolizing the school board’s time and generating unwanted media attention. Suddenly, what began as a straightforward measure to distribute funding more equitably to sports becomes a political battle that’s not worth fighting.
If that scenario seems far-fetched, you haven’t paid much attention to school board meetings. It may not even be necessary for the cheerleading moms to storm the meeting; the issue may not even be put on the table. Many school board members run for election specifically to introduce and protect pet programs, so cutting those programs simply is not an option.
Though Roza’s suggestions are thoughtful and have the potential to be effective in solving a host of problems in education apart from just budgetary woes, they will likely never see the light of day in the current education atmosphere. Unless there is a widespread culture shift, changes in governance, and more public involvement in education issues, smarter budget cuts don’t stand much of a chance. There will be a more powerful and involved interest group to contend with at every corner, whether it’s teachers’ unions or cheerleading moms.
In short, district schools just can’t do per-unit cost budgeting. The political opposition is simply too strong. But charter schools might be different. Because they get far less money than traditional public schools, they must be more efficient. And politically, charter schools may not have to please the cheerleader moms (and dozens of other groups), who can always go elsewhere. That’s one reason why we need more charter schools.
Jennifer W. Ash is a doctoral student in education policy at the University of Arkansas. She can be reached at jash@uark.edu.
