Joint Committee to Develop a Master Plan for Education
Affordability of A High-Quality Education System
Historically, public schools in California and the United States have been funded primarily by local property taxes, with the actual tax rates determined locally. This local determination, however, led to significant differences in resources available to different school districts throughout the states, depending on the relative value of the property within the districts. Over the past three decades, courts have issued various orders aimed at equalizing school funding. The underlying assumption behind these efforts is that there is a clear relationship between the amount of money available and the quality of education provided to students. Research suggests, however, that it is just as important to consider how resources are used as it is to determine what resources are available.
Modifications of public school financing systems, particularly those prompted by court orders, have sought to 'level the playing field' by invoking equal protection clauses in state constitutions. These constitutional provisions have been used to establish the fact that state government has ultimate responsibility for assuring that all students have equal access to educational opportunities and hence life chances. The 1968 Serrano v. Priest decision was one of the earliest of these court decisions, requiring California to finance its public schools in a way that was more equitable for both taxpayers and students. The ruling focused on the base general purpose funds available to schools and did not require that all sources of revenue be equalized. The decision specifically excluded categorical funding from the base amounts to be equalized that derived from state and local sources. Categorical funding was exempted to enable districts to respond to special needs emanating from student characteristics or particular district circumstances. This ruling, and others that followed in California and other states, established an important principle: equitable funding does not necessarily mean equal funding.
This principle did not answer the question of what is an adequate amount of funding that should be provided to schools. California's implicit determinations of adequacy have been made primarily on the basis of historical expenditures, rather than on analysis of what schools actually need to provide equitable educational opportunities for all students. Many states, and key education stakeholders in California, have compared expenditures in their public schools with average expenditures reported by other states, or schools that are most similar to their own, as a rough gauge of the adequacy of their own funding. Expenditures per pupil or expenditures per unit of average daily attendance (ADA) are the two most frequently cited measures of adequacy of funding. The two approaches produce slightly different measures of adequacy; the first provides an overall measure of effort to support schools, while the second is more reflective of workload, by accounting for student attendance behavior and movement of families.
As originally conceived, categorical funds were supplemental funds allocated to schools above their basic general revenues, to meet special needs of students served and, to a more limited extent, particular school circumstances. It might logically be concluded that there would be a relationship between total resources received and schools serving high concentrations of special needs students. However, no clear relationship seems to exist between student characteristics and total school district revenue. This fact appears to reflect a growing tendency among states and the federal government to earmark public funds for specific programs and services that have little or no relationship to student differences. These trends seem to have sparked frustration in many states about not only the amount of funding provided to public schools but also how that money is allocated.
Increasingly, states are recognizing that any effort to determine the adequacy of funding must first begin with a clear understanding of the educational and other goals that are to be accomplished. This concept of adequacy is based on a belief that how much funding is provided and how it is allocated should in some way be linked to expectations of student achievement and institutional performance. The standards-based approach to school reform, coupled with the current federal effort to promote school-level accountability for student achievement, has lent added impetus to operationally defining what constitutes an adequate base of funding. Conceptually, researchers have identified three steps to defining an adequate base of funding. The first step is to explicitly define the goals of an 'adequate' or 'high-quality' education. This step constitutes a complex undertaking since there are probably as many different goals for public education as there are people willing to offer an opinion. This step also requires state policymakers to identify which of those goals are appropriately something the public schools should be responsible for attaining and those which are affected by factors such as poverty and, therefore, are not reasonably within the ability of schools to control.
The second step is to identify the essential components of an adequate or high-quality education. This step is also complicated, because even those components that research indicates are strongly related to student achievement may have different outcomes when applied in different local communities. Nonetheless, states can be guided by the research that does point to certain elements as essential to effective teaching and learning. For instance, the quality and experience of teachers in schools is more strongly related to student achievement than is almost any other school-based factor. Expert subject-area knowledge, years of teaching experience, and knowledge of a variety of teaching strategies and learning styles are all measures of the capacity of teachers to provide high-quality education.
The third step is to attach a cost to these components: to determine how much money will be needed to actually implement the education system that is envisioned. This step, too, represents an elusive task, because of the absence of any strong relationships between the amount of money available and student achievement. This absence results from the fact that a host of factors beyond the amount of money available influence teaching and learning outcomes; school culture, family and cultural values, school policies and practices, and the skills of educational providers and administrators all influence student achievement and are not easily quantifiable.
This three-step process of determining the adequacy of resources is an important advance over historical approaches of allocating money on the basis of what is available annually or how far above or below the national average a state is. It also furthers the goal of accountability by explicitly acknowledging a link between what is expected from public schools and the resources provided to meet those expectations. Further, it enables state policymakers and taxpayers to consciously determine if they can afford to invest the resources needed to realize the education system they envision.
Similar to the concern about adequacy of funding for basic operations, there is a concern about the adequacy of school facility finance. There is a general belief that inadequate investment in school construction and modernization has resulted in a nationwide crisis, but that individual districts have fared relatively better or worse. Nationally, most states fund school construction and modernization through a combination of state and local resources. Locally, most school facilities are financed throughvoter-approved General Obligation bonds, financed by revenue from limited-term property tax increases. This practice has raised concerns about equity in many states, because of differences in assessed property tax values. In 1994, the Arizona Supreme Court ruled that reliance on local General Obligation bonds to finance school facilities was unconstitutional because it "created vast disparities in districts' ability to afford school construction, building maintenance, and equipment."  Arizona transferred responsibility for school finance from local school districts to the state in response to this court ruling. Similarly, a class action lawsuit has been filed in Colorado to overturn that state's system of school facility finance.
California had to address the issue of the adequacy of state facility financing earlier than most states, partly because of sustained growth in its public schools, combined with the passage of Proposition 13 by California's voters in 1978. Prior to Proposition 13, California financed school construction and modernization primarily through locally approved General Obligation bonds. Proposition 13 eliminated the authority of local school districts and other local governments to set their own property tax rates and had the effect of shifting primary responsibility for financing school construction and modernization from local districts to the state. By 1984, it had become apparent that revenue from state bond issues alone was insufficient to meet the infrastructure needs of California's public schools. In response, voters passed a new initiative in 1984, Proposition 46, restoring the ability of local school districts to issue General Obligation bonds with two-thirds approval of local district voters; and two bills were enacted through the legislative process authorizing school districts to impose developer fees (AB 2929, statutes of 1986) and (Chapter 1451, Statutes of 1982), which authorized creation of special (Mello-Roos) financing districts to finance subdivision infrastructure, including new school construction.
Public education also includes public colleges and universities. Issues of adequacy of funding and affordability are equally salient at the postsecondary education level but reflect the differing structures and missions of public postsecondary institutions. Community and junior college finance issues are most similar to those included in the foregoing discussion regarding funding for the K-12 public schools, in that the community colleges have historically derived much of their financing from local communities through property taxes. Many community college districts have been granted limited authority to levy local property taxes to partially finance basic college operations, with the balance of basic operations funded from a combination of state financing, other fund raising, student fees, and tuition charges. Variations in total property values have produced disparity in revenues generated from one local community to another and have prompted actions to give states a larger share of responsibility for providing adequate financing to meet basic operational needs.
Comprehensive state colleges and universities have historically received a majority of their operational revenue from a combination of state financing, student fees, tuition, and other revenue sources. In the case of research universities, a substantial source of the 'other' revenues has been state, federal, and private research grants, as well as gifts from alumni and other patrons. Enabling legislation and state constitutional provisions generally require or permit selective admissions of students to state colleges and universities, while granting much broader access to community colleges - particularly in California, which promises access to any adult who possesses a high school diploma or can benefit from instruction beyond high school.
Determining what constitutes adequate funding of public colleges and universities also requires progression through the three-step process of precisely defining the goals desired from public colleges and universities, determining the essential components for achieving those goals, and assigning a cost to those components. A further layer of complexity is added, however, in that state policymakers must also decide how much of those costs should be borne by the state and how much should be borne by students and their families through the form of mandatory fees and/or tuition charges. Since enrollment in public colleges and universities is not compulsory by law but instead entirely voluntary, most states subscribe to the proposition that students have an obligation to pay for a portion of their education in the form of tuition charges.61 Need-based financial aid is usually made available to ensure that students who wish to attend college do not feel that choice has been denied them because of the perceived cost of attendance.
No state has yet developed and implemented an analytic approach to determining what is an adequate base of funding that should be provided to public colleges and universities. Most continue to rely on such proxies as state appropriations for higher education as a proportion of total state appropriations for government operations, comparison of state appropriations for public higher education with appropriations reported by other states, and per capita expenditures on higher education. While these measures provide an indicator of how state funding compares to some other benchmark, they fail to answer the question of whether this level of funding is adequate.
In California and other states, estimates of steady future increase in enrollment demand are producing greater signs of stress in the financing of postsecondary education. Not only is there the question of whether states can afford to increase their investment in supporting the basic operations of public colleges and universities, states must also address the need for construction of new facilities and modernization of existing facilities. As with the problems of facility financing in public schools, states have assumed an increasing responsibility for financing of new construction and modernization of public colleges and universities, relying heavily on the issuance of General Obligation bonds. Facility costs are only partially correlated to enrollment demand estimates for public postsecondary education, because of the additional costs associated with the research facilities and graduate program needs of senior institutions as compared to the needs of community colleges - although these differences can be partially reduced by facility requirements of workforce preparation programs tied to local industry needs.
The issues of affordability and adequacy are different but related matters for all levels of public education. Central to each issue is the question of what goals are being pursued through public education institutions. These goals, in turn, define the components that are essential to attaining them and drive the costs that are associated with the envisioned education system. With respect to public schools, adequacy and affordability are entirely a question of public will to make the needed level of education investment. At the postsecondary education level, the question of what is adequate and affordable must be divided between what is adequate and affordable to the State and what is affordable to students and their families - a delicate task of balancing accessibility and cost. At all levels of education, state policymakers must consider how resources are used to promote student achievement, and then devise ways to make sure resources are directed to these practices - while avoiding heavy statutory prescriptiveness and extensive categorical allocation of funds.