ADEQUACY and EQUITY: THE BASIS FOR SFRA and 2010/2011 EDUCATION AID

[Dollar$ and Sense]

We take this opportunity to present to you Chapter 2 from our recent publication called SOLUTIONS. It has become particularly relevant because we are told that education aid for the 2010-2011 school year will be based on a district’s “Adequacy Budget.”

ADEQUACY and EQUITY

THE BASIS FOR THE SCHOOL FUNDING REFORM ACT OF 2008

“…schools are being adequately funded when the amount of funding provided is sufficient to allow students, schools, and school systems to meet prescribed state performance standards.” (1)

The value determined to represent a district’s “ADEQUACY BUDGET” is the single most significant calculation for New Jersey’s School Funding Reform Act (SFRA). This number is the starting point for calculations that fund every public school in the state. The components of the “ADEQUACY BUDGET” calculation include:

1) the base amount for elementary, middle, and high school students;

2) the weights for at-risk and limited English proficiency (LEP) students, and county vocational districts;

3) two-thirds of the census-based costs for the general special education category;

4) all of the census-based costs for speech. (2)

A district’s “Adequacy Budget” is a point of reference. It is meant to represent the accurate cost to a district to meet the required New Jersey Core Curriculum Content Standards (CCCS) for all children. Whether funding is actually available through state or federal aid or from property taxes is not relevant to this calculation.

The SFRA calculation is as follows: State Aid = (Adequacy Budget – Local Fair Share) + Categorical Aids. (2) The state aid figure is the additional dollars needed to meet the CCCS. By definition, if the “Adequacy Budget” calculation is wrong, then the state aid figure is also wrong. The state aid figure is not determined on the basis of what NJ can afford. It is meant to be part of an accurate representation of the true costs of meeting the standards the state has established.

Historically, increased concern about providing equitable and adequate education began in Kansas with Brown vs. Board of Education (1954). Achievement gaps, educational opportunities, and funding equity were the issues. Since this time, courts all around the nation have played a critical role in school finance. Adequacy, as well as equity, became the focus in Kentucky in 1989. It became clear that equitable was not necessarily adequate. The Court’s decision in the case of Rose vs. the Council for Better Education tied adequacy to proficiencies in specific subject areas. The standards-based movement was first represented in the publication of “A Nation At Risk - The Imperative For Educational Reform” (1983). (3) Established standards presumably provided courts with the tools necessary to make effective remedial decisions. Tests were developed so that states presumably could measure performance in achieving standards. These tests, in some form, are now used in all fifty states.

What exactly constituted adequacy first became an issue for the courts in Mississippi (1993). From that point through 2003, twenty-one states conducted adequacy studies, New Jersey included. New York’s court provided a landmark ruling in 2003. As reported by Peter Schrag in the New York Times (2003): “…adequacy means allocating resources not through the usual horse-trading that divides up funds according to the relative power of competing interests. Instead, it demands, as Judge Kaye said, ‘determining the actual cost of providing a sound basic education.’” [Emphasis added.]

Prior to New Jersey’s adequacy study, and the SFRA that followed, numerous studies had been undertaken in other states, providing a wealth of experience and information in this regard.

Unfortunately, lessons learned from prior studies were not applied in New Jersey’s case. The calculations that establish “Adequacy Budgets” for New Jersey schools under the SFRA are flawed and provide inaccurate results. Prior to enactment of the SFRA, final regulations for S-1701; 6A:23A were filed in January of 2005. Of particular interest is:

6A:23A-1.1 Purpose and scope:

“The purpose of these rules is to assure the financial accountability of boards of education through enhanced State monitoring, oversight and authority…The rules also establish mechanisms to ensure the efficient expenditure of budgeted funds in a manner consistent with a district’s approved annual budget.” (4)

Assuring “financial accountability” and “efficient expenditure” was the intent of the regulations finalized during the 2004-2005 school year. By the 2007-2008 school year, many school districts in New Jersey had spent several years cutting budgets and spending.

The SFRA, signed into law in January of 2008, provided “District State Aid Profiles” for every school district. These profiles included “Adequacy Budget” calculations for the 2008-2009 school year, as well as actual spending for the 2007-2008 school year. It makes sense to presume that many districts should have been very close to the “Adequacy” level, given S-1701.

However, using the method of calculation devised by the NJ Department of Education, 383 of New Jersey’s 595 operating districts spent more in 2007-2008 than the amount that was projected by the formula for 2008-2009. (5) In some cases, the differential was tremendous.

The examples below show approximate amounts that school district budgets were over “Adequacy” as determined by the SFRA:

Pleasantville: $12 million on a $69 million budget;

Carlstadt-East Rutherford: $2.8 million on a $10.8 million budget;

Paramus: $7 million on a $63.5 million budget;

Evesham: $9 million on a $62 million budget;

Cherry Hill: $20 million on a $153 million budget;

Princeton: $19 million on a $59 million budget;

It seems unlikely that that these districts were overspending to this degree. Considering that S-1701 was firmly in place and that the DOE was monitoring administrative spending, and recognizing the absurdity of 383 of 595 districts spending over “Adequacy,” the natural conclusion is that the formula must be flawed.

Common sense dictates that the DOE would validate a newly created formula by comparing hypothetical results with actual spending in districts considered fiscally and educationally efficient. This did not happen.

1) “Adequacy” is commonly measured in one of four ways: “The Successful Schools (Districts) Model (also the Empirical approach): This model looks at the spending of schools that meet the performance standards established by the state. Certain costs are removed such as: At-Risk Funding, food Services, Special Education, and Transportation. Once these costs are removed, the remaining average per-student cost for these schools is then used as the ‘Adequate Funding’ amount.

2) Professional Judgment Model: This approach uses education experts to identify resources needed to establish model schools that can achieve state education goals.

3) Statistical Modeling: This system puts state and local finance and enrollment information into a statistical formula which produces a per-student cost.

4) Whole-Schools Approach: This assumes that: 1) there is a school approach that policy makers support; 2) the cost of the approach can be determined; and 3) that such costs can be translated into a base cost figure and a series of adjustments.” (6)

New Jersey chose to use the Professional Judgment Panel and the Whole Schools Approach.

The “Adequacy” approach has great appeal to courts and other branches of government. It answers the concerns of equity, and it provides “judicially manageable standards”. (7)

“This consensus is reflected in a recent report from the Task Force of the National Conference of State Legislators. The report stated, ‘state policy makers and the courts should apply the test of ‘adequacy’ as a primary criterion in examining the effectiveness of any existing or proposed state school finance system.’” (7)

An alternative to the methods used by NJ is the “Successful School District” approach developed by Dr. John Augenblick and Dr. John Meyers. Their firm, A&M, is nationally recognized as being expert on education finance and well known to the DOE. Their method identifies schools that meet state standards in a cost effective manner and then uses their average expenditures to establish a foundation amount that represents the true cost of an “adequate” education.

Maryland, with guidance provided by A&M, used the “Successful Schools” approach along with the Professional Judgment approach. Dollar$ and Sense recommends this approach to reach an accurate measure of “Adequacy.” Dr. Augenblick and Dr. Meyers used the foundation amounts developed from the “Successful Schools” approach and the adjustments from the Professional Judgment approach to account for special needs.

It is noteworthy that the statewide cost estimate for Maryland, calculated in 2002, exceeded available dollars by $2.0 billion. However, this information set the standard that Maryland sought to achieve.

Issues of equity and adequacy have been studied for 45 years. New Jersey’s school funding formula should be based on what has been learned during this time, in an effort to provide students across the state with the resources necessary for an equitable and adequate education. The level of resources must not be determined by what the state wishes to spend in a given budget year.

END NOTES:

1) Final Report to the Maryland Commission on Education, Equity, and Excellence, 2002.

2) A New Formula For Success: All Children/All Communities; N.J. Department of Education. See www.dollarsandsense.bz - resources.

3) A Nation At Risk - The Imperative For Educational Reform – 1983; National Commission on Excellence in Education. See www.dollarsandsense.bz - resources.

4) PL 2004 Chapter Law 73 (S-1701) and NJAC 6A:23A (S-1701 regulations). See www.dollarsandsense.bz - resources.

5) Districts Above Adequacy – see www.dollarsandsense.bz - resources.

6) Education Finance Adequacy; Education Commission of the States; April 2003.

7) Educational Adequacy, Democracy, and the Courts; Michael Rebell