Running a school and improving the way it operates requires the availability of resources, prime of which is money. The financing of school budgets in the US varies between school districts and states. The distribution of funds among schools in a state is done based on the number of pupils to ensure that every child’s education is covered. Additionally, funding is also allocated categorically to ensure that special programs and facilities are included. Therefore, to fully understand how school operations are financed, it is necessary to think in the lines of resource equity and adequacy. Thus, adequacy advocates for the state provision of funding to students to meet their academic needs whereas equity focuses on bridging the gap between the abilities that local districts have in raising revenue for their schools (Owings & Kaplan, 2012). Maintaining a perfect balance in terms of equity and adequacy is not easy, especially considering that apart from the two aspects of financial management in schools, other challenges like proper allocation of funds and accountability must be factored in the financing of school operations.
Summary of Interview
According to the interviewed educator, among the fiscal challenges that affect school financing operations in California are budgetary constraints and the lack of technical expertise as well as adequate staffing in school facilities. The educator explained that the fiscal constraints in schools are so severe that the management is incapable of doing repairs on their own, especially in terms of upgrading facilities through the construction of new structures or the modernization of old ones. In terms of technical expertise and staffing, the educator stated that the problem is that schools lack background facilities which would provide knowledge of the best way to conduct their school financing operations.
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Also highlighted is the issue of low bonding capacity, especially among rural schools in California. He states that sometimes, due to the diminished bonding capacity, by the time the schools make crucial payments to staff members, they have no money left to facilitate the betterment of the facility. The educator pointed out that the root of the issue above may be the fact that California is home to a retirement community comprised of conservative, older, and wealthier residents, who have previously campaigned against bonding. The last challenge that the educator mentioned is the difficulty associated with acquiring state funds, mainly in cases involving smaller state districts. The educator says that considering that the funds available to for school operations are already inadequate, it gets even worse when schools are forced to hire consultants so they can access funds from the state. He also explained that the school budgets are sometimes too small to justify the affordability of soft costs, like those that are associated with hiring consultants. In such cases, even if the schools are eligible for state funding, they do not pursue it.
School facility funding in California has fluctuated over the years. The changes that have been experienced may be attributed to both demographic and economic conditions, such as the recession of 2008 and the periods of expanding and declining enrolment. Additionally, the seasonal availability of state bonds and political events have also affected the available funding within schools in California. For instance, between 1978 and 1984, the spending in school facilities within the state declined steadily, a phenomenon that may be attributed to the passing on the 1978 Proposition 13. The proposition led to the reduction of property tax rates by 1% and prohibited the issuance of obligatory bonds by school districts, which increase property taxes until the bond is repaid fully. However, the spending on school facilities increased slightly between 1984 and 1986 because two state bonds were passed to facilitate the provision of funding for K-12 facilities within schools (Brunner & Vincent, 2018). Hence, an upward trend in school spending within California begun.
The increase in school spending prevailed into the mid-90s as a result of four factors. First, school enrolment rates heightened in the early 80s, necessitating the construction of new school facilities. Secondly, between 1986 and 1992, voters in the state approved seven bonds that increased the funding available for school facilities by $6.8 billion. Moreover, in 1986, the voters approved Proposition 46, re-establishing local school districts’ authority in the issuance of general bond obligations, with the only requirement being the approval of two-thirds of voters in a specific region. Lastly, during the same year, the state legislature approved the AB 1926, authorizing the imposition of developer fees by school districts to provide funds for the construction of new facilities in schools (Brunner & Vincent, 2018). Resultantly, further improvements in facility funding were experienced, owing to the betterment of the economic and political conditions within which schools were operating.
An even more significant increase in school funding was experienced between 1996 and 2005, owing to the significant political events. Among them was the passing of four state bonds that increased available school facility funds by $30 billion and the authorization of Proposition 39, which reduced the number of votes required to generate general obligation bonds within local districts by 11.7%. However, facility spending within schools declined drastically between 2007 and 2014 and then leveled out at the beginning of 2015 (Brunner & Vincent, 2018). Hence, factoring in the prevailing economic conditions at the time of the decline, it can be attributed to the Great Recession, which adversely impacted both local and state budgets. See Appendix 1 for a visual representation of the trend of school facility spending in California between 1970 and 2016.
Financial management in schools is characterized by the presence of fiscal challenges, which result from a variety of prevailing economic and political conditions. Sometimes, school districts in different states may experience similar issues but often, the financial challenges that plague schools across different states differ. Therefore, among the economic problems that schools in California face are; budgetary and capital constraints, inadequate staffing and technical expertise, limited local bonding capacity, and complex state funding mechanisms.
Budgetary and Capital Constraints
A critical issue that California’s school districts face is capital constraints, which restrict budgetary allocations. Resultantly, schools are forced to limit routine, and minor repairs on their facilities, and they cannot participate in modernizing their facilities without external assistance (Vincent, 2018). The latter has resulted in a flawed school facility spending system in the state, characterized by low expenditures on each pupil. The low spending on pupils impacts students negatively as evidenced by the fact that California’s fourth-grade students ranked 45 th in a nationwide survey, with other large states like Florida and Texas being higher up the ladder. Additionally, statistics show that there is a significant difference in test scores among students of different races and social, economic classes within California. Hence, it is evident that California’s school financing system is inequitable because base funding differences are established due to factors like district type and size and not the needs of the students. Resultantly, funding may vary in districts serving similar student populations, as expressed in Appendix 2 (Weston, 2010). Thus, the lack of funding results from a variety of factors within the school districts in California, all of which must be accounted for to resolve the arising budgetary and capital constraints.
Inadequate Staffing and Technical Expertise
Reports show that rural and small districts in California report the lack of expertise and staffing to facilitate effective planning, renovation, and management of facilities. Hence, they result in hiring consultants, whose services can only be accessed infrequently due to the expenses that are associated with the same. In other cases, small districts find it impractical to have specialists that deal with maintenance because their services are not required often (Vincent, 2018). Research has established that it is crucial for the school system in California to hire staff with more expertise, which supersedes previously established standards. The practical implementation of the state’s grade-level standards requires that the system be aligned in terms of frameworks, curriculum and professional development, to support the changes of professional practice associated with the successful management of school facility funding (Moffitt et al., 2018). Therefore, the expertise and funding issues in California’s school funding system not only affect school districts in terms of the hiring of subordinate staff but also in the acquisition of operational and facility staff.
Limited Local Bonding Capacity
Small and rural districts in California lack the assessment values that urban or larger districts possess. Hence, in some instances, their capacity to issue bonds is diminished, restricting their capability to manage funds in schools successfully. Moreover, the nature of the residents in the districts makes them less likely to support an increase in taxes to facilitate the upgrading of school facilities. Also, in cases that schools within the marginalized districts are interested in pursuing local bonds for school facilities, the lack the know-how of the nature of the process makes the pursuit a complicated and expensive endeavor (Vincent, 2018). Resultantly, they are disadvantaged and remain incapable of meeting school funding needs.
Additionally, the value of the property determines the nature of the construction, renovation, operation, and maintenance of school facilities. Regardless of the efforts that California has made in equalizing funds among public schools, property wealth in different districts influences school facility funding. In wealthy areas, the school facilities are well maintained, whereas lower income districts struggle to manage and run schools. Less affluent neighborhoods tend to have unsafe and inadequate school facilities, accounting for about 72% of California’s districts (Vincent, 2018). Thus, from a perspective of capital generation through revenue collection, it is evident that rural and small school districts in California experience a competitive disadvantage in the provision of equitable and adequate school facilities.
Complex State Funding Mechanisms
Understanding the eligibility criteria and submitting applications for state funding in California requires the knowledge of the complicated and time-consuming process, thereof. Therefore, successful implementation of state funding results in the need for schools to hire consultants, while those that cannot afford to acquire such services operate without knowing their eligibility status (Vincent, 2018). Hence, it appears that funding from state facilities is unfair to smaller districts as the processes make it difficult for rural and small districts that lack local funds to seek substitution from state funding. Furthermore, in California, the formulas for funding facilities focus on the average daily attendance; a criterion that does not provide a level access platform for smaller school districts (Freedberg, 2019). Therefore, the mechanism used in allocating funds to school districts in California discriminates against the rural and small districts, making it impossible for them to maintain high educational standards.
Plan to Address Challenges
The undebatable nature of the issues that plague the school funding system in California has necessitated the development of a solution to resolve the critical problems of complexity and inequality. Currently, the proposed plan was suggested by Governor Jerry Brown, which focuses on the introduction of a weighted pupil funding formula (WPF). The WPF approach to allocating facility funds in schools is expected to allow the provision of base funding to all students and the allocation of more funds for targeted students. Additionally, the proposal also highlights that its implementation will encompass the provision of extra funds to districts where targeted students comprise more than 50% of the school population. Furthermore, the proposal advocates for the allocation of varying weights across grade levels, considering that higher grades are likely to be more expensive than lower ones (Weston, 2010). See Appendix 3. However, to fully reform the school facility funding system in California, it is critical to develop a more elaborate plan that explores and covers more aspects of school funding as proposed below.
Major Components of a School District’s Budget
A school district’s budget in California comprises of three main parts, including revenue, expenditure, and program. Revenue refers to the sources of income that school districts have such as local bonds. Currently, the revenue sources for school districts in California have increased to allow the incorporation of property tax and federal tax as part of the revenue sources (Sorenson, 2010). Resultantly, school districts have become better placed to manage their sources of revenue, making it easier for them to implement better budgetary plans.
Additionally, programs refer to the daily operation of schools. The successful running of a school requires proper funds allocation to satisfy current expenses. These expenses cover school needs that include funds needed to run regular and special school programs, as well as the payments made to cater to both support and community services. On the other hand, expenditures are divided into categories that encompass current expenses, capital improvement, as well as long and short-term debt repayment (Picus, 2017). Therefore, the proper management of school revenue is crucial to meeting the program and expenditure needs within a school district. For California’s school funding system to be reformed, the players must be well informed of the components of a school district’s budget system to ensure that they maximally exploit their revenue sources to generate enough funds for the running of top-notch school programs and the fulfillment of expenditure needs.
Major Components of California’s School Finance Program
Significant changes have occurred in the financing of public K-12 education within California. Until the late 70s, school funding in the state was mainly dependent on revenue generated from property taxes. The state played a limited role in financing school operations. Therefore, local property taxes accounted for about 60% of funding in schools while the state offered on 34% of school revenue and federal dollars covered the remaining 6%. Additionally, of the funds collected as revenue, 90% was for general purposes, allowing the schools to determine how they wanted to allocate the funds (Duncombe & Yinger, 2011). The autonomy in funds allocation heightened the chances of misappropriation and reduced accountability.
Regardless, in 2004, the school funding system changed such that the government began to provide 67% of the funds. Local sources cover 22% whereas the federal government and the state lottery cover 9% and 2% respectively. Of the 60% funds that are provided by the state, 40% is restricted to catering to specified needs, such that the said portion cannot be used to satisfy needs that are not stipulated by the state. The legislature determines the total annual spending within school districts, and the regions cannot increase their revenues through the exploitation of parcel taxes (Duncombe & Yinger, 2011). Thus, the current education finance system in California is centralized. However, considering the variety of needs across school districts, maximum exploitation of school facility funding would call for ‘controlled decentralization,’ which can allow school districts to allocate funds depending on their preferences and needs. In certain instances, the budgetary needs dictated by the district do not align with specific school needs.
Inter-relations between School Level and District Level Budgets
The Local Control Funding Formula (LCFF) has changed how local educational agencies in California are funded, and their performance measured to allow the determination of the steps that can be taken to facilitate students’ success by exploiting their full potential. The system is based on a three-tier framework, first of which is general assistance. At the said level, the focus lies on the support and resources offered to local education agencies. In the second tier, covering differentiated aid, at least one agency is mandated the task of providing to local educational agencies that meet specified criteria. Finally, the third tier includes intensive intervention, often required depending on matters of persistence performance over specified periods ("Local Control Funding Formula - Allocations & Apportionments (CA Dept of Education)," 2018). Hence, exploiting the three tire framework in catering to the budgetary needs of school districts and the schools within them is crucial to the successful reform of the school facility funding system in California.
Principles of Fiscal Control and Accountability plus Different Types of Fiscal Audits
The financial control and accountability principles that are employed by the Los Angeles Unified School District seek to reduce the risk of misuse of funds allocated to school districts in California. School districts use the “Budget and Finance Policy Summary” to establish the financing and budgeting policies they are expected to abide by. Among the principles outlined require the districts to base their financial allocation on sound budgetary principles that facilitate proper management of assets to mitigate chances of incurring debt. Additionally, financial control principles require school districts to budget based on the goals of the superintendent and the board, to facilitate unity in funds allocation and reduce the risk of mismanagement. Vitally, the budget that is presented must align with the GFOA standards and should be organized in an easily readable manner, be ready on time as well as be easily manageable ("Superintendent's 2008-2009 Final Budget", 2008). Thus, the provisions of the fiscal control and accountability serve the purpose of ensuring that funds allocated to school districts are adequately managed. However, it is crucial to decentralize the accountability systems, thereof, to allow local flexibility (Kirst, Goertz & Odden, 2007). This will enable capacity-building and the provision of incentives that align with student performance standards to promote more exceptional student achievement.
Moreover, in terms of audit requirements, school districts must participate in audits to review different sections of the financial structure at least annually. Continuous inspections are also crucial because they ascertain previous findings and prevent fraud. Thus, school districts must perform both internal and external audits, with the three essential external audits including financial and program compliance audits as well as a performance audit ("Audit Guidelines-Requirements - Local Education Agency (LEA) Audit Guidelines (CA Dept of Education)," 2018). Hence, the exploitation of the information obtained different kinds of audits can be used to facilitate better funds allocation on the school district level, and if decentralized can be exploited to maximize the funds allocated to each school within the school districts. Better distribution of funds will translate into the improvement of educational facilities and the consequent boost in academic performance.
Financial Implications of School Choice
A school’s choice of programs is crucial, mainly in terms of funding. The latter has significant implications for establishing whether a program meets legal requirements and mitigates the issues that are associated with equity. The expansion of choice programs in schools offers opportunities that go beyond the development of educational programs and into the enhancement of how education for all students is funded. Therefore, to maximize the benefits associated with the incorporation of choice programs in schools, it is crucial to factor in the issues that characterize state funding formulas (Shuls, 2017). Since varied spending per pupil depends on the local effort that is likely to vary between communities, to increase equity through choice school programs it is crucial to boost the effort in districts that have lesser wealth, limit the effort in wealthy school districts and reduce the impact that school district boundaries have.
The financial challenges experienced in California’s school system are critical because they have not only affected the management of funds in schools but also the performance of students, as a result of the inadequacy of facilities. Therefore, for the state to make appropriate reforms to the school funding system, it must tailor the corrective measures it takes to eradicate principle issues like budgetary and capital constraints, inadequate expertise, limited local bonds, and complex state funding procedures. A targeted approach to reducing the state’s school facility funding issues would require exploitation of the knowledge on critical components of the school district’s budget as well as those of the state school finance program. Additionally, understanding the relations of the school and district budgets is critical as is comprehending the principles of financial control and accountability. Similarly, understanding the implications of school choice is necessary for the successful reinvention of the school facility funding system in California.
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