What Is Adequate?: Operationalizing the Concept of Adequact for New York

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What Is Adequate? Operationalizing the Concept
of Adequact for New York

• Thomas Downes
• Department of Economics
• Tufts University
• March 2004

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Introduction

• Motivation
• CFE v. State trend towards adequacy mandates
• What lessons can be gleaned from research on
  methods to determine adequate spending?
• Organization
• Critical review of alternative methods for
  estimating adequate spending
• Comparison of adequacy estimates for NY
• Cross-cutting issues in adequacy estimation
• Concluding remarks

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What Level of Spending Is Adequate?

• Working Definition of Adequacy
• State standards determine adequate level of
  spending
• Must account for cross-district variation in
  costs
• Two-step process for determining adequate
  spending for each district
• Determine adequate spending in a benchmark
  district
• Adjust to account for variation in costs

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Geographic Cost Variation Approach

• Input-based approach
• Not linked to performance standard
• Second step must use an input price index rather
  than a cost-of-education index
• Digression Calculating an input price index
• Chambers (1997) v. Duncombe (2002)
• Should estimation method only account for costs
  that cannot be manipulated?

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Empirical Identification Approach

• Logic of the approach
• Problems with the approach
• The selection problem Are successful districts
  valid benchmarks?
• How should costs be adjusted?
• Example Regents' Proposal on State Aid for
  2004-05

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Professional Judgment Approach

• Logic of the approach
• Problems with the approach
• Absence of budget constraint and of incentives to
  compromise
• Limits of personal experience of panel members
• Self-serving behavior
• Concerns about external validity
• Example AIR/MAP study for NY

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Cost Function Approach

• Logic of the approach
• Problems with the approach
• Difficult to explain
• Data requirements
• Black box nature of method is unattractive
  Should the method used to determine adequate
  spending provide more guidance on resource use?
• Example Duncombe/Yinger estimates for NY

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Comparing Estimates for NY

• Barriers to comparing estimates
• Differences in standards used
• Lack of availability of disaggregated estimates
  (AIR/MAP results)
• What comparisons can be done? - Figure 1
• Similarly of distributions implied by Regents'
  Proposal and cost function (Duncombe/Yinger)
• Sensitivity of results to cost adjustment

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Crosscutting Issues

• The Incentive Problem
• Theory Only compensate for costs that cannot be
  manipulated so as to avoid perverse incentives
• Reality Almost any cost determinant can be
  manipulated.
• Solutions Use of averages to determine adequate
  spending and of evidence on incentives
• Are Results Normative?
• Updating the Adequacy Calculations

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Concluding Remarks

• Need to draw on strengths of the various methods
  to develop a unified method that is defensible
  and understandable
• Suggestion Cost function combined with
  professional judgment
• Success of similar approach in California
• Importance of getting things right the cost
  adjustment problem