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Chapter 8 Equity and Adequacy


Chapter 8 Equity and Adequacy Two other sides of Fiscal Effort: Equity & Adequacy. Equity Should Not be Confused with Equality Equality means treating ... – PowerPoint PPT presentation

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Title: Chapter 8 Equity and Adequacy

Chapter 8 Equity and Adequacy
Two other sides of Fiscal Effort
  • Equity
  • Adequacy.

Equity Should Not be Confused with Equality
  • Equality means treating everyone the same under
    the law
  • Equity involves giving people the treatment they

Spending Equality ?
  • If equality governed school spending, everyone
    would receive the same level of funding
  • Everyone cannot be treated the same because
    needs differ
  • Equality cannot be the sole principle to govern
    school finance.

Spending Equality ?, cont.
  • Inherent inequities exist within school
    districts, schools, and within classrooms
  • Staffing a special education classroom costs more
  • staffing a general education classroom

Equity A Medical Model
  • A patient suffering with a rare form of cancer
    costs more to treat than
  • the well one who
  • needs only a flu shot
  • No one would expect both patients bills to be
    the same. One will necessarily cost
  • more than the other
  • So it is with education. Some of our patients
    needs will cost more to care for than others.

2 Hypothetical School Systems
  • 1st - Urban school system with
  • 25 of its students identified as eligible to
    receive special education services
  • 50 of the student body reading more than two
    years below grade level
  • 90 of the students eligible for free or
    reduced-price lunch

2 Hypothetical School Systems, cont.
  • 2nd -Suburban school system with
  • 99 of its students reading on or above grade
  • 2 identified as eligible to receive special
    education services
  • 0 eligible for free and reduced-price lunch

2 Hypothetical School Systems, cont.
  • To provide funds necessary for each school
    systems to be successful will be more costly for
    the first school system
  • For both to be funded equally, at some arbitrary
    level, would be inherently INequitable
  • The second school system has much greater needs
    and subsequently greater costs.

School Finance EQUITY
  • School finance must be concerned with equity
    providing what students need
  • Measuring equity becomes
  • complicated requires
  • sophisticated statistical procedures
  • Measuring equity has also been the basis of legal
    challenges of many states finance formulae

Equality Is an Important Principle
  • When schools or school systems are considered
    equal, their funding should be equal

Schools A B
  • Both secondary schools in the same school
  • Both have 1,500 students.
  • Both have the same of students
  • On free and reduced lunch
  • Eligible for special education
  • Going on to higher education upon graduation
  • Both schools have similar facilities and programs

Schools A B, cont.
  • If the funding for
  • School A were 20
  • higher than for School
  • B, we would consider
  • there to be a fundamental
  • unfairness in the funds
  • allocation.

Horizontal Equity
  • Students who are alike should receive equal
    shares (of funding)
  • Horizontal equity is measured by calculating the
    dispersion, or inequality, in the distribution of
  • When there is no dispersion in funds, one can
    assume there is perfect horizontal equity

Horizontal Equity, cont.
  • When this occurs, there are equal expenditures in
    funding levels such as in per pupil expenditures,
    student/teacher ratios, equal teacher resources,
    and the like across various measures.

Horizontal Equity, cont.
  • Horizontal equity can be applied broadly in
    comparing large and similar subgroups of students
  • For example, we can compare
  • All vocational students at the high school level
  • All full-day kindergarten students
  • All students in general education elementary
  • In this case, we would expect spending, or
    resource allocation, to be substantially similar
    for each of these rather large subgroups.

Research Trends Unclear
  • One 50-state study revealed that between 1970 and
    1975,spending disparities among states increased
  • Another study showed that several states involved
    in school finance reform improved horizontal
    equity fiscal neutrality, 1970-75
  • A 1997 General Accounting Office study found
    substantial improvements in equity over time
  • Other studies show that significant financial
    disparities still remain in horizontal equity
    among the states

Vertical Equity
  • Vertical equity recognizes that students and
    schools are different and that the treatment of
    unequals requires appropriate unequal treatment
  • While horizontal equity is rather easy to
    quantify, vertical equity choices are based on

Vertical Equity, cont.
  • Appropriate treatment
  • varies from one school division
  • to another.

Appropriate Treatment
  • Legitimate factors must be identified that can
    be used to allocate resources differently based
  • The characteristics of the students
  • The characteristics of the schools or the school
  • The characteristics of various programs

Legitimate Factors Include
  • Percent of eligibility for free and reduced lunch
  • Percent of students speaking English as a second
  • Percent of students involved with special
    education services
  • Most educators would agree that serving these
    students needs requires additional services if
    they are to meet the challenges of high-stakes
    testing programs such as No Child Left Behind.

Fiscal Neutrality
  • Equity is achieved when the distribution of
    services is determined by the taxpayers
    preferences for education and not by the fiscal
    capacity of the locality or state
  • This is also known as taxpayer equity or wealth

Reconciling Fiscal Neutrality Equity
  • How do states provide for fiscal neutrality while
    assuring equity?
  • By calculating a lower cost for services to
    those who can least afford to pay for the
  • Equalization of
  • Funding.

Equalizing Funding
  • Each state provides some method for equalizing
    the funding within its boundaries
  • More than 2/3 of the 50 states have had their
    state funding formula contested in court
  • The equalization concept is a continuum that
    ranges from total equalization to no equalization

Absolute Approximate Fiscal Equalization
  • Absolute fiscal equalization is more of a
    theoretical goal than a practical achievement
  • While it is possible in theory, it is virtually
    impossible to achieve politically

Absolute Fiscal Equalization
  • Absolute fiscal equalization is achieved whenever
    the following three objectives are achieved
  • Variance in fiscal position among local school
    districts has been neutralized
  • Variance in fiscal effort among local school
    districts has been eliminated
  • Variance in educational needs due to incidence of
    clients has been accommodated

Absolute Fiscal Equalization, cont.
  • Absolute fiscal equalization is achieved whenever
    the following three objectives are achieved
  • Local school divisions have equal resources to
    fund schools
  • Local school divisions make equal effort to fund
  • Schools spend what is needed to educate students
    with special learning needs

Absolute Fiscal Equalization, cont.
  • This definition achieves fiscal neutrality and
    addresses the issues of horizontal and vertical
  • This is a theoretical and not a practical concept

Approximate Fiscal Equalization
  • Approximate fiscal equalization is achieved
    whenever the following three objectives are
  • Variance in fiscal position among local school
    districts has been neutralized
  • Constrained variance in fiscal effort among local
    school districts is permitted
  • Variance in educational needs due to incidence of
    clients has been accommodated

Approximate Fiscal Equalization, cont.
  • Approximate fiscal equalization is achieved
    whenever the following three objectives are
  • Local school districts have equal resources to
    fund schools
  • Local school divisions have some leeway in how
    they raise spend money for schools
  • Schools spend what is necessary to educate
    students with special learning needs

Absolute Approximate Fiscal Equalization
  • The two definitions are similar except
  • The 2nd condition allows for constrained or
    controlled spending by the local school districts
  • Neutralized fiscal position and meeting clients
    educational needs in spite of the local capacity
    are still required

State Aid Grants to Districts
  • Each state equalizes for the fiscal capacity of
    local districts through its method for funding
  • This funding usually comes through grants of
    various types

State Aid Grants Continuum
Non- Matching Flat
Equalization Full State Equilization Grants
Grants Grants Funding Grants
Nonequalization Grants
  • Non-equalization grants make no attempt to
    equalize funding for the capacity of local school
  • Grants may be categorical aid to school divisions
    allocating a constant dollar amount on a per
    pupil basis based on an application process
  • Poorer school divisions may not have the
    personnel to write the grants enabling them to
    qualify for the funds

Flat Grants
  • Flat grants provide a fixed amount of funding per
    pupil to each school district in the state
  • This funding is not based on the localitys
    fiscal capacity
  • Most states do not use flat grants as the primary
    vehicle for distributing funds to localities

Examples of Flat Grants
  • Californias Constitution requires 120 of state
    funding per pupil to each locality regardless
    of the localitys fiscal position
  • Virginias Constitution requires that
  • the locality fund
  • no more than
  • 80 and no less
  • than 20 of
  • state standards,
  • regardless of
  • the localitys capacity

Equalization Impact of Flat Grants
School Local Local Flat
Grant Total Spending District Property
Revenue Amount Per Pupil
Value A 5,000 50 2,000
2,050 B 50,000 500 2,000
2,500 C 250,000 2500 2,000
4,500 D 500,000 5000 2,000 7,000
Flat Grants with Increased State Support
School Local Local Flat
Grant Total Spending District Property
Revenue Amount Per Pupil
Value A 5,000 25 4,000
4,025 B 50,000 250 4,000
4,250 C 250,000 1250 4,000
5,250 D 500,000 2500 4,000 6,500
Flat Grants with Increased State Support, cont.

Greater burden placed on the state to provide for
education services reduces the disparity in total
per pupil spending, increasing equalization.
Equalization Grants
  • Equalization grants provide for greater state
    funding for the localities with less capacity to
    raise their own funds and
  • provide for less state
  • funding for the
  • with greater capacity

Foundation Programs
  • Foundation programs are a means of providing
    equalization grants to school systems
  • A foundation program establishes some minimum
    level of per-pupil funding that must be met with
    a combination of local and state funding
  • No district can fall below this foundation level

Foundation Programs
  • Once the foundation level has been met, local
    districts are free to supplement funding, called
    leeway funds, to achieve a higher level of
    per-pupil spending if they so elect

Foundation Grants
Local State Foundation
Local Total Capacity Aid
Level Leeway Funding A 1,000
9,000 10,000 0 10,000 D
7,500 2,500 10,000 2,500 12,500 E
10,000 0 10,000 2,500 12,500
Foundation Grants Equalize Funding
  • In this scenario, school district E has ten times
    the capacity of school district A, yet spends
    only 25 more on a per pupil basis
  • Where the capacity differential was initially 10
    to 1, the spending differential due to the
    foundation formula is now only 1 to 1.25

What This Means for Students
  • The poorest school district (A) now has the
    financial means to provide the states the
    minimum foundation level regardless of their
    capacity to fund education services
  • This enables school district A to compete with
    district E in terms of programs, in effect
    raising the education bar for all students in
    that state

Minimum Funding?
  • State legislatures frequently see the word
    minimum as the spending limits
  • Too often minimum becomes the target level of
    funding and does not advance beyond the minimum

Minimum Funding?, cont.
  • Localities may elect not to add sufficient leeway
    funds (based either on values or available
    resources) while higher capacity systems may add
    substantially higher dollar amounts, exacerbating
    the per pupil spending disparity

Minimum Funding?, cont.
  • State governments may be reluctant to set
    adequate levels of spending for a foundation
    program because elected officials cannot agree on
    what is adequate

Guaranteed Tax Base Programs
  • A second type of equalization grant is the
    Guaranteed Tax Base program (GTB)
  • GTB programs guarantee that each locality can
    operate as if all school districts had an equal
    per pupil property tax base

Guaranteed Tax Base Programs, cont.
  • The state determines its share of spending for
    the total cost of education
  • The formula then provides a means for deciding
    how much funding would come to each locality,
    based on a measure of their wealth
  • More state funding goes to low capacity systems
    while less aid goes to high capacity systems

Guaranteed Tax Base Programs, cont.
  • Once the state aid is calculated, the tax rates
    are equalized so the same tax yield is achieved
    for rich or poor districts

Guaranteed Tax Base Programs, cont.
  • A recapture clause provides that the state
    recaptures extra funds generated by wealthy
    localities and dispenses them to poorer
    localities, effectively increasing the states
    floor level of services

Combination Programs
  • Other equalization formulae exist as hybrids
    between foundation programs and equalization
  • These programs take the best of other formulae
    and apply those components to their particular
    conceptual framework

Calculating Vertical Equity
  • Vertical equity means providing what people need
  • Vertical equity recognizes that students and
    schools are different, and that the treatment of
    unequals requires appropriate unequal treatment

Weighted Pupil Approach
  • Determining a base cost for various categories of
  • Once the lowest base cost is determined it is
    given a weight of 1.0

Weighted Pupil Approach Example
  • Florida bases a weighting of 1.0 for the students
    in basic programs in grades 4 through 8
  • Kindergarten and grades 1 through 3 are weighted
    slightly higher with high school grades being
    even higher
  • Weightings for vocational and special education
    are significantly higher ranging up to a factor
    of 15

Determining Adequacy by Costing Out
  • After determining a weight for different
    services and learning needs, many school
    districts established means for costing out
    related services with state and federal funds
  • Method used to determine the costing out of
    services can vary from state to state, district
    to district

Example Costing Out Special Education Services
Special Education Category
Weighting Emotionally Disturbed 3.7 Socially
Maladjusted 2.3 Deaf 4.0 Specific
Learning Disability (part time)
7.5 Visually Disabled (part time)
10.0 Hospitalized and Homebound (part time)
Fiscal Adequacy is a Value-Driven Concept
  • What is enough money to fund a school district?
  • To what standard of academic
  • excellence for all pupils?
  • For what unique learning needs
  • of this student population?
  • With which academic elective,
  • extra- and co-curricular offerings?

Fiscal Adequacy
  • Attempts to quantify adequacy and how much a
    state or school district needs to spend for its
    students remains ambiguous.
  • The adequacy concept has been challenged in
    court since the 1990s.

Fiscal Adequacy, cont.
  • Recent legal challenges have shifted from
    disparities in school funding to adequacy issues.

A Definition of Adequacy
  • providing sufficient funds for the average
    district/school to teach the average child to
    state standards, plus sufficient additional
    revenues for students with special needs to allow
    them to meet performance standards as well.

Odden, A. and Piccus, L. (2004). School
Finance A Policy Perspective, 3rd ed. New
York McGraw-Hill.
Fiscal Adequacy
  • School finance experts refer to four methods for
  • discussing the concept of fiscal adequacy
  • Economic cost function
  • Successful school district
  • Professional consensus
  • Cost of effective school-wide strategies (also
    known as state of the art or best practices)

Economic Cost Function Approach
  • This statistical approach is used more frequently
    in business than in education
  • Economic cost function tries to answer how much
    money per pupil is needed in a given school
    district to produce a certain level of student

Economic Cost Function Approach, cont.
  • The result demonstrates the per pupil expenditure
    necessary to achieve certain levels of student
    performance given the student and district

Economic Cost Function Approach, cont.
  • This model reflects certain values in determining
  • Some individuals or community values play a role
    in deciding how much a community is willing to
    spend to achieve a certain level of student

Research Shows Wide Variation in Adequacy Levels
  • The adequacy spending levels ranged from 49 to
    460 of the average in Wisconsin 75 to 158
    in Texas.
  • In Wisconsin and Texas, the adequate expenditure
    level for large urban school districts ranged
    from three to four times that of the average

Successful School District
  • This method identifies school
  • districts which have had success
  • in bringing student performance
  • to state proficiency standards
  • This approach then sets the adequacy spending
    level to the weighted average of the expenditure
    level of the successful districts

Problems with Successful School District Approach
  • This method omits outliers (atypical districts)
    from the equation
  • Unfortunately, virtually all large, urban areas,
    very wealthy and very poor districts, as well as
    small, rural systems are eliminated
  • It also may inaccurately represent the actual
    costs of delivering adequate services in the
    atypical districts

Limitations Successful School District Method
  • Districts that have been identified as successful
    are generally average in size, non-urban, with
    little diversity in their student make up
  • These districts also tend to spend less than the
    state average

Limitations Successful School District Method,
  • Omitting schools that must address the major
    challenges that one finds in the real world
    artificially lowers the level for achieving
    success, raising questions about its usefulness
    and validity

Professional Consensus (Judgment) Approach
  • Educational professionals identify the components
    of a prototype school they believe would enable
    the staff to teach students to some predetermined
    performance level
  • The costed-out factors (number of professional
    and support staff, technology, instructional
    resources, etc.) add up to determine a schools
    adequate financial base (that can be adjusted for
    varying student demographics)

Limitations Professional Consensus Approach
  • Provide little differentiation
  • for the average school and
  • one with a high concentration
  • of at-risk students
  • In spite of this drawback, the professional
    consensus approach is gaining interest at the
    state level

State-of-the-Art Approach
  • Selects research findings on student achievement,
    frequently seen in high-achieving schools
  • Identifies all ingredients needed for those
    research-identified teaching and learning
  • Determines a cost basis for each of the
  • Determines what an adequate base of spending for
    the school should be

State-of-the-Art Approach, cont.
  • Funding determination is made for the school
    level and not as an average for the school
  • This approach allows the school to use a number
    of school-wide strategies that state-of-the art
    researchers and practitioners claim are most