Chapter 10
SCHOOL FINANCE AND
BUSINESS MANAGEMENT
William E. Camp and
Nicolas D. Ferguson
The terms school finance and
business management are often used synonymously. In actual practice school
finance refers toissues concerning school funding and expenditures, while
school business management typically refers to management and logistical
procedures relating to the business operations of the school district. In
reality, many of the topics relating to school finance and business management
are overlapping concerns. All have major impact on the operation of the school
system.
School operations in the
1990s have entered a new and challenging period. The headlines in recent papers
echo the crisis conditions school funding is facing in the nation; emergency
declarations that become so commonplace they hardly garner attention. The
heading, "School funding: less than needed, more than expected"
(EDCAL, 1991, p. 1), stands not as a battle cry for change but as the status quo
in state after state. Unfortunately, education is only one of many public
services facing crisis at a time when economic conditions force taxpayers to
question government levels of expenditures.
The issues of school finance
present complex and competing demands on scarce resources in our society.
Though most individuals agree that education provides a competitive edge in a
free market and represents an investment in national economic productivity,
there exist many divergent opinions on how resources should be used and which
individuals should gain access to the programs provided. As education is
expected to do so much more today than in the past, the funding requests
increase and place greater demands on changing state resources.
A tradition of local control
formed the basis of school finance decisions for decades as most issues
revolved around the local school district. Most monies came from local property
taxes with minimum support from the state government. Beginning in the 1960s,
the financing of schools truly became a tripartite relationship between
federal, state, and local governments. Increasing state expenditures led to
greater control by the state legislative and administrative bodies to the
extent that local control became more myth than reality. Increasing federal
support exerted a much greater influence on issues within schools as
categorical funding forced greater educational opportunity for disadvantaged
and minority students and students with disabilities. The enormity of the
changes in the past three decades greatly influenced how monies flow to school
districts and as a result, which programs receive support.
As society has changed, the
issues affecting how resources will be distributed between districts and even
students has become more complicated. Prior to the 1960s, concepts concerning
the funding of schools were much simpler. States were expected to provide
support for a minimum education with districts having the option to provide
more support with the approval of the local electorate. "Equality of
educational opportunity means not an identical education for all children, but
the provision by state or local means of at least certain minimum essentials in
the provision of schools, their supervision, and their financial support" (Mort
& Reusser, 1941, p. 99). This concept of distributing funds through a
minimum foundation program meant the state provided more money to property-poor
districts than to property-wealthy districts in order to equalize funding, but
districts still provided most of the school aid through property taxes. The
problem in this method of state support revolved around the fact that it
ignored the great differences in property value from one district to another
and thus allowed great discrepancies in school funding from one locality to
another. Further complicating this difference in revenues was the fact that the
minimum foundation program typically did not provide a minimum guarantee of
funding to poor districts.
Since education is a state
function in all states in the nation and theoretically, all children in a state
are equally important and entitled to the same advantages of education; the
discrepancies in school programs became glaringly evident. Beginning in the late
1960s, issues regarding school equity provided the basis for challenging the
status quo. School finance entered a much more complex and demanding
environment with increasingly hostile debates on how much money is needed and
how it should be distributed.
National goals for promoting
equal opportunity to educational programs and development of effective schools
for all children formed the framework for the evolving issues in the financing
of public schools. The funding of public
education became the center of philosophical struggles arising from political,
social, and economic values underlying a changing concept for modern education
and the method of financing these changes. During the period from 1960 to 1990
more attention was focused on issues of equality. Access to school programs and
facilities became the center of debate in promoting a number of values gaining
wide acceptance in American society. The debate began to center around defining
equal opportunity and determining how
it should be addressed. Within this argument, five values became the focus of
debate. Walker (1988, p. 1) stated that, "The enduring dominant values in
school finance policy in the twentieth century are: (1) adequacy, (2) equity,
(3) efficiency, (4) legitimacy, and (5) liberty."
The term adequacy refers to
the concept that a certain commitment or bargained level of funding is to be
provided. This commitment is the basis for the idea that there is a level of
funding necessary to provide the state-required minimum program, and the
legislature should provide a means for a district to meet this level of
funding. The issue of adequacy attempts to define sufficient funding of
education based on a statewide basic program cost including measures of
availability and condition of instructional courses and materials, necessary
facilities and equipment, trained teachers, class size, and school services.
This issue is fundamental to the question of school quality since education
relies on adequate dollar resources to provide appropriate programs to
students. Unfortunately, sufficient resources do not necessarily translate into
effective programs. The difficulty of defining an adequate program means
providing an educational program suitable to the varying needs of all students.
The concept of equity has
taken on the cloak of equal opportunity. In reality it refers to fairness in
the treatment of students and taxpayers. In Serrano v. Priest (1971) the
standard of equity states simply that school district resources should be based
on the wealth of the state and not individual district property wealth. This
concept of fiscal neutrality allows the state to rely more on state revenues
and distribute money to districts based on varying district and student needs.
State funding means that the state should also be able to rely on more
progressive taxes to meet these educational needs. This taxation means that the
burden of the tax falls on those with the greatest ability to pay, as in an
income tax.
The term efficiency refers to
better use of existing resources. This use may refer to how the resources are
divided among school districts or how the resources are used within the
district. Gone are the days when districts can ignore concepts of allocative efficiency
by choosing more expensive methods of achieving similar results. Effective
classroom management, staff development, risk management, and energy management
are a few of the management techniques that relate to efficiency issues.
Legitimacy relates the
values of the public to the methods in which the school finance system works.
It relates the public's perception of needed changes in school structure to
changes actually taking place. As an example, the public must perceive the need
for providing teachers with competitive salaries and students with new school
facilities in terms of the resulting costs. If the costs are more than the
state can pay or the public is willing to pay, then legislators must work for a
school funding system that the public can accept.
Liberty has become an
increasingly important school finance issue. Liberty has been interpreted in
several different arenas as a question of choice. To the local school district,
the issue of choice means gaining new autonomy from undue restraints from state
and federal governments. Issues of site-based management, discretionary
funding, and restructuring of schools place a new emphasis on local control and
are becoming the focal point for improving education in California. For
parents, the issue of liberty centers on being able to choose schools and
educational programs. The issue of greater choice between public and private
schools has become the centerpiece of national educational policy and has
gained limited political support across the nation while developing concerted
opposition from most public school teacher and administration groups. In
California, a recent voucher initiative promoting scholarships for choice
between public and private schools has become a political issue. The choice
initiative will alter the entire nature of schools in the state by shifting
valuable funding from public schools to private schools. While a small group of
students may actually receive a better education, most students will have
little choice in the schools they attend and new inequities will develop in
public education.
Unfortunately, most
educators and legislators know very little about school finance and the many
surrounding issues that drive major changes in the way schools do business.
Though superintendents and their executive staffs understand the many issues driving
changes in funding and spend considerable time and effort in the political
arena working for favorable funding alternatives, most educators ignore these
issues and their impact on local education programs.
The California system of
public school finance plays an important role in shaping the educational
programs in the state. Programs that receive support flourish while those
programs that lose funding disappear. Conflicting forces lobbying within the state,
as well as national values, greatly influence these decisions. The economic and
social changes occurring in recent decades place a great demand on limited
resources and threaten the viability of maintaining an effective public school
system. Five major influences impacting the current system of school finance in
California include historical, political, economical, demographical, and
constitutional issues.
The formation of public
school finance in California evolved through several stages during the history
of the state. Education in California is a constitutional responsibility of the
state with the legislature charged in Article IX of the Constitution of 1879
with providing and funding a system of public schools. The chronology of
California public school finance illustrates the changing nature of this
support with a shift of control from the local district to the state through
five stages: (1) the establishment of a state system of education, (2)
identification of state and local support for education, (3) emergence of the
state foundation program, (4) development of the revenue limit to address
questions of equalization, and (5) pressures for restructuring of education.
Prior to 1849, school
funding was primarily left to the parents and citizens of the local communities
with education mainly offered through private schools. The Constitution of 1849
established the state and local partnership for financing schools with the
authorization of counties and school districts to levy school taxes and the use
of state funds from the sale of public lands to fund local schools. Attendance
became free to all children in 1870 and elementary districts were allowed to
tax at a rate of 30 cents per one hundred dollars of assessed valuation as
voted by the electorate of the district. In 1879, a new constitution was developed
which became the foundation for current authorization of funding for schools.
High school districts were authorized in 1891, and state funds were apportioned
on a flat grant basis by attendance without regard to differences in wealth between the districts.
By 1931 the state
established a system of maximum tax rates to control school expenditures and
limit increases in local property taxes. "This procedure of establishing
maximum tax rates was an attempt to ensure voter approval of any increase in tax
rates above a certain limit, while giving local boards the authority to
increase tax rates up to this limit" (Meltsner, Kast, Kramer, &
Nakamura, 1973, p.16). The state also introduced a system of permissive
overrides (e.g., meals for needy pupils and programs for special education)
allowing boards to increase the property tax to certain limits without going to
the voters. As local support increased, the state's share of educational
expenditures decreased. "The state thus ensured that local districts would
come to rely increasingly on the property tax" (Meltsner, et al., 1973, p.
16). In response to growing dissatisfaction with high property taxes, the
Riley-Stewart Plan was introduced in 1933, doubling state support for public
schools. A state sales tax was introduced in 1933 and a state income tax was
introduced in 1935 to raise the necessary revenue (Picus, 1991).
Passage of Proposition 9 in
1944 introduced the concept of equalization based on assessed valuation for
elementary apportionments. Passage of Proposition 3 in 1946 brought the
secondary system of schools under the principle of equalization. Based on
concepts developed initially by George Strayer and Robert Haig in New York
during the early 1920s, this concept of equalization was called a foundation
program and finally became a statutory program in California (1947). In a
foundation program the state provides more state funding to districts with low
property valuation. This system of funding provided wide differences in support
for education since districts with high property values could easily raise more
funds from their local tax base than could poor districts even with state
equalization aid. By the late 1960s, ". . . in Baldwin Park the assessed
valuation per child totaled only $3,706; in Pasadena, assessed valuation was
$13,706; while in Beverly Hills, the corresponding
figure was $50,885--a ratio of 1 to 4 to 13" (Serrano v. Priest,
1971). The higher assessed values of local property allowed districts to
provide higher school expenditures per student.
Relying on court action in a
landmark case for school finance, the property-poor districts won a major victory
when the court ruled in Serrano v. Priest (1971) that the current system
of financing schools in California was unconstitutional due to the gross
funding disparities based on district wealth. The court held that this
disparity violated guarantees of equal protection. The state was forced to
develop a new system of distributing state aid among the 1,042 school
districts. The new funding formula, called a Revenue Limit, was designed to
force school revenues to within a difference of $100 per student between districts.
Due to inflation, this difference is now interpreted to be $200 per student.
The formula forced districts to apply local taxes to the formula before
receiving state aid. Initially, this new system was only marginally effective
since the state still was not adequately funding the new formula, and large
differences in property values still meant that many districts could fund a
more expensive program. California legislators introduced a squeeze factor
in the formula that with increased state support would eventually equalize
funding in school districts. The formula slowed the growth in funding to
property-wealthy districts, while increasing the funding to property-poor
districts.
Proposition 13 began with
California taxpayers' concern over rapidly increasing property values and an
overreliance by government
on the property tax. The resulting public initiative radically changed the financing
of schools in California. The new proposition was crudely worded and created a
tax nightmare for California because it froze valuations at their 1976 levels,
except when ownership of property changed. Local tax entities found they could
no longer raise revenues to support daily operations. This lack of funding led
local governments to charge user fees
for many activities previously supported through local taxes. Even with the
change in the fee structure, local governments were facing a crisis. This
funding crisis forced the legislature to provide an immediate bail-out using
state surplus funds. Since the bail-out was temporary, the legislature worked
to shift funding burdens to the state level, especially in regard to schools.
This increasing state support of education combined with the use of the Revenue
Limit formula shifted primary funding from the local district to the state
level. As a result, the actions of California voters had unintentionally
changed the basic support of school districts in the state.
The report, A Nation at
Risk (1983), led to a national resurrection of interest in education in the
1980s. Funding for education had reached a critical low, and the resulting
attention led to a national effort to improve education in the United States.
Senate Bill 813, the Hughes/Hart Education Reform Act of 1983, increased state
funding in California, introduced a mentor-teacher program, established higher
starting salaries for teachers, and introduced reforms in personnel relations
and student graduation requirements. The overall impact of the 1980s was to
increase funding for education. An additional $10 billion was allocated for
elementary and secondary schools in California during this period.
Unfortunately, the impact of the money was largely offset by inflation and
growth in the student population. In real terms, the increase amounted to only
an additional five percent of funds for public schools (Guthrie, Kirst, &
Odden, 1990). The actions by the legislature and the California voters set the
stage for the current funding of education in the state. Control shifted from
the local districts to the state as the state increased its support by billions
of dollars. It also shifted the political battles for more educational funding
from the local to the state level.
Education impacts two very
important factors in most communities: people's money and their children. Combine
these interests with rapidly rising property values and the resulting property
taxes, and conflict over how much is enough became a center of political
interest in the state of California. The success of populist movements such as the ballot initiative for
Proposition 13 radically changed funding by constraining both local and state
revenues. This constraint on revenues meant a greater competition for limited
resources. "Not only would school politics become primarily state
politics, now education advocates were pitted against other interests to
determine education's share of the budget" (Guthrie, Kirst, & Odden,
1991, p. 5).
Proposition 4 closely
followed Proposition 13 and was another constitutional initiative supported by California
voters. While Proposition 13 limited local taxes, Proposition 4 limited state
appropriations and thus the level of taxes collected by the state government.
"The result of this amendment was that government spending became an
ever-decreasing percentage of personal income. The Gann limit created a squeeze
on resources available to local school districts in addition to that previously
generated by Proposition 13" (Schmieder & Townley, 1991, p. 3). This
political effort meant that California was the only state in the United States
limiting both its local and state governments' ability to raise revenues
through property taxes.
A political effort led by
the California Teachers' Association in 1989 attempted to eliminate education
from
the year-to-year lobbying
requirements by seeking additional money to support education and by establishing
a guarantee of a percentage of the state budget for elementary and secondary
schools. The passage of Proposition 98 was seen as a major victory for public
education. This legislation guaranteed that schools would receive at least 40.3
percent of the state budget as well as guaranteed increases for inflation and
growth. The resulting backlash from other public agencies forced educators to
support a modification to Proposition 98 through Proposition 111 in 1990. This
change actually forced education to continue in the political battles to gain
financial support. The modification showed that the guarantees were hollow
during an economic crisis, and the deterioration of the state economic picture
in 1990 resulted in real losses in funding for public schools. The year 1992
found education in competition for funding with welfare projects in the
governor's budget proposal. This proposal places education in the forefront of
the issue of taking from the very poorest people in the state (many of whom are
children) to support education funding. This action places educators in a very
unpopular political position, especially if the money is used to raise salaries.
Some legislators already
believe that teacher salaries in California, ranking in the top five states in
the nation, are currently competitive (Legislative Update, 1991). They resist
placing more money into district hands for further increases in salaries. These
legislators believe that new monies should be used to improve other areas of
public education such as reduction of class size, improvements in technology,
and providing new program support to provide effective education.
California spends $24.9
billion a year to support current operations for elementary and secondary education
with the state controlling 85 percent of this support (EdSource, 1990). Costs
are growing at the rate of $2 billion each year, which places a burden on
taxpayers even in a state as wealthy as California. California's support for
education has been declining during the past two decades. In 1971, California
rated fifth in the United States in personal income per capita, third in
general expenditures per capita, and eighth in expenditures for schools per
capita. In 1981, California ranked fifth in the United States in personal income
per capita, seventh in general expenditures per capita, but nineteenth in
expenditures for schools per capita (Factbook for School Finance Information,
1982). By 1989, California ranked ninth in personal income per capita and
twenty-third in educational expenditures per capita (Rankings of the States,
1991).
In the past several decades
the state had not experienced more than one year of downturn in the state economy.
This yearly growth in the economy allowed the state to maintain a high growth
in expenditures. "One out of every eight school dollars raised in the
United States was being spent in California, and the state was not even staying abreast of inflation"
(Guthrie, Kirst, & Odden, 1991, p. 3). In 1989, the California economy
slowed and this trend was to last for several years. The economic impact means
that schools are having to examine every facet of their operation as fewer
state funds have a dramatic impact on money available to local districts. Since
districts are highly dependent on state funding, administrators at the local level
have few options to raise additional funds and are forced to cut school
budgets.
One of the greatest
challenges facing California is how to deal with the rapid growth in the state.
California is currently the most populous state in the country and is
experiencing growth of approximately 500,000 new residents each year.
California enrollment in the fall of 1989 was 4,771,978; and was the largest
public school enrollment in the country (Education Week, 1990). From 1990 to
1995, California's public school enrollment is expected to grow at approximately
230,000 students per year (California State Department of Education, 1992). At
an approximate cost in current operations for 1990-91 of $4,826 per student
(Estimate of School Statistics, 1991), the state must increase support at the
rate of $1 billion per year just to meet the needs of new students. Also, many
of these students have greater educational needs and costs because many of
their individual backgrounds include language diversity and poverty.
This growth also places
major demands on districts to build new facilities. The estimate for needs of
new facilities in the state for the next five years is $12.65 billion, and the
need for renovation of current facilities may exceed $4 billion (California
State Department of Education, 1992). This amount translates into building 20 new classrooms a day in California for the
next five years. The state has been slow to address this need as a decline of
students in the early 1970s reminds officials that this trend could rapidly
reverse and leave districts with excess facilities. Facing this possibility,
the state requires new facilities in a district to consist of at least 30
percent portable buildings and also requires districts to convert to year-round
programs to qualify for facility funding. The bureaucracy of the facility
approval process has slowed the development of new schools by requiring up to
seven years to receive approval for state funding of new facilities.
Several constitutional
issues are of current focus in the state. The issue that education is a
fundamental right in California means that equity will continue to be a primary
focus as school administrators attempt to shift additional funding to their districts. The Capistrano school
district is leading a coalition of districts in a new equity challenge in the
state courts once again, raising issues begun in Serrano v. Priest
(1971). In Capistrano v. Honig the California school finance system is
being challenged based on inequalities of expenditures per pupil that result in
lesser educational opportunities for students in the lower spending school
districts of the state.
Proposition 13 continues to
cause controversy as Nordlinger v. Hahn (1991) will be heard by the
United States Supreme Court to determine if it violates concepts of equal
protection under the law. The case is based on discrepancies in tax levies
between two similar homes in Baldwin Park, California. Stephanie Nordlinger
pressed the case due to a tax levy of $1,700 on her home, while a neighbor in a
similar home, but one purchased years earlier, pays only $350. The United
States Supreme Court ruled against a similar taxation system in West Virginia
known as the Welcome Stranger tax in Allegheny Pittsburg Coal Company
v. County Commissioners of Webster County (1989). If the Court finds the
proposition in violation of the law, it will force the legislature to address
issues of unequal taxation between properties based on length of ownership. If
the case is upheld, the legislature will still have to address the limitations
Proposition 13 places on local districts access to local funding of school
facilities through bond issues. The current requirement that forces a
two-thirds support of a bond issue versus many states' acceptance of a simple majority,
has made it very difficult to pass local bond issues in California.
Reform and revitalization of
education in California are facing severe constraints entering the 1990s. It
will take vision and cooperation at all levels of government and education to
continue to improve California schools. At the center of these issues is reform
of school finance in California by addressing issues of adequacy, equity,
efficiency, legitimacy, and liberty. The effective use of school funds
continues as a primary goal of making certain that educational programs receive
maximum support.
School business management
has become the responsibility of every employee in the school system. There is
no way to achieve the efficiency and productivity required in the contemporary
school system without the active participation of every individual in the
district. This participation requires that each person understand the
ramifications of good business management--the idea that schools run as
effective business operations.
Schools are one of the
largest and most important businesses in most communities. They are typically
one of the largest employers in an area and may run the largest food program
and transportation system in the community. Schools also serve one of the most
important clienteles in any area--the children. To effectively
deliver their
product--education--schools must learn to utilize scarce resources efficiently.
The assistant superintendent for business is charged with the responsibility of
overseeing this dynamic and important area of school administration.
"Essentially, everything involving the management of fiscal and logistical
services of the district are under the auspices of the assistant superintendent
for business" (Wood & Camp, 1990, p. 102).
At one time, the assistant
superintendent for business and the business office staff made decisions regarding
the management of these areas of responsibility with little input from faculty
or staff. Today with the impact of school reform movements, strategic planning,
and site-based management, these activities are of cooperative concern for all
employees of the school system. Efficient and effective management control of
the resources available to the district enhances the productivity and impact of
the school district. The assistant superintendent for business is charged with
this management control as an integral member of the administrative team and
often is either second or third in the chain of command in the school district.
This individual is accountable for the successful use of district resources
over the long-term and must make a commitment to maintaining the viable
operation of the district with a primary responsibility of meeting the needs of
the children, district personnel, and the community which the district serves.
The duties of the
contemporary assistant superintendent for business continue to expand
dramatically. Economic, political, and legal constraints of today's society
continue to alter the role of business management in school districts. Growth
in expenditures, student populations, diversity of students attending schools,
compliance and regulatory conditions, and demands for equal opportunity have
greatly altered the accountability standards required of schools districts. The
complexity and detail of reports demanded by local, county, state, and federal
governments has increased. Taxpayers have mounted efforts to limit increases in
state and local revenues and demanded more efficient use of public monies.
Citizens are more willing to sue districts for actual or perceived wrongs as
lawyers urge these litigants to go after the deep pockets represented by
massive school expenditures and large insurance policies. As the result of these
new demands, many areas of responsibility of the business services areas have
developed new dimensions. Dependent on the size of the school district, the
assistant superintendent for business may actually be involved with each area
of business in a small district, or may only oversee general operations with
specific hands-on duties in planning and budgeting in large districts.
The assistant superintendent
for business is directly responsible to the superintendent of schools and the school
board. The position requires the individual to have a broad-based knowledge of
school district operations, legal and
administrative procedures required by the state, and a business background to understand and direct the very technical
nature of the position. Since decisions regarding the expenditure of funds
directly impact the educational program, it is important for this individual to
understand the interrelationship of the
education program and fiscal decisions. As a consequence, many boards expect
this
individual to have an
educational background with line administrative experience such as a school principal.
Other boards separate the educational decisions and business operations and
hire the person to oversee business operations from a business background. In
practice, the best alternative is to select an individual with experience in
both education and business.
Despite the philosophy of
the board, it is clear that there is a developing shortage of trained business people
willing to accept the responsibilities of this demanding position. Line
administrators including principals tend to direct their training toward
instructional and curriculum decisions and would often have to take a decrease
in pay to assume a director's position to gain the necessary background and
experience to handle the leadership and administrative requirements for this
position. University training programs also ignore the training of people for
these positions since most states do not require certification for the assistant
superintendent for business. These factors indicate there will be an increasing
demand for people trained and willing to accept this challenging job.
The assistant superintendent
for business oversees the various departments and areas in the daily operations
for the school district and must be reasonably knowledgeable about each area
and how all the numerous activities fit within the overall organization. Key
responsibilities typically involve leadership and management of the budget,
accounting, auditing, financial reporting, risk management, and cash management.
Other areas of responsibility often require oversight, though other individuals
reporting to the assistant superintendent may carry out daily responsibility
for monitoring and controlling these operations. These tasks include purchasing
and warehousing, debt service and capital fund management, office management,
associated student body activity fund accounting, student attendance
accounting, personnel management, maintenance and operations, facilities
management, transportation, and food services.
Financial planning,
including development of the budget, is one of the most important activities in
the school district as it requires translation of the educational program into
financial terms. The financial plan actually determines which activities are
important to the school district in attempting to meet its educational mission.
This plan should identify the mission and objectives of the educational
program; the strategies necessary to meet the needs of students, employees, and
citizens in the community; methods to assess successful progress in the
educational program; and personnel and program costs required to provide a
quality program. The budget process should examine alternative methods of
addressing these needs due to the costs required to provide the program. This
information should be examined in light of limited resources to determine where
money can most effectively be used in relation to legal requirements for the
district. The typical budget process involves eight steps: (1) developing the
educational plan; (2) developing an expenditure analysis; (3) comparing
expected expenditures with anticipated revenues; (4) presenting this plan to
the public, board, administration, or staff as appropriate for comments and discussion;
(5) adoption of a plan by the school board; (6) administration of the plan
during the year; (7) making changes through amendment of the budget as the year
progresses; and (8) evaluation of how the plan addresses the needs identified
as important by the district. Financial planning and budgeting is an on-going
process that must meet current operational requirements (typically for a year)
while addressing longer range plans for improvement and change.
The State of California
requires districts to monitor and report all financial operations according to
very specific requirements. County education offices must monitor and work with
local districts to make sure that these operations conform to state legal
requirements. Recent interest has been focused on the continued, solvent
operation of school districts. Steps to monitor and control operations are more
stringent as the result of the attention focused recently on the several
districts experiencing financial problems. The state is allowed to take control
of financial operations where school boards ignore concepts of basic financial
management and fail to maintain sufficient reserves to meet their financial
obligations.
The state requires several
important reports which help district, county, and state officials to monitor financial
conditions in the district. Student population reports referred to as Period 1,
Period 2, and Annual reports are very important as they form the basis of state
support to the district. Other important reports include the 200-Series reports
presenting the financial condition of the district and categorical reports for use
of state and federal funds. The state is looking at the possibility of going to
a system for electronic collection and transfer of this information similar to
that used in other states. This technique would allow greater and faster
evaluation of information at the county and state levels and earlier
identification of districts needing intervention.
The process of managing and
investing district funds has gained greater interest in the past two decades.
Many districts rely on
county agencies to handle this process. By accumulating funds into a single investment
pool, the counties can hire a professional fund manager to negotiate the best
investment rates available in an international market. Assistant
superintendents must carefully monitor the cash flow within the district and
make sure that banks being used by the district safeguard funds, that cash
handling techniques meet legal requirements within the schools, and that cash
reserves provide adequate funds for current operations.
Payroll management is a
complicated procedure which not only requires that employees are paid on time but
that proper deductions for taxes, retirement, health, and other benefits are
properly withheld and sent to the appropriate agencies. Salary issues are the
subject of considerable attention throughout the nation. At issue are questions
concerning whether different salary schedules can be used to serve as a method
to promote greater productivity in the school work force. Since salaries and
benefits account for approximately 80-85 percent of the current operating budget
of most school districts, this issue has taken on greater importance in
decisions for the restructuring of schools.
Purchasing refers to the
process of identifying, ordering, receiving, warehousing, and distributing materials
in the district. This process involves the many bidding procedures required by
state law to order equipment and materials necessary to offer an appropriate
educational program in the district. It may include a wide range of procedures
from the building of a new school to ordering supplies necessary to operate the
instructional program at the classroom level.
The concept of risk
management has changed greatly in the last ten years. Initially it referred to
the process
of purchasing insurance.
With the tremendous increase in the cost of insurance in the past decade, many
schools have found that they
must carefully examine this area. Many new alternatives to the outright purchase
of insurance are currently being used including the acceptance of a certain
level of loss, to forming cooperatives for self-insuring against losses.
Districts are also emphasizing preventive measures to reduce losses. Greater
attention is placed on effective loss control management that ensures fewer accidents
and identifies and eliminates safety hazards that may increase costs for the
future.
The school district acts as
an agent in handling student activity funds. The agent status means that
students are responsible for the use of these funds. Since students are minors,
district management adds great responsibility not only in protection of the
money but also in training staff and students in the proper use of the monies.
The state restricts students in many activities related to raising and using
these funds and requires an annual audit of the funds. Liability issues
restrict schools in allowing many fund-raising activities by students. The
final result is the district is responsible for the stewardship of these funds
and meeting all legal requirements.
The continued maintenance
and operations (facility maintenance, custodial operations, and grounds care)
required of preserving
school land and facilities is an ongoing operation. Districts have learned that
preventive maintenance and good custodial operations pay in the long run.
Unfortunately, this area is one of the first reduced during financial crisis.
The concept that districts will eliminate instructional programs last is still
predominant. In the long run, maintenance and operation reductions will
increase the districts' costs for repair bills in the future.
It is extremely important
that contract negotiations begin working in a cooperative climate with a
win-win approach. Employees need to understand that much of the salary
increases achieved in the 1980s were the
result of the educational
improvement movement and less the consequence of union actions. District salaries
are largely dependent on state support, and administrators can only negotiate
what is available. Increasing salaries will depend more on cooperative lobbying
at the state level than negotiating at the district level. A common area which
surfaces during budget crisis is student transportation. Districts are beginning
to look at charging parents to transport students despite disagreement on the
legal basis for this fee. This action is gaining support since the state pays
approximately 40 percent of the cost for student transportation in most
districts which is down from 70 percent ten years ago. This decision should be weighed
carefully since a large portion of district revenues are based on student
attendance. This decision could ultimately result in lost state support for
districts. Districts are utilizing other techniques to save money on
transportation funding including contract services, running a more efficient
internal transportation department, utilizing more fuel-efficient buses, and
extending distances for students eligible to ride buses.
Many students rely on
schools for their primary meal for the day. As a result, both the state and
federal government provide supplemental funds to help support district
breakfast and lunch programs. The process of meeting the many state and federal
requirements requires careful management of the food service program. Efficient
management of this department has gained new emphasis in a climate of limited budgets.
Districts are requiring that food services become self-supporting. Many
districts are looking at contracting out the management of this program.
A greater emphasis is being
placed on districts to compete for federal, state, and local grants in order to
provide a broader program
and opportunity to students in the district. In the past, private schools often
met 40 to 60 percent of their budgets through work with foundations and private
support groups. Public schools often ignored many of these private grants,
concentrating primarily on federal and state grants. Today, public schools are
looking at all grant opportunities as sources of funds for new programs and to meet
budget demands. Competition for the grants with the many districts and private
groups has become intense. Developing professional applications to compete for
government and private grants is providing a new challenge for school
districts.
Staff development has been
used only sparingly by school districts for decades until recent attention has been
focused on this need by reform efforts. Top corporations may spend as much as
four percent of their payroll in training, while school districts spend less
than one percent (Carnevale, 1989). Since districts are constrained by tenure
requirements in replacing many faculty and staff, it becomes more important to achieve
improvement through carefully planned training programs. As increased
efficiency and effectiveness in public education lies in the enhancement of the
teaching skills of teachers and the leadership and administrative skills of
administrators, improvement in education requires a positive link to training
and staff development. Restructuring and improved productivity are highly
dependent on improving employee performance in schools. Districts need to
continue to improve staff development programs.
School finance and business
management in California have experienced dramatic change during the past
decades as issues impacting
funding and management of schools entered a volatile climate on the local, state,
and federal levels. At the local level, opposing efforts favoring resistance to
taxes on one side, and the demands for more quality educational programs and
higher teacher salaries on the other are forcing
districts to the brink of
insolvency across the state. At the state level, issues concerning equity,
adequacy, and excellence in education collide with huge budget deficits and
political resistance to major changes in educational funding. At the federal
level, controversy is fueled by pressure for increasing educational
quality with less federal
support for education and increasing bureaucratic paperwork. Pressure for educational
choice continues to gain momentum at the national level in spite of resistance
from many educational lobbies. A final issue is the tremendous rate of growth
in many school districts, compounded by the influx of high-need populations and
inadequate budgets for school facilities, that place California education at an
important crossroad that will determine the future for millions of school-aged
children throughout the state.
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