How to steer the tough budget road ahead: accelerate your performance

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  • The reality is that school district budgets are likely to be constrained at least through 2015.

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  • Tough times come to serve as a healthful (if bitter) tonic by forcing leaders to identify priorities and giving them political cover to trim the fat.

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  • Good times are not just around the corner.

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Good times are not just around the corner. Rather, at least for the next half-decade, educators are facing what Secretary Duncan has termed the “new normal.” After three generations in which national, nominal per pupil spending went up every single year, learning to operate in an environment of flat or declining spending is a new challenge for most educators. It's important to know how not to respond, and then to start thinking proactively about how to find the silver lining in this cloud.

The fiscal nightmare isn't over yet so educators and district leaders would do well to look ahead with no illusionsand a resolve to make the most of this difficult time.

Despite the pervasive sense that K-12 schooling has been hammered by the recent recession, K-12 spending has fared better than one might think. Nonetheless, things are likely to remain tight much longer than we might wish. Knowing how to respond to the looming challenges is something that will pay hefty dividends in the half-decade tocome.

It certainly feels like things have been tough so far. Yet, U.S. Department of Education data show that school-district staff increased by 2.3% nationally over the course of the Great Recession (Education Intelligence Agency, 2010). During that same period, private-sector jobs fell by 6.8%. While national per-pupil spending data isn't tallied yet for the last two years, state legislatures have generally sought to protect K-12 while taking enormous bites out of spending on public safety, transportation, higher education, and other services.

"While educators hope better days are just around the corner, the reality is that school district budgets are likely to be constrained at least through 2015."--Frederick Hess

Unfortunately, national education leaders have too rarely been candid with educators and communities about where matters stand. In 2010, while touting the $10-billion federal "Edujobs" bill,Secretary of Education Arne Duncan said that while "we want people to be responsible to be efficient," districts had already been cutting for five or seven years and had cut "through... fat, through flesh, and into bone" (U.S. Department of Education, 2010). But Duncan's claims were inaccurate. The National Centerfor Education Statistics, for instance, reports that, nationally, per-pupil spending increased 16% from 2000 to 2007. Indeed, nominal per-pupil spendingrose every year from 1933 until 2007.

While educators hope better days are just around the corner, the reality is that school district budgets are likely to be constrained at least through 2015. For starters, the Center for Budget and Policy Priorities noted in March that, "The upcoming fiscal year (FY2012) is shaping up as one of the most difficult budget years on record for states.Thus far, some 44 states and the District of Columbia are projecting budget shortfalls totaling $112 billion for fiscal year 2012." CBPP also reports,"Already, some 26 states are projecting shortfalls totaling $75 billion for FY2013... Once all states have prepared estimates, this total is likely to grow."

Unemployment is expected to remain above 8% into 2012 and above 6% through 2015. While the worst of the recession may be over, Nobel Prize winning economist Joseph Stiglitz cautions: "This is ananemic recovery... and is likely to remain anemic" (Heath & Salamat, 2010). Stateline reported in January that "revenues -while up a bit now - plunged so deeply in 2008 and 2009 that it will take years for many states to return to levels they saw before the recession" (Goodman, 2011).

More specifically, four factors will continue to squeeze states and districts. First, schools have been cushioned for most of the past two years by tens of billions in federal stimulus aid, and then by 2010's Edujobs bill. Those dollars are now almost tapped out, leaving districts that used them to minimize cuts in staff or services in a position where they're about to confront dramatic shortfalls. CBPP has noted that in fiscal 2011, states had "approximately $59 billion in federal aid to assist inclosing budget shortfalls that totaled some $130 billion. For 2012, states are already reporting shortfalls that total $112 billion with only $6 billion" still available.

Second, while the worst of the real estate collapse is past, the impact on property tax collections hasn't yet fully rippled through. Homeowners are well aware that state property tax assessments tend to lag market valuation by two to three years. That means most states are still collecting property taxes based on 2008 or 2009 valuations.With most experts expecting residential real estate to bottom in 2012, and commercial real estate to bottom in 2012 or 2013, there will be a downward gravitational pull on property tax revenues until 2014 or 2015. Given that property tax revenues account nationally for almost 30% of school spending, the challenge is clear.

Third, states are and will continue to be squeezed by underfunded pension and health care systems in years ahead.That means fewer dollars for other services, including current school spending.The most recent analysis by the Pew Center on the States in spring 2011reported that the gap between promised public employee retirement benefits and the money set aside to fund them grew to at least $1.26 trillion in fiscal year2009. In fiscal 2009, 31 states were below the 80% funded threshold (Pew Center on the States, 2011).

Finally, state budgets are under growing pressure, particularly when it comes to health care. In fiscal 2010,Medicaid eclipsed K-12 education as the single most expensive item in state budgets. Nationally, state-run health insurance programs consume almost 22% ofstate spending, while growing by 8.2% last year (Vestal, 2011).When the stimulus dollars targeted to help states with Medicaid bills are gone next year, states will have to find a way to replace about $60 billion a year.Looking forward, the 2010 Affordable Health Care Act means states will be shouldering substantial new health care obligations starting in 2014. The Congressional Budget Office projects that health care reform will boost state Medicaid enrollment by at least 16 million between 2014 and 2019, and one recent report from the Senate Finance Committee predicts that this will cost states at least $118 billion through 2023 (Fox, 2011).

The upshot? Good times are not just around the corner. Rather, at least for the next half-decade, educators are facing what Secretary Duncan has termed the "new normal." After three generations in which national, nominal per-pupil spending went up every single year, learning to operate in an environment of flat or declining spending is a new challenge for most educators. It's important to know how not to respond,and then to start thinking proactively about how to find the silver lining in this cloud.

FIRST, WHAT NOT TO DO...

A clinic in how not to respond was provided by interviews in the 2011 Phi Delta Kappan article "Leading Through a Fiscal Nightmare," in which a variety of comments by superintendents and principals revealed four common fallacies likely to alienate supporters (Ginsberg & Multon, 2011).

MISTAKE#1: EXCUSE-MONGERING.

One leader said, "I feel as though I am at a point where I have to say that it is OK for some kids to fail because we cannot provide the extra help they need." When parents lose their jobs, or take a pay cut, they don't say, "It's now OK for my kid to go foodless." When police budgets are cut, we'd be furious if the police said, "Hey, we can't keep you safe." It's fine for educators to look askance at vacuous declarations that "all children will learn." What's not OK is to use budget cuts as an excuse to accept mediocrity - to say, "Well, we used to think no one should fail, but now we've changed our mind." Every leader, public and private, has good budget years and bad ones. Responsible leaders make it their mission to do the very best they can with the resources they have.

"This dynamic may be why education is the only professional sector that seems to have realized no increase in productivity since the introduction of the personal computer."--Frederick Hess

MISTAKE#2: ASSUMING THAT PROGRESS ONLY COMES WITH NEW DOLLARS.

One leader insisted, "You can't push forward with new innovations without the funding to see them through." That's just silliness. The most innovative organizations in the world tend to be cash-poor startups. They rely on moxie, creativity, and elbow grease. In schooling, "innovation" has typically meant layering new dollars and programs atop everything that came before. So, districts didn't rethink staffing or school libraries when they got classroom computers or Internet connectivity, they just added these to everything already in place. This dynamic may be why education is the only professional sector that seems to have realized no increase in productivity since the introduction of the personal computer.

MISTAKE#3: THINKING THAT ANY BUDGET CUT WILL BE DEBILITATING.

One superintendent asserted, "It is impossible to make cuts in a district and not have it impact teachers and students. We cut a secretary, and many tasks are now falling to teachers. This takes up their precious time to prepare for students. We cut a technology integration person, and now teachers are having to spend more time researching web sites and online projects. We cut a mail delivery person, and now secretaries and paras are having to do curbside pickup and drop-off of mail so the mail can travel on buses." By this logic, no organization - not the U.S.military, not the U.S. Postal Service, not General Motors - can ever make cuts or trim personnel without compromising quality. In fact, lots of organizationshave made cuts that seemed painful but ultimately boosted productivity, strengthened the culture, and left them more nimble. Obviously, cutting in dumb ways - such as zeroing out music, art, or sports to save small dollars - has an adverse impact. The challenge for leaders is to use rough periods as an opportunity to prune in smart ways so their organizations emerge leaner and healthier. To act otherwise is to abdicate responsibility.

MISTAKE#4: ALLOWING RATHER THAN CONDEMNING UNACCEPTABLE EMPLOYEE RESPONSES.

Said one principal, "I was and continue to be surprised at how some people react. I had typically reasonable people telling me that they weren't going to do their job... I feel we have taken a huge step backwards in our communication, trust, and cooperation. So,we have more work to do and are working together more poorly." The principal should have been outraged rather than calmly relaying the employee reaction; he should have expressed disbelief that "reasonable people" were declaring an intention to shortchange children. Until that kind of sentiment routinely draws an appropriately fierce public reaction from leaders, instead of a watery "we have taken a huge step backwards in our communication," it's tough to make the case that the public can be confident that new funds will be well spent.

What to do? The winning course, given that families, i.e., taxpayers, across America have lost jobs and homes,and had to tighten their belts, is to recognize that things are tough all over and then protect kids and programs by optimizing spending, rethinking instructional delivery, or finding ways for adults to shoulder the load.

TOUGHTIMES ARE AN OPPORTUNITY

Michigan state treasurer Andy Dillon,whose state knows something about dealing with wrenching economic challenges after the travails of the auto industry, has encouraged states to view tough budgetary conditions as an opportunity to pursue reform. "We have to do what General Motors did to itself," Dillon said. "It wasn't until [General Motors] hit the wall that the real structural changes happened. We have a small window of opportunity to make structural, long-term changes to state government to avoid hitting a similar wall. That time is now."

Educators would do well to embrace that same kind of mindset. Fortunately, as contributors explored in my 2010 book Stretching the School Dollar, education leaders have a wealth of ways to control spending by tightening operations, rethinking staffing, and using technology in more powerful ways.

Let's be blunt: No one makes tough choices in flush times. The leaders of any organization would rather sidestep problems than confront them. It doesn't matter if you're a tough-minded, for-profit CEO or a cuddly koala of a nonprofit executive; nobody is eager to squeeze salaries, shut down inefficient programs, seek out savings, or trim employees when they can avoid it. A manager who tries when times are good is just a mean-spirited S.O.B. who alienates staff and creates disruptions. That's why recessions, threats posed by new competitors, difficult fund-raising cycles, and the like are so beneficial for organizations. They make possible the occasional pruning. They allow managers to tackle problems that otherwise get swept under the carpet.

Tough times come to serve as a healthful (if bitter) tonic by forcing leaders to identify priorities and giving them political cover to trim the fat. Unfortunately, most districts haven't had a meaningful house cleaning in decades. Consequently, in my experience, I have found district after district to be careless about deploying talent, undisciplined at the negotiating table, and lax about pursuing operational efficiencies. This is not just about making sure resources are better used. It's also about the lethargy that can take root, and how leaner,efficiency-hungry organizations create an environment that attracts and energizes talent.

The Council of Great City Schools, the nation's primary coalition of big-city districts, has launched a Performance Measurement and Benchmarking Project that allows urban school systems to compare their operational and financial efficiency against their peers. In the first few years of the project, districts have saved millions by improving the efficiency of their custodians, bus fleets, procurement operations, and electricity use. CGCS's roster of powerful diagnostic tools will prove useful to any district (Casserly, 2010).

University of Washington scholar Marguerite Roza has shown how districts can use unit-cost analyses of programs and practices to identify savings (2010). In one district, for example,cheerleading cost the district $1,348 per cheerleader. The problem:cheerleading was offered as a class, requiring a salaried teacher. The superintendent shifted cheerleading to after-school status, saving tens of thousands of dollars without eliminating any opportunities.

Boosting productivity requires grappling with the cost of teaching. Teacher salaries and benefits amount to half or more of district spending. The most promising way to control costs without slashing services is to get more value out of each employee. While American schools have been in a multi-decade push for class-size reduction -cutting student-teacher ratios from 23:1 in the early 1970s to about 15:1 today - this massive increase in staffing has shown no evidence of academic benefits.Smaller classes are attractive in the abstract, but it's also the case that the need to hire more bodies dilutes the quality of teacher selection and training. Indeed, some high-performing nations, like South Korea and Singapore, have some middle school and high school classes that are much larger than the American norm. Increasing aggregate student-teacher ratios by about two students, from15:1 to 17:1, could yield savings of nearly 10% when it comes to district salary and benefits.

"The promise lies in using these tools to solve problems more smartly, deliver knowledge, support students, reimagine instruction, refashion cost structures, and challenge students in new ways."--Frederick Hess

Another key to getting much more bang for the buck is to explore how to seize on the transformative power of education technology. Unfortunately, too often, education leaders, industry shills, and technology enthusiasts seem to insist that the technology itself will be a difference-maker. Fact is, it's the rethinking that matters, not the technology. The promise lies in using these tools to solve problems more smartly, deliver knowledge, support students, reimagine instruction, refashion cost structures, and challenge students in new ways. Put another way: The greatest power in emerging technologies is the opportunity to reconsider what's doable. Technology makes it possible to deliver expertise over distances, differentiate functions of support staff and educators and permit them to specialize, automate rote instructional tasks, and customize lesson plans and pacing of curriculum for particular children. Embracing technology in these ways will yield vast new opportunities for higher-quality and more cost-effective instructional delivery.

Hoover Institution scholar John Chubb has calculated that integrating online instruction into the school day -by having elementary students work online for one hour, middle school studentsfor two hours, and high school students for three hours - could cut spending by perhaps 8% (or more than $700 per student) in the typical district (Chubb, 2010).The Rocketship Academies in San Jose have used computer-assisted instruction to deliver impressive results while relaxing student-teacher ratios because classroom instruction is complemented by technological tools. A handful of school districts are using providers like Rosetta Stone or tutor.com in ways that start to reduce some of the burdens on classroom teachers, creating the opportunity to take a fresh look at staffing approaches.

More broadly, states and districts have embraced accountability systems predicated on student achievement, but this is only half of the equation. Any well-run public or private organization cares not just about outcomes but about the inputs required to deliver those outcomes. Today, however, there's not a single state - and precious few districts - where accountability metrics emphasize cost-effectiveness. This is an enormous opportunity. By reporting spending data in tandem with school and district achievement data (adjusting appropriately for cost-of-living and student need), it becomes possible to start talking about which programs, schools, and educators are doing more with less. And it provides an opportunity to ask whether seemingly impressive or disappointing results look the same once we've considered the resources in play. If we want district and school leadersto focus on maximizing bang-for-the-buck, we need to start tracking it and recognizing those who are getting it done.

Some educators and education advocates have hoped that they've ridden out the worst and that things will get better soon. Unfortunately, the fiscal picture is grimmer than we might wish, and educators and district leaders would do well to look ahead with no illusions and a cool resolve to make the most of this difficult time.

Frederick M. Hess is director of education policy studies at AEI

References

1. Casserly M.

(2010). Managing for results in America's great city schools. In Hess F., Osberg E. (Eds.), Stretching the school dollar: How schools and districts can save money while rving students best (pp. 97-124). Cambridge, MA: Harvard Education Press.

2. Chubb J.

(2010). More productive schools through online learning. In Hess F., Osberg E. (Eds.), Stretching the school dollar: How schools and districts can save money while serving udents best (pp. 155-176). Cambridge, MA: Harvard Education Press.

3. Education Intelligence Agency. (2010, October 4). Education hiring grew 2.3% during cession. Elk Grove, CA: Author. www.eiaonline.com/archives/20101004.htm

4. Fox M.

(2011, March 1). Health care law to cost states $118 billion, Republican report says. National Journal. www.nationaljournal.com/healthcare/health-care-law-to-cost-states-18-billion-republican-report-says-20110301

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1. Ginsberg R.,

2. Multon K.

(2011, May). Leading through the fiscal nightmare: The impact on principals and superintendents. Phi Delta Kappan, 92 (8), 42-47.

6. Goodman J.

(2011, January 13). State budget outlook: the worst isn't over. Stateline. ww.stateline.org/live/printable/story?contentId=541781

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1. Heath M.,

2. Salamat R.

(2010, August 5). Stiglitz says U.S. faces 'anemic recovery,' needs more stimulus. Bloomberg Businessweek, www.bloomberg.com/news/2010-08-05/stiglitz-says-anemic-u-recovery-means-obama-should-seek-more-stimulus.html

8. Pew Center on the States. (2011, April). The widening gap: The great recession's impact on state pension and retiree health care costs. Washington, DC: Author.

9. Roza M.

(2010). Now is a great time to consider per-unit cost of everything in education. In Hess F., & Osberg E. (Eds.), Stretching the school dollar: How schools and districts can save money while serving students best (pp. 71-96). Cambridge, MA: Harvard Education Press.

10. U.S. Department of Education. (2010, August 10). U.S. Secretary of Education Arne Duncan press conference call on passage of education jobs bill. Washington, DC: uthor.

11. Vestal C.

(2011, January 14). Health care budgets in critical condition. Stateline. www.stateline.org/live/details/story?contentId=542173

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About the Author

 

Frederick M.
Hess
  • An educator, political scientist and author, Frederick M. Hess studies K-12 and higher education issues. His books include "Cage-Busting Leadership," "Breakthrough Leadership in the Digital Age," "The Same Thing Over and Over," "Education Unbound," "Common Sense School Reform," "Revolution at the Margins," and "Spinning Wheels." He is also the author of the popular Education Week blog, "Rick Hess Straight Up." Hess's work has appeared in scholarly and popular outlets such as Teachers College Record, Harvard Education Review, Social Science Quarterly, Urban Affairs Review, American Politics Quarterly, The Chronicle of Higher Education, Phi Delta Kappan, Educational Leadership, U.S. News & World Report, National Affairs, the Washington Post, the New York Times, The Wall Street Journal, the Atlantic and National Review. He has edited widely cited volumes on the Common Core, the role of for-profits in education, education philanthropy, school costs and productivity, the impact of education research, and No Child Left Behind.  Hess serves as executive editor of Education Next, as lead faculty member for the Rice Education Entrepreneurship Program, and on the review boards for the Broad Prize in Urban Education and the Broad Prize for Public Charter Schools. He also serves on the boards of directors of the National Association of Charter School Authorizers and 4.0 SCHOOLS. A former high school social studies teacher, he teaches or has taught at the University of Virginia, the University of Pennsylvania, Georgetown University, Rice University and Harvard University. He holds an M.A. and Ph.D. in Government, as well as an M.Ed. in Teaching and Curriculum, from Harvard University.


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