New Financial Realities Call for New Approaches

It could have been almost any district in the country. I attended a school board meeting that was downright depressing. “Costs are growing faster than revenue. Next year we will have a large budget gap to close”. As board members started to throw questions at the CFO,  he added “ We forecast it will get worse in each of the next five years.”

After a bit of stunned silence, every board member wanted to speak. Most lamented the situation and many said this is unfair and unreasonable. The chair summarized the situation “ Folks, stop complaining and lets start planning. We have only three choices, just three. 1) Raise taxes, which won’t pass at the polls, 2) draw down the reserves, which won’t last long or 3) cut programs and staff.” Much of the discussion centered on what and who to cut.

These three tried and true options have helped many a school board pass a balanced budget and still, somehow, provide a decent education for all. The depth and length of this unprecedented (at least since 1929) financial crisis calls for different, equally unprecedented, strategies. Most districts can’t keep cutting back and provide a 21st century top quality education. They need a fourth option, 4) Do things differently – better and less expensive, not just less of the same.

Districts need to re-imagine how to educate their students at a permanently lower per pupil spending level. I know that school boards have made many changes over the last few years to balance their budgets, changes like larger classes, turning down the heat, and cutting electives or extracurriculars. These are reductions, but not fundamental changes on the order of how Orbitz fundamentally changed buying an airline ticket and  Best Buy brought fundamental change to the corner TV sales and repair shop. 

School districts can fundamentally alter how we serve students in a world of declining resources, and serve them better by embracing 5 strategies.

1. Let Academic return on investment guide spending. This sounds cold and corporate but its 100% child centered. The idea is simple: for each program or teaching strategy measure how much students learn, how many students are being served, and the costs associated with the effort. The formula is

Academic return on investment = (increase in student learning) x (number of students helped) / $ spent

There are three powerful concepts hidden inside this idea; not all money spent to help kids learn is effective, all money spent should lead to positive student outcomes, and spending $1,000 to help a student is better than spending $2,000 for similar gains.

School leaders have intuitively always tried to fund what they think works, but the new normal calls for having hard data that lets them know for sure. They can’t afford to guess. Fortunately the treasure trove of information from  common formative assessments, end of unit tests, and progress monitoring allows most districts to determine what works, and works cost effectively without adding new assessments or relying on state tests.

2. Trade down, because we must. As a child, a trip to the doctor’s office usually meant saying hello to the nurse and being examined by the physician. Today, a secretary says hello, a lab tech takes my blood, am LPN takes my history, and a physician assistant exams me. Only if the problem is serious might I see the doctor. 

In medicine two positions have splintered into many, each new position shifted some work to a lower cost person doing just the part of the job that is appropriate. This is an example of trading down, having lower skilled, thus less expensive staff, perform the less skilled and less critical work. If you are thinking,” I don’t like this, especially in my schools”, well neither do I. When done thoughtfully, however,  it can be better than simply cutting teachers, programs and services completely.

Some districts have traded well trained paraprofessionals for elementary librarians, interning graduate student social workers for full time social workers, or even aerobics instructors for PE teachers. Another flavor of trading down is subcontracting instructional activities from teachers who may have above market wages and benefits to similar professionals in the private or nonprofit sector. Districts have partnered with social service agencies to provide counseling, non profits like the Harlem Children’s Zone to provide reading intervention, and private firms to run entire schools.

3. Manage class size in a nuanced way. As a parent and former school board member, I know small class sizes are popular. As a superintendent with shrinking budgets, I learned quickly that adding a few students to a class can reduce costs dramatically Rather than wrestle with what is the right class size, set lots of different class size targets—one for each type of class and student.

Many districts set one class size target for all elementary classes. Could first and fifth grade be different? These regular class size decisions often carry over to special classes. If 25 students are in Ms. Smith’s class, then just these 25 students go to PE. What if 2 classes went to PE at once, thus increasing the size of a noncore class, without impacting the more critical regular class.

There are many variations on this theme. Could high school seniors have lecture style classes of 100, just like they will take as college freshman? Could honors and AP classes have 40 students, while struggling students have just 15 to a class? While some of these numbers may seem big, successful examples abound. After school sports often have 50 students to each adult, band class is often 60 students to a teacher, preparing for the school play or concert might have 50 students to an adult and some districts routinely place 75 elementary students in a PE class.

There is an upside to larger classes as well. Great teachers can serve more students and salaries could also rise. A high school teacher who teachers 180 students a day (say 6 periods of 30 students), rather than a more typical 120 (5 periods of 24 students), could be paid 50% more without hurting the budget. Imagine a school where master teachers earned $90,000 to $120,000. Would this attract and retain staff that could do wonders despite the more desks in the room?

4. Consolidate the many separate budgets. Schools have lots of budgets, but they don’t all get equal scrutiny. The operating budget is the largest and typically the most tightly managed. Off in the shadows sits the special education budget funded by IDEA, the early childhood budget funded by a state grant, the Title 1 budget, the food service revolving account, the health insurance reserve fund and up to 50 more.

In my conversations with school board members across the country few have seen all these budgets and fewer have reviewed them in detail. No one is intentionally hiding them, but due to wildly different reporting requirements, limitations on use of funds, staggered fiscal calendars (many grants start in September, not July like the operating budget) and incompatible line items each of these budgets tends to be siloed and managed separately. How many of these budgets did you review last year?

Having separate budget managers tends to lead to lots of separate programs.  One district of just 5,000 students had 5 different reading programs and 5 different teams of teachers, one paid for by the operating budget, another by title I, a third by integration funds, another by title III and the last by a state grant. The staff worked separately and used different materials. The only thing they had in common was all were understaffed and not very effective. By combining funds, one great program was developed, with extensive coaching and unified leadership. Reading scores skyrocketed as a result.

5. Technology to the rescue, maybe. Orbitz couldn’t have transformed air travel without the internet and the computer chip has changed most work places. Unfortunately, so far technology has increased costs for schools, not lowered them.  Worse yet,  despite spending billions and billions on K-12 technology, much of it in support of reading, NAEP reading scores over the last two decades have remained essentially flat.

This lack of transformation may be because many districts have tried to use technology within the current structures. This means software to learn a foreign language still has a teacher in front of the room, 25 students at desks, plus a bunch of PCs. Will some combination of online learning, full class instruction, virtual field trips, and software generated personalized lessons allow 1 teacher to help 200 students master a foreign language? Maybe, and districts should experiment (and of course measure the academic return on investment).

Back office computers have helped Southwest Airlines and FedEx lower its costs through powerful scheduling and robust data systems. This kind of technology isn’t as exciting as online instruction, but it has a proven track record of stretching limited resources. Since data can drive instruction and scheduling drives staffing, technology to manage district operations deserves more attention in the future, leaner world.

These five ideas won’t make balancing the district budget fun or easy. The impact on staff is significant, but so are the benefits to students. Some of the ideas may (do in fact)  seem unusual and uncomfortable, but the world’s finances have changed and the old tried and true approaches may no longer close the gap and meet the needs of our children.