The COSTS of EDUCATION HOW TO ORDER THIS BOOK BY PHONE: 877-500-4337 or 717-290-1660, 9AM–5PM Eastern Time BY FAX: 717-509-6100 BY MAIL: Or der Dep artm ent ProActive Publ ic a tions, Inc. 439 North Duke Street Lanc ast er, PA 17602, U.S.A. BY CREDIT CARD: American Express, VISA, MasterCard BY WWW SITE: http://www.proactivepublications.com The COSTS of EDUCATION Revenue and Spending in Public, Private and Charter Schools BETTY COX Associate Professor, University of Tennessee at Martin SPENCER C. WEILER Associate Professor, University of Northern Colorado LUKE M. CORNELIUS Associate Professor, University of North Florida PRO ACTIVE PUBLICATIONS The Costs of Edu c a tion ProActive Publ ic at ions 439 North Duke Street Lanc ast er, Penns ylv an ia 17602-4967 U.S.A. Copyr ight © 2013 by ProActive Publ ic at ions All Rights Res erved No part of this publ ic at ion may be re prod uced, stored in a ret rieval syst em, or transm itt ed, in any form or by any means, elect ronic, mec hani c al, phot oc opyi ng, rec ordi ng, or othe rw ise, witho ut the prior writt en perm iss ion of the publ isher. Printed in the United States of Ameri ca 10 9 8 7 6 5 4 3 2 1 Main ent ry und er tit le: The Costs of Edu c at ion: Reve n ue and Spendi ng in Publ ic, Priv ate and Chart er Schools A ProActive Publ ic at ions book Bibl io gr ap hy: p. Inc ludes ind ex p. 241 ISBN: 1-885432-54-2 Betty Cox: To my wonderful husband, Stanley, for his love and constant support, which made this book possible. Luke Cornelius: To Warren Marsland, alumnus, teacher, friend, and long-serving business officer of the Allendale Columbia School, Rochester, NY (1958–2001), who inspired my writing of this work. Spencer Weiler: To Jen, Ellen, and Emerson for their sacrifice, support, and love. You make me smile every day. Contents Introduction xi 1. Soaring School Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Public Education Revenues 2 The Nation’s Investment 5 Sources of Funding 7 State Funding 7 Equality in Funding? 11 Economist Perspective 11 The Future of Spending 12 Conclusion 15 References 16 2. Who Controls the Dollars? . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Local School Districts 19 State Governments 25 Federal Government 27 Conclusion 31 References 31 3. Paying for Education: An Overview of the Funding System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 Local Revenue 34 Local Authority for Revenue Allocation 38 State Revenue 39 Federal Revenue 50 Conclusion 53 References 54 vii viii Contents 4. An Overview of the Budget Process . . . . . . . . . . . . . . . . . . 55 Budget Strategies 56 Preparing School District Budgets 60 Timeline 60 Ancillary Budget Documents 63 Anticipating Expenditures 64 Anticipating Revenues 65 The School District Budget as a Tool 66 Presenting a School District Budget 67 Publishing a School District Budget 68 Adoption of a School District Budget 69 Administration of a School District Budget 70 Fund Balance and Cash Reserve Accounts 73 The Role of Training 73 Auditing the School District Budget 74 Conclusion 75 References 76 5. An Overview of the Expenditure Process . . . . . . . . . . . . . . 77 What Are Expenditures? 78 Understanding Expenditures 79 Revenue Sources 79 Expenditure Trends 80 Reporting Expenditures 81 Expenditure Priorities 83 Planning for Resource Allocation 85 Expenditure Process 87 Reducing Expenditures 88 Managing and Monitoring Expenditures 89 Budgeting Strategies 90 Expenditure Strategies 91 Conclusion 92 References 92 6. Misleading and Inaccurate Information . . . . . . . . . . . . . . . . 95 Multiple Budgets and Financial Reports 95 Quality of Information 109 Inconsistent Accounting Guidelines 112 An Analysis of One School District 127 Deliberately Misleading Information 131 Contents ix Conclusion 131 References 132 7. The Dynamics of Spending . . . . . . . . . . . . . . . . . . . . . . . . . 135 What is Spending? 136 U.S. Spending Versus International Spending 136 Who Influences Spending? 138 Spending Equity Formulas 139 Ensuring Proper Spending 144 Effective and Efficient Spending 147 Transparency of Resource Allocation 148 Spending Philosophy 149 Conclusion 150 References 150 8. Spending Decisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Spending Decisions: The State 153 The Evolution of School Finance Litigation 155 Spending Decisions: Local School Districts 159 Spending Decisions: Schools 162 Evaluating Spending Decisions 165 Conclusion 167 References 168 9. Non-Public Education Institutions: A Comparison to Public Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 169 Private Schools 170 Categories and Characteristics of Private Schools 171 Private School Costs of Education 172 Private School Expenditures 173 Private School Revenues 175 Fiscal Leadership and Organization in Private Schools 176 Charter Schools 178 Charter School Revenue 182 A Comparison of Charter School Revenue and Traditional School Revenue 184 Charter School Expenditures 185 Financial Liability 189 For-Profit Charter Schools 191 Returns on the Public’s Investment in Charter Schools 193