How State Dominated Educational Systems Level Down Accountability and Increase Costs

January 3rd, 2011

Introduction

The United States Constitution bestows plenary authority to govern education on the states rather than the federal government.  Accordingly, in the American governmental system all the powers of local governments including county governments and school districts are derived from the state.  Whatever authority the state grants to local governments, and, therefore, to local school districts, the state also can withdraw or modify.  

Still, the tradition of local control is rooted in our democratic principles.  It also symbolizes our democracy in action.  Local control enables a local school system to be accountable to its constituents rather than being controlled remotely by a governmental entity that imposes its political agenda which is incongruent with local priorities and needs.  Remote governing bodies, such as county or state governments, therefore, are not as accountable to the standards necessary to provide quality education as are local schools.  

A top-down, state dominated educational system is contrary to our democratic principles and traditions especially when it comes to the governance of our schools.  Increased control by the state through state politically appointed county departments of education, such as in New Jersey and California, means less local control because control is a zero sum game.  As such, every increase in or recapture of state or county power can only result from a corresponding loss at the local level.  

Special attention is given to the states of New Jersey and California because they embody the problems associated with state domination of local school systems as executed through the level of county government.  During recent decades, the cherished home rule tradition of school governance in New Jersey and California was eroded to the point where local control of education has been largely superseded by the state and its extension, county government.   

The rising power of the states of New Jersey and California (Fusarelli and Cooper, 2009) grew from the states’ increasing domination of school finance and, therefore, policy making because of the strings the states attached to funding.  Legal challenges to funding inequities and disparities led to court decisions, such as Serrano v. Priest in California and Abbott v. Burke in New Jersey, establishing financial neutrality as the basis for school funding.  The states tried to remedy the disparities among districts with the infusion of incremental state funds and regulation.  

Subsequent rulings focused on adequacy which required state governments to provide resources to disadvantaged districts such that the provision of education adequately met their constitutional requirements.  New Jersey’s state constitution went even further because of its provisions guaranteeing a thorough and efficient education or a “T&E” education as it became known and manifested in the Abbott v. Burke court decision. 

Legal challenges to subsequent state funding formulas such as law suits to address financial inequities and tax base disparities have caused states to greatly increase taxes so as to generate the necessary funds with which to offset the inequalities.  Nowhere is this more predominant than in the New Jersey and California.  

But greatly increased state taxes and spending have led to corresponding increases in state regulation of local school districts so as to enable states to better control the use of state educational aid.  This, in turn, has led to exponential increases in state mandates for administrative regulation, program requirements, standards, and budgetary controls.  Naturally, as state mandates and control over local schools increased, the size of state and county bureaucracies increased with a corresponding increase in the costs being passed on to local school districts.   

The rise in the power of the state has paralleled the increase in the state’s control over public education finance.  The transformation of the state’s educational finance system to a more centralized model has resulted in a corresponding loss of control by the local taxpayer over educational policy, programs, and services.  More importantly, it has greatly decreased the ability of local citizens as well as the state government to hold schools accountable for educational performance.  

County government (Fischel, 2009) is the entity through which states have traditionally executed their authority. But County government, as the implementation arm of the state, is too distant from the provision of education as well as the educational needs and priorities of local communities to be able to hold local schools accountable. 

History

Historically, the American system for organizing school districts has employed two major models based on traditional political boundaries:  counties and townships.  Every state except Hawaii employs one of these models or a combination as the basis for organizing its schools.  Hawaii is the only statewide school district in the nation and its public schools are 100% financed by the state.  

The settlers of New England (Fischel, 2009) established the township as the political unit within which school districts were organized and this model spread westward.  The Mid-Atlantic and Southern states, however, have generally used the county as the organizing structure for local schools.  Indeed, schools in the states (Kenney and Schmidt, 1994, cited in Fischel, 2009) of Maryland, Florida, West Virginia and Louisiana are organized into consolidated countywide districts without individual school districts.  For example, (Fischel, 2009, pp. 165-166) “the city of Baltimore is considered a county district in Maryland and is distinct from adjacent, suburban “Baltimore County”; each is a separate (county) school district.”  

New Jersey

While such court decisions as Robinson v. Cahill and Abbott v. Burke fundamentally changed the state’s role in education in New Jersey, recreating the office of the Executive County Superintendent of Schools as well as the passage of S1701 into law were similarly profound in their far reaching impact on New Jersey’s school system.  Because using property taxes as the primary basis for funding local school districts is inextricably linked to home rule, these actions transcended local taxpayers’ rights to determine the financial and human resources allocations of their local schools.  More importantly, these court rulings and laws directly affected local taxpayers’ democratic rights. 

Office of the Executive County Superintendent

When New Jersey Governor Corzine signed the CORE Act, CommUNITY Against Regionalization Efforts (2009), Assembly Bill A4 and Senate Bill S19, into law, he transformed the role of county superintendents of education from mere disseminators of state educational policies into powerful Executive County Superintendent of Schools.  In so doing, the governor empowered each Executive County Superintendent to begin consolidating all schools into K to 12 districts and ultimately to consolidate all schools within one countywide organization.  Indeed, passage of the pending New Jersey Senate bill (New Jersey Department of Education 2010), S450, would eliminate all local school administrators over the level of principal and establish the Executive County Superintendent as the official who will govern and operate all public schools within the consolidated countywide district. 

The Executive County Superintendent is a political appointee whose contract calls for him/her to focus on maximizing the reduction of expenses in all of the schools within the county rather than on improving student and school achievement.  These political appointees are empowered to veto local school district budgets despite their previous approval by their duly elected local board of education as well as any contracts for vendors or school personnel not covered by a collective bargaining agreement.  Also, they have unilateral authority to scale down, postpone, or eliminate any non-mandate protected program or service.  

New Jersey gave the Executive County Superintendent unprecedented powers over local school districts through the office of Executive County Superintendent of Schools.  These county superintendents have the authority to put New Jersey well on its way to duplicating Maryland’s centralization of power over local school districts at the county level.  Indeed, the Executive County Superintendents have the authority to consolidate all of New Jersey’s 600 plus school districts serving more than 1.3 million students statewide within one of 21 countywide districts.  

By creating the office of Executive County Superintendent of Schools, New Jersey moved to the verge of replicating the state of Maryland’s county school system model.  First, the state of Maryland eliminated all local school officials beyond the level of principal.  It then consolidated all of its schools serving less than one million students statewide within one of the 24 countywide districts in each county under an Executive County Superintendent.  

Although Maryland abolished all administrators above the level of principal from the local schools in the name of saving money, cutting administrative expenses, and cutting property taxes, these small one time savings were more than exceeded by the ongoing costs of the office of Executive County Superintendent of Schools with its ever increasing bureaucracy.  For example, in Maryland, the Montgomery County Department of Education alone has an annual operating budget of approximately $2 billion with nearly 22,000 employees despite having a total student enrollment of less than 138,000.  The office of Executive County Superintendent of Schools for Montgomery County, therefore, employs roughly one administrator for every six of its students!  

The Executive County Superintendent, who is appointed by the governor, supervises, directs and manages the functions of the County Office of Education as a representative and subordinate of the New Jersey State Commissioner of Education.  The Executive County Superintendent oversees all public school districts within his/her county.  To accomplish these goals, each county superintendent is given a staff and a budget which are not subject to taxpayer input, approval or elections. 

Contrary to core principles of democracy, the Executive County Superintendent has the authority to override a school district’s budget despite its prior approval by its duly elected board of education.  He/she can do so without any prior consultation or notification of the elected board of education or the local district’s superintendent or business administrator.  Indeed, the Executive County Superintendent’s exercise of a line item veto over non-instructional costs in a local school district’s budget would be contrary to the will of the locally elected board of education that represents the local taxpayers as demonstrated by their previous vote of approval for the vetoed items.  

In addition, a board of education is prohibited from transferring funds into any line item that was vetoed by the Executive County Superintendent.  The County Superintendent’s line item veto authority covers all non-instructional line items including administrative expenses.  The appointed Executive County Superintendent, therefore, could eliminate administrative positions deemed necessary by the elected local board of education who would then lack sufficient recourse.  

The Executive County Superintendent is empowered to review all district budgets within the county.  He/she has the authority to veto a portion of the district’s budget and the district will have to deduct this portion prior to the budget’s posting on the ballot for the public vote in April.  The district is then prohibited from transferring any funds into those line items or spending any funds toward the vetoed items for the fiscal year.  

The Executive County Superintendent’s is responsible for ensuring that each school district budget includes sufficient funds to meet the requirements of the state’s Core Curriculum Content Standards (CCCS).  The district’s administrative and support services per pupil costs are compared to the state median.  The Executive County Superintendent can administer reductions in these areas if the district’s costs exceed the state guidelines. 

The Executive County Superintendent is required to review, evaluate, and approve all employment contracts for administrators not covered by a collective bargaining agreement including but not limited to superintendents, assistant superintendents, and business administrators.  He/she must also enforce the state mandated caps on accumulated unused vacation and sick days.  

According to the School Funding Reform Act (New Jersey Department of Education, 2008), the Executive County Superintendent can withhold or recapture state aid if he/she discovers excessive spending, inefficiencies, or that the district has violated any state law or regulation.  Another condition for receiving state aid stipulates that every district must refinance all outstanding debt for which a three percent net present value could be realized. 

The Executive County Superintendent enforces the state mandated four percentage point cap on a local school district’s annual property tax levy.  The tax levy is also reduced if the district’s budget is found to exceed the state’s calculated adequacy level for that particular district and if the district receives an increase in state aid exceeding the greater of two percent or the Consumer Price Index (CPI.)   

The implication behind the creation of the office of Executive County Superintendent of Schools was that it would somehow save the taxpayers’ money and enable the state to have lower property taxes.  The experience of such a control model in the state of Maryland contradicts such assumptions as does the New Jersey’s county control model.  New Jersey’s 21 counties combine to spend over $6.3 billion annually in property taxes and hold more than $5 billion in outstanding debt.  County government places a tremendous burden on New Jersey’s taxpayers especially as compared to those in Connecticut where county government was eliminated in 1960.  

While economies of scale apply in the private sector especially in manufacturing, they do not apply as well to the education sector with its value added services.  In the education arena it usually takes a defined number of people per capita to provide a defined level of service.  Larger school systems such as regional or consolidated countywide school districts, therefore, are more expensive to operate than smaller, local school districts because of their “penalties of scale” (Coffin, 2010, p. 1).    

Decentralization rather than centralization brings decision makers closer to the taxpayers and local priorities.  Taxpayers have more of a stake in the success of their local school rather than county districts.  Indeed, separating the taxpayer from his/her ability to control and influence the operating budget and educational plan of his/her local school district cuts neither costs nor property taxes. 

S1701

When New Jersey Governor James McGreevey signed S1701 into law on July 1, 2004, as Chapter 73, Public Laws of New Jersey 2004 (New Jersey Department of Education, 2005), the state took a major step in its continued erosion of local control over school districts especially in terms of a district’s surplus, budget flexibility, administrative spending limits, and spending growth limitation adjustments.  While this legislation accelerated the loss of local autonomy for school districts the state did not apply it to county and municipal governments even though these levels of government also are funded primarily by local property taxes.  

S1701 reduced the maximum allowable district surplus to no more than three percent in the 2004-05 fiscal year and two percent in the 2005-06 fiscal year and beyond.  Prior to the passage of S1701, the state prohibited non-Abbott districts from having a surplus of less than six percent.  Because a district’s surplus serves as insurance against unforeseen expenses, S1701 forces a district to either cut non-mandate protected educational programs and services such as regular education or increase property taxes.  

S1701 required that any surplus in excess of the percentage limitations must be used for property tax relief.  But the property tax relief would be implemented by limiting the amount of property taxes a district could levy in the upcoming fiscal year rather than as a direct refund to taxpayers, furthering constraining local autonomy.  

S1701 (New Jersey Department of Education, 2005) limited a district’s budgetary flexibility by restricting the growth in the base budget to the higher of two and half percent or the Consumer Price Index (CPI).  It also limited Spending Growth Limitation Adjustments (SGLA) that enable districts to meet unbudgeted increases in expenses for such items as hazardous route transportation, courtesy busing, insurance, utilities, or legal services.  Once routine budgetary transfers such as line item transfers exceeding ten percent as well as transfers of surplus and unbudgeted revenue now require county approval.  

According to the New Jersey School Boards Association (2004), S1701 further eroded local taxpayer control by limiting a district’s use of second ballot questions, often referred to as second questions.  By casting votes on second questions, citizens exert control over the authorization of funds for specific educational programs and services that are in addition to the base operating budget.  Through the exercise of second questions (New Jersey School Boards Association, 2004, p. 3), “the community determines if it is willing and able to raise the money to fund the expenditure over cap for programs ranging from full-day Kindergarten and after-school enrichment programs to extra-curricular activities.”  

S1701 further eroded the ability of local school districts to develop, approve, and implement their operating budgets.  Decision making authority over many budgetary items such as the acquisition and allocation of a school district’s financial and human resources were largely transferred to the county level of government as the state’s execution arm.  Indeed, (New Jersey School Boards Association, 2004, p. 2) S1701 “lessened a community’s ability to determine school finance matters and related educational policy.”  

Upon taking office in January, 2010, New Jersey Governor Christie announced he would withhold $475 million in promised state aid to school districts statewide as part of his effort to close the state fiscal year budget deficit of approximately $2 billion.  What makes the governor’s plan significant is that he requires districts to make up for cuts in state aid by using their surplus and reserve account funds.  

Governor Christie’s plan requires districts to use all of their excess surplus plus 25% of the reserve accounts for capital, maintenance, emergencies and excess.  This means that most non-Abbott districts will lose most if not all of their state aid for the balance of the fiscal year that ends on June 30.  Because the state already required districts to roll over any surplus exceeding the two percent level as property tax relief according to S1701, this reduction in surplus will lead most likely to deeper cuts to non-mandate protected educational programs and property tax increases in districts statewide.  

California

While the California Department of Education has the overall responsibility to administer education throughout the state, it does so primarily through California’s 58 counties.  Each county department of education oversees the school districts within its boundaries.  While the counties collect property taxes on behalf of the state and the mill rate is established in the state constitution, it is the state that determines how much funding including revenue from property taxes each district receives and how those funds are allocated.   

But California had enjoyed a long tradition of local control of school district budgets, capital projects, human resources as well as the provision of educational programs and services according to local needs and priorities.  The role of the state and county governments in governing and funding local school districts was severely limited.  While the state provided a minimal funding level, local school districts levied property taxes to generate the overwhelming majority of their revenues.  Taxpayers’ votes determined district budgets as well as the members of their local boards of education.  A district’s financial and human resources allocations were based on the district’s educational plan as approved by the duly elected local board of education.  

The state ended this tradition by constantly eroding local control through the strings it attached to the funding it provided and the policies it mandated for local school districts.  Once the state gained the majority control over school finance, the state was then in a position to also control educational policy in all of the nearly 1,000 school districts.  

Today, local school districts depend almost entirely on the state for their revenues and largely lack the authority to raise revenues that only they can control.  Because state funds come with powerful strings attached, the state leverages its funding to determine how a district allocates its budget and human resources.  Districts have almost no discretion over their use of the majority of state funds.  

The strings attached to California’s state aid result in the majority of a district’s funds being restricted only for use according to the state’s mandates.  Most of the unrestricted state funding finances the salaries and benefits for a district’s employees.  A district’s financial and human resources allocation is overwhelmingly determined by the state according to its one size fits all approach which does not account for differences in local educational needs, priorities, and cost drivers.  By controlling school finance and making policy decisions that once were the province of local school districts, California consolidated and centralized the control of education at the state level.  

The current recession has adversely impacted the state’s budget over the last few years especially education which is the largest component of California’s expenditures.  This has caused the state to pass along revenue cuts, deferrals, and allocation formula adjustments to local school districts despite promises and legislative guarantees to the contrary.  Because legislation has forced local school districts to become overwhelmingly dependent on state revenues, districts were forced to depend on unreliable state aid and, therefore, have been disproportionately affected.  

But the seeds of California’s fiscal calamity were sown well before the current recession could impact its budget.  The roots of the financial crisis are found in California’s history of creating unsustainable state budgets especially during periods of economic growth while simultaneously forcing local school districts to become overly dependent on unreliable state revenue sources.  There are three fundamental causes of the fiscal crisis which continue to plague California’s local school districts.  These include a major court ruling, state constitutional amendments, and voter passed initiatives. 

The first causal factor was the 1971 California Supreme Court’s Serrano v. Priest ruling in which the court declared the system of funding local school districts based on primarily on local property taxes to be unconstitutional if differences in ratables (Fischel, 2001, p. 99) “led to disparities in educational opportunities, which the court apparently took to mean spending per pupil.”  This decision not only effectively ended the tradition of local control over school budgets, property tax levies, and capital projects but also led to the centralization of control over school finance at the state level. 

But the resultant centralization of school finance at the state level lowered the quality of education generally throughout the state because it separated local taxpayers from their connection or stake in their local schools.  This stake derives from the payment of local property taxes for local schools.  This demonstrated Fischel’s (2001) homevoter hypothesis because the benefits local taxpayers derived from the quality of the education provided in their local schools funded by their local property taxes were no longer capitalized in their property values.  Fischel (2001, p. 129) concludes, “voters are aware of this connection, and that statewide funding especially alienates the majority of the population who have no children in the public school system.” 

Fischel (2001) demonstrates how the Serrano v. Priest decision resulted in the passage of Proposition 13 with its dramatic end to local control over the then main source of revenues, local property taxes.  According to Fischel (2001,) the Serrano v. Priest decision led to the passage of a state constitutional amendment called Proposition 13 which was the second major cause.  The enactment of this legislation in 1978 severely cut the amount of local property tax revenue available to local school districts as well as the amount under local control.  The legislation enabled the state to collect and then redistribute local property taxes based on the state’s funding formula rather than according to local needs and priorities.  

The third major factor in the reshaping of California’s school finance system was the passage of Proposition 98 in 1988.  When voters approved this ballot initiative, the state of California was compelled to guarantee a minimal level of funding for all local school districts throughout the state. 

Prior to the Serrano v. Priest ruling, local school districts controlled their budgets including the levying of property taxes to fund school operations.  But post Serrano, the state imposed revenue limits on school districts and narrowed the gap in general purpose funding by capping the wealthier districts while providing larger subsidies to low income districts.  The (Perry, 2004) ceiling placed on wealthier districts combined with the sliding scale of increases for lower income districts helped the state achieve the equalization standard expressed in the Serrano v. Priest ruling.  

But the adoption of Proposition 13 went beyond the Serrano v. Priest ruling in changing the state’s role in school finance by severely limiting a district’s ability to levy and benefit directly from local property taxes.  Proposition 13 amended the California State Constitution with its main provisions including:  

No property should be taxed at more than one percent of 1975 fair market value; municipalities may impose “special taxes” by a two-thirds vote of the electors; assessments may not grow more than two percent annually from 1975-76 levels, to which they were rolled back, except for property sold after 1975-76; and no increase in state taxes may be enacted without a two-thirds vote of each legislature.  (Yudof, Kirp, Levin, & Moran, 2002, p. 798)  

Following the passage of Proposition 13, the state was empowered to establish a statewide mill rate, limit millage increases, and, more importantly, prevent local school districts from levying, collecting, and benefiting directly from local property taxes.  This overturned the Separation of Sources Act (Barbour, 2007 as cited in Perry & Edwards, 2009) which had granted exclusive control over determining and levying property taxes to local governmental entities including school districts in 1910.  

Because of the resultant drastic reduction in the control over and receipt of local property tax revenues, the state was forced to (Yudof  et al., 2002, p. 798) “bail them out by using $2.2 billion of the $3 billion state surplus to make up the difference.”  While the state gained control over the allocation of locally levied property taxes, the inequities in funding among school districts were then a function of the state’s school funding formula rather than ones caused by disparities in property values and ratables.  

Because Proposition 13 and the Serrano v. Priest ruling combined to both severely limit the ability of local school districts to raise their own revenue to fully fund their budgets and centralize the control over school district funding at the state level, the voters amended the constitution by approving Proposition 98 in 1988.  Proposition 98 guaranteed that the state would use the local property taxes that it now controlled plus other state tax revenues to fund a minimum level or floor of all local school district budgets.  

According to the requirements of Proposition 98, the state guarantees that at least 40% of its general fund resources will be dedicated to funding public education.  This guaranteed funding floor is established by modifying the amount a district received in the preceding fiscal year (Edwards & Leichty, 2010) for enrollment, attendance, and statewide income levels. 

In 1990, Proposition 111 modified Proposition 98 to the extent that if the state’s General Fund revenues decline, then the growth rate of the guaranteed funding level will be lowered correspondingly.  As a constitutional amendment, Proposition 111 enables the state to make “fair share” reductions to the guaranteed funding level during economic downturns (Edwards & Leichty, 2010, p. 5).    

The risk to local school district budgets of depending on unreliable revenue from the state’s unsustainable budgets materialized in major way during economic crisis following Governor Schwarzenneger’s election.  To alleviate the state’s budget deficit, Governor Schwarzenegger (Picus as cited in Fusarelli & Cooper, 2009) negotiated a one year suspension of Proposition 98.  Although the governor guaranteed that the funds would be repaid (Picus as cited in Fusarelli & Cooper, 2009, p. 14) he “did not include them in his annual budget” for the following fiscal year.   

Nationwide the soaring cost of under funded state mandates and regulation has forced local school districts to raise property taxes or cut non-mandate protected regular education programs and services resulting in a leveling down of educational quality.  California is no exception as Greenhut (2005, p. 1) reports that according to Proposition 4, which was approved in 1979, the state is required “to reimburse local school districts for the mandates it imposes on them.  California owes districts more than $3.6 billion.”  These deferred payments have caused severe cash flow problems for local school districts.  

As the state’s fiscal crisis deepened and with Proposition 98’s guaranteed educational funding being the largest state expenditure (Edwards & Leichty, 2010), the state cut educational funding to the bare minimum.  In this way the state not only reduced spending in the current fiscal year (Edwards & Leichty, 2010) but also minimized its obligations going forward.  These funding reductions caused districts to cut non-mandate protected regular education programs and services and exacerbated their cash flow problems.  

But Proposition 111’s amendments compel the state to accrue a maintenance factor for any shortcomings owed districts resulting from a suspension of or changes in the minimum funding guaranteed in Proposition 98.  The maintenance factor (Edwards & Leichty, 2010, p. 5) is the “difference between the actual spending level and what would have been spent under normal growth.”  By the second quarter of 2009 the state’s cumulative maintenance factor debt obligation reached $11.2 billion which further highlighted the funding shortfalls for local school districts.  

The Serrano v. Priest ruling combined with Propositions 13 and 98 resulted in the state controlling school finance and policy for all of its nearly 1,000 school districts.  The state determines how its various educational resources are allocated among the school districts and largely how they will be used.  

The state establishes revenue limits for each district.  But only through the passage of legislation can the state, rather than the local school district, adjust a district’s revenue limit.  When the local property taxes controlled by the state increase, the majority of schools do not benefit because any incremental property tax revenue is applied to the limit and the state’s component is lowered proportionately.  

Conclusion

The states of New Jersey and California exemplify the problems associated with state domination of local school systems particularly as executed through the level of county government.  State centralized funding leads to a one-size-fits-all approach for education but one that fits no district.  

The specific needs of individual school districts vary to such a large degree that they render uniform state funding and policy formulas inadequate.  Instead, public school districts need a mass customization of educational funding, control, and policy that can only derive from local control.  Oates (1972) supports the notion that public education should be provided at the lowest level.  Kenny (1982) also argues for the provision of public education by local school districts.  

Baker, Green, and Richards (2008, p. 66) explain how “the local property tax empowers local voters to express what they want for their local public schools.”  The consequence according to Baker, Green, and Richards (2008, p. 66) is that “when property taxes become statewide taxes, the political advantages of empowering local citizens and promoting competition and sorting among jurisdictions is lost.”  This mass standardization of school finance and policy leads to state funding guidelines that are incongruous with the needs and priorities of local school districts.  

It is difficult for state run school systems to be accountable to the taxpayer.  California demonstrates its lack of accountability by withholding or deferring funds which it is legally obligated to send to local school districts.  As a result, California has “fallen from its position a leader in per-student spending in the 1970’s to now spending well below the national average (Jacobson, 2007, p. 2).  As Jacobson (2007, p. 3) explains, because the state has centralized control over local school finance and policy, the state’s “financial resources are distributed in such an irrational way that schools serving similar student populations in similar locations receive different funding.”  

California regularly withholds funds that it is required to allocate spend on its public schools but uses these funds to help offset state budget deficits.  California has withheld nearly $15 billion of aid for its schools.  California owes local school districts more than $3.6 billion in reimbursement for under funded state mandates in violation of Proposition 4 requirements.  Moreover, the state’s owes local school districts $11.2 billion in Proposition 111 maintenance factor obligations.   

New Jersey is similarly expanding state control and authority through its counties at the expense of local control, autonomy, and accountability.  The state increased its bureaucracy and administrative expenses through the greatly expanded Office of The Executive County Superintendent.  This appointed official can override decisions made by duly elected boards of education through the exercise of the line item veto.  

The authority of the Executive County Superintendent supersedes that of locally elected boards of education effectively rendering local boards of education as no longer the trustees of a district’s financial and human resources whom the taxpayer can hold accountable.  Taxpayers have great difficulty holding the state accountable.  Examples of this include the state’s recapturing surplus and reserve funds governed by S1701, the failure of the School Construction Corporation, and the continued lack of student and school achievement in the Abbott districts. 

Any reduction in local school district control over the levying and allocating of property taxes decreases accountability and adversely affects public school quality.  Taxpayers are more involved in, have a much greater stake in their local school districts, and act to hold these school districts accountable when they pay local property taxes directly to their local schools rather than have their local property taxes controlled by the state and redistributed as if they were statewide revenues according to a state funding formula.  

Fischel (2001, p. 152) explains the consequences of statewide property tax redistribution using voters without children in the public schools, “At the local level, they are willing to support, or at least not oppose, high levels of spending because better schools add to the value of their homes.  At the state level, voters without children do not perceive such an offsetting benefit to their taxes.”  Having a lowered sense of ownership in their schools, taxpayers become more complacent as the proportion of state funding increases.  This causes a corresponding reduction in the level of accountability required by the stakeholders and the quality of their public schools’ education declines as a result. 

State control over schools interrupts the connection taxpayers’ make between their property values and property taxes.  As Sonstelie, Brunner, and Ardon explain (Sonstelie, Brunner, & Ardon, 2000, p. 102 as cited in , 2001, p. 136) the “reason that local control produces better schools is that the local property tax system channels the revenues of nonresidential property into public education.”  The greater is the proportion of non-residential properties in a district’s mix of ratables, the lower is the tax burden on residential properties.  This lowers their “tax price” (Fischel, 2001, p. 136) making their local schools relatively less expensive and as a result, taxpayers are “induced to spend more on education.”  

Typical taxpayers resemble investors because they want their major asset, their home, to appreciate in value.  As Fischel (2001, p. 136) explains how “voters tolerate property taxes only when the public services financed by them are capitalized in home values.”  Home owners have a vested interest in the success of their local schools because the credit rating of a school district’s host municipality is largely dependent on the financial soundness and credit worthiness of its schools.  The higher is a municipality’s or a school district’s credit rating; the lower is its debt service expense. 

The greater is the quality of the local school district, the greater is the taxpayer’s property value because the demand for quality education leads to a higher market price.  As a result, taxpayers strive to protect and improve their property values.  They evaluate the quality of their school district so as to maximize their property values.  But if their school district’s quality deteriorates or is expected to decline, typical Tieboutian taxpayers will vote with their feet.   

By voting with their feet, taxpayers choose the local school district that best meets their needs and one that will contribute to their property values.  But taxpayers vote not only with their feet but also on school district operating budgets, capital projects, and board of education members.  Through the exercise of these votes, taxpayers control the quality of education provided by their local schools as well as the level of property taxes levied.  Their collective decisions lead to a Pareto efficient allocation of local public education.  In this context, Baker, Green, and Richards (2008, p. 21) state that the “Tiebout model represents the most basic form of school choice.” 

Tiebout (1956) argues that because crowding and congestion affect the provision of public goods and services, it is inefficient to provide public education at a centralized level and public education is more efficiently provided at the local level.  Fischel (2001) supports this conclusion with his assessment of California’s centralized school finance system in which taxpayers lost control over local schools and property taxes.  This led to reduced levels of taxpayer involvement in and support for public education.   

Fischel (2001, p. 161) concludes “the apparent quality of public education has declined nationwide as the states’ share of funding for it has risen.”  It is essential that taxpayers rather than states or counties have control over their local schools so they will be motivated to properly fund, support and improve public education.  

References

Baker, B. D., Green, P., & Richards, C. E. (2008). Financing Education Systems. Upper Saddle River, New Jersey:  Pearson Education, Inc. 

Barbour, E. (2007). State-Local Fiscal Conflicts in California:  From Proposition 13 to Proposition 1A. Public Policy Institute of California, http://www.ppic.org/content/pubs/op/OP_1207EBOP

Coffin, S. (2010, December 26). Penalties of Scale:  Why Large School Districts Need to Disaggregate. Retrieved from Coffin’s Education Center, http://www.coffinseducationcenter.com

CommUNITY Against Regionalization Efforts (2009). Core Act, C.A.R.E. Retrieved from http://www.saveoursmallschools.com/legislation

Edwards, B., M., & Leichty, J. (2010). School Finance 2009-10:  Budget Cataclysm and its Aftermath. Mountain View, California:  EdSource.  

Fischel, W. A. (2001). The Homevoter Hypothesis:  How Home Values Influence Local Government Taxation, School Finance, and Land-Use Policies. Cambridge, Massachusetts: Harvard University Press. 

Fischel, W. A. (2009). Making the Grade:  The Economic Evolution of American School Districts. Chicago and London:  University of Chicago Press.  

Fusarelli, B. C., & Cooper, B. S., Editors. (2009). The Rising State:  How State Power is Transforming our Nation’s Schools. Albany, New York:  SUNY Press.  

Greenhut, S. (2005). State meddling hamstrings schools. The Orange County Register, Retrieved from http://www.ocregister.com  

Jacobson, L. (2007). California’s Schooling is “Broken”:  Studies Call for Overhaul of Finance, Governance. Education Week, 26(28) Retrieved from http://www.edweek.org/ew/toc/2007/03/21/index.html 

Kenny, L. W. (1982). Economies of scale in schooling. Economics of Education Review, (2) 1-24. 

Kenny, L. W., & Schmidt, A. B. (1994). The Decline in the Number of School Districts in the United States 1950 – 1980. The Public Choice, (79) 1-18. 

New Jersey Department of Education (2005). S1701 Regulations. Retrieved from http://www.state.nj.us/education/finance.  

New Jersey Department of Education (2008). School Funding Reform Act. Retrieved from http://www.state.nj.us/education.   

New Jersey Department of Education (2010). S450. Retrieved from http://www.state.nj.us/education.   

New Jersey School Boards Association (2004). S1701 Signed Into Law. Retrieved from http://www.njsba.org/S1701-Update.     

Oates, W. E. (1972). Fiscal Federalism. New York:  Harcourt Brace Jovanovich.  

Perry, M. (2004). Rethinking How California Funds its Schools. Mountain View, California:  EdSource.  

Perry, M., & Edwards, B. (2009). Local Revenues for Schools:  Limits and Options in California. Mountain View, California:  EdSource.  

Picus, L. O., (2009). California. In Fusarelli, B. C., & Cooper, B. S., (Editors), The Rising State: How State Power is Transforming our Nation’s Schools, (pp. 9-26). New York, New York:  SUNY Press. 

Sonstelie, J., Brunner, E., & Ardon, K. (2000). For Better or for Worse? School Finance Reform in California.  San Francisco:  Public Policy Institute of California. 

Tiebout, C. M., (1956). A Pure Theory of Local Expenditures. The Journal of Political Economy, 64, 416-424.

Yudof, M. G., Kirp, D. L., Levin, B., & Moran, R. F. (2002). Educational Policy and the Law. Belmont, California:  Wadsworth Group/Thomson Learning.

Does Mayoral Control Provide a Governance Structure that is well suited for our Schools?

January 1st, 2011

Introduction

In terms school reform, accountability is not possible if a school district lacks the proper control model or governance structure for local control.  Once the most appropriate control structure is in place, only then can a school district achieve the level of accountability necessary to improve student and school achievement.  Educational quality and accountability, therefore, depend on a school system employing the control model that best suits its needs and priorities.  

But what control model makes accountability possible?  Mayoral control is one governance structure that is often promoted as a model of democratic accountability particularly for large urban school districts.  Perhaps its most democratic aspect is that it concentrates all responsibility for a school district’s performance in one person, the mayor.  When the mayor has control over the municipality’s school system, then the voters have one focal person whom they can hold directly accountable for their local school district’s performance.  

Proponents of mayoral control contend that such a control model provides for greater accountability than does having an elected board of education run a school district.  Because there is often a much greater voter turnout for mayoral elections as compared to board of education elections, they are touted as more reflective of the will of people.  Still, it is not clear whether having an independently elected school board of education or even an elected school superintendent rather than having only an elected mayor in charge of the school system combined with holding elections in November rather than in April or May would result in comparable voter turnout.  

According to the typical mayoral control model, the mayor appoints the board of education as well as the superintendent of schools.  But in order for the mayor to have such power, often he/she must be granted the authority by the state government as well as the municipal legislature.  Even Secretary of Education, Arne Duncan, (Kroll, 2009) advocates such changes.  Secretary Duncan (Kroll, 2009) favors the mayoral control model because he asserts that such a model establishes clear lines for accountability whereas pathways to accountability may be much less clear with a board of education governance structure.  

The typical mayoral control model concentrates the authority to govern the municipality’s schools within the office of the mayor placing the mayor rather than the board of education at the top of the governance structure.  Advocates believe this facilitates efficiencies and accountability.  Viteritti (2009) echoes this position by arguing that mayoral control enables changes to the school system to occur sooner and more efficiently.  

Alternatively, opponents of mayoral control argue that an elected board of education control model, within which the board appoints the superintendent of schools, is more democratic and provides for greater accountability.  One of their main arguments is that the elected board of education control model grew as a good government response to the corruption, waste, and political patronage that were common place in school systems run by mayors especially in the early to mid twentieth century.  

Proponents of mayoral control argue that it is their model that often enables large and particularly urban school districts to solve educational problems because the mayoral control model provides the governance and control structure that makes accountability more likely.  Their primary rationale for supporting this model is that it makes one focal person, the mayor, responsible for holding all schools accountable to high standards.  When the mayoral control model is applied they contend that there is no divided authority in the governance of schools because the mayor has all the decision making power necessary to affect change and establish reform.  This model generates greater accountability especially in urban school districts because there is a clear and direct chain of command emanating from the mayor over all aspects of the city’s schools.  

Mayoral control advocates cite that mayors rather than board of education members are more likely to have the experience and the political network necessary to lead a large municipal-wide enterprise.  Because mayors are elected in citywide elections, they also may be more likely to have a broader understanding of the full range issues affecting all of the municipality’s schools than would board of education members elected by ward or some other political subdivision of the municipality.  

In summarizing their findings concerning mayoral control, Harris and Rotherham (2007, p. 2) state that mayors “are the only officials accountable for the health of entire cities. They have experience delivering and monitoring a wide range of services to their constituents, and are able to mobilize their cities’ resources to create high quality educational options for youth.  And, because voters hold them accountable for the quality of life in their city, mayors might as well truly be engaged with improving education.” 

Strong Mayor – Weak Mayor

There are different forms of governance structures involving the mayor including the strong mayor and weak mayor forms.  Which form mayoral control and authority take influences how the mayor can impact the school system.  In this context, Cuban and Usdan (2003) argue that whether or not term limits apply to the mayor affects the extent to which mayoral control can be effective.  

The strong mayor or strong mayor – weak council form of government resembles the federal model in which the mayor serves as the chief executive while the council is the legislature.  This form gives the mayor broad authority over all administrative and financial aspects of municipal government including developing, proposing, and administering the municipality’s budget as well as appointing, supervising, and replacing all departmental staff.  Edelstein (2006) reports that this governance structure facilitates mayoral control of the school system as a function of the powers granted the mayor under this form of government.  

The mayor operating under a strong mayor form of government typically appoints the municipal board of education and the superintendent.  Proponents believe that this provides for much greater accountability because there is one person who can be held accountable for the quality of education citywide.  Opponents disagree according to their belief that such a structure will lead to less accountability because voters can no longer vote for individual board of education members while the mayor’s four year term does not provide enough recourse.  

Alternatively, the weak mayor or council – manager form of government more closely resembles that of a corporate governance structure.  Under this governance structure, the council is the legislative body while the city manager operates with many of the executive powers granted the mayor when under the strong mayor form which makes the mayor “weak” in the sense that his/her role is largely ceremonial. 

According to the weak mayor or council – manager form of government, the city manager wields authority over the administrative and financial aspects of government including developing, proposing, and administering the municipality’s budget as well as appointing, supervising, and replacing all departmental staff while the council appoints the city manager and approves the municipal budget.  Because the city manager serves largely in the role of chief executive and the mayor’s authority is correspondingly limited, the mayor’s ability to impact the school system is similarly limited under this form of government. 

Mayoral Control Rationale

Increasingly, many large urban school districts are looking to change their control structure and adopt the mayoral control model.  Tired of the status quo, these districts seem to expect that the mayoral control model will address the two major shortcomings of their school systems.  That is, they want their schools to benefit from having a mayor who is elected citywide and who, in turn, can be held directly responsible for the performance of their school system.  

Large urban districts that adopt the mayoral control model do so with an expectation that their democratically elected mayor will hold their students and schools accountable for their performance.  In this way, it is believed the mayor will provide the leadership and accountability necessary to overcome what is often perceived as a fragmented, dysfunctional, and less than fully accountable elected board of education governance model when it is replaced with the mayoral control model.  

But many major urban school districts desperate for improved student and school performance look to adopt the mayoral control model to improve their district’s academic achievement and educational quality through its democratic accountability.  But what if the change from an elected board of education with possibly a weak mayor or council – manager form to a governance structure of mayoral control involving perhaps the strong mayor form of mayoral governance should fail?   

The benefits that taxpayers derive from their local school district quality and property taxes are capitalized in their property values.  Because taxpayers strive to protect and improve their property values, they constantly evaluate the quality of their school district so as to maximize their property values.  If their school district’s quality should deteriorate or is expected to decline, then these typical Tieboutian (Tiebout, 1956) taxpayers will “vote with their feet.”    

By voting with their feet taxpayers choose the local school district that best meets their needs and one that will contribute to their property values.  But taxpayers vote not only with their feet but also on school district operating budgets, capital projects, and board of education members.  Through the exercise of these votes, taxpayers expect to control the quality of education provided by their local schools as well as the level of property taxes levied.  

The collective decisions of taxpayers lead to a Pareto efficient allocation of local public education.  In this context, Baker, Green, and Richards (2008, p. 21) state that the “Tiebout model represents the most basic form of school choice.”  If an urban school district’s quality deteriorates or is expected to decline, therefore, the tax base supporting the local schools will decline correspondingly.  This further supports the need for school districts especially urban ones to adopt the school governance model that is best suited to its needs such as an elected board of education. 

The Mayoral Control Experience

While more of America’s larger and especially urban school districts are considering adopting the mayoral control model, more than a dozen already have some form of mayoral control including Boston in 1992, Chicago in 1995, Cleveland in 1998, Philadelphia in 2001, and New York City in 2002.  A few other school districts are considering mayoral control if even for a second time such as Detroit in which it was established in 1999.  But according to Levy (2004, p. 3) “it is difficult to link changes in governance to improvements in student achievement.”  

To date, it seems as if the impact of mayoral control model on school and student achievement has been mixed.  Levy (2004, p. 3) points out that Boston, Chicago, and Cleveland, “with the longest history of mayoral control, have improved test scores in both elementary and secondary schools, though their racial achievement gaps remain” while “Detroit’s scores have gone down.”  Levy (2004, p. 3) continues by stating that “the lowest 20% of schools have improved, and have done so more rapidly that their school systems as a whole.”   

Darling-Hammond (2009) reports some different results for the impact of mayoral control model on school and student achievement.  Boston (Darling-Hammond, 2009, p. 3) had the “largest gains in student proficiency rates between 2003 and 2007 in fourth and eighth grade math and fourth grade reading.” However, “Boston was tied with San Diego for gains in fourth grade math and with Houston for gains in eighth grade math” while San Diego and Houston did not have mayoral control of their schools.  Chicago which had many failing schools and a highly decentralized school system until Mayer Daley took over in 1995, recorded only “modest gains under mayoral control” according to Darling-Hammond (2009, p. 3) while “Austin, one of the highest achieving urban districts in all subjects during all of those years,” did so without a mayoral control governance structure.  

New York City

But proponents contend that the mayoral control model is a governance structure that has led to turnarounds in student performance and accountability particularly in previously failing urban school systems.  New York City is a prime example, they contend.  Testifying in favor of mayoral control for New York City’s public schools, Thomas A. Dunne, Fordham’s vice president for government relations and urban affairs, stated (Howe, 2009, p. 1) “It was not long ago that our schools were a dismal failure and no one wanted to be held accountable.  New York City public officials abdicated their responsibility and created 32 local school boards.  No one person or authority took responsibility for our schools.  There was political infighting, confusion, some school boards became patronage mills and as a result the children suffered.  Education was no longer a priority.”  

Joseph M. McShane, president of Fordham, summarized (Howe, 2009, p. 2) the benefits of mayoral control by testifying, “A key ingredient in improving school performance is accountability.”  The mayoral control model provides one leader whom can held accountable for student and school performance.  

Stern (2007) summarizes the factors that led to New York City’s second adoption of the mayoral control model and the replacement of its elected board of education governance model.  “The old Board of Education offered a case study of the paralysis that sets in when fragmented political authority tries to direct a dysfunctional bureaucracy.  New Yorkers arrived at a consensus that there was not much hope of lifting student achievement substantially under such a regime.  The newly elected Bloomberg made an offer that they couldn’t refuse:  Give me the authority to improve the schools, and then hold me accountable for the results” (Stern, 2007, p. 1).  

New York City’s second adoption of the mayoral control model in 2002 resulted largely from the public’s reaction to the problems associated with the decentralization of the citywide school district into 32 independent school districts in 1969.  Each local board of education governed its own district and was elected locally.  While each local board of education was fully empowered to operate its district, there was no accountability for school and student achievement.  

Segal (2005, p. 132) describes how New York City adopted the mayoral control model, “putting Mayor Michael Bloomberg at the helm of the school system.  The idea was to introduce long-needed accountability into what had been one of the most unaccountable bureaucracies in the state.”  Segal (2005, p. 132) continues “Bloomberg has repeatedly said he would stake his success on his ability to improve education, implicitly inviting New Yorkers to vote him out of office if he fails.”  

New Jersey

New Jersey’s largest public school district, Newark, not only is one of the three districts taken over and operated by the state including Jersey City and Paterson but also has one of the highest per pupil spending rates in the state.  As an Abbott District, Newark’s public schools also are funded almost entirely by the state of New Jersey.  Despite such lavish spending and state funding, Newark’s schools’ and students’ performances as measured by standardized tests lag far behind the state averages in all subject areas.  

Segal (2005, p. 29) goes further in reporting that “in New Jersey, corruption and gross mismanagement clearly correlate with poor student performance.  The three school districts that the New Jersey state education department took over – Jersey City, Paterson, and Newark – had the highest rates of systemic corruption and among the lowest test scores and highest dropout rates in the state.”  Perhaps either despite or because of these dire conditions, Newark Mayor Booker is advocating that the city change to a mayoral control model as the governance structure for its school system. 

Oakland United School District

The Oakland United School District demonstrates what problems can occur within a weak mayor form of government in which the mayor shares power over the school system with an elected board of education.  In the Oakland United School District, the mayor appoints some members of the board of education while other members are elected directly to those positions.  In 2000, “Oakland voters (Wong and Shen, 2007, p. 742) approved a change in the city’s charter, allowing Mayor Brown to appoint three new school board members to an expanded ten member board.”  

The Oakland United School District’s “mixed” board of education did not function effectively (Wong and Shen, 2007, p. 742).  The board’s worsening financial position eventually led to its bankruptcy and being taken over by the state of California in 2003.  In 2009, however, the State Superintendent of Public Instruction restored full control and authority over the Oakland United School District to a fully elected rather than “mixed” board of education effectively removing the mayor from having influence over the school system.  

Detroit

But the mayoral control model is not necessarily a panacea as the failure of the Detroit school system attests.  Detroit’s public schools and students consistently have been among the worst performing in the nation.  Kirst and Bulkley (2001) believe that Detroit’s weak mayor governance structure may have contributed to the citywide school system’s problems.  Indeed, James (2002, cited in Wong and Shen, 2007, p. 743) reports these findings “Detroit’s experience with mayoral control between 1999 and 2004 was politically contentious with teachers unions and the National Association of Colored People on the opposing side and the business and the urban league on the supporting side.”  

Indeed, continuous objections to widespread corruption, waste, financial mismanagement, and patronage in Detroit’s school systems caused Detroit to reconsider mayoral control.  Moreover, the reliance on the patronage system to make personnel decisions compounded its adverse impact on schools.  In 2004, (Wong and Shen, 2007, p. 743) voters disaffected with the continuing poor performance of their school system, rejected Detroit Mayor Kwame Kilpatrick’s attempt to gain their approval of “Proposition E, which would have enabled him to appoint a strong chief executive as well as the entire board.”  As a result, Detroit changed from mayoral control to an elected citywide board of education control model.  

While test scores and enrollment continue to decline, Detroit has closed more than 145 schools since 2004 (Saulny, 2010).  To help overcome the problems plaguing the district including a projected budget deficit of approximately $320 million, Michigan Governor Jennifer Granholm appointed Robert Bobb as the district’s emergency manager in 2009 (Saulny, 2010).    Nonetheless, Secretary of Education, Arne Duncan, (Kroll, 2009) advocates Detroit’s returning to the mayoral control model to provide for more continuity, stability, and accountability in the school system. 

Chicago

Tired of widespread corruption, waste, financial mismanagement, and patronage mills in its school system as well as poor student and school performance, Chicago adopted the mayoral control model in 1995.  Although Chicago’s mayors have historically enjoyed significant influence over the city school system including some appointive authority (Carl, 2009), the passage of the Chicago School Reform Act officially empowered the mayor to appoint the entire board of education and the superintendent of schools.  

In passing the Chicago School Reform Act, Chicago’s residents sought to link electoral accountability and the city’s educational performance accountability by holding a singular elected official, the mayor, accountable for improving its student and school achievement.   Establishing complete mayoral control in 1995 was actually more of a return to a strong mayor governance structure over the city’s schools because (Carl, 2009) the mayor’s appointive authority over the board of education had been largely transferred to a citywide commission in 1988.  

Kirst and Bulkley (2001) studied the history of mayoral control in Chicago.  They concluded that the improvement in the Chicago’s school system since 1995 may be linked to the city’s adoption of a strong mayor governance structure.  But the track record of Chicago’s school system before full mayoral control was established in 1995 shows that it did not generally lead to gains in school and student achievement.  Mayors regularly used their influence over Chicago’s school system to achieve their personal and political agendas prior to the passage of the Chicago School Reform Act.  

Carl (2009, p. 305) concludes that Chicago’s mayors regularly used their office to build “coalitions that met their own political interests; with one possible exception, these political interests did not necessarily coincide with higher quality urban schools.  All of the mayors embraced educational positions that were as much about marshalling votes and winning the support of corporate Chicago as they were about improving the schools.”  

Still, despite a history of mixed results, advocates of the mayoral control model regularly cite the problems associated with having elected boards of education govern large urban school districts.  These proponents assert that having the mayor appoint the entire board of education and the superintendent of schools is perhaps the best way for a large urban district to improve school and student achievement.  

Yet, Hess (2008) seems to disagree with the mayoral control model in his analysis of the performance history of Chicago’s school system which has been largely under some degree of mayoral control.  Hess (2008) takes issue with a board of education that is appointed either in full or in large part by the mayor.  

Chicago Summary

According to Hess (2008), there is a risk for any major urban school district including Chicago’s when its board of education is composed of all mayoral appointments that it could lose the transparency necessary for accountability.  “Appointed officials, buffered from political and constituent considerations, are more likely to leave significant distributional or value-laden issues unaddressed” continues Hess (2003, cited in Hess, 2008, p. 233).  As a result of this avoidance of complex challenges, an appointed board of education may not necessarily represent the wide range of educational views and priorities of the city’s various constituent groups.  

In his review of Chicago as well as other major urban school districts, Hess (2008, p. 234) concludes that “mayors can get caught up politicizing school boards in self-serving ways or that, rather than embracing municipal attention to schooling, making education part of a mayor’s portfolio might leave it vulnerable to shifts in mayoral focus.”  The inherent risk with the mayoral control model, therefore, may be that education ceases being a major stand alone municipal enterprise with its own duly elected set of officials and stakeholders and becomes perhaps just another city function competing for scarce financial and human resources.  

Wong and Shen (2007) assess the impact of mayoral control model on Chicago’s school and student achievement more favorably.  Wong and Shen (2007) argue that since its adoption in 1995, the mayoral control model has improved accountability by integrating authority throughout the school system and reversed the trend to fragmentation as well as decentralization.  

Also, Wong and Shen (2007) cite how Chicago’s school system was able to correct its flawed financial management under the of mayoral control model.  Wong and Shen (2007, p. 740) conclude that under the guidance of the mayor, the administration of Chicago’s school system “improved its capital funding, balanced the budget, and secured labor stability through a four year contract with the teachers’ union.” 

Wong and Shen (2007) go further in describing the benefits gained by the Chicago school system by having mayoral control.  Wong and Shen (2007, p. 740) report that “The school board launched its first capital improvement plan in decades to address the deterioration of the schools’ physical plant.  The administration also improved management efficiency by waging a public battle against waste and corruption, downsizing the central office, and contracting out several operations.”   

Boston

Student and school performance had deteriorated to such an extent that by 1992, Boston became the first large urban school district to adopt the mayoral control model.  The elected board of education was replaced with one appointed by the mayor (Levy, 2004).    

Mayoral control is largely credited with turning around Boston’s school system which had suffered through years of corruption, financial mismanagement, and patronage (Hess, 2008).  Proponents contend that by finally having one person, the mayor, to hold accountable for the school system rather than a fragmented elected board of education, Boston was able to turnaround a school system with failing student and school performance.  

The Boston school system seemed to benefit from the accountability afforded by the mayoral control model.  Portz (Portz, 2003, cited in Hess, 2008, p. 222) assessed the impact of this governance structure, “A more consensual, elite dialogue has replaced the contentious debate, racial divisions, and constituent services.  In contrast to long meetings and divided votes, the typical meeting of the appointed committee is both shorter and less contentious.”  In addition to providing for greatly increased stability in the school system leadership, mayoral control seemed to provide Boston with the accountability necessary for greatly improved school and student performance.  Hess (2008, p. 222) supports this conclusion by listing several accomplishments including but not limited to how Boston: 

  • “Outperformed other Massachusetts districts with similar low-income populations in elementary, middle, and high school.”  
  • “Demonstrated greater improvement by African-American students than did similar Massachusetts districts.” 
  • “Increased fourth and eighth grade reading and math scores on the National Assessment of Educational Progress (NAEP) at a faster rate than the average of other large American cities, as well as faster than the national average.” 

In Boston, the change to mayoral control seemed to provide the kind of leadership necessary for school system-wide accountability.  In turn, the increased accountability improved the way the school system operated and performed. 

Los Angeles

The Los Angeles school district is the nation’s second largest school district.  It includes the school systems of 26 other cities besides Los Angeles, over 1,100 schools, and slightly less than one million students.  Because it is composed of the school systems of 26 other proximate cities, Los Angeles is often referred to as a large unified school district or the L.A.U.S.D.  The L.A.U.S.D. exemplifies a large urban school district with a mixed governance structure that is plagued by a fragmented power sharing arrangement among 26 mayors rather than centralized control under the command of one mayor or locally elected board of education.  As such the L.A.U.S.D. suffers from the penalties or diseconomies of scale that afflict large urban districts.  It also lacks the benefits of having one just one person or group, one mayor or board of education, which the voters can hold accountable for the school system’s performance.  

The Los Angeles school district seems to be a district, therefore, that could readily benefit from disaggregating into several smaller local districts of no more than 3,500 students and unifying control under a locally elected board of education within each of these smaller districts.  Each of these districts would be empowered to allocate its financial and human resources according to local needs and priorities.  Implementing this arrangement would empower each local district to levy their own local property taxes to fund their schools according to local needs and priorities.  This also would require the repeal of California’s Proposition 13 that banned local districts from levying their own local property taxes.  

Once a newly disaggregated school district becomes free of the excessive bureaucratic burdens imposed by its former fragmented unmanageably large school district, unified under the control of a locally elected board of education, free of its state’s governmental strings attached to funding, and regains the ability to levy their own property taxes, each small local district would be much better equipped to generate the necessary public support for the public funding of its local public schools.  The disaggregation process, therefore, not only could be applied successfully to school districts nationwide with enrollments exceeding 3,500 but also would greatly improve accountability and enable the disaggregated school districts to realize the benefits of economies of scale. 

Conclusion

Because mayoral control provides for the mayor to be held accountable for the city’s school and student achievement, quality education can become more of a priority.  Still, either mayoral control or an elected board of education can provide the governance structure that makes the accountability necessary for improved school system performance possible.  The direct lines of authority under mayoral control or a superintendent under the control of an elected board of education can make for more effective decision making.  

But the mayoral control model is neither a panacea nor a cure for all that ails a large urban school district.  The chronic failure of the Detroit school system demonstrates how not to operate a school district even with mayoral control.  Also, there is no compelling evidence that mayoral control leads to improved performance for all students and schools within a district (Kremer, 2010).  

Objections to a history of widespread corruption, waste, financial mismanagement, and patronage in urban school systems has caused more than a dozen large cities to change or to begin the change process from an elected citywide board of education control model to a mayoral control model since 1995.  Moreover, the reliance on a patronage system to make personnel decisions compounded the typical elected citywide board of education’s adverse impact on schools.  As a result of patronage, the hiring and allocating of school personnel tended to be based less on merit and more on political considerations which caused many well qualified educators and administrators to be excluded from the schools.  

In order for the mayoral control model to succeed, therefore, a large urban school district needs to have the right kind of leader who is dedicated to not only improving education and increasing accountability but also to eliminating corruption and imbedded patronage systems.  While there may be no perfect control model for large urban school districts, mayoral control can provide perhaps an appropriate platform for achieving accountability for improved school and student achievement.  

Large urban school districts seem to benefit from the clear lines of authority and centralized decision making process that accompany mayoral control.  While cities should pay close attention to avoiding penalties or diseconomies of scale due to their size, it is possible that mayoral control can overcome many of the problems associated with a dysfunctional large urban district.  

Hess (2008, p. 239) summarizes “replacing an elected board with one named by a strong, active, and accountable mayor is a promising way to jump-start coherent and sustained school improvement” especially for large urban school districts.  New York City, Boston, and Chicago exemplify large urban school district mayoral control success stories.   Hess (2008, p. 240) concludes that “In the case of dysfunctional urban districts, mayoral control seems to offer clear advantage in terms of coherence, political leadership, and accountability.”  

References

Baker, B. D., Green, P., & Richards, C. E.  (2008). Financing Education Systems. Upper Saddle River, New Jersey:  Pearson Education, Inc.  

Carl, J. (2009). “Good politics is good government:”  The Troubling History of Mayoral Control of the Public Schools in Twentieth-Century Chicago. American Journal of Education, 115, 305-336.   

Cuban, L. & Usdan, M. D. (2003). Powerful Reforms with Shallow Roots. New York City:  Teachers College Press. 

Darling-Hammond, L. (2009). Response. National Journal Online – Education Experts, Retrieved from http://www.education.nationaljournal.com.   

Edelstein, F. (2006). Mayoral Leadership and Involvement in Education:  An Action Guide for Success. Washington, D.C.:  U.S. Conference of Mayors.  

Harris, D. & Rotherham, A. J. (2007). Get Mayors in the Schooling Game.  Progressive Policy Institute.  Retrieved from http://www.ppionline.org

Hess, F. M. (2003). “The Voice of the People,” American School Board Journal, 190, (4) 36-39.  Cited in Hess, F. M. (2008). Looking for Leadership:  Assessing the Case for Mayoral Control of Urban School Systems, (p. 233). American Journal of Education, 114, 219-245.  

Hess, F. M. (2008). Looking for Leadership:  Assessing the Case for Mayoral Control of Urban School Systems, American Journal of Education, 114, 219-245. 

Howe, Bob. (2009). Fordham Advocates Mayoral Control of City Public Schools. Fordham University Website, Retrieved from http://www.fordham.edu.  

James, S. (2002, January 22). Schools chief put to the test. Detroit Free Press

Kirst, M. W. & Bulkley, K. E. (2001). Mayoral Takeover:  The Different Directions taken in Different Cities. Report, Consortium for Policy Research in Education, Washington, D.C.:  National Institute on Educational Governance, Finance, Policymaking, and Management, U.S. Department of Education. 

Kremer, T. G. (2010, February 14).  Mayor Should Support District, Not Take it Over. The Post-Standard, p. E 1.    

Kroll, A. (2009). Mayoral Control isn’t the answer for Detroit Schools. The Detroit News, Retrieved from http://www.andykroll.com/american-politics/det-news.   

Levy, M. (2004). Mayoral Control of Public Schools:  Lessons From Other Cities. Public Education Reform Project, Washington Lawyers’ Committee for Civil Rights and Urban Affairs, Retrieved from http://www.dcpswatch.com.  

Portz, J. (2003). “Boston: Agenda Setting and School Reform in a Mayor-centric System.” In Henig, J. R. & Wilbur, C. R. (Editors), Mayors in the Middle:  Politics, Race, and Mayoral Control of Urban Schools. Princeton, New Jersey:  Princeton University Press, Cited in Hess, F. M. (2008). Looking for Leadership:  Assessing the Case for Mayoral Control of Urban School Systems, (p. 222). American Journal of Education, 114, 219-245.   

Saulny, S. (2010, March 18). Detroit Plan Would Close 45 Schools, The New York Times, March 18, 2010. p. A 19.    

Segal, L. G. (2005). Battling Corruption in America’s Public Schools. Cambridge, Massachusetts:  Harvard University Press.  

Stern, S. (2007). Grading Mayoral Control. Manhattan Institute for Policy Research. Retrieved from http://www.manhattan-institute.org.    

Tiebout, C. M. (1956). A Pure Theory of Local Expenditures, The Journal of Political Economy, 64, 416-424. 

Viteritti, J. (2009). (Editor). When Mayors Take Charge:  School Governance in the City. Washington, D.C.:  Brookings Institution Press. 

Wong, K. K. & Shen, F. X. (2007). Mayoral Leadership Matters:  Lessons Learned from Mayoral Control of Large Urban School Systems, Peabody Journal of Education, 82 (4), 737-768.

Newark: A Case Study of Agglomeration and Deglomeration

January 1st, 2011

Non-generalizable, Historical, and Natural Resource Factors 

Puritans seeking land with easy access to major waterways on which to establish their own theocracy purchased land along the Passaic River from the Hackensack Indians in May, 1666 to found “New-Ark” or “Our Town on Passaick River” (History of Newark, 2010a, p. 1).  Overly abundant raw materials such as the tamarack tree’s bark for tannin, hides of wild animals for leather, and iron as well as natural resources such as water for drinking, drainage, agriculture, livestock, transportation, and commerce played a crucial role not only in transforming Newark into an industrial center, city, and transportation hub but also pulling several industries to its location.  Leatherworkers were able to quickly develop a collective expertise for shoe and boot production because of their unlimited access to tannin (Hartman & Lewis, 2010) which is essential for tanning leather.  This factor when combined with its minimal transportation costs caused Newark to become a least cost location that pulled in other shoe and boot makers as well as related enterprises. 

Beginning in 1815, Seth Boyden almost single handedly revolutionized leather manufacturing as well as inventing several other products in Newark.  Boyden not only invented patent leather but also improved the leather manufacturing process such that by 1837 Newark had over “155 patent leather manufacturers” (Tuttle, 2009, p. 27) and the concentration of the many formerly small individual leatherworkers had expanded into larger businesses (Hartman & Lewis, 2010) manufacturing a range of top quality shoe, boots, saddles, harnesses, carriages, coaches, lace, and hats.  As a result, Newark was producing “90% of all patent leather in the United States” by 1860 (Tuttle, 2009, p. 27) and almost “90% of the nation’s leather by 1870” (History of Newark, 2010a, p. 1).  

Boyden translated his success with leather into a second industry by leveraging the availability of another raw material, iron.  He created the first malleable iron business in America which was soon renowned for its quality buckles, carriages, ornaments, and harnesses which complemented the leather manufacturing and blacksmithing industries (Tuttle, 2009; Turner, Koles & Cummings, 2003).  Boyden’s innovative leather and malleable iron businesses drew other “weight losing” (Pucher, 2010) businesses to Newark.  These industries benefited greatly from the opening of the Morris Canal in 1831 which they used to meet the increasing industrial and agricultural demands of the hinterlands (History of Newark, 2010a).  By 1834, major railroads further reduced the transportation and communication costs of transporting goods.   

Agglomeration Economies:  Localization

Leather manufacturing businesses initially and iron manufacturing businesses subsequently clustered in Newark because they benefited from both internal and external scale economies primarily as a result of being located in a transportation node.  Easy access to abundant inexpensive raw materials, natural resources, workers, capital, and other production inputs lowered production costs resulting in internal economies of scale.  The more leatherworking enterprises located in Newark, the more these locally clustered firms benefited from external economies such as the sharing of new technologies, a concentrated skilled workforce, enhanced communication, minimal assembly costs, essential specialized goods and services plus easy access to a transportation network.  The localization economy linked the leatherworking enterprises making it easier to increase production (History of Newark, 2010a).  

Being located in a crucial transportation node, the leather industry leveraged the concomitant lower costs but greater speed of its transportation and communication systems to expand its zone of influence throughout the hinterlands.  Newark’s reputation for quality leather products especially shoes and boots quickly spread enabling its goods to be exported along the Atlantic coast especially from the 1780’s to 1820’s.  By the 1820’s sales of its leather products were so successful especially in the South that the nation’s first regularly scheduled weekly shipping between Newark and such major “break-of-bulk points” or “entrepots” (Pucher, 2010) as Savannah and Charlestown caused the “South to largely cede its shoe and boot manufacturing” (Tuttle, 2009, p. 24).  Also, the British blockade during the War of 1812 accelerated the growth of manufacturing within America and especially Newark because as the nation “began producing goods it formerly imported” from Great Britain it became much more “self-sufficient” (Tuttle, 2009, p. 24).  

Newark’s economic advantage as a major transportation hub began its rapid growth in 1765 when it improved and expanded its roads and established ferries to enable its goods to be transported more efficiently over the Hackensack and Passaic Rivers to markets in New York City: “Newark suddenly became the major stopover on the main route connecting the Hudson and Delaware Rivers” (Tuttle, 2009, p. 17).  But the construction of two bridges over the Hackensack and Passaic Rivers in 1795, which largely superseded the ferries, helped Newark to ultimately achieve localization and urbanization economies.  

Agglomeration Economies:  Urbanization

Agglomeration economies that resulted from the spatial concentration of industry and people within Newark led ultimately to the development and growth of Newark as a city.  The more and different kinds of interdependent businesses that were pulled to Newark by its economic advantages, the faster the population increased and the workforce diversified and improved its skills.  The benefits of population agglomeration including the development of improved infrastructure, transportation, communication, and knowledge as well as production input sharing affected all industries because of their proximity.  

The addition of large numbers of immigrants to its diverse skilled labor force, 80% of which were involved in some form of manufacturing, beginning in 1826 helped establish Newark as the regional industrial center (History of Newark, 2010a).  While most of the immigrants worked on the Morris Canal which caused Newark’s population to increase from 8,017 in 1826 to about 105,000 in 1870, only Buffalo’s population growth rate exceeded Newark’s within America due to the construction of the larger Erie Canal (Hartman & Lewis, 2010; Tuttle, 2009).  

Newark leveraged its lower external costs of crowding, congestion, and noise plus its lower cost of doing business combined with skilled labor over New York City to attract not only leading inventors such as Thomas Edison, who invented the stock ticker and electric pen, and John Wesley Hyatt, who invented celluloid for camera film while in Newark, but also other industries.  The number of banks and insurance companies quickly grew to meet the needs of local industries including Mutual Benefit in 1845 and Prudential in 1873. 

Improvements to the sewer system enabled Newark to overcome health and sanitation problems so that it could advance as a major urban residential and commercial center beyond the 1850’s.  Although Newark enjoyed an abundant water supply, its streams and the Passaic River not only provided outlets for refuse, waste, and garbage but also often overflowed onto the city’s streets “posing a serious health hazard” (Modica, 2010, p. 2).  Because the early “common sewers” were “open ditches dug in the middle of the street,” (Modica, 2010, p.3) the first real sewer was completed in 1854 under Broad Street. 

But the need to address major diseases stemming from the lack of sanitation, population growth, and industrial clustering, led Newark to increase its sewers from 4.5 miles in 1858 to 112 miles in 1893 and to 310 miles by 1910 (Modica, 2010; Tuttle, 2009).  The sewers not only enabled more diverse businesses to develop including four major department stores, Hahne & Company, L.S. Plaut, L. Bamberger, and Kresge’s, but also caused many of the employees to become residents and extended the customer base out into what would become the suburbs by the early 1900’s (History of Newark, 2010a).  The sewer system “made the city a viable place to live and work.  Modica (2010, p. 9) explained that without this system, Newark’s residential and industrial growth, from a small village to a modern metropolis, would not have been possible.”    

Deglomeration Diseconomies

Newark’s businesses and population began to deglomerate because of the diseconomies of scale caused by businesses that were burdened beyond their optimal size and excessive population agglomeration.  The excessive clustering of businesses and people led to increasing costs plus negative externalities including congestion, crowding, noise, and the 1967 riots.  Newark lost a major portion of its tax base as middle and upper income residents moved to the suburbs to consume more land which was facilitated by increased modes of transportation and automobile ownership and usage plus improved and expanded rail services, roadways, and highways which combined to lower transportation and commuting costs.  

Because Newark’s population continued to grow by nearly 200,000 people by the end of World War II despite a “Depression-related loss of 13,000 people” (Tuttle, 2009, p. 87) “the city bought the abandoned Morris Canal to accommodate its growing population so that it could build a subway system” (Tuttle, 2009, p. 103).  To try to abate the exodus to the suburbs, Newark worked to rebuild its slums by obtaining “more federal money per capita, and used the funds to flatten entire neighborhoods and build more public-housing units per capita than any city in the country” (Tuttle, 2009, p. 87).  

Newark leveraged its transportation network including the “Port Newark, the major container shipping facility for the Port of New York and New Jersey and the largest on the East Coast, Newark Liberty International Airport,” highways, roadways, and railroads to develop the service and transportation industries necessary to replace its lost manufacturing industries (History of Newark, 2010a, p. 1).  Major investments in cultural, civic, and entertainment developments including the New Jersey Performing Arts Center, Prudential Center, Riverfront Stadium, AirTrain Newark which connected the New York Port Authority to Newark, and University Heights Science Park (History of Newark, 2010) led to increases in the residential population, median income, and real estate prices after 2000 (Tuttle, 2009).  In this way, Newark became the gateway to the “Gateway Region” of industry, commerce, and urbanization (Newark, New Jersey, 2010b, p. 1) because “the city was simply too valuable a hub for transportation and commerce to remain tangled in despair and economic malaise forever” (Tuttle, 2009, p. 210).    

References

Hartman, D. & Lewis, B. (2010, October 31). A Walk Through Newark: History of Newark. Thirteen/WNET. Retrieved from http://www.thirteen.org/newark/history.html 

Modica, G. R. (2010, October 31). The History of the Newark Sewer System. All in New Jersey. Retrieved from http://www.usgennet.org/usa/nj/state/EssexNewarkSewer.html 

Pucher, J. (2010, November 11). Class notes. New Brunswick, New Jersey: Rutgers University. 

Turner, J., Koles, R. T., & Cummings, C.F. (2003). Newark The Golden Age. Charlestown, SC: Arcadia Publishing. 

Tuttle, B. R. (2009). How Newark Became Newark: The Rise, Fall, and Rebirth of an American City. New Brunswick, New Jersey: Rutgers University Press.  

Wikipedia (2010a, October 31). History of Newark, New Jersey. Wikipedia. Retrieved from http://www.en.wikipedia.org/wiki/HistoryOfNewark,NewJersey 

Wikipedia (2010b, October 31). Newark, New Jersey. Wikipedia. Retrieved from http://www.en.wikipedia.org/wiki/Newark,NewJersey

Penalties of Scale: Why Large School Districts Need to Disaggregate

December 26th, 2010

Proponents of mayoral control frequently argue that concentrating decision-making power over the school system within the mayor’s office rather than at the state level or within an elected board of education enables more resources to be focused on those most affected by education and enables those most involved in providing education to provide better instruction.  But state control causes local school districts to spend less time on students as well as parents because more time is required to be spent on state imposed bureaucratic obligations and requirements.  Mayoral control advocates, therefore, go further by arguing that concentrating decision-making power over the school system within an elected board of education often leads to instability, fragmented leadership, and a dysfunctional school system. 

The local school district not only is closest to the students, parents, teachers, and taxpayers but also has the necessary expertise to most effectively decide how to provide a quality education and to generate the necessary support among local taxpayers for the public funding of public education.  But the size of the local school district impacts school and student performance.  If a school district gets too large and unwieldy even with mayoral control then parental engagement decreases which harms student achievement because parental involvement is a key component supporting student performance. 

Antonucci (1999, p. 1) reports that “the larger a school district gets, the more resources it devotes to secondary or even non-essential activities.  In sum, large school districts engage in ‘mission creep,’ building activities which rapidly lose any connection to the original goal of educating children”.  Antonucci (1999) argues that large urban school districts are too large to function effectively and to improve school and student performance.  Indeed, his research suggests (Antonucci, 1999, p. 2) that the typical “American public school system suffers from penalties of scale”.  Many education reformers, especially those who favor large countywide school districts, purport that the larger is a school district the more economies of scale it realizes.  These reformers, however, do so based on presumed but unsubstantiated economies of scale that do not account for the true nature of school systems and educational organizations. 

Big business is much more like a large public school district than is small business.  While scale may differ, the effects of scale and scale economies are largely the same.  Most large businesses operate in the flat portion of the long run average cost curve while many of the older, less efficient, larger, perhaps declining industries, utilities or utility-like firms (i.e., railroads) operate beyond the pivot point on the long run average cost (LAC) curve at which their LAC exceeds their marginal cost (MC) which results in operating losses.  Large especially urban public school districts also operate beyond this pivot or break point. 

The economics of large especially urban school districts resemble those of big business because when a large, often urban, school system’s LAC exceeds its MC it typically results in public subsidies to cover budgetary gaps as exemplified by the Abbott districts in New Jersey.  This defines the economics of our nation’s large scale public school systems such as Newark, New York City, Los Angeles, and Chicago.  Large scale public school systems operate with enrollment levels that are beyond their optimal level (i.e., approximately 3,500 students) which results in their LAC exceeding their MC.  At this pivot point, the cost of their production inputs exceeds the benefits of their educational output largely as a result of congestion and crowding.  This is turn results in ongoing subsidies because, as New Jersey demonstrates, state legislators seem to believe that the Abbott school systems should continue and subsidize them according to a rationale similar to the one supporting the railroad industry’s subsidies. 

The conventional wisdom or misconception concerning our schools that somehow they are different from yet should be run as if they were each a large private sector business is the root cause of many of the challenges facing our public schools.  Larry Cuban demonstrates this principle in his book, The Blackboard and the Bottom Line.  In his book, Cuban (2004, pp. 3-4) quotes from the “Blueberry Epiphany” of Jamie Vollmer, a former business executive turned school reformer:  ”Our schools are not factories”.  Indeed, no business could survive if they had not only to abide by the same rules and regulations but also to operate according to the same economic constraints as those that apply to our public schools.   

The size of large urban school districts, therefore, influences the extent to which any form of structural control can improve the school system.  Large urban school districts generally have not been accountable for improving school and student performance because they have been constrained by their overly large scale with its concomitant penalties of scale or diseconomies of scale.  The typical large urban school district needs to be right-sized or disaggregated into several smaller districts with each not exceeding approximately 3,500 students.  This would enable the control structure for the school system to improve accountability and lowers its cost structure while freeing it from penalties of scale.  The solution seems to be to disaggregate districts with more than 3,500 students into several smaller more manageable but empowered local school districts under the control of a locally elected board of education. 

Los Angeles

The Los Angeles school district is the nation’s second largest school district.  It includes the school systems of 26 other cities besides Los Angeles, over 1,100 schools, and slightly less than one million students.  Because it is composed of the school systems of 26 other proximate cities, Los Angeles is often referred to as a large unified school district or the L.A.U.S.D.  The L.A.U.S.D. exemplifies a large urban school district with a mixed governance structure that is plagued by a fragmented power sharing arrangement among 26 mayors rather than centralized control under the command of one mayor or locally elected board of education.  As such the L.A.U.S.D. suffers from the penalties of scale that afflict large urban districts.  It also lacks the benefits of having one just one person or group, one mayor or board of education, which the voters can hold accountable for the school system’s performance. 

The Los Angeles school district seems to be a district, therefore, that could readily benefit from disaggregating into several smaller local districts of no more than 3,500 students and unifying control under a locally elected board of education within each of these smaller districts.  Each of these districts would be empowered to allocate its financial and human resources according to local needs and priorities.  Implementing this arrangement would empower each local district to levy their own local property taxes to fund their schools according to local needs and priorities.  This also would require the repeal of California’s Proposition 13 that banned local districts from levying their own local property taxes. 

Conclusion

Once a newly disaggregated school district becomes free of the excessive bureaucratic burdens imposed by its former fragmented unmanageably large school district, unified under the control of a locally elected board of education, free of its state’s governmental strings attached to funding, and regains the ability to levy their own property taxes, each small local district would be much better equipped to generate the necessary public support for the public funding of its local public schools.  The disaggregation process, therefore, not only could be applied successfully to school districts nationwide with enrollments exceeding 3,500 but also would greatly improve accountability and enable the disaggregated school districts to realize the benefits of economies of scale. 

References

Antonucci, M. (1999). Mission Creep:  How Large School Districts Lose Sight of the Objective – Student Learning (AdTI Issue Brief Number 176).  Retrieved from http://www.adti.net/education/antonucci.mission.creep.html.   

Cuban, L. (2004). The Blackboard and the Bottom Line. Cambridge, Massachusetts:  Harvard University Press.

Glen Ridge: Creating an Autonomous Public School District

July 14th, 2010

Whether to Secede?

Unfunded state and federal mandates are strangling the Glen Ridge Public Schools as well as traditional public school districts nationwide.  Unfunded mandates drive school district budgetary deficits, property tax increases, operational restrictions, and educational program and service reductions.  When the costs and consequences of these mandates are combined with a statewide 2.0% tax and expenditure limit (TEL) or cap, the Glen Ridge school district is compelled to consider whether (Read, 2010) “to effectively secede from New Jersey’s public school system.”   

Glen Ridge along with the majority of New Jersey’s public school districts can no longer afford to pay for state and federal unfunded and under funded mandates because the district is forced to spend disproportionately more to meet the requirements of these mandates than it receives in total state and federal financial aid.  This creates a budgetary deficit.  Making up for this mandate-created deficit annually forces Glen Ridge to make extremely difficult choices.  The challenges involved in the budgetary decision making process were exacerbated when the Glen Ridge school district along with dozens of others statewide lost all of its state financial aid.  Moreover, the state of New Jersey’s imposition of a 2.0% TEL further constrains the district’s financial outlook. 

While the state and federal governments force Glen Ridge to fully fund the unfunded portion of their mandates, Glen Ridge must make up for the mandate deficit and balance its budget annually.  There are, however, only two kinds of programs and services offered by our public schools:  those that are mandate protected and those that are not mandate protected.  The Glen Ridge school district like public schools nationwide, therefore, must choose between cutting non-mandate protected programs and services or raising property taxes.

Unfunded Mandates Drive Budgetary Deficits

When a school district experiencing increases in mandate-driven uncontrollable expenses becomes limited by a 2.0% TEL, it must cut expenses even more severely to stay within the cap.  There is no exemption for the ever increasing costs of the state’s special education mandates included within Governor Christie’s 2.0% TEL (Maxwell, 2010,) for example.  Public school districts, therefore, must allocate scarce financial and human resources to pay for the unfunded portion of mandates and spend disproportionate administrative time on external reporting.  A school district spends less time and money on core educational programs and services as a result.   

Because traditional public school districts such as Glen Ridge are required to fund the unfunded portion of all state and federal mandates over which it has no control, state and federal mandates drive the overwhelming majority of the district’s expenditures and, hence, property tax levies.  Cuts to state aid or especially the elimination of state educational aid as is the case for Glen Ridge may force a traditional public school district to increase class sizes so as to minimize its expenditures for teachers and aides.  But this will lead to lower test scores and likely No Child Left Behind Act (NCLB) operational and financial penalties. 

Reduced or zero state aid particularly when combined with a 2.0% TEL, therefore, gives a school district only one course of action:  hold property tax increases within the state imposed percentage point limit while simultaneously cutting non-mandate protected programs and services but fully funding the unfunded portion of all mandates.  That is, cutting regular education.  The ultimate irony is that property taxes could be slashed nationwide especially those funding our public schools and there would be no need for TELs, if the state and federal governments would just fully fund all of their mandates! 

A Question of Autonomy

Trenton continues to blame school districts such as Glen Ridge for their property tax and expenditure increases rather than take responsibility for its role in forcing district budgets to increasingly higher levels.  Instead of fully funding its mandates which drive up the cost of public education, Trenton focuses largely on constricting the funding, budgets, operations, and independence of local school districts. Given these state imposed burdens, costs, and constraints are most likely to become even more severe, what should a public school district do? 

How could Glen Ridge restructure its educational system such that the district would not only enable its public schools to increase the property taxpayers’ return on their investment but also greatly improve the quality of education while holding their schools accountable to these standards?  The question of how to achieve the proper level of autonomy, therefore, is the challenge confronting the Glen Ridge Public Schools.

What is autonomy?  Autonomy, in its most fundamental form, means that a school district is free to develop, design, and implement its own budget.  The budget is the financial representation of the district’s educational plan; therefore, the district must have full authority to acquire and allocate the financial and human resources necessary to providing those educational programs and services that fully meet the needs and priorities of the school district.  Indeed, if something is not in a school district’s budget, it will not be in any classroom!  This requires gaining control over all of a public school district’s financial, operational, pedagogical, curricular, and administrative functions so that the district is ultimately able to provide an academically rigorous learning environment that maximizes student achievement.  

Options for Autonomy

To achieve the proper level of autonomy for its school district, Glen Ridge is considering a number of options including (Read, 2010) “converting some or all of the four schools in the 1,932 student district to charter or private schools.”  The purpose of any conversion is to implement a new governance structure that will operate with much greater autonomy from state and federal mandates than the Glen Ridge school district currently enjoys.  Whatever form this new governance structure may take; it should provide the basis for financial soundness, operational flexibility, educational innovation, student achievement, and maximizing the taxpayers’ return on their investment in their local public schools, all of which are currently constrained by state control. 

Although (Read, 2010) “New Jersey will allow a public school to become a charter school if 51 percent of the teaching staff and parents sign a petition for it, according to the New Jersey School Boards Association.  That has never happened.”  The privatization concept is also being considered for which Dr. Bruce Baker, Associate Professor of Education at Rutgers University’s Graduate School of Education (Read, 2010,) stated that, “There are precedents in municipalities in Vermont and Maine. The towns raise tax dollars to send high school students to a private school.”  Another alternative is to transform the district into a set of private schools operated either by a locally elected board of education or by a private for-profit firm.  

Plank and Smith (2008) report that in the wake of Hurricane Katrina, “the Louisiana legislature created a Recovery School District” within which the “state intends to reopen most of New Orleans schools as charter schools, pioneering what stands to become the nation’s first all-chartered public school system.”  New York City has expanded its Empowerment Schools program (Plank & Smith, 2008.)  Chicago has implemented a more complex program (Plank & Smith, 2008) by “replacing up to 100 low performing schools” which can be operated as “district performance schools, charter schools or as contract schools.” 

But would any of the aforementioned options provide the proper autonomy such that Glen Ridge would gain control over its operating budget and, thereby, have the ability to provide a top quality education that meets the needs and priorities of the district rather than objectives set remotely in Trenton?  Glen Ridge should strive for the kind of governance structure that is worth the effort, if it is to confront the many challenges to achieving the proper kind of autonomy.  How, then, should Glen Ridge restructure its educational system?  

Autonomy and Self-Governance

To achieve the proper autonomy, Glen Ridge could reinvent itself by becoming an entirely unique version of a local public school district that is autonomous self-governing, self-funding, and as free as possible from state as well as federal mandates.  As an autonomous school district, Glen Ridge would eliminate the excessive financial and administrative burdens imposed by state mandates.  It would be much more cost effective and efficient for the district to provide educational programs and services without the administrative burden of state requirements.  Self-governance would increase the financial resources available for the classroom because the funds that are currently used for compliance with state mandates could be redirected to improving student learning and achievement, which after all is the real mission of our schools.  

Self-governance would empower the school district to improve the quality of education in ways more consistent with the priorities of the local community rather than state mandates.  Finding ways to legally opt out of the state system perhaps through a state sanctioned voter approved referendum would restore full decision-making authority to the local level.  Because decisions guiding the operations of Glen Ridge’s self-governing school district would no longer be made largely at the state level, parents, teachers, administrators, the board of education, and local taxpayers would be better able not only to shape the quality of education provided in the local schools but also to hold their local schools accountable for this outcome.  In this context, the conversion could be considered as achieving (Plank & Smith, 2008) “autonomy for accountability.”  

Becoming an Autonomous Self-Governing School District

An autonomous self-governing school district would be independent of the state system but would remain a public school district serving the same local community rather than a confederation of charter schools, private schools or schools run in full or in part by a private company.  But in return for the ability to become autonomous and, therefore, free from state mandates, a self-governing school district would forgo all state aid!  Self-governance would provide a public school district with the authority necessary to improve education consistent with the priorities of its local school community as well as the flexibility to innovate rather than be forced to march in lock-step to the state’s one size fits all mandates that fit no district.  Opting out of the state system would restore full decision-making authority to the school district. 

Once the process leading to independence is approved by the state, a public school district could possibly become self-governing when a majority of the registered district voters who voted in a district-wide vote approved of the change.  While these votes would comply with the laws governing ballot procedures, campaigns, and elections, they would be held in April so as to provide sufficient lead time to convert to self-governance by July 1, the beginning of the new fiscal year.  Once the district community voted to authorize the school district to become self-governing, it would be governed solely by its board of education without oversight from the County Executive Superintendent, Board of School Estimate or municipal government.  Board of education members would continue to be chosen from among the registered voters in the school district. 

Local property tax levies rather than tuition would continue to be the primary source of funding for a self-governing public school district.  An autonomous district would be eligible to receive appropriate state or federal grants.  The annual operating budget would be decided by its board of education rather than be subject to district-wide public votes so as to be consistent with the annual budget approval process for municipal and county governments which are not subject to approval through a vote of their respective electorates.  Alternatively, the annual operating budget would be subject to voter approval should municipal and county government budgets be similarly submitted for public votes. 

Taxpayers can vote on their local school district budgets in all but a handful of towns but no taxpayer is able to vote on the budget of his/her municipal or county government despite the fact that these two levels of government are funded almost entirely by local property taxes.  Because taxpayers can vote on school budgets, they can hold their school systems accountable but without a corresponding vote on municipal and particularly county government budgets taxpayers can not hold these levels of government accountable.  This is one of the chief reasons why county government costs New Jersey’s taxpayers more than $6.1 billion annually! 

Taxpayers choose the local public school district that best meets their needs and one that will contribute to their property values by exercising true Tieboutian choice (Tiebout, 1956) and voting with their feet.  But taxpayers vote not only with their feet but also on school district operating budgets, capital projects, and board of education members.  Through the exercise of these votes, taxpayers control the quality of education provided by their local schools as well as the level of property taxes levied.  Their collective decisions lead to a Pareto efficient allocation of local public education. 

Locality is crucial for accountability.  Because state policy makers especially as compared to the local board of education are more distant from those most affected by the state’s mandates, students, teachers, and schools, the impact of their mandates is more adverse on a public school district’s finances and the quality of education it provides.  Our public schools, therefore, must be given the choice of becoming autonomous, self-governing, self-funding local public school districts free from state mandates so that they can be liberated to provide a top quality education while held being accountable to this standard by those who are the most capable of doing so, the school district’s taxpayers. 

Optional Compliance

Many states pass legislation known as (Fix & Kenyon, 1990) “optional compliance” to force state government to fund its mandates.  Optional compliance provides public school districts and (Fix & Kenyon, 1990) “units of local government the right not to comply with state mandates” and “can place added pressure on the legislature to fund the cost of mandates if it wishes to ensure that all local governments comply.  This right of optional compliance, in effect, can give the local governments” and local school districts “new leverage in dealing with the state legislature to ensure that they do get funding.  If they do not, they are under no obligation to carry out the mandate.”  

Still, states often find ways to provide much less than full funding for mandates by circumventing optional compliance laws.  States regularly restrict their obligation to reimburse the unfunded portion of mandates by (Fix & Kenyon, 1990) having a “narrow definition of what constitutes a mandate.”  States often enable (Fix & Kenyon, 1990) “the legislature to exempt the state from providing funding under certain circumstances.”  In addition, states often manipulate the labeling of the source of funds to minimize their payouts.  Fix and Kenyon (1990) demonstrate that “funds are provided simply by earmarking some portion of what is considered local aid or general revenue sharing.  If a state merely earmarks funds that area coming from another source as opposed to providing new funds, then the state is really not accomplishing the objective of mandate reimbursement.” 

States also manipulate the timing of when local school districts receive funding rather than pay local schools districts in advance of the mandate’s implementation.  Fix and Kenyon (1990) use California’s experience to demonstrate, “In California, however, funding is provided on a reimbursement basis; funding can occur long after the mandate is implemented.”  School districts and “local governments carry out mandates, submit claims, and hope to get paid.  In the meantime, they must carry out the mandate; they have no option.”  This forces California’s public school districts to either borrow or cut regular education programs to fund the unfunded portion of mandates while hoping for full state reimbursement which does not include the refunding of any incurred interest expense. 

Unfunded Mandates Force Cuts to Regular Education

While the State of New Jersey is increasingly mandating programs and services to be provided by the state’s public schools, its level of financial aid and the portion of the mandates for which it provides funding are declining rapidly.  But public school districts have no control over many of the major cost drivers resulting from under funded mandates such as the expenses associated with increases in enrollment, transportation, legal actions, and the number as well as the mixture of special education students.  The range of state and federal under funded mandates includes but is not limited to No Child Left Behind (NCLB,) Individuals with Disabilities in Education Act (IDEA,) Quality Single Accountability Continuum (QSAC,) Core Curriculum Content Standards (CCCS,) bilingual instruction, free and reduced price breakfasts and lunches, incremental state special education requirements, special education related law suits, biohazard training, radon testing, state and federal standardized testing as well as programs to prevent bullying, teasing, and taunting.  

School districts are required by state and federal laws to provide the special education programs and services included in a student’s Individual Education Plan (IEP); therefore, special education budgets cannot be cut and the under-funded portion of special education’s costs must be made up from other budgetary sources.  To offset the increased costs of under funded special education mandates, districts are increasingly forced to significantly reduce programs for regular education students because property tax increases have been limited largely through state legislation.  Under funded state special education mandates not only have sharply increased the competition between regular and special education programs for funding within a school’s budget but also have created sharp divisions within a school’s community because they pit the parents of special and regular education students against each other in the fight for funding.

In 2005, New Jersey state aid covered less than one-third of state mandated special education programs and services while the federal IDEA is funded only at approximately five percent of its cost to local school districts nationwide.  Since January 2008, special education financial aid has been further and significantly reduced for most districts statewide based on the new state funding formula that reduces a district’s special education aid calculation to the extent that its classification rate is above the state average.  In addition, wealthy districts have been losing entitlement aid for at-risk children, particularly special education as these and other categorical financial aid funds are now subjected to the formula’s wealth-equalizing local share calculation.

All of this comes at a time when the costs for special education are skyrocketing.  Increased costs for mandated preschool programs including intensive services for autistic students and lower special education student to teacher ratios are a major part of the problem.  But more importantly there are also increasing numbers of costly out-of-district placements as well as parental lawsuits against public school districts for the purpose of obtaining private school placements for their children at the public’s expense.

New Jersey has the highest proportion of special education students in out-of-district placements as well as the fourth highest classification rate for special education eligibility in the country.  Many of New Jersey’s school districts find that out-of-district placements can consume as much as 50% of the special education budget despite covering approximately ten percent of special education enrollment.  The students placed in out-of-district schools tend to be the most expensive because they are usually the ones most in need of special education programs and services.  Depending on the student’s disability, the annual cost of sending a student to an out-of-district private school can range from roughly $70,000 to over $250,000 especially for the most educationally and physically challenged students.

The legal costs arising from parental special education-based law suits are another major expense for schools.  As parents have become more knowledgeable about what constitutes special education programs and services, they have increased their demands to have their children receive not only more intensive services as well as increasing their children’s classification but also more placements in private schools which have resulted in more parents suing school districts for these additional benefits. 

New Jersey’s legal system operates according to a fee shifting principle in which a school district losing in an administrative court not only must pay all of the judgment costs but also all of the plaintiff’s legal costs including those for their attorneys and expert witnesses regardless of the length of the trial.  Litigation for special education proceedings often takes longer than civil law suits; increasing both legal fees and court costs.  There is the additional cost resulting from the amount of time required of teachers, child study teams, and administrators to appear in court rather than in school.  While school districts do settle a number of cases rather than run the risk of potentially more expensive outcomes, these settlements fuel the cost of providing special education.  Holding New Jersey school districts harmless from such law suits could be another way in which to enable school districts to allocate more of their scarce resources to student instruction.

The State of New Jersey requires special education programs for children with educational disabilities ages three to five, particularly autistic children.  While the only difference for preschool aged children is the state requirement to have a speech pathologist on the child study team, the same IEP, evaluation, eligibility, due process, and least restrictive environment requirements apply for all special education students regardless of age.  These mandated pre-school programs put an additional expense burden on local school districts as long as the mandates continue to come without the requisite funding from the state. 

The special education students to teacher ratios are set by the State of New Jersey and they are, necessarily, lower than the student to teacher ratios for regular students.  These staffing ratios are based primarily on the student’s IEP, classification, and intensity of services required.  The student to teacher ratio for a class for children with the lowest level of disabilities having one teacher has a maximum of eight while the maximum is twelve for a class with one teacher and one aid.  Although ratios usually range from four to seven depending on the severity of the student’s disability, class sizes exceeding six students require two aids in addition to the teacher.

Classes for children with autism and other profound cognitive disabilities are limited to a ratio of three to one.  While providing a good education for students with special needs, without the requisite state funding for these mandated levels, the higher costs of such low student to teacher ratios are often offset by higher student to teacher ratios for regular education.  Because smaller class sizes have been shown to improve learning for all students, the under-funded state mandates for special education can have a deleterious effect on regular student education.

When the State of New Jersey requires its public schools to pay for an ever increasing proportion of special education costs through its under funded mandates, the state is not only forcing property taxes to increase but also pressuring districts to find the missing funds by reducing the regular education budget.  Such forced cuts to the regular education budget may cause school districts to reduce the number of regular education teachers which would result in much larger class sizes for regular education students.  Larger class sizes have been shown to lead to lower test scores which make it more difficult for students to achieve adequate yearly progress (AYP) as required by NCLB.  As a result, school districts are much more likely to be subjected to many of NCLB’s more stringent financial penalties.  This further reduces the financial resources available to support quality education. 

Unless the people of New Jersey wish to have not only higher property taxes but also a downward spiral in the quality of their public education, then the State of New Jersey should pay the full costs of its mandated school programs and services particularly special education.  If all of New Jersey’s special education mandates were fully funded, the quality of the education of all of New Jersey’s public school students, both regular and special, would be the greatest beneficiary. 

Conclusion   The consequences of centralizing most of the control over the allocation of a school district’s financial and human resources at the state level gives rise to many unintended obstacles for local school districts.  Chief among them is the contradictory challenge of trying to hold local school districts accountable to standards made remotely at the state level that do not reflect and often conflict with unique local educational requirements and priorities.  As a result, when the state imposes a one-size-fits-all approach to local school district resource allocation, funds tend not to be used as efficiently as they could be under local control.  School systems are more accountable when decision making over financial and human resources is made at the district level. 

A local school district can improve student and school performance best when the district is empowered to allocate its financial and human resources according to its educational plan rather than being required to follow state directives.  The school district would have all the tools it would need to hold its schools and students accountable because it could make real time decisions based on specific measurable performance goals for each school and student.  The school district is the most qualified to continually calibrate local performance goals because only the school district can combine a keen understanding of local educational necessities with the timely and specific assessment of individual school and student achievement.  State control is too remote which causes not only inappropriate delays but also decisions that tend to be inconsistent with the district’s educational plan.  

In response to the shortcomings of the state dominated school system, Glen Ridge needs to adopt a new model for the control structure of its local school system that is largely free of state domination.  Because a local school district’s control structure affects how all of the school system’s stakeholders combine to produce a quality education, Glen Ridge needs the most appropriate control structure that will provide the highest level of accountability.  As a result, Glen Ridge might consider adopting a control structure that provides for maximum autonomy and self-governance. 

What matters most in terms of maximizing autonomy and self-governance is that Glen Ridge employs the control structure that fosters the greatest public support for the maximum public funding of its autonomous public schools.  Glen Ridge would be able to operate more cost-effectively with lower property taxes and earn a higher rate of return on its educational investment if it became an autonomous self-governing school district by opting out of the state system. 

References

Fix, M. & Kenyon, D. A., (1990). Coping with Mandates:  What are the Alternatives? Washington, D.C.:  The Urban Institute Press. 

Maxwell, L.A., (2010). N.J. Property Tax Cap Sparks Funding Concerns. Education Week, 29(36). Retrieved from http://www.edweek.org/ew/articles/2010/07/12/.

Plank, D. N. & Smith, B., (2008). Autonomous Schools:  Theory, Evidence and Policy in The Handbook of Research in Education Finance and Policy, Ladd, H. F., & Fiske, E. B., (Editors) (402-424). New York, New York:  Routledge Taylor & Francis Group. 

Read, P., (2010, July 4).  Glen Ridge Considers Big Change to Schools. The Star Ledger, pp. 1, 4.

Tiebout, C. M., (1956). A Pure Theory of Local Expenditures, The Journal of Political Economy, 64, 416-424.


TELs take their Toll on Education

June 29th, 2010

Tax and Expenditure Limits (TEL)

The major question confronting New Jersey’s educational system is most likely whether the state should implement a 2.5% cap on local public school districts’ annual operating budgets which is otherwise known as a tax and expenditure limit (TEL.) This question seems to arise from the most compelling issue facing public office holders, legislators, and policy makers as well as taxpayers statewide which is how to limit the amount and growth rate of New Jersey’s taxes especially its property taxes.  Governor Christie’s answer is to implement a 2.5% TEL on local property taxes and expenditures similar to Massachusetts’ Proposition 2.5 or California’s Proposition 13.

Why should taxpayers allow the passage of legislation that would enable the state of New Jersey to limit a local school district’s ability to determine the amount of property taxes it levies as well as its level of expenditures?  Voters currently have more control over their local school district’s property taxes than they have over any other form of taxation whether the tax is levied by their municipal, county, state or federal government.  Why then should the state be able to set an arbitrary one-size-fits-all limit on the amount of property taxes local school districts can levy when property taxes are set according to local needs and priorities?  Such a one-size-fits-all cap will fit no district because districts are unique.

Taxpayers can vote on their local school district budgets in all but a handful of towns but no taxpayer is able to vote on the budget of his/her municipal or county government despite the fact that these two levels of government are funded almost entirely by local property taxes.  Because taxpayers can vote on school budgets, they can hold their school systems accountable but without a corresponding vote on municipal and particularly county government budgets taxpayers can not hold these levels of government accountable.  This is one of the chief reasons why county government costs New Jersey’s taxpayers more than $6.1 billion annually! 

All Local School District Property Taxes are Invested in the Host Municipality

All of a local school district’s property taxes remain and are invested in the schools of the host municipality so that the taxpayers benefit fully from the property taxes levied.  County property taxes differ sharply from those levied to fund our public schools because they are redistributed to support an unaccountable, wasteful, and duplicative layer of government.  This leads many researchers, most notably O’Sullivan, Sexton, and Sheffrin (2007,) to conclude that “local governments” and public school districts “must have access to a revenue source that they can adjust to meet varying demands.” 

Funding our public schools through local property taxes is essential because county government siphons away crucial local property taxes and state governmental financial aid is unreliable.  O’Sullivan, Sexton, and Sheffrin (2007) demonstrate that “the property tax can be administered by local government” and public school districts “with relatively little fear of its tax base migrating to other jurisdictions, thus providing local governments with the needed fiscal autonomy. The property tax has been the source of economic independence of local units of government” and local public school districts for generations. 

Unfunded State and Federal Mandates Cause TELs to Cut Regular Education

There are only two kinds of programs and services offered by our public schools:  those that are mandate protected and those that are non-mandate protected.  Because school districts are forced by the state and federal governments to fully fund the unfunded portion of their mandates, public school districts must choose between cutting non-mandate protected programs and services or raising property taxes.  School districts have no control over many of their major cost drivers such as the costs resulting from increases in unfunded mandates, enrollment, utilities, transportation, health insurance, legal actions, and the number as well as the mix of special education students.  When a school district that is limited by a 2.5% TEL experiences increases in these uncontrollable expenses, it must cut expenses in other areas to stay within the cap. 

One major fallacy in the cap advocacy argument is that local school districts are required to fund the unfunded portion of all state and federal mandates over which local school districts have no control.  State and federal mandates drive the overwhelming majority of local school district expenditures and, hence, property tax levies.  Property taxes could be slashed nationwide especially those funding our public schools and there would be no need for TELs, if the state and federal governments would just fully fund all of their mandates! 

A TEL may force a typical school district to increase class sizes so as to minimize its expenditures for teachers and aides.  But this will lead to lower test scores and likely No Child Left Behind (NCLB) operational and financial penalties.  A TEL, therefore, gives a school district only one course of action:  hold property tax increases within the state imposed percentage point limit while simultaneously cutting non-mandate protected programs and services but fully funding the unfunded portion of all mandates.  That is, cutting regular education. 

There is No Such Thing as a Free Lunch

Governor Christie along with the proponents of TELs purport that school districts will be become more financially responsible because of the state imposed limit on their expenditures and tax levies.  TEL proponents argue that if school districts are left to their own devices, they would continue to spend and tax at ever increasing rates while the TEL’s implementation will force school districts to hold down expenditures and property taxes.  TEL proponents seem to expect units of local government and our public schools to provide the same level of public goods and services if not a higher quality of education but at a lower price. 

TEL proponents and policy makers disaffected by the seemingly ever increasing size and cost of public education assert that the TEL will lower property taxes and, therefore, make the provision of public education more efficient rather than cutting essential educational programs and services.  Although most people realize there is no such thing as a “free lunch,” TEL advocates claim that school systems could provide at least the same quantity of education without lowering the quality of education because the TEL would compel districts to eliminate waste.  But no TEL can guarantee that any school district will not cut non-mandate protected programs and services or regular education before eliminating any waste or inefficiency.  

The passage of the major TEL’s, Proposition 2.5 in 1980 in Massachusetts and Proposition 13 in 1978 in California, shows how voters frustrated with state governmental inefficiency, waste, and overspending resorted to a cap which they perceived as the only means available to remedy their situation.  Voters in both states believed prior to the vote that the imposition of the TEL would substantially eliminate inefficiency, waste, and overspending but it would do so without lowering the quality or quantity of public goods and services such as education.  But once the TELs were imposed in Massachusetts and California, however, taxpayers acted “consistent with the (O’Sullivan, 2001) regret theory of tax limits” or buyers’ remorse. 

The history of TELs, budgetary caps or even the wage and price controls imposed under former President Nixon demonstrates that placing arbitrary limits on revenues and expenditures results in a corresponding reduction in the quantity and quality of the public programs and services such as education provided by the TEL affected entity.  Indeed, Downes and Figlio (2008) describe the TEL proponents who assert that “constitutional constraints like Proposition 13 could reduce the size of local governments and, at the same time, have little or no effect on the quality of public services provided” as seeking a “free lunch.” 

Apples versus OrangesMassachusetts’ Proposition 2.5 versus Governor Christie’s 2.5% Cap

Contrary to Governor Christie’s 2.5% cap proposal, Massachusetts imposed its 2.5% TEL during an economic boom and provided significant amounts of incremental state aid to school districts to make up for the loss of local property tax revenue.  But New Jersey is mired in a deep recession with seemingly ever increasing state budget deficits which have already resulted in severe cuts to state educational aid.  Because state aid is declining and no additional state financial aid is forthcoming to offset lost property tax revenues, school districts would be forced to cut non-mandate protected educational programs and services much more deeply than was experienced in Massachusetts. 

State aid is unreliable.  Massachusetts educational aid fluctuates while California has not complied with Proposition 98’s constitutional guarantees to provide state aid to local school districts to make up for the property tax revenues lost under Proposition 13.  As a result of Proposition 13, California’s per pupil spending fell precipitously to an average of approximately $7,500 per pupil as compared to an average of $47,000 per inmate at its state penal institutions while its average class sizes became the second highest in the nation.  Also, Massachusetts imposed its 2.5% cap during a period of declining student enrollment while New Jersey’s enrollment levels continue to increase.  Hence, Massachusetts’ lower school district expenditures were largely offset by a much lower level of student enrollment which helped to greatly minimize the cuts to educational programs and services which would not be the case in New Jersey. 

Taxpayers’ Expectations for TELs

New Jersey taxpayers generally seem to believe that much greater accountability, efficiency, and transparency at all levels of government will lead to lower spending and, hence, lower taxes.  But voters do not want fewer public goods and services; just a much lower price for the public goods and services that they enjoy today.  Government at all levels tends to overtax, taxpayers contend, because governments waste financial resources and are inefficient.  Governor Christie’s 2.5% TEL, therefore, seems to be a tempting way to accomplish these goals.  

In addition, Governor Christie’s 2.5% TEL lacks the flexibility for state and local governments as well as our public schools to respond appropriately to unforeseen circumstances or a declining economy.  For instance, public schools tend to experience an increase of students transferring from private schools when the economy declines and parents are more challenged to find ways to pay for tuition in addition to property taxes.  Governor Christie’s 2.5% cap proposal, therefore, can not guarantee that any level of government will operate at peak efficiency before cutting the public goods and services including education that they provide. 

Governor Christie’s 2.5% cap proposal would enable the state to determine the budgetary and property tax policies of local governments and school districts through its state imposed limitations.  If enacted, the 2.5% cap would lead, therefore, to increased centralization of educational funding along with its concomitant increased control over local school districts’ operations.  The 2.5% TEL would lead to limitations on local school district expenditures and property tax levies which in turn would lower the quality of public education. 

TELs’ Impact on Education and Student Achievement

TELs not only limit the amount of property tax revenue available to school districts but also and more importantly adversely impact how a typical school district provides educational programs and services.  Downes and Figlio’s (1999a) findings explain how “the imposition of tax and expenditure limits results in the long-run reductions in the performance of public school students.”  Students attending schools in TEL affected districts (Figlio, 1997; Downes, Dye, & McGuire, 1998; Downes & Figlio, 1999b) not only experienced much larger class sizes but also scored significantly lower on mathematics, language arts, and social studies standardized tests.  When it comes to education, therefore, TELs lead to a reduction in the quantity as well as the quality of education, an increase in class sizes, and a leveling down of student achievement. 

TELs seem to adversely impact student achievement disproportionately to the amount of property tax revenues lost or expenditures cut.  Downes and Figlio (2008) conclude that TELs “lead to reductions in student outcomes that are far larger than might be expected given the changes in spending.”  Possible explanations for this result include disproportionate cuts in instructional rather than administrative expenditures, higher student-teacher ratios, and a shift especially of the more talented students to private K to 12 schools.  Because teacher salaries and benefits generally account for more than approximately 70% of a typical school district’s budget, it stands to reason that these expenses would be cut more severely.  Reductions of teachers under the constraints of a TEL often lead to larger class sizes which when combined with the loss of regular educational programs and services tends to result in the transfer of many students especially the more gifted ones to private schools (Downes & Figlio, 2008.) 

Conclusion

While Governor Christie aims to limit local public school districts’ property tax revenues and expenditures to no more than a 2.5% annual increase, this cap will most likely lead to a leveling-down of the quality of public education.  Indeed, our nation’s two major TELs, California’s Proposition 13 and particularly Massachusetts’ Proposition 2.5 on which Governor Christie’s proposal is modeled, demonstrate the downside of such caps.  These TELs (Fishel, 2001) destroyed the connection among local control, property taxes, school district budgets, educational quality, and taxpayer support because taxpayers essentially lost their ability to hold local school districts accountable to their goal of maximizing their property values. 

The fundamental problem with trying to hold all of New Jersey’s public school districts’ property tax revenues and expenditures to annual increases not exceeding 2.5% is that it leads to a one-size-fits-all approach for education but one that fits no district.  Baker, Green and Richards (2008) explain, “The local property tax empowers local voters to express what they want for their local public schools.”  But when the artificial budgetary constraints of a TEL are imposed by the state, as Baker, Green and Richards (2008) conclude, “the political advantages of empowering local citizens and promoting competition and sorting among jurisdictions is lost.”  Thus, the TEL leads to school district budgets that are incongruous with the needs and priorities of local school districts. 

Governor Christie’s proposed reduction in local school district control over the levying of property taxes and determining the operating budget decreases local school district accountability and adversely affects public school quality.  Because reductions of property tax revenues through the 2.5% TEL will reduce the level of local investment in the school district; the stake held by local taxpayers is similarly reduced.  Fischel (2001) explains this using the motives of taxpayers without children in the public schools, “At the local level, they are willing to support, or at least not oppose, high levels of spending because better schools add to the value of their homes.”  Through the imposition of a TEL, “At the state level, voters without children do not perceive such an offsetting benefit to their taxes.”  Having a lowered sense of ownership in their schools, taxpayers become more complacent without local control over their school district’s property taxes.  This causes a corresponding reduction in the level of accountability required by the stakeholders and, therefore, the quality of their public schools’ education declines.

Taxpayers choose the local public school district that best meets their needs and one that will contribute to their property values by exercising true Tieboutian choice (Tiebout, 1956) and voting with their feet.  But taxpayers vote not only with their feet but also on school district operating budgets, capital projects, and board of education members.  Through the exercise of these votes, taxpayers control the quality of education provided by their local schools as well as the level of property taxes levied.  Their collective decisions lead to a Pareto efficient allocation of local public education. 

But a TEL, such as Governor Christie’s 2.5% cap proposal, would destroy the Tieboutian equilibrium (Tiebout, 1956) enjoyed by local public school districts.  It would do so by artificially limiting budgets below the levels congruent with the needs and priorities of local school districts.  Because the quality of a taxpayer’s local public schools as well as his/her property taxes are capitalized in the value of their home, the consequence of Governor Christie’s 2.5% TEL would be to lower educational quality and, therefore, property values.  

References

Baker, B. D., Green, P., & Richards, C. E., (2008). Financing Education Systems, Upper Saddle River, New Jersey:  Pearson Education, Inc. 

Downes, T. A. & Figlio, D. N., (1999a). Do Tax and Expenditure Limits Provide a Free Lunch? Evidence on the Link Between Limits and Public Sector Service Quality. National Tax Journal, 52, 113-128. 

Downes, T. A. & Figlio, D. N., (1999b). Economic Inequality and the Provision of Schooling, Federal Reserve Bank of New York, Economic Policy Review, 5, 99-110.   

Downes, T. A. & Figlio, D. N., (2008). Tax and Expenditure Limits, School Finance and School Quality in The Handbook of Research in Education Finance and Policy, Ladd, H. F., & Fiske, E. B., (Editors) (373-388).  New York, New York:  Routledge Taylor & Francis Group. 

Downes, T. A., Dye, R. F., & McGuire, T. J., (1998). Do Limits Matter? Evidence on the Effects of Tax Limitations on Student Performance, The Journal of Urban Economics, 43, 401-417.

Figlio, D. N., (1997). Did the “Tax Revolt” Reduce School Performance?, The Journal of Public Economics, 65, 245-269.

Fischel, W., (2001). The Homevoter Hypothesis: How Home Values Influence Local Government Taxation, School Finance, and Land-Use Policies, Cambridge, Massachusetts: Harvard University Press.  

O’Sullivan, A., (2001). Limits on Local Property Taxation:  The United States Experience in Property Taxation and Local Government Finance, Oates, W. E., (Editor) (177-200). Cambridge, Massachusetts:  Lincoln Institute of Land Policy.

O’Sullivan, A., Sexton, T. A., & Sheffrin, S. M., (2007). Property Taxes and Tax Revolts:  The Legacy of Proposition 13. Cambridge, Massachusetts:  Cambridge University Press. 

Tiebout, C. M., (1956). A Pure Theory of Local Expenditures, The Journal of Political Economy, 64, 416-424.

Countywide School Districts will Increase Administrative Costs and Property Taxes Statewide

April 6th, 2010

Passage of NJ Senate bill, S450, would eliminate all local school administrators over the level of principal and consolidate all school districts within each county under the control of the Executive County Superintendent.  S450 would have New Jersey adopt Maryland’s consolidated county school system model.  The state of Maryland eliminated all local school officials beyond the level of principal.  It consolidated all of its local schools serving less than one million students statewide within one of its 24 countywide school districts under an Executive County Superintendent.  

 

When Maryland abolished all school administrators above the level of principal, it said it was to save money, cut administrative expenses and cut property taxes.  But Maryland’s total statewide administrative costs increased rather than decreased as promised under the consolidated countywide school district because the Executive County Superintendent is not accountable to the voters which enables him/her to increase staff without taxpayer input.  The ever increasing cost of the County’s bureaucracy continued to more than offset any savings. 

 

In Maryland, for example, the Montgomery County Department of Education has an annual operating budget of about $2 billion with nearly 22,000 employees despite having a total student enrollment of less than 138,000.  The office of the Executive County Superintendent of Schools for Montgomery County employs roughly one administrator for every six of its students!  The Montgomery County consolidated school district has more than three times the number of administrators per student than it does teachers!  Contrary to what S450 purports, it will not provide for a more cost effective educational system rather it will increase costs especially administrative expenses.  States that have adopted this model such as California have increased costs and taxes. 

 

The implication behind S450 is that it would somehow save money and enable the state to lower property taxes by eliminating administrators over the level of principal.  Proponents even suggest unsubstantiated savings of $553 million.  But Maryland’s total statewide administrative costs increased rather than decreased as promised following the implementation of its consolidated countywide school district.  The experience of such a model in Maryland contradicts the assumptions inherent in S450 based on its consolidated county school district control model for New Jersey. 

 

Rather than add another bureaucracy, the most effective way to cut property taxes is to eliminate the tax burden imposed by county government.  County government places a tremendous burden on New Jersey’s taxpayers especially as compared to those in Connecticut where county government was eliminated in 1960.  New Jersey’s 21 counties combine to spend over $6.1 billion annually in property taxes, hold more than $5 billion in outstanding debt and have over 44,000 employees.  Just the three counties of Union, Essex and Bergen together levy approximately $1.6 billion in annual property taxes. 

 

The question facing New Jersey’s taxpayers is whether more money would be saved by eliminating county government or by adopting countywide school districts as advocated by S450.  The answer is straight forward.  Saving $6.1 billion annually in property taxes by eliminating county government would be the best way to ease New Jersey’s tax burden rather than implementing S450 and hoping that an unaccountable county bureaucracy will not overspend and overtax as it does in Maryland.