School Finance Systems and Their Responsiveness to Performance Pressures: A Case Study of Texas

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March 2007
Janet S. Hansen, Julie Marsh, Gina S. Ikemoto, Heather Barney

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SFRP Working Paper 10

New accountability systems require states and districts to accomplish something they have never accomplished before—ensuring that all students meet state standards. To improve student performance to the requisite levels, “business as usual” approaches to public education are likely to be insufficient. Along with other elements of education policy such as standards, accountability, curriculum, and teacher training, school finance must be rethought. To explore how these heightened state and national performance expectations have altered educational resource decisions, the School Finance Redesign Project (SFRP) conducted interviews of state, district, and school leaders in four states, asking these leaders about their efforts to improve student performance and the constraints they face in implementing improvement reforms. This report presents the findings of state, district, and school interviews conducted in Texas State.

Texas was one of the first states to implement a standards-based approach to school improvement that held districts and schools accountable for results. It is often cited as an exemplar of a consistent and coherent approach to education reform, having restructured basic financing formulas to take district and student characteristics into account and having instituted a “recapture” program that forces wealthy districts to subsidize poorer ones. Recent initiatives have even challenged traditional finance mechanisms, such as the standard salary schedule, the staff-based model of allocating resources, and the centralization of major resource decisionmaking in district offices. In spite of these efforts, many Texas students are still not achieving required levels of performance, and recent court decisions have indicated that the finance system is hovering on the edge of unconstitutionality and inadequacy.

In our interviews, study districts in Texas reported high awareness of the importance of raising achievement, with respondents more frequently mentioning state performance pressures than federal ones as the impetus for their actions. Districts also reported high awareness of the importance of using education resources effectively and efficiently. They cited an impressive array of actions they had taken to link their resource allocation decisions to student needs, to build the capacity for teaching and learning, to create financial incentives rewarding teachers based on test scores and other indicators of student performance, and to make their decisionmaking more strategic and data-driven. Although the number of new initiatives was large, they did not appear to be what one administrator called “random acts of improvement,” but rather deliberate steps aligned with district goals.

District personnel cited a number of factors that contributed to their efforts to connect resource allocation decisions to educational objectives. Some were district-specific: a new governance structure in one district, a focus on continuous improvement in another, decentralized decisionmaking to the school level in a third, and the leadership style of central office administrators in a fourth. Other enabling factors common to the study districts included accountability systems, the availability of student data, creative and united leadership, flexibility, a supportive community, and outside funding.

Inadequate funding, driven in part by a state-imposed tax-rate limitation, was the chief barrier cited by local officials in meeting expectations for higher student performance (our interviews were conducted before passage of the 2006 finance reforms that aimed to increase the state share of the burden for education spending). Interviewees also complained about unfunded state mandates and legislative set-asides that reduce unrestricted district revenues. Finally, federal requirements related to the Title I compensatory aid program and restrictions on state special-purpose and philanthropic funding were cited as additional constraints.

District officials acknowledged that their sense of being short of needed funding led them to seek state, federal, and philanthropic grants even when they were not convinced that the required approaches were effective or when they felt that outside funding contributed to “policy churn.” They also noted that state policymakers, who had deliberately reduced state control over local districts in the mid-1990s, seemed to be moving to reassert some of that control. Finally, district officials acknowledged that resistance to change among educators themselves sometimes gets in the way of efforts to more effectively link resource use to performance objectives.

Respondents also explained how several broader factors constrained their efforts to improve performance. At the highest level, political tensions and impasses had stalled significant reform and left fundamental finance mechanisms largely in place. Policymakers expressed frustration about the absence of information that could help them more effectively link resource decisions to performance. At the local level, officials were concerned that rising populations of economically-disadvantaged and English Language Learners were presenting special challenges as they felt these students often require extra resources and make it more difficult for districts to recruit and retain high-quality staff.

A final constraining factor lay with the adults in the system. Although the Texas State Constitution prohibits collective bargaining for school employees, teacher groups have been successful in having teacher protections written into the state code. While principals generally felt that they retained flexibility in how they used staff, they frequently complained about the difficulty of firing ineffective individuals. Officials at both the state and local levels pointed to the persistence of traditional attitudes regarding the equitable distribution of resources as another factor which allows adult interests to trump the needs of students.

The state’s school finance system was created largely in response to court decisions, and a Texas Supreme Court ruling was the strongest factor driving school finance reform at the time of our interviews. The facts that tax reform had to be part of school finance reform and that education policymaking had become less bipartisan complicate the politics of reform. Serious disagreements exist about the best way to use resources: debates that continue in part because of the absence of persuasive empirical evidence regarding “what works.”

Our findings shed light on the problems that ground-level administrators and policymakers face in implementing educational change within the current finance system and illustrate why progress is slow, despite these well-intentioned efforts. We hope that the findings of this and other SFRP reports will encourage policymakers, practitioners, and the public to overcome historical precedents, politics, and resistance to change in order to create an educational system that truly makes student achievement the ultimate goal.