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Budgeting Based on Student Needs

This California district demonstrates that students can be the foundation of all school financial decisions.
The Oakland skyline from the harbor.

School finance reform has become a key component for transforming public schools in the United States. Over the last decade, a growing number of districts have turned to an approach known by different names— student-based budgeting, weighted student funding and fair student funding, among others—in which budgets are allocated to schools in dollars, based on the needs of students within a school, rather than in staff positions. Student-based budgeting allows for a more equitable and rational allocation of funds among students and schools with differing levels and types of needs and a better alignment of school budgets with instructional goals. Authors Jason Willis and Matt Hill helped the Oakland (Calif.) Unified School District transform itself and use student-based budgeting to better meet the needs of its students.

The typical organization of an urban district, which includes top-down management, compliance-focused departments, and one-size-fits-all change efforts, is the backdrop for many of the change efforts initiated in urban school districts in the past that have been unable to produce sustainable results.

Third-graders at ASCEND, which is a K8 school in the Oakland Unified School District, take part in a literacy event where books were given to students, as Principal Larissa Adams (in back) looks on.

In contrast, a student-based budgeting (SBB) system, otherwise known as results-based budgeting, helps districts, such as the Oakland (Calif.) Unified School District, keep sight of the "customer." In this type of budgeting approach, the dollars follow the child.

Therefore, schools are able to express the needs of their students clearly and request services from central offices. It suggests that transferring resources, and thereby authority, to school communities enables better decisions and resource configurations for students.

New Central Office Strategies

The current economic and fiscal climate in education provides an opportunity and incentive for school communities to consider a SBB system. For example, many communities have called for greater transparency about where districts are investing their resources.

Additionally, this new climate places more pressure on central offices, rather than school sites, to make cuts in budget and staff. Establishing a SBB system in a school district helps address many challenges and external pressures. Ultimately, this results in significant changes to the function, focus and culture of central office departments.

From Compliance to Education

The current structure of school districts in the United States is primarily top-down and compliance-oriented. The low level of achievement of many students causes policy makers at the federal, state and district levels to impose additional rules and restrictions on how schools use funds.

Aside from Oakland, other districts use student-based budgeting (SBB). Denver parents and administrators gather last December at the Superintendent Parent Forum to help create a school budget with SBB dollars.

For example, when we implemented results-based budgeting in Oakland, we had more than 100 different types of funding sources, each with its own system of regulation. It restricted the district in how and where it used the funding. And it mandated that the district write a plan before it purchased anything, have a committee sign off on the plan, track expenditures across the different funding categories, and then have someone audit those expenditures.

Not only is this frustrating, but it also takes time, energy and resources away from what matters most: quality instruction in the classroom. One of the primary changes that a student-based budgeting system enables is a shift from compliance orientation, since it allocates resources based on student needs and focuses on student outcomes instead of inputs.

School districts are able to move to a more strategic and innovative culture. This does not mean the districts will not comply with state and federal regulations, but it means they will prioritize dedicating resources and people's time to strategy, innovation and reinvention.

This fundamental shift allows for schools to spend more time on developing their vision and mission, establishing long-term goals and aligning resources—human or otherwise— to follow the needs of their students. In Oakland, the central office provided additional support to schools so that they could establish a three-year strategic planning cycle.

Based on this shift, schools were able to change their culture to be more focused on continuous improvement. In addition, we revamped the budget calendar to provide schools with more time for planning, implemented technology to give schools better access to data, and offered training to help school communities look at their data and identify strategies to meet the unique needs of their students.

Principal Development, Support

Another advantage that the system affords central offices is the attention given to appropriate principal development and support systems. Historically, districts have supported principals through state-mandated trainings or other preparation programs that provide the necessary content but may not be tailored toward the specific growth needs of the principals.

A plethora of new support systems are required to build and maintain a core of principals who can effectively lead their schools to improve student outcomes. For example, Oakland introduced data coaches and trainings focused on establishing a collaborative school environment. The Oakland central office redirected substantial resources during and after establishing the SBB to build an effective pipeline for recruiting, developing and retaining principals who could bring the vision and energy to realign resources and school culture to improve student outcomes.

Further, we learned that data—both quantitative and qualitative, that had been standardized across the district could serve as a valuable tool for district-level intervention and support to schools. As Oakland implemented a way to classify the growth and performance of schools, those that were lagging behind would receive more attention and resources from central office—and support the needs of the principal and leadership team.

Increasing Transparency

School districts have tended to exercise little innovation in reporting financial information to the public and other external stakeholders. Implementing a student-based budgeting system turns this common practice upside down. Devolving resources to the school level can raise questions from stakeholders about the amount, distribution and direction of resources throughout the organization.

Instructional superintendents Robert Woodson and Kristin Waters speak with Kate Kotaska, manager of school buildings, right, in reviewing proposed SBB changes.

If the school district can be clear, concise and simple in its response, this will enhance the level of transparency for the organization. In addition, it will force the school district to simplify the explanation about how resources are expended. In Oakland, the budget department was continually improving its techniques to communicate with internal and external stakeholders via community meetings and an improved Web site. It became one of several areas that were reviewed periodically to identify how the department could improve further.

The initial clarity in presenting how dollars are allocated can then be used to improve and advance systems within the organization. Oakland worked to develop streamlined, easy-to-use budget reports for schools. A principal would have a consistent and readable resource from which to make decisions.

Another example is identifying districtwide indicators that mark significant and symbolic measures that emphasize priorities. In Oakland, each year we identified the percentage of unrestricted general fund resources that were allocated to schools. It revealed that the priority was to push additional resources to schools and that the central office had to continually work to create new efficiencies and better services for schools.

Schools as Decision-Makers

As large urban districts implement student- based systems, they are better able to recognize that a top-down management approach does not meet individual school needs, let alone students. The reality is that, for many large urban school districts, implementing this management structure is impossible.

First, the logistical challenge alone of communicating with and then holding employees accountable to one direction is tremendous. Second, the diversity of student populations is vast and creates major obstacles to implementing a one-size-fits-all strategy. When SBB districts begin to analyze spending on a per-student basis and compare it to student outcomes, they clearly see the inequities that have been created over time. Third, such a system highlights the remnants of programs from past administrations.

Many superintendents implement a new reform or program when they enter a district, and typically bits and pieces of that program live on, since many districts do not review the effectiveness of programs annually. This is especially problematic in urban districts, where the average tenure of superintendents is only three and a half years.

After many years, a "school reform gumbo" is created, made from these past programs, that is not strategically aligned and pulls money away from classrooms. As school communities receive more resources and become savvy about how to use them, central offices must shift toward a service-oriented culture.

Students and parents rally for full education funding.

School communities no longer want to be told what to do; instead they want support and services that will help them implement their vision, direction and priorities in a consistent manner. Emphasizing collaboration rather than directives ultimately changes the nature of the relationship between a school administrator and central office staff. This shift to a service and support role will not come naturally for all central office employees.

Districts need to be careful about not overlooking the professional development needs of the central office. It is easy to identify training opportunities for principals, but it is just as important to help central office employees become service providers.

In Oakland, the chief operating officer was renamed the chief service officer to highlight the culture shift. The chief service office brought in customer service training for all central office employees, and it was very useful in helping employees become service providers to schools.

Each employee was trained on how to understand the needs of students and families and provide responsive and reliable service. Go to any district in the country and the central office will have a nickname: "the District," "Downtown," "the Death Star," or a name that is inappropriate to include in this article.

The reason is that the central office typically has all the resources and power, and schools do not feel supported. There is not a supply-and-demand relationship between the schools and the central office. The central office identifies "necessary" services and then provides them to schools. Often there is little or no feedback from the schools.

Transitioning to student-based budgeting in Oakland required the central office to redefine its role. In addition to focusing on serving the schools, the central office developed a menu through which principals could purchase services. This menu highlighted the activities and services of the central office, as well as the costs associated with these activities and services.

For example, the menu detailed the services of math and English coaches, the cost per coach and the service standards for each coach. Oakland then created a two-way accountability system in which schools received scorecards based on student outcomes and the central office received scorecards based on how well it served schools. This performance management system greatly changed the conversations between central office and the schools.

Rethinking Core District Functions

By doing the following, a student-based budgeting system can expose dysfunctional technical and logistical systems that impede student achievement:

? Updating technology. Information technology systems used by many public sector agencies are often out-of-date and inefficient. In California, there are only a handful of vendors that provide core human resource and finance systems to school districts. The system typically runs off of older and outdated versions of software, which stems from the lack of investment in these technologies over time. The impact to school districts and schools can be profound, as our reliance for information and data is tied to a system that is inadequately meeting the needs of principals and other school leaders.

Baltimore City Public Schools also uses student- based budgeting. Baltimore school board members listen to CFO Michael Frist discuss the budget.

? Linking control and procurement systems to student achievement. While implementing SBB in Oakland, we realized our position-control and procurement systems were not timely. Principals would often identify the lack of up-to-date information as a hindrance to making better-informed decisions at their schools. We also realized that many of the processes that involved multiple departments were too slow and inaccurate. In one example, we were experiencing chronic issues with processing state and federal expenditure requests. The school district had difficulty identifying appropriate uses that drove student achievement.

? Becoming proactive about staying on budget. Another example of how Oakland was able to rethink its core district functions was centered on responding to potential financial challenges proactively rather than reactively. Central office administrators were forced to create systems that tackled these issues earlier on as a result of the change in how resources were allocated. The school district established a "balancing pot" of resources to assist in preventing schools from exceeding their budgets and impacting the district's overall financial position. More importantly, each principal contributed a portion of his or her general fund or general purpose funds to the pot. Pressures, from peers mostly, were put on those who were unable to stay within their budget, because every other principal had a financial stake.

Impact on Student Outcomes

The changes that occurred in Oakland Unified School District within the central office not only helped the school system to better serve students, but it was also a transformative experience for us as central administrators. Among all the ways that implementing a student-based budgeting system changed our practice, there were several that made an indelible impression.

First and perhaps most important, principals and other school leaders have the capability to operate effectively in an environment where they have more responsibility and autonomy over decisions at the school. The staying power behind a policy like this is providing the support necessary for principals to make informed decisions and holding everyone accountable to stated goals and objectives.

Second, a stronger case needs to be made for investments in analytical solutions. School districts record, collect and store an immense amount of data. There are vast opportunities to mine this data that provide insight to better instructional practice. However, we don't invest in the systems geared specifically to cull this data and lift out those insights. This is a critical aspect of making SBB successful.

Third, issues of equity within a school system must be an active part of every conversation. Our opportunity to close the educational gap between our high- and low-performing students is embedded in the strategies and dialogues that we prioritize in a district.

Finally, cultural change in an urban system is possible, but it takes consistent investments of resources and human capital over a period of time. The changes to Oakland's approach to educating students are proven in their academic achievement over the past six years. Oakland has posted the largest academic gains (118 points on the California Academic Performance Index) of any major urban district in California. But this did not happen in a year or even three years. These changes, if done correctly and inclusively, can have a dramatic effect on an urban school landscape. The opportunity is very real to move the central office from a "Death Star" to a guiding light.

This article is excerpted with permission from the Annenberg Institute of School Reform at Brown University , Fall 2010 issue of Voices in Urban Education.

Jason Willis is the chief financial officer of the Stockton (Calif.) School District. Matt Hill is administrative officer in the superintendent's office in the Los Angeles Unified School District.