Why don’t American high-school students perform as well as their peers in other industrialized nations? One reason is that they devote less time and intellectual energy to their schooling. Learning takes work, and that work is generally not going to be as much fun as hanging out with friends or playing Grand Theft Auto. The question is how to pull them away from such distractions in favor of studying longer and harder. The strategy followed by nations throughout East Asia and much of Europe has been to base admission to specific universities and academic programs (such as law and medicine) largely on students’ performance on a battery of subject-specific examinations devised by a nation’s ministry of education. These high-stakes exams are very different from the multiple-choice aptitude tests-the SAT-1 and the ACT-that serve a similar function here. Each subject exam is three hours or more, and students write essays or solve multistep problems, showing their work. My analysis of data from the Third International Mathematics and Science Study (see “A Steeper, Better Road to Graduation,” Feature, Winter 2001) demonstrates that students in countries with such high-stakes exit exams outperform students in other, equally developed countries by 1.3 grade levels in science and 1.0 grade level in math.

The idea of a government-sponsored exam limiting access to postsecondary education has never been popular in America, the land of second chances. In fact, the American higher education system’s open-door admissions policies are a major strength of the U.S. economy, enabling adults of any age, whatever their background or mistakes in life, to return to school and gain new skills. Nevertheless, the problem of how to motivate students remains. The strategy in 17 states, such as Florida, Texas, and New Jersey, is to require students to pass a minimum-competency exam in order to graduate from high school. These are tests of basic skills, and the passing scores are typically set so low that the possibility of failing the tests does not motivate most students to try harder. New York State and North Carolina, by contrast, give students an incentive to study through the use of rigorous end-of-course exams that signal medium and high achievement levels, not just meeting minimum standards. The results of New York’s famed Regents exams are reported on students’ high-school transcripts, and students earn special Regents diplomas if they pass enough of the tests. Colleges consider the Regents diploma a mark of significant achievement, making it worth students’ while to learn the tested subjects. The Regents exams give students a lofty goal to aspire to, rather than a low hurdle to jump over.

The state of Michigan rejected the use of minimum-competency exams, largely because it wanted the state’s high-school test to reflect more challenging learning goals. Michigan policymakers also did not want to take the risk that a high-stakes exam would lower the rates of high-school graduation and college attendance. Instead, similar to New York and North Carolina, the state took the modest step of reporting students’ scores on their high-school transcripts.

In 1999, Michigan increased the reward for good academic performance by offering the Michigan Merit Award, a one-year $2,500 scholarship for any student who scores at Level I or Level 2 on the Michigan Educational Achievement Program (MEAP) tests in reading, mathematics, science, and writing. Students take these tests for the first time in the spring of their junior year. They can also earn the scholarship by meeting the standards in two subjects and scoring in the 75th percentile or higher on the SAT or the ACT. Students who attend college in Michigan are eligible for the full $2,500 scholarship, while students going to college out of state can receive up to $1,000. Starting with the class of 2005, students can be awarded up to $500 more if they meet or exceed state standards on two of the four MEAP exams in 7th and 8th grade as well. College financial aid officers are prohibited from taking the merit award into account when they make need-based awards, meaning that students who earned the scholarship would not have their need-based grant aid reduced, as is common. A number of other states also have merit-based scholarship programs that are open to all students, but the awards are typically less generous and are based not on tests developed by the states, but on grades or college-admissions test scores.

Scholarship programs like Michigan’s carry a low cost-benefit ratio. The total expense for the Michigan Merit Award comes to less than 1 percent of the state’s K-12 education spending, yet the program has the potential to realign incentives within the school system in a way that serves the interests of students, parents, educators, and the community. It encourages students to study harder; enhances their opportunity and willingness to go on to college; improves the learning climate in most schools; and strengthens the energy for reform among parents and teachers. What makes the Michigan program so powerful is that the scholarships are based on students’ performance on an external exam that reflects the state’s recommended curriculum. If the awards were based instead on, say, high-school grades, many students would respond by choosing easy courses where an A is guaranteed. Teachers would face little incentive to set higher standards; in fact, the pressure to inflate grades would intensify. If the awards were based primarily on SAT or ACT scores, the main result would be an increase in Kaplan’s revenues from test-prep courses. The only way to win the award is to learn the curriculum well enough to pass the state’s high-school test. Unless the curriculum is misguided, this focuses everyone in the system on the main goal of K-12 education.

Unvarnished Benefits

Before the advent of the scholarship program, students and parents in Michigan saw few short-term, tangible benefits when school districts opted for higher standards, more qualified teachers, or a heavier workload for students. The immediate consequences of such decisions-higher taxes, more homework, lower grade point averages (GPAs), a greater risk of being denied a diploma-were negative. As a result, parents pressured teachers to be easy graders and taxpayers were reluctant to pay them well enough to recruit highly qualified personnel. The Michigan Merit Award makes everyone stronger advocates of higher standards and better teaching.

The fact that the scholarships go to every student who meets or exceeds the absolute standard also enhances the classroom environment. Competitive merit scholarships have the dysfunctional effect of pitting classmates against one another. The winners of these traditional merit scholarships are seen as nerds, suck ups, or “Oreos” by their classmates. That is why many schools stopped awarding these honors at school assemblies. There were too many incidents of catcalls mixed with unenthusiastic applause. The merit award helps to reduce peer pressure against students who perform well academically. Students who joke around in class will no longer be honored and rewarded by their peers because their disruptions make it harder for the rest of the class to get the $2,500 award. The fact that the cut score for the merit award was set at a level that is achievable by almost all students makes everyone believe that it is an attainable goal, one worth striving for.

The merit award program enhances the state’s ability to hold schools accountable for student achievement. When the MEAP high-school exam was a no-stakes test, students had no reason to try their best on the primary indicator of performance in the state’s high-school accountability system. Many students were boycotting the test. School ratings thus reflected, in part, a school’s success in getting students to put in some effort on the tests. This reduced the validity of high-school tests as measures of student achievement. If the state had turned the MEAP into a high-stakes exam by making high-school graduation contingent on passing it, this would have affected only those students at the bottom of the achievement curve. The merit award has given students across the board an incentive to do the best they can on the high-school test, thus improving the fairness, validity, and effectiveness of the state’s school accountability system.

Increasing the stakes attached to the MEAP assessment also improved the academic environment by focusing the efforts of teachers and students on a good test. In fact, the MEAP is a much better exam than the tests that most teachers develop for themselves and use to grade their students. It is the product of an extensive consultative process, for which input was obtained from hundreds of well-regarded teachers. All test questions are pretested and reviewed for ambiguity and bias by trained testing professionals. By contrast, studies of tests developed by teachers have found that the overwhelming majority of the questions were created to tap the lowest of Bloom’s taxonomic categories: knowledge of terms, facts, or principles. A 1987 study found that less than 20 percent of the questions developed by secondary-school history teachers required the integration of ideas. College instructors required such integration in 99 percent of their test items. Most secondary-school teachers test for low-level competencies because that is what they teach. The MEAP high-school test pushes things in the other direction.

One final benefit of the merit award program is that it tends to redirect students away from preparing for high-stakes multiple-choice tests like the SAT-1 and the ACT. This is a good thing because the ACT and the SAT-1 are not comprehensive measures of a well-rounded secondary education. Both of these admissions tests fail to assess most of the material-economics, civics, literature, foreign languages, and the ability to write an essay-that high-school students are expected to learn. The energy that students devote to cracking the SAT-1 and the ACT would be better spent reading widely and learning to write coherently, to think scientifically, to analyze and appreciate great literature, and to converse in a foreign language. The MEAP tests have been developed with great care and are far superior to the ACT, yet, despite the existence of the scholarship program, the ACT continues to carry much higher stakes for Michigan students because it is the primary admissions test used by Michigan’s colleges.

Evidence from Canada and Michigan

Michigan’s scholarship program is still young. Therefore, we must look elsewhere for evidence of its likely long-term effects on student performance. Analyses of high-stakes exam systems around the world have demonstrated that they lead to significant achievement gains, but these are not comparable to the moderate-stakes system in Michigan. Canada affords a more relevant example. In the early 1990s, the provinces of Alberta, British Columbia, Newfoundland, Quebec, and Francophone New Brunswick administered curriculum-based examinations in English during students’ junior year of high school and in French, mathematics, biology, chemistry, and physics during their senior year. Students’ performance on the exams accounted for 40 to 50 percent of their final grade. This was only a moderate stake because college-admissions decisions were based almost entirely on high-school grades and were generally made before the senior-year exams were graded. Nevertheless, studies have found that, after controlling for the size and structure of the school and the social background of its students, schools in provinces with external exams taught their students a statistically significant one-half of a U.S. grade-level equivalent more math and science by 8th grade than comparable schools in provinces that did not give curriculum-based external tests.

Schools in provinces that used external exams were also more likely to have teachers who specialized in teaching one subject in middle school and to hire teachers who majored in the subject they will teach. Schools in these provinces devoted more hours to math and science instruction and built and equipped better science labs; their students were more likely to do experiments in science class and to agree with the statement that science is useful in everyday life. Students also talked with their parents more often about schoolwork and reported that their parents had more positive attitudes about the subject. The success of these exams led other provinces-Manitoba and Anglophone New Brunswick-to introduce curriculum-based external exit exams in the late 1990s.

Can we expect similar effects in Michigan? The early signs are promising. Before the introduction of the merit award, just 75 percent of public high-school juniors were taking the MEAP tests. When Michigan’s scholarship program became effective for high-school juniors who took the state tests in the spring of 1999, participation immediately jumped by 10 percentage points. Participation rates continued to climb thereafter, reaching 99.7 percent of seniors in the class of 2002.

More important is the substantial increase in the number of students meeting or exceeding Michigan’s education standards. Test scores usually decrease as participation improves, yet in math the proportion of test-takers meeting the standard rose from 61 percent in the spring of 1998 to 67 percent for the class of 2002. In reading, the proportion increased from 59 percent in 1998 to 71 percent for the class of 2002 (see Figure 1). Similar improvements were seen in writing and science. The proportion of the graduating class passing all four MEAP tests and winning a merit award increased by 7 percent from 2000 to 2002. Forty-six percent of the public and private school students who took all four tests got a merit award in 2000.

Michigan students have also improved their standing on other tests. Average scores on the ACT test were constant among Michigan students, while the nation’s average score declined by 0.2 points. On the SAT-1, Michigan’s scores on the combined verbal and mathematics tests rose 5 points more rapidly than for the rest of the nation.

There is also good news about Michigan’s high-school graduation rate. Nationally, graduation rates fell slightly during the 1990s; the ratio of the number of regular diplomas awarded to the number of 10th graders enrolled three years earlier declined from 77 percent in 1991 to 76 percent in 2001. By contrast, Michigan’s regular diploma to 10th-grade enrollment ratio rose from 78 percent in 1991 to 83 percent in 2001. Unlike Ohio and Indiana, its neighbors to the south, Michigan did not implement a high-school graduation test. This decision has apparently paid off. Indiana’s diploma to 10th-grade enrollment ratio declined from 78 percent in the five-year period before implementation of the graduation test in 2000 to 77 percent in 2001.

Since Michigan’s scholarship program enhances a student’s ability to attend college, one might expect that it would also increase college-attendance rates. This is what happened in Georgia, particularly at colleges in the state, after the creation of the Hope scholarship program. However, the Hope scholarship is considerably more generous than Michigan’s award. The Hope scholarship lasts four years (if you maintain at least a 3.0 GPA), while the merit award is good for only one year. The Hope scholarship also pays full tuition at Georgia public universities and community colleges and a similar amount at private colleges in Georgia. Michigan’s $2,500 award covers only about half of average tuition and fees at Michigan’s public four-year colleges. Consequently, one would expect a smaller response to the Michigan Merit Award than to the Hope scholarship. In any case, the data necessary to determine conclusively whether the merit award influenced college attendance are not yet available.
Students who blow off high school pay a very high price, much larger than they imagine when they are in school. They believe they will be able to attend college despite low grades and low achievement. But in fact their chances of completing a degree program are almost zero. They are also unaware that applying themselves in high school helps them get jobs that offer training and promotion opportunities and eventually higher wage rates. States that desire to focus students’ attentions would be wise to consider merit-based scholarship programs like those in use in Georgia and Michigan. They offer little in the way of downside risk, and they have the potential for wide-ranging benefits.

-John H. Bishop is a professor of human resource studies at Cornell University.

The post Money and Motivation appeared first on Education Next.

The Costano School in East Palo Alto, California, achieved national recognition in 2000 for overcoming enormous obstacles to achieve academic success. Its principal, Marthelia Hargrove, was designated Principal of the Year by the National Alliance of Black School Educators, and the school was identified by the nonprofit Education Trust as one of the relatively few high-poverty, high-minority schools nationwide that perform well on state exams.

Just two years later, however, the school’s performance came under question when 11 former students, interviewed by the San Jose Mercury News, acknowledged that they had received inappropriate help from teachers on state tests. A former Costano teacher told the paper that a school administrator had encouraged him to cheat on the exams, and a subsequent examination of the students’ actual answer sheets revealed an unusually high number of erasure marks where answers had been changed from wrong to right.

Costano does not appear to be an isolated case. Similar incidents have been documented in Indiana, Maryland, New York, Texas, and Virginia, to name just a few. These scandals have aroused public concern, but there has been little hard evidence on the extent of cheating by school personnel on the type of tests required by recently enacted accountability legislation. Our research on cheating in Chicago indicates that the problem is significant enough to require attention, but not so widespread as to call into question the integrity of the nation’s educators. A statistical technique that identifies cases of potential cheating within Chicago’s public schools (described in detail below) indicates that, on any given exam, only 3 to 6 percent of classrooms experience instances of teachers or administrators’ doctoring students’ exams.

Still, with the implementation of the No Child Left Behind Act, the incentives for teachers and administrators to manipulate the results from high-stakes tests will only grow, especially as schools begin to feel the consequences of low scores. No matter what the outcome, cheating hurts the cause of school improvement. When they are not caught, school personnel who cheat may avoid accountability and thereby also cheat their students and the public. When they are caught, these school personnel produce scandals that drain energy and resources from the real business of schools and reform. With better detection methods, like the technique described here, schools can both investigate potential abuses of the system and deter cheating in the future, both of which will increase confidence in the results from high-stakes tests.

This article describes the results of a three-year investigation into cheating by school personnel. The goals of this research were to measure the prevalence of cheating by teachers and administrators and to analyze the factors that predict cheating. Strategies for cheating can include altering students’ answer sheets, giving students the answers, or obtaining copies of an exam before the test date and literally “teaching the test”–prepping students with answers to actual test questions. Using data on test scores and student records from the Chicago Public Schools, we developed a statistical algorithm to identify classrooms where cheating was suspected. This method depends on two hallmarks of potential cheating: unexpected fluctuations in students’ test scores and unusual patterns of answers for students within a classroom. At the invitation of Arne Duncan, chief education officer of the Chicago Public Schools, we were given the opportunity to work with Chicago administrators to design and implement auditing and retesting procedures in 2002. The results of this retesting provided strong support for the effectiveness of our method for detecting cheating. Finally, we examined whether cheating responds to incentives, notably the introduction of a high-stakes testing regime in 1996.

Testing Procedures

Each year, Chicago students in grades 3 through 8 are required to take the Iowa Test of Basic Skills (ITBS), a national norm-referenced exam with a reading comprehension section and three separate math sections, for a total of four subtests. The sample used in our analysis included all students in grades 3-7 for the years 1993-2000. (We excluded 8th graders because our statistical method requires scores for the following year.) Our data included each student’s answers on each year’s test; which school and classroom each student was in; each student’s previous and future test scores; and demographic variables including each student’s age, sex, race, and eligibility for the federal school lunch program, a widely used proxy for family income. The data also included a wide range of school-level characteristics. However, the data did not allow us to directly link teachers to classrooms or to track a particular teacher over time. Our final data set contained roughly 20,000 students per grade per year, distributed across approximately 1,000 classrooms, for a total of more than 40,000 “classroom years” of data (with four subject tests per classroom year) and more than 700,000 “student year” observations.

The ITBS is administered over a week-long period in early May. Only 3rd-grade teachers are permitted to give the exam to their own students; in other grades, teachers generally switch classrooms to proctor the exam. The exams are delivered to the schools one to two weeks before testing and are supposed to be kept in a secure location by the principal or the school’s designated test coordinator, usually an administrator or counselor. Each section of the exam consists of 30 to 60 multiple-choice questions; students are given between 30 and 75 minutes to complete a section. Students mark their responses on answer sheets, which are scanned electronically to determine the student’s score. There is no penalty for guessing.

Once time is up, teachers or administrators collect the exams and then “clean” the answer keys by erasing stray pencil marks, removing dirt or debris from the form, and darkening answers that were marked faintly by students. At the end of the testing week, the testing coordinators at each school deliver the completed answer keys and exams to the Chicago district’s central office. School personnel are not supposed to keep copies of the actual exams, but school officials acknowledge that a number of teachers do so each year.

Identifying Cheating by School Personnel

Cheating by teachers and administrators, especially in extreme cases, is likely to leave tell-tale signs. Consider the results from two actual classrooms taking the same test, one of which we suspect of cheating. Figure 1 presents the students’ average scores for the preceding, current, and following years, expressed in “grade equivalents.” The ITBS is normed in such a way that the average 6th grader, for instance, taking the test during the eighth month of the school year, would score 6.8. A typical student would be expected to gain one grade equivalent for each year of school.

Students in the cheating classroom experienced relatively large increases in test scores from the previous to the current year (1.7 grade equivalents on average). The following year, however, their scores actually declined. By comparison, students in the typical classroom gained roughly one grade equivalent each year, as expected. The pattern of an unexpectedly large increase and then a decline in test scores fits the profile of a classroom where cheating is going on. Increases in test scores that are the result of cheating do not represent genuine gains in knowledge. Thus there is no reason to expect unusually large increases to be sustained on future exams taken by these students–unless, of course, next year’s teachers also cheat. In the absence of such collusive behavior, large gains due to cheating should be followed by unusually small gains or even declines for these students the next year. If sizable increases in test scores were due to an especially talented teacher, the gains would be likely to have a greater permanent component, even if students regressed a bit the following year.

We developed a measure of how unusual the fluctuations in test scores are by ranking each classroom’s average test-score gains against all other classrooms in that same subject, grade, and year. Classrooms with relatively big gains on this year’s test and relatively small gains on next year’s test will score high on this indicator. Since students in the same classroom typically disperse into different classrooms the following year, we used the composition of the current year’s classrooms as our basis of analysis.

However, mere fluctuations in test scores are not enough to justify an investigation into potential cheating. Evidence that students’ answers may have been influenced by school personnel in an unethical manner is also necessary. For instance, the easiest way for a teacher to cheat is to alter the same block of consecutive questions for a substantial portion of students in the class. In the classroom in Figure 1 with unusual test-score patterns, an examination of students’ exams revealed that a large block of students provided identical answers on consecutive questions in the middle of the test, while no such pattern was found in the other classroom. More sophisticated cheating might involve skipping some questions so as to avoid a large block of identical answers or altering different blocks of questions for different students. We detected these and other potential strategies for cheating by combining four different measures of how suspicious a classroom’s answer strings appear (see the web version of this article at www.educationnext.org for details). The essence of each measure is to predict whether individual students would answer each question correctly based on their past and future performance and to use these predictions to identify unexpected answer patterns.

These two indicators of cheating–unusually large increases followed by small gains or even declines in test scores the next year and unexpected patterns in students’ answers–form the basis of our method for detecting evidence of suspected cheating. Among classrooms that are extremely unlikely to have cheated (classrooms with low values on both cheating indicators), there is only a slight positive relationship between unusual test scores and suspicious answer strings. By contrast, among classrooms with highly suspicious answer strings, the probability of large fluctuations in test scores increases dramatically. To estimate the prevalence of cheating, we simply take the difference between the number of classrooms with highly suspicious answer strings that one would predict to have had large test-score fluctuations (assuming that they hadn’t cheated) and the actual number of classrooms with highly suspicious answer strings and large test-score fluctuations. Intuitively, this measures the number of “extra” classrooms we find with large test-score fluctuations among the set of classrooms with highly suspicious answer strings.

Our analysis estimated that the share of classrooms where cheating occurred on any particular subject test ranged from 1.1 percent to 2.1 percent, depending on where the statistical cutoff point was set. For instance, the higher estimate has a cutoff at the 80th percentile, meaning that to be suspected of cheating, a classroom would need to experience gains better than 80 percent of all classrooms, and its pattern of answers would need to appear more suspicious than 80 percent of all classrooms. The same is true for the lower estimate, which requires that classrooms be above the 95th percentile on both indicators.

If every classroom that cheated did so on only one subject test, then the overall prevalence of cheating on the ITBS would simply be four times its prevalence on any particular subject test. In many instances, however, classrooms appeared to cheat on multiple subjects. Thus our method estimated that cheating occurred on at least one subject test in 3.4 to 5.6 percent of all classrooms. The range in estimates is again explained by the higher and lower statistical cutoff points we used to determine whether a classroom should be suspected of cheating.

This pattern of results indicates that cheating on one subject test is not an isolated affair. Therefore, if we have detected genuine cheating, one would expect that a teacher who cheats on one part of the test would be more likely to cheat on other parts of the test. Also, a teacher who cheated one year would be more likely to cheat the following year. Finally, to the extent that cheating is either condoned by the principal or carried out by the school’s testing coordinator, one would expect to find multiple classrooms in a school cheating in any given year and perhaps even that cheating in a school one year predicts cheating there in future years.

Our analysis indicated that our measures of cheating were strongly correlated across all of these dimensions. For example, if wholesale cheating had occurred on one test in a given subject within a particular classroom, it was ten times more likely that cheating on a test in another subject would be identified in the same classroom. There was also evidence of correlation in cheating within schools, suggesting some centralized effort by a school counselor, test coordinator, or the principal. Finally, we found that cheating in the classroom the previous year predicted cheating this year. Classrooms that cheated in the same subject the previous year were nearly nine times more likely to cheat this year than a classroom that did not cheat last year.

The Retesting Experiment

Because of the necessarily indirect nature of our empirical strategy, we explored a range of supplemental tests designed to assess the validity of the estimates. These all confirmed that our methods are highly effective at isolating cases of potential cheating and avoiding false positives (innocent teachers accused of cheating). But perhaps the most compelling evidence for the validity of our methods comes from the results of a unique policy intervention.

A few weeks after the spring 2002 ITBS exam was administered, the Chicago Public Schools gave us the opportunity to retest more than 100 classrooms under controlled circumstances that made cheating virtually impossible. The retested classrooms were of three types. First, we identified the set of classrooms most likely to have cheated, based on the prevalence of suspicious answer strings and unusual gains in test scores on the initial spring 2002 exam. The second type of classroom, which we used as a control group, consisted of classrooms with large test-score gains but no evidence of cheating in their answer strings, a sign of plain-old good teaching. These students would be expected to maintain their gains when retested, though there might be some regression. The third type of classroom, which served as another control group, consisted of randomly selected classrooms.

Classrooms identified as “most likely to have cheated” experienced gains on the initial spring 2002 test that were nearly twice as large as the typical Chicago classroom (see Figure 2). On the retest, however, those excess gains disappeared completely–the gains between the spring 2001 test and the spring 2002 retest were close to the system-wide average. In stark contrast, classrooms identified as potentially having good teachers scored even higher on the reading retest than they did on the initial test. Their math scores fell slightly on the retest, but they continued to post extremely large gains. The randomly selected classrooms also maintained almost all of their gains when retested, as would be expected.

What Predicts Cheating?

Using the indicators of teacher cheating described above, we conducted a series of analyses to examine the relationship between cheating and a variety of classroom and school characteristics. Several striking findings emerged.

On the one hand, classrooms that performed poorly the previous year were much more likely to cheat. For example, a classroom that scored one standard deviation below average the previous year was 23 percent more likely to cheat the next year. Likewise, classrooms in schools with lower achievement, higher poverty rates, and more African-American students were more likely to cheat. Classrooms with a higher proportion of students included in the official test reporting (in other words, fewer kids designated as disabled or limited English proficient and thus excluded from the accountability system) were also more likely to cheat–a 10 percentage point increase in the proportion of students in a class whose test scores “count” increased the likelihood of cheating by roughly 20 percent. Because a greater portion of their students would contribute to the overall assessment of the classroom and school under the accountability policy, these teachers perhaps felt more pressure to ensure that the students in their classrooms scored high on the exams. Teachers who administered the exam to their own students were approximately 50 percent more likely to cheat.

On the other hand, classrooms with students from multiple grades were 65 percent less likely to cheat than classrooms where all students were in the same grade. It is probably more difficult for teachers in such classrooms to cheat since they must administer two different test forms to students, which will necessarily have different correct answers. Classrooms in schools with teachers who graduated from more-prestigious undergraduate institutions were also less likely to cheat; classrooms in schools with younger teachers were more likely to cheat.

Reusing a test form that had been administered in a previous year had no statistically significant impact on cheating. This suggests that teachers’ taking old exams and teaching specific questions to students is not an important component of what we are detecting as cheating (though anecdotal evidence suggests that this practice exists).

From a public-policy perspective, especially in the era of high-stakes testing, perhaps the most important question is how cheating responds to incentives. Before 1996, ITBS scores merely provided teachers and parents with a sense of how a child was progressing academically. But beginning in 1996, the Chicago school district launched an initiative designed to hold students and teachers accountable for student learning.

The reform agenda had two main elements. The first involved putting schools “on probation” if less than 15 percent of students scored at or above national norms on the ITBS reading exam. (Students’ performance in math was not used to determine probation status.) Schools placed on probation and exhibiting little subsequent improvement could be reconstituted; this meant closing the school and dismissing or reassigning all personnel. The second piece of the accountability reform was an end to social promotion–the practice of passing students to the next grade regardless of their performance. Under the new policy, students in the 3rd, 6th, and 8th grades had to meet minimum standards on the ITBS in both reading and mathematics in order to be promoted to the next grade. The promotion standards were implemented in the spring of 1997 for 3rd and 6th graders. Decisions on promotion were based solely on students’ scores in reading comprehension and mathematics.

As might be expected, the cheating by school personnel increased following the introduction of high-stakes testing, particularly in the lowest-performing classrooms. For example, the likelihood of cheating in a classroom that was one standard deviation below the mean increased by roughly 29 percent in response to the school probation policy and 43 percent due to the ending of social promotion. The magnitude of these changes is particularly great considering that no elementary school on probation was actually reconstituted during this period and that the social promotion policy has no direct effects on teachers’ pay or job security. By contrast, classrooms that performed one standard deviation above the average experienced no significant change in cheating in response to these two policies.

Conclusions

The results of this study demonstrate the value of statistical analysis to school districts interested in catching cheaters or deterring future cheating. The findings from the retesting experiment were used to launch investigations of 29 classrooms. While these investigations have not been completed, it is expected that disciplinary action will be brought against a substantial number of teachers, test administrators, and principals. Perhaps more important, a preliminary analysis of the 2003 test results suggests that the incidence of cheating has declined in the district.

Moreover, there is a more positive aspect to our methods than just the isolation of instances of potential cheating. Using these tools, we were able to identify a set of classrooms that made extraordinary test-score gains without any indication of cheating. This will pave the way to identifying and rewarding outstanding teachers.

While evidence of cheating is sometimes used to impugn high-stakes testing programs, our results actually show that explicit cheating by school personnel is not likely to be a serious enough problem by itself to call into question high-stakes testing, both because the most egregious forms of cheating are relatively rare and, more important, because cheating could be virtually eliminated at a relatively low cost through the implementation of proper safeguards, such as those used by the Educational Testing Service on the SAT or GRE exams.

However, the sort of cheating that our methods are capable of catching is just one of many potential behavioral responses to high-stakes testing. Other responses, like teaching to the test and cheating in a subtler manner, such as giving the students extra time, are presumably also present but harder to measure. The challenge for educators and policymakers will be to develop a system that captures the obvious benefits of high-stakes testing as a means of providing incentives while minimizing the possible distortions that these measures induce.

-Brian A. Jacob is an assistant professor at Harvard University’s Kennedy School of Government, and Steven D. Levitt is a professor of economics and social sciences at the University of Chicago. A more detailed account of this investigation can be found in the August 2003 issue of the Quarterly Journal of Economics.

The post To Catch a Cheat appeared first on Education Next.

Experienced teachers are, on average, more effective at raising student performance than those in their early years of teaching. This gives rise to the concern that too many teachers leave the profession after less than a full career and that too many leave troubled inner-city schools for suburban ones. Until now, the roots of these problems have not been well understood. In particular, it is not known whether teachers leave schools with high concentrations of disadvantaged and low-achieving populations for financial reasons or because of the working conditions associated with serving these students. Nor are there good estimates of what kinds of salary increases would need to be offered to slow the turnover among teachers.

The chief obstacle to resolving these issues has been the difficulty of separating the effects of teachers’ salary levels from their working conditions and preferences. The outstanding suburban school that retains most of its teachers is likely to be attractive on a number of levels: the pay is good, students are high performing, and parents are supportive. Since all three factors help in attracting and retaining teachers, it becomes difficult to calculate the degree to which each factor separately affects a teacher’s decision to return to that school the following year. Conversely, the school that has disadvantaged and low-performing students may suffer high rates of teacher turnover, but sorting out the causes of turnover is difficult. Doing so requires detailed information for enough teachers and students to allow analysts to distinguish statistically among the various factors that affect teachers’ decisions.

Fortunately, important parts of the necessary information are now available for elementary schools in the state of Texas for the years 1993 through 1996. Working in cooperation with the Texas Education Agency, the University of Texas at Dallas’s Texas Schools Project has combined various data sets to create a database of key characteristics of both teachers and students during this period in all Texas public schools. This information includes the race, ethnicity, and gender of both students and teachers; students’ eligibility for a subsidized lunch; and students’ performance on the Texas Assessment of Academic Skills (TAAS), a criterion-reference test administered each spring to students in grades 3 through 8. The database also contains annual information about the teachers: their years of experience, their education and salary levels, the grades and subjects they teach, and the size of their classes.

Our analysis of these data reveals that teachers transfer from one school to another–or exit the Texas public school system altogether–more as a reaction to the characteristics of their students than in response to better salaries in other schools. This tends to leave disadvantaged, low-achieving students with relatively inexperienced teachers. Because teachers appear so unresponsive to salary levels, it would take enormous across-the-board increases to stem these flows. Indeed, the results suggest that policymakers ought to consider selective pay increases, preferably keyed to quality, for work in inner-city schools, together with efforts to improve the working conditions in these schools.

Reasons for Leaving

Teachers decide whether to remain at a school for a multiplicity of reasons, which can be divided into four main categories: 1) characteristics of the job, including salary and working conditions; 2) alternative job opportunities; 3) teachers’ own job and family preferences; and 4) school districts’ personnel policies. Although we were not able to look at the ways in which all of these factors affect teachers’ decisions with respect to their employment situation, we were able to examine directly the impact of salary and certain working conditions. We were also able to draw some reasonable inferences about how family considerations and alternative job opportunities influence their decisions by examining how teachers’ choices differ by gender and experience.

Admittedly, working conditions is a broad concept that can cover everything from class size to discipline problems to student achievement levels. Though we do not have data on every aspect of teachers’ working conditions, we do know certain characteristics of their students that many believe affect the teaching conditions at a school: the percentage of low-income students at the school (as estimated by the percentage eligible for a subsidized lunch), the shares of students who are African-American or Hispanic, average student test scores, and class sizes. Whether these characteristics directly affect teachers’ decisionmaking or indicate other less tangible factors (such as the disciplinary climate or bureaucratic environment at the school) cannot be determined.

When looking at the impact of working conditions on retention rates, one needs to take into account other factors that may affect teachers’ employment choices. Some teachers possess skills that are considered valuable in the marketplace. For instance, math and science teachers may find more competition for their services in the private sector than an English teacher would. However, our study focuses on elementary teachers, who tend to have similar educational backgrounds and similar opportunities outside the education system. As a result, differences in opportunities among teachers of different subjects should not be very important for this analysis.

A more important consideration is that many teachers may wish to remain at a particular location for other than job-related reasons, perhaps out of a desire to live near their hometown or near their spouse’s workplace. Consequently the availability of jobs in the locality may be an important determinant of the probability of exiting a school, and the control for any systematic differences across regions within Texas.

Retention rates can also be affected by the number of years a teacher has spent in a particular location. The more years working in a particular district, the more costly it becomes to leave, simply because pay, responsibilities, and job opportunities are often tied directly to experience within the same school district. The financial attractiveness of moving elsewhere also attenuates with the passage of time. Because many districts credit a transferring teacher with only a limited number of years of experience, teachers may have to take a salary cut if they switch school districts. In general, switching careers grows costlier with age and experience. One must give up the higher salary that comes with experience within a particular field, and the time to accumulate gains from any change in job or career grows shorter as one ages. For this reason, our analysis takes into account the number of years teachers have held their jobs by comparing only teachers with similar levels of experience.

Other relevant differences among teachers may arise from their family circumstances, such as the job opportunities of a spouse or a desire to stay home with young children or to enjoy the benefits of home ownership. For example, many female teachers who leave teaching do so in order to leave the labor market altogether, often for family reasons. We unfortunately lack information on family structure, sources of income other than salary, the location or type of housing, and whether and where a spouse works. However, we are able to look separately at teachers grouped by gender, giving us an opportunity to assess the extent to which female and male teachers are influenced by different considerations.

Ethnicity may also affect decisionmaking. Teachers may prefer to teach in schools where they share the ethnic characteristics of students, or they may find it easier to obtain a position if administrators prefer instructors who have certain ethnic characteristics. To ascertain whether ethnic background affects teachers’ decisionmaking, we also look separately at white, African-American, and Hispanic teachers.

One limitation of our study is that we do not have direct information on school districts’ hiring and retention practices. Districts have options when hiring, and the willingness of a teacher to leave a position will depend on the availability of an attractive position elsewhere. Although few teachers are involuntarily separated from their jobs, we do not know whether a job change is determined primarily by a teacher’s decision or by that of the employer, and the circumstances undoubtedly affect both opportunities and the range of choices a teacher will consider. Our lack of information about employer-initiated moves may lead to an underestimate of the improvements in pay and working conditions achieved by teachers who move voluntarily, but the size of this underestimate is probably not very large.

Movement between and within Districts

Nationwide, approximately one-fifth of all teachers decide to leave the school at which they are teaching each year. The pattern in Texas is roughly the same as in the nation as a whole. On average, in each year between 1993 and 1996, more than 18 percent of Texas teachers decided not to remain at the school at which they were teaching. More than 6 percent changed schools within their districts, another 5 percent switched from one district to another, and 7 percent left Texas public schools altogether.

Let’s look first at the changes in salary typically experienced by teachers moving to a new district. Instead of relying on salary data reported for each individual teacher, we calculate district average salaries for teachers in each of their first ten years of experience during the period from 1993 to 1996. These averages are based on regular pay for teachers without advanced degrees and exclude extra pay for coaching or other activities. (The latter is not an important part of compensation: more than 85 percent of teachers receive no extra pay, and the median extra pay for those who do receive it is about $1,000 per year.) We use these averages to characterize the salary schedule of each district and then estimate the potential salary change resulting from a move, given the experience level of each teacher. For example, the salary change for a teacher who switches districts after four years of teaching is assumed to equal the average salary of fifth-year teachers in the new district minus the salary for that level of experience in the old district.

On average, teachers who move between districts after no more than two years at a school improve their salaries, though just barely. Male teachers gain 1.2 percent in salary, while women gain 0.7 percent. Even these small gains begin to disappear for teachers with more experience. Overall, the average annual salary gain among all teachers with less than ten years’ experience is 0.4 percent of annual salary, or roughly $100. Women with three to nine years of experience who decide to change districts actually take, on average, a small pay cut. In short, most teachers moving between districts do not receive substantially better pay in their new jobs.

The picture for working conditions is quite different. There is strong evidence that teachers moving between districts have the opportunity to teach higher-achieving, higher-income, nonminority students. The findings for achievement are the clearest and most consistent. The average job switcher moving from one district to another moved to a district whose average achievement was 0.07 standard deviations higher on the TAAS than the district the teacher left. (The difference is three percentile points on a 100-point scale.) The shares of the district’s students who were African-American, Hispanic, or low income also declined significantly for movers. On average, the districts to which teachers moved had 2 percentage points fewer African-American students and 4.4 percentage points fewer Hispanic students than the districts they had left. The percentage of low-income students in movers’ districts fell by more than 6 percent.

These patterns were even more pronounced for teachers who moved from urban to suburban districts. The salaries of such teachers actually declined by 0.7 percent, on average, as a result of their moves. Meanwhile, the average achievement in the new districts increased by 0.35 standard deviations (14 percentile points), and the shares of African-American and Hispanic students decreased by 14 and 20 percentage points, respectively. Teachers who moved between different suburban districts experienced similar, albeit smaller, changes in student characteristics. Student achievement in their new districts was one-tenth of a standard deviation higher, while the percentages of African-American, Hispanic, and economically disadvantaged students all declined.

We can gain further insight into the factors associated with teacher mobility by examining the pre- and post-move school characteristics for teachers moving to a new school within the same district. These results confirm that teachers who move between schools within urban districts typically arrive at a school with higher average student achievement (0.11 standard deviations) and a smaller percentage of minority and low-income students. In other words, those who choose to change schools within districts appear to follow the same attributes, seeking out schools with fewer academically and economically disadvantaged students. These patterns are also consistent with the notion that new teachers are often placed in the most difficult teaching situations and that senior teachers can often choose comfier positions within the system.

Important differences emerge, however, when we separate teachers by their own ethnic background. African-American teachers tend to move to schools with higher percentages of African-American enrollment than their previous schools, regardless of whether they change districts or simply move to a new school in the same district. However, the average change in the percentage of Hispanic students for teachers of Hispanic descent is not much different from the changes experienced by teachers as a whole. The typical gap in average test scores between their current and former school is also much smaller for African-American and Hispanic teachers who have switched schools.

It is not clear whether these ethnic differences are the result of teachers’ preferences or of the job opportunities available to them. It could be that African-American teachers prefer to work at a school near where they live. If so, then residential segregation by race may lead to the selection of schools with more African-American students. Or teachers may simply prefer to teach students of a similar ethnic background. Alternatively, job opportunities for African-American teachers may be more extensive in schools with higher proportions of African-American students.

All this movement of teachers among schools obviously affects the composition of the teaching force at particular schools. Since exiting rates are smaller at schools with more advantaged students, these schools also enjoy more experienced teachers. The pattern is particularly striking when schools are grouped according to their average level of student achievement. As Figure 1 shows, almost 20 percent of teachers in schools in the bottom quartile of student achievement leave their schools each year, while in the top-quartile schools only 15 percent leave. The driving force of this relationship is not teachers’ leaving urban districts for suburban ones; on the contrary, most of the difference in leaving rates between these types of schools is caused by teachers moving to new schools within their original district. Since teachers with fewer than two years of experience tend to be less effective than more experienced teachers, existing mobility patterns in Texas are likely to adversely affect the achievement of disadvantaged students.

Salaries and Student Demographics

The analysis to this point has not disentangled the effects of salaries from the effects of the working conditions associated with students of varying achievement and family backgrounds. To identify more precisely the independent effects of the multiple factors affecting teachers’ choices, we use regression analysis to estimate the separate effects of salary differences and school characteristics on the probability that a teacher will leave a school district in a given year, holding constant a variety of other factors, including class size and the type of community (urban, suburban, or rural) in which the district is located. We also compare the impact of salaries and school characteristics on the probability of switching to another district with their impact on the probability of leaving teaching altogether.

The results of this analysis confirm that teachers are more likely to leave districts with low average achievement scores. Ethnic composition of the student body is also an important determinant both of the probability of leaving the public schools entirely and of switching from one school district to another. White teachers, regardless of their teaching experience, will tend to move to schools with fewer African-American and Hispanic students. Less experienced white teachers are also more likely to leave the public schools altogether if they come from schools with higher concentrations of African-American and Hispanic students. For African-American and Hispanic teachers, the reactions to varying concentrations of African-American students are almost exactly the opposite.

The differential effect of the ethnic composition of the student body for white and African-American teachers could reflect personnel policies that prefer minority teachers in schools with higher concentrations of minority students. But teachers’ own preferences may be even more important, as suggested by the fact that the decision to leave the Texas public schools altogether–a decision much more closely related to the individual teacher’s preferences than to the district–is influenced in the same way by the schools’ ethnic composition.

If the ethnic composition of the school is the most important factor affecting teachers’ decisions to change jobs, financial considerations are also relevant, especially when it comes to a decision by a somewhat less experienced male teacher to move from one district to another. For male teachers with fewer than three years of experience, the estimated change in the probability of switching districts for a 10 percent increase in salary is 2.6 percentage points; for men with three to five years of experience, the estimated change for a salary increase of the same magnitude is 3.4 percentage points; for still more experienced male teachers, financial effects trail off, down to essentially zero for those with more than 20 years of experience.

The results indicate that higher salaries significantly reduce the probability that male teachers will leave a district. The magnitude of the effect is largest for those early in their career. By contrast, the effects of salary difference for more experienced women teachers are significantly smaller. While females in their first five years of teaching are somewhat responsive to salary differences, such differentials have no observable effects on those with six or more years of experience.

In short, the financial impact on the decisions of female teachers is less than half that for men. Because they represent the vast majority of elementary teachers, women’s unresponsiveness to financial differentials is important to the subsequent policy discussion.

Policy Implications

The results presented above confirm the difficulty that schools serving academically disadvantaged students have in retaining teachers, particularly those early in their careers. Teaching lower-achieving students–whether because teachers find it more difficult or less rewarding–is a strong factor in decisions to leave Texas public schools, and the magnitude of the effect holds across the full range of teachers’ experience levels. There is also strong evidence that a higher rate of minority enrollment increases the probability that white teachers will leave a school. By contrast, increases in the shares of African-American and Hispanic students reduce the probability that African-American and Hispanic teachers will leave.

Given these findings, a key question is how to reduce the flows out of low-achieving, high-minority schools and out of the teaching profession altogether. One oft-proposed solution is to provide teachers with “combat pay”–salary increments designed to encourage them to remain at a tough school. But how large would the increase need to be in order to neutralize the effects of difficult working conditions? Let’s consider this closely.

The situation is complicated by the fact that most elementary-school teachers in Texas are white females (only 20 percent are African-American or Hispanic, while only 14 percent are male). As noted earlier, female teachers are less responsive to increases in salary, meaning that the bonus required to keep them at a school will be larger than for males. In addition, white teachers are the most likely to exit low-achieving, high-minority schools, meaning that it will take even larger increases to retain them. If the teaching corps looked much different–say, if the teachers in urban elementary schools were mostly African-American and Hispanic males–the costs of the “combat pay” solution would be lower.

Based on our findings of what causes teachers to leave their schools, we calculated the salary increases that would be necessary to offset the effects of difficult working conditions in large urban versus suburban schools. These calculations, performed separately for white male and female teachers in their early careers, are shown in Figure 2. The findings suggest that truly large boosts in salary would be needed, particularly for women. Female teachers in large urban school districts would require a 25 percent initial increase in compensation, rising to more than 40 percent when they reach three to five years of experience. Moreover, this is only in the “typical” urban school. For the neediest or most troubled schools in urban areas, even the differentials calculated in Figure 2 would probably not be sufficient to stem the high levels of turnover in such schools.

Not only would across-the-board salary increases of 25 to 40 percent for teachers in urban areas be an enormously expensive reform, but it would be difficult to target such a solution, since teachers typically negotiate salary schedules that apply to all the teachers in the district, not just to those in the most disadvantaged schools. Similarly, even if targeted to the most disadvantaged schools, any increases in salaries would almost certainly go to new and middle-career teachers alike, even though our results indicate that salary differentials are nearly irrelevant for women teachers with ten or more years of experience.

As a result, improving the working conditions of teachers may prove both more effective and more realistic. Unfortunately, at this time, we do not fully understand the working conditions that are most important. But, to the extent that other characteristics of schools where disadvantaged students are found–such as safety and disciplinary problems, more bureaucratic rules, poor leadership, greater student turnover, or a greater distance to work–are important elements, improving these working conditions could mitigate the turnover problem we have identified. And these improvements might have their own effect on student performance.

Finally, it is important to note that this study focuses solely on how many teachers move among schools and out of teaching. We have not examined the quality of the teachers who move from one district to another or leave teaching altogether. The actual cost of improving the quality of instruction depends crucially on whether good teachers, not just experienced teachers, are being retained. Salary policies that are guided just by the characteristics of the students in a school will retain both the good and the bad teachers.

We do know from our other work that differences in teacher quality are more significant than the differences arising from having inexperienced teachers. Therefore, an approach with more appeal might be simply to accept the fact that there may be greater turnover in schools serving a larger disadvantaged population, but then to concentrate much more attention and resources on the quality dimension. While we do not have much experience with such policies, they seem like the most feasible way to deal with the problems of schools serving low-income and minority students.

-Eric A. Hanushek is a senior fellow at the Hoover Institution, and Steven G. Rivkin is an associate professor of economics at Amherst College. The late John F. Kain was a professor of economics and political economy at the University of Texas at Dallas.

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The media continually parrot the claims of widespread fiscal crises in the nation’s school districts. Yet it’s hard to square these jeremiads with the simple fact that, after adjusting for inflation, per-pupil spending today is nearly three times what it was in 1960-and that spending jumps were higher in the 1990s than ever before.

Where did all this money go? How do schools seem to sponge up every last dollar? Why have the extensive investments in technology done nothing to forestall budgetary train wrecks or to produce significant achievement gains? Why does every slowdown in the economy seem to wreak so much havoc among school officials?

The authors of this issue’s cover stories, political scientist Jon Fullerton and management professor William Ouchi, address these questions from different angles.  Fullerton examines the politics of school budgeting and tells us that school managers are, in effect, rewarded for overspending. Moreover, they operate with primitive accounting systems that can serve to mask financial problems for years on end. Even the best financial officers are trapped by state, federal, and union mandates. Worse, the systems are so centralized, argues Ouchi, that they waste money on bureaucratic operations and lack the capacity to respond rapidly to changing circumstances.

In a few cases, school districts’ problems are the result not of poor management but of something more serious. Taking a look at the rising problem of teacher cheating on tests of achievement, Brian Jacob and Steven Levitt have come up with an estimate of the extent of the problem in Chicago and have designed a technique that will help to bring the problem under better control. Fortunately, they show that 95 percent or more of the teachers in Chicago administer tests honestly to their students, a welcome testimony to the decency of the teaching profession.

In professions like law and medicine, the occasional bad seeds are weeded out by committees of their peers. If teachers would like to enjoy similar self-policing, argues Denis Doyle, they will need to jettison the tactics of industrial-style unionism in favor of organizations more like the medieval guilds. And teachers could further enhance their sense of professionalism, says David Ferrero, if they were able to create schools reflecting their pedagogical commitments. They might also be less inclined to leave such schools, since path-breaking research by Eric Hanushek, Steven Rivkin, and John Kain reveals that teachers’ working conditions are more likely to determine whether they stay at a school-or even in the profession-than are their salaries. The essay is based on an extraordinary set of data collected in cooperation with the state of Texas under the leadership of John Kain, whose untimely death this past summer is mourned by his many friends in the educational research community.

This, the first issue of Education Next‘s fourth year, also features Ron Haskins‘s penetrating examination of Head Start’s history, explaining why a program with such great promise has had so little success. Federal programs are also the focus of Diane Ravitch‘s essay. Ravitch, the onetime head of the U.S. Department of Education’s research and development efforts, warns the department’s new Office of Innovation and Improvement not to be taken in by hucksters peddling the latest fad. Meanwhile, John Bishop highlights a promising innovation, Michigan’s college scholarship program for students who perform well on state tests. And in one of Education Next‘s most personal and moving essays, Ann Christy Dybvik traces an autistic boy’s steps through the school day and examines the impact of the federal inclusion mandate on children with disabilities.

In publishing circles they say that a journal’s third year is make-or-break. Thank you, readers, for joining us for a fourth.

-The Editors

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Vouchers in the courts

James E. Ryan provides a balanced and comprehensive description of the next round in the legal fight over vouchers (“The Neutrality Principle,” Feature, Fall 2003). State constitutional provisions serve as the most immediate impediment to voucher programs that include religious schools. The assumption had long been that state courts are free to interpret their constitutions differently from the federal provisions, even if those interpretations diverge from federal holdings.

Zelman arguably undermines this presumption by intimating that there is no longer any justification for treating religious schools differently from their secular counterparts in indirect funding programs. However, one point that is missing from Ryan’s otherwise comprehensive article is how a conservative court would reconcile its federalist inclinations with a holding that states cannot provide a “more spacious” conception of church-state separation. Only if the Establishment Clause represents both the floor and the ceiling of church-state relationships should states be barred from alternative approaches. A holding that states must march in lockstep with the federal experiment would have implications for other federalism issues, a point likely to be on the minds of the justices.

As Ryan notes, the most popular line of attack on these comprehensive state provisions is that they are based on the much-maligned Blaine amendment of 1876. Pro-funding groups argue that the federal Blaine amendment-which sought to prohibit public funding of sectarian schools-was nothing more than an exercise in Catholic bigotry. Because many state provisions were modeled after the failed amendment, the argument goes, they too are suspect in origin and effect.

Ryan’s historical argument fails in two respects. First, the Blaine amendment was the capstone of a much larger controversy over the future of American public education. Funding of sectarian schools was only one aspect of the controversy, and anti-Catholicism a subset thereof. While anti-Catholicism and opposition to parochial school funding motivated many Blaine amendment supporters, other people were motivated by a variety of concerns, not the least of which was whether there should be a federal role in education. Second, many state constitutional provisions were enacted for reasons that had nothing to do with anti-Catholicism. Several midwestern states enacted their constitutions with provisions preventing the funding of religious schools before the rise of organized nativism and long before the Blaine amendment. A recent review of the state constitutional conventions in Oregon (1857) and Washington (1889) for an amicus brief in Locke v. Davey revealed no evidence of anti-Catholic animus. As Ryan correctly concludes, the road to challenging these state provisions may be long and arduous, requiring a state-by-state review.

STEVEN K. GREEN
Willamette University College of Law
Salem, Oregon

The SAT

I was one of the two psychometricians on the panel that advised the College Board on the issue of whether the SAT scores of disabled students who take the test with accommodations should be “flagged” (see Miriam Kurtzig Freedman, “Disabling the SAT,” Feature, Fall 2003). In my opinion, the decision to end the practice of flagging was the right one.

Standard testing conditions are problematic for many people with disabilities. This is why the College Board grants testing accommodations, such as extended time to finish the test. However, many people with disabilities do not want others to know about their disability. The practice of flagging SAT scores essentially informs college-admissions officers that the applicant has a disability. The opportunity for bias against the student is obvious.

There are two arguments in favor of flagging. The first is that providing an accommodation may give students with disabilities an unfair advantage. The second is that scores from accommodated test administrations are less valid than scores from standard administrations.

As Freedman argues, the current version of the Standards for Educational and Psychological Testing can be interpreted to support the practice of flagging when information on the comparability of scores across standard and nonstandard test administrations is lacking. However, these standards also state: “If a modification is provided for which there is no reasonable basis for believing that the modification would affect score comparability, there is no need for a flag.” Furthermore, the Standards are silent on the issue of where to draw the line between “comparability” and “noncomparability.”

The College Board has sponsored more research on the effects of testing accommodations than any other organization in the world. The findings for the SAT show that students with disabilities perform much better when given accommodations such as extended time. Meanwhile, students without disabilities score only a little better when given an accommodation. The only evidence in support of “noncomparability” was for male students with learning disabilities who had extended time. Their first-year college GPAs were lower than the SAT predicted. However, this finding did not hold for females with learning disabilities, and it was reduced when males’ high-school grades were factored in. When evaluating the size of this “overprediction” for learning-disabled males, the majority panel noted that it was smaller than the overprediction for other groups of students, such as African-American males. The practice of flagging could not be supported by the relatively small effect noted just for learning-disabled males.

STEPHEN G. SIRECI
University of Massachusetts
Amherst, Massachusetts

Miriam Kurtzig Freedman responds: I thank Stephen Sireci for his thoughtful letter. Nevertheless, I am not prepared to assume that college-admissions officers will be biased against applicants with disabilities. Neither the panel that voted to end flagging nor the College Board has presented any evidence to support this assumption.

Sireci writes that the only evidence of noncomparability is the “relatively small effect noted just for learning-disabled males” and concludes that this could not support the continued practice of flagging. Yet when the panel’s two psychometricians asked themselves the key question-Are the scores from standard and nonstandard administrations of the test comparable?-one answered, “No,” and Sireci answered, “Not sure.” We still have no “reasonable basis” to believe the scores are comparable. Thus the College Board’s decision to end flagging is difficult to reconcile with the evidence and the panel’s own deliberations.

Licensing leaders

Frederick M. Hess seems obsessed with the need to establish a “deregulation” route to identify and prepare school leaders (“Lifting the Barrier,” Forum, Fall 2003). His model seems to suggest that just about anyone with a master’s degree, preferably in business administration, can provide leadership to schools and districts. This is truly a flawed concept in that a business executive, while having the requisite management and financial skills, has basically no knowledge of the learning process, adolescent psychology, curricular programs, and instructional strategies. Schools need leaders of instruction who have a broad repertoire of pedagogical skills that have been built through extensive school-based experiences.

GERALD N. TIROZZI
Executive Director
National Association of
Secondary School Principals
Reston, Virginia

University-based programs in educational administration have been far too unselective in whom they admit and “train” for leadership roles. Those same programs, it should be pointed out, are too often undercapitalized and are expected to generate credit hours without many of the resources needed to foster quality programs. I agree that far too many programs in educational administration are disconnected from the real world of education practice. One simple illustration is the absence, in many programs, of any substantive work on assessment and accountability and of helping administrators learn how, in Marc Tucker’s words, to “recognize the elements of sound standards-based classroom organization and practice.”

Frederick Hess, however, sounds like far too many critics who suggest that the free-market approach is the answer. It seems so right to suggest that if you deregulate credentialing for administrators, they (the bright, the better educated, and the managerially savvy) will come. The authors even have anecdotal evidence to prove their point from places like Seattle and San Diego. But basing public policy on a broad deregulatory idea ignores the important difference between the education of our children and other public pursuits. Deregulation of such things as the telephone industry has brought more options, but has also engendered lots of problems. The consequences of broad deregulation of education are potentially more deleterious and far-reaching than may be evidenced in other public- and private-sector endeavors. I am convinced that the byproduct of deregulation via the Hess route will be further mediocrity with instances of excellence, which we already have.

THOMAS J. LASLEY II
Dean, School of Education
University of Dayton
Dayton, Ohio

Frederick M. Hess responds: Neither I nor any responsible reformer imagines that private-sector candidates are saviors or in possession of unique skills. The point is only that they ought to be judged on their ability and not blocked out by statutes or regulations. Gerald Tirozzi asserts the continued need for traditional courses in educational administration, despite the absence of evidence that these courses teach useful or necessary skills. He acknowledges the promise of performance-based licensure, but then calls for a continued regime of mandatory coursework. Such required seat time, of course, is the antithesis of licensure based on how well administrators serve children.

If we agree that educational administration programs don’t provide the leaders we need, and if three decades of reform haven’t made much difference, why is Thomas Lasley so confident that minor adjustments in courses or programs will produce substantial change? If potential new applicants are less suited to school leadership positions than current leaders or are likely to “do harm,” why does Lasley presume that they will be hired over conventional candidates? If he believes that district hiring officials are unwilling or unable to gauge ability, then we have identified a need for much more fundamental change in educational administration.

Teacher pay

Richard Vedder points out that teachers are not paid as badly as everyone thinks (“Comparable Worth,” Forum, Summer 2003). Unions like to use measures of annual salary, while Vedder suggests that hourly wages provide a more accurate gauge of teachers’ pay. But neither is a very good unit of measure.

Teachers commonly work many more hours than the official time they spend in school because they typically prepare for class, grade exams, and perform other tasks outside the formally defined school day. In my experience, most teachers work as much as other professionals, about 50 hours per week.
The best unit is the number of contractual work days, which for teachers is typically about 182 days per year. The work year for most workers is 238 days. In other words, a teacher’s annual salary is based on about 76 percent of a standard work year. Thus a teacher’s salary of $45,000 translates into a full-year salary of $59,000.

T. ALLEN LAMBERT
Ithaca, New York

The Asian-white gap

Jens Ludwig (“The Great Unknown,” Check the Facts, Summer 2003) raises a number of important questions about the U.S. Department of Education’s study of the black-white test-score gap. But he ignores entirely the fact that their analysis and virtually all other studies on this matter are limited by the fact that the test scores of African-Americans were measured only against whites. Asian-Americans are a smaller minority than blacks, but outperform both whites and blacks in school. Asians should be included in the data to ascertain why this group has such a great academic advantage; one reason is perhaps their tight-knit traditional family structure.

STEVE FELLOWS
Seattle, Washington

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The American Dream and the Public Schools

By Jennifer Hochschild and Nathan Scovronick
Oxford University Press, 2003, $35; 301 pages.

In The American Dream and the Public Schools, Jennifer Hochschild and Nathan Scovronick offer a panoramic view of American public education and the efforts to reform it. Just a list of key chapter headings and topics-desegregation, finance, structural reform, school choice, inclusion-reveals the book’s ambitious scope. It might be described as a literature review with attitude.

The attitude-the use of the “American Dream” as the central analytical concept-will be familiar to readers of Hochschild’s previous work. At the core of the American Dream is equality of opportunity, a notion that artfully blends both collective and individual responsibilities. The role of government is to provide everyone with a fair chance to pursue success. Individuals then use this opportunity to go as far as their talents and drive will allow.

Public schools are the principal vehicle for translating the dream into reality. However, while the authors briefly acknowledge that progress has been made, the thrust of their argument is that the efforts to promote school desegregation and equitable school funding have failed thus far.

For the most part, Hochschild and Scovronick blame this reality on the unwillingness of better-off families and communities to approve adequate transfers to the worse-off. In the absence of such transfers, the intergenerational transmission of advantage will continue unabated, with ever more damaging effects in a society whose rewards are increasingly keyed to the attainment of education and the possession of higher-order skills.

It would not be unfair to describe Hochschild and Scovronick as bloodied but unbowed 1960s liberals. Their hope is for a system of public education in which children of all races and classes learn side by side, in classrooms equally endowed with key resources. This hope is unattainable, they believe, unless citizens strike a balance between self-interest and the common good. “Too many Americans,” they write, “are unwilling to take the required risk, pay the necessary price, or surrender their initial advantage.”

Important parts of this thesis are undeniably true. Efforts to reduce school segregation have stalled, as has progress toward eliminating achievement gaps between white students and most racial and ethnic minorities. Income and wealth are less equally distributed than they were 30 years ago. But can these realities be reasonably attributed to a collective failure since the 1960s to fund the public schools? My reading of the evidence says no.

Consider the following: Not only has inflation-adjusted spending per pupil nearly doubled since 1970 (and tripled since 1960), it has also become substantially more equal across jurisdictions. According to figures from the Department of Education and the Census Bureau, the ratio of spending between the median school district and school districts in the 75th and 90th percentiles has decreased, while the ratio between the median and the 10th and 25th percentiles has increased.

Citing the research of William Evans and his colleagues, Christopher Jencks and Meredith Phillips conclude in their 1998 volume The Black-White Test Score Gap, “Despite glaring economic inequalities between a few rich suburbs and nearby central cities, the average black child and the average white child now live in school districts that spend almost exactly the same amount per pupil.” This is what we would expect in light of the fact, cited by Hochschild and Scovronick, that the states’ contribution to K-12 education funding has risen by 10 percentage points over the past three decades, a trend that tends to lean against local inequalities.

Much of the increased spending has gone to reduce class size; the average pupil/teacher ratio has fallen from more than 22 in 1970 to roughly 17 today. Here again the process of equalization is evident. Harvard University scholar Ronald Ferguson has shown that average pupil/teacher ratios are unrelated either to the racial composition of schools or to the percentage of students eligible for free lunches (a standard proxy for family income).

None of this is to deny that additional resources for lower-achieving schools and districts could be beneficial, especially if these resources were invested in policies with a strong research base, such as smaller classes for minority students in the earliest grades. Indeed, it is sensible to believe that schools with high percentages of poor and minority students may need higher per-pupil allocations than wealthier districts. This is in part because disadvantaged districts typically must spend more on security and special education and also because poor and minority students are more likely to arrive at the schoolhouse door with family and neighborhood-based problems. My point is only that during the past three decades, public education has made more progress toward resource equity than one would conclude from the authors’ pessimism.

“Liberal Materialism”

A number of issues deserve more emphasis than Hochschild and Scovronick choose to give them. Let me mention just three, selected from a long list.

First, I would attach more weight to institutional factors unrelated to family or community wealth that skew the allocation of vital resources. For example, a considerable body of evidence suggests that the best teachers make the most difference for kids at the bottom. A rational system would bring the two together. However, present practices do just the opposite; seniority and other work rules allow many of the best teachers to opt out of the classrooms and schools where they could do the most good. And as the authors note in passing, the transformation of many urban school districts into jobs programs and patronage systems has made taxpayers and public officials reluctant to pour additional resources down what they consider a rathole.

Second, the authors fail to give enough weight to non-school-based influences on student achievement. In a path-breaking analysis, UCLA scholar Meredith Phillips showed that at least half of the black-white gap is attributable to differences that exist before children enter 1st grade. It is unfair to hold public schools responsible for these differences, and it is unwise to assume that any feasible education reform could adequately compensate for them. Among other things, we need a new partnership between the federal government and the states to ensure that all three- and four-year-olds can attend preschools, regardless of family resources, if their parents choose to send them. (In fairness, I suspect the authors would agree with this recommendation.)

Third, this book suffers from what might be termed liberal materialism-that is, a persistent underestimation of the role of culture in shaping individual behavior and social outcomes. For example, rigorous research has found that income plays only a minor role in explaining the black-white achievement gap. Factors such as parenting practices are far more significant. Another example: the authors cite the overseas schools run by the Department of Defense to support the thesis that a high level of racial integration boosts minority achievement. Maybe so. But they overlook an obvious alternative hypothesis-namely, that a military culture focused on discipline, respect for authority, and merit is disproportionately beneficial for minority students, especially when it is reinforced by similar attitudes among their parents.

The authors offer a clear, challenging argument and mobilize a mountain of evidence in its support. But every social scientist knows that confirming evidence can be found for nearly any hypothesis. The harder task is to expose one’s cherished theories to challenging evidence and to remain open to a range of alternative explanations. The American Dream and the Public Schools is a superb brief for the traditional liberal interpretation of the ills of our education system. But one need not be a conservative to believe that it is far from the whole story.

-William A. Galston is a professor in the University of Maryland’s School of Public Affairs.

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Back in 1976, when I was a crackerjack reporter for the Woodlawn High School Calumet, I interviewed the Baltimore County school district’s superintendent, Joshua Wheeler. The conversation was to provide my introduction to the politics of public education. I asked Wheeler, who was about to retire, why the district did not require students to pass proficiency tests in order to graduate. “I know we’re a great school system,” I said, “but even so, some of our kids graduate without being able to read and write.”

Wheeler’s amazingly candid response is one that I will never forget. “Your question shows that you do not understand the purpose of the public education system,” Wheeler intoned. “The purpose of public education is not to educate students. The purpose of public education is to provide an education for those few who want it.”

“But what about the other kids?” I asked. “Why don’t we let them leave school so the rest of us can learn? They’d be happier, we’d be happier, and it would save the taxpayers money.” I thought I was the first person to come up with the idea.

“We can’t do that,” Wheeler explained patiently. “Crime would go up. Unemployment would go up. Parents would be angry. In 40 years in the school system, all I’ve heard from each generation is that the succeeding generation couldn’t read as well. I happen to disagree … and whenever we do require more homework and start failing kids, parents complain that their kids are working too hard.”

Wheeler’s sentiments are still shared by some educators today, though few would voice them in public. They just don’t accord with the bipartisan “leave no child behind” attitude rippling through public education. But, however offensive his remarks might have been, Wheeler had one thing right: Americans tend to want schools that teach the basics, provide a bit of “academics,” but add a lot of sports, dances, and other extracurricular activities. He had lasted six years as superintendent, a highly political position. A latter-day Horace Mann, who would want academic schools, couldn’t have lasted six minutes.

After talking with Wheeler, much of what I saw at my beloved Woodlawn High School suddenly made sense. I now understood the teacher who slept through class, telling students that if they didn’t bother him, he wouldn’t bother them. I understood the goofy social studies teacher who taught us astrology rather than history; likewise, the math teacher who hated math, and so instead gave delightful lectures on libertarian philosophy.

Not all my teachers were turkeys. Coach Goudy both won most of his games and pounded modern literature into his students with a no-holds-barred Socratic method. Mr. George, a brash ex-football player, practically bullied students into sharing his enthusiasm for history. My journalism teacher, Miss Warfield, taught me to write clearly and on deadline. While not always scintillating, a trio of science teachers, Mr. Bryant, Ms. Albrecht, and Mr. Lawler, gave students a real appreciation for the scientific method, which served me well years later as a researcher.

But those dedicated and knowledgeable teachers were rebels, subverting the system by pushing students to meet high standards, or at least some standards. As a high-school student, I planned someday to join their ranks and to do my small part to make the purpose of public schools educating students, not just providing an education to “those few who want it.”

At least until I got to college. As a sophomore, I asked an education professor how to get certified to teach social studies. He explained that I would need 12 education classes, but only 4 in the social sciences. I had no need to understand the subject I taught, he insisted, since “the curriculum people will tell you what to teach.” That was when I decided to become a political scientist.

-Robert Maranto is an assistant professor of political science at Villanova University.

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In April 2003, Joseph Olchefske, a nationally recognized reformer, announced his intention to resign as superintendent of the Seattle Public Schools. Surprisingly, given his background in investment banking and his previous experience as the school district’s chief financial officer, Olchefske was felled by a financial crisis. In the fall of 2002, the school district had discovered an unexpected $23 million deficit for the previous fiscal year. The district was on track to ledger another $12 million deficit for the 2002-03 fiscal year.

About a month later, Dennis Chaconas was fired as superintendent of the Oakland, California, public schools. New software, installed so that the school district could better understand its finances, had uncovered a $40 million deficit from the previous year. The deficit for the current year was expected to be equally large. To keep the district solvent, the state of California provided a $100 million line of credit and took over the district’s operations, stripping the school board of all but advisory powers and appointing an administrator to replace Chaconas. Although Oakland had long been known as a troubled school district, it had appeared to be moving in the right direction under Chaconas. Teacher turnover was down and test scores were up.

Unlike the financial chicanery that doomed corporate titans like Enron and WorldCom (now MCI), intentional corruption does not seem to have been behind either of these crises. Deliberate malfeasance has played a role in many a school district’s financial distress (as in Compton, California), but Seattle and Oakland fell into difficulty while they seemed to be on the upswing. Why can even school districts that are apparently healthy suddenly find themselves on the verge of insolvency? This question will become increasingly urgent in the coming months, given the grim budget outlook that most states are facing. The problem is particularly acute in California (the primary focus of this article), where the state government, which largely dictates K-12 spending, is in the midst of a financial crisis.

The specific path to financial distress is, of course, unique in each case. Any number of factors, from excessively generous concessions at the bargaining table to a fiscal crisis at the state level, can throw a district into financial turmoil. The common way of dealing with these crises is to focus on the immediate causes of financial distress and to treat them as a straightforward management problem. However, such crises are more properly understood as the result of underlying political and legal realities that prevent districts from managing their finances properly.

Four general factors can interact to create financial instability. First, the dynamics of public funding and the budgeting process encourage school districts to spend their entire funding allocation, creating a cost structure that is difficult to adjust down when revenue drops or fails to grow at an expected rate. Second, districts are constrained in how they can spend money and in the financial engineering options open to them. Third, the lack of attention afforded to the nuts and bolts of financial management in K-12 public education can result in naïve oversight and inadequate management-information systems that can delay appropriate responses to emerging financial crises. Finally, school district finances are lodged within a larger political environment. Politicians and state officials may find ways to help push districts over the financial edge in order to accomplish their own purposes.

The Downsides of Incrementalism

Given that school districts largely do not have to face the vagaries of “selling” their services to fickle consumers, one might think that balancing the budget would be fairly straightforward. Not so. The typical district has a budgeting process that results in its permanently “living on the edge,” with revenues just matching costs. When hard times arrive, it is difficult for districts to adjust for a variety of reasons.

The first reason is the use of incremental budgeting. That is, school districts generally determine their current year’s budget by taking the previous year’s budget and adding or subtracting incremental spending to each major item. By contrast, zero-based budgeting asks managers to examine the services they are required to deliver and then build up their cost structure from scratch. Another strategy, activity-based costing and its derivatives, separates the costs of various activities within a business. Then, by looking at external benchmarks and generating ideas internally, managers search for ways to reduce the costs of these activities while delivering the same level of service (if such a level of service is even needed). The goal of using these budgeting methods is to ensure that the organization aligns its costs with its strategy and most valuable activities.

The downsides of the incremental approach are obvious when they are compared with methods that are more tightly focused on value. Making piecemeal changes to district priorities through a fragmented series of increments based on last year’s budget will not ensure that the organization is carrying out the strategically correct activities or that it is executing them in a cost-effective manner. Thus when cuts need to be made, in the name of “fairness” they are often imposed as flat percentage cuts to each department across the board, ignoring both the relative efficiency and the relative importance of various departments. This method in fact provides an incentive for inefficiency: the fatter a department gets, the better it can survive the inevitable budget cycles.

Nevertheless, as the political scientist Aaron Wildavsky pointed out years ago, the incremental approach has a lot going for it in the governmental sphere. First, it is simpler than the other approaches. Large urban school districts are complex, multilevel organizations with hundreds of sources of revenue, each with its own set of requirements and constraints. During the 2001-02 school year, the Los Angeles Unified School District received funding from well over 200 federal and state grants and entitlement programs. Any attempt at zero-based budgeting would require decisionmakers to understand and work within the constraints imposed by these funding streams, each of which is typically earmarked for a specific group of students or a particular school program. Much of the remaining money is devoted to salaries, largely for teachers. In short, most of the school district’s funding is already spoken for. This makes zero-based budgeting or even activity-based costing almost pointless from a budget officer’s point of view, since so little of a district’s funds are available for reallocation.

These value-oriented reviews can also be dangerous for managers in the public sphere to undertake. School boards and superintendents are justifiably hesitant to mobilize too many stakeholders against them at once by saying, “Let’s rethink our whole approach.” In normal years, the incremental approach enables district leaders to limit the political stresses around budgeting by focusing on a few specific changes. As a result, the incremental approach is likely to lead a long and healthy life in school district budgeting. Unfortunately, this also means that school districts will be exposed to all the flaws of incrementalism: spending patterns that are poorly aligned to strategic priorities; fragmented educational programs; and little ability to quickly restructure resources across departments and schools.

Use It or Lose It

School districts also face strong incentives to spend their entire funding allocation in any given year. In the private sector, profits are good. They can be used to grow the business, to provide a cushion during downturns, or to reward investors. School districts, however, are reluctant to generate surpluses (the public sector’s analogue for profits). Like most government agencies, school districts operate under conditions of “use it or lose it.” The assumption is that if they don’t spend the money, they didn’t need it. Even if a school district were to control its costs enough to generate a significant surplus, the extra funds would immediately become a target for outside interests. Large surpluses suggest to politicians that too much money is being put into the schools and to unions that too little is being paid to teachers.

For instance, in 2002, after a spring of difficult cost-cutting, administrators in Los Angeles discovered that the school district had a substantially larger ending balance than projected. The union saw this as proof that the district could afford raises for teachers and that some unpopular budget cuts, such as increases in class size, were unnecessary. In the spring of 2003, union-backed candidates ousted two incumbent school board members. This was the result of several factors, but the previous year’s budget cuts and unexpectedly large ending balance played a significant role in mobilizing the union. It is thus little wonder that districts attempt to “kiss” a zero or a statutorily established minimum balance every year.

The most popular way of soaking up excess revenues is to increase salaries and to hire additional school personnel, especially in districts that have difficulty attracting and retaining qualified teachers. Thus in June 2000, during the best of financial times for California, the Oakland school district gave teachers a 24 percent salary increase (in addition to the normal step increases). While increasing teachers’ salaries pleases teachers and their unions, hiring additional teachers makes class sizes more manageable, pleasing parents and teachers alike. Moreover, reductions in class size are at times encouraged by the state through significant financial support, as in California. As a result, districts’ personnel costs tend to keep pace with growth in district revenues. For example, during the five-year period from 1996-97 to 2001-02, increases in personnel costs outstripped increases in district revenues in 14 of the 20 largest California school districts (see Figure 1). While such changes are politically popular and can improve a district’s ability to recruit qualified teachers, they are difficult to reverse. Personnel costs are notoriously “sticky”–easy to increase but hard to reduce.

Slippery Revenues

The problem with building up costs to match revenues is that school districts do not generate their own revenues and cannot control their service obligations.

At one time, the majority of school funds came from the local community in the form of property taxes. The movement to equalize spending among rich and poor communities changed all that. In 1950 localities provided about 57 percent of the revenues available to school districts. By 2000 their share had dropped to 43 percent (see Figure 2). Even this significantly understates the decline in local influence over school district revenues. Many states, including California, Florida, and Texas, either place caps on local property-tax rates or redistribute property-tax receipts when they exceed a certain level. Localities cannot simply raise property-tax rates to the level they feel is necessary to fund the schools.

The situation has reached an extreme in California. First, the California Supreme Court’s 1971 Serrano decision required the state to make school spending between rich and poor districts more equitable. Second, Proposition 13, which the voters passed in 1978, placed a cap on property taxes. Finally, in 1988, Proposition 98 required the state to spend a minimum amount of the general fund on education. As a result, the share of school spending from local revenues dropped from 62 percent in 1970 to 31 percent in 2000 (see Figure 3). With no real power over revenues, local school boards in California face little incentive to conserve on costs as a means to lower tax rates.

K-12 education is the largest line item in most state budgets, representing 22 percent of total state spending and more than a third of general fund expenditures (money that comes from state taxes and is not earmarked for specific purposes). Thus school district funding is tied to the sources of state general funds–typically receipts from sales taxes and income taxes. In turn, these receipts are closely tied to state economic conditions, even more closely than property taxes are. Therefore, when states face significant deficits, funding for education must be cut. And, unlike some other government agencies, which can choose to reduce services by letting roads go unpaved, releasing prisoners early, or turning away indigents in search of health care, the schools cannot simply stop educating kids. They must serve all students within their area, and they have a multitude of mandates they must fulfill whatever their funding situation.

When an economic downturn hits, school districts suffer revenue cuts, but cutting costs is difficult. The typical district spends more than 80 percent of its revenues on salaries and benefits, and salaries tend to ratchet only one way–up. In addition, as Michael Podgursky recently noted in these pages (see “Fringe Benefits,” Check the Facts, Summer 2003), districts often provide generous defined-benefit plans to both current employees and retirees. With double-digit annual increases in health-care expenses, the relative cost of benefits to school districts can be expected to rise substantially. What’s more, many school districts have almost unlimited obligations to provide health benefits to their retirees. In 2002, the Los Angeles school district had estimated liabilities of $4.8 billion in unfunded benefits for its current and future retirees, an amount greater than the value of its net assets.

A final complexity in the district budgeting process comes from its timing. Many school districts are required to settle on a budget before they know what their revenue will be. In the spring of 2003, due to a large projected deficit and the difficult cuts it implied, the state of California had not adopted a budget by July 1, the deadline for school districts to turn in their budgets–budgets that are based, theoretically, on the funding elucidated in the state budget. This places a further brake on school boards’ ability to cut costs aggressively. It can be hard for board members to justify taking political heat for unpopular cuts before knowing exactly how large the revenue gap will be.

When a Dollar Is Not a Dollar

One of the fundamental principles of financial management in the private sector is that money is fungible. In other words, a dollar received as revenue from a customer can be used for many things. Part of it pays for the good or service received by the customer. But the profit from that revenue may also be reinvested in the company or paid out to shareholders and to the firm’s employees.

By contrast, large public school districts receive a substantial portion of their revenues in the form of categorical or restricted funds. Each of these revenue streams has strict limitations on how the money can be spent. For instance, federal Title I funding for compensatory education must be spent only on low-performing students, unless the entire school qualifies as a Title I school. From the legislator’s point of view, this makes perfect sense: legislation was enacted and programs created with the intent of targeting a particular group or solving a particular problem. Such monies are intended to “supplement, not supplant” existing district expenditures.

District managers, however, are faced with a crazy quilt of funding streams for purposes that match the district’s strategic priorities only by happenstance, if at all. In order to achieve the district’s goals, good managers will attempt to find ways to use categorical and restricted monies that are not in line with the district’s aims to free up other funds that can then be used to pursue its priorities.

The result is what I will call the “dance of supplantation.” District managers attempt to use restricted, categorical funding to free up unrestricted, general-fund monies while the providers of revenue attempt to prevent them from doing so. Managers performing this dance with too much gusto can suddenly find they have danced over a cliff. Money they were counting on being able to use might be withheld. Worse, money they have already spent may need to be paid back. For instance, in 1991 the Richmond Unified School District in California went bankrupt. One of the contributing factors was superintendent Walter Marks’s overly aggressive repurposing of funds. The district found that it had to repay the state for $4 million that had been earmarked for desegregation efforts and then inappropriately spent.

The dance of supplantation takes on special importance when districts enter times of financial crisis. Unlike private businesses, where a surplus in one division can provide cash for the whole company, districts cannot typically use, say, their surplus nutrition funds to pay for instruction, or vice versa. During the recent financial crisis in Oakland, one of the strategies proposed by the board and superintendent was to repurpose bond monies intended for construction to the general fund, in repayment for general-fund monies already spent for construction. Perhaps not surprisingly, the state attorney general disallowed this maneuver. This took away Oakland’s last alternative to a state loan and takeover.

In California, districts are further constrained in that they do not have full access to their reserves. Districts are required to deposit reserves with their local counties to prevent them from foolishly investing the funds. (Until 1994, nothing prevented the counties from making foolish investments. That’s when Orange County lost its school districts’ funds as well as its own after a series of highly speculative trades plunged the county into bankruptcy.) In addition, some special funds held by the county, such as workers’ compensation, cannot be used for other purposes once the district has paid into them. So even if a district has overfunded a particular reserve, it does not have access to that money in times of need. While this eliminates the temptation to raid funds for short-term gain, it also places limits on districts’ financial flexibility. When a district finds itself in financial trouble, it must respond with one hand tied behind its back.

The Perils of Instructional Leadership

While the budgeting and finance issues discussed above make it easy for districts to get into financial trouble, poor financial management skills among district staff and incomplete information flow can turn what would have been a painful budget-cutting exercise into insolvency.

It begins at the top. While public companies can ensure that their boards of directors are stocked with financial know-how, this is not possible for elected school boards. As a result, many school boards lack basic financial literacy. The complicated structuring of district revenues and the lack of single, consolidated financial reports further undermine board members’ ability to monitor the financial situation. Finally, the frequent turnover of boards and superintendents limits institutional memory. Any expertise board members have accumulated is lost as they move on.

Moreover, boards tend to hire superintendents who may not have a deep level of financial expertise themselves. In the private sector, CEOs are expected both to provide strategic direction for a company and to ensure that the finances are in order. Business leaders would scoff at the idea that the financial side of a business should be isolated from the production side. In the world of education, however, the ability to provide “instructional leadership” is considered separate from and more important than mere financial management. This can result in weak financial oversight. Dennis Chaconas, the former superintendent in Oakland, admitted that he relied on others to deal with the financial aspects of the district. “I concentrated on academics,” he told the Oakland Tribune. “I thought that was the most important issue facing the district.” In Seattle, Moss Adams Advisory Services, brought in to determine what went wrong, noted that the explicit “kids first” focus of the district resulted in an organizational culture that did not take financial management seriously enough–despite the superintendent’s considerable experience with finance. Such an environment can result in middle managers not being held accountable, even if they fail to stay within budget or to make needed cuts.

Compounding the naïveté of top management can be a general dearth of talent in the business departments themselves. While there are many fine CFOs and business managers in America’s school districts, the overall pool of talent in the finance department is not comparable to the private sector. The reasons are not hard to discern. First, many critical business managers in large school systems rose into these positions “through the ranks” and may have started out in an unrelated position, such as teacher or principal. While such an organic process of “growing your own” can result in strong employees who know the specific issues and details of their district, these employees have not been exposed to approaches outside of the closed world of education and have not gone through the professional crucible of working for a large accounting firm, as many private-sector managers do. As a result these administrators may inherit inefficient and tremendously outdated processes with no clear ideas on how to improve them.

Second, it is not even clear why business managers from the private sector would want to work for a school district. As discussed above, financial management (and human-resources management and information-technology management) is typically not considered a “core” activity for a district. Moreover, it is often politically difficult to pay such managers substantially more than managers on the instructional side of the district. The result is that good business managers can get a lot more money doing the same job outside of the public school system (see Figure 4). This is not true of even the finest teachers, who would be hard pressed to find a similar teaching job at a greater salary outside of a public school. Unless and until school districts are willing to pay competitive salaries, we can expect them to be short on business talent.

Since information technology is not considered a core activity either, large school districts are notorious for having antiquated information systems. Large private companies with thousands of employees will typically have accounting and personnel systems that connect the budget to ongoing financials to human resources to operations to sales. The technology behind such systems is generally based on a few standard platforms (SAP, PeopleSoft, Oracle) and installed by a major IT service provider (IBM Global Services, Accenture).

School districts, however, often have multiple, cobbled-together systems developed over a long period of time and based on nonstandard architecture. As a result, budgeting systems do not connect automatically with accounting systems, and both may be isolated from the human-resources systems that track who is hired, when, and for how much. The combination of weak financial expertise and outdated IT systems results in problems being uncovered late and critical degrees of freedom being lost. Unless departments devote substantial time and effort to coordinating data flow, it is easy for the number of people hired to exceed the number of positions in the budget. Overspending can continue undetected for months. Oakland provides a dramatic example of this, discovering that it was in trouble only after it was already $40 million in the hole. At this point, Oakland was already underwater and, unless the district were able to free up other restricted monies, it would ultimately need a bailout.

The fix is to install newer and more-integrated IT systems. This can be quite expensive (potentially more than $100 million for the largest districts) and is an easy political target. Interested parties might want to spend the money required on teacher salaries rather than on expensive new systems for the district bureaucrats.

The Usefulness of Insolvency

School districts are unavoidably part of a larger political environment. Cities, counties, and state legislators and regulators all have political interests in the schools that may or may not line up with the interests of a school district’s current board and management. In fact, these outside actors might secretly applaud a district’s financial collapse because of the opportunities it creates.

Although some states have “academic bankruptcy” laws, it is difficult for a district to be taken over for failure of its education system. This is because many factors aside from the quality of a school district contribute to students’ academic performance. Financial mismanagement, however, is much more clear-cut. If a district cannot make payroll or pay its bills, its operations will cease unless someone steps in to provide the needed liquidity. Since schools cannot simply stop operating, as a business would, state or county governments find themselves having to step in to provide a loan to the district. This hands politicians a much more palatable excuse to take over a district than “academic bankruptcy.” Allowing a district management team that has already shown questionable financial judgment to continue in office would put state monies directly at risk.

For instance, in 1995 the Illinois legislature handed the governance of Chicago schools to the mayor at least partly as a result of a massive deficit. Newark, Cleveland, Compton, Detroit, East St. Louis, and Philadelphia have all been the subjects of outside intervention in which fiscal mismanagement was one of the arguments for action. For those in favor of significant changes to district governance or management, bankruptcy can be a good thing.

What Is to Be Done?

Using bankruptcy or severe deficit spending as a tool for gaining control of schools is, unfortunately, quite expensive for the state and for the students. Either the state or the district will have to make up the deficit, and the bankrupt school district will find itself even more financially constrained than before, with today’s students receiving fewer resources on account of yesterday’s mistakes. So what can be done to prevent such occurrences in the future?

First it is important to understand that most of the problems discussed here have been structural issues resulting from how school systems are governed and regulated. As long as school board members are elected, we cannot guarantee that districts will have either the knowledge or the will to manage their finances well. We also cannot eliminate the multitude of political interests and pressures that shape budgeting decisions. Given this situation, there is a set of realistic reforms that states and districts could undertake right now, as well as deeper reforms that would change the very structure of school districts and thus get closer to the roots of the problem.

Let me discuss the more realistic reforms. First, the state and federal finance systems for schools tend to be too complex and impose far too many limitations on how districts can spend their money. The current move toward block grants by state and federal agencies is a welcome one, as it has the potential to allow districts sufficient flexibility to pursue their strategic goals and to reallocate money as needed.

Second, board members should demand of their superintendents both instructional leadership and financial expertise. District leaders should also undertake the appropriate training to make themselves better financial managers. In addition, the leadership should bring in independent outside financial and business experts to monitor district finances before a crisis erupts. States can help districts in this process by requiring financial training for new school board members.

After receiving the appropriate training and hearing from outside experts, school district officials might end the practice of “starving” their business functions in order to focus on instruction and would install IT systems that provided adequate surveillance of the overall operations of the district. These systems should reliably track revenues, positions, and spending on a timely basis.

Finally, districts should develop robust multiyear financial projections and contingency plans that clearly specify how the district will adjust if expected funding does not come through. The projections should incorporate accurate (as opposed to ad hoc or historical) projections of students and staffing requirements. Contingency plans should be made part of salary negotiations.

Now let’s look at some deeper, more structural reforms that could lessen the likelihood of financial crises. First, appointed (as opposed to elected) school boards would eliminate some of the multitude of political interests and pressures that shape budgeting decisions. While such boards certainly provide no guarantee of solvency, whoever appoints the board could ensure that there is an adequate amount of financial know-how present. Of course, such boards also represent a dramatic step away from the relatively direct democratic control of schools that predominates now and that many communities prize. A turn towards appointed boards would be a major, and hotly contested, shift.

Second, choice-based reforms such as charter schools and vouchers, if thoroughly implemented (and combined with more rational state funding), could eliminate a significant amount of the complexity associated with district finances. Each school would need to balance only its own budget. In addition, the closer connection between schools and parents could counteract the upward pressure that special interests exercise on the budget. Most important, individual school-level governance would lower the consequences of financial failure. Unlike school districts, individual schools that pursued only “instructional leadership” to the detriment of fiscal stability could simply go out of business, their place taken by more responsible peers. Unfortunately, if the state does not fund such reforms at the appropriate level or ensure some level of competence on the part of suppliers before they open schools, there may not be enough responsible peers available to pick up the slack.

Of course, a lot more is at stake in each of these structural reforms than better financial management. These reforms will not (and should not) be judged solely on this one dimension, and their political palatability varies dramatically across the country. However, as long as school boards are elected and school districts are political battlegrounds, it will be difficult to ensure that school systems manage their finances responsibly.

-Jon Fullerton is a vice president of the Urban Education Partnership, based in Los Angeles, California.

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