Occasional
Paper No. 39
School Finance Changes in Maine,
New Hampshire, and Vermont
Pushpam Jain, Assistant Research Professor
Center
for Research and Evaluation
College
of Education & Human Development
University
of Maine
5766
Shibles Hall
Orono,
ME 04469-5766
September 2001
A publication of the College of
Education & Human Development at the University of Maine and the Penquis
Superintendents’ Association.
The
Occasional Paper Series is intended to provide educators and
policymakers in Maine with information that can assist them as they address the
complex problems confronting their communities, education systems, or
students. Papers are distributed
periodically as topics vital to educational improvement are addressed by
faculty and graduate students at the University of Maine. The opinions and information obtained in the
Occasional Paper Series are the authors’ and do not necessarily
represent those of the University of Maine or the College of Education &
Human Development.
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Copyright © 2001 by the Center for Research
and Evaluation. This paper may be
photocopied for individual use.
Center for Research & Evaluation
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Abstract
How
have the three Northern New England states of Maine, New Hampshire, and Vermont
approached the issue of adequacy in funding?
Larger changes in school finance policy have shifted the reform focus
from interdistrict equity to ensuring an adequate funding level within a state. What are the similarities and differences in
the 'adequacy based' funding formulas in Maine, Vermont, and New
Hampshire? Understanding the three
states' approach towards adequacy can provide some guidance for other states
attempting to operationalize adequacy in school funding. Given the regional nature of the three
states, one would expect a somewhat similar approach to adequacy in Northern
New England; but all three states approached funding adequacy differently.
How
have the three Northern New England states of Maine, New Hampshire, and Vermont
approached the issue of adequacy in funding?
An "adequate" funding level is crucial to ensure attainment of
outcomes on state standards recently proposed in the three states.
In
this paper, first, I briefly summarize the larger changes in school finance policy
that have shifted the reform focus from interdistrict equity to ensuring an
adequate funding level within a state.
Second, I examine the "adequacy based" funding formulas,
either proposed or implemented, in Maine, Vermont, and New Hampshire. Finally, I explore the similarities and
differences between the adequacy approaches in the three states. Understanding the three states' approach
towards adequacy can provide some guidance for other states attempting to operationalize
adequacy in school funding. Given the
regional nature of the three states, one would expect a somewhat similar
approach to adequacy in Northern New England; but all three states approached
funding adequacy differently.
Shift from Equity to Adequacy
State
and local institutions, including the legislature, the governor, courts,
interest groups, and individual school boards, have shaped school finance over
the last few decades (Wong, 1999; Ladd & Hansen, 1999; Odden, 2000; Odden
& Picus, 2000). School funding
dominates state policy because it is the largest single-budget category of
spending in all states (NCSL, 1996). At
the same time, court challenges to state funding formulas and consequent
judicial intervention, has influenced school finance over the last 3 decades
(Minorni & Sugarman, 1999).
Traditionally, the school finance debate has focused on achieving equity
in interdistrict spending, which somewhat resulted from the establishment of
the foundation formula. In spite of a
foundation formula that sought to guarantee a minimum funding level, state
funding formulas faced several court challenges, starting in the federal court
and then moving to individual state courts (Minorni & Sugarman, 1999). While these court challenges may have had
some impact on the distribution of resources, the link between school resources
and student outcomes remains tenuous (Burtless, 1996). In addition, equity issues vary if one
examines the different federal levels of the education system; namely, the federal,
state, and local (Wong, 1999).
Given
that funding equity remained an elusive target and at the same time the link
between academic achievement and school funding remained tenuous at best, the
discussion in school funding began to shift from equity to adequacy. Several short-term events converged to
propel this shift, which are explained below.
A major factor has been recent school funding lawsuits based on state
educational clauses, which have targeted the state's responsibility in
educating its citizens and ensuring that the citizens receive an
"adequate" education (Ladd & Hansen, 1999). In addition, as the focus in education
policy shifted to standards in education and away from input factors to an
outcomes-based accountability approach, the funding emphasis also shifted
towards resources necessary to attain high outcomes (Odden, 2000), in contrast
to the elusive goal of equitable funding.
The
Kentucky court decision of 1989 in Rose
v. Council for Better Education (790 S. W. 2d 18), part of the third wave
of school finance litigation based on state constitutions (Heise, 1995),
propagated a major shift in constitutional challenges to school funding, as it
shifted the debate to adequacy issues.
The Kentucky Supreme Court declared the entire state system of
elementary and secondary education unconstitutional, for failing to provide all
children an adequate education. The
court emphasized how little Kentucky currently spent on education as compared
with neighboring states and, in turn, how poor was the educational attainment
of Kentucky students. The Court based
its decision on the state constitution's education clause and held that all
Kentucky schoolchildren had a constitutional right to an adequate education
(Minorni & Sugarman, 1999). The
court ordered the state to overhaul the entire system of education to bring it
into compliance. Ladd and Hansen (1999)
argue that the Kentucky decision highlighted an important lesson from the
educational reforms of the 1960s, 1970s, and 1980s: Improving the fiscal
capacity of schools may be necessary, but certainly isn’t sufficient to achieve
equal educational opportunity. Since
the Kentucky decision, adequacy has moved to the center stage in discussions of
fairness in school finance systems.
During
this time period, the movement for state standards was taking hold. Smith and O'Day (1990) proposed a
standards-based systemic reform strategy, suggesting that the failure of the
two previous waves of education reform argued for a coherent, state-centered education
system. The first wave of education
reform in the early 1980s focused on expanding or improving inputs going into a
school system (such as longer school day, increased requirements for
graduation, and better teachers). Since
the publication of a Nation at Risk
in 1983, focus in education was shifting to outcomes of the education system,
as opposed to the traditional emphasis on system inputs. A second wave of reform followed in the
middle to late 1980s, which called for a fundamental restructuring of
schooling, focusing on decentralization, professionalization, and bottom-up
change. Deeming these two efforts to be
failures, Smith and O'Day (1990) proposed a systemic reform strategy at the
state level, where a state education system was aligned towards a high
standards curriculum, and progress on these standards could be measured through
assessments. At the same time, systemic
reform sought to hold schools accountable to performance on state
standards. As states in the 1990s
adopted a standards-based reform strategy and the focus shifted to outcomes,
the school funding issues also began to focus on the level of resources
necessary to attain those outcomes, as opposed to the previous approach focused
on level of resources going into the school.
Thus, the court induced adequacy targets, and the shift in education
policy towards an outcomes-based accountability propelled a shift in education
finance towards adequacy.
Understanding Adequacy
What
is adequacy? The Kentucky court
provided broad guidelines to the legislature about what constitutes an adequate
education, which focused on outcomes and the necessary sufficient knowledge
linked to these outcomes. Berne and
Stiefel (1999) argue that adequacy specifies a level of resources that is
sufficient to meet defined or absolute, rather than relative, output
standards. Odden (2000) mostly agrees
with this notion, in defining adequacy as resources which are sufficient (or
adequate) to achieve some educational result, such as a minimum passing grade
on a state achievement test. The unit of
analysis for understanding adequacy, in most cases, is either the child or the
school. Most importantly, in order to
understand funding adequacy, an agreement on adequate performance outcomes is
necessary (Ladd & Hansen, 1999).
Adequacy in Northern New England
As
nationally the focus in school finance has shifted from equity to adequacy, so
also in the three New England states, recent school funding reform measures
have sought to target adequacy. How did
Vermont, New Hampshire, and Maine develop their measures of adequacy? I first provide a brief overview of the
larger reform in the three states individually, and then examine how the three
states defined adequacy.
At
present, school finance scholars agree on four approaches to operationalizing adequacy. One is to identify a set of inputs based on
professional judgment and calculate their costs, but then funds are distributed
as block grants rather than categorical funds designated for each specific
input. A second approach is to use an
econometric model to understand how outcomes are linked to resources within a
state, and then define an adequacy standard based on this model. A third approach is to empirically observe
resources associated with high outcomes in well performing schools. A fourth emerging market-oriented approach
is based on the development of whole-school designs that school districts can
buy, which represent the frontier of knowledge about how to produce the desired
level of student outcomes (Ladd & Hansen, 2000; Odden, 2000). The first three approaches usually include
adjustments for special needs populations, such as students in poverty,
bilingual, and special education students.
Maine's Essential Programs and Services
Maine,
in the absence of an external imposition such as a court mandate, tackled the
school funding issue to determine an adequate level of resources necessary to
meet the state standards. In response,
the state board of education devised the Essential Programs and Services (EPS)
funding approach. The EPS Committee, in
developing an adequacy level, developed a prototypical school and then
determined the necessary inputs for such a school to meet the programs and
services required under the state standards.
A determination of an adequate level of resources was mostly based on
committee judgments, which resulted in a final amount of $4,407 for each
elementary student, with adjustments for different student populations (Maine
Department of Education, 2000).
In
Maine, there was no court case or an external imposition forcing the state to
change school funding. Given that in
Maine the state contributes a greater share of school funding compared to
Vermont and New Hampshire, school funding in Maine has been comparatively more
equitable. Similar to national trends,
the Maine legislature also became concerned about whether all districts had
adequate resources to meet the new state standards (also known as opportunity
to learn standards in the past). In
response, the state board proposed the Essential Programs and Services
approach.
The
approach deems the following eight programs as "essential" to meet
the state standards: career preparation, English language and arts, health and
physical education, mathematics, modern and classical languages, science and
technology, social studies, and visual and performing arts. In terms of essential services, the program
considers school personnel, supplies and equipment, resources for specialized
populations, specialized services, district services, and school level
adjustments as essential services. The
committee developed prototypical schools at grades K-5, 6-8, and 9-12 with
average enrollments. Based on
professional judgment, past experience, and other research in the field, the
committee determined the level of resources necessary to attain EPS for a
prototypical school. In its final
report, the committee set per pupil operating cost of $4,407 for K-5, $4,543
for 6-8, and $5,081 for 9-12 (Maine Department of Education, 2000; Silvernail,
2000).
A
major shortcoming of Maine's adequacy approach is that it is not directly
linked to outcomes, which is a foundation for any adequacy formula. This is a problem inherent in the adequacy
model based upon inputs. In addition,
given the lack of information and necessary research, determination of inputs
is subjective. For example, simply
changing the pupil–teacher ratio the committee proposed can result in major
changes in the final adequacy amount[1]. EPS remains
a proposal which the legislature is in the process of adopting as a concept
bill and it remains to be seen whether the state will fully adopt this funding
approach.
Vermont's Act 60
Vermont
did not treat school funding reform as an adequacy issue, and the state was
more concerned with taxpayer equity. In
addition, the state sought to reduce spending disparity across districts, or at
least ensure that the ability to raise the foundation level was entirely
independent of local wealth.
The
Vermont legislature passed the Equal Educational Opportunity Act in 1997 in response
to Vermont Supreme court's decision in Brigham
v. Young (No. 96-502 [VT filed Feb. 5, 1997]), which declared the state
school funding system unconstitutional because the existing system failed to
provide equal educational opportunity to students in property poor communities
and so it violated a state constitutional right to education. The two major areas Act 60 covers are school
funding and standards-based reform. The
funding policy is designed to decrease the property tax burden (making the
property tax more progressive) and increase equity across school districts,
such that the state would contribute 70% to 80% of school expenses. To this end, Act 60 institutes a state
property tax with a state rate. The tax
formula is income-sensitive, where persons earning below $75,000 pay their
share of the property tax as a percentage of their income. Towns receive Act 60 funds based on the
number of students (Jain, 2000). This
is highly atypical for a state with a strong tradition of local control, and where
local governments contributed 65% to 75% of school expenses (Jain, 1997). Towns can spend above the state level by
locally adding on to the state rate and the state guarantees an equal yield to
all towns for a given tax rate.
Vermont
provides a "General State Support Grant" (block grant) to school
districts based on the number of equalized pupils. The statewide education property tax rate was set at $1.10 per
$100 of equalized grand list. For 1999,
the amount was set at $5000 in FY97 dollars, adjusted for secondary, poverty,
and ESL students, and it included special education mainstreaming and essential
early education grants. The amount of
funding was built upon the existing foundation grant. For categorical grants, the state funds 60% of special education
costs, and provides a $100 grant per pupil to mainstream special education
students. For special education costs
above $50,000, the state covers 90% of the costs. The state funds 30% of capital construction and 50% of
transportation costs. It also provides
additional support for small school with enrollments under 100. Act 60 created an Education Fund and a
Stabilization Reserve administered by the Executive Branch.
Vermont
was not as concerned about adequacy as the state legislature, and the larger
state policy climate was driven towards improving taxpayer equity and
guaranteeing equal yield on a given tax rate in different school
districts. The state did not use an
adequacy language in outlining its funding reform. The level of funding (or an adequacy amount) was built on the
state's previous foundation grant, and Vermont avoided developing a new
adequacy-based formula.
Adequacy in New Hampshire
New
Hampshire used a statistical approach to define adequacy, examining school
districts performing average on the state assessment, and among those districts
the state observed the level of resources that the low spending districts
utilized. The state used several
adjustments to compute an adequacy level, which illustrates that even when utilizing
a nationally recognized formula, the final outcome depends on how a state
chooses to weight different factors.
The New Hampshire Supreme Court
ruled in 1993 that the provision of an adequate education was the
constitutional responsibility of the state and that the state must guarantee
its funding (Claremont I) (Hall,
1998). Subsequently, as part of
Claremont II in 1997, the Supreme Court ruled that a system with primary
reliance on variable local property tax rates to fund public education was unconstitutional. The state has gone through several funding
proposals and the issue still remains unsettled. I highlight some of the major funding reforms proposed and the program
currently in place.
Governor
Shaheen proposed an Advancing Better Classrooms (ABC) plan in 1998 that relied
on a statewide property tax, with an adequate spending level of $4,629. Districts were expected to set a maximum tax
rate of $15.06, with the state subsidizing districts unable to raise the
adequate level at the state tax rate.
The
legislature ignored the court imposed deadline of April 1999, in spite of
numerous reform proposals under consideration.
A school finance legislation passed in 1999 raised the total state
commitment to $825 million, with a funding level at $4,220 per student. The
bill raised additional revenue with increases in the cigarette tax, BPT and BET
taxes, as well as a new rental car tax, and a new statewide school property tax
of $6.60 per $1,000 of equalized property valuation. The bill originally included a phase-in provision for towns
facing a tax increase, but the court found the phase-in unconstitutional
because it created two distinct classes of taxpayers. The legislature replaced
the phase-in provision with a hardship relief measure for low and moderate
income taxpayers. The legislation is
set to expire in January 2003, compelling the legislature to develop a
permanent funding solution and also develop a new formula for adequate
education grants.
New
Hampshire determined the adequacy amount based on the average expenditure in a
sample of districts. The state first ranked districts with 50% to 60% of their
elementary students scoring at the basic level or above on the NHEIAP test, by
their expenditure. From this group, the lowest spending districts that
represented 50% of the enrollment were used to calculate an average base
expenditure of $3,547 per elementary pupil, which was adjusted downwards to
$3,201 to account for costs not required for a constitutionally adequate
education. Districts are then funded
based on their average daily membership, with the following weightings: 1.0 for
elementary pupil, 1.2 for a high school student, and 2.0 for an educationally
disabled child. Poverty weightings are based on the percent of elementary pupils
receiving free or reduced meals: If less than 12% are eligible, there is no
additional weight; if 20% to 24% are eligible, each child receives an
additional weight of 0.5; if 24% or more are eligible, each child receives an
additional weight of 1.0. In addition to a weighted pupil amount, districts
also receive 70% of local transportation costs. The statewide program total for fiscal year 2000 was $825
million.
The
program faces several court challenges, and a judge ruled in January 2001 that
because of variances in property valuation across districts, the property tax
cannot be administered uniformly throughout the state. Hence, he ruled that New Hampshire’s
statewide property tax is unconstitutional and ordered the state to pay back
the approximately $440 million a year it has been collecting through the tax to
fund education (Manchester Union Leader, January 18, 2001). Governor Shaheen, in response, has proposed
a new plan that will raise more than $900 million a year for public education.
Her plan calls for a 2.5% narrow-based sales tax and for the statewide property
tax to be lowered from $6.60 to $4.90 per $1,000.
New
Hampshire, Vermont, and Maine each adopted a different approach to school
funding. New Hampshire and Maine
operationalized two of the nationally proposed adequacy models, but Vermont
retained its foundation-based approach.
Vermont was more concerned about equalizing spending and also equalizing
the capacity to raise revenues across districts. A foundation amount is not necessarily related to student
outcomes. New Hampshire examined
spending patterns in average performing and low spending districts to establish
an adequate amount; whereas, Maine researched the necessary inputs for a
prototypical school to develop an adequacy amount. The case of these three states illustrates that in spite of a
broad agreement on the concept of adequacy, there is no standard approach on
how to operationalize adequacy. And
even when a state adopts a widely recognized adequacy approach, the local formulation
of various issues that are a part of the formula, highly influence the final
adequacy level.
Lessons for Adequacy
The
goal of an adequacy formula is to shift the debate from what is spent in a
district relative to another district, to what is adequate for educating a
class of students within any district.
Yet issues of equity remain poignant and still dominate statehouse
discussions, and the focus on these issues may create the push for reform. This was the case in Maine, where the
legislature was concerned with the great disparity in spending across
districts. Similarly, in New Hampshire
and Vermont, the court cases arose out of this disparity across districts. But once the states initiated reform, it
mostly followed the path of adequacy, except in Vermont.
Accountability
and link to outcomes has to be a key piece of any adequacy mechanism. For most adequacy formulas to be viable at
the state level, policymakers need to rationalize that the predetermined level
of resources are necessary to attain
the outcomes they have deemed as important for the states. This needs to be combined with a strong
emphasis on accountability because simply an emphasis on outcomes would be
irrelevant without holding stakeholders accountable.
Nationally,
there seems to be an emerging consensus on the concept of adequacy, understood
as an adequate level of resources necessary to attain the predetermined outcome
standards. Adequacy was initially
proposed as national opportunity to learn standards (Smith and O'Day, 1991),
but it has been more widely adopted at the state level. Yet there is no agreement on how to
operationalize adequacy, partly because it is an emerging, cutting-edge
concept. There are four proposed
strategies to operationalize adequacy, but even within each strategy, there is
room for great variability.
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