Bringing education budgets to the school level

In 1980, Arizona transformed K-12 education funding, creating a weighted-student formula and “equalizing” funding to ensure all school districts received the same base level amount based on their needs, not how much their school district could generate based on local wealth.

But that system was built when Arizona government had only one fax machine. It was created before there were computers in schools and accessible internet, and even before the existence of public charter schools and tuition-free open enrollment between districts.

While our current system funds students, the transparency and reporting of that funding stops at the district-level and does not necessarily follow the students down to the school level.

State Representative Paul Boyer sponsored legislation to change that. House Bill 2385, signed by Governor Doug Ducey in 2017, brings financial transparency to the school level beginning in FY2021– specifically districts and charters will be required to publish student-level funding spent at each campus, which will be compared to the amount the state allocates in its weighted-student formula.

In addition to Arizona’s law, a new federal law within the Every Student Succeeds Act (ESSA) also requires states to implement school-level financial transparency starting next year but is less complete than Arizona’s new law.

National education policy expert Aaron Smith with the Reason Foundation, who has studied the topic extensively, wrote in a 2017 policy brief that while funding is distributed from the state based on student needs, once the money gets to district and charter central offices, often-times they instead fund rigid staffing-levels “rather than giving principals actual dollars that can be spent flexibly based on school priorities.”

“Just because you fund a district based on students doesn’t mean that that money is going to be pushed down to the school level to where that student actually attends,” Smith told Chamber Business News in an interview. “ESSA and Arizona’s new law will require transparency around this, so we can see how spending within a school district compares across schools.”

Arizona is giving districts time to implement this new accounting system, and the Arizona Auditor General is working closely with educators to develop a reporting system that works for schools and is transparent to the public. The Arizona Department of Education is required to integrate this new school-level information into the school reports.

Educators need time because Arizona’s school accounting system is complex and clunky. There are only a handful of people at each district who are able to read and interpret the hundreds of coded lines that make up a district budget. Every funding category can be tracked, and, depending on how the district sets up the system each category can be 15-20 digits long, said Tanque Verde Unified School District business manager Adam Hamm.

“When I came into the district, finance was a black hole,” he said. “So I thought, how can we make it to where a principal doesn’t have to call the business office and wait a week or two for me to get this report to them.”

The northeast Tucson district was ahead of the curve three years ago and sought solutions ahead of the state and federal law. They looked to industry for a solution, contracting with Allovue, for-profit “EdFinTech” company that connects education, finance, and technology to meet the needs of education decision-makers. Now, Tanque Verde can be a model for others.

“Being a government agency and stewards of taxpayers’ money is very important,” he said. “In the past we’ve had large annual financial reports that have detailed budget information, but it’s disseminated in all of those code structures.”

With the platform, principals at Tanque Verde can now quickly access their supply budgets on a searchable platform that reconciles nightly with the district accounting department. Hamm said the district’s five-year goal is to give principals full autonomy of their entire budget.

“We’re trying to get a step ahead of the inevitability of those reporting requirements,” Hamm said. “I’m really impressed with this district and the Board being so forward thinking.”

Megan Gilbertson

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