Rural School Funding News Special Series:
Financing Rural Schools: Characteristics of Strong Rural School Finance Systems

Last Updated: April 27, 2011

This article appeared in the April 2011 Rural Policy Matters.

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In this series, Rural School Funding News is reviewing general principles of school finance and sharing information about school funding systems that support rural schools and their unique characteristics and needs. While there are no easy answers to questions about how to fund schools, especially in this economic climate, we hope that these articles will provide you promising practices, ideas for advocacy, and guidelines that are easily transferable in your analysis and work on your own school finance systems.

If you are new to the series, you can review a brief introduction to the subject and discussion of Characteristic 1: A Strong Foundation Formula, here; Characteristic 2: Effective Use of the Judicial System, here; Characteristic 3: Fair Accounting for Cost of Living and Geographic Differences, here; Characteristic 4: Recognition of the Benefits of Small Schools, here; Characteristic 5: A Balance of Revenue Sources for Schools, here; Characteristic 6: Efficiency in the State Revenue System, here; Characteristic 7: Equity and Adequacy, here; Characteristic Eight: An Accurate Match of Resources to Needs, here; and, Characteristic Nine: Sufficient Pay to Ensure Teacher Quality, here.

Characteristic Ten: Research-Based Calculations of Needed Funding

Throughout this series we have cited elements of state school finance systems that should be in place to support the unique characteristics and needs of rural schools. Many state legislatures have debated some of these measures, for example whether to create a new transportation fund due to rising gas prices or provide extra funding for students with particular needs, or cut funding for certain programs such as after school initiatives.

Many of these conversations, however, are not informed by critical facts, such as how many students in each district need to be bused to school and over what distances, or how many students in a given school or state would benefit from after-school programs and what the staffing needs of a strong after school program would be in different school circumstances. In other words, the discussions are not informed by how much such programs would cost to implement successfully. Instead the conversation often relates to an amount that was previously allocated to particular programs after other budget items were covered. Rarely do these conversations address “unfunded mandates” such as school accountability measures that are imposed without taking into account the costs to schools of meeting performance goals.

When research is conducted to determine the costs of particular aspects of an educational system, those efforts are generally described as “costing out” studies. Costing out studies are sometimes referred to adequacy studies because they strive to find accurate measures of the funding it would take to provide every student an opportunity to receive an adequate education. (For a more detailed discussion on adequacy in education, refer to installment seven of this series here.) Most states have undertaken some kind of costing-out study at some point.

In a costing out study, researchers take into account state laws and regulations describing what is required of schools as well as characteristics of the students and schools in a state. The studies then typically make recommendations not only about spending levels but also, often, efficiency measures that can make a difference for schools’ success.

Costing out studies may be commissioned by state legislatures, education leadership groups, advocacy groups, or even courts in an effort to determine how well the state is meeting its legal duty to provide an education for students in the state. The effectiveness of these studies is sometimes dependent on who commissioned and conducted the study. Commissioning organizations, the research firms that conduct the studies, and the audience receiving the study all have biases and preconceived notions about school funding and its role in student achievement. In determining the quality of the costing out study it is important to weigh the influences of the likely biases in that study.

Here is a very brief description of each of the four general research methods used in adequacy studies along with their strengths and weaknesses:

  • In a professional judgment approach, researchers conduct focus groups of educators to guide their calculations of costs of the needed inputs for schools to succeed. A benefit of this approach is that the study reflects what professionals in the field believe are the resources that schools need, but these studies are sometimes criticized as not being objective. Wyoming used this approach in its costing out study.
  • A newer approach that considers what inputs are needed is the evidence-based costing-out study, which looks to research about school reform methods with some measure of success. Consultants provide the data on strategies that have been used in other schools and study authors calculate the cost of implementing those strategies in the state being studied. A benefit of this approach is that states have the opportunity to consider how much it would cost to put research-based practices into place, but the prototypes for schools used in the study may not match the reality in schools in that state and strategies studied might not be good matches for all schools.
  • A successful school study looks to places in the state where students are achieving at high levels and reports how much money would be needed to implement similar practices statewide. These studies may also examine groups of schools in the state, such as those with high numbers of low-income students. Successful school studies allow readers to easily understand how costs were calculated, but their recommendations may be rooted too much in past practices. They may not account for ‘outlier’ situations that contribute to the school’s success, for example and extraordinary school leader. Further, the successful school may face less serious challenges to meeting student needs than other schools. This type of study has been conducted in Ohio.
  • The cost function approach is a mathematical method that statistically links the cost of educational outcomes with the characteristics of every district in the state to make a conclusion about how every school can achieve set goals. Cost function studies have the benefit of providing very specific information about needed funding for each district and for specific groups of student. But often the specific data needed to make these projections is not available. This is also one of the more difficult methods to understand. Texas has used this approach.

Rural school advocates should consider which method is most appropriate and should also closely monitor the process to be used by researchers to gather information for the costing out study. Although some of the methods rely on participant contributions from educators, every costing out study should include input from the public, including opportunities for interested parents, students, and stakeholders to contribute their thoughts and expertise on what is needed in their schools. If possible, rural school representatives should serve on panels that will inform the researchers’ work. All parties should have access to information about the methodology used in the report. There should also be an opportunity to review and comment on the study before it is released in final form.

The elements of a finance system that supports rural schools must be addressed in any costing out study as well. Many of the factors we have discussed in this series have a place in adequacy studies, including recognition of the needs of small schools, recognition of socioeconomic and academic challenge of groups of students, and cost of living measures that take into account hidden costs of living in high poverty and/or rural areas. More specifically, the study should answer questions such as:

  • How much more does it cost to educate a student who lives in a remote rural area than one in a more populated area of our state?
  • How much money does it take to operate a very small rural school that is adequately resourced and staffed?
  • What is the cost to ensure that a student learning English for the first time will be able to succeed in our state’s schools?
  • How much does it cost to hire and retain a highly qualified, strong teacher to work in a small rural school with high numbers of students living in poverty?

A comprehensive study conducted by school finance experts can provide data that rural schools can use in advocacy for a more rural-sensitive school funding system. And, information gleaned from those studies can help answer the question, “does money matter?” Find out whether your state has ever undergone an adequacy study, and, if so, who commissioned the study, and what conclusions it makes. Determine whether the study is too outdated to provide relevant information to policymakers and those writing state budgets each year. If it is, it may be timely to advocate for the legislature or other group to commission a new study. If a study is commissioned, try to participate in the process of selecting a research firm and advocate for opportunities for rural people to participate in the study process.

The Rural Trust has worked with adequacy studies in a number of capacities by contributing expertise on rural school funding issues to report writers, by working with community groups to foster participation in studies, and by providing support for advocacy work around study recommendations. If you are interested in learning more about working on school finance policy using costing out studies, contact the Rural Education Finance Center at Rural Trust. We are happy to help.

Read more:

Information about adequacy studies that have been done in a variety of states:

Read more from the April 2011 Rural Policy Matters.