Hosted by The Center for
Education Reform
Hosted by The Center for
Education Reform
EDUCATION STARTS WITH COMMON SENSE; TIE FUNDS TO STUDENTS, LET FREE
MARKET WORK
By Jeffry L. Flake
The Arizona Republic, September 5, 1997
In a decision that surprised virtually no one, Superior Court Judge Rebecca Albrecht recently ruled that the Arizona Legislature's "ABC" plan for school finance failed to fix what the court considers a "constitutionally flawed system."
In truth, "constitutionally flawed" is one of the kinder things that can be said about our current system of school finance. "Intellectually incoherent" would be more accurate. How else would you describe a system in which the ability of school districts to construct facilities depends neither on the number of students it educates nor the quality of education it provides?
Because our current system of school finance is an affront both to the courts and to common sense, the legislative task is twofold: to create a fairer system and to create a more sensible system. Thus far, the Legislature has focused on the former and ignored the latter. If legislators want to kill two birds with one stone, they should focus on the latter and ignore the former. It is entirely possible to satisfy the courts without creating a more sensible system, but it would be difficult to create a more sensible system without satisfying the courts. Why? Because the basis of a sensible system is per-pupil capital funding. In other words, every student is worth the same amount, and such a system, of course, is inherently equalizing.
First, a quick primer on our current system of school finance. Funding to operate schools is assessed locally through the primary property tax. If a district cannot raise the guaranteed minimum amount of funding, the state kicks in the balance. This system, which provides equity for operations (teacher salaries, classroom supplies, etc.), has been in place since the early 1980s. On the other hand, when a school district needs to build a school, it must raise all of the funding locally. Thus, districts with substantial property wealth can build nice facilities with minimal tax effort, and districts with low property wealth often settle for spartan facilities despite high tax rates. Arizona's Supreme Court has ruled that such disparities violate the state Constitution's "general and uniform" requirement and has directed the Legislature to find a remedy.
While virtually everyone concedes that the current system is broken, there is no agreement on what to do to fix it. Some believe that the system can be tweaked, while others believe that it should be overhauled. Count me among those who believe it should be overhauled.
Those who want to tweak the current system like to point out that the vast majority of school districts in Arizona have "no trouble at all" raising money for school construction. They are right. But this is the most compelling reason we have to overhaul the system. Since when have we celebrated the fact that taxes are easy to raise? I happen to live in a high school district that has "no trouble at all" raising school construction funding. We just built a $50 million high school that cost more per square foot than the Ritz Carlton Hotel. I live in an elementary school district that has "no trouble at all" raising school construction funding. We're demolishing and rebuilding a school that is less than 20 years old because "it doesn't meet district standards."
The fact that most school districts have "no trouble at all" raising school construction funding is about to bankrupt us all. School districts statewide have a total of between $3.5 billion and $5 billion in outstanding debt. (We don't know the exact figure, because school districts often list principal as interest in order to circumvent statutory debt limits). Debt service on this amount is currently $437 million annually, a figure that is growing at an average of 13 percent per year.
Still, however, the most disturbing legacy of our current system of school finance is not leaky roofs or domed football stadiums or any degree of squalor or opulence in between. The most disturbing legacy of our current system can be found in high dropout rates, low test scores and unrealized academic potential. This is not an argument for increased spending on education. The problem is that the manner in which the education funding is collected and distributed does little to foster innovation and improvement. Tweaking the system will do little to change the underlying incentives, or lack thereof.
A sensible system of school finance is one that places a greater value on students than it does on property, a model based on consumer choice that rewards schools that can attract students and disciplines those schools that cannot. A consumer-choice model would tie all funding - not just operations funding but capital funding as well - to the student. Under such a system, school districts would not be able to borrow money to build facilities by using homes and businesses in the district as collateral, as they presently do. Because all funding would travel with the student, the only way for schools to receive public funding would be to attract students.
There are two main arguments against the consumer-choice school finance model. One is typically made by the political right, and the other by the political left. The right maintains that consumer choice would erode local control. To the extent that "district control" is equated with local control, they are right. But if we belive that the students and their parents should be in charge, the consumer-choice model is a far superior way to achieve true local control.
A corollary argument is that the centralizing nature of per-pupil capital funding would lead to out-of-control spending. Exhibit A in this argument would be the fact that state-controlled per-pupil spending on operations increased 57 percent between 1985 and 1995. This increase is indeed troubling, but not early as troubling as the 117 percent increase over the same period for "locally controlled' school construction spending. Holding the line on government spending will be difficult under any scenario, but introducing choice and competition is the most effective way to drive down the cost.
The political left's main argument against the consumer-choice model is that "schools won't be built in time" if districts are unable to use the secondary property tax. These are the same people who lie awake at night worrying that new grocery stores will not be built without a government edict. The success of charter schools over the past three years should put this worry to rest. Even without a per-pupil capital amount, 241 charter schools have been established and are educating more than 30,000 students. At least one district school has closed its doors because of competing charter schools, and others have resorted to advertising in the newspapers, on the radio and even in local movie theaters for new students. The free market, which would be unleashed under a consumer-choice model, will always do a better job than government in allocating goods and services.
Back to the courts. The best way to satisfy the legal requirements we are under is to ignore them and do what makes sense to parents, students and taxpayers. When we do so we will discover that what makes sense to parents, students and taxpayers will suit the court just fine.
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Jeffry L. Flake is executive director of the Goldwater Institute, 201 N. Central Avenue, Phoenix, AZ 85004.