A r c h i v e d  I n f o r m a t i o n

Investing in School Technology: Strategies to Meet the Funding Challenge - November 1997

Chapter 3 (continued)

Bridging the Funding Gap

The prudent planner should project future revenues and expenditures over the system's life cycle, or for at least five years. However, many school districts respond to little more than their mandate, i.e., to prepare a budget for the coming fiscal year. In general it is probably unwise to make detailed projections more than five years into the future because the degree of uncertainty increases with time until the projected data have so much uncertainty surrounding them that they are virtually worthless.

As shown earlier in Exhibit 2.6, the costs of the technology plan should be developed using a bottom-up approach. In other words, each element in the technology plan in each school should be costed and then aggregated to produce a series of cost figures for the whole school district. Projections of revenues, on the other hand, typically are developed using a top-down approach. The key set of numbers to derive is the statement of expected revenues, i.e., the dollars the district expects to receive from each major source and the proportion of each of those funds available to pay for the technology plan.

In developing a projection of expected revenues, separate lines should be used for each item. Where one funding source provides several different types of money, several lines should be used for each type of aid. For example, state aid may be specifically designated for children with special needs, library books, school nurses, or other items that have been given special priority by state legislators. Additional lines may be needed for the receipt of lump sum revenues for general education purposes under a title such as "general state aid," "foundation grant," or "equalization program."

Funding Mechanisms at Work

We conclude this report by illustrating several funding mechanisms or approaches to funding used in states and districts across the nation. One describes how excess earnings generated by a state utility company have been used by the state to install and fund the community's basic network infrastructure. Another describes the approach one state has chosen to address the issue of technology equity and the vigorous attempts it has made to ensure low-wealth districts are not left behind in the race to equip schools with technology. In some states, a portion of the proceeds from the state lottery goes to elementary and secondary education. We look at one state where substantial funds from this source are distributed for instructional technology.

While there are many competing uses for the proceeds generated by state lotteries, taxes dedicated to producing funds for school technology obviate this type of competition. Though new taxes may be unpopular, they do provide in some instances an irresistible source of funding for school technology. We examine two dedicated taxes that have been levied to raise money for school technology, one by state government, the other by local government. Approaches to funding technology will be quite different not only across states but also across school districts. We illustrate the way two districts have self-funded their school technology plans. One is a relatively high-wealth district, the other is relatively low-wealth. Perhaps paradoxically, the high-wealth district has borrowed to fund its technology plan, while the low-wealth district avoided borrowing in implementing its plan. Finally, the role of local education foundations is explained and illustrated.

Building the Infrastructure with Public Utility Revenues

In April 1995, the Maine Public Utilities Commission approved an Order for NYNEX (the state-regulated telephone company) to develop a plan to provide schools and libraries in the state with access to advanced information networks and services. The initiative underlying the commission's order was a general policy statement in the state's utilities legislation aimed at promoting community interaction and the sharing of knowledge and information across all telecommunications technologies and networks. To advance this policy, NYNEX was directed to provide a statewide network to allow schools, libraries, and other users to access network services, including the Internet and its World Wide Web.

In addition to establishing the mechanism for developing the backbone network, the commission's order also instructed NYNEX to ensure that each eligible school and library has available the services and facilities it needs to connect to the backbone tier. This service connection is referred to as the access tier. There are 1,200 schools and libraries eligible for the program, and 97.8 percent of the connections were made by September 1997. On completion, the program will have established a statewide network interconnecting all of Maine's schools and libraries.

The program provides 56 Kbps access from the backbone network to the location of each school and library. Schools that obtained advanced communications services and equipment prior to the program are given "equivalent value" funding to remove any "pioneer penalty." The commission's order also provides a funding mechanism through which schools can buy a computer and obtain system training. Up to $2,000 is available to each school and library to buy a computer should the school not already have one capable of connecting to the access tier. Funds for training are capped at about $750,000 overall. Using a train-the-trainer concept, two individuals from each school will receive three days of comprehensive training on access tier services. Based on feedback from early participants, the program appears to produce a substantial leverage effect with additional technical assistance and donations of equipment being offered to schools by local phone and cable TV companies.

To implement the plan, the Maine Public Utilities Commission created an advisory board. The plan itself was developed by NYNEX in conjunction with school and library representatives, but it was initially ordered by the commission in a NYNEX rate case. In examining NYNEX's intrastate rates, the commission found that intrastate rates generated revenues that were $14.4 million in excess of what the utility company was allowed to earn. The commission instructed NYNEX to reduce rates to eliminate $10.4 million of the excess earnings. NYNEX continues to collect the remaining $4 million, but this sum is now applied to the state's program for providing and improving network access and services for all the state's schools and libraries. The program provides $4 million per year for five years and the money accrues into a NYNEX account at the rate of $333,000 per month. Under the program, all services or facilities are provided either directly by NYNEX or by other providers with money obtained from the NYNEX managed account.

Also, a mechanism similar to universal service is contained in the legislation that will provide a similar amount of annual funding for the program after the initial five years. This law establishes a telecommunications access fund and gives the Maine Public Utilities Commission the authority to require all telecommunications carriers to contribute to the fund. The fund will be made available to assist schools and libraries in paying the cost of acquiring and using advanced telecommunications technology. The legislation ensures that the annual cost that each carrier may be required to contribute will not exceed 1.5 percent of its intrastate revenues.

Originally, the cost of providing the network was estimated by NYNEX at about $20 million using discounted tariff rates. The commission, however, instructed NYNEX to base its estimates on incremental or out-of-pocket expenses. The commission reasoned that the state's NYNEX rate payers had already paid for allocated costs under the discounted rates. The commission's action reduced the estimated cost of the network to about $10 million.

Achieving Technology Equity through State Funding

Established as a state-funded partnership with the goal of improving student learning, Ohio SchoolNet is a $95-million initiative that facilitates the installation and use of network technology in Ohio’s public schools. These funds represent a considerable expansion of Ohio’s funding for educational technology.

Through the sale of bonds, $95 million is funding two major components of SchoolNet: $50 million is targeted to wire Ohio’s public school classrooms (at a cost of $500 each for approximately 100,000 classrooms) and $45 million is funding the purchase of computers and peripherals for classrooms in 25 percent of Ohio’s public school districts with the lowest adjusted property valuation per pupil (at $3,200 per computer for 14,000 classrooms). Each classroom telecommunications connection will be capable of accommodating voice, video and data transmissions.

Since 1995, the Ohio General Assembly has appropriated $430 million from the state’s FYs 1996, 1997 and 1998 operating budgets to fund SchoolNet Plus. A complementary program to SchoolNet, SchoolNet Plus provides eligible, targeted districts with financial resources to purchase one interactive computer workstation for every five students enrolled in grades K-4. In addition to computer hardware, districts can use SchoolNet Plus funds to purchase software and two-way audio and video equipment and to offset costs for training and related services. SchoolNet Plus funds are allocated based on a district’s average daily membership count for students enrolled in grades K-4 from October of 1995. If an eligible district already meets the minimum requirement of one multimedia computer workstation for every five students grades K-4, the district may use SchoolNet Plus funds to purchase workstations for students in grades 5-12.

In addition to SchoolNet and SchoolNet Plus, Ohio provides financial appropriations to further the implementation of education technology in the state’s public schools. An appropriation of $3.3 million in the FY98-99 state budget bill continues Ohio’s technology equity program, which was appropriated at $12.1 million in FY 96-97. Eligible Ohio public school districts will receive, in addition to their SchoolNet and SchoolNet Plus entitlements, state-provided funding to purchase computer hardware and software and to offset costs for professional development. A $9.2 million state-sponsored appropriation provides for competitive grants for districts and consortia comprised of districts, institutions of higher education, businesses, community centers, and other organizations to create and maintain prototypes that demonstrate engaging use of two-way interactive video resources for distance education.

The Ohio General Assembly also appropriated $30 million in the FY 98-99 budget bill to upgrade electrical capacity in Ohio’s existing public school classrooms to use Ohio SchoolNet technologies. All public K-12 districts are eligible to apply for these funds.

The Ohio SchoolNet Telecommunity provides start-up grants for distance education to Ohio’s public and private schools. This six-year, $26-million project is a partnership among the Public Utilities Commission of Ohio, the Ohio Department of Education, and nine telephone companies. The grants are state administered and provide to consortia (composed of schools, museums, zoos, institutions of higher education, government agencies, and businesses) opportunities to use two-way video teleconferencing to expand access to technology for Ohio’s students.

Raising Revenues through a State Lottery

Schools and districts in Georgia have received substantial funds for technology from the Lottery for Education Program. Program allocations from 1994 through 1997 have provided a total of $144,650,577 for classroom technology ($33 per student per year) and $76,310,000 for other technology grants targeting areas such as assistive technology, model technology projects, and vocational learning. Lottery proceeds will fund the following K-12 public school technology initiatives through Georgia’s FY 97 supplemental and FY 98 regular budgets:

In addition, $500,000 in lottery funds will be spent on alternative school programs and $8,505,830 in combined lottery and state funds will provide a comprehensive fund accounting, student information system and financial analysis model. The fund accounting system will replace an outdated, 10-year-old system. The student information system will allow school systems to transmit to the state department of education the mandated student record in electronic form and to collect and transmit student full-time equivalent funding data. Implementing all three systems simultaneously will provide the advantages of system compatibility and interfacing.

On top of those expenditures, the state received $4.8 million in FY97 federal funds from the Technology Literacy Challenge Fund. The grant monies will be awarded to local school systems on a competitive basis to assist in implementing their local plans for technology.

Raising Additional Tax Revenues

Missouri raises funds for its Video Instructional Development and Educational Opportunities (VIDEO) Program by levying a sales tax on video rentals. This tax first went into effect in 1988, and was extended in 1992 and 1994. In FY 97, the tax is projected to generate over $2.5 million in funding for schools. The VIDEO Program encourages all educational institutions in Missouri to supplement educational opportunities through the use of telecommunications technology, including instructional television programming and satellite broadcast instruction. School districts obtain funds from the VIDEO Program by requesting:

More than 500 school districts, accounting for 2,200 buildings across the state, participated in the program in FY 97. These funds helped schools to add satellite dishes, antennas, TV monitors, VCRs, CD-ROMs, modems, video disc players, video projectors, and distance learning courses for students and staff. Since the program's inception, more than 1,600 teachers have received training in various aspects of video technology and video information usage for education using VIDEO funds.

The Calcasieu Parish School Board in Louisiana uses revenue obtained from a local sales tax to fund school technology. This school district has an enrollment of 35,000 students in 59 schools, including 33 elementary schools. There are 25 percent to 30 percent minority students in the parish.

In 1988, the school board superintendent asked voters for a half percent add-on to the local sales tax for four years to raise money for classroom enhancements. Residents were informed that they would have the opportunity to judge for themselves whether the money raised was being well spent before they voted on retaining the additional tax. The tax money was spent specifically on classroom technology and its support, and the community was pleased with the results. When the superintendent asked voters in 1992 to support retaining the additional sales tax for another 10 years, 80 percent of them approved.

Using Bonds for Self-funding by Wealthy School Districts 46

The Plano Independent School District in Texas, which has a student enrollment of 39,000, used the proceeds of a $19 million bond that was passed in 1990 to network 53 sites in the district. A second bond issue for additional technology funds was attempted in 1993 but failed. But with a full-tilt public information campaign, the district persuaded voters in just five months to pass in 1996 a $175 million bond package that includes significant new funds for school technology. The first of three propositions on the ballot was for $131 million in bonds to build seven schools; it passed with 70 percent of the votes cast. About 5 percent, or $8 million, of this sum is earmarked for technology items in the new schools. The second proposition, which passed with 60 percent of the votes, was for $20 million for technology in the district's elementary schools. The third proposition provided $24 million for technology in secondary schools and passed with 65 percent of the votes. The turnout for the ballot was 8 percent, which is normal for a bond vote.

One aspect of the bond had special appeal for voters. Residents of the district were feeling the effects of state legislation that captures and redistributes local tax dollars to equalize districts' property wealth statewide. For example, in 1996, against an operating budget of $200 million, Plano returned $16 million to the state and expected to give back $27 million in 1997. The revenue from bonds, however, is not subject to recapture, so every dollar raised stayed within the district.

Other features of this bond issue also were important to its passage. For instance, the committee that first evaluated the school district's technology needs was community-based, and teams of teachers and other district staff spent more than a year researching technology options and costs by reviewing what other districts were doing. District leaders visited all district schools to brief staff on the bond package proposal. And local community groups received over 200 presentations by district staff and committee members. Literature was disseminated to clearly identify what technology each individual school would receive and when it would be received.

Some large companies are headquartered in the district (e.g., EDS, JC Penney, Frito Lay, and Digital Switch), and residents are quite technology aware. Even so, the extensive outreach effort described earlier was instrumental in dissipating community concerns about issues such as student safety on the Internet, the adequacy of staff training, and whether acquisition of technology would lead to the federal government in Washington, DC, accessing information about children.

As a result of the successful passage of the bond ballot, beginning in fall 1997, every teacher in the Plano Independent School District received either a Pentium or Macintosh computer. Every classroom in its elementary schools will receive seven Pentium 100 computers (or better), a video disc player, VCR, 29-inch monitor, and upgraded technology in their libraries. The middle and high schools will receive industrial technology labs each costing $157,000 on average. Each high school will also get a foreign language lab costing on average $180,000, and science classrooms in secondary schools will get over $4.5 million in hardware and software.

The funding for the new schools is being obtained through 20-year bonds, but five-year bonds are funding the technology acquisitions. These five-year bonds will be sold over three years. The district counts on a five-year life for its computers, so expects 20 percent of them to be retired each year. Further bond issues are planned to fund the replacement of systems, and residents are already aware that the district will be coming back to them in just a few years for additional funds.

The district's staff regularly evaluates the financial benefits of leasing but has not found advantageous terms thus far. The district expects to keep its computers for five years, and under the existing four- and five-year leasing terms available to it, it could own the computers outright after three years.

With regard to passing bonds, it pays to persist, provided lessons are learned from earlier failures. Like Plano, the New Haven Unified School District in California first failed in its attempt to pass a $55 million bond issue in 1992 for retrofitting schools for technology. 47 With a two-thirds requirement for passage of the bond proposition, the District just failed with 65 percent of the vote. The District went back to the voters in 1993. Little organized effort had been given to the first initiative in 1992, but much more organization went into the second attempt, with the result that 75 percent of the voters favored passage of the bond.

Developing a Reliable Revenue Stream to Fund the Technology Plan

Most of Florida’s 67 school districts have large enrollments. The Volusia County School District has 68,000 students distributed among 75 schools, placing it just above the midpoint in size for the state. The district raises some education should be encouraged to take up the task of funding technology. Some advocates of education technology believe that dollars through local taxes, which are restricted to capital projects such as new school construction and school buses, and now school technology. All unspent local dollars revert to the state to be redistributed to school districts statewide. The Volusia County School District has an impressive and sophisticated technology plan, with funding derived from tax dollars raised locally for capital projects. All schools in the district are wired, and there are 19,000 personal computers in the district's schools and administrative offices.

Despite being one of Florida’s poorer school districts, Volusia County began developing a technology plan about eight years ago. The plan was ambitious and came with a relatively high price tag of about $30 million. It was developed with little thought of implementation costs. Not surprisingly, it never got funded.

Another technology plan was developed two years later, this time based on firmly budgeted money. The county committed to the school board to provide a specific level of local tax dollars (intended for capital projects) to fund school technology for a specified period of time. The district now spends about $17 million annually on capital items, of which $4 million to $5 million is devoted to technology. Although the technology plan provides for some pilot programs, it is based on equity across schools within the district, and it is claimed this feature of the plan facilitates the acquisition of funds based on local tax dollars.

A key element of the district's success with its technology plan has been the school board's ability to maintain a constant revenue stream through both good and bad cycles of the local economy. With a secure revenue stream that’s not subject to the vicissitudes of local government budgeting, staff have been able to plan with confidence and to avoid wasting resources. And knowing exactly which parts of the plan will be executed over, say, each of the next three years saves scarce dollars in the long run. A firm plan, backed by secure funding, enables the district to make special deals with suppliers. The technology plan is also reinforced by ensuring that all aspects of school technology are controlled by the district. For example, even though the state sends categorical dollars for technology directly to schools in the district, the schools have reached an agreement that allows these dollars to come directly to the district to help fund the technology plan. In another example, the district has established a district-based repair process that handles an average of 400 machines per week.

So far, the district has avoided borrowing money to fund the technology it has acquired. However, it anticipates additional sources of funds will be needed when the time comes to buy additional hardware for its high schools and middle schools, and it expects to obtain these funds by tagging onto a bond issue for new school construction and other capital improvement projects.

Using District Education Foundations48

Local education foundations provide one of the most viable long-term solutions to the problem of creating dollars to fund technology, according to some educational technology advocates. Currently, most education foundations are established simply as tax-exempt 501(c)(3) fund-raising organizations that supplement and enhance the standard educational fare. Contributions are tax deductible, and donors may be given the option of making contributions for general or designated projects. Usually, teachers are allowed to apply for the funds raised by the foundation through mini- or horizon- (i.e., innovative) grant programs.

Typically, foundations establish in their by-laws what percentage of their earnings goes to mini-grants and what percentage goes to an endowment. For example, one education foundation in St. Vrain Valley, near Boulder, Colorado, invests 50 percent of all contributions to make the foundation self-perpetuating. The Williamston Schools Foundation in Michigan ensures that a proportion of the $50,000 raised annually is reserved to fund large-scale projects. Usually, all grant expenditures by a foundation are approved by an executive committee.

Some foundations take advantage of their status to act as a "front" for the school district by applying for grant opportunities that, in the foundation's absence, would not be available. The education foundation in Perry Township School District, Indiana, for example, has found that it is eligible to apply for about three times as many grants as the school district can. Although most state and federal grants come through the local school district, most grants overall come from private foundations. Also, in some districts there are per-student limits on school expenditures, so foundations are sometimes used to overcome constraints imposed by spending caps.

Education foundations may also consider expanding their traditional role by providing venture capital, seed money, or other funding to provide technology and professional development. For example, a 501(c)(3) foundation is eligible to obtain technology systems under a tax-exempt lease and provide the systems to schools at a competitive interest rate. Although the boards of some education foundations are composed of local politicians and businessmen who would have little difficulty managing and overseeing this type of activity, others may lack that sophistication. This is an unfortunate situation because, in this role, foundations could provide a good mechanism for leveraging support, involving the community, and bringing a sense of fair play to the school technology decisions made within a school district.

Many school districts are so small that individually their chances of attracting grant funds are small. In these circumstances, a foundation can be established to serve several small districts. For example, 17 small school districts, with a total of 35,000 students, are encompassed by the Cape Educational Technology Alliance (CETA) in rural Cape May County, New Jersey. CETA was established to help obtain grant money for educational technology, but the foundation also facilitates technology planning, staff development, purchasing, and maintenance for county schools. Setting up accounts and establishing non-profit status can be considerable hurdles to the formation of educational foundations, so it is essential to get professional help. In CETA's case, for example, an accountant and an attorney on the board helped to establish the organization.

In Pendleton County, Kentucky, the school district foundation initially planned to fund student scholarships, but a growing emphasis on technology in the district and state led the foundation to earmark most of its disbursed funds for the purchase of peripheral computer equipment. The foundation's goal for 1997 is to award $50,000 to the county's four schools to complement state-supported school and district computer networks.

The funds raised by foundations are not limited grants, and the spending of funds is not limited to equipment acquisition. For example, in California, Saratoga's education foundation recently funded a technology media specialist to assist teachers, a science teacher and a science aide, as well as hardware for technology labs. The foundation raised $48,000 last year by direct mail solicitation to each property owner in the district, and about 70 percent of the parents in the district made a donation. In addition, a one-day telephone solicitation raised $67,000.


46 Most of the details in this account were obtained (with permission) from the May/June 1996 issue of Insider's Letter newsletter, published by the National School Boards Association, Institute for the Transfer of Technology to Education.

47 Newsletter, Computer-Using Educators, Inc., May/June 1996.

48 Some of the details in this account were obtained (with permission) from "The Funding Puzzle" in the June 1996 issue of Electronic School , published by the National School Boards Association.


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