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

Assessment of School-Based Management - October 1996

What Are the Budgeting Practices in Effective Site-Based Managed Schools?

The results from the study reported here used the high involvement framework to explore effective school-based management reforms and within them the exemplary school-based budgeting practices. This research, which is part of a larger study of school-based management, is based on data collected from nine school districts: Bellevue, Washington; Chicago, Illinois; Denver, Colorado; Edmonton, Alberta, Canada; Jefferson County, Kentucky; Milwaukee, Wisconsin; Prince William County, Virginia; Rochester, New York; and Victoria, Australia.13 In each of the nine districts, an elementary school and a high school were studied.14 These schools were not typical schools. We went to districts that had delegated real budgeting and personnel responsibility to the school. Within these districts, we went to schools that had been identified as actively restructuring by either the superintendent or the associate superintendent for curriculum and instruction. Actively restructuring schools were defined as schools that had active school-based management governance activities in place, and had made concrete, observable changes to their instructional approaches. Thus, our sample included schools that had used school-based management to improve school performance.

Each district was visited by a team of two or three researchers for two to four days. During this period, budget documents were collected and extensive interviews were conducted. At the district office, the superintendent, four assistant superintendents (for school-based management/restructuring, curriculum/instruction, personnel and finance), selected school board members and the union president were usually interviewed. School site visits included interviews with the principal, vice principal, members of the school site council, union chair, resource specialists or selected department chairs, and several other chairs. In addition, a follow-up interview was conducted by telephone with a budget specialist, usually the associate superintendent for finance, in each of the districts.

How is money allocated to schools?

Among the districts in our sample, all had an allocation formula that was either wholly or partially based on various categories of student needs and/or grade levels. Prince William County allocated money to schools based on ten different categorizations of students (by grade level, special needs, program type, etc.). Jefferson County varied the per pupil allocation according to grade level and student need by providing, for example, an extra $16 for a third grade student on a reduced lunch program and an extra $25 for an eleventh grade student on a reduced lunch program. Sometimes other conditions, such as the size and condition of the school building, were taken into account in the allocation formula as well. In Victoria, for example, the type of building, the number of students, the size of the building, and the condition of the building influenced the school site allocation. Schools in Chicago received money based on enrollment, special needs of students, operation and maintenance of the site building, special programs of the school board, security services, and food services.

Districts provided schools with varying amounts of budget authority. Most often, there were few discretionary funds given to the school. Victoria, for example, allocated three lumps of money --- one for curriculum, another for administration, and the third for facilities --- to each site, but schools could not transfer money from one lump to another. Furthermore, together these lumps only represented about 10% of the total school budget. As a result, there was not a great deal of flexibility.15 Similarly, Milwaukee gave each school a line item budget in which money could be transferred, but only if approved first by the district.

A few districts provided schools with more discretion in their site budgets. Edmonton, Jefferson County, Prince William County, and Rochester all allocated schools a budget which was composed of a base allocation for resource needs consistent in all schools, which often included specific staffing positions, and a per pupil allocation for other specified items. According to interviews, budget specialists felt that this was an effective way to take into account economies of scale by providing even the smallest school with funds for a base program as well as money for discretionary spending. This allocation did not comprise the total school budget, however. In Prince William County, for example, this base allocation consisted of salaries for specific personnel, including the principal, librarian, guidance counselor, secretarial/clerical staff, and custodial staff. In addition, salaries for the director of student activities, in-school suspension staff, and security personnel were included in the base line allocation for high schools. A per pupil allocation was then added to this base allocation to provide funding for instructional staff, related support staff, supplies, equipment, and services for students. Several items were excluded from this site allocation, however, including funds for attendance and maintenance personnel, cafeteria staff, student transportation to and from school, utilities, and repair and maintenance of school buildings and grounds. As a result of these exclusions, the districts that provided the most discretion were usually allocating between 85 and 95% of the school budget to the site, but even then many constraints, as discussed below, existed.

Across all schools, a major constraint on school control over spending was that very few discretionary dollars remained after salaries were paid and district restrictions, such as class size, were taken into consideration. Perhaps as a consequence, principals in the schools we studied were active in cultivating resources from outside sources. Almost all of the schools had or were in the process of applying for grants and other funding from the government and private sources. The high school in Milwaukee, for instance, had an Eisenhower grant and a Carl Perkins grant from the federal government and several grants from local foundations. In Victoria, the secondary school raised more locally than it received from the state for the school site budget. During interviews, school faculty in Victoria commented that they viewed the state allocation as the minimum and the additional money they raised provided them with real flexibility. In general, these additional funds helped reduce the constraints of the district allocation and had the effect of increasing the schools' discretionary pots.

This next section reports on exemplary budgeting practices in the 18 actively restructuring schools and the nine districts that we studied. Our expectation, based on previous research, was that these actively restructuring schools would have authority to determine the mix of professionals; how to spend or save money for substitute teachers and utilities; the source of supply; and how to spend unused funds. We also expected that school-level participants would have access to fiscal and performance data for making budget decisions, be trained in budgeting, and be rewarded for demonstrated knowledge and skills.

Budget Power

To assess the amount of power in schools with respect to budgeting, we first identified who was empowered at the site. As discussed below, we found that a redesign process occurred at the school to accommodate new budget responsibilities. Next, we looked at what control schools had over their budgets, particularly in areas that traditionally have been controlled by the central office.

Who is empowered at the school site? School-based budgeting involves dispersing power that was once centralized in the district office to the school site. Across the sample districts, who was empowered at the school site was often determined by decision-making structures outside of the school. In most sample districts, either central office or state policy formally identified who would be responsible at the school site for the budgeting process. In seven of the nine districts, the task of developing and monitoring the budget was vested with a school site council. The composition of the council was also usually specified by an outside body. School site councils in Chicago, for example, were defined by state policy and were composed of the principal, two teachers, six parents, and two community representatives. By contrast, in Jefferson County, the schools decided who was going to be on the council. Similarly, Milwaukee dictated that parents had to comprise at least 51% of the council, but schools were able to determine the composition of the rest of the council. Two districts, Edmonton and Prince William County, identified the principal as the sole person responsible for the planning and expenditure of all funds. At the district level, such policies typically were set through collective bargaining agreements.

Although who was empowered was formally defined, the exemplary schools in our sample worked hard to ensure that power was devolved throughout the organization. Thus, in effective schools where the responsibility for the budget was delegated to a school site council, the process of developing the budget usually entailed soliciting input from various groups of stakeholders, including parents, so that many constituents participated in the budget decision making process. Further, the council typically set up a budget subcommittee to organize this process. A few councils empowered the principal to oversee budget development.

In the exemplary schools studied, the budget process usually began with the principal and/or a budget subcommittee soliciting input on school priorities. These forums used to get input were both formal (i.e., surveys and scheduled meetings) and informal (i.e., conversations and word of mouth). At the elementary school in Rochester, for instance, the entire faculty identified school needs as a group; the principal helped the group convert these needs to dollar amounts; and then the group prioritized the needs. Such activities were incorporated into regularly scheduled faculty meetings, which were held after school. Similarly, the elementary school principal in Bellevue had each teacher submit an individual budget in addition to soliciting a school budget from the council. In most schools, the principal and/or budget subcommittee developed a site budget based on input from various school constituents and presented it to the school council. The school council usually reserved the right to adopt the budget or request that changes be made.

Similarly, in Edmonton and Prince William County, where principals were solely responsible for the budget, a budget committee composed of the principal and staff members drafted the site budget based on school priorities that had been set by the faculty. This budget then was presented to the faculty for recommendations. Although principals in these districts had the ultimate authority to approve the final budget, they relied heavily on faculty input to guide the process and usually did not contradict faculty wishes. Thus, although principals had veto power, we found in the schools we studied that it was rarely used.

The dispersion of power was critical for preventing turf wars over the budget process. Consider, for example, the high schools where the budget was developed by department chairs rather than through broader stakeholder channels. At the high school in Prince William County, most of the budget was constructed through departments. Dwindling resources took the focus of the budgeting process away from instructional improvement and the school spent significant amounts of time trying to be equitable in distributing resources across departments. Similar problems occurred at the high schools in Bellevue and Milwaukee where primarily department chairs, and not a wide variety of constituents, were actively involved in the budget process.

In most of the schools we studied, principals were critical players in the budget development process. Frequently they were required to serve on the council with duties including chairing the budget subcommittee or implementing budget decisions made by the council. In Edmonton and Prince William County, the district specified that the budget process was to be done in conjunction with multi-constituency input, but the process for getting that input was left to the principal's discretion. Edmonton principals used results from formal district surveys to get a sense of the attitude of parents and the community toward the school, the district and its programs; and the attitude of staff toward students and parents, toward other staff, the school, the district and its programs.

Therefore, while the principal and school staff played the predominate role in budget development, parents and students in exemplary schools were also involved in the process. Although they almost never served on the budget subcommittee, parents and students were surveyed for input on school priorities and needs to guide the process. In general, their participation was restricted to approving the final budget through council membership.

In sum, regardless of whether a budget subcommittee, school site council, or principal was responsible for the budget, in the exemplary schools we studied many stakeholders were consulted during the budget development process.

What control over the budget do schools have? As noted earlier, previous research on school-based budgeting identified four areas of control: authority to determine the mix of professionals and paraprofessionals at the school site, authority over substitute teachers and utilities, the ability to choose where to purchase supplies, and authority to carry over unused funds from one year to the next. In traditionally managed districts these areas are largely under the control of the central office, but earlier studies of school-based managed districts found a shift of control toward the school site (Hentschke, 1988; Wohlstetter & Buffett, 1992). Table 1 indicates the extent to which the districts we studied had devolved control in these four areas.

Power Summary Measures for the School-Site Budgeting Process

School District Mix of Teachers & Other Staff Substitute Teachers Utilities Source of Supply Carry over Unused Funds
Bellevue, Washington Yes Yes No Yes Yes
Chicago, Illinois Yes No No Yes No
Denver, Colorado No Yes No Yes No
Edmonton, Canada Yes Yes Yes Yes Yes
Jefferson County, Kentucky Yes Yes No Yes Yes
Milwaukee, Wisconsin Yes Yes No Yes Yes
Prince William County, Virginia Yes Yes No Yes Yes
Rochester, New York Yes Yes No No No
Victoria, Australia No Yes Yes Yes Yes

Districts provided schools with varying amounts of authority over the mix of teachers and other staff at the site. Schools usually had the power to reduce class size by adding teachers, but could not increase class size due to collective bargaining agreements, district policy, or state law. There was more flexibility in the mix of classified staffing positions, including maintenance and clerical staff. Both the elementary and high schools we studied in Jefferson County eliminated some custodial and librarian positions so that they could add more staff to the classrooms, such as teacher aides. A school in Rochester eliminated a custodial position and used the extra money to purchase additional supplies and equipment.

Schools frequently had difficulty increasing the number of teachers at the site because most districts allocated teacher salaries using a district-wide average. According to interviews with budget specialists, this allocation method was used to prevent schools from trying to save money by hiring more inexpensive, and possibly less qualified, teachers. While this provided schools with hiring flexibility in terms of experience, it prevented site flexibility in the number of positions. Unlike the private sector where changes in staffing patterns is a major component of high performance, schools were not able to save money through teacher salaries and, therefore, could not really change staffing much because money for an additional teacher had to come from another source. As a result, most of the changes made in professional staffing patterns were relatively minor. The high school in Prince William County, for example, shifted a full-time classroom teacher to part-time and had the person serve as the school's budget officer the rest of the time. This person was a teacher who worked part-time on the school site budget and taught in the classroom the rest of the time.

Similar findings were found in districts where teacher salaries were not allocated to the school site. In Bellevue, the staffing of administrators and teachers was determined centrally by ratio. Schools had to submit a special waiver for changes in their staffing patterns. Likewise, the mix of professionals and paraprofessionals at the school site was centrally determined and allocated in Denver and Victoria based on student enrollment.16 Once again, schools in these districts were unable to make significant changes in their professional staffs.

Almost all of the districts in our sample decentralized money for substitute teachers to individual schools. This enabled schools with low rates of teacher absenteeism to accrue money allocated for substitute teachers and to use it for other purposes. At the same time, schools that went over this allocation usually had to access other funds in order to balance their budgets. There was some form of a "hold harmless" provision in all of the districts that served to protect schools from financial hardship, however. Bellevue and Jefferson County gave schools control over funds for professional leave activities, while the district covered the cost of uncontrollable items such as illnesses and emergencies. In Milwaukee and Rochester, schools were allocated a set number of substitute teacher days per teacher per year, based on the district average. These districts then paid for any days exceeding this amount. (In essence, these policies in Milwaukee and Rochester created a win-win situation for the schools. The schools could have more money by saving substitute teacher funds, but the district bailed them out if they went over their budgeted allocation.) Finally, schools in Edmonton and Prince William County were provided with funds to cover the cost of short-term absences, but the district picked up the cost of substitute teachers after the regular teacher had been absent for more than three consecutive days.

In interviews, faculty members stated that substitute teacher funds, if carefully spent, could be used to enhance budget flexibility by empowering schools to trade-off substitute teachers for other resources. This was one area where schools had some real budgetary flexibility, but it represented only a small portion of the budget. We heard evidence, however, suggesting that teachers had begun to feel the collective impact of their individual decisions. As one teacher explained, "If a teacher calls in sick and does not come to work, then that teacher has made the decision to use school money for a substitute teacher."

As shown in Table 1, it was more common for districts to decentralize funds for substitute teachers than for utilities. Some districts argued they retained control over utilities for efficiency reasons. Jefferson County, for example, had a district-wide, computer-controlled energy management system to maximize efficiency. As a result, even if the districts had decentralized the cost of utilities to the school site, the school may not have had control over these funds. In Chicago, the cost of utilities was allocated to the schools for record keeping purposes, but they were paid for centrally. Furthermore, schools in Chicago were not penalized for utility costs exceeding their allocation nor were they rewarded for any savings. In Jefferson County, the cost of operating the energy management system was put into each school's budget, but schools had little control over the system or these funds. Of the sample districts, Edmonton's approach was the most radical, allowing schools to control funds for both utilities and substitute teachers.17

Generally speaking, the interviews suggested that schools did not want control over utilities. Among school-level participants, there was a preference for controlling funds related directly to managing instructional activities, but not for controlling funds related to the physical plant. In Jefferson County, the district handled most expenditures related to the building. As the principal at the elementary school commented, "I don't want to be a manager of a hotel. I want to focus on the business of schooling." This sentiment restricted school site authority over the budget process, however. Much of the budget was already constrained through restrictions on teacher salaries and, as a result, schools had relatively small amounts of discretionary funding. Central office jurisdiction over utilities further constrained the dwindling discretionary pot at the school site.

Whether schools could choose where to purchase supplies, staff development, and maintenance services was another element of budgeting power. Most of the districts we studied allowed schools to make purchases from vendors outside the district, but the central offices usually had mechanisms in place to discourage schools from doing so. Jefferson County, for example, restricted purchases outside of the district to a pre-approved list of vendors. Among the sample districts, only Rochester required schools to use the district warehouse and central office for supplies.

Districts also frequently monitored the amount of money that was spent on outside vendors to ensure that costly errors were not made. In Bellevue, schools could only make purchases under $100 outside of the district. Similarly, schools in Jefferson County and Prince William County had to use a bidding process designed by the central office for purchases over $5,000 and $2,500 respectively. This bidding process required schools to solicit a minimum number of bids and the central office usually had final approval. According to interviews with central office administrators, districts put in place these deterrents to prevent schools from spending more than they needed to on a particular good or service. These costs amounted to less than 5% of the whole school budget, however, and appeared to unnecessarily constrain the budget without any clear focus on results.

Some schools bought supplies outside the district even if they were discouraged from doing so. In Milwaukee, for instance, schools were strongly discouraged from purchasing maintenance services outside, because the central office felt schools paid a premium for these services. Schools continued to use these outside services, however, because the response was so much quicker and, as a result, it was more cost-effective for them to do so. According to an interview with the budget specialist in the central office, this use of power at the school site had forced the district maintenance department to become more competitive. Not only is this what is supposed to happen in the ideal school-based budgeting process, but studies in the public sector suggest that this type of response builds a central office culture focused on providing services instead of on reinforcing rules (Barzelay, 1992).

As shown in Table 1, over half of the districts in this study, which had been identified as having exemplary school-based management practices, had unspent funds revert back to the central office at the end of the year. In Rochester, state law prohibited the carry over of unspent funds. Chicago allowed state Chapter 1 funds to be carried over, but general funds reverted back to the board of education. Denver was in the preliminary stages of allowing schools to carry over unused funds and was piloting the program in a couple of schools.

In other districts where schools were able to carry over funds from one year to the next, restrictions usually existed. These restrictions included allowing schools to carry over funds only in certain accounts, such as equipment and supplies, or restricting the total amount that could be carried over. In Prince William County, for instance, schools could only carry over a small amount -- $1,000 for elementary schools and $3,000 for high schools.

Many schools took advantage of the opportunity to carry over unused funds, regardless of whether or not restrictions existed. One elementary school in Edmonton accrued a $25,000 surplus over a five-year period. Similarly, schools in Milwaukee carried over $6 million district-wide in one year. As a result, schools were able to make purchases that otherwise would not have been possible by adding unspent money to their discretionary pots. Furthermore, the evidence suggests that schools were making budget decisions carefully each year to ensure there was money to carry over.

Schools that had the power to carry over unused funds also usually had to carry deficits into the next fiscal year as well. A school in Jefferson County, for example, overspent by $2,100 in one year. This deficit subsequently was rolled over into the following year's budget.

In sum, there was a gap in the schools studied between the ideal and actual amount of power devolved to the site. There continued to be many restrictions on the budget, such as in the mix of teachers, which resulted in a very small discretionary pot for the school. As a result, allocations had not changed substantially because schools did not have the flexibility to do so. Districts were slowly scaling up the level of discretion at the school site, however. Several districts had implemented pilot programs that would eventually be expanded to all of the schools. Edmonton schools had the option for utilities to be included in the site budget and Denver had piloted the ability to carry over unused funds in a couple of schools. Eventually, all Edmonton schools would have utilities included in the site budget and all schools in Denver would carry over unused funds. Therefore, although there was a gap between ideal and actual school-based budgeting practices, districts were working to slowly close this gap.

13 For a more complete description of this study and the research methods, see Wohlstetter, Smyer, & Mohrman (1994).

14 Both schools in Rochester were pilots for school-based budgeting. Schools in Victoria were not part of the "Schools of the Future" reform where 95% of the expenditures are devolved to the site.

15 This has changed under the "Schools of the Future" reform where schools now receive money based on a simple per pupil formula and most of the budget is devolved to the schools.

16 Denver gave schools the actual salary allocation but this was for reporting purposes only and the allocation could not be altered.

17 According to district policy, authority over utilities was initially optional for schools in Edmonton, but eventually all schools would have funds for utilities in their site budgets.

[Part 2: The High Involvement Framework: Strategies for School-Based Budgeting] [Table of Contents] [Part 4: What Are the Budgeting Practices in Effective Site-Based Managed Schools? (continued)]