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Study of equity in a state public school finance system prior to and after implementing performance-based funding

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Study of equity in a state public school finance system prior to and after implementing performance-based funding
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Jones, Sandra L
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Education ( jstor )
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Equity ( jstor )
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Funding ( jstor )
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Educational Leadership thesis, Ph.D ( lcsh )
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Thesis (Ph.D.)--University of Florida, 2003.
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Includes bibliographical references.
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Printout.
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Vita.
Statement of Responsibility:
by Sandra L. Jones.

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A STUDY OF EQUITY IN A STATE PUBLIC SCHOOL FINANCE
SYSTEM PRIOR TO AND AFTER IMPLEMENTING
PERFORMANCE-BASED FUNDING












By

SANDRA L. JONES


A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL OF THE
UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT
OF THE REQUIREMENTS FOR THE DEGREE OF
DOCTOR OF PHILOSOPHY

UNIVERSITY OF FLORIDA


2003













ACKNOWLEDGMENTS

This research project could not have been completed without the support, advice, encouragement, and assistance of many people. I am grateful for family, friends, colleagues, and members of my doctoral supervisory committee.

First, I am greatly indebted to my committee that had a wide range of talents and expertise. I thank Dr. David Honeyman for chairing my committee and guiding me through the process, Dr. James Doud for his servant leadership and invaluable encouragement, Dr. Craig Wood for his wisdom of educational finance and law in an interesting way, and Dr. David Miller for making difficult statistical methodology understandable. I am also grateful for the advice and encouragement from Dr. Rhodella Brown, Dr. Mary Elizabeth Grace-Calhoun, Dr. Katherine Gratto, and Dr. Jason Storch. Angela Rowe provided constant support that was crucial to my success as a doctoral student.

I would like to thank my family for being continual reminders of the importance of family in any endeavor. This includes my brothers, Alfred Langston and Charles Langston, and their families. While our father was taken from us early, he has always been a source of inspiration. Especially, I want to thank my mother, Christine Langston Albritton, for setting the example as a loving, independent, and encouraging lady. I thank my step-dad, Irvin, for always making himself available to help. I lovingly thank my son, Christopher Sean, for his faith, being there, and the daily supportive caring calls throughout my doctoral program.








A heartfelt thank you goes to my dear friends, Carol and Betty Jo. I am grateful to these kindred spirits for their unwavering friendship through the years and for their support through this educational journey and through our life journey.

Finally, I could not have even begun this endeavor without my wonderfully supportive husband, Tom. He has been a source of love, loyalty, confidence, and motivation throughout our 26 years of marriage. He gave me the strength to continue to strive for my goals and dreams. I thank him for having faith in me.















TABLE OF CONTENTS

Page

ACKN OW LEDGM ENTS......................................................................................... ii

ABSTRACT ............................................................................................................ vi

CHAPTER

I BACKGROUND OF THE STUDY ............................................................... 1

Introduction.................................................................................................. 1
Background to the Problem ............................................................................ 4
Statem ent of the Problem ............................................................................ 15
Purpose of the Study................................................................................... 16
Research Questions..................................................................................... 17
Significance of the Study............................................................................ 17
Lim itations of the Study............................................................................... 20
Overview of M ethodology .......................................................................... 21
Definition of Term s ..................................................................................... 22
Organization of the Study by Chapters....................................................... 23

2 REVIEW OF THE LITERATURE .............................................................. 24

Introduction................................................................................................ 24
Concept of Equity in Public Schools........................................................... 24
Early Education Finance Theory ................................................................. 26
Education and Benefits to Society............................................................... 29
Principles of Equity .................................................................................... 32
Statistical M easures for Horizontal Equity.................................................. 36
School Finance Equity Litigation................................................................. 43
The Florida Form ula................................................................................... 69
Perform ance-Based Funding....................................................................... 82
Bush/Brogan A+ Plan for Education......................................................... 107
Sum m ary ................................................................................................... 111

3 RESEARCH M ETHODOLOGY .............................................................. 114

Introduction............................................................................................... 114
Population of the Study............................................................................. 115









M ethodology ............................................................................................ 116
M easures of Equity................................................................................... 117
Summ ary.................................................................................................. 125

4 ANALYSIS OF DATA ............................................................................ 127

Introduction.............................................................................................. 127
Equity Before and After the Implementation of Performance-Based
Funding ................................................................................................ 128
Interpretation of Results............................................................................ 143
Summary .................................................................................................. 147

5 CONCLUSIONS ...................................................................................... 149

Introduction.............................................................................................. 149
Findings.................................................................................................... 154
Conclusions.............................................................................................. 158
Implications for Public Policym akers........................................................ 159
Future Studies........................................................................................... 161

REFERENCES .................................................................................................... 165

BIOGRAPHICAL SKETCH ................................................................................ 176





























V













Abstract of Dissertation Presented to the Graduate School
of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy

A STUDY OF EQUITY IN A STATE PUBLIC SCHOOL FINANCE
SYSTEM PRIOR TO AND AFTER IMPLEMENTING PERFORMANCE-BASED FUNDING By

Sandra L. Jones

December 2003

Chair: David S. Honeyman
Major Department: Educational Leadership, Policy, and Foundations

The purpose of this quantitative study was to determine the effects of additional revenues for performance on the equity of a state school finance system. The research included an analysis of the equity of the 1997-1998, 1999-2000, and 2000-2001 Florida Education Finance Program (FEFP) with and without the application of performancebased funding of reward dollars from the Florida A+ Plan and School Recognition Program. The FEFP included revenue from state and local sources.

Using statistical measurements that were developed for public school equity studies, the degree of horizontal equity on revenue per weighted full-time equivalent student (WFTE) was analyzed for the 67 public school districts prior to and following the implementation of performance-based funding. The results of the study indicated that additional revenues of performance-based funding had slightly disequalizing effects within the years of the study. The results were indicated by resource accessibility









measures, including the range, restricted range, federal range ratio, variance, and the standard deviation. The coefficient of variation indicated a decreased equity in the last year of the study, as performance-based funding was applied. Calculations of the McLoone Index indicated decreased equity, while the Gini coefficient indicated a negligible increase in equity due to the additional revenues from performance-based funding within the year of the study. Both indicated that the additional revenues had slight to negligible effects on equity and wealth neutrality within those years. Some values increased during the years of the study with and without the award dollars so it cannot be determined that the decrease in equity was due solely to performance-based funding.

For all of the measures analyzed, the decrease in equity, or the slight shift toward disequalization, was most evident when the revenues from performance-based funding were applied within the years of the study.














CHAPTER 1
BACKGROUND OF THE STUDY

Introduction

Public school finance has been and continues to be a priority policy issue and

challenge at the state, local, and national level. As of 2003, the big business of financing public schools in the United States involved over $379 billion; 59 million children; and almost 5 million teachers, administrators, and staff (Odden & Picus, 2000, in press). Equity and adequacy continued to be issues in 2003, and the productivity of the use of the input education dollars and adequacy of those dollars were also at the forefront of the school finance policy discussions and arguments (Odden & Picus, 2000). The education of the children of this country would have been negatively impacted if the importance of adequate and equitable resources was neglected (Adams, 1997; Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996; Thompson, Wood, & Honeyman, 1994).

The question to many state legislators and policymakers was how to allocate and distribute the state funds with a method that was both adequate and equitable to the different school districts and their schools (Brown, 1999; Odden & Picus, 2000). As the 1990s ended, public school policymakers more and more wanted to know how much base spending was necessary to educate public school students to high state standards. With this change to concern regarding high performance standards for students, litigation seemed to broaden its concern from just equity to issues of adequacy and productivity (Odden & Picus, 2000, in press).








As of 2003, state financing structures and school districts needed to renovate or rethink the state public school finance systems to accomplish the newer, more challenging productivity standards and expectations to demonstrate accountability (Odden & Picus, 2000, in press). Ongoing concerns about public education continued with ever-increasing costs for educational services and growing dissatisfaction with the performance of the students in the public school systems. Taxpayers continued to believe that, while there were educational benefits of public education to society, the school systems were also responsible for heavy tax burdens. While public education had provided for real societal and economic development, the concerns about fiscal equity and the allocation of state-appropriated resources were still being considered, discussed, and researched (Chambers, 1996; Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996; Thompson et al., 1994).

The cornerstone of the Goals 2000 and Elementary and Secondary Act (ESEA) programs, promoted by the Clinton administration, was the approach of systemic reform (Rotherman, 1999). More than 45 states asserted that they were engaged in setting new and challenging standards for the education of American students, with appropriate policies being implemented around the new standards. Assessments that were linked to the standards helped give a clear picture of expectations to students, offered informational feedback to teachers and provided an opportunity for valid accountability based on improvements in the schools and districts that were working toward specific outcome expectations. The interest in performance-based reform was a reflection of the general preoccupation with managerial efficiency and the best ways to utilize educational








resources to get more educational output for the funding inputs (Fuhrman & O'Day, 1996).

Educational policymakers in many states explored the possibility of allocating a portion of state education funds to schools as monetary rewards for improvements in student test scores and other performance indicators (Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996). This approach of performance-based budgeting (PBB), performance-based school funding (PBSF), or performance-based funding (PBF) allowed for the allotment of a portion of the education dollars to schools or districts that demonstrated particular standards of student achievement. The rewards were outside of the state funds that were part of the school finance equalization programs and were relatively small amounts (King & Mathers, 1996, 1997).

"The new educational accountability" was the new model of state and local school governance. There were three major parts of this new model or approach: "A primary emphasis on measured student performance as the basis for school accountability; . .. the creation of relatively complex systems of standards by which data on student performance are compared by school and by locality; and the creation of systems of rewards and penalties and intervention strategies to introduce incentives for improvement" (Elmore, Abelmann, & Fuhrman, 1996, p. 65).

The future funding for our country's schools was affected by the emphasis on equity and adequacy, the development of and requirements to meet more rigorous educational standards, and more efficient and effective resource allocation and utilization to produce higher and enhanced student achievement. All of this was in a setting of expanded site-based management and budgeting and changing teacher compensation.








(Odden & Picus, 2000). In summary, changes were brought about by educational reform, with a then-current trend toward greater accountability where many states had adopted a performance-based budgeting program with rewards and sanctions that encouraged schools and educators to make the necessary steps to see that student performance improved (Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996).

Background to the Problem

The responsibility and provision for the operation of the public schools in the

United States rests with the states according to the terms of the Tenth Amendment to the United States Constitution (U.S. Constitution, Amend. X). With the responsibility for the education of the citizenry set forth in state constitutions, "state legislatures are required.., to create and maintain 'thorough,' 'efficient,' [and] 'equal' educational systems 'throughout' their respective states" (Alexander & Alexander, 1992, p. 128). Therefore, the states have developed school finance programs to allocate and distribute revenues for public education.

School finance was concerned with the dispersal and utilization of money to

provide educational services and to produce student achievement (Odden & Picus, 2000, in press). In financing public schools, states have been concerned with equity, adequacy, and efficiency (Odden & Picus, 2000, in press; Thompson et al., 1994). While adequacy was the idea of providing enough resources to provide for the educational needs of students, "equity is the concept of a fair and just method of distributing resources among those same children" (Thompson et al., 1994, p. 57). However, additional resources had to be available to children who came into the educational setting with handicaps such as language barriers or needs for special education. Therefore, "equity may be seen as the








precondition of equality where the hope for equal opportunities requires unequal inputs" (Thompson et al., 1994, p. 57). In practice, the concept has meant assuring equal dollars for equal students or providing sufficient amounts of money to afford similar programs when different needs and related educational costs were taken into account (Chambers, 1996).

The allocation of scarce resources and fiscal equity were issues in public education for many years. In 1906, Ellwood Cubberley conducted the first formal research on the topic of school finance in his doctoral dissertation at Columbia University. He asserted that all children in a state were equally important and entitled to the same advantages. Further, he stated that it was the state's responsibility to provide minimum education programs and to equalize educational opportunities as much as possible (Cubberley, 1906; Thompson et al., 1994).

George D. Strayer and Robert M. Haig found in their 1923 study that there had existed a movement for equalization of educational opportunity that beseeched the states to provide equal educational facilities for each child in the public school system (Strayer & Haig, 1923).

There were several objects that could be taken into account when considering the equity of a school finance program. After the object was selected such as expenditures per student or revenues per student the principles of equity were applied to evaluate how fairly the state education dollars were allocated and distributed to the various school districts. There were three principles of equity: horizontal equity, vertical equity, and fiscal neutrality (Odden & Picus, 2000; Thompson et al., 1994).








The principle of horizontal equity held that equal students received equal

expenditures or shares of the dollars. Therefore, if the object under study was revenues per student, then all students that were alike would receive the equal shares. The vertical equity principle held that students that were different, unalike with specifically determined legitimate differences, were entitled to unequal treatment, with appropriately larger, unequal shares of the revenues. Fiscal neutrality was the equity principle that there should be no relationship between the revenues per student, or the quality of the education received by a student, and the wealth of the local school district (Odden & Picus, 2000; Thompson et al., 1994).

Throughout the 1970s, the concept of equity was a major issue in public school finance (Odden & Picus, 2000; Thompson et al., 1994). Equity, as described earlier, was the fairness in the way state resources were allocated and distributed to the school districts and schools (Brown, 1999). The issues that so often arose were how to determine if funding formulas were equitable in the distribution of state funds to the individual districts and states. The legal issues of equity have been addressed for K- 12 public education through court cases since the 1960s (Odden & Picus, 2000; Thompson et al., 1994). Researchers of school finance responded to the equity issue and developed statistical measures that would determine the degree of equity of funding programs (Thompson et al., 1994). These statistical measures were utilized to examine the degree of equity of funding programs in individual states or groups of states. The research results were often used in court cases to analyze and ensure equity in public education formulas.








Since the beginning of the 1990s, funding for schools has competed with

declining state resources (Brown, 1999; Ladd, 1999b). A number of factors contributed to the decline in funding (Campbell, Leverty, & Sayles, 1996; Honeyman & Bruhn, 1996). Fewer tax dollars were generated for the states' general revenues due to the economic recession of the early 1990s. There was mistrust in education and the outputs, resulting in less support for significant increases in expenditures for public schools. Another factor was the increased competition for the state resources by the Department of Corrections and for health care (Honeyman & Bruhn, 1996). Therefore, there were fewer state and local revenue dollars allocated to education. In addition, there were also demands for increased technology in the schools and for the funds to support this technology.

Equity in the allocation of educational resources was an important issue addressed by school finance researchers, state politicians, and school policymakers. They worked to analyze, explain, and predict alternatives that might affect future funding. The efforts were substantially successful with the Florida Education Finance Program, which gave Florida one of the nation's most equitable school finance systems (Chambers, 1996; O'Loughlin, 1992).

The Florida Finance Formula: Florida Education Finance Plan

The Florida Education Finance Program (FEFP) was enacted in 1973 by the

Florida Legislature. The Legislature established the following state policy on equalized funding:

To guarantee to each student in the Florida public educational system the
availability of programs and services appropriate to his educational needs which are substantially equal to those available to any similar student notwithstanding








geographic differences and varying local economic factors. (Florida Statute,
Section 236.012(1))

In providing the equalization of educational opportunity, the FEFP took into

account the varying local property tax bases throughout the districts, the varying program cost factors, the district cost differentials, and the variations in per student cost for substantially equivalent educational programs due to sparsity and student population dispersion (Florida Department of Education, 1996).

The FEFP based financial support for public education upon the individual

student involved in a specific educational program, not upon the numbers of teachers or classrooms. "FEFP funds are generated by multiplying the number of full-time equivalent students (FTEs) in each of the funded educational programs by cost factors to obtain weighted FTEs" (Florida Department of Education, 1996, p. 1). The calculation then involved multiplying the weighted FTEs by a state determined base student allocation and a district cost differential to ascertain the state and local FEFP funds. The Legislature determined the various cost factors, factors that represent the relative cost differences among the programs.

Financial support for public education in Florida came from several sources. In the 1994-1995 school year, the school districts received 50.0% of their funds from state sources, 42.5% from local district sources (including the Required Local Effort), and

7.5% from federal sources. School districts in the 1997-98 school year received 50.58% of their financial support from state sources, 41.94% from local sources, and 7.48% from federal sources (Florida Department of Education, 1999). The major portion of state support was appropriated by the Legislature and distributed under the provisions of the








FEFP. The predominate amount of the legislative appropriation of $5,269,296,389 for 1996-1997 and $5,636,048,955 for 1999-2000 was from the General Revenue Fund.

Although there were a number of tax sources deposited in the General Revenue Fund, the major tax source was the Florida sales tax. In addition, funds were appropriated to meet other needs, and proceeds from the Florida Lottery were used to finance appropriations, such as District Discretionary Lottery Funds, Pre-School Projects, and School Recognition awards in the Bush/Brogan A+ Plan (Florida Department of Education, 1999, 2000a).

Local financial support for Florida public schools was from revenue derived

predominately from property taxes in each district. Each of the 67 counties was a countywide school district. There were no local nonproperty taxes levied by local school boards (Florida Department of Education, 1999, 2000a).

The Legislature yearly set the amount of the required local effort, and by statutory procedure it determined each district's share. Each school board was required to levy the millage set for its required local effort. Based on tax roll information provided by the Department of Revenue, the Florida Commissioner of Education certified the necessary millage for each district in the summer of each year. In 1996, certifications varied from

6.464 mills to 7.139 mills due to the use of "assessment ratios designed to equalize the effect on the FEFP of differing levels of property appraisal in counties" (Florida Department of Education, 1996, p. 2).

School districts received federal funds directly and through the state as an administering agency. However, the State Board of Education was responsible for approving plans for cooperating with the federal government for any of the educational








programs and for providing appropriate administration of those funds. The State Board was required to prescribe rules covering the contracts or agreements with the federal agencies. Examples of funds from federal legislation included the Adult Education Act, Job Training Partnership Act, Individuals with Disabilities Education Act, Elementary and Secondary Education Act, Carl D. Perkins Vocational and Applied Technology Education Act, and National School Lunch Act (Florida Department of Education, 1996, p. 4).

Performance-Based Funding

Changes brought about by educational reform and the trend toward more

accountability provided states with the impetus to develop and implement performancebased funding programs. The educational accountability models utilized performancebased budgeting that usually consisted of some type of measurable student performance, standards for comparing the performance information by the school or district, and a set of incentives and/or disincentives. These consisted of monetary rewards going to schools or districts, intervention strategies to assist low-performing schools, and sanctions for those schools that did not meet expected progress or standards through accountability or accreditation processes (Fuhrman & O'Day, 1996; King & Mathers, 1996, 1997).

The goal of performance based program budgeting was to improve student

performance. Performance indicators in reward programs varied among, but were not confined to, student achievement, performance assessments, student attendance, teacher attendance, dropout rate, retention rate, and transition from high school. Some rewards were based on an absolute standard, and others were earned based on growth and








progress made toward achievement goals (Fuhrman & O'Day, 1996; King & Mathers, 1997).

Directly related to performance based budgeting, survey results from a few states produced insightful findings relating to motivation and rewards and sanctions. Perceptions were found that included the opinions that sanctions such as declaring schools "in crisis" or the dismissal of personnel were more incentive than any other part of an accountability system (King & Mathers, 1997). Respondents shared that it was the rating or label that made a difference to educators. Others surveyed by Mathers and King expressed the opinion that public hearings were appropriate sanctions, since they often pressed for school improvement. Therefore, it may be that the contribution of financial rewards to school improvement was obscured by the fear of threatened sanctions and negative publicity (King & Mathers, 1996, 1997).

Low-performing schools and student groups might have been the entities most affected by accountability systems. "Dramatic one-year improvements in lowperforming schools suggest that state interventions and local improvement plans made a difference, or that the promise of rewards (or threat of sanctions) motivated teachers and principals to alter conditions for instruction, learning and assessment" (King & Mathers, 1997, p. 161).

There were at least two scenarios that existed in a performance-based budgeting model: (a) an individual school or district showed some or marked student improvement that exceeded standards and warranted financial or non-financial rewards, and (b) individual schools or districts showed some or marked lack of improvement or decreases








in test scores or student performance, warranting intervention strategies by the state, or sanctions (Elmore et al., 1996; Fuhrman & O'Day, 1996; King & Mathers, 1996, 1997).

In the first scenario individual schools or districts, depending on the state,

received reward funds for meeting or exceeding expectations on assessments. These financial rewards varied, due to the appropriations set by the legislatures of the various states. During 1996-1997, examples of appropriations for rewards ranged from $3.2 million in Indiana to $27.2 million in Kentucky. Rewards were given directly to districts, schools, or teachers. Examples of the range of rewards given were $2,500-$63,000 per school in South Carolina (1996-1997), $250-$30,000 per school in Texas (1994-1995), $415-$16,451 per school in Indiana (1996-1997), and $1,155-$2320 per teacher in Kentucky (1996-1997) (King & Mathers, 1996, 1997).

Each of the states using performance-based budgeting dictated different uses of the reward funds. Some allowed for the funds to be used for instructional improvement on the basis of the School Improvement Councils advising the principal; some approved the funds for academic enhancement, but no salary bonuses; some prescribed the funds for educational purposes but not for athletics or salary bonuses; and in some states, teachers were given the opportunity to decide where the money should be put to best use. Other states distributed rewards to a variety of recipients.

Interventions or sanctions, needed in the second scenario where districts or

schools did not meet expected standards, included accreditation sanctions for districts and schools. These included hearings, after an initial year of low performance, and notification of the public of deficiencies and plans for improvements. Special intervention teams might have been appointed to sponsor staff development and








implement improvement plans. Continued low performance may have resulted in a board of managers or closing a campus.

In summary, changes were brought about by educational reform, with a thencurrent trend toward greater accountability where many states had adopted a performance based budgeting program with rewards and sanctions that encouraged schools and educators to make the necessary steps to see that student performance improved. Therefore, during the 2000s, state financing structures and school districts needed to renovate or rethink the state public school finance systems to accomplish the newer, more challenging productivity standards and expectations to demonstrate accountability (Fuhrman & O'Day, 1996; Ladd, 1996a; Odden & Picus, 2000; Picus & Wattenbarger, 1996). Florida was one of the states that took the lead in developing standards and a plan for higher standards and performance-based funding. The Bush/Brogan A+ Plan for Education

Governor Jeb Bush, Lieutenant Governor Frank Brogan, and members of the

Florida legislature developed and implemented the A+ Plan in the late 1990s. Florida's Lieutentant Governor Frank Brogan described A+ Plan for Education as the most comprehensive state accountability, as of June 1999 (Brogan, 1999). It was based on the conviction that all children have the ability to learn, was focused on student achievement, and started with high expectations of test scores. They further professed that "no child would be left behind or abandoned to a substandard education in Florida" (Brogan, 1999, p. 1).

There were three principal initiatives that were used to lay the foundations for the Plan in 1995. First, the Florida Department of Education adopted ambitious academic








standards. The Florida Comprehensive Assessment Test (FCAT) was developed to measure these standards through student achievement. Brogan described this development as a 2-year process involving parents, teachers, members of the business community, as well as others. According to Brogan, with the involvement of this eclectic mix, there was broad local support for the developed Sunshine State Standards (Brogan, 1999).

More than 70% of the Florida tenth-grade students scored below the basic level in the first administration of the reading section of the FCAT, but public support for demanding public academic standards remained high. Brogan and Bush felt that the Sunshine State Standards provided the blueprint to reach the significantly higher expectations (Brogan, 1999).

The second initiative provided choices to parents, teachers, and communities by permitting the development of public charter schools. These schools, being free from the burdens of possibly unnecessary rules and regulations, were stringently accountable for the achievement of their students. There were more than 70 charter schools serving a diverse group of about 11,000 Florida students. This included a significant number of students traditionally considered to be low achieving or at risk, along with Exceptional Student Education (ESE) students and minorities (Brogan, 1999).

The third part of the foundation for the A+ Plan was the program initiated to

remediate critically low-performing schools. These identified critically low-performing schools were sites where "two-thirds of their students scored below the proficient level on standardized tests of reading, writing, and math for two consecutive years" (Brogan, 1999, p. 1). Having put these schools on notice, the Department of Education and State








Board of Education were empowered to aid schools in preparing improvement plans and to mandate changes in the staffs and curriculum structure if the designated schools did not demonstrate improvement (Brogan, 1999).

Statement of the Problem

The Bush/Brogan A+ Plan was a comprehensive accountability system that

significantly raised the achievement bar. Florida schools began receiving report cards in 1999 and were graded on a scale of A to F, with grades based primarily on students' performance on the developed FCAT. However, schools were also graded on how well the lowest achieving students in each school learned, and it was asserted that the schools would not receive high marks if the low-performing students were left behind. The A+ Plan had, in its accountability package, significant incentives and rewards for successful results as well as disincentives and rigorous remediation for schools that were failing (Brogan, 1999).

Rewards for success included a bonus of $100 per student for those schools that received an A or improved by one grade level on the A to F scale. The legislature had appropriated $15 million for this purpose in the 1999-2000 school year and raised it to $60 million for the 2000-2001 school year (Florida Department of Education, 2000a). Additionally, the highest performing schools were deregulated by the state and rewarded with the freedom of site-based budgeting and innovating their curriculum as well as other strategies to further enhance learning at their schools (Brogan, 1999).

For the schools that did not receive high grades, Brogan asserted that there was additional assistance for remediation, and there were disincentives or consequences for repeated failure. Students became eligible for Opportunity Scholarships (vouchers) if








their school received an F for 2 years in any 4-year period. This allowed the students to take the voucher and attend any public school or qualified private school of their choice. The school chosen by the student received the state funds allotted for his/her education (Brogan, 1999).

The Bush/Brogan A+ Plan, therefore, required increased accountability for

student achievement from the state level, while it also pushed much of the power and control to the school district, school, and parent level. In summary, the key elements of the A+ Plan included "rigorous and measurable expectations for student performance, understandable information to parents about school performance, deregulation of budgets and curriculum at the school level, remediation and unprecedented assistance to low performing schools" (Brogan, 1999, p. 2). It also included School Recognition awards of $100 per student to the schools that earned an "A" grade.

The School Recognition Awards of $100 for each student in the A+ Plan may have a disequalizing effect on the equity of the state educational finance distribution system. The effect of the reward dollars on the equity of the educational funding system warranted analysis.

Purpose of the Study

The evidence from the states included in some studies suggested that the

performance-based budgeting/accountability systems advanced educational reforms, and obviously, the rewards and sanctions brought about incentive effects. However, the rewards of money to the "A" schools, as in the Florida plan, may have the effect of disequalizing the funding of the districts. In this study, the principles of equity along with the effects of the rewards in the Bush/Brogan A+ Plan were addressed.








According to the Office of Program Policy Analysis and Government Accountability (OPPAGA) of the Florida Legislature,

The need to preserve equity in public education funding prevents policymakers from distributing funds to public schools solely on the basis of
performance. Nevertheless, the Legislature can use the budgeting process to financially reward or sanction schools without jeopardizing equity if it limits
the amount of funding it distributes on the basis of performance. The Legislature can also use non-financial incentives and disincentives to
improve school performance without affecting equity.(OPPAGA, 1998b,
p. 1)
The purpose of this study was to determine the effects of additional revenues for performance on the equity of a state school finance system. The research used quantitative measures of equity to determine the degree to which additional revenues awarded to high performing schools corresponded to the principles of equity.

Research Question

This study was conducted to answer the following research question: What were the effects of additional revenues for performance on the equity of a state school finance system?

Significance of the Study

Few studies to date have been conducted to determine the effects of monetary performance rewards given to high achieving schools or districts on the equity of K-12 state school finance systems. However, a recent study was conducted on the effects of performance-based funding on the equity of funding for the community college system in Florida (Brown, 1999). This researcher sought to advance the level of knowledge in the field of education finance by conducting research designed to investigate the question for K-12 public school finance. The present study was designed to study the measures of








equity before and after the implementation of performance-based funding rewards and to evaluate the effects of the additional revenues on a public school finance system.

As of 2000, there was not a perfect funding method for the school districts in all of the states. The use of funding formulas was the most common method until the 1990s, when performance-based funding or budgeting was beginning to be considered and utilized. The intent of funding formulas was to distribute state resources equitably and adequately to the various public school districts and schools (Odden & Picus, 2000).

Examinations of horizontal equity in the funding of public elementary and

secondary schools utilized the statistical measures of range, federal range ratio, restricted range, coefficient of variation, McLoone index, and the Gini coefficient (Berne & Stiefel, 1984; Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994). Horizontal equity, often described as "equal treatment of equals," was a school finance principle asserting that students who were alike should have received equal shares of revenue or funding (Thompson et al., 1994). Perfect equity existed when each student in a district or school received the same amount of revenue. The statistical measures of horizontal equity determined how far off funding formulas were from perfect equity (Brown, 1999). Public school elementary and secondary funding equity was measured by revenue per pupil or expenditures per student (Odden & Picus, 2000).

Vertical equity was examined for elementary and secondary public school funding. Due to the extra costs of special education, vocational programs, and compensatory education varying among districts, the state funding needed to assure equality of unequals was larger for some districts than for other districts (Thompson et al., 1994, p. 178). The degree of vertical equity in a school funding program was








increased by a funding methodology that took into consideration differences among students (Brown, 1999). Usually the vertical adjustments were made utilizing pupil weighting or categorical funding (Thompson et al., 1994).

The educational accountability models utilized performance-based budgeting that usually consisted of some type of measurable student performance, standards for comparing the performance information by the school or district, and a set of incentives and/or disincentives. These consisted of monetary rewards going to schools or districts, intervention strategies to assist low-performing schools, and sanctions for those schools that did not meet expected progress or standards through accountability or accreditation processes.

The goal of performance-based program budgeting was to improve test scores and to improve student performance. Performance indicators in reward programs varied among, but were not confined to, student achievement, performance assessments, student attendance, teacher attendance, dropout rate, retention rate, and transition from high school. Some rewards were based on an absolute standard, and others were earned based on growth and progress made toward achievement goals.

School finance has been set within a framework of a significant body of case law. The courts of a number of states have declared their respective financing systems unconstitutional (Odden & Picus, 2000; Thompson et al., 1994). The courts have directed attention, examination, and analysis to how well a system conformed to the legal standards mandated by the courts for educational opportunity equalization (O'Loughlin, 1992). In this light, the current study served to evaluate the effect of additional revenues to schools/districts with regard to court established legal principles.








In summary, state legislatures and state level education policymakers were faced with difficult circumstances as they attempted to reform education through accountability and improve student performance through performance based budgeting/funding. State finance systems are built on the principles of equity. As formulas changed to include performance-based financial rewards, as in the Florida system, it was important to examine how these changes affected the equity objective of the funding program.

Considering the significance of public education to our society, the objectives of the funding program, and the amount of revenue needed for operating schools, it was in the best interest of all policymakers to examine how equitably the state dollars were distributed. While too little funding could negatively affect the educational process and the well being of the country, too much funding could produce inefficient institutions, even while the level of funding supported high performance programs (Chambers, 1996). As formulas were adjusted and modified to include performance-based financial incentives, it was important to analyze the effect of these changes on the equity objective of the state school funding program (Brown, 1999; Florida Department of Education, 1999). Therefore, the ability to comparatively evaluate the effects of monetary rewards on equity before and after implementation was in the best interest of policymakers and very valuable to the education decision-making processes in school finance.

Limitations of the Study

Public school finance researchers have been concerned with the adequacy, utilization efficiency, and equity of revenues as well as taxpayer burden in realm of public education (Odden & Picus, 2000; Thompson et al., 1994). This study addressed only the effects of the dispersal of funds for performance on equity of the Florida state








school finance system, the Florida Education Finance Program. Questions of adequacy, efficiency, or taxpayer burden were not addressed.

A major limitation of this study was its generalizability. The results,

relationships, and effects developed using data from the state of Florida and Florida school districts were appropriate only to this state. However, the results were valuable to policymakers and those in positions of implementation in other states.

Overview of Methodology

This study was designed to be nonexperimental, utilizing population data. Using statistical measurements that were developed for public school equity studies, the researcher analyzed the degree of horizontal equity on revenue per weighted full-time equivalent (WFTE) student for the 67 public school districts of Florida prior to and following the implementation of performance-based funding. The researcher also analyzed the degree of horizontal equity on revenue per WFTE with and without performance-based funding for the year of performance-based funding implementation.

The Florida State Department of Education provided the data from the Florida

Education Finance Program for the school years 1997-1998, 1999-2000, and 2000-2001. The school year 1997-1998 was the year before implementation, and the year 1999-2000 was chosen because it was the first year that complete data were available to show performance-based allocations for the 67 districts.

Total revenue per WFTE was found by dividing the total revenue by the weighted full-time equivalent student count. Total revenue per WFTE was used to calculate the range, restricted range, federal range ratio, coefficient of variation, Gini coefficient, and McLoone index for each year chosen in the study to analyze the degree of horizontal








equity as described by Berne and Stiefel (1984) and Odden & Picus (2000). The calculations were examined, analyzed, and compared.

Definition of Terms

Adequacy "means providing sufficient funds for the average district or school to teach the average child to state standards, plus sufficient additional revenues for students with special needs to allow them to meet performance standards as well" (Odden & Picus, 2000, p. 430).

Horizontal equity is equity in which all members of the group are considered equal.

Vertical equity is equity "in which differences (for which unequal resource distributions are legitimate) among members of the group are recognized" (Odden & Picus, 2000, p. 47).

The Florida Education Finance Program (FEFP) has been the funding device for public schools in Florida since 1973. The intent of the state law has been to guarantee each Florida public school student the availability of substantially equal programs and services appropriate to his educational needs regardless of geographic differences and varying local economic factors (Florida Department of Education, 1996).

A performance measure is a quantitative or qualitative indicator used to assess state agency performance (OPPAGA, 1998a).

A performance-based program budget is a budget that incorporates approved programs and performance measures OPPAGA, 1998a).

Performance-based program budgeting (funding) is a method of relating

appropriation to program performance and expected outcomes. This form of budgeting








considers how well an agency is achieving its goals using the money it has been given when assessing funding needs. It identifies specific purposes for fund allocation, reports on past performance, and allows for comparison of programs. It offers program managers flexibility to reallocate resources when necessary and provides rewards for achievement or sanctions for failure (OPPAGA, 1998a, p. 4).

Organization of the Study by Chapters

This study of equity in the Florida public school finance system prior to and after implementing performance-based funding is organized into five chapters. Chapter 1 serves as an introduction to the problem consisting of the background to the problem, the purpose of and significance of the study, the methodology of the study, the definition of terms used in the study, and the limitations of the study. Chapter 2 presents a review of pertinent literature. The procedures used in this study are described in Chapter 3. Chapter 4 consists of a presentation and discussion of the data. Lastly, the findings, conclusions, and recommendations are given in Chapter 5.














CHAPTER 2
LITERATURE REVIEW

Introduction

Chapter 2 contains the literature search for the study. The concept of equity was reviewed in preK-12 education finance, along with the appropriate statistical measurements utilized to analyze the degree of equity in a funding program. Various studies were examined to decide which principles of equity were investigated, how these identified principles were measured, and which variables were used in the assessments. This study also reviewed selected fiscal equity court cases.

The researcher examined the developing accountability concept of performancebased funding. The funding program and allocation of revenue for districts and schools in the state of Florida was also described. Also, the researcher reviewed the performance-based funding in the Bush/Brogan A+ Plan for Florida.

Concept of Equity in Public Schools

The concept of equity and equitable treatment in education finance was one that developed and changed over time (Brown, 1999; Thompson et al., 1994; Wood & Thompson, 1993). With the following passage, Wood and Thompson discussed the evolvement of equity and equality through Alex B. Toqueville's assertions in Democracy in America and the idea of individual gain and achievement based on one's merits and work ethic (Tocqueville, A., 1835. Philip Bradley, Ed., Vintage Books, 1945, as cited in Wood & Thompson, 1993).








The gradual development of the principle of equality is a providential fact.
It has all the chief characteristics of such a fact: It is durable, it constantly
eludes all human interference, and all events as well as all men contribute to
its progress. (Wood & Thompson, 1993, p. 1)

The research of the early education theorists was compatible with the principles of social justice as discussed by John Rawls in A Theory ofJustice (Rawls, 1973, as cited in O'Loughlin, 1992; Thompson et al., 1994). Philosopher Rawls was concerned with justice and viewed fairness as the only means of achieving equity. In his book, Rawls greatly influenced liberal thinking. He gave a systematic account of justice as fairness; outlined the proper reach of, and limitations on, individual liberty; and he differentiated among acceptable and unacceptable forms of social inequality (Cavalier, 1999).

The arguments for equality of educational opportunities by education finance theorists seemed to be consistent with Rawls' second principle of justice requiring that "legitimate inequality must be to the greatest benefit of the least advantaged" (Thompson et al., 1994, p. 215). In keeping with Rawls' philosophy, education finance theorists held that it was the duty of the government to fund all educational needs, with some children having greater needs for more resources.

Equity and equality were not exactly interchangeable, since equity extends

beyond the general concept of equality (Wood & Thompson, 1993). John Rawls argued that there were some (people) who were more disadvantaged than others, and that the unequal distribution of resources or goods was necessary and required to compensate those that were least advantaged (Cavalier, 1999). Therefore, the pursuit of a basic sense of justice among members of our society was required (Wood & Thompson, 1993).

While concepts of equity were found throughout many ideologies and often reflected a variety of political agendas, the concept of equity depends on subjective








perceptions of individuals in collective groups. The perception of equity may or may not be in line with legal theory, but, regardless of the viewpoint, "equity attempts to achieve a higher level of justice and the resultant rights in order to attain what is perceived to be a greater, better, and more economically productive society" (Wood & Thompson, 1993, p. 2).

Early Education Finance Theory

The current concept that states should make every effort to equalize educational opportunity came from the work of Ellwood Patterson Cubberley in the early 1900s. In his 1906 dissertation, School Funds and Their Apportionment, Cubberley argued that a minimum level of education and equalization of educational opportunities was a state responsibility. He asserted that all children within a state had a right to the same educational opportunities (Cubberley, 1906; Chambers, 1996; Odden & Picus, 2000; Thompson et al., 1994).

In the 1920s Harlan Updegraff extended Cubberley's theories and advanced the concept that the state would change the amount of financial support based on the amount of local funding generated. He asserted that each child should be afforded a minimum level of education, compared to other students in the state, disregarding their location in the state (Wood & Thompson, 1993). Therefore, he argued for the state to appropriate the required funding to establish a minimum level of funding for all districts in a state.

In 1921, George D. Strayer and Robert M. Haig introduced the concept of a minimum educational foundation program for funding education. They believed and promoted a minimum educational foundation system and a series of education finance formulas to assure their education finance goals. Their goals included the following four








elements: (a) the establishment of adequate schools to ensure equal educational facilities to each child in the state, (b) tax levies for educational finance purposes that were based on taxpayers ability to pay, (c) a uniform tax effort all over the state, and (d) a system that did not hinder the ability of the local districts to raise resources above the minimum level (Strayer & Haig, 1921, as cited in Wood & Thompson, 1993; Chambers, 1996; Thompson et al., 1994).

Paul R. Mort, in 1924, continued the evolvement of educational opportunity equalization and education need in school finance literature through his doctoral dissertation. In The Measurement ofEducational Need, Mort asserted that in a minimum funding program the measure of educational need was the measure of cost for educational opportunity, or "it costs what it costs"; the overall educational needs of a community influenced the costs of educational programs. This meant that individual districts should be differentiated from others based on actual costs, and when a satisfactory minimum educational opportunity was available in every district, then equalization was satisfied (Mort, 1924, as cited in Thompson, et al., 1994; Chambers, 1996).

Mort's postulates implied that a satisfactory educational equalization program

would have three components. His components included common educational activities for all districts throughout the state, a demand for funding for unusual expenditures beyond the control of local communities, and unusual cost for justified special needs in particular communities. Therefore, he devised a weighted pupil concept, linked educational opportunity with standards of visible equality, and argued that state money was responsible for providing funding to produce uniform equality to all children of a state (Mort, 1924, as cited in Thompson et al., 1994; Chambers, 1996). Therefore, Mort's








concept of school finance resulted in equal access for children and the idea of vertical equity (Brown, 1999).

Henry Morrison proposed the idea of full state funding during the 1930s in his book, School Review (Morrison, 1930). In his view, the educational opportunity differences were due to taxing subdivisions of the states. His proposition included the abolishment of all public school districts and any reliance on property tax. This idea of full state funding of expenditures from a mandated state income tax was met by political opposition at the local and state levels, although later gained some interest (Thompson et al., 1994; Wood & Thompson, 1993).

In summary, the financing of public education evolved up to and during the 1950s with funding formulas based on concepts developed by Strayer and Haig and extended by Mort. Mort used the formulas to present common educational programs, which determined nearly the same educational opportunity for each student in a given state. In addition, he introduced and argued for the concept of the weighted pupil, with the weightings based on a classification of students with various special needs and the concept of vertical equity (Brown, 1999; Thompson et al., 1994; Wood & Thompson, 1993).

Later researchers, Roe L. Johns and Edgar L. Morphet in The Economics

Financing ofEducation, expanded the concept of equalization of educational opportunity considering educational need. They identified additional variables that affected educational opportunity costs, including costs related to sparsity and population density (Johns & Morphet, 1975).








These researchers expanded the concept, as discussed by Mort, of considering the various educational needs for educational opportunity equalization. This idea took into account that the different educational needs, depending on the varying needs of students and community expectations, affected the educational delivery costs. Considerations were related to students with special needs; school-related needs, such as varying size and location; and special program needs. The provision of equalization for those educational opportunities among the varying communities was the responsibility of the state legislatures through the state funding formulas (Chambers, 1996; Wood & Thompson, 1993).

Education and Benefits to Society

The American system of public education had the aim of educating every child in the country and reflected the values and goals of the American society (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). Thomas Jefferson wrote that no nation could remain both ignorant and free. Therefore, to protect their freedom and to provide a trained work force, Americans developed an elaborate educational system (Garms, Guthrie, & Pierce, 1988). The principal intent of public education was to "benefit society through increased productivity, improvement of an individual's and society's quality of life, and increased standards of living for all people" (Wood & Thompson, 1993, p. 10). The benefits of an educated population were generally greater for society than for the individual citizen; however, the benefits of education accrued to both.

Many economists have held the belief that education and economics engage in constant interdependency. Theodore Schultz, John Kenneth Galbraith, and Gary Becker








asserted that the historic elements of land capital, and labor had to embrace the idea of human capital (Thompson et al., 1994; Warsh, 1992). Schultz, who won a Nobel Prize in 1979, explained the concept when he wrote,

Human capital has the fundamental attributes of the basic economic concept of
capital; namely, it is a source of future satisfactions, or of future earning, or both of them. What makes it human capital is the fact that it becomes an integral part
of the person. (Schultz, 1970, as cited in Thompson et al., 1994, p. 24)

Schultz' focus on education as a key to raising productivity led to the modern emphasis on human capital and paved the way for Gary Becker's analyses of human skills as a source of production and growth (Thompson et al., 1994).

Gary Becker, another economist from the University of Chicago who won the Nobel Prize for economics, explained that capital could mean a bank account, shares of stock, an assembly line or steel plates, all forms of capital in the sense that they yield income, and other useful outputs over a long period of time. He also asserted that schooling and training courses were also capital in the sense that these educational activities improved a person's health, raised earnings, or added to a person's knowledge over much of a lifetime. He argued that it was fully in keeping with the capital concept to say that such expenditures were investments in capital, but these produced human, not physical or financial, capital. This was because one could not separate a person from his or her knowledge, skills, health, or values the way it was possible to move physical assets while an owner stayed put (Becker, as cited in Warsh, 1992).

Thompson et al. (1994) asserted that under the conditions of the human capital concept, education took on substantial meaning. They stated that "the concept of human capital permits viewing the costs of unskilled labor as true cost and the expense of creating more productive skilled workers as an investment with tangible returns"








(Thompson et al., 1994, p. 24). Therefore, the idea of human capital represented a step in recognizing education as an investment that increased gain.

Individuals benefit from their education in many ways. They are major

beneficiaries as they have improved personal opportunities for increased income, greater social mobility, higher socioeconomic status, and more cultural opportunities (Odden & Picus, 2000; Thompson et al., 1994). These benefits lead to other benefits as better educated people tend to be less susceptible to illness, have less unemployment, are more open to new ideas and information, and are more active consumers (Thompson et al., 1994). The individual benefits, then, also support the concept that education is an investment, not an expense.

Economic studies confirmed that funding for public education was an investment, not just an expense. There were significant cost-effective economic social returns on the expenditures. Well-educated students grew into educated adults that were more productive and contributed to the overall economic and social well-being of society. Therefore, the whole society, as the primary recipient of benefits, was responsible for funding an appropriate education system (Garms et al., 1988; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993).

Each of the states was legally obligated to provide an "equal educational opportunity and a basic educational program" to all state residents between certain designated ages (Wood & Thompson, 1993, p. 12). The goal was to furnish equal opportunity and education programs, regardless of the student's location in the state or relative wealth of the local community (1993), and the desire of the individual student to achieve should have been the only restriction of the educational programs.








In reality, any state's wealth was not distributed in a uniform format. Therefore, the ability of the diverse school districts to offer the educational programs mandated by the state legislature varied from district to district, depending on the wealth variation. State intervention was necessary to attain any form of equity in education finance structure. A distribution formula for state funding was the method utilized to disburse the state funds to the local school districts. These funding formulas were used to distribute funds to schools and to balance the inequities caused by local tax base differences (Odden & Picus, 2000; Wood & Thompson, 1993). In keeping with the concept that a student's educational opportunity should not be a function of the wealth of the local community, Wood and Thompson (1993) asserted that each state was justified to tax the wealth of all residents to provide funding to the poorer districts.

Principles of Equity

Equity in public school finance referred to the fairness in distributing state funds to local school districts and students (Berne & Stiefel, 1979). Researchers were encouraged to create a framework that portrayed exactly what investigators were trying to assess in equity studies. The setting of the study of equity was founded on the criteria of four questions (Berne & Stiefel, 1979; Brown, 1999; Odden & Picus, 2000; Wood & Thompson, 1993). First, a researcher should make clear the question of equity for whom? Expenditures for students receiving educational services were usually considered the basis for equity, although some studies considered taxpayer equity. Which resources to distribute represented the second question to be identified. These resources were identified as revenues from state or federal sources, or they represented teacher salaries or other expenditures. The third query asked which principles of equity were examined in








the research. This was related to horizontal equity, vertical equity, or wealth neutrality. Which statistical measures were used to measure the degree of equity was the fourth question to be addressed (Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Wood et al., 1990).

Horizontal and vertical equity were central to the public school finance debate, and the construct of equity drives the allocation formulas or mechanisms utilized to sustain fairness in the educational and fiscal structure (Brown, 1999; Garms, 1979; Garms, Guthrie, & Pierce, 1988; Odden & Picus, 2000; Thompson, Honeyman, & Wood, 1993; Thompson et al., 1994; Wood & Thompson, 1993). Horizontal equity, usually described as equal treatment of equals, was an equity principle that stated that children who were alike should receive equal shares of resources (Berne & Stiefel, 1999). States had to try to balance expenditures reasonably for all students who were "educated under similar circumstances with similar educational abilities-horizontal equity" (Wood & Thompson, 1993, p. 18). The achievement of perfect equity took place when each student in a state received the same apportionment of funding. Measurements of horizontal equity were used to determine statistically how far the expenditures per students were from perfect equity (Berne & Stiefel, 1979, 1999; Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993).

Vertical equity was an equity principle, which stated that students not alike should be treated differently, described as unequal treatment of unequals. This meant that allocations had to be made for varying expenditures on special populations of students. Children who were considered to have unequal needs and requirements for different levels of funding included those who were handicapped, from impoverished areas, or








who spoke English as a second language (Berne & Stiefel, 1999; Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994). A public school finance model that took into account the various student differences increased the degree of vertical equity of a funding mechanism. The use of pupil weightings, based on the diverse student special needs, was one of the most common ways to enhance the degree of vertical equity.

The principles of horizontal and vertical equity are also related to taxation.

Horizontal equity is described as an equal effort exerted by taxpayers with equal abilities to pay. Therefore, two people with equal incomes and equal valued housing should be assessed at the same property tax rate and thereby support equitable tax burdens. In contrast, the second principle of vertical equity provides that taxpayers with varied abilities to pay would exert dissimilar efforts in carrying tax burdens (Wood & Thompson, 1993).

Many studies described different variables utilized in evaluating the degree of

horizontal equity in preK-12 education. As they analyzed the differences and inequalities in funding formulas among many states, they also firmed up the equity principles, assessment variables, and appropriate statistical measurements (Berne, 1988; Berne, Steifel, & Moser, 1997; Berne & Steifel, 1979, 1999; Bezeau, 1979; Brown, 1999; Chambers, 1996; Hertert, Busch, & Odden, 1994; Hickrod, Chaudhari, & Lundeen, 1980; Kearney & Chen, 1989; Owens & Maiden, 1999; Steifel, Rubenstein, & Berne, 1998; Verstegen, 1996; Verstegen & Salmon, 1991; Wood, Honeyman, & Bryers, 1990).

Very often equity research utilized the variable revenue per pupil. The who of the study, per Berne and Stiefel's framework, was the pupil as the unit of analysis, and revenue was the object that should be equitable (Brown, 1999). Revenue was described








as the sum of state and local revenues, with some variation (Alexander, 1997, 1998; Kearney & Chen, 1989; Verstegen, 1987; Verstegen & Salmon, 1989). A revenue variation example was operating revenue per pupil, which was defined as revenue lessened by federal, capital improvement, and debt service funds (Brown, 1999; Hertert et al., 1994). Researchers also often used the variable expenditures per pupil (Brown, 1999; Hickrod et al., 1980; Kearney & Chen, 1989; Wood et al., 1990).

While the unit of analysis in studies of fiscal equity was usually "pupil," this unit was often characterized in various ways. Pupil was described as average daily attendance (ADA) or average daily membership (ADM) (Odden & Picus, 2000; Thompson et al., 1990), with some studies utilizing pupil weightings (Brown, 1999; Stark, Wood, & Honeyman, 1993). The use of a weighting formulation was needed to make vertical adjustments when financial policymakers considered students with special needs or specific program costs (Odden et al., 1979; Odden & Picus, 2000; Thompson et al., 1994).

The weighted full-time equivalent (WFTE) was formed by researchers by combining the concept of weighting with another unit of analysis, the full-time equivalent. Stark et al. (1993) described the WFTE as "the summation of the percentages of time a student spends in a particular program multiplied by weighted cost factor associated with the provisions of services for that program" (p. 235). The Florida Education Finance Program (FEFP) used a funding formula to distribute state resources to school districts based on a WFTE. Therefore, research on public school finance equity for the state of Florida also utilized WFTE for the unit of analysis (Brown, 1999;








Chambers, 1996; Harrell, 1992; Maiden, 1994; O'Loughlin, 1992; Stark et al., 1993; Summers, 1993).

In summary, equity was very important in taxation and appropriations for expenditures per student. The state funding formulas changed through political maneuverings and litigation in the various states in the attempts to equitably distribute the financial resources for public school funding. As the social, political, and economic environments changed and affected states and local school districts, education finance policies were altered to better assure equity (Wood & Thompson, 1993).

Statistical Measures for Horizontal Equity

Several statistics were used to assess the degree of equity in public school finance for one variable, such as expenditures per student. Berne and Stiefel (1984) identified and described these statistics and their properties in their book, The Measurement of Equity in School Finance. The measurements included the range, restricted range, federal range ratio, coefficient of variation, Gini Coefficient, and McLoone Index. The Lorenze curve was often utilized to describe and explain the Gini coefficient (Berne & Stiefel, 1999; Brown, 1999; Chambers, 1996; Odden & Picus, 2000; O'Loughlin, 1992; Thomspon et al., 1994; Wood et al., 1993). Researchers were able to analyze the degree of equity from a distinct viewpoint with each of the different statistical measurements (Brown, 1999; Chambers, 1996; Odden & Picus, 2000; Thomspon et al., 1994; Verstegen, 1996). The repeated use of these statistical measures established an acknowledged procedure for equity measurement studies (Brown, 1999; Chambers, 1996; Thompson et al., 1994).








Range

The range is a general dispersion measure that is the difference between the highest and lowest per-pupil observation, when the observations are ordered from the highest to lowest. The larger the range, the greater the inequality. This statistic measures the maximum difference in the variable among students in a state, but it was also a disadvantage. Since it indicates the difference between only two observations, the smallest and the largest, it does not take into consideration the effect of discrepancies or outliers. Usually, in every state there were outlying districts. Some districts had low property wealth or low-income rural districts. In addition, there were districts with oil wells or nuclear power plants, with very few students. These districts were anomalies and did not represent the more common districts (Chambers, 1996; Odden & Picus, 2000; Wood & Thompson, 1993).

The range statistical measurement does not give evidence of the degree of

equality or inequality for the observations in the studies and, therefore, is a poor indicator for assessing the degree of equity. Further, the range increases with inflation, and an increasing range indicates a system with increasing inequality. While the range statistics are used extensively by school finance litigants and analysts and demonstrates the maximum degree of inequity in data, the range is not a favored measure (Odden & Picus, 2000; Thompson et al., 1994).

Restricted Range

The restricted range is the second horizontal equity statistic and is the difference between an observation near the top of a distribution and an observation near the bottom of the distribution. Therefore, the restricted range takes into consideration the middle of








the distribution by leaving out a percentage of pupil observations at the extremes. The restricted range is defined as the difference between observations at the 95th percentile and the 5th percentile (Brown, 1999; Chambers, 1996; Odden & Picus, 2000; O'Loughlin, 1992; Thompson et al. 1994). It is also described by Odden and Picus (2000) as the difference between the 90th percentile and the 10th percentile, leaving out even more outliers. As occurs with the range, the smaller the restricted range, the better the equity of the distribution. However, the restricted range still measures the degree of inequality between just two observations and not the overall distribution. It also increases with inflation, as does the range. While the restricted range is preferred to the range, neither are good indicators of the equity of the entire set of observations in the distribution of the object for the entire education funding system (Odden & Picus, 2000; Thompson et al., 1994).

Federal Range Ratio

The federal range ratio is a variation of the restricted range and was "originally designed as a federal test to measure whether states met federal wealth neutrality guidelines in distributing federal funds" (Thompson et al., 1994, p. 248). The ratio is analyzed in a number of studies on per-pupil revenue and is also examined for the range of per-pupil expenditures. This is calculated by dividing the restricted range by the observation at the 5th percentile (Thompson et al., 1994). This was often converted into a percentage by multiplying by 100. The smaller the decimal calculated for the ratio, then the less variation there is in the distribution of data, therefore making the distribution of observations more equitable (Chambers, 1996). Because this statistic is a ratio, it eliminates the inflation problem, since the ratio does not increase with inflation. Because








the federal range ratio does not vary significantly with inflation, it is considered a more acceptable statistic than range or restricted range (Brown, 1999; Chambers, 1996; Odden & Picus, 2000).

The federal range ratio is a statistic that also is utilized to determine whether states may include federal Impact Aid in calculating state equalization aid (Odden & Picus, 2000). It had once been known as the "federal measure of disparity" (Hickrod et al., 1980, p. 182). The federal range ratio was developed to analyze and determine whether a state's school finance model was structured to equalize expenditures (Kearney & Chen, 1989). The measure may be used on both objects of expenditures and revenue. Coefficient of Variation

Another horizontal equity statistic is the coefficient of variation (CV) and is

defined as the standard deviation divided by the mean. It measures the variability in the distribution about the mean (Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Verstegen, 1996). The coefficient is expressed in either decimal or percent form, and it varies from 0 to 1 or from 0 to 100, as a percentage. The smaller the CV, the better the object is distributed to children, and a zero CV represents a uniform distribution of funds to students. The object is usually the revenue or expenditures for a given proportion of children in the state (King & Mathers, 1997; Odden & Picus, 2000; Thompson et al., 1994).

The CV is a statistic that includes all values of a set of observations, does not change with inflation, and is relatively easy to understand. If the model of the school funding system remains the same, but all economic and dollar variables rise with inflation, the CV remains the same. This indicates that the equity of the system has not








changed. Therefore, due to these characteristics, the coefficient of variation is increasingly utilized by school finance analysts (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993).

An issue discussed by Odden and Picus (2000) was the determination of an

appropriate standard for the coefficient of variation. Describing it as a value judgment, they stressed that the main concern was to determine a relative standard that would compare districts in the varying quartiles, or an absolute standard that would establish a cutoff point for the determination of equity. While recommending an absolute standard for equity of about 10%, it was recognized that standard setting involved politics, and different states and researchers of school finance varied on acceptable levels (Odden & Picus, 2000).

Gini Coefficient

The Gini Coefficient is a statistical measurement adopted from measures of

income inequality used by economists. This statistic shows how far the distribution is from allocating each percentage of students with equal percentages of revenues (Chambers, 1996; Kearney & Chen, 1989; Odden & Picus, 2000; O'Loughlin, 1992; Thompson et al., 1994). School finance researchers, led by Hickrod in the 1970s, used the Gini Coefficient to measure wealth neutrality (Thompson et al., 1994). While wealth is defined as the ability of a district to support the schools with local income and property taxes, wealth neutrality describes the relationship between the school district's wealth and the distributed expenditures for the school district (Hickrod et al., 1980; Thompson et al., 1994). The funding structure is said to be "wealth neutral" if there is little, or no, relationship between the local district wealth and local district expenditures (Chambers,








1996; Thompson et al., 1994). The Gini coefficient represents this relationship, or lack of relationship, through a calculated ratio. The ratio determines a number between zero and one. The smaller the Gini coefficient, the more equitable the distribution of expenditures or revenue (Brown, 1999; Chambers, 1996; Odden & Picus, 2000; Thompson et al., 1994).

To determine the Gini Coefficient, a graph is prepared by plotting the cumulative percentage of enrollments on one axis, usually the horizontal axis, against the cumulative percentage of revenues or expenditures on the other axis, usually the vertical axis. The resulting graph indicates the degree to which the revenue or expenditures are distributed equally to students at various percentiles. If the object of expenditures or revenues are perfectly distributed, the Gini graph will be a straight 45-degree line (Odden & Picus, 2000). The 45-degree line represents perfect equity indicating that a certain percentage of the students receive an equivalent percentage of revenue or are allotted an equal percentage of expenditures (Chambers, 1996). It is best explained by the Lorenze curve (Thompson et al., 1994). This was the name of the concave curve formed from the plotted data described above, when the object was not perfectly distributed.

The Gini coefficient was the area between the Gini/Lorenze curve and the 45degree line divided by the area under the 45-degree line. The resultant value ranges from zero to one where a thoroughly equitable distribution occurs when the Gini coefficient equals zero. This index includes all observations and is not affected by inflation (Odden & Picus, 2000).

A value for the Gini Coefficient that is close to zero suggests equality, but the school funding model may be unequal. However, the Gini Coefficient is a frequently








used horizontal equity statistic in school finance research and analysis. Although a standard had not been set, it was suggested by Odden and Picus (2000) that a value of less than .05 was desirable. The smaller the Gini Coefficient, the smaller the area between the 45-degree line of perfect equity and the Lorenze curve of plotted observations; therefore, the more equal the distribution of the object (Odden & Picus, 2000).

The Gini Coefficient is considered a wealth neutrality test and was most

frequently used by school finance researchers to indicate the degree of equity on perpupil expenditures. However, from the 1970s to 1990s, researchers also utilized the Gini Coefficient and Lorenze curve to examine the degree of equity on per-pupil revenue. Some also used the Gini Coefficient on weighted units of analysis (Chambers, 1996). McLoone Index

The McLoone Index is a statistic unique to school finance and was designed by

and named after Eugene McLoone, an economics professor at the University of Maryland in the 1960s (Hickrod, Chaudhari, & Lundeen, 1980; Odden & Picus, 2000, Thompson et al., 1994). The measure was created due to a belief that each state should be concerned with the school districts having expenditures or revenues that are below the median of the distribution. It was developed to provide a measure for this bottom half of the distribution and to examine the degree of equality for those observations below the 50th percentile (Chambers, 1996; Odden & Picus, 2000). According to McLoone and other school finance researchers, the state was responsible for "bringing up the low spending districts" (Hickrod et al., 1980, p. 182).








The McLoone Index is defined as the ratio of the sum of the values of all

observations, such as expenditures, below the median to the sum of observations if they all had the value of the median (Hickrod et al., 1980; Keamrney & Chen, 1989; Odden & Picus, 2000; Thompson et al., 1994). A higher McLoone Index results when fewer dollars are required to raise all observations below the median level up to the median level (Chambers, 1996). The Index ranges from zero to one, with a one representing perfect equity. The value for most school finance sets of data is in the 0.7 to 0.9 range. While there is no standard set for a "good" McLoone Index, it was suggested by Odden and Picus (2000) that 0.95 is desirable.

Researchers used the McLoone Index to examine the equity of the distribution using per-pupil expenditures, per-pupil revenue, and also a weighted unit of analysis. Since the McLoone Index is a straightforward measure of equity of the distribution for the bottom half of the data set, it is popular in school finance and is included in many school finance equity studies (Hertert, Busch, & Odden, 1994; Hickrod et al., 1994; Kearney & Chen, 1989; Odden & Picus, 2000; Wood, Honeyman, & Bryers, 1990).

School Finance Equity Litigation

As determined by the United States Constitution, public education was a responsibility of the states (Alexander & Alexander, 1992; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). The Tenth Amendment states, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people" (Alexander & Alexander, 1992, p. 842). Therefore, state legislatures delegated public education implementation to state departments and agencies, with school districts designated as the managerial entities








to operate daily functions of state public schools (Alexander & Alexander, 1992; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993).

As the states accepted additional responsibility in public school finance,

legislatures began to seriously develop state funding frameworks that increased the amount of revenue for school districts and provided a more uniform educational minimum foundation across the states (Brown, 1999; Thompson et al., 1994). This resulted in the public school finance equity question of how well the funding mechanisms worked in allocating state resources adequately and equitably to the various school districts within a state (Brown, 1999; Wood & Maiden, 1996). Due to these concerns, there was court involvement in the changing of the equity concept from one that was philosophical to a legal concept. In general, successful litigation was based on sound legal strategies, well-informed litigants in the area of school finance research, and expert data analysis (Wood & Maiden, 1996, p. 197). A number of court cases clarified the equity concept in public school finance, and this mandated that a number of states change and improve their funding mechanisms (Brown, 1999; Thompson et al., 1994).

The local school districts operated within the legal framework of each state's

court system, state constitutions, state statutes, and administrative rules and regulations. Although the parameters varied from state to state, the local districts were mandated to administer and work within the state parameters. In addition, local school boards were not allowed to take on additional responsibilities or to disregard assigned duties (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993).

There was more access to public education finance data in the early to middle part of the 20th century, and researchers of educational finance made significant progress








toward the analysis and understanding of education finance data and the differences among the funding structures in the various states. However, the findings of the research studies were not often brought to bear in funding practices by state policymakers (Wood & Thompson, 1993). Many state legislatures were averse to recognize and implement the findings of educational finance research, and early litigation processes were not able to truly employ the research findings. Although the early cases were based on simple analysis of the data, these cases previewed the debate and litigation regarding public policy for school funding for many years (Wood & Thompson, 1993). Early History of Education Finance Litigation

Equity, meaning equality of education, in public school funding in the United

States was the subject of litigation in both state and federal courts. The primary case that addressed equal education opportunities was Brown v. Board ofEducation in 1954. The issue before the U.S. Supreme Court was the constitutionality of the segregation practice of different public schools for white and black students (O'Loughlin, 1992; Wood & Thompson, 1993). Brown was a challenge to the legal decision in Plessy v. Ferguson (1896).

In 1896, Plessy v. Ferguson was argued before the U.S. Supreme Court. The issue before the Court was the law requiring "separate-but-equal" public transportation facilities for blacks and whites (Wood & Thompson, 1993). The Court, acknowledging the importance of the decision of the country's public schools, held for the separate-butequal doctrine and held that the practice was valid (Plessy v. Ferguson, 1896; Wood & Thompson, 1993).








The next school court case utilizing the Plessy doctrine was Cumming v.

Richmond in 1899. This case was the first litigation before the Supreme Court regarding public school funding. Since a Georgia county school board already had in place a high school for white students in the district, the board refused to also provide a school for minority pupils. While the defendant school board asserted that the district could not afford to operate two high schools, the plaintiffs argued that the school for minorities had to be built or the white schools had to be closed (Wood & Thompson, 1993).

The U.S. Supreme Court determined that taking the school and educational

opportunities away from white children would not provide minority children additional educational opportunities. Closing the high school for white students would not provide advance the position of the black students. The court finding distinguished between a perception of a "nonarbitrary denial of equal treatment versus a hostile denial of equal treatment as prohibited by the Fourteenth Amendment" (Wood & Thompson, 1993, p. 6). The Plessy and Cumming cases determined the direction of court action for about 50 years.

The argument in Brown v. Board ofEducation challenged the Plessy finding and the separate-but-equal doctrine. The Brown argument depended on the interpretation of Section 1 of the Fourteenth Amendment to the Constitution. This prohibited the states from denying the equal protection of the laws to any individual in their respective states (Brown v. Board ofEducation, 1954; O'Loughlin, 1992). It stated,

All persons born or naturalized in the United States and subject to the jurisdiction
thereof, are citizens of the United States and the State wherein they reside. No
State shall make or enforce any law which shall abridge the privileges or
immunities of citizens of the United States; nor shall any State deprive any person
of life, liberty, or property, without due process of law; nor deny to any person








within its jurisdiction the equal protection of the laws. (U.S. Constitution,
Amendment XIV, section 1)

Chief Justice Earl Warren wrote the finding for the Court and stated,

Where a state has undertaken to provide an opportunity for an education in its
public schools, such an opportunity is a right which must be made available to all
on equal terms. Segregation of children in public schools solely on the basis of race deprives children of the minority group of equal educational opportunities,
even though the physical facilities and other "tangible" factors may be equal.
(Brown v. Board ofEducation, 1954, p. 493)

The Court also emphasized the importance of education as a governmental

function and a requirement for success in life (O'Loughlin, 1992).

Today, education is perhaps the most important function of state and local
governments. Compulsory school attendance laws and the great expenditures for education both demonstrate our recognition of the importance of education
to our democratic society. It is required in the performance of our most basic
public responsibilities, even service in the armed forces. It is the very
foundation of good citizenship. Today it is a principal instrument in awakening the child to cultural values, in preparing him for later professional training, and
in helping him to adjust normally to his environment. In these days, it is
doubtful that any child may reasonably be expected to succeed in life if he is
denied the opportunity of an education. (Brown v. Board ofEducation, 1954, p.
493, as cited in Alexander & Alexander, 1992)

The overturning of Plessy meant the end to the legalized separate-but-equal policy

of segregation in public schools in the United States. Based on the Court's interpretation

of the equal protection clause of the Fourteenth Amendment, education opportunities in

the public schools had to be made available to all students equally (O'Loughlin, 1992).

Therefore, in Brown v. Board ofEducation, the Supreme Court reversed Plessy v.

Ferguson in its landmark decision. This finding began the modem era of the use of the

courts in the efforts of education finance theorists to affect and shape change in education

finance (Wood & Thompson, 1993). These theorists interpreted the opinion of the

Supreme Court in Brown v. Board ofEducation to mean that "where the government has








undertaken to provide education, it must do so on an equal basis of all residents of a given state" (Wood & Thompson, 1993, p. 10).

A number of court cases followed that dealt with the issues of differences in

funding among school districts, disparities that resulted from the funding models in each state. Mclnnis (1968) was filed on behalf of public school students in Cook County where the plaintiffs argued that the state statutes related to the public school financing structure were unconstitutional because of the resulting funding differences among the school districts (Odden & Picus, 2000; O'Loughlin, 1992). The revenues for the districts came 75% from local property taxes and 20% from state sources. This funding model produced differences in expenditures from $400 to $1,000 per student, and the plaintiffs argued that these variations denied individuals the equal protection opportunity guaranteed by the U.S. Constitution's Fourteenth Amendment (Mclnnis v. Shapiro, 1968; Odden & Picus, 2000; O'Loughlin, 1992).

The McInnis suit was dismissed by the federal district court, and later the U.S.

Supreme Court affirmed the dismissal (Mclnnis v. Shapiro, 1968). The court determined that the financing structure complied with the Fourteenth Amendment, even though the structure allowed for variations in expenditures, and it was not discriminatory. The court further explained that the Constitution did not require that the funding take place only on the basis of the students' educational need. Further, the Constitution did not mandate strict guidelines for equal expenditures for each pupil (Mclnnis, 1968; Odden & Picus, 2000; O'Loughlin, 1992).

In Burrus v. Wilkerson (1970), the challenge was to the state's funding method in Virginia. Again, the funding structure was funded heavily from the local property tax.








The plaintiffs asserted that the system created major disparities in the educational opportunities in the various counties and that this model violated the equal protection clause. The Virginia state constitution in Burris v. Wilkerson (1972) required that the legislature maintain an efficient and free system of public schools (O'Loughlin, 1992; Odden & Picus, 2000), but the federal district court had concluded in Burrus v. Wilkerson (1969) that "courts have neither the knowledge, nor the means, nor the power to tailor the public moneys to fit the varying needs of these students throughout the State" (Burris, 1969, p. 574, as cited in Minorini & Sugarman, 1999b, p. 37).

While the federal court could find no standard to apply for educational need in the Mclnnis case, the state supreme court in Serrano (1971) determined a manageable standard in the concept of fiscal neutrality (Odden & Picus, 2000; O'Loughlin, 1992). This established a relationship that could be examined between the taxable property wealth of a district and the expenditures per student. Under the California funding structure, more than half of the school revenues were from local real property taxes, and the courts determined in Serrano that districts with low tax bases were not able to levy taxes at a rate that was adequate to provide the revenue that could be generated with much less tax effort in the more property rich districts. Therefore, this enabled the courts to utilize a standard to measure an equality of educational opportunity (Odden & Picus, 2000; O'Loughlin, 1992).

Theories of Litigation and Selected Cases

The public school finance cases were litigated before the courts under three

different theories. The first theory was based on the "equal protection doctrine" under the U.S. Constitution. Utilizing this proposition, attorneys argued that the state funding








framework violated the clause, because "lower funding level in poorer districts results in a deprivation to education students who reside in these districts" (Underwood, 1994, p. 144).

The second and third theories utilized in school finance litigation brought before the courts were based on rights that were guaranteed by state constitutions. The equal protection clause under state constitutions was utilized by some school finance litigators, and other attorneys argued that the particular state had failed to appropriately provide an education to the state's students, according to the articles of the state constitution (Brown, 1999; Underwood, 1994).

Litigators who searched for reform through the federal government court

systems, however, were not very successful. This was demonstrated in San Antonio v. Rodriguez (1973). In this case, the U.S. Supreme Court upheld the Texas public school finance mechanism constitutionality, even though there were large differences in the resource distributions. Due to the difficulty with litigation through the federal government, litigators for public school finance reform concentrated their efforts through the state constitutions and court systems (Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993).

The first state litigation for public school finance, Serrano v. Priest, in 1971 was successful and laid the groundwork for subsequent state court cases through equal protection. In 1971, Robinson v. Cahill (1972) paved the way for equity and adequacy, when the court required that educational opportunity should be provided in a "thorough and efficient" manner as required by the state constitution (Brown, 1999; Camp & Thompson, 1988, p. 222; Thompson et al., 1994).








Public school finance researchers and reformers determined that litigation was important in advancing the equity of state funding for education, without regard to the court rulings (Camp & Thompson, 1988). Referred to earlier, the funding structures in at least 14 states were held to be unconstitutional (Dayton, 1996). A number of states reformed their funding models, just in anticipation of possible legal action. Related to the amount of funding, it was found by researchers that there were increases in state revenues for education, when there was a court ruling that education was a fundamental right (Brown, 1999; Hickrod, Hines, Anthony, Dively, & Pruyne, 1992).

Two court cases were filed in the 1960s, Mclnnis v. Shapiro (1968) in Illinois and Burrus v. Wilkerson (1970) in Virginia, that challenged the constitutionality of disparities in educational expenditures across the state's school districts. These cases were brought on equal protection grounds and argued that the systems were unconstitutional because education was a fundamental right and the big disparities in revenues per student or expenditures per student were not related to educational need. The plaintiffs argued that wide disparities could only exist if they were related to educational need and could not be related to other variables, such as the local tax base in each district (Odden & Picus, 2000).

During the trials, the courts requested standards to evaluate and measure

educational need. Since there was no agreement at the time on the definition or means to measure educational need, the courts ruled that the variations in expenditures were not sufficient to justify overturning the state finance system (Odden & Picus, 2000). The courts ruled that the suits were non-justiciable, because there was no standard to use to evaluate the claims of the plaintiffs (Odden & Picus, 2000).








Therefore, these first court cases that sought to resolve school finance inequities were not successful, and in most of the subsequent cases, many of the defendants attempted to have the court declare the case non-justiciable using McInnis and Burress as precedents. Plaintiffs in later cases, however, continued to utilize equal protection in their challenges of state finance models, but they also developed standards for the courts to use (Odden & Picus, 2000).

Many equal protection court cases were brought on the basis of federal or state equal protection clauses, or both (Thompson et al., 1994; Wood & Thompson, 1993). The court used one of two tests to determine whether the clause was violated in the state public school finance system. The first test was the rational test and asked if the government had a reason for the disparity in treatment of individuals. If the court in such as case invoked the rational equal protection test, the state action was usually upheld with the state identifying some basis for its law that treats individuals differently (Odden & Picus, 2000, in press).

The second test was "strict judicial scrutiny." This was used by the courts to

force states to show that there was a "compelling state interest" for the government action and that there was "no less discriminatory" policy that could have been used by the state government to carry out the compelling interest. Because it was very difficult for a state to identify both parts of this test, there was no other state policy that would have been less discriminatory, and the state usually lost the case under this test (Odden & Picus, 2000, in press).

The key for the plaintiffs was to identify the qualifying factors for which the courts could invoke strict judicial scrutiny. The courts could do this only in two








circumstances, when the state action affected a fundamental right, or when the state action produced a suspect classification. The U.S. Constitution prohibits any government actions that affect individuals differently due to religion or national origin. Then the U.S Supreme Court decision in Brown v. Board ofEducation (1954) also identified race as a suspect class. It effectively overturned all state laws that treated individuals in a different way exclusively on the basis of race (Odden & Picus, 2000). Litigation based on equal protection

The challenge for school finance litigators was to determine strategies to place legal arguments against disparities in per-pupil expenditures under the umbrella of equal protection litigation and to identify standards that could be used by the courts to make decisions (Odden & Picus, 2000). Litigation that was based on either state or federal equal protection clauses made two arguments in court. First, education was a fundamental right and had to be provided equitably to all individuals. Second, the state school finance structures created a suspect class that was based on property wealth per student.

In 1970, Coons, Clune, and Sugarman (as cited in Minorini & Sugarman, 1999a; Odden & Picus, 2000) framed this argument, stating that school financing systems needed to be fiscally neutral. This neutrality meant that the expenditures per pupil could not be related to the local district property wealth per pupil. Without fiscal neutrality, the quality of education was greater for pupils in high property wealth districts and less for students in low property wealth per pupil districts (Minorini & Sugarman, 1999a; Odden & Picus, 2000).








Serrano v. Priest. The Serrano v. Priest case was filed in California in 1968. The trial court dismissed the case initially on the basis that school finance cases were nonjusticiable, citing Mclnnis and Burruss. The case was then appealed to the California Supreme Court that gave an opinion in August of 1971. The Court ruled that, based on the Fourteenth Amendment to the U.S. Constitution and the equal protection clause in the California constitution, the case was justiciable, based on the standard of fiscal neutrality (Odden & Picus, 2000). It opined also that education was a fundamental right and that property wealth per pupil was a suspect class. It also stated that, based on the alleged facts, the California school finance structure was not constitutional. As a precedentsetting opinion, this case gained nationwide political and legal attention, and it supported many similar cases in other states (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993).

San Antonio v. Rodriguez. The San Antonio v. Rodriguez case was brought in

Texas in 1973. It went directly to a federal district court panel, with the next legal stage being an appeal to the U.S. Supreme Court. This district court held for the plaintiffs and found that education was a fundamental right and that property wealth per pupil was a suspect classification. The court's decision determined that the Texas school finance structure was in violation of the Constitution's equal protection clause, and the court directed the Texas legislature to develop a new finance system (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993).

The case was appealed to the U.S Supreme Court. In March of 1973, the Court gave the opinion that the Texas system did not violate the U. S. Constitution, in a 5-4 decision. The Court held that, as important as education was for the country's citizens








and for the responsibilities of citizenship, education was not mentioned in the Constitution. Therefore, the Court was not willing to recognize education as a fundamental right. The Supreme Court also held that property wealth per pupil was not a suspect class, because it related to school districts and not individuals (Odden & Picus, 2000; Wood & Thompson, 1993).

In rendering its opinion in this case, the U.S. Supreme Court invoked only the rational test, not strict judicial scrutiny. Texas explained that the existing method of funding education by local property taxes demonstrated the principle of local control. This response to a rational test was accepted by the courts as reasonable (Odden & Picus, 2000).

The Rodriguez (1973) case eliminated the U. S. Constitution as a feasible legal route to reform for school finance. With their decision, the U.S. Supreme Court effectively threw out all school finance cases out of federal courts across the country. These cases went back to state courts, to be litigated in each state on the basis of state equal protection clauses and state education clauses. The Rodriguez decision, however, also encouraged court action at the state level, suggesting that states could find education to be a fundamental right. State constitutions had clauses expressly requiring access for students to a free, public education (Wood & Thompson, 1993).

Robinson v. Cahill (1973). The New Jersey Supreme Court recognized the

Rodriguez case in its decision in April of 1973. It acknowledged that the U.S. Supreme Court's test for finding education to be a fundamental right and that education was mentioned in the New Jersey constitution. The New Jersey court, however, held that education was not a fundamental right, that property wealth per pupil was not a suspect








class, and the New Jersey school finance system did not violate the equal protection clause (Odden & Picus, 2000).

The New Jersey Supreme Court did, however, overturn the New Jersey school

finance structure, and held that the state's constitution mandated that the state structure be a thorough and efficient public education system. This court stated that a school finance system that allowed for such wide differences in spending per student, and where these differences were strongly linked to local property wealth per pupil, was not a thorough and efficient system. The court directed the state legislature to develop a new structure. Therefore, the court ruled the system as unconstitutional predominately on the basis of disparities in spending, since these were the only criteria available to determine if the system was thorough or efficient (Odden & Picus, 2000, p. 35).

The Robinson v. Cahill case was important because it kept litigation for school finance active; it forged a method for challenging school finance systems using state education clauses; and it also laid some early groundwork for litigation involving adequacy (Odden & Picus, 2000).

Litigation based on state education clauses

Litigation in school finance court cases focused at the state level after the Rodriquez (1973) decision (Odden & Picus, 2000; O'Loughlin, 1992; Wood & Thompson, 1993). The challenges to the state public school finance systems under the state education clause needed additional legal strategies beyond those that were used for litigation under equal protection. Some plaintiffs sued using the education clause to build a fiscal neutrality argument, meaning that education was a fundamental interest and/or that property wealth per pupil created a suspect class (Odden & Picus, 2000). Other court








cases utilized the state education clauses to support arguments about the education being fundamental and property wealth as a suspect class brought under the equal protection clause (Washakie County School District No. I v. Herschler, 606 P. 2d 310 (Wy. 1980); Dupree v. Alma School District No. 30, 651 S.W. 2d 90 (Ark. 1983); Edgewood Independent School District v. Kirby, 777 S.W. 2d 391 (Tex. 1989); Edgewood v. Meno, 893 S.W. 2d 450 (Tex. 1995); Brigham v. State (VT 1997); Odden & Picus, 2000; O'Loughlin, 1992).

In the Edgewood v. Kirby (1989) decision in Texas, the decision led to a new

finance structure that was unique. The Texas state education clause required an efficient system of public free schools, and the structure was first overturned on the basis of fiscal neutrality. However, it was argued and found that the Texas system was very equal except for the top and bottom 50 districts. After the submission of many plants to create a new public school finance system, with continued court rejections, the legislature developed a finance structure that recaptured funds from the top districts. Then the court found the legislature in violation of the section of the constitution that disallowed the state's reallocation of local revenues. The legislature then constructed "two-tiered pupil weighted" finance system that required the "wealthiest districts to voluntarily, with voter approval, give some of their wealth or revenues to lower-wealth districts as a condition for receiving any state aid (Odden & Picus, 2000, p. 36).

A third use of the education clause in school finance litigation was to add

substantive meaning into the state clause, and this led to the adequacy cases that were brought in the 1990s (Odden & Picus, 2000). Education clauses varied across states, with some of the language requiring the development of an education system, while other








clauses required thorough and efficient or thorough and uniform. All states mandated the creation of a system of public schools. Therefore, the precise meaning of each state's education clause depended on the state's constitutional language, which depended on the states' political history and previous interpretation (Odden & Picus, 2000, in press).

William Thro developed a classification format of state constitutional language that advanced the understanding of education finance litigation (Thro, 1989). Thro's Category I lists described clauses that forced a minimum educational responsibility on the part of the state legislature. The Category I states have not provided plaintiffs with a strong basis for litigation. The Category II state constitutions exhibited greater state obligations and required that public education had to meet particular minimum standards, such as thoroughness and efficiency. The plaintiffs in Category II states had some success in court challenges (Wood & Thompson, 1993). It was in the three Category II states of Montana, Texas, and Kentucky that courts declared the respective school finance systems unconstitutional in the late 1980s (Thro, 1990). This took place in Helena Elementary School Dist. Number 1 v. State (1989), Rose v. Councilfor Better Education (1989), and Edgewood Independent School Dist. v. Kirby (1989).

Thro's Category III states were those that had stronger and more explicit language in their state constitutions. Category IV states had clauses that provided fundamental right status for education. Despite the state constitution language, plaintiffs attempted to demonstrate through a variety of methods and analyses that state obligations were not being met (Wood & Thompson, 1993).

Odden and Picus (2000) determined that there were five aspects to school finance system litigation based on the state education clause. These included the historical








meaning of the education clause, education clauses requiring more than just an education system, substantive demands of the education clause-adequacy arguments, the question of adequacy requiring equal outcomes, and the education clause and absolute deprivation.

One aspect of challenging the system was through the use of the historical

meaning of the education clause. This was done by analyzing the debates of the state's constitutional convention, to examine the phrasing of the education clause, and to determine the view of education held by the authors of that constitution. In some states the phrases related to education systems, such as general and uniform, only meant the evolution of one statewide uniform system. In other states, the clauses meant more specifically a statewide uniform system, assuming equal expenditures per pupil and sometimes fully funded by the state, or the phrases could have inferred equal spending or access to basic educational opportunities in all districts of the state (Odden & Picus, 2000).

Although there was not a single solution to the meaning of the education type and school finance system that writers of constitutions really meant to form with their education clauses, the litigators from both sides of court cases explored the constitutional history of the state involved. Plaintiffs and defendants looked for meanings and specific ideas related to the intent of the framers, and they searched for notions that were relevant to the school finance issues (Odden & Picus, 2000).

Three litigation routes sought to find substantive meaning in the education clauses and looked to examine clauses that required more than just an education system. Since state courts made decisions about what the state education clauses mandated for the








school finance structures, the job for the litigants was to argue and convince the court to agree with and accept the desired meaning (Odden & Picus, 2000, in press).

One strategy used was to argue that the education clause placed an affirmative duty on the state legislature to create more than just an education system. In the 1973 Robinson case, the New Jersey court asserted that the thorough and efficient education clause required that all pupils were provided equitable opportunities to contend for jobs in the labor market. The New Jersey court used this argument again in the 1990 Abbott v. Burke (Abbott v. Burke, 100 N.J. 269 (1985); Abbott v. Burke, 119 N.J. 287 (1990)) case to guarantee the fulfillment of higher education for the low-income and minority students in New Jersey's lower income or property poor school districts. New Jersey courts overturned the state's education system in both cases (Odden & Picus, 2000).

There were other examples of court cases based on the substantive meaning aspect. In 1975, an Idaho court held in Thompson v. Engelking that it was the legislature's prerogative, and not the court's, to interpret the education clause (Thompson v. Engelking, 537 P.2d 635 (Idaho 1975)). In the 1976 Oregon case of Olsen v. State, the court held that the Oregon school finance system was justified on the basis of local control (Olsen v. State, 554 P.2d 139 (Oregon 1976)). And in 1982, the Colorado Supreme Court ruled in Lujan v. Colorado that the education clause of thorough and efficient was met when the state provided an education program in every school district, even if there was disparity in the quality of the programs (Lujan v. Colorado State Board ofEducation, 649 P.2d 1005 (Colo. 1982)); Odden & Picus, 2000).

The third litigation approach was to focus completely on the substantive demands of the state constitution's education clause. This strategy led to the use of the adequacy








term and its definition in the school finance court cases of the late 1980s through the 1990s. The New Jersey cases of 1973 and the Seattle v. State case of 1978 used this strategy (Seattle School District No. 1 ofKing City v. State, 585 P.2d 71 (Wash. 1978)), even though the term was not used. Through these court decisions, the idea of school funding was broadened beyond just finance to providing an education program that gives students equal opportunities to learn to higher standards (Odden & Picus, 2000).

In the 1982 Pauley v. Bailey case in West Virginia, a definition of a more "adequate" program was developed (Pauley v. Bailey, C.A. No. 75-126 (Cir. Ct. Kanawha Cty, W.Va. 1982)). After an initial motion to dismiss, based on Mclnnis and Burruss, the Supreme Court of West Virginia held that the case was indeed justiciable. But the Court also ordered the lower trial court to ascertain the characteristics of a thorough and efficient (T & E) education system. The Supreme Court also required the trial court to evaluate how T & E the existing education system was.

The court proceedings determined that the T & E required the equality of

programs and services across all school districts in West Virginia and that the existing school finance structure did not render this equality (Odden & Picus, 2000). The state did not appeal the overturning of the finance system, but it did create and gather committees to define standards that would represent a T & E program. The overview committee then compiled and organized the subcommittee reports into a Master Plan of standards. Because the implementation of the Plan would have required doubling the education funding, West Virginia only implemented part of it. Fifteen years after the proposal of the Master Plan, a court ordered the state to fully fund the plan in 1997 (Odden & Picus, 2000).








The adequacy approach to interpreting education clauses in state constitutions was utilized in a number of cases in the 1990s. In 1989, the Kentucky Supreme Court overturned the state's school finance system and also found the whole state system of education to be unconstitutional. While this litigation started as a fiscal neutrality case, the court finding changed it to an adequacy case. The court ruled that school finance equity meant that all pupils should have access to an adequate education program. The state then had to reform the education system, including the finance system and all other programs.

The reforms in Kentucky denoted the kind of reform first known as systemic reform, and this became standards-based education reform (Odden & Picus, 2000; O'Loughlin, 1992; Wood & Thompson, 1993). The Kentucky reforms included a tiered funding structure that included new money, content standards for all major subject areas, performance standards with a new testing system, more school-based management, and a accountability system with rewards and sanctions (Odden & Picus, 2000; Kentucky Department of Education, 1995).

The Supreme Courts of Alabama and Massachusetts overturned the state

education and public school finance structures based on adequacy arguments in Alabama Coalition for Equity, Inc. v. Hunt and McDuffy v. Secretary of the Executive Office of Education (Alabama Coalition for Equity, Inc. v. Hunt, 1993 WL 204083 (Ala. Cir.); McDuffy v. Secretary of the Executive Office of Education, 615 N.E. 2d 516 (Mass. 1993)). The courts used similar language to that used in the Kentucky decision in describing the requirements for an adequate education program. Based on the court ruling, Massachusetts enacted standards-based education and finance reform.








Several other states overturned their state's education finance systems based on

adequacy arguments. In the Wyoming case of Campbell County School District, State of Wyoming, et al. v. State of Wyoming (1995), the courts ordered the legislature to design the best educational system based on an educational package that every Wyoming student was entitled to have. The court further directed the legislature to determine the cost of the best system and then to take the steps to fund it (Odden & Picus, 2000). Five other state courts overturned the school finance systems in the following cases: Roosevelt Elementary District v. Bishop, 1994 WL 378649 (Ariz. 1994) in Arizona; DeRolph et al. v. State, 677 N.E. 2d 733 (Oh. 1997) in Ohio; Claremont School District v. Governor, No. 92-711 (New Ham. 1993) in New Hampshire; Tennessee Small School System v. McWherter, 851 S.W. 2d 139 (Tenn. 1993) and Tennessee Small School System v. McWherter, S.W. 2d 894 S.W. 2d 7374 (Tenn. 1995) in Tennessee; and Leandro v. State, 472 S.E. 2d 11 (NC 1996) in North Carolina (Odden & Picus, 2000).

The recent Ohio court decision in DeRolph blurred the lines between equity and adequacy. Although an Ohio Supreme Court decision in the 1970s rejected an equity challenge to the state's finance system, a coalition of plaintiffs filed suit against the state of Ohio in 1991, claiming that the education provided by Ohio was not constitutionally adequate (Minorini & Sugarman, 1999b). The plaintiffs were made up of several school districts, superintendents, educators, students, and friends (Odden & Picus, 2000). After a long trial and following the reasoning of the Kentucky court's prior decision and discussion of adequacy standards, the Ohio court ruled for the plaintiffs. However, the state attorney general's office quickly appealed the trial court decision (Minorini & Sugarman, 1999b).








In 1997, the trial court's decision was upheld by the Supreme Court of Ohio. The decision was based more on educational inputs, usually related to equity theory, than on educational outputs, which seemed to be more related to the focus in adequacy arguments and decisions (Minorini & Sugarman, 1999b). The court criticized the heavy reliance on local property tax for school funding and reminded the legislature of their responsibility in supporting the public statewide education system. It also mandated a systemic overhaul of the funding system and allowed the legislature a year to develop a new funding structure (Minorini & Sugarman, 1999b).

While the Ohio Supreme Court's emphasis had been on input equity, the state

legislature's renovation of the funding system focused on the determination of the cost of providing all Ohio students with an adequate and equitable education. To accomplish this, the legislature examined the spending patterns of districts within the state that were in compliance with state standards for input and outcome. Through the use of a mean spending level for those districts, and adjusting for cost differentials around the state and varying need levels of student populations, the Ohio legislature developed a baseline level of school expenditures that each district would be assured (Minorini & Sugarman, 1999b).

There was a trend in the late 1990s for the state supreme courts, after earlier

rejecting constitutional challenges to state public school funding systems, to revisit the funding issues when the states had continued to fail to address the inequities and adequacies of their funding structures. The Supreme Courts in Ohio (DeRolphL 1997) and Arizona (Roosevelt Elementary School District 66, 1994) struck down school finance systems some years after those courts had upheld the state school finance systems in








previous cases (Long, 1999). The Supreme Courts in the New York case of Reform Educational Financing Inequities Today (1995), the North Carolina case of Leandro (1997), and the South Carolina case of Abbeville County School District (1999) permitted suits for school finance to move forward even though earlier findings rejected the challenges to the state public school funding structures (Long, 1999).

In the 1990s courts rejected the school finance cases based on adequacy in

Coalition for Equity v. Chiles, 680 So. 2d 400 (Fla. 1996) in Florida; Committee v. Edgar, 673 N.E. 2d 1178 (Ill. 1996) in Illinois; and Pawtucket v. Sundlun, 662 A. 2d 40 (R.I. 1994) in Rhode Island. In the Florida case of Coalition v. Chiles (1996), the plaintiffs lost at the Supreme Court level, and the high court ruled that no cause of action was presented (Minorini & Sugarman, 1999b). Some state courts, such as those in Maine, Virginia, Minnesota, and Wisconsin, suggested in their decision that successful arguments could be made on the basis of educational adequacy when rejecting plaintiffs' arguments in fiscal neutrality cases (Odden & Picus, 2000).

The New Jersey Robinson case of 1973 foreshadowed adequacy in the court's interpretation of the thorough and efficient clause. Most of the decision focused largely on financial disparities, and legislative responses sought to correct those disparities. However, in subsequent multiple decisions from 1989 through 1998, the court systematically overturned the New Jersey system in different Abbott v. Burke decisions (Abbott v. Burke, 1985, 1990, 1994,1997, 1998; Long, 1999; Minorini & Sugarman, 1999b; Odden & Picus, 2000).

There were several major aspects of the New Jersey case as it changed from a

funding equity case to an educational adequacy case. It began by focusing predominately








on the most disadvantaged districts, and then it utilized a new approach to defining adequacy. The unique educational adequacy described a comprehensive school design that could be made compatible with state program content and standards of performance (Odden & Picus, 2000). The cost could be estimated and used as a basis for needs allocations, for amounts to be incorporated into a funding formula. Therefore, the New Jersey court forced the state to confront the definition of educational adequacy and issues that been in litigation since 1973.

An increasing number of state court decisions suggested that adequacy was

challenging equity as the standard to which the public school funding structures should be held (Guthrie & Rothstein, 1999). There was also the litigation question of whether adequacy required equal outcomes or required all students to actually achieve to some indicator of high minimum standards. Researchers Minorini and Sugarman (1999b) claimed that they did not. They asserted that adequacy was interpreted as a level of resources for a district that would enable the district to provide a type of educational program that would be sufficient to teach nearly all students to high specific standards (Minorini & Sugarman, 1999b).

Courts were also asked to consider the aspect of the education clause and absolute deprivation. This meant that the courts had to determine whether, under the state education clause, the state's school finance system worked to actually deprive pupils of an education program. The courts usually held that the clauses only required a provision for a basic education program. Anything beyond basic was considered under the control of the local school district. Adequacy cases, however, usually required states to define








and fund an education plan that met an absolute standard (Odden & Picus, 2000, in press).

A summary table from the McGraw Hill website summarized the key school

finance litigation from 1968 to 2002 (Odden & Picus, 2004). School finance cases had been adjudicated in 42 states, with the school finance systems upheld in about half the cases and overturned in the other half. Therefore, the plaintiffs were successful about half the time in time in challenges to overturn systems that allowed for disparities in educational expenditures that showed a relationship to local property wealth per student, or in education programs. In several states, there were subsequent rounds of the same litigation, and some of the later cases were successful in their challenges of the school finance structure. States, such as Arizona, Connecticut, Minnesota, Missouri, New Jersey, Texas, and Washington, were successful in finally overturning their states' school finance system (McGraw Hill, 2000; Minorini & Sugarman, 1999b; Odden & Picus, 2000, 2004).

The constitutional strategies utilized in the school finance court cases were about evenly split between the use of the state education clause and the equal protection clause of the U.S. Constitution (Odden & Picus, 2000, in press). Those courts that used the equal protection clause held that education was both a fundamental right and that property wealth per pupil was a suspect classification. The states of Arkansas, Connecticut, West Virginia, and Wyoming used both clauses (Odden & Picus, 2000). Litigation Summary

School finance litigation has evolved through the years. Court cases initially used state and federal equal protection clauses to focus on resource distribution inequities.








Litigation then revolved around the state education clauses, and there was debate regarding substantive issues that connected school finance to services and programs. This meant that the court cases became litigation based on state education clauses and were adequacy focused (Odden & Picus, 2000, in press).

The use of the education clause in challenging school finance systems was unlike that of using the equal protection clause and ended up bringing up concerns about the substance and quality of the school districts' education programs throughout the state. The litigation founded on state education clauses was determined state by state with strategies that depended on the history of the state, the meaning of adequacy arguments made by plaintiffs, and the justices that happened to be on the supreme court when the case was adjudicated (Minorini & Sugarman, 1998; Odden & Picus, 2000).

Courts began moving away from the cases involving disparities to cases involving educational adequacy. While the courts were showing a preference for the issues involved in adequacy cases, the standards-based education reform movement began evolving and, through professional associations, began developing standards that exemplified education quality. This enabled the courts to utilize the created standards that were developed by educators to measure and evaluate education systems and to examine the funding for the system.

Although litigation may have been brought about by plaintiffs or advocates whose major goal was to improve funding equity, the process of resolution by courts and legislatures may have also dealt with the adequacy of educational support (Dayton, 1996). The courts in the 1990s moved away from" equity defined in dollars to equity defined in terms of programs and services or school design, to which a dollar figure could








be attached" (Odden & Picus, 2000, p. 45). The adequacy argument was similar to the educational needs framework of the early school finance cases. The litigation approach through adequacy, along with standards-based education reform and school designs, was just the education needs argument, with the earlier missing standards and measures (Ladd, 1999; Minorini & Sugarman, 1999b).

The Florida Formula

During the year 1999-2000, the state of Florida had the fourth largest student membership in the United States. Only California, New York, and Texas had more students in the public schools. Florida had more than 2 million students in the public elementary and secondary schools (Florida Department of Education, 2000a). The state was composed of 67 county school districts. The unweighted full-time equivalent membership varied from 1,030 students in Lafayette County to 352,000 students in the Dade County schools (Florida Department of Education, 2000a). Each district was required to provide documentation of an adequate school program (Florida Statute 236.012(1)).

The Florida Education Finance Program (FEFP) had the goal of equalizing educational opportunity (Owens & Maiden, 1999). After several years of Florida utilizing the Minimum Foundation Program funding mechanism, Florida's Constitution was revised to mandate a "uniform and free system of public school" (Florida Constitution 1968, Article IX, Section (1)). After Roe L. Johns directed a study of the Florida public school finance system, major changes were made to the Minimum Foundation Program (Chambers, 1996). The Florida Legislature enacted the Florida








Education Finance Program (FEFP) in 1973 and set forth state policy on equalized funding:

To guarantee to each student in the Florida public educational system the
availability of programs and services appropriate to his educational needs which are substantially equal to those available to any similar student notwithstanding geographic differences and varying local economic factors. (F.S. 236.012 (1))

The Florida Education Finance Program (FEFP) was a "highly modified"

foundation plan that based the education funding on individual students and services provided in specific educational programs rather than on teacher or classroom count (Florida Department of Education, 1996, 1999, 2000a). To equalize the educational opportunity among students, the FEFP recognized "varying local property tax bases; varying program cost factors; district cost differentials; and differences in per student cost for equivalent educational programs due to sparsity and dispersion of student population" (Florida Department of Education, 1999, p. 1; Owens & Maiden, 1999).

The FEFP was the primary structure for funding public schools in Florida, and while there were other sources of funding, it was the foundation of the finance program. The key feature of the program was to base financial support on the individual student taking part in a particular education program. The FEFP fund amounts were determined by multiplying the number of full-time equivalent students (FTEs) in each of the funded education programs by specified cost factors to obtain weighted FTEs. The weighted FTEs were then multiplied by a "base student allocation" and by a "district cost differential" in the primary calculation to determine the Base Funding. The program cost factors for different services provided in the various educational programs were determined by the Legislature and represented relative differences in cost among the educational programs. Supplements were added and adjustments made to the Base








Funding to determine the Total State and Local Funding (Chambers, 1996; Florida Department of Education, 1999; O'Loughlin, 1992).

Horizontal and vertical equity were recognized in the FEFP. The vertical equity of the Florida funding system was addressed through the recognition of the varying costs of the educational services based on the particular student needs. The horizontal equity of the system was dealt with through the use of the district cost differential that was added from each county. This was used in the formula to address the differences in costs of educational services in school districts where the cost of living indices varied from the statewide average (Chambers, 1996; Florida Department of Education, 1996, 1999, 2000a).

A power equalization provision was incorporated into the FEFP. This guaranteed the same revenue for the same property tax rate to each district. The purpose of the power equalization provision was to equalize the differences in funding created by the required local effort in districts where there were lower property value assessments; therefore, it addressed taxpayer equity (Chambers, 1996; Florida Department of Education, 1996, 1999, 2000a; Odden & Picus, 2000). Recent Changes in the FEFP

The legislative sessions of 1997, 1998, and 1999 made significant changes in the FEFP. The 1997 and 1998 Legislatures based the funding for exceptional student programs on a changed matrix of needs for those students that required exceptional student services, and they moved the funding for adult vocational and adult general education programs from the FEFP to providing funding by separate appropriations for








Workforce Development and Adult Disabled programs (Florida Department of Education, 1999, 2000a).

The Legislature of 1999 enacted Chapter 99-398, Laws of Florida (as cited in Florida Department of Education, 1999, 2000a), which focused on a design for high quality education for Florida schools. This legislation mandated that all public schools were to be held accountable for student performance and acceptable standards. It also sought to improve the quality of Florida's teachers, the teacher preparation training programs, and professional and staff development courses. The legislation also dealt with and strengthened school truancy procedures and safety measures (Florida Department of Education, 1999, 2000a).

Significant changes in the FEFP that were covered in this 1999 legislation

included provisions for Opportunity Scholarships, the Pilot Scholarship for Students with Disabilities, the Supplemental Academic Instruction Categorical Fund, and the Average Daily Attendance Factor (Florida Department of Education, 1999, 2000a). In addition funds were also appropriated for School Recognition.

For Opportunity Scholarships, the parent or guardian of a public school student had the right to request the scholarship for the child to attend a private school if

the student has spent the prior year at a public school that has been
designated "F" and that school has had two school years of low performance
in a four-year period, or the student has been assigned to such a school for
the next school year; and the student has obtained acceptance in a
participating private school, and the parent has notified the school district of the request for an opportunity scholarship no later than July 1 of the first year
in which the student intends to use the scholarship. (Florida Department of
Education, 1999, p. 1)

In the Pilot Scholarship Program for Students with Disabilities, students were provided with scholarships to a public or private school of choice, if those students'








academic progress in at least two areas did not meet expected levels for the previous year as set forth or determined by their Individual Education Plan (Florida Department of Education, 1999).

Under the Supplemental Academic Instruction Categorical Fund, the funding for summer programs and dropout prevention programs was transferred from the FEFP to the categorical section to fund all supplemental strategies. The funding for full-time equivalent membership in programs beyond the 180-day regular school term in the FEFP was provided only for students in juvenile justice programs (Florida Department of Education, 1999, p. 2).

An average daily attendance factor was to be utilized in the calculation of FEFP funding beginning with the 2001-2002 school year. Since average daily attendance could only be determined following the completion of a school year, the 1999-2000 data, for example, were needed for the calculation of the next year's FEFP appropriation (Florida Department of Education, 1999).

The General Appropriations Act of 1999-2000 and other legislation included major changes in the Florida finance model. The changes included the provision for inservice training being removed from the FEFP and subsequently funded with an appropriation of $34,000,000. Each school district was required to design a structure that had to be approved by the Department of Education for professional and staff development that would link and align inservice sessions appropriately with student and instructional needs. The needs were determined by school improvement plans and inputs from teachers and administrators and focused on subject content and teaching methods, including technology. These were also related to the Sunshine State Standards, data








analysis and assessment, school safety, and classroom management. The legislation also provided for Juvenile Justice Programs to be funded for 250 days (Florida Department of Education, 1999, 2000a).

In addition, the General Appropriations act provided $15,000,000 under Special Allocations to be utilized for School Recognition/Merit Schools to provide $100.00 per student for A schools and those schools that showed improvement. In 2000, this amount was raised to $60,000,000 to provide sufficient funds for these awards (Florida Department of Education, 2000a).

Sources of Funds for Florida Public Schools

Financial support for public schools in Florida came from state sources, local

sources, and federal sources. During the 1997-98 school year, state sources provided the Florida school districts with 50.58% of their financial support; local sources, including the FEFP Required Local Effort portion, provided 41.94%; and federal sources provided

7.48% in 1994-95 (Florida Department of Education, 1999).

State support. The state support for the public schools was provided

predominately by legislative appropriations and distributed through the FEFP provisions (Florida Department of Education, 1996, 1999, 2000a). State funds appropriated to finance the FEFP in the 1999-2000 school year were $5,636,048,955. With the exception of $48,900,000, which was appropriated from the State School Trust Fund, the FEFP appropriation was from the state's General Revenue Fund. Although the General Revenue Fund included a number of tax sources, the major tax source was the sales tax. The legal authorization was under Section 236.012-236.68, F. S., Item 109, Chapter 99226, Laws of Florida (Florida Department of Education, 1996, 1999, 2000a).








There were also state funds appropriated for other special uses. Florida Lottery proceeds were used to finance the two appropriations of District Discretionary Lottery Funds, $151,535,000, and Pre-School Projects, $103,765,000. Lottery proceeds were also utilized to fund the appropriation of $180,000,000 that provided the cash and debt service requirements for Classrooms First and 1997 School Capital Outlay Bond Programs. Funds appropriated for categorical programs and special allocations were Supplemental Academic Instruction, Instructional Materials Program, Student Transportation, Public School Technology, Class Size Reduction (K-3), Florida Teachers Lead Program, Teacher Training, and School Lunch Match/Breakfast Supplement (Florida Department of Education, 1996, 1999, 2000a).

The Florida Constitution, Article XII, Section 9(d) provided for capital outlay

funds. It designated a stated amount annually to each district from the revenue generated from motor vehicle licensing. Section 9(a)(2) of the State Constitution (as cited in Florida Department of Education, 1999) also provided for funds to school districts from gross utilities taxes, as set forth by legislative allocation. Racing Commission funds of $13,000,000 were distributed to each county commission in equal amounts, distributed by the state directly to the school districts (Florida Department of Education, 1996, 1999, 2000a).

Local support. Local revenue for the public school funding structure was

generated predominately from local property taxes. Each of the 67 counties is a school district. The FEFP required that the local school boards levy the required local effort millage rate in order to receive funds from the state. The millage rate, established yearly by the legislature, had to be applied to the aggregate assessed property value as part of








the FEFP required local effort provision. This rate for each district was calculated by multiplying an equalization factor by the aggregate assessed property value for the district (Chambers, 1996; Florida Department of Education, 1996,1999, 2000a).

The Legislature set the amount of the required local effort each year and was determined by a statutory procedure, which was initiated by property tax valuation certification by the Department of Revenue. For example, the Legislature set the required local effort at $3.5 billion for 1996-97 and set the amount of $3,872,505,386 as the required local effort for 1999-2000 (Florida Department of Education, 1999). The rates, which were set in July of each year, were determined by dividing the dollar amounts of required local effort by 95% of the aggregated taxable value for school purposes of all districts. Therefore, each district's deduction for required local effort was the certified millage on 95% of the nonexempt assessed valuation of the district (Chambers, 1996). Since the required local effort could not exceed 90% of a district's total FEFP entitlement, the millage rates were sometimes adjusted (Florida Department of Education, 1996, 1999, 2000a).

The Commissioner of Education certified each district's required local effort on July 14, 1999, based on the 1999 tax roll provided by the Department of Revenue. Due to the use of assessment ratios that equalized the effect on the FEFP of the varying levels of property appraisal in the different counties, the certifications for 64 of the 67 counties varied from 6.560 mills to 5.940 mills in 1999, with 6.035 as the state average. Since there was a limitation that the local required effort could not exceed 90% of a district's total FEFP entitlement, the district millage rates of Collier, Monroe, and Walton were reduced from 6.123, 5.963, and 6.147 to 5.164, 4.093, and 5.751 mills, respectively









(Florida Department of Education, 1999; F.S. 236.081 (4) (b), as cited in Florida Department of Education, 1999).

Local school boards could also set discretionary tax levies for capital outlay and maintenance and for current operations. As of 1999, the school boards could levy up to

2.0 mills. This levy produced funds for construction and remodeling, as provided in Section 235.435 (3) (b), F.S. (as cited in Florida Department of Education, 1999); site and site improvement; auxiliary or ancillary facilities; maintenance, renovation, and repair of existing school plants; and school bus purchases (Chambers, 1996; Florida Department of Education, 1996). Lease-purchase agreement payments for "educational facilities and sites were authorized for amounts not exceeding one-half of the proceeds of the millage levied under this authority. Payments could also be used to repay loans used for those authorized purposes (F.S. 236.25 (2), as cited in Florida Department of Education, 1996, 1999, 2000a).

In addition to the required local effort millage, school districts were also allowed to levy discretionary operating millage. However, the Legislature set the maximum discretionary current operation millage for 1999-2000 at 0.510 mills. Districts, however, were able to set an additional levy, not to exceed 0.25 mill, that could raise an amount not to exceed $50 per FTE student (Florida Department of Education, 1996, 1999, 2000a).

Qualified electors were also able to vote an additional millage levy for operations and capital outlay purposes for a period not to exceed 2 years. The tax levies for debt service were in addition to the levies for current operation, but they were limited to 6 mills and 20 years' duration, without specific State Board approval. These levies were limited by the State Board of Education Rule. While qualified electors could vote for a








local bond issue to be retired by a millage levy, the Rules disallowed districts from issuing school bonds in excess of 10% of the nonexempt assessed district valuation without specific State Board approval (Florida Department of Education, 1996; Sections 236.31-236.42, F.S., Rule 6A-1.037, FAC).

Developmental research schools at some state universities, known as lab schools, were classified for funding as special school districts. With no taxing authority, the districts were given the same funding dollar allocations per student as was generated for district students by the tax base of the district in which the school was located. Local required effort was not deducted from the FEFP calculation. For the 1999-2000 school year, the total contribution for discretionary and supplemental discretionary millage for the four schools was $578,650 (Florida Department of Education, 1999).

Local revenue, therefore, to support schools was derived almost exclusively from ad valorem property taxes. There are no local nonproperty taxes that are levied specifically for school support. The local revenues for school funding were based on 95% of the district's assessed valuation, but the levy of discretionary millages brought about less equality into the Florida Education Finance Program, with the richer districts able to generate more revenue for the same effort than the poorer districts (Chambers, 1996).

Funding, in gross dollars, for the Florida system of public schools had increased from both state and local sources since the beginning of the Florida Education Finance Program in 1973-1974. However, of the total monies from the combined state and local sources, the percentage contributed by the state decreased considerably (Chambers, 1996).








Federal support. Federal support was part of the public school funding structure in the state of Florida. When the State Board of Education found collaboration advantageous, the Board approved plans for cooperating with the federal government in carrying out any phase of the educational program. The Board was required to provide guidelines for appropriate administration of funds allotted to the state from federal appropriations. The State Board was also responsible for developing and enforcing rules regarding contracts or agreements made with federal agencies. The Commissioner of Education was obligated to recommend methods of cooperation and policies for proper administration of the federal funds (Florida Department of Education, 1996, 1999).

Federal funds went to school districts either directly from the federal government or through the state as an administering agency. Several of the federal agencies may have provided federal funds such as the Department of Labor, Veterans Administration, Department of the Interior, Department of Education, Department of Defense, and Department of Agriculture. Examples of federal program revenues for 1997-1998, included the following: the Adult Education Act ($7.8 million), the Job Training Partnership Act ($12,8 million), the Individuals with Disabilities Education Act ($141.1 million), the Elementary and Secondary Education Act ($351.7 million), the Carl D. Perkins Vocational and Applied Technology Education Act ($30.2 million), and the National School Lunch Act ($358.5 million) (Florida Department of Education, 1999).

In summary, the Florida Education Finance Program (FEFP) had the goal of

equalizing educational opportunity. The FEFP required that each district participating in the state appropriations must provide evidence of its effort to maintain an adequate school program throughout the district and must meet specified state requirements:








Florida Equity Studies

Several studies examined and analyzed the equity of the Florida funding structure for public schools. Vaughan sought to determine the equity in the distribution of revenues before and after the implementation of the FEFP and the extent to which the revenue levels available for public education were related to district wealth before and after the FEFP implementation. Vaughan concluded that the interdistrict per-pupil distribution under the implemented FEFP was relatively equitable. Vaughan also determined, however, that the FEFP was not wealth neutral, but he also found that wealth neutrality improved after the implementation of the FEFP (Vaughan, 1979, as cited in Owens & Maiden, 1999).

Other researchers, Carroll and Park (1983), compared the interdistrict equity of the funding system under the FEFP with the funding distribution that existed under the earlier funding structure of the Minimum Foundation Program. They determined that there were increased disparities in instructional expenditures and per-pupil revenue availability after the FEFP. Their overall conclusion was that the implementation of the FEFP more readily benefited the larger and more urban districts. The largest benefit of the FEFP reached the school districts that were less poverty-prone (Carroll & Park, 1983).

Shiver evaluated the differences between the FEFP and the MFP (Shiver, 1982, as cited in Owens & Maiden, 1999). He found that that the range of the district revenues had increased with the change to the FEFP, that there was a stronger relationship between pupil wealth and state and local revenue per pupil, that there was no change in the relationship between state and local revenue per pupil and district property per pupil, and








that there was "less equalization" in the funding plan than in earlier years. Shiver concluded,

There was no evidence to indicate that the FEFP had achieved greater fiscal
equalization in the financing of Florida's public schools. Data suggested that
FEFP, in fact, had resulted in some diminution of the equalization effects among
the school districts. (Shiver, 1982, p. xiii)

Stark et al. (1993) explored the interdistrict equity qualities of the FEFP in their study regarding the effects of the Florida lottery on the financing of public schools in Florida. They found a high degree of interdistrict horizontal equity through the utilization of the FEFP.

The equity of the distribution of FEFP funding was examined in 1992, by

O'Loughlin, Wood, and Honeyman, with their emphasis on the effects of the revenues allocated through the scarcity supplement of the FEFP on interdistrict per-pupil equity. The concluded that overall the basic part of the FEFP was "relatively equitable," but there were disequalizing effects from the addition of supplements, discretionary dollars, and categorical supplements. The strongest effect was from the discretionary levy. Also, the funding distribution showed a strong inverse relationship to the districts' property wealth, with the scarcity supplement reducing this relationship (O'Loughlin, 1992; O'Loughlin, Wood, & Honeyman, 1992).

In 1995 Maiden and Wood examined the collective disequalizing effects of

unequalized local discretionary funding as a component of the Florida Funding System. They found that the FEFP exhibited a relatively high level of interdistrict resource accessibility, with a lower level of interdistrict wealth neutrality (Maiden & Wood, 1995; Owens & Maiden, 1999).








Performance-Based Funding

The cornerstone of the Goals 2000 and Elementary and Secondary Act (ESEA), promoted by the Clinton administration, was the approach of systemic reform. As of 1996, more than 45 states asserted that they were engaged in setting new and challenging standards (Fuhrman & O'Day, 1996). It was hoped that assessments that were linked to the standards would give a clear picture of expectations to students, offer informational feedback to teachers, and provide an opportunity for valid accountability based on improvements in the schools and districts that were working toward specific outcome expectations (Fuhrman & O'Day, 1996). The interest in performance-based reform was a reflection of the general preoccupation with managerial efficiency and the best ways to utilize educational resources to get more educational output for the funding inputs (Fuhrman, 1999; Fuhrman & O'Day, 1996).

The "new educational accountability" was the new model of state and local school governance. There were three major parts of this new model or approach:

A primary emphasis on measured student performance as the basis for
school accountability; . . . the creation of relatively complex systems of
standards by which data on student performance are compared by school
and by locality; and the creation of a systems of rewards and penalties and
intervention strategies to introduce incentives for improvement. (Elmore et
al., 1996, p. 65)

There were several challenging issues that had to be addressed in designing

performance-based accountability systems, and a few states, such as Kentucky, South Carolina, Texas, Mississippi, Indiana, and Florida, tackled those issues in their efforts to create their own systems (Ladd, 1996a). These concerns included whether in constructing measures of performance, average student scores should be adjusted for differences in prior knowledge or socioeconomic background; whether the goals for









students should be separated from measurements of performance of the district; whether performance-based accountability systems were compatible with the newer assessment forms that encouraged higher-order thinking and problem solving, or portfolios; whether the undesirable side effects of accountability could be kept to a tolerable level, with a balance being found so that the financial awards would be large enough to change behavior, but not so great that there would be outright cheating; whether a system could be designed that was understandable to the educators and political public, as well as implementing a model that was technically complex; the recognition that the success of such new systems was dependent on the stability of the state governance and the capacity of the state to provide required assistance and support to school districts, school, and teachers; and that the states that were gaining experiences with performance-based reforms and funding were not states with strong teacher unions, and there was little information known about implementation issues and effectiveness in those states (Ladd, 1996a).

The Consortium for Policy Research in Education conducted a survey in 1993 of superintendents and commissioners in the 50 states. Responding to a variety of questions, respondents from at least 43 states expressed that they were changing, or planning to change, their accountability system. Most of them answered that in focusing more on performance outcomes, there were plans for standards (Elmore et al., 1996). According to the survey, the states of Georgia, Indiana, Kentucky, North Carolina, South Carolina, and Texas gave monetary rewards for school performance improvements above set standards. There were also research data regarding the Mississippi accountability program that awarded money to districts/schools that demonstrated marked improvement









(Elmore et al., 1996). By 1999, Florida was awarding money to schools that were designated as "A" schools as part of its A+ Plan and Florida School Recognition Program (Brogan, 1999; Florida Department of Education, 2000c).

In looking at the states that were attempting the new educational accountability system, it seemed clear that all the attempts to change the long-time relationships among the facets of the organizational structures entailed three major problems: the design, the implementation, and the politics of the new accountability systems (Elmore et al., 1996). In these strategies there was an emphasis on student outcome measures; school evaluation formats that were more complex; systems of incentives, penalties, and intervention methods to enhance school improvement; and an increased emphasis on higher academic and curriculum expectations (Ladd, 1996a). Selected States with Performance-Based Funding

States, school districts, and even local schools have reacted to the national

concern regarding the quality of American K-12 public education by undertaking many different kinds of reforms that focused on organizational structure and finance (Ladd, 1996a, 1999). Types of reforms included merit pay for teachers, changing the structure of financial incentives, and mandated standards and state report cards, all shifting the focus away from the inputs to measured student outcomes. Charles T. Clotfelter and Helen F. Ladd examined and described examples of programs in South Carolina and the Dallas Independent School District that focused on outcomes with the use of incentives that rewarded the schools that were most effective in meeting set standards or for making significant contribution to increased student performance. A comparison and contrast study of the accountability systems of Mississippi and Kentucky was conducted by









Richard F. Elmore, Charles H. Abelmann, and Susan H. Fuhrman. In addition, Richard King and Judy Mathers conducted a study of states and the effects of incentives and disincentives central to many accountability plans (Elmore, Abelman, & Fuhrman, 1996; King & Mathers, 1996). In Florida, Governor Bush and Lt. Governor Brogan developed and implemented the A+ Plan of accountability (Brogan, 1999).

South Carolina and Dallas, Texas. South Carolina was the first state to introduce a school performance incentive program, and it began with the South Carolina Improvement Act of 1984. This legislation included many initiatives that represented more than a 20% increase in state funding for education. The reforms in the Act were financed by a percentage-point rise in the state sales and use tax. The program included increased pay for teachers, tougher high school course and graduation requirements, a basic skills exit exam for seniors, a performance incentive program for principals, school improvement councils, statewide kindergarten, new tests and remedial support for low performing students, and increased capital expenditures (Clotfelter & Ladd, 1996).

Dallas, Texas, had one of the most thorough and "sophisticated" accountability

and incentive programs in the United States, with the program growing out of the work of a special group commissioned by the Dallas School Board in 1990. The goal was to hold all levels of the district accountable for results and to stimulate improvement. This group had strong support from the business community, and as part of the accountability system, the financial awards were given to the personnel in the high performing, most effective schools (Clotfelter & Ladd, 1996). The local business community funded half of the $2.5 million award costs. The Dallas schools were also affected by the Texas state recognition and reward program, as the state placed more emphasis on the absolute








performance of students on the Texas Assessment of Academic Skills (TAAS). The complex system was facilitated by the statewide orientation toward accountability and the accompanying testings, the lack of strong teacher unions to oppose the program, and good district statisticians (Clotfelter & Ladd, 1996).

Neither Dallas nor South Carolina based the school rankings on students' absolute test performance. Both systems started by determining the difference between each student's absolute score and a predicted test performance, and a gain represented a change from some predicted score. The two systems did determine the predicted score differently, as well as differed in how they incorporated background information into the school rankings and the determination of "winners." The next step was for the student "gains" to be aggregated into school "gains" for all students that were enrolled in a school for an entire year (Clotfelter & Ladd, 1996).

In both South Carolina and Dallas, financial and other rewards were given to the "winning" schools, and this was determined by the schools' ranking. The schools were required to demonstrate higher performance on test scores to be eligible for awards.

In each winning school in the Dallas system, bonuses were given to the staff, with the teachers and principals each receiving a bonus of $1,000 and $500 going to the nonprofessional staff. Also, the school activity fund was given $2,000. With about 20% of school personnel receiving awards each year and a fixed amount of money available, the proportion of schools that "won" depended on the number of personnel in the winning schools (Clotfelter & Ladd, 1996). In an effort to create more winners, a second tier of awards was established in Dallas for those personnel in the nonwinning schools that exceeded predicted performance, and these won smaller awards.








In contrast to Dallas, the funding awarded in South Carolina was given

specifically to the schools, where the use of the funds was determined by the school in consultation with a local school committee, and the awards could not be given directly to teachers. Winning schools shared a pot of money in proportion to their enrollments, with winning schools that did not reach attendance goals receiving somewhat less. Schools generally received awards that were in the range of $15,000 to $20,000 per school. After a school was in a winning category, and it continued its high performance, it was excused from some of the complex paperwork that was required for requests for waivers regarding its operations and for exceptions (Clotfelter & Ladd, 1996).

The school accountability systems such as these also provided significant

information regarding the schools that demonstrated low performance. In Dallas, such low-performing schools received intense scrutiny from the superintendent, with much attention placed on the designed school improvement plan and progress toward education outcome goals. Along with this, the central office monitored the school administration more closely and sometimes provided additional resources or support to the school (Clotfelter & Ladd, 1996). Noteworthy, however, is the fact that low performance did not immediately indicate automatic sanctions, as it did in some state, like Kentucky.

Comparing Kentucky and Mississippi. Kentucky and Mississippi have both

developed fully their accountability systems, even though they are actually in early stages of implementation. These two states represented relatively advanced stages of development when compared with other states, but they represent two very different policy environments. While Kentucky started the country's most complete reform in 1990 as a result of court action and the Kentucky Reform Act, Mississippi slowly









evolved to its system through a series of small changes that took place from the early 1980s (Elmore et al., 1996). The Mississippi approach required lower costs for assessments and administration than Kentucky, and while they both contained accountability systems, the states were working with significantly different resource amounts. While their common focus was on striving to move from input and process regulation to a system of performance-based accountability, Mississippi was interpreted as the more basic model of the new state accountability, and Kentucky was seen as the more complex version, with a higher cost (Elmore et al., 1996). Table 2-1 describes the major features of the accountability designs for Kentucky and Mississippi, as of 1995. Issues Related to Designs of Performance-Based Funding

Given that there was substantial concern regarding the accountability of school districts and schools for the funds that were allotted to them and the achievement of the students within those districts, one would wonder why public officials had not demanded more school by school accounting and accountability (Guthrie, 1996, 1998). It had been technically possible to account for school spending more precisely for some time. The school-by-school information was available with little technical or accounting complexity to decision makers in school districts (Guthrie, 1996, 1998). While this may seem like the obvious accounting methods that should have been followed, it was not. As of 1996, there had been no serious demand for a change in the accounting procedures. There were hypotheses set forth to explain the absence of more policy relevant financial data being made available for analysis, and most of these hypotheses were tied to political conditions (Guthrie, 1996).










Table 2-1

Comparison of Kentucky and Mississippi Systems


Design Feature Kentucky Mississippi


Goal of System


Level of Accountability Standard of Accountability Types of Assessments Subject Areas


Every student, school, and district be at least proficient in twenty years (five student levels from novice to distinguished)

School and Districts (Each school has its own threshold it must meet every two years)

Fixed standards



Criterion-referenced and portfolios

Reading, writing, mathematics, social studies, science, arts and humanities, practical living and vocational studies


Every school district be at least at level 3 (which is Successful)



Every district is ranked each year (five different levels)



Floating standard for normreference tests with absolute minimum and maximum values

Criterion-referenced and normreferenced

Reading, language, mathematics, high school subject tests


Grades tested Graduation test


4,5,9,11,12 Not required


Noncognitive Index


Rewards


Sanctions or Assistance


Attendance, retention, dropouts, transition


Cash rewards for teachers in schools that meet or exceed thresholds

Distinguished educators go to schools in crisis; parents have the right to transfer a child out of the school; certified staff are placed on probation


School process standards (different percentages for different levels)

Process regulations lifted for level 4 and level 5 schools


Office of Conservatorship, takeover provision


Elmore et al., 1996, p. 72

Designing the new educational accountability systems required tackling a

challenging set of technical and conceptual issues. Changes were taking place in the understanding of how to measure student performance, with a new emphasis on testing


4,5,6,7,8,9 Required


Design Feature Kentucky Mississippi









measures that that tried to test whether students understood and were able to apply knowledge to problem solving. States that were designing a new system had to decide (a) who should be held accountable, (b) what was the appropriate level of performance, (c) what were the appropriate performance indicators, and (d) what would be the consequences of performance above or below specified standards (Elmore et al., 1996). Clotfelter and Ladd posed the questions just a little differently. "What will be measured? Will adjustments be made for socioeconomic factors? How will the measures be linked to the rewards for educators?" (Clotfelter & Ladd, 1996, p. 24).

As of 1996, researchers stressed that states needed to provide funding to

experiment with performance-based funding systems in order to gather data and have the opportunity to evaluate and modify systems. Policymakers needed more reliable information on the contribution of different strategies that enhanced student learning so that it could be assured that appropriate resources were available. Schools that were identified as winners or exemplary in the state with performance-based accountability offered chances to see what was working and with what resources. Also, decisions that were made regarding the award funds in winning schools identified what these educators felt was important for student learning. While the success of these reforms was not guaranteed, the opportunities to improve educational performances would be enhanced with further research and studies related to the effect of specifically funded strategies on the educational output (Ladd, 1996a, 1996b).

As of 2000, educational policymakers continued to explore the possibility of allocating a portion of state education funds to schools as monetary rewards for improvements in student test scores and other performance indicators. The rewards were








outside of the state funds that were part of the school finance equalization programs and were relatively small amounts (King & Mathers, 1997). More states were implementing such a program. There were variations in standards and rewards, sanctions, and incentives, and some states had reduced the reward appropriations that were in place in previous years.

The literature review also included studies regarding the use of resources and the implied direct relationship between additional money being given to districts/schools and the assumed improvement of test scores (Clark, 1998; Clark & Toenjes, 1998; Hanushek, 1997a, 1997b; Greenwald, Hedges, & Laine, 1996a, 1996b). Researchers disagreed on the statistical findings of these studies and debated the positive relationship between additional resources and student performance. Some, Eric Hanushek, in particular, believed that it was not the additional funding that was necessary for improvement. Rather, it was the use of the funds more efficiently within the schools and organization (Hanushek, 1996, 1997a, 1997b). Nicola Alexander found in her New York study that the imposition of standards policies did not substantially change the association between race, poverty, and student outcomes. The findings represented important implications for equity, since it appeared that the students' achievements were tied to where they attended school (Alexander, 1997, 1998). Catherine Clark, in a Texas study, concluded that "even in the case of a large Texas district that appears to be distributing more resources to schools serving students with the greatest need, there is little measurable effect from the resources "(Clark, 1998, p. 389).

Other researchers vehemently disagreed and said that more funding was definitely needed, although it should be allocated based on those areas of severe educational need.








Clark described resource levels as still not adequate to overcome the handicap of a background of poverty and suggested that funding be directed to achieve strong academic performance for all students (Clark, 1998; Clark & Toenjes, 1998). Additional literature was reviewed that discussed alternative allocations of resources but did not necessarily discuss the subject from a performance-based budgeting viewpoint.

The educational accountability models of the states reviewed usually consisted of some type of measurable student performance, standards for comparing the performance information by school or district, and a set of incentives and/or disincentives. These consisted of rewards, sanctions, and intervention strategies. Team-based rewards were being utilized by 14 states: Indiana, Kentucky, South Carolina, Texas, Connecticut, Florida, Georgia, Illinois, Maryland, New Jersey, New Mexico, North Carolina, Pennsylvania, and Washington (King & Mathers, 1996, 1997). These states also provided intervention assistance or imposed sanctions on low-performing schools through their accountability or accreditation processes.

Performance indicators in reward programs varied among, but were not confined to, student achievement, performance assessments, student attendance, teacher attendance, dropout rate, retention rate, and transition from high school. Some rewards were based on an absolute standard, and others were made on growth made toward achievement goals. There were interventions in place for technical assistance, corrective actions, removal of district and/or school administrators, and actions to withhold state funds (King & Mathers, 1996, 1997).

Schools were compared for accountability purposes, sometimes according to

annual improvements in the performance of all students and sometimes for improvements








by distinct, specific student groups. Some states, such as Texas, South Carolina, and Indiana, had reduced, or suspended, their appropriations for rewards over the previous couple of years. The amounts of rewards have varied greatly from state to state, as well as how the rewards may be used and to whom they may be given (Hirth, 1998; King & Mathers, 1996, 1997).

King and Mathers reviewed four states' policies and interviewed almost 100 policymakers and "key influentials" to compare the accountability systems of Indiana, Kentucky, South Carolina, and Texas (King & Mathers, 1996, 1997). The staff from the Office of Program Policy Analysis and Government Accountability (OPPAGA) staff from Florida prepared a study on the Public Schools and Performance-Based Program Budgeting: Challenges and Opportunities to review the new Florida accountability system and make recommendations to the Department of Education and the State Legislature. This report also summarized the performance based plans in twelve of the states mentioned above (OPPAGA, 1998b).

South Carolina. South Carolina incentive rewards were given as part of the 1984 Education Improvement Act (EIA) to "reward schools and school districts for exceptional or improved performance" (South Carolina Code, Section 59-18.10; South Carolina State Department of Education, 1996). This School Incentive Reward Program (SIRP) was based on measures of pupil performance, the state's Criterion-referenced Based Skills Assessment Program (BSAP), norm-referenced achievement test scores, as well as students' and teachers' attendance rates and student dropout rates (King & Mathers, 1996, 1997).




Full Text

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A STUDY OF EQUITY IN A STATE PUBLIC SCHOOL FINANCE SYSTEM PRIOR TO AND AFTER IMPLEMENTING PERFORMANCE-BASED FUNDING By SANDRA L. JONES A DISSERTATION PRESENTED TO THE GRADUATE SCHOOL OF THE UNIVERSITY OF FLORIDA IN PARTIAL FULFILLMENT OF THE REQUIREMENTS FOR THE DEGREE OF DOCTOR OF PHILOSOPHY UNIVERSITY OF FLORIDA 2003

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ACKNOWLEDGMENTS This research project could not have been completed without the support, advice, encouragement, and assistance of many people. I am grateful for family, friends, colleagues, and members of my doctoral supervisory committee. First, I am greatly indebted to my committee that had a wide range of talents and expertise. I thank Dr. David Honeyman for chairing my committee and guiding me through the process, Dr. James Doud for his servant leadership and invaluable encouragement, Dr. Craig Wood for his wisdom of educational finance and law in an interesting way, and Dr. David Miller for making difficult statistical methodology understandable. I am also grateful for the advice and encouragement from Dr. Rhodella Brown, Dr. Mary Elizabeth Grace-Calhoun, Dr. Katherine Gratto, and Dr. Jason Storch. Angela Rowe provided constant support that was crucial to my success as a doctoral student. I would like to thank my family for being continual reminders of the importance of family in any endeavor. This includes my brothers, Alfred Langston and Charles Langston, and their families. While our father was taken from us early, he has always been a source of inspiration. Especially, I want to thank my mother, Christine Langston Albritton, for setting the example as a loving, independent, and encouraging lady. I thank my step-dad, Irvin, for always making himself available to help. I lovingly thank my son, Christopher Sean, for his faith, being there, and the daily supportive caring calls throughout my doctoral program. ii

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A heartfelt thank you goes to my dear friends, Carol and Betty Jo. I am grateful to these kindred spirits for their unwavering friendship through the years and for their support through this educational journey and through our life journey. Finally, I could not have even begun this endeavor without my wonderfully supportive husband, Tom. He has been a source of love, loyalty, confidence, and motivation throughout our 26 years of marriage. He gave me the strength to continue to strive for my goals and dreams. I thank him for having faith in me. iii

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TABLE OF CONTENTS Page ACKNOWLEDGMENTS ii ABSTRACT vi CHAPTER 1 BACKGROUND OF THE STUDY 1 Introduction 1 Background to the Problem 4 Statement of the Problem 15 Purpose of the Study 16 Research Questions 17 Significance of the Study 17 Limitations of the Study 20 Overview of Methodology 21 Definition of Terms 22 Organization of the Study by Chapters 23 2 REVIEW OF THE LITERATURE 24 Introduction 24 Concept of Equity in Public Schools 24 Early Education Finance Theory 26 Education and Benefits to Society 29 Principles of Equity 32 Statistical Measures for Horizontal Equity 36 School Finance Equity Litigation 43 The Florida Formula 69 Performance-Based Funding 82 Bush/Brogan A+ Plan for Education 107 Summary Ill 3 RESEARCH METHODOLOGY 1 14 Introduction 114 Population of the Study 1 15 iv

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Methodology 116 Measures of Equity 117 Summary 125 4 ANALYSIS OF DATA 1 27 Introduction 127 Equity Before and After the Implementation of Performance-Based Funding 128 Interpretation of Results 143 Summary 147 5 CONCLUSIONS 149 Introduction 149 Findings 154 Conclusions 158 Implications for Public PoHcymakers 159 Future Studies 161 REFERENCES 165 BIOGRAPHICAL SKETCH 176 V

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Abstract of Dissertation Presented to the Graduate School of the University of Florida in Partial Fulfillment of the Requirements for the Degree of Doctor of Philosophy A STUDY OF EQUITY IN A STATE PUBLIC SCHOOL FINANCE SYSTEM PRIOR TO AND AFTER IMPLEMENTING PERFORMANCE-BASED FUNDING By Sandra L. Jones December 2003 Chair: David S. Honeyman Major Department: Educational Leadership, Policy, and Foundations The purpose of this quantitative study was to determine the effects of additional revenues for performance on the equity of a state school finance system. The research included an analysis of the equity of the 1997-1998, 1999-2000, and 2000-2001 Florida Education Finance Program (FEFP) with and without the application of performancebased funding of reward dollars from the Florida A+ Plan and School Recognition Program. The FEFP included revenue from state and local sources. Using statistical measurements that were developed for public school equity studies, the degree of horizontal equity on revenue per weighted full-time equivalent student (WFTE) was analyzed for the 67 public school districts prior to and following the implementation of performance-based funding. The results of the study indicated that additional revenues of performance-based funding had slightly disequalizing effects within the years of the study. The results were indicated by resource accessibility vi

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measures, including the range, restricted range, federal range ratio, variance, and the standard deviation. The coefficient of variation indicated a decreased equity in the last year of the study, as performance-based funding was applied. Calculations of the McLoone Index indicated decreased equity, while the Gini coefficient indicated a negligible increase in equity due to the additional revenues from performance-based funding within the year of the study. Both indicated that the additional revenues had slight to negligible effects on equity and wealth neutrality within those years. Some values increased during the years of the study with and without the award dollars so it carmot be determined that the decrease in equity was due solely to performance-based funding. For all of the measures analyzed, the decrease in equity, or the slight shift toward disequalization, was most evident when the revenues from performance-based funding were applied within the years of the study. vii

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CHAPTER 1 BACKGROUND OF THE STUDY Introduction Public school finance has been and continues to be a priority policy issue and challenge at the state, local, and national level. As of 2003, the big business of financing public schools in the United States involved over $379 billion; 59 million children; and almost 5 million teachers, administrators, and staff (Odden & Picus, 2000, in press). Equity and adequacy continued to be issues in 2003, and the productivity of the use of the input education dollars and adequacy of those dollars were also at the forefront of the school finance policy discussions and arguments (Odden & Picus, 2000). The education of the children of this country would have been negatively impacted if the importance of adequate and equitable resources was neglected (Adams, 1997; Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996; Thompson, Wood, & Honeyman, 1994). The question to many state legislators and policymakers was how to allocate and distribute the state fiinds with a method that was both adequate and equitable to the different school districts and their schools (Brown, 1999; Odden & Picus, 2000). As the 1990s ended, public school policymakers more and more wanted to know how much base spending was necessary to educate public school students to high state standards. With this change to concern regarding high performance standards for students, litigation seemed to broaden its concern from just equity to issues of adequacy and productivity (Odden & Picus, 2000, in press). 1

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2 As of 2003, state financing structures and school districts needed to renovate or rethink the state pubHc school finance systems to accomplish the newer, more challenging productivity standards and expectations to demonstrate accountability (Odden & Picus, 2000, in press). Ongoing concerns about public education continued with ever-increasing costs for educational services and growing dissatisfaction with the performance of the students in the public school systems. Taxpayers continued to believe that, while there were educational benefits of public education to society, the school systems were also responsible for heavy tax burdens. While public education had provided for real societal and economic development, the concerns about fiscal equity and the allocation of state-appropriated resources were still being considered, discussed, and researched (Chambers, 1996; Fuhrman «& O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996; Thompson et al., 1994). The cornerstone of the Goals 2000 and Elementary and Secondary Act (ESEA) programs, promoted by the Clinton administration, was the approach of systemic reform (Rotherman, 1999). More than 45 states asserted that they were engaged in setting new and challenging standards for the education of American students, with appropriate policies being implemented around the new standards. Assessments that were linked to the standards helped give a clear picture of expectations to students, offered informational feedback to teachers and provided an opportunity for valid accountability based on improvements in the schools and districts that were working toward specific outcome expectations. The interest in performance-based reform was a reflection of the general preoccupation with managerial efficiency and the best ways to utilize educational

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3 resources to get more educational output for the funding inputs (Fuhrman & O'Day, 1996). Educational policymakers in many states explored the possibility of allocating a portion of state education funds to schools as monetary rewards for improvements in student test scores and other performance indicators (Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996). This approach of performance-based budgeting (PBB), performance-based school funding (PBSF), or performance-based funding (PBF) allowed for the allotment of a portion of the education dollars to schools or districts that demonstrated particular standards of student achievement. The rewards were outside of the state funds that were part of the school finance equalization programs and were relatively small amounts (King & Mathers, 1996, 1997). "The new educational accountability" was the new model of state and local school governance. There were three major parts of this new model or approach: "A primary emphasis on measured student performance as the basis for school accountability; ... the creation of relatively complex systems of standards by which data on student performance are compared by school and by locality; and the creation of systems of rewards and penalties and intervention strategies to introduce incentives for improvement" (Elmore, Abelmann, &, Fuhrman, 1996, p. 65). The future fiinding for our country's schools was affected by the emphasis on equity and adequacy, the development of and requirements to meet more rigorous educational standards, and more efficient and effective resource allocation and utilization to produce higher and enhanced student achievement. All of this was in a setting of expanded site-based management and budgeting and changing teacher compensation.

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4 (Odden & Picus, 2000). In summary, changes were brought about by educational reform, with a then-current trend toward greater accountability where many states had adopted a performance-based budgeting program with rewards and sanctions that encouraged schools and educators to make the necessary steps to see that student performance improved (Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996). Background to the Problem The responsibility and provision for the operation of the public schools in the United States rests with the states according to the terms of the Tenth Amendment to the United States Constitution (U.S. Constitution, Amend. X). With the responsibility for the education of the citizenry set forth in state constitutions, "state legislatures are required ... to create and maintain 'thorough,' 'efficient,' [and] 'equal' educational systems 'throughout' their respective states" (Alexander & Alexander, 1992, p. 128). Therefore, the states have developed school finance programs to allocate and distribute revenues for public education. School finance was concerned with the dispersal and utilization of money to provide educational services and to produce student achievement (Odden & Picus, 2000, in press). In financing public schools, states have been concerned with equity, adequacy, and efficiency (Odden & Picus, 2000, in press; Thompson et al., 1994). While adequacy was the idea of providing enough resources to provide for the educational needs of students, "equity is the concept of a fair and just method of distributing resources among those same children" (Thompson et al., 1994, p. 57). However, additional resources had to be available to children who came into the educational setting with handicaps such as language barriers or needs for special education. Therefore, "equity may be seen as the

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5 precondition of equality where the hope for equal opportunities requires unequal inputs" (Thompson et al., 1994, p. 57). In practice, the concept has meant assuring equal dollars for equal students or providing sufficient amounts of money to afford similar programs when different needs and related educational costs were taken into account (Chambers, 1996). The allocation of scarce resources and fiscal equity were issues in public education for many years. In 1906, EUwood Cubberley conducted the first formal research on the topic of school finance in his doctoral dissertation at Columbia University. He asserted that all children in a state were equally important and entitled to the same advantages. Fxirther, he stated that it was the state's responsibility to provide minimum education programs and to equalize educational opportunities as much as possible (Cubberley, 1906; Thompson et al., 1994). George D. Strayer and Robert M. Haig found in their 1923 study that there had existed a movement for equalization of educational opportunity that beseeched the states to provide equal educational facilities for each child in the public school system (Strayer &Haig, 1923). There were several objects that could be taken into account when considering the equity of a school finance program. After the object was selected such as expenditures per student or revenues per student the principles of equity were applied to evaluate how fairly the state education dollars were allocated and distributed to the various school districts. There were three principles of equity: horizontal equity, vertical equity, and fiscal neutrality (Odden & Picus, 2000; Thompson et al., 1994).

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6 The principle of horizontal equity held that equal students received equal expenditures or shares of the dollars. Therefore, if the object under study was revenues per student, then all students that were alike would receive the equal shares. The vertical equity principle held that students that were different, unalike with specifically determined legitimate differences, were entitled to unequal treatment, with appropriately larger, unequal shares of the revenues. Fiscal neutrality was the equity principle that there should be no relationship between the revenues per student, or the quality of the education received by a student, and the wealth of the local school district (Odden & Picus, 2000; Thompson et al., 1994). Throughout the 1970s, the concept of equity was a major issue in public school finance (Odden & Picus, 2000; Thompson et al., 1994). Equity, as described earher, was the fairness in the way state resources were allocated and distributed to the school districts and schools (Brown, 1999). The issues that so often arose were how to determine if funding formulas were equitable in the distribution of state funds to the individual districts and states. The legal issues of equity have been addressed for K-12 public education through court cases since the 1960s (Odden & Picus, 2000; Thompson et al., 1994). Researchers of school finance responded to the equity issue and developed statistical measures that would determine the degree of equity of fimding programs (Thompson et al., 1994). These statistical measures were utilized to examine the degree of equity of funding programs in individual states or groups of states. The research results were often used in court cases to analyze and ensure equity in public education formulas.

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7 Since the beginning of the 1990s, funding for schools has competed with declining state resources (Brown, 1999; Ladd, 1999b). A number of factors contributed to the decline in funding (Campbell, Leverty, & Sayles, 1996; Honeyman & Bruhn, 1996). Fewer tax dollars were generated for the states' general revenues due to the economic recession of the early 1990s. There was mistrust in education and the outputs, resulting in less support for significant increases in expenditures for public schools. Another factor was the increased competition for the state resources by the Department of Corrections and for health care (Honeyman & Bruhn, 1996). Therefore, there were fewer state and local revenue dollars allocated to education. In addition, there were also demands for increased technology in the schools and for the funds to support this technology. Equity in the allocation of educational resources was an important issue addressed by school finance researchers, state politicians, and school policymakers. They worked to analyze, explain, and predict alternatives that might affect future funding. The efforts were substantially successful with the Florida Education Finance Program, which gave Florida one of the nation's most equitable school finance systems (Chambers, 1996; O'Loughlin, 1992). The Florida Finance Formula: Florida Education Finance Plan The Florida Education Finance Program (FEFP) was enacted in 1973 by the Florida Legislature. The Legislature established the following state policy on equalized funding: To guarantee to each student in the Florida public educational system the availability of programs and services appropriate to his educational needs which are substantially equal to those available to any similar student notwithstanding

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8 geographic differences and varying local economic factors. (Florida Statute, Section 236.012(1)) In providing the equalization of educational opportunity, the FEFP took into account the varying local property tax bases throughout the districts, the varying program cost factors, the district cost differentials, and the variations in per student cost for substantially equivalent educational programs due to sparsity and student population dispersion (Florida Department of Education, 1996). The FEFP based financial support for public education upon the individual student involved in a specific educational program, not upon the numbers of teachers or classrooms. "FEFP funds are generated by multiplying the number of full-time equivalent students (FTEs) in each of the funded educational programs by cost factors to obtain weighted FTEs" (Florida Department of Education, 1996, p. 1). The calculation then involved multiplying the weighted FTEs by a state determined base student allocation and a district cost differential to ascertain the state and local FEFP funds. The Legislature determined the various cost factors, factors that represent the relative cost differences among the programs. Financial support for public education in Florida came fi-om several sources. In the 1994-1995 school year, the school districts received 50.0% of their funds from state sources, 42.5% from local district sources (including the Required Local Effort), and 7.5% from federal sources. School districts in the 1997-98 school year received 50.58% of their financial support from state sources, 41.94% from local sources, and 7.48% from federal sources (Florida Department of Education, 1999). The major portion of state support was appropriated by the Legislature and distributed under the provisions of the

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9 FEFP. The predominate amount of the legislative appropriation of $5,269,296,389 for 1996-1997 and $5,636,048,955 for 1999-2000 was from the General Revenue Fund. Although there were a number of tax sources deposited in the General Revenue Fund, the major tax source was the Florida sales tax. In addition, funds were appropriated to meet other needs, and proceeds from the Florida Lottery were used to finance appropriations, such as District Discretionary Lottery Funds, Pre-School Projects, and School Recognition awards in the Bush/Brogan A+ Plan (Florida Department of Education, 1999, 2000a). Local financial support for Florida public schools was from revenue derived predominately from property taxes in each district. Each of the 67 counties was a countywide school district. There were no local nonproperty taxes levied by local school boards (Florida Department of Education, 1999, 2000a). The Legislature yearly set the amount of the required local effort, and by statutory procedure it determined each district's share. Each school board was required to levy the millage set for its required local effort. Based on tax roll information provided by the Department of Revenue, the Florida Commissioner of Education certified the necessary millage for each district in the summer of each year. In 1996, certifications varied from 6.464 mills to 7.139 mills due to the use of "assessment rafios designed to equalize the effect on the FEFP of differing levels of property appraisal in counties" (Florida Department of Education, 1996, p. 2). School districts received federal fiands directly and through the state as an administering agency. However, the State Board of Education was responsible for approving plans for cooperating with the federal government for any of the educational

PAGE 17

10 programs and for providing appropriate administration of those funds. The State Board was required to prescribe rules covering the contracts or agreements with the federal agencies. Examples of funds from federal legislation included the Adult Education Act, Job Training Partnership Act, Individuals with Disabilities Education Act, Elementary and Secondary Education Act, Carl D. Perkins Vocational and Applied Technology Education Act, and National School Lunch Act (Florida Department of Education, 1996, p. 4). Performance-Based Funding Changes brought about by educational reform and the trend toward more accountability provided states with the impetus to develop and implement performancebased funding programs. The educational accountability models utilized performancebased budgeting that usually consisted of some type of measurable student performance, standards for comparing the performance information by the school or district, and a set of incentives and/or disincentives. These consisted of monetary rewards going to schools or districts, intervention strategies to assist low-performing schools, and sanctions for those schools that did not meet expected progress or standards through accountability or accreditation processes (Fuhrman & O'Day, 1996; King & Mathers, 1996, 1997). The goal of performance based program budgeting was to improve student performance. Performance indicators in reward programs varied among, but were not confined to, student achievement, performance assessments, student attendance, teacher attendance, dropout rate, retention rate, and transition from high school. Some rewards were based on an absolute standard, and others were earned based on growth and

PAGE 18

11 progress made toward achievement goals (Fuhrman & O'Day, 1996; King & Mathers, 1997). Directly related to performance based budgeting, survey results from a few states produced insightful findings relating to motivation and rewards and sanctions. Perceptions were found that included the opinions that sanctions such as declaring schools "in crisis" or the dismissal of personnel were more incentive than any other part of an accountability system (King & Mathers, 1997). Respondents shared that it was the rating or label that made a difference to educators. Others surveyed by Mathers and King expressed the opinion that public hearings were appropriate sanctions, since they often pressed for school improvement. Therefore, it may be that the contribution of financial rewards to school improvement was obscured by the fear of threatened sanctions and negative publicity (King & Mathers, 1996, 1997). Low-performing schools and student groups might have been the entities most affected by accountability systems. " Dramatic one-year improvements in lowperforming schools suggest that state interventions and local improvement plans made a difference, or that the promise of rewards (or threat of sanctions) motivated teachers and principals to alter conditions for instruction, learning and assessment" (King & Mathers, 1997, p. 161). There were at least two scenarios that existed in a performance-based budgeting model: (a) an individual school or district showed some or marked student improvement that exceeded standards and warranted financial or non-financial rewards, and (b) individual schools or districts showed some or marked lack of improvement or decreases

PAGE 19

12 in test scores or student performance, warranting intervention strategies by the state, or sanctions (Elmore et al., 1996; Fuhrman & O'Day, 1996; King & Mathers, 1996, 1997). In the first scenario individual schools or districts, depending on the state, received reward funds for meeting or exceeding expectations on assessments. These financial rewards varied, due to the appropriations set by the legislatures of the various states. During 1996-1997, examples of appropriations for rewards ranged from $3.2 million in Indiana to $27.2 million in Kentucky. Rewards were given directly to districts, schools, or teachers. Examples of the range of rewards given were $2,500-$63,000 per school in South Carolina (1996-1997), $250-$30,000 per school in Texas (1994-1995), $415-$16,451 per school in Indiana (1996-1997), and $l,155-$2320 per teacher in Kentucky (1996-1997) (King & Mathers, 1996, 1997). Each of the states using performance-based budgeting dictated different uses of the reward funds. Some allowed for the funds to be used for instructional improvement on the basis of the School Improvement Councils advising the principal; some approved the funds for academic enhancement, but no salary bonuses; some prescribed the funds for educational purposes but not for athletics or salary bonuses; and in some states, teachers were given the opportunity to decide where the money should be put to best use. Other states distributed rewards to a variety of recipients. Interventions or sanctions, needed in the second scenario where districts or schools did not meet expected standards, included accreditation sanctions for districts and schools. These included hearings, after an initial year of low performance, and notification of the public of deficiencies and plans for improvements. Special intervention teams might have been appointed to sponsor staff development and

PAGE 20

13 implement improvement plans. Continued low performance may have resulted in a board of managers or closing a campus. In summary, changes were brought about by educational reform, with a thencurrent trend toward greater accountability where many states had adopted a performance based budgeting program with rewards and sanctions that encouraged schools and educators to make the necessary steps to see that student performance improved. Therefore, during the 2000s, state financing structures and school districts needed to renovate or rethink the state public school finance systems to accomplish the newer, more challenging productivity standards and expectations to demonstrate accountability (Fuhrman & O'Day, 1996; Ladd, 1996a; Odden & Picus, 2000; Picus & Wattenbarger, 1996). Florida was one of the states that took the lead in developing standards and a plan for higher standards and performance-based funding. The Bush/Brogan A+ Plan for Education Governor Jeb Bush, Lieutenant Governor Frank Brogan, and members of the Florida legislature developed and implemented the A+ Plan in the late 1990s. Florida's Lieutentant Governor Frank Brogan described A+ Plan for Education as the most comprehensive state accountability, as of June 1999 (Brogan, 1999). It was based on the conviction that all children have the ability to learn, was focused on student achievement, and started with high expectations of test scores. They further professed that "no child would be left behind or abandoned to a substandard education in Florida" (Brogan, 1999, p. 1). There were three principal initiatives that were used to lay the foundations for the Plan in 1995. First, the Florida Department of Education adopted ambitious academic

PAGE 21

14 standards. The Florida Comprehensive Assessment Test (FCAT) was developed to measure these standards through student achievement. Brogan described this development as a 2-year process involving parents, teachers, members of the business community, as well as others. According to Brogan, with the involvement of this eclectic mix, there was broad local support for the developed Sunshine State Standards (Brogan, 1999). More than 70% of the Florida tenth-grade students scored below the basic level in the first administration of the reading section of the FCAT, but public support for demanding public academic standards remained high. Brogan and Bush felt that the Sunshine State Standards provided the blueprint to reach the significantly higher expectations (Brogan, 1999). The second initiative provided choices to parents, teachers, and communities by permitting the development of public charter schools. These schools, being free from the burdens of possibly unnecessary rules and regulations, were stringently accountable for the achievement of their students. There were more than 70 charter schools serving a diverse group of about 1 1 ,000 Florida students. This included a significant number of students traditionally considered to be low achieving or at risk, along with Exceptional Student Education (ESE) students and minorities (Brogan, 1999). The third part of the foundation for the A+ Plan was the program initiated to remediate critically low-performing schools. These identified critically low-performing schools were sites where "two-thirds of their students scored below the proficient level on standardized tests of reading, writing, and math for two consecutive years" (Brogan, 1999, p. 1). Having put these schools on notice, the Department of Education and State i

PAGE 22

Board of Education were empowered to aid schools in preparing improvement plans and to mandate changes in the staffs and curriculum structure if the designated schools did not demonstrate improvement (Brogan, 1999). Statement of the Problem The Bush/Brogan A+ Plan was a comprehensive accountability system that significantly raised the achievement bar. Florida schools began receiving report cards in 1999 and were graded on a scale of A to F, with grades based primarily on students' performance on the developed FCAT. However, schools were also graded on how well the lowest achieving students in each school learned, and it was asserted that the schools would not receive high marks if the low-performing students were left behind. The A+ Plan had, in its accountability package, significant incentives and rewards for successful results as well as disincentives and rigorous remediation for schools that were failing (Brogan, 1999). Rewards for success included a bonus of $100 per student for those schools that received an A or improved by one grade level on the A to F scale. The legislature had appropriated $15 million for this purpose in the 1999-2000 school year and raised it to $60 million for the 2000-2001 school year (Florida Department of Education, 2000a). Additionally, the highest performing schools were deregulated by the state and rewarded with the freedom of site-based budgeting and innovating their curriculum as well as other strategies to further enhance learning at their schools (Brogan, 1999). For the schools that did not receive high grades, Brogan asserted that there was additional assistance for remediation, and there were disincentives or consequences for repeated failure. Students became eligible for Opportunity Scholarships (vouchers) if

PAGE 23

16 their school received an F for 2 years in any 4-year period. This allowed the students to take the voucher and attend any public school or qualified private school of their choice. The school chosen by the student received the state funds allotted for his/her education (Brogan, 1999). The Bush/Brogan A+ Plan, therefore, required increased accountability for student achievement from the state level, while it also pushed much of the power and control to the school district, school, and parent level. In summary, the key elements of the A+ Plan included "rigorous and measurable expectations for student performance, understandable information to parents about school performance, deregulation of budgets and curriculum at the school level, remediation and unprecedented assistance to low performing schools" (Brogan, 1999, p. 2). It also included School Recognition awards of $100 per student to the schools that earned an "A" grade. The School Recognition Awards of $100 for each student in the A+ Plan may have a disequalizing effect on the equity of the state educational finance distribution system. The effect of the reward dollars on the equity of the educational fimding system warranted analysis. Purpose of the Study The evidence from the states included in some studies suggested that the performance-based budgeting/accountability systems advanced educational reforms, and obviously, the rewards and sanctions brought about incentive effects. However, the rewards of money to the "A" schools, as in the Florida plan, may have the effect of disequalizing the fimding of the districts. In this study, the principles of equity along with the effects of the rewards in the Bush/Brogan A+ Plan were addressed.

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17 According to the Office of Program Policy Analysis and Government Accountability (OPPAGA) of the Florida Legislature, The need to preserve equity in public education funding prevents policymakers from distributing fimds to public schools solely on the basis of performance. Nevertheless, the Legislature can use the budgeting process to financially reward or sanction schools without jeopardizing equity if it limits the amount of funding it distributes on the basis of performance. The Legislature can also use non-financial incentives and disincentives to improve school performance without affecting equity.(OPPAGA, 1998b, p.l) The purpose of this study was to determine the effects of additional revenues for performance on the equity of a state school finance system. The research used quantitative measures of equity to determine the degree to which additional revenues awarded to high performing schools corresponded to the principles of equity. Research Question This study was conducted to answer the following research question: What were the effects of additional revenues for performance on the equity of a state school finance system? Significance of the Study Few studies to date have been conducted to determine the effects of monetary performance rewards given to high achieving schools or districts on the equity of K-12 state school finance systems. However, a recent study was conducted on the effects of performance-based fiinding on the equity of fiinding for the community college system in Florida (Brown, 1999). This researcher sought to advance the level of knowledge in the field of education finance by conducting research designed to investigate the question for K-12 public school finance. The present study was designed to study the measures of

PAGE 25

18 equity before and after the implementation of performance-based funding rewards and to evaluate the effects of the additional revenues on a public school finance system. As of 2000, there was not a perfect funding method for the school districts in all of the states. The use of funding formulas was the most common method until the 1990s, when performance-based funding or budgeting was beginning to be considered and utilized. The intent of funding formulas was to distribute state resources equitably and adequately to the various public school districts and schools (Odden & Picus, 2000). Examinations of horizontal equity in the fiinding of public elementary and secondary schools utilized the statistical measures of range, federal range ratio, restricted range, coefficient of variation, McLoone index, and the Gini coefficient (Berne & Stiefel, 1984; Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994). Horizontal equity, often described as "equal treatment of equals," was a school finance principle asserting that students who were alike should have received equal shares of revenue or funding (Thompson et al., 1994). Perfect equity existed when each student in a district or school received the same amount of revenue. The statistical measures of horizontal equity determined how far off funding formulas were from perfect equity (Brown, 1 999). Public school elementary and secondary funding equity was measured by revenue per pupil or expenditures per student (Odden & Picus, 2000). Vertical equity was examined for elementary and secondary public school funding. Due to the extra costs of special education, vocational programs, and compensatory education varying among districts, the state funding needed to assure equality of unequals was larger for some districts than for other districts (Thompson et al., 1994, p. 178). The degree of vertical equity in a school funding program was

PAGE 26

19 increased by a funding methodology that took into consideration differences among students (Brown, 1999). Usually the vertical adjustments were made utilizing pupil weighting or categorical funding (Thompson et al., 1994). The educational accountability models utilized performance-based budgeting that usually consisted of some type of measurable student performance, standards for comparing the performance information by the school or district, and a set of incentives and/or disincentives. These consisted of monetary rewards going to schools or districts, intervention strategies to assist low-performing schools, and sanctions for those schools that did not meet expected progress or standards through accountability or accreditation processes. The goal of performance-based program budgeting was to improve test scores and to improve student performance. Performance indicators in reward programs varied among, but were not confined to, student achievement, performance assessments, student attendance, teacher attendance, dropout rate, retention rate, and transition from high school. Some rewards were based on an absolute standard, and others were earned based on growth and progress made toward achievement goals. School finance has been set within a framework of a significant body of case law. The courts of a number of states have declared their respective financing systems unconstitutional (Odden & Picus, 2000; Thompson et al., 1994). The courts have directed attention, examination, and analysis to how well a system conformed to the legal standards mandated by the courts for educational opportunity equalization (O'Loughlin, 1992). In this light, the current study served to evaluate the effect of additional revenues to schools/districts with regard to court established legal principles.

PAGE 27

In summary, state legislatures and state level education policymakers were faced with difficult circumstances as they attempted to reform education through accountability and improve student performance through performance based budgeting/funding. State fmance systems are built on the principles of equity. As formulas changed to include performance-based financial rewards, as in the Florida system, it was important to examine how these changes affected the equity objective of the funding program. Considering the significance of public education to our society, the objectives of the ftinding program, and the amount of revenue needed for operating schools, it was in the best interest of all policymakers to examine how equitably the state dollars were distributed. While too little funding could negatively affect the educational process and the well being of the country, too much funding could produce inefficient institutions, even while the level of funding supported high performance programs (Chambers, 1996). As formulas were adjusted and modified to include performance-based financial incentives, it was important to analyze the effect of these changes on the equity objective of the state school funding program (Brown, 1999; Florida Department of Education, 1999). Therefore, the ability to comparatively evaluate the effects of monetary rewards on equity before and after implementation was in the best interest of policymakers and very valuable to the education decision-making processes in school finance. Limitations of the Study Public school finance researchers have been concerned with the adequacy, utilization efficiency, and equity of revenues as well as taxpayer burden in realm of public education (Odden &. Picus, 2000; Thompson et al., 1994). This study addressed only the effects of the dispersal of funds for performance on equity of the Florida state

PAGE 28

21 school finance system, the Florida Education Finance Program. Questions of adequacy, efficiency, or taxpayer burden were not addressed. A major limitation of this study was its generalizability. The results, relationships, and effects developed using data from the state of Florida and Florida school districts were appropriate only to this state. However, the results were valuable to policymakers and those in positions of implementation in other states. Overview of Methodology This study was designed to be nonexperimental, utilizing population data. Using statistical measurements that were developed for public school equity studies, the researcher analyzed the degree of horizontal equity on revenue per weighted full-time equivalent (WFTE) student for the 67 public school districts of Florida prior to and following the implementation of performance-based funding. The researcher also analyzed the degree of horizontal equity on revenue per WFTE with and without performance-based funding for the year of performance-based funding implementation. The Florida State Department of Education provided the data from the Florida Education Finance Program for the school years 1997-1998, 1999-2000, and 2000-2001. The school year 1997-1998 was the year before implementation, and the year 1999-2000 was chosen because it was the first year that complete data were available to show performance-based allocations for the 67 districts. Total revenue per WFTE was found by dividing the total revenue by the weighted full-time equivalent student count. Total revenue per WFTE was used to calculate the range, restricted range, federal range ratio, coefficient of variation, Gini coefficient, and McLoone index for each year chosen in the study to analyze the degree of horizontal

PAGE 29

22 equity as described by Beme and Stiefel (1984) and Odden & Picus (2000). The calculations were examined, analyzed, and compared. Definition of Terms Adequacy "means providing sufficient funds for the average district or school to teach the average child to state standards, plus sufficient additional revenues for students with special needs to allow them to meet performance standards as well" (Odden & Picus, 2000, p. 430). Horizontal equity is equity in which all members of the group are considered equal. Vertical equity is equity "in which differences (for which unequal resource distributions are legitimate) among members of the group are recognized" (Odden & Picus, 2000, p. 47). The Florida Education Finance Program (FEFP ) has been the funding device for public schools in Florida since 1973. The intent of the state law has been to guarantee each Florida public school student the availability of substantially equal programs and services appropriate to his educational needs regardless of geographic differences and varying local economic factors (Florida Department of Education, 1996). A performance measure is a quantitative or quahtative indicator used to assess state agency performance (OPPAGA, 1998a). A performance-based program budget is a budget that incorporates approved programs and performance measures OPPAGA, 1998a). Performance-based program budgeting (funding) is a method of relating appropriation to program performance and expected outcomes. This form of budgeting

PAGE 30

23 considers how well an agency is achieving its goals using the money it has been given when assessing funding needs. It identifies specific purposes for fund allocation, reports on past performance, and allows for comparison of programs. It offers program managers flexibility to reallocate resources when necessary and provides rewards for achievement or sanctions for failure (OPPAGA, 1998a, p. 4). Organization of the Study by Chapters This study of equity in the Florida public school finance system prior to and after implementing performance-based funding is organized into five chapters. Chapter 1 serves as an introduction to the problem consisting of the background to the problem, the purpose of and significance of the study, the methodology of the study, the definition of terms used in the study, and the limitations of the study. Chapter 2 presents a review of pertinent literature. The procedures used in this study are described in Chapter 3. Chapter 4 consists of a presentation and discussion of the data. Lastly, the findings, conclusions, and recommendations are given in Chapter 5.

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CHAPTER 2 LITERATURE REVIEW Introduction Chapter 2 contains the literature search for the study. The concept of equity was reviewed in preK-12 education finance, along with the appropriate statistical measurements utilized to analyze the degree of equity in a fiinding program. Various studies were examined to decide which principles of equity were investigated, how these identified principles were measured, and which variables were used in the assessments. This study also reviewed selected fiscal equity court cases. The researcher examined the developing accountability concept of performancebased fiinding. The fimding program and allocation of revenue for districts and schools in the state of Florida was also described. Also, the researcher reviewed the performance-based fimding in the Bush/Brogan A+ Plan for Florida. Concept of Equity in Public Schools The concept of equity and equitable treatment in education finance was one that developed and changed over time (Brown, 1999; Thompson et al., 1994; Wood & Thompson, 1993). With the following passage. Wood and Thompson discussed the evolvement of equity and equality through Alex B. Toqueville's assertions in Democracy in America and the idea of individual gain and achievement based on one's merits and work ethic (Tocqueville, A., 1835. Philip Bradley, Ed., Vintage Books, 1945, as cited in Wood & Thompson, 1993). 24

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25 The gradual development of the principle of equality is a providential fact. It has all the chief characteristics of such a fact: It is durable, it constantly eludes all human interference, and all events as well as all men contribute to its progress. (Wood & Thompson, 1993, p. 1) The research of the early education theorists was compatible with the principles of social justice as discussed by John Rawls in A Theory of Justice (Rawls, 1973, as cited in O'Loughlin, 1992; Thompson et al., 1994). Philosopher Rawls was concerned with justice and viewed fairness as the only means of achieving equity. In his book, Rawls greatly influenced liberal thinking. He gave a systematic account of justice as fairness; outlined the proper reach of, and limitations on, individual liberty; and he differentiated among acceptable and unacceptable forms of social inequality (Cavalier, 1999). The arguments for equality of educational opportunities by education finance theorists seemed to be consistent with Rawls' second principle of justice requiring that "legitimate inequality must be to the greatest benefit of the least advantaged" (Thompson et al., 1994, p. 215). In keeping with Rawls' philosophy, education finance theorists held that it was the duty of the government to fund all educational needs, with some children having greater needs for more resources. Equity and equality were not exactly interchangeable, since equity extends beyond the general concept of equality (Wood & Thompson, 1993). John Rawls argued that there were some (people) who were more disadvantaged than others, and that the unequal distribution of resources or goods was necessary and required to compensate those that were least advantaged (Cavalier, 1999). Therefore, the pursuit of a basic sense of justice among members of our society was required (Wood & Thompson, 1993). While concepts of equity were found throughout many ideologies and often reflected a variety of political agendas, the concept of equity depends on subjective

PAGE 33

perceptions of individuals in collective groups. The perception of equity may or may not be in line with legal theory, but, regardless of the viewpoint, "equity attempts to achieve a higher level of justice and the resultant rights in order to attain what is perceived to be a greater, better, and more economically productive society" (Wood & Thompson, 1993, p. 2). Early Education Finance Theory The current concept that states should make every effort to equalize educational opportunity came from the work of EUwood Patterson Cubberley in the early 1900s. In his 1906 dissertation, School Funds and Their Apportionment, Cubberley argued that a minimum level of education and equalization of educational opportunities was a state responsibility. He asserted that all children within a state had a right to the same educational opportunities (Cubberley, 1906; Chambers, 1996; Odden & Picus, 2000; Thompson et al., 1994). In the 1920s Harlan Updegraff extended Cubberley 's theories and advanced the concept that the state would change the amount of financial support based on the amoimt of local funding generated. He asserted that each child should be afforded a minimum level of education, compared to other students in the state, disregarding their location in the state (Wood & Thompson, 1993). Therefore, he argued for the state to appropriate the required funding to establish a minimum level of funding for all districts in a state. In 1921, George D. Stray er and Robert M. Haig introduced the concept of a minimum educational foundation program for funding education. They believed and promoted a minimum educational foimdation system and a series of education fmance formulas to assure their education finance goals. Their goals included the following four

PAGE 34

27 elements: (a) the establishment of adequate schools to ensure equal educational facilities to each child in the state, (b) tax levies for educational finance purposes that were based on taxpayers ability to pay, (c) a uniform tax effort all over the state, and (d) a system that did not hinder the ability of the local districts to raise resources above the minimum level (Strayer & Haig, 1921, as cited in Wood & Thompson, 1993; Chambers, 1996; Thompson et al., 1994/ Paul R. Mort, in 1924, continued the evolvement of educational opportunity equalization and education need in school finance literature through his doctoral dissertation. In The Measurement of Educational Need, Mort asserted that in a minimum funding program the measure of educational need was the measure of cost for educational opportunity, or "it costs what it costs"; the overall educational needs of a community influenced the costs of educational programs. This meant that individual districts should be differentiated from others based on actual costs, and when a satisfactory minimum educational opportunity was available in every district, then equalization was satisfied (Mort, 1924, as cited in Thompson, et al., 1994; Chambers, 1996). Mort's postulates implied that a satisfactory educational equalization program would have three components. His components included common educational activities for all districts throughout the state, a demand for ftmding for unusual expenditures beyond the control of local communities, and unusual cost for justified special needs in particular communities. Therefore, he devised a weighted pupil concept, linked educational opportunity with standards of visible equality, and argued that state money was responsible for providing fiinding to produce uniform equality to all children of a state (Mort, 1924, as cited in Thompson et al., 1994; Chambers, 1996). Therefore, Mort's

PAGE 35

concept of school finance resulted in equal access for children and the idea of vertical equity (Brown, 1999). Henry Morrison proposed the idea of full state funding during the 1930s in his book, School Review (Morrison, 1930). In his view, the educational opportunity differences were due to taxing subdivisions of the states. His proposition included the abolishment of all public school districts and any reliance on property tax. This idea of full state funding of expenditures from a mandated state income tax was met by political opposition at the local and state levels, although later gained some interest (Thompson et al., 1994; Wood & Thompson, 1993). In summary, the financing of public education evolved up to and during the 1950s with funding formulas based on concepts developed by Strayer and Haig and extended by Mort. Mort used the formulas to present common educational programs, which determined nearly the same educational opportunity for each student in a given state. In addition, he introduced and argued for the concept of the weighted pupil, with the weightings based on a classification of students with various special needs and the concept of vertical equity (Brown, 1999; Thompson et al., 1994; Wood & Thompson, 1993). Later researchers, Roe L. Johns and Edgar L. Morphet in The Economics Financing of Education, expanded the concept of equalization of educational opportimity considering educational need. They identified additional variables that affected educational opportunity costs, including costs related to sparsity and population density (Johns & Morphet, 1975). i ] j

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29 These researchers expanded the concept, as discussed by Mort, of considering the various educational needs for educational opportunity equalization. This idea took into account that the different educational needs, depending on the varying needs of students and community expectations, affected the educational delivery costs. Considerations were related to students with special needs; school-related needs, such as varying size and location; and special program needs. The provision of equalization for those educational opportunities among the varying communities was the responsibility of the state legislatures through the state funding formulas (Chambers, 1996; Wood & Thompson, 1993). Education and Benefits to Society The American system of public education had the aim of educating every child in the country and reflected the values and goals of the American society (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). Thomas Jefferson wrote that no nation could remain both ignorant and free. Therefore, to protect their freedom and to provide a trained work force, Americans developed an elaborate educational system (Garms, Guthrie, & Pierce, 1988). The principal intent of pubhc education was to "benefit society through increased productivity, improvement of an individual's and society's quality of life, and increased standards of living for all people" (Wood & Thompson, 1993, p. 10). The benefits of an educated population were generally greater for society than for the individual citizen; however, the benefits of education accrued to both. Many economists have held the belief that education and economics engage in constant interdependency. Theodore Schultz, John Kenneth Galbraith, and Gary Becker

PAGE 37

30 asserted that the historic elements of land capital, and labor had to embrace the idea of human capital (Thompson et al., 1994; Warsh, 1992). Schultz, who won a Nobel Prize in 1979, explained the concept when he wrote, Human capital has the fundamental attributes of the basic economic concept of capital; namely, it is a source of future satisfactions, or of future earning, or both of them. What makes it human capital is the fact that it becomes an integral part of the person. (Schultz, 1970, as cited in Thompson et al., 1994, p. 24) Schultz' focus on education as a key to raising productivity led to the modem emphasis on human capital and paved the way for Gary Becker's analyses of human skills as a source of production and growth (Thompson et al., 1994). Gary Becker, another economist from the University of Chicago who won the Nobel Prize for economics, explained that capital could mean a bank account, shares of stock, an assembly line or steel plates, all forms of capital in the sense that they yield income, and other useful outputs over a long period of time. He also asserted that schooling and training courses were also capital in the sense that these educational activities improved a person's health, raised earnings, or added to a person's knowledge over much of a lifetime. He argued that it was fully in keeping with the capital concept to say that such expenditures were investments in capital, but these produced human, not physical or financial, capital. This was because one could not separate a person from his or her knowledge, skills, health, or values the way it was possible to move physical assets while an owner stayed put (Becker, as cited in Warsh, 1992). Thompson et al. (1994) asserted that under the conditions of the human capital concept, education took on substantial meaning. They stated that "the concept of human capital permits viewing the costs of unskilled labor as true cost and the expense of creating more productive skilled workers as an investment with tangible returns"

PAGE 38

31 (Thompson et al., 1994, p. 24). Therefore, the idea of human capital represented a step in recognizing education as an investment that increased gain. Individuals benefit from their education in many ways. They are major beneficiaries as they have improved personal opportunities for increased income, greater social mobility, higher socioeconomic status, and more cultural opportunities (Odden & Picus, 2000; Thompson et al., 1994). These benefits lead to other benefits as better educated people tend to be less susceptible to illness, have less unemployment, are more open to new ideas and information, and are more active consumers (Thompson et al., 1994). The individual benefits, then, also support the concept that education is an investment, not an expense. Economic studies confirmed that ftinding for public education was an investment, not just an expense. There were significant cost-effective economic social returns on the expenditures. Well-educated students grew into educated adults that were more productive and contributed to the overall economic and social well-being of society. Therefore, the whole society, as the primary recipient of benefits, was responsible for funding an appropriate education system (Garms et al., 1988; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). Each of the states was legally obligated to provide an "equal educational opportunity and a basic educational program" to all state residents between certain designated ages (Wood & Thompson, 1993, p. 12). The goal was to furnish equal opportunity and education programs, regardless of the student's location in the state or relative wealth of the local community (1993), and the desire of the individual student to achieve should have been the only restriction of the educational programs.

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32 In reality, any state's wealth was not distributed in a uniform format. Therefore, the ability of the diverse school districts to offer the educational programs mandated by the state legislature varied from district to district, depending on the wealth variation. State intervention was necessary to attain any form of equity in education finance structure. A distribution formula for state funding was the method utilized to disburse the state funds to the local school districts. These funding formulas were used to distribute funds to schools and to balance the inequities caused by local tax base differences (Odden & Picus, 2000; Wood & Thompson, 1993). In keeping with the concept that a student's educational opportunity should not be a function of the wealth of the local community. Wood and Thompson (1993) asserted that each state was justified to tax the wealth of all residents to provide funding to the poorer districts. Principles of Equity Equity in public school finance referred to the fairness in distributing state flinds to local school districts and students (Berne & Stiefel, 1979). Researchers were encouraged to create a framework that portrayed exactly what investigators were trying to assess in equity studies. The setting of the study of equity was founded on the criteria of four questions (Berne & Stiefel, 1979; Brown, 1999; Odden & Picus, 2000; Wood & Thompson, 1993). First, a researcher should make clear the question of equity for whom? Expenditures for students receiving educational services were usually considered the basis for equity, although some studies considered taxpayer equity. Which resources to distribute represented the second question to be identified. These resources were identified as revenues from state or federal sources, or they represented teacher salaries or other expenditures. The third query asked which principles of equity were examined in

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33 the research. This was related to horizontal equity, vertical equity, or wealth neutrality. Which statistical measures were used to measure the degree of equity was the fourth question to be addressed (Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Woodetal., 1990). Horizontal and vertical equity were central to the public school finance debate, and the construct of equity drives the allocation formulas or mechanisms utilized to sustain fairness in the educational and fiscal structure (Brown, 1999; Garms, 1979; Garms, Guthrie, & Pierce, 1988; Odden & Picus, 2000; Thompson, Honeyman, & Wood, 1993; Thompson et al., 1994; Wood & Thompson, 1993). Horizontal equity, usually described as equal treatment of equals, was an equity principle that stated that children who were alike should receive equal shares of resources (Berne & Stiefel, 1999). States had to try to balance expenditures reasonably for all students who were "educated imder similar circumstances with similar educational abilities — horizontal equity" (Wood & Thompson, 1993, p. 18). The achievement of perfect equity took place when each student in a state received the same apportionment of funding. Measurements of horizontal equity were used to determine statistically how far the expenditures per students were fi-om perfect equity (Berne & Stiefel, 1979, 1999; Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). Vertical equity was an equity principle, which stated that students not alike should be treated differently, described as unequal treatment of unequals. This meant that allocations had to be made for varying expenditures on special populations of students. Children who were considered to have unequal needs and requirements for different levels of funding included those who were handicapped, from impoverished areas, or

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34 who spoke English as a second language (Beme & Stiefel, 1999; Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994). A public school finance model that took into account the various student differences increased the degree of vertical equity of a funding mechanism. The use of pupil weightings, based on the diverse student special needs, was one of the most common ways to enhance the degree of vertical equity. The principles of horizontal and vertical equity are also related to taxation. Horizontal equity is described as an equal effort exerted by taxpayers with equal abilities to pay. Therefore, two people with equal incomes and equal valued housing should be assessed at the same property tax rate and thereby support equitable tax burdens. In contrast, the second principle of vertical equity provides that taxpayers with varied abilities to pay would exert dissimilar efforts in carrying tax burdens (Wood & Thompson, 1993). Many studies described different variables utilized in evaluating the degree of horizontal equity in preK-12 education. As they analyzed the differences and inequalities in funding formulas among many states, they also firmed up the equity principles, assessment variables, and appropriate statisfical measurements (Beme, 1988; Beme, Steifel, & Moser, 1997; Beme & Steifel, 1979, 1999; Bezeau, 1979; Brown, 1999; Chambers, 1996; Hertert, Busch, & Odden, 1994; Hickrod, Chaudhari, & Lundeen, 1980; Keamey & Chen, 1989; Owens & Maiden, 1999; Steifel, Rubenstein, & Beme, 1998; Verstegen, 1996; Verstegen & Salmon, 1991; Wood, Honeyman, & Bryers, 1990). Very often equity research utilized the variable revenue per pupil. The who of the study, per Beme and Stiefel' s fi-amework, was the pupil as the unit of analysis, and revenue was the object that should be equitable (Brown, 1999). Revenue was described

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35 as the sum of state and local revenues, with some variation (Alexander, 1997, 1998; Kearney & Chen, 1989; Verstegen, 1987; Verstegen & Salmon, 1989). A revenue variation example was operating revenue per pupil, which was defined as revenue lessened by federal, capital improvement, and debt service funds (Brown, 1999; Hertert et al., 1994). Researchers also often used the variable expenditures per pupil (Brown, 1999; Hickrod et al., 1980; Kearney & Chen, 1989; Wood et al., 1990). While the unit of analysis in studies of fiscal equity was usually "pupil," this unit was often characterized in various ways. Pupil was described as average daily attendance (ADA) or average daily membership (ADM) (Odden & Picus, 2000; Thompson et al., 1990), with some studies utilizing pupil weightings (Brown, 1999; Stark, Wood, & Honeyman, 1993). The use of a weighting formulation was needed to make vertical adjustments when financial policymakers considered students with special needs or specific program costs (Odden et al., 1979; Odden & Picus, 2000; Thompson et al., 1994). The weighted fiill-time equivalent (WFTE) was formed by researchers by combining the concept of weighting with another unit of analysis, the fiiU-time equivalent. Stark et al. (1993) described the WFTE as "the summation of the percentages of time a student spends in a particular program multiplied by weighted cost factor associated with the provisions of services for that program" (p. 235). The Florida Education Finance Program (FEFP) used a fimding formula to distribute state resources to school districts based on a WFTE. Therefore, research on public school finance equity for the state of Florida also utilized WFTE for the unit of analysis (Brown, 1999;

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36 Chambers, 1996; Harrell, 1992; Maiden, 1994; O'Loughlin, 1992; Stark et al., 1993; Summers, 1993). In summary, equity was very important in taxation and appropriations for expenditures per student. The state funding formulas changed through political maneuverings and litigation in the various states in the attempts to equitably distribute the financial resources for public school funding. As the social, political, and economic environments changed and affected states and local school districts, education finance policies were altered to better assure equity (Wood & Thompson, 1993). Statistical Measures for Horizontal Equity Several statistics were used to assess the degree of equity in public school finance for one variable, such as expenditures per student. Berne and Stiefel (1984) identified and described these statistics and their properties in their book. The Measurement of Equity in School Finance. The measurements included the range, restricted range, federal range ratio, coefficient of variation, Gini Coefficient, and McLoone Index. The Lorenze curve was often utilized to describe and explain the Gini coefficient (Berne & Stiefel, 1999; Brown, 1999; Chambers, 1996; Odden & Picus, 2000; O'Loughlin, 1992; Thomspon et al., 1994; Wood et al., 1993). Researchers were able to analyze the degree of equity from a distinct viewpoint with each of the different statistical measurements (Brown, 1999; Chambers, 1996; Odden & Picus, 2000; Thomspon et al., 1994; Verstegen, 1996). The repeated use of these statistical measures established an acknowledged procedure for equity measurement studies (Brown, 1999; Chambers, 1996; Thompson et al., 1994).

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37 Range The range is a general dispersion measure that is the difference between the highest and lowest per-pupil observation, when the observations are ordered from the highest to lowest. The larger the range, the greater the inequality. This statistic measures the maximum difference in the variable among students in a state, but it was also a disadvantage. Since it indicates the difference between only two observations, the smallest and the largest, it does not take into consideration the effect of discrepancies or outliers. Usually, in every state there were outlying districts. Some districts had low property wealth or low-income rural districts. In addition, there were districts with oil wells or nuclear power plants, with very few students. These districts were anomalies and did not represent the more common districts (Chambers, 1996; Odden & Picus, 2000; Wood & Thompson, 1993). The range statistical measurement does not give evidence of the degree of equality or inequality for the observations in the studies and, therefore, is a poor indicator for assessing the degree of equity. Further, the range increases with inflation, and an increasing range indicates a system with increasing inequality. While the range statistics are used extensively by school finance litigants and analysts and demonstrates the maximum degree of inequity in data, the range is not a favored measure (Odden & Picus, 2000; Thompson et al., 1994). Restricted Range The restricted range is the second horizontal equity statistic and is the difference between an observation near the top of a disfribution and an observation near the bottom of the distribution. Therefore, the restricted range takes into consideration the middle of

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38 the distribution by leaving out a percentage of pupil observations at the extremes. The restricted range is defined as the difference between observations at the 95th percentile and the 5th percentile (Brown, 1999; Chambers, 1996; Odden & Picus, 2000; O'Loughlin, 1992; Thompson et al. 1994). It is also described by Odden and Picus (2000) as the difference between the 90th percentile and the 10th percentile, leaving out even more outliers. As occurs with the range, the smaller the restricted range, the better the equity of the distribution. However, the restricted range still measures the degree of inequality between just two observations and not the overall distribution. It also increases with inflation, as does the range. While the restricted range is preferred to the range, neither are good indicators of the equity of the entire set of observations in the distribution of the object for the entire education funding system (Odden & Picus, 2000; Thompson et al., 1994). Federal Range Ratio The federal range ratio is a variation of the restricted range and was "originally designed as a federal test to measure whether states met federal wealth neutrality guidelines in distributing federal funds" (Thompson et al., 1994, p. 248). The ratio is analyzed in a number of studies on per-pupil revenue and is also examined for the range of per-pupil expenditures. This is calculated by dividing the restricted range by the observation at the 5th percentile (Thompson et al., 1994). This was often converted into a percentage by multiplying by 100. The smaller the decimal calculated for the ratio, then the less variation there is in the distribution of data, therefore making the distribution of observations more equitable (Chambers, 1996). Because this statistic is a ratio, it eliminates the inflation problem, since the ratio does not increase with inflation. Because

PAGE 46

the federal range ratio does not vary significantly with inflation, it is considered a more acceptable statistic than range or restricted range (Brown, 1999; Chambers, 1996; Odden & Picus, 2000). The federal range ratio is a statistic that also is utiUzed to determine whether states may include federal Impact Aid in calculating state equalization aid (Odden & Picus, 2000). It had once been known as the "federal measure of disparity" (Hickrod et al., 1980, p. 182). The federal range ratio was developed to analyze and determine whether a state's school finance model was structured to equalize expenditures (Kearney & Chen, 1989). The measure may be used on both objects of expenditures and revenue. Coefficient of Variation Another horizontal equity statistic is the coefficient of variation (CV) and is defined as the standard deviation divided by the mean. It measures the variability in the distribution about the mean (Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Verstegen, 1996). The coefficient is expressed in either decimal or percent form, and it varies fi-om 0 to 1 or fi-om 0 to 100, as a percentage. The smaller the CV, the better the object is distributed to children, and a zero CV represents a uniform distribution of funds to students. The object is usually the revenue or expenditures for a given proportion of children in the state (King & Mathers, 1997; Odden & Picus, 2000; Thompson et al., 1994). The CV is a statistic that includes all values of a set of observations, does not change with inflation, and is relatively easy to understand. If the model of the school funding system remains the same, but all economic and dollar variables rise with inflation, the CV remains the same. This indicates that the equity of the system has not

PAGE 47

40 changed. Therefore, due to these characteristics, the coefficient of variation is increasingly utihzed by school finance analysts (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). An issue discussed by Odden and Picus (2000) was the determination of an appropriate standard for the coefficient of variation. Describing it as a value judgment, they stressed that the main concern was to determine a relative standard that would compare districts in the varying quartiles, or an absolute standard that would establish a cutoff point for the determination of equity. While recommending an absolute standard for equity of about 10%, it was recognized that standard setting involved politics, and different states and researchers of school finance varied on acceptable levels (Odden & Picus, 2000). Gini Coefficient The Gini Coefficient is a statistical measurement adopted from measures of income inequality used by economists. This statistic shows how far the distribution is from allocating each percentage of students with equal percentages of revenues (Chambers, 1996; Kearney & Chen, 1989; Odden & Picus, 2000; O'Loughlin, 1992; Thompson et al, 1994). School finance researchers, led by Hickrod in the 1970s, used the Gini Coefficient to measure wealth neutrality (Thompson et al., 1994). While wealth is defined as the ability of a district to support the schools with local income and property taxes, wealth neutrality describes the relationship between the school district's wealth and the distributed expenditures for the school district (Hickrod et al., 1980; Thompson et al., 1994). The funding structure is said to be "wealth neutral" if there is little, or no, relationship between the local district wealth and local district expenditures (Chambers,

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41 1996; Thompson et al., 1994). The Gini coefficient represents this relationship, or lack of relationship, through a calculated ratio. The ratio determines a number between zero and one. The smaller the Gini coefficient, the more equitable the distribution of expenditures or revenue (Brown, 1999; Chambers, 1996; Odden & Picus, 2000; Thompson et al., 1994). To determine the Gini Coefficient, a graph is prepared by plotting the cumulative percentage of enrollments on one axis, usually the horizontal axis, against the cumulative percentage of revenues or expenditures on the other axis, usually the vertical axis. The resulting graph indicates the degree to which the revenue or expenditures are distributed equally to students at various percentiles. If the object of expenditures or revenues are perfectly distributed, the Gini graph will be a straight 45-degree line (Odden & Picus, 2000). The 45-degree line represents perfect equity indicating that a certain percentage of the students receive an equivalent percentage of revenue or are allotted an equal percentage of expenditures (Chambers, 1996). It is best explained by the Lorenze curve (Thompson et al., 1994). This was the name of the concave curve formed from the plotted data described above, when the object was not perfectly distributed. The Gini coefficient was the area between the Gini/Lorenze curve and the 45degree line divided by the area under the 45-degree line. The resuhant value ranges from zero to one where a thoroughly equitable distribution occurs when the Gini coefficient equals zero. This index includes all observations and is not affected by inflation (Odden & Picus, 2000). A value for the Gini Coefficient that is close to zero suggests equality, but the school funding model may be unequal. However, the Gini Coefficient is a frequently

PAGE 49

42 used horizontal equity statistic in school finance research and analysis. Although a standard had not been set, it was suggested by Odden and Picus (2000) that a value of less than .05 was desirable. The smaller the Gini Coefficient, the smaller the area between the 45 -degree line of perfect equity and the Lorenze curve of plotted observations; therefore, the more equal the distribution of the object (Odden & Picus, 2000). The Gini Coefficient is considered a wealth neutrality test and was most frequently used by school finance researchers to indicate the degree of equity on perpupil expenditures. However, from the 1970s to 1990s, researchers also utilized the Gini Coefficient and Lorenze curve to examine the degree of equity on per-pupil revenue. Some also used the Gini Coefficient on weighted units of analysis (Chambers, 1996). McLoone Index The McLoone Index is a statistic unique to school finance and was designed by and named after Eugene McLoone, an economics professor at the University of Maryland in the 1960s (Hickrod, Chaudhari, & Lundeen, 1980; Odden & Picus, 2000, Thompson et al., 1994). The measure was created due to a belief that each state should be concerned with the school districts having expenditures or revenues that are below the median of the distribution. It was developed to provide a measure for this bottom half of the distribution and to examine the degree of equality for those observations below the 50th percentile (Chambers, 1996; Odden & Picus, 2000). According to McLoone and other school finance researchers, the state was responsible for "bringing up the low spending districts" (Hickrod et al., 1980, p. 182).

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43 The McLoone Index is defined as the ratio of the sum of the values of all observations, such as expenditures, below the median to the sum of observations if they all had the value of the median (Hickrod et al., 1980; Kearney & Chen, 1989; Odden & Picus, 2000; Thompson et al., 1994). A higher McLoone Index results when fewer dollars are required to raise all observations below the median level up to the median level (Chambers, 1996). The Index ranges from zero to one, with a one representing perfect equity. The value for most school finance sets of data is in the 0.7 to 0.9 range. While there is no standard set for a "good" McLoone Index, it was suggested by Odden and Picus (2000) that 0.95 is desirable. Researchers used the McLoone Index to examine the equity of the distribution using per-pupil expenditures, per-pupil revenue, and also a weighted unit of analysis. Since the McLoone Index is a straightforward measure of equity of the distribution for the bottom half of the data set, it is popular in school finance and is included in many school finance equity studies (Hertert, Busch, & Odden, 1994; Hickrod et al., 1994; Kearney & Chen, 1989; Odden & Picus, 2000; Wood, Honeyman, & Bryers, 1990). School Finance Equity Litigation As determined by the United States Constitution, public education was a responsibility of the states (Alexander & Alexander, 1992; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). The Tenth Amendment states, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people" (Alexander «& Alexander, 1992, p. 842). Therefore, state legislatures delegated public education implementation to state departments and agencies, with school districts designated as the managerial entities

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44 ' * to operate daily functions of state public schools (Alexander & Alexander, 1992; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). As the states accepted additional responsibility in public school finance, legislatures began to seriously develop state funding frameworks that increased the amount of revenue for school districts and provided a more uniform educational minimum foundation across the states (Brown, 1999; Thompson et al., 1994). This resulted in the public school finance equity question of how well the funding mechanisms worked in allocating state resources adequately and equitably to the various school districts within a state (Brown, 1999; Wood & Maiden, 1996). Due to these concerns, there was court involvement in the changing of the equity concept from one that was philosophical to a legal concept. In general, successful litigation was based on sound legal strategies, well-informed litigants in the area of school finance research, and expert data analysis (Wood & Maiden, 1996, p. 197). A number of court cases clarified the equity concept in public school finance, and this mandated that a number of states change and improve their funding mechanisms (Brown, 1999; Thompson et al., 1994). The local school districts operated within the legal framework of each state's court system, state constitutions, state statutes, and adminisfrative rules and regulations. Although the parameters varied from state to state, the local districts were mandated to administer and work within the state parameters. In addition, local school boards were not allowed to take on additional responsibilities or to disregard assigned duties (Odden & Picus, 2000; Thompson et al., 1994; Wood «& Thompson, 1993). There was more access to public education finance data in the early to middle part of the 20th century, and researchers of educational finance made significant progress

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45 toward the analysis and understanding of education finance data and the differences among the funding structures in the various states. However, the findings of the research studies were not often brought to bear in funding practices by state policymakers (Wood & Thompson, 1993). Many state legislatiures were averse to recognize and implement the findings of educational finance research, and early litigation processes were not able to truly employ the research findings. Although the early cases were based on simple analysis of the data, these cases previewed the debate and litigation regarding public policy for school funding for many years (Wood & Thompson, 1993). Early History of Education Finance Litigation Equity, meaning equality of education, in public school funding in the United States was the subject of litigation in both state and federal courts. The primary case that addressed equal education opportunities was Brown v. Board of Education in 1954. The issue before the U.S. Supreme Court was the constitutionality of the segregation practice of different public schools for white and black students (O'Loughlin, 1992; Wood & Thompson, 1993). Brown was a challenge to the legal decision in Plessy v. Ferguson (1896). In 1896, Plessy v. Ferguson was argued before the U.S. Supreme Court. The issue before the Court was the law requiring "separate-but-equal" public transportation facilities for blacks and whites (Wood & Thompson, 1993). The Court, acknowledging the importance of the decision of the country's public schools, held for the separate-butequal doctrine and held that the practice was valid {Plessy v. Ferguson, 1896; Wood & Thompson, 1993).

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46 The next school court case utiUzing the Plessy doctrine was Cumming v. Richmond in 1899. This case was the first litigation before the Supreme Court regarding public school funding. Since a Georgia county school board already had in place a high school for white students in the district, the board refused to also provide a school for minority pupils. While the defendant school board asserted that the district could not afford to operate two high schools, the plaintiffs argued that the school for minorities had to be built or the white schools had to be closed (Wood & Thompson, 1993). The U.S. Supreme Court determined that taking the school and educational opportunities away from white children would not provide minority children additional educational opportunities. Closing the high school for white students would not provide advance the position of the black students. The court finding distinguished between a perception of a "nonarbitrary denial of equal treatment versus a hostile denial of equal treatment as prohibited by the Fourteenth Amendment" (Wood & Thompson, 1993, p. 6). The Plessy and Cumming cases determined the direction of court action for about 50 years. The argument in Brown v. Board of Education challenged the Plessy finding and the separate-but-equal doctrine. The Brown argument depended on the interpretation of Section 1 of the Fourteenth Amendment to the Constitution. This prohibited the states from denying the equal protection of the laws to any individual in their respective states {Brown v. Board of Education, 1954; O'Loughlin, 1992). It stated, All persons bom or naturalized in the United States and subject to the jurisdiction thereof, are citizens of the United States and the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person

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47 within its jurisdiction the equal protection of the laws. (U.S. Constitution, Amendment XIV, section 1) Chief Justice Earl Warren wrote the finding for the Coiut and stated, Where a state has undertaken to provide an opportunity for an education in its public schools, such an opportunity is a right which must be made available to all on equal terms. Segregation of children in public schools solely on the basis of race deprives children of the minority group of equal educational opportunities, even though the physical facilities and other "tangible" factors may be equal. (Brown v. Board of Education, 1954, p. 493) The Court also emphasized the importance of education as a governmental function and a requirement for success in life (O'Loughlin, 1992). Today, education is perhaps the most important function of state and local governments. Compulsory school attendance laws and the great expenditures for education both demonstrate our recognition of the importance of education to our democratic society. It is required in the performance of our most basic public responsibilities, even service in the armed forces. It is the very foundation of good citizenship. Today it is a principal instrument in awakening the child to cultural values, in preparing him for later professional training, and in helping him to adjust normally to his environment. In these days, it is doubtful that any child may reasonably be expected to succeed in life if he is denied the opportunity of an education. (Brown v. Board of Education, 1954, p. 493, as cited in Alexander & Alexander, 1992) The overturning of Plessy meant the end to the legalized separate-but-equal policy of segregation in public schools in the United States. Based on the Court's interpretation of the equal protection clause of the Fourteenth Amendment, education opportunities in the public schools had to be made available to all students equally (O'Loughlin, 1992). Therefore, in Brown v. Board of Education, the Supreme Court reversed Plessy v. Ferguson in its landmark decision. This finding began the modem era of the use of the courts in the efforts of education finance theorists to affect and shape change in education finance (Wood & Thompson, 1993). These theorists interpreted the opinion of the Supreme Court in Brown v. Board of Education to mean that "where the government has

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48 undertaken to provide education, it must do so on an equal basis of all residents of a given state" (Wood & Thompson, 1993, p. 10). A number of court cases followed that dealt with the issues of differences in funding among school districts, disparities that resulted from the fimding models in each state. Mclnnis (1968) was filed on behalf of public school students in Cook County where the plaintiffs argued that the state statutes related to the public school financing structure were unconstitutional because of the resulting fiinding differences among the school districts (Odden & Picus, 2000; O'Loughlin, 1992). The revenues for the districts came 75% from local property taxes and 20% from state sources. This fimding model produced differences in expenditures from $400 to $1,000 per student, and the plaintiffs argued that these variations denied individuals the equal protection opportunity guaranteed by the U.S. Constitution's Fourteenth Amendment {Mclnnis v. Shapiro, 1968; Odden & Picus, 2000; O'Loughlin, 1992). The Mclnnis suit was dismissed by the federal district court, and later the U.S. Supreme Court affirmed the dismissal {Mclnnis v. Shapiro, 1968). The court determined that the financing structure complied with the Fourteenth Amendment, even though the structure allowed for variations in expenditures, and it was not discriminatory. The court fiirther explained that the Constitution did not require that the fimding take place only on the basis of the students' educational need. Further, the Constitution did not mandate strict guidelines for equal expenditures for each pupil {Mclnnis, 1968; Odden & Picus, 2000; O'Loughlin, 1992). In Burrus v. Wilkerson (1970), the challenge was to the state's fiinding method in Virginia. Again, the fimding structure was fiinded heavily from the local property tax.

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49 The plaintiffs asserted that the system created major disparities in the educational opportunities in the various counties and that this model violated the equal protection clause. The Virginia state constitution in Burris v. Wilkerson (1972) required that the legislature maintain an efficient and free system of public schools (O'Loughlin, 1992; Odden & Picus, 2000), but the federal district court had concluded in Burrus v. Wilkerson (1969) that "courts have neither the knowledge, nor the means, nor the power to tailor the public moneys to fit the varying needs of these students throughout the State" {Burris, 1969, p. 574, as cited in Minorini &. Sugarman, 1999b, p. 37). While the federal court could find no standard to apply for educational need in the Mclnnis case, the state supreme court in Serrano (1971) determined a manageable standard in the concept of fiscal neutrality (Odden & Picus, 2000; O'Loughlin, 1992). This established a relationship that could be examined between the taxable property wealth of a district and the expenditures per student. Under the California fiinding structure, more than half of the school revenues were from local real property taxes, and the courts determined in Serrano that districts with low tax bases were not able to levy taxes at a rate that was adequate to provide the revenue that could be generated with much less tax effort in the more property rich districts. Therefore, this enabled the courts to utilize a standard to measure an equality of educational opportunity (Odden & Picus, 2000; O'Loughlin, 1992). Theories of Litigation and Selected Cases The public school finance cases were litigated before the courts under three different theories. The first theory was based on the "equal protection doctrine" under the U.S. Constitution. Utilizing this proposition, attorneys argued that the state funding

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50 framework violated the clause, because "lower funding level in poorer districts results in a deprivation to education students who reside in these districts" (Underwood, 1994, p. 144). The second and third theories utilized in school finance litigation brought before the courts were based on rights that were guaranteed by state constitutions. The equal protection clause under state constitutions was utilized by some school finance htigators, and other attorneys argued that the particular state had failed to appropriately provide an education to the state's students, according to the articles of the state constitution (Brown, 1999; Underwood, 1994). Litigators who searched for reform through the federal government court systems, however, were not very successfiil. This was demonstrated in San Antonio v. Rodriguez (1973). In this case, the U.S. Supreme Court upheld the Texas public school finance mechanism constitutionality, even though there were large differences in the resource distributions. Due to the difficulty with litigation through the federal government, litigators for public school finance reform concentrated their efforts through the state constitutions and court systems (Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). The first state litigation for public school finance, Serrano v. Priest, in 1971 was successfiil and laid the groundwork for subsequent state court cases through equal protection. In 1971, Robinson v. Cahill (1972) paved the way for equity and adequacy, when the court required that educational opportunity should be provided in a "thorough and efficient" manner as required by the state constitution (Brown, 1999; Camp & Thompson, 1988, p. 222; Thompson et al., 1994).

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51 Public school finance researchers and reformers determined that litigation was important in advancing the equity of state funding for education, without regard to the court rulings (Camp & Thompson, 1988). Referred to earlier, the funding structures in at least 14 states were held to be imconstitutional (Dayton, 1996). A number of states reformed their funding models, just in anticipation of possible legal action. Related to the amount of funding, it was found by researchers that there were increases in state revenues for education, when there was a court ruling that education was a fundamental right (Brown, 1999; Hickrod, Hines, Anthony, Dively, & Pruyne, 1992). Two court cases were filed in the 1960s, Mclnnis v. Shapiro (1968) in Illinois and Burrus v. Wilkerson (1970) in Virginia, that challenged the constitutionality of disparities in educational expenditures across the state's school districts. These cases were brought on equal protection grounds and argued that the systems were imconstitutional because education was a fundamental right and the big disparities in revenues per student or expenditures per student were not related to educational need. The plaintiffs argued that wide disparities could only exist if they were related to educational need and could not be related to other variables, such as the local tax base in each district (Odden & Picus, 2000). During the trials, the courts requested standards to evaluate and measure educational need. Since there was no agreement at the time on the definition or means to measure educational need, the courts ruled that the variations in expenditures were not sufficient to justify overturning the state finance system (Odden & Picus, 2000). The courts ruled that the suits were non-justiciable, because there was no standard to use to evaluate the claims of the plaintiffs (Odden & Picus, 2000).

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52 Therefore, these first court cases that sought to resolve school finance inequities were not successful, and in most of the subsequent cases, many of the defendants attempted to have the court declare the case non-justiciable using Mclnnis and Burress as precedents. Plaintiffs in later cases, however, continued to utilize equal protection in their challenges of state finance models, but they also developed standards for the courts to use (Odden & Picus, 2000). Many equal protection court cases were brought on the basis of federal or state equal protection clauses, or both (Thompson et al., 1994; Wood & Thompson, 1993). The court used one of two tests to determine whether the clause was violated in the state public school finance system. The first test was the rational test and asked if the government had a reason for the disparity in treatment of individuals. If the court in such as case invoked the rational equal protection test, the state action was usually upheld with the state identifying some basis for its law that treats individuals differently (Odden & Picus, 2000, in press). The second test was "strict judicial scrutiny." This was used by the courts to force states to show that there was a "compelling state interest" for the government action and that there was "no less discriminatory" policy that could have been used by the state government to carry out the compelling interest. Because it was very difficult for a state to identify both parts of this test, there was no other state policy that would have been less discriminatory, and the state usually lost the case under this test (Odden & Picus, 2000, in press). The key for the plaintiffs was to identify the qualifying factors for which the courts could invoke strict judicial scrutiny. The courts could do this only in two

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53 circumstances, when the state action affected a fundamental right, or when the state action produced a suspect classification. The U.S. Constitution prohibits any government actions that affect individuals differently due to religion or national origin. Then the U.S Supreme Court decision in Brown v. Board of Education (1954) also identified race as a suspect class. It effectively overturned all state laws that treated individuals in a different way exclusively on the basis of race (Odden & Picus, 2000). Litigation based on equal protection The challenge for school finance litigators was to determine strategies to place legal arguments against disparities in per-pupil expenditures under the umbrella of equal protection litigation and to identify standards that could be used by the courts to make decisions (Odden & Picus, 2000). Litigation that was based on either state or federal equal protection clauses made two arguments in court. First, education was a fundamental right and had to be provided equitably to all individuals. Second, the state school finance structures created a suspect class that was based on property wealth per student. In 1970, Coons, Clune, and Sugarman (as cited in Minorini & Sugarman, 1999a; Odden & Picus, 2000) framed this argument, stating that school financing systems needed to be fiscally neutral. This neutrality meant that the expenditures per pupil could not be related to the local district property wealth per pupil. Without fiscal neutrality, the quality of education was greater for pupils in high property wealth districts and less for students in low property wealth per pupil districts (Minorini & Sugarman, 1999a; Odden & Picus, 2000).

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54 Serrano v. Priest. The Serrano v. Priest case was filed in California in 1968. The trial court dismissed the case initially on the basis that school finance cases were nonjusticiable, citing Mclnnis and Burruss. The case was then appealed to the California Supreme Court that gave an opinion in August of 1971. The Court ruled that, based on the Fourteenth Amendment to the U.S. Constitution and the equal protection clause in the California constitution, the case was justiciable, based on the standard of fiscal neutrality (Odden & Picus, 2000). It opined also that education was a fiindamental right and that property wealth per pupil was a suspect class. It also stated that, based on the alleged facts, the California school finance structure was not constitutional. As a precedentsetting opinion, this case gained nationwide political and legal attention, and it supported many similar cases in other states (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). San Antonio v. Rodriguez. The San Antonio v. Rodriguez case was brought in Texas in 1973. It went directly to a federal district court panel, with the next legal stage being an appeal to the U.S. Supreme Court. This district court held for the plaintiffs and found that education was a fiindamental right and that property wealth per pupil was a suspect classification. The court's decision determined that the Texas school finance structure was in violation of the Constitution's equal protection clause, and the court directed the Texas legislature to develop a new finance system (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). The case was appealed to the U.S Supreme Court. In March of 1973, the Court gave the opinion that the Texas system did not violate the U. S. Constitution, in a 5-4 decision. The Court held that, as important as education was for the country's citizens

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and for the responsibilities of citizenship, education was not mentioned in the Constitution. Therefore, the Court was not wiUing to recognize education as a fundamental right. The Supreme Court also held that property wealth per pupil was not a suspect class, because it related to school districts and not individuals (Odden & Picus, 2000; Wood & Thompson, 1993). In rendering its opinion in this case, the U.S. Supreme Court invoked only the rational test, not strict judicial scrutiny. Texas explained that the existing method of funding education by local property taxes demonstrated the principle of local control. This response to a rational test was accepted by the courts as reasonable (Odden & Picus, 2000). The Rodriguez (1973) case eliminated the U. S. Constimtion as a feasible legal route to reform for school finance. With their decision, the U.S. Supreme Court effectively threw out all school finance cases out of federal courts across the country. These cases went back to state courts, to be litigated in each state on the basis of state equal protection clauses and state education clauses. The Rodriguez decision, however, also encouraged court action at the state level, suggesting that states could find education to be a fundamental right. State constitutions had clauses expressly requiring access for students to a free, public education (Wood & Thompson, 1993). Robinson v. Cahill (1913) . The New Jersey Supreme Court recognized the Rodriguez case in its decision in April of 1973. It acknowledged that the U.S. Supreme Court's test for finding education to be a fundamental right and that education was mentioned in the New Jersey constitution. The New Jersey court, however, held that education was not a fundamental right, that property wealth per pupil was not a suspect

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56 class, and the New Jersey school finance system did not violate the equal protection clause (Odden & Picus, 2000). The New Jersey Supreme Court did, however, overturn the New Jersey school finance structure, and held that the state's constitution mandated that the state structure be a thorough and efficient public education system. This court stated that a school finance system that allowed for such wide differences in spending per student, and where these differences were strongly linked to local property wealth per pupil, was not a thorough and efficient system. The court directed the state legislature to develop a new structure. Therefore, the court ruled the system as unconstitutional predominately on the basis of disparities in spending, since these were the only criteria available to determine if the system was thorough or efficient (Odden & Picus, 2000, p. 35). The Robinson v. Cahill case was important because it kept litigation for school finance active; it forged a method for challenging school finance systems using state education clauses; and it also laid some early groundwork for litigation involving adequacy (Odden & Picus, 2000). Litigation based on state education clauses Litigation in school finance coiul cases focused at the state level after the Rodriguez (1973) decision (Odden & Picus, 2000; O'Loughlin, 1992; Wood & Thompson, 1993). The challenges to the state public school finance systems under the state education clause needed additional legal sti-ategies beyond those that were used for litigation under equal protection. Some plaintiffs sued using the education clause to build a fiscal neuti-ality argument, meaning that education was a fundamental interest and/or that property wealth per pupil created a suspect class (Odden & Picus, 2000). Other court

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57 cases utilized the state education clauses to support arguments about the education being fundamental and property wealth as a suspect class brought under the equal protection clause (Washakie County School District No. 1 v. Herschler, 606 P. 2d 310 (Wy. 1980); Dupree v. Alma School District No. 30, 651 S.W. 2d 90 (Ark. 1983); Edgewood Independent School District v. Kirby, 111 S.W. 2d 391 (Tex. 1989); Edgewood v. Meno, 893 S.W. 2d 450 (Tex. 1995); Brigham v. State (VT 1997;,Odden & Picus, 2000; O'Loughlin, 1992;. In the Edgewood v. Kirby (1989) decision in Texas, the decision led to a new finance structure that was unique. The Texas state education clause required an efficient system of public free schools, and the structure was first overturned on the basis of fiscal neutrality. However, it was argued and found that the Texas system was very equal except for the top and bottom 50 districts. After the submission of many plants to create a new public school finance system, with continued court rejections, the legislature developed a finance structure that recaptured funds fi-om the top districts. Then the court found the legislature in violation of the section of the constitution that disallowed the state's reallocation of local revenues. The legislature then constructed "two-tiered pupil weighted" finance system that required the "wealthiest districts to voluntarily, with voter approval, give some of their wealth or revenues to lowerwealth districts as a condition for receiving any state aid (Odden & Picus, 2000, p. 36). A third use of the education clause in school finance litigation was to add substantive meaning into the state clause, and this led to the adequacy cases that were brought in the 1990s (Odden & Picus, 2000). Education clauses varied across states, with some of the language requiring the development of an education system, while other

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58 clauses required thorough and efficient or thorough and uniform. All states mandated the creation of a system of public schools. Therefore, the precise meaning of each state's education clause depended on the state's constitutional language, which depended on the states' political history and previous interpretation (Odden & Picus, 2000, in press). William Thro developed a classification format of state constitutional language that advanced the understanding of education finance litigation (Thro, 1989). Thro's Category I lists described clauses that forced a minimum educational responsibility on the part of the state legislamre. The Category I states have not provided plaintiffs with a strong basis for litigation. The Category II state constitutions exhibited greater state obligations and required that public education had to meet particular minimum standards, such as thoroughness and efficiency. The plaintiffs in Category II states had some success in court challenges (Wood & Thompson, 1993). It was in the three Category 11 states of Montana, Texas, and Kentucky that courts declared the respective school finance systems unconstitutional in the late 1980s (Thro, 1990). This took place in Helena Elementary School Dist. Number 1 v. State (1989), Rose v. Council for Better Education (1989), and Edgewood Independent School Dist. v. Kirby (1989). Thro's Category III states were those that had stronger and more explicit language in their state constitutions. Category IV states had clauses that provided fiindamental right status for education. Despite the state constitution language, plaintiffs attempted to demonstrate through a variety of methods and analyses that state obligations were not being met (Wood & Thompson, 1993). Odden and Picus (2000) determined that there were five aspects to school finance system litigation based on the state education clause. These included the historical

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59 meaning of the education clause, education clauses requiring more than just an education system, substantive demands of the education clause-adequacy arguments, the question of adequacy requiring equal outcomes, and the education clause and absolute deprivation. One aspect of challenging the system was through the use of the historical meaning of the education clause. This was done by analyzing the debates of the state's constitutional convention, to examine the phrasing of the education clause, and to determine the view of education held by the authors of that constitution. In some states the phrases related to education systems, such as general and uniform, only meant the evolution of one statewide uniform system. In other states, the clauses meant more specifically a statewide uniform system, assuming equal expenditures per pupil and sometimes fully funded by the state, or the phrases could have inferred equal spending or access to basic educational opportunities in all districts of the state (Odden & Picus, 2000). Although there was not a single solution to the meaning of the education type and school finance system that writers of constitutions really meant to form with their education clauses, the litigators fi-om both sides of court cases explored the constitutional history of the state involved. Plaintiffs and defendants looked for meanings and specific ideas related to the intent of the framers, and they searched for notions that were relevant to the school finance issues (Odden & Picus, 2000). Three litigation routes sought to find substantive meaning in the education clauses and looked to examine clauses that required more than just an education system. Since state courts made decisions about what the state education clauses mandated for the

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school finance structures, the job for the htigants was to argue and convince the court to agree with and accept the desired meaning (Odden & Picus, 2000, in press). One strategy used was to argue that the education clause placed an affirmative duty on the state legislature to create more than just an education system. In the 1973 Robinson case, the New Jersey court asserted that the thorough and efficient education clause required that all pupils were provided equitable opportunities to contend for jobs in the labor market. The New Jersey court used this argument again in the 1990 Abbott v. Burke (Abbott v. Burke, 100 N.J. 269 (1985); Abbott v. Burke, 1 19 N.J. 287 (1990)) case to guarantee the fulfillment of higher education for the low-income and minority students in New Jersey's lower income or property poor school districts. New Jersey courts overturned the state's education system in both cases (Odden & Picus, 2000). There were other examples of court cases based on the substantive meaning aspect. In 1975, an Idaho court held in Thompson v. Engelking that it was the legislature's prerogative, and not the court's, to interpret the education clause {Thompson V. Engelking^ 537 P.2d 635 (Idaho 1975)). In the 1976 Oregon case oiOlsen v. State, the court held that the Oregon school finance system was justified on the basis of local control {Olsen v. State, 554 P.2d 139 (Oregon 1976)). And in 1982, the Colorado Supreme Court ruled in Lujan v. Colorado that the education clause of thorough and efficient was met when the state provided an education program in every school district, even if there was disparity in the quality of the programs {Lujan v. Colorado State Board of Education, 649 P.2d 1005 (Colo. 1982)); Odden & Picus, 2000). The third litigation approach was to focus completely on the substantive demands of the state constitution's education clause. This strategy led to the use of the adequacy

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61 term and its definition in the school finance court cases of the late 1980s through the 1990s. The New Jersey cases of 1973 and the Seattle v. State case of 1978 used this strategy (Seattle School District No. 1 of King City v. State, 585 P.2d 71 (Wash. 1978)), even though the term was not used. Through these court decisions, the idea of school funding was broadened beyond just finance to providing an education program that gives students equal opportunities to learn to higher standards (Odden & Picus, 2000). In the 1982 Pauley v. Bailey case in West Virginia, a definition of a more "adequate" program was developed {Pauley v. Bailey, C.A. No. 75-126 (Cir. Ct. Kanawha Cty, W.Va. 1982)). After an initial motion to dismiss, based on Mclnnis and Burruss, the Supreme Court of West Virginia held that the case was indeed justiciable. But the Court also ordered the lower trial court to ascertain the characteristics of a thorough and efficient (T & E) education system. The Supreme Court also required the trial court to evaluate how T & E the existing education system was. The court proceedings determined that the T & E required the equality of programs and services across all school districts in West Virginia and that the existing school finance structure did not render this equality (Odden & Picus, 2000). The state did not appeal the overturning of the finance system, but it did create and gather committees to define standards that would represent a T & E program. The overview committee then compiled and organized the subcommittee reports into a Master Plan of standards. Because the implementation of the Plan would have required doubling the education fimding. West Virginia only implemented part of it. Fifteen years after the proposal of the Master Plan, a court ordered the state to fully fimd the plan in 1997 (Odden & Picus, 2000).

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62 The adequacy approach to interpreting education clauses in state constitutions was utihzed in a number of cases in the 1990s. In 1989, the Kentucky Supreme Court overturned the state's school finance system and also found the whole state system of education to be unconstitutional. While this litigation started as a fiscal neutrality case, the court finding changed it to an adequacy case. The court ruled that school finance equity meant that all pupils should have access to an adequate education program. The state then had to reform the education system, including the finance system and all other programs. The reforms in Kentucky denoted the kind of reform first known as systemic reform, and this became standards-based education reform (Odden & Picus, 2000; O'Loughlin, 1992; Wood & Thompson, 1993). The Kentucky reforms included a tiered funding structure that included new money, content standards for all major subject areas, performance standards with a new testing system, more school-based management, and a accountability system with rewards and sanctions (Odden & Picus, 2000; Kentucky Department of Education, 1995). The Supreme Courts of Alabama and Massachusetts overturned the state education and public school finance structures based on adequacy arguments in Alabama Coalition for Equity, Inc. v. Hunt and McDuffy v. Secretary of the Executive Office of Education {Alabama Coalition for Equity, Inc. v. Hunt, 1993 WL 204083 (Ala. Cir.); McDuffy V. Secretary of the Executive Office of Education, 615 N.E. 2d 5 16 (Mass. 1993)). The courts used similar language to that used in the Kentucky decision in describing the requirements for an adequate education program. Based on the court ruling, Massachusetts enacted standards-based education and finance reform.

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63 Several other states overturned their state's education finance systems based on adequacy arguments. In the Wyoming case of Campbell County School District, State of Wyoming, et al. v. State of Wyoming (1995), the courts ordered the legislature to design the best educational system based on an educational package that every Wyoming student was entitled to have. The court further directed the legislature to determine the cost of the best system and then to take the steps to fund it (Odden & Picus, 2000). Five other state courts overturned the school finance systems in the following cases; Roosevelt Elementary District v. Bishop, 1994 WL 378649 (Ariz. 1994) in Arizona; DeRolph et al. v. State, 677 N.E. 2d 733 (Oh. 1997^ in Ohio; Claremont School District V. Governor, No. 92-71 1 (New Ham. 1993) in New Hampshire; Tennessee Small School System v. McWherter, 851 S.W. 2d 139 (Tenn. 1993) and Tennessee Small School System V. McWherter, S.W. 2d 894 S.W. 2d 7374 (Tenn. 1995) in Tennessee; zndLeandro v. State, All S.E. 2d 1 1 (NC 1996) in North Carolina (Odden & Picus, 2000). The recent Ohio court decision in DeRolph blurred the lines between equity and adequacy. Although an Ohio Supreme Court decision in the 1970s rejected an equity challenge to the state's finance system, a coalition of plaintiffs filed suit against the state of Ohio in 1991, claiming that the education provided by Ohio was not constitutionally adequate (Minorini & Sugarman, 1999b). The plaintiffs were made up of several school districts, superintendents, educators, students, and friends (Odden & Picus, 2000). After a long trial and following the reasoning of the Kentucky court's prior decision and discussion of adequacy standards, the Ohio court ruled for the plaintiffs. However, the state attorney general's office quickly appealed the trial court decision (Minorini & Sugarman, 1999b).

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64 In 1997, the trial court's decision was upheld by the Supreme Court of Ohio. The decision was based more on educational inputs, usually related to equity theory, than on educational outputs, which seemed to be more related to the focus in adequacy arguments and decisions (Minorini & Sugarman, 1999b). The court criticized the heavy reliance on local property tax for school funding and reminded the legislature of their responsibility in supporting the public statewide education system. It also mandated a systemic overhaul of the funding system and allowed the legislature a year to develop a new funding structure (Minorini & Sugarman, 1999b). While the Ohio Supreme Court's emphasis had been on input equity, the state legislature's renovation of the funding system focused on the determination of the cost of providing all Ohio students with an adequate and equitable education. To accompUsh this, the legislature examined the spending patterns of districts within the state that were in compliance with state standards for input and outcome. Through the use of a mean spending level for those districts, and adjusting for cost differentials around the state and varying need levels of student populations, the Ohio legislature developed a baseline level of school expenditures that each district would be assured (Minorini & Sugarman, 1999b). There was a trend in the late 1990s for the state supreme courts, after earlier rejecting constitutional challenges to state public school funding systems, to revisit the funding issues when the states had continued to fail to address the inequities and adequacies of their funding structures. The Supreme Courts in Ohio (DeRolph^ 1997) and Arizona (Roosevelt Elementary School District 66, 1994) struck down school finance systems some years after those courts had upheld the state school finance systems in

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65 previous cases (Long, 1999). The Supreme Courts in the New York case of Reform Educational Financing Inequities Today (1995), the North Carolina case of Leandro (1997), and the South Carolina case of Abbeville County School District (1999) permitted suits for school finance to move forward even though earlier findings rejected the challenges to the state public school funding structures (Long, 1999). In the 1990s courts rejected the school finance cases based on adequacy in Coalition for Equity v. Chiles, 680 So. 2d 400 (Fla. 1996) in Florida; Committee v. Edgar, 673 N.E. 2d 1 178 (111. 1996) in Illinois; and Pawtucket v. Sundlun, 662 A. 2d 40 (R.I. 1994) in Rhode Island. In the Florida case of Coalition v. Chiles (1996), the plaintiffs lost at the Supreme Court level, and the high court ruled that no cause of action was presented (Minorini & Sugarman, 1999b). Some state courts, such as those in Maine, Virginia, Minnesota, and Wisconsin, suggested in their decision that successful arguments could be made on the basis of educational adequacy when rejecting plaintiffs' arguments in fiscal neutrality cases (Odden &, Picus, 2000). The New Jersey Robinson case of 1973 foreshadowed adequacy in the court's interpretation of the thorough and efficient clause. Most of the decision focused largely on financial disparities, and legislative responses sought to correct those disparities. However, in subsequent multiple decisions firom 1989 through 1998, the court systematically overturned the New Jersey system in different Abbott v. Burke decisions {Abbott V. Burke, 1985, 1990, 1994,1997, 1998; Long, 1999; Minorini «& Sugarman, 1999b; Odden & Picus, 2000). There were several major aspects of the New Jersey case as it changed fi-om a funding equity case to an educational adequacy case. It began by focusing predominately

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66 on the most disadvantaged districts, and then it utiUzed a new approach to defining adequacy. The unique educational adequacy described a comprehensive school design that could be made compatible with state program content and standards of performance (Odden & Picus, 2000). The cost could be estimated and used as a basis for needs allocations, for amounts to be incorporated into a funding formula. Therefore, the New Jersey court forced the state to confront the definition of educational adequacy and issues that been in Utigation since 1973. An increasing number of state court decisions suggested that adequacy was challenging equity as the standard to which the public school funding structures should be held (Guthrie & Rothstein, 1999). There was also the litigation question of whether adequacy required equal outcomes or required all students to actually achieve to some indicator of high minimum standards. Researchers Minorini and Sugarman (1999b) claimed that they did not. They asserted that adequacy was interpreted as a level of resources for a district that would enable the district to provide a type of educational program that would be sufficient to teach nearly all students to high specific standards (Minorini & Sugarman, 1999b). Courts were also asked to consider the aspect of the education clause and absolute deprivation. This meant that the courts had to determine whether, under the state education clause, the state's school finance system worked to actually deprive pupils of an education program. The courts usually held that the clauses only required a provision for a basic education program. Anything beyond basic was considered under the control of the local school district. Adequacy cases, however, usually required states to define

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67 and fund an education plan that met an absolute standard (Odden & Picus, 2000, in press). A summary table from the McGraw Hill website summarized the key school finance litigation from 1968 to 2002 (Odden & Picus, 2004). School finance cases had been adjudicated in 42 states, with the school finance systems upheld in about half the cases and overturned in the other half. Therefore, the plaintiffs were successful about half the time in time in challenges to overturn systems that allowed for disparities in educational expenditures that showed a relationship to local property wealth per student, or in education programs. In several states, there were subsequent rounds of the same litigation, and some of the later cases were successfiil in their challenges of the school finance structure. States, such as Arizona, Cormecticut, Minnesota, Missouri, New Jersey, Texas, and Washington, were successfiil in finally overturning their states' school finance system (McGraw Hill, 2000; Minorini & Sugarman, 1999b; Odden & Picus, 2000, 2004). The constitutional sfrategies utilized in the school finance court cases were about evenly split between the use of the state education clause and the equal protection clause of the U.S. Constitution (Odden & Picus, 2000, in press). Those courts that used the equal protection clause held that education was both a fiindamental right and that property wealth per pupil was a suspect classification. The states of Arkansas, Connecticut, West Virginia, and Wyoming used both clauses (Odden & Picus, 2000). Litigation Summary School finance litigation has evolved through the years. Court cases initially used state and federal equal protection clauses to focus on resource distribution inequities.

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68 Litigation then revolved around the state education clauses, and there was debate regarding substantive issues that connected school finance to services and programs. This meant that the court cases became litigation based on state education clauses and were adequacy focused (Odden & Picus, 2000, in press). The use of the education clause in challenging school finance systems was unlike that of using the equal protection clause and ended up bringing up concerns about the substance and quality of the school districts' education programs throughout the state. The litigation founded on state education clauses was determined state by state with strategies that depended on the history of the state, the meaning of adequacy arguments made by plaintiffs, and the justices that happened to be on the supreme court when the case was adjudicated (Minorini & Sugarman, 1998; Odden & Picus, 2000). Courts began moving away from the cases involving disparities to cases involving educational adequacy. While the courts were showing a preference for the issues involved in adequacy cases, the standards-based education reform movement began evolving and, through professional associations, began developing standards that exemplified education quality. This enabled the courts to utilize the created standards that were developed by educators to measure and evaluate education systems and to examine the fiinding for the system. Although litigation may have been brought about by plaintiffs or advocates whose major goal was to improve funding equity, the process of resolution by courts and legislamres may have also dealt with the adequacy of educational support (Dayton, 1996). The courts in the 1990s moved away from " equity defined in dollars to equity defined in terms of programs and services or school design, to which a dollar figure could

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69 be attached" (Odden & Picus, 2000, p. 45). The adequacy argument was similar to the educational needs framework of the early school finance cases. The litigation approach through adequacy, along with standards-based education reform and school designs, was just the education needs argument, with the earlier missing standards and measures (Ladd, 1999; Minorini & Sugarman, 1999b). The Florida Formula During the year 1999-2000, the state of Florida had the fourth largest student membership in the United States. Only California, New York, and Texas had more students in the public schools. Florida had more than 2 million students in the public elementary and secondary schools (Florida Department of Education, 2000a). The state was composed of 67 county school districts. The unweighted full-time equivalent membership varied from 1,030 students in Lafayette County to 352,000 students in the Dade County schools (Florida Department of Education, 2000a). Each district was required to provide documentation of an adequate school program (Florida Statute 236.012(1)). The Florida Education Finance Program (FEFP) had the goal of equalizing educational opportunity (Owens & Maiden, 1999). After several years of Florida utilizing the Minimum Foundation Program ftinding mechanism, Florida's Constitution was revised to mandate a "uniform and free system of public school" (Florida Constitution 1968, Article DC, Section (1)). After Roe L. Johns directed a study of the Florida public school finance system, major changes were made to the Minimum Foundation Program (Chambers, 1996). The Florida Legislamre enacted the Florida

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70 Education Finance Program (FEFP) in 1973 and set forth state policy on equalized funding: To guarantee to each student in the Florida public educational system the availability of programs and services appropriate to his educational needs which are substantially equal to those available to any similar student notwithstanding geographic differences and varying local economic factors. (F.S. 236.012 (1)) The Florida Education Finance Program (FEFP) was a "highly modified" foimdation plan that based the education funding on individual students and services provided in specific educational programs rather than on teacher or classroom count (Florida Department of Education, 1996, 1999, 2000a). To equalize the educational opportunity among students, the FEFP recognized "varying local property tax bases; varying program cost factors; district cost differentials; and differences in per student cost for equivalent educational programs due to sparsity and dispersion of student population" (Florida Department of Education, 1999, p. 1; Owens & Maiden, 1999). The FEFP was the primary structure for funding public schools in Florida, and while there were other sources of funding, it was the foundation of the finance program. The key feature of the program was to base financial support on the individual student taking part in a particular education program. The FEFP fund amoimts were determined by multiplying the number of fiiU-time equivalent students (PTEs) in each of the funded education programs by specified cost factors to obtain weighted PTEs. The weighted PTEs were then multiplied by a "base student allocation" and by a "district cost differential" in the primary calculation to determine the Base Funding. The program cost factors for different services provided in the various educational programs were determined by the Legislature and represented relative differences in cost among the educational programs. Supplements were added and adjustments made to the Base

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71 Funding to determine the Total State and Local Funding (Chambers, 1996; Florida Department of Education, 1999; O'Loughlin, 1992). Horizontal and vertical equity were recognized in the FEFP. The vertical equity of the Florida funding system was addressed through the recognition of the varying costs of the educational services based on the particular student needs. The horizontal equity of the system was dealt with through the use of the district cost differential that was added from each county. This was used in the formula to address the differences in costs of educational services in school districts where the cost of living indices varied from the statewide average (Chambers, 1996; Florida Department of Education, 1996, 1999, 2000a). A power equalization provision was incorporated into the FEFP. This guaranteed the same revenue for the same property tax rate to each district. The purpose of the power equalization provision was to equalize the differences in funding created by the required local effort in districts where there were lower property value assessments; therefore, it addressed taxpayer equity (Chambers, 1996; Florida Department of Education, 1996, 1999, 2000a; Odden & Picus, 2000). Recent Changes in the FEFP The legislative sessions of 1997, 1998, and 1999 made significant changes in the FEFP. The 1997 and 1998 Legislatures based the ftinding for exceptional student programs on a changed matrix of needs for those students that required exceptional student services, and they moved the funding for adult vocational and adult general education programs from the FEFP to providing ftinding by separate appropriations for

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72 Workforce Development and Adult Disabled programs (Florida Department of Education, 1999, 2000a). The Legislature of 1999 enacted Chapter 99-398, Laws of Florida (as cited in Florida Department of Education, 1999, 2000a), which focused on a design for high quality education for Florida schools. This legislation mandated that all public schools were to be held accountable for student performance and acceptable standards. It also sought to improve the quality of Florida's teachers, the teacher preparation training programs, and professional and staff development courses. The legislation also dealt with and strengthened school truancy procedures and safety measures (Florida Department of Education, 1999, 2000a). Significant changes in the FEFP that were covered in this 1999 legislation included provisions for Opportunity Scholarships, the Pilot Scholarship for Students with Disabilities, the Supplemental Academic Instruction Categorical Fund, and the Average Daily Attendance Factor (Florida Department of Education, 1999, 2000a). In addition funds were also appropriated for School Recognition. For Opportunity Scholarships, the parent or guardian of a public school student had the right to request the scholarship for the child to attend a private school if the student has spent the prior year at a public school that has been designated "F" and that school has had two school years of low performance in a four-year period, or the student has been assigned to such a school for the next school year; and the student has obtained acceptance in a participating private school, and the parent has notified the school district of the request for an opportunity scholarship no later than July 1 of the first year in which the student intends to use the scholarship. (Florida Department of Education, 1999, p. 1) In the Pilot Scholarship Program for Students with Disabilities, students were provided with scholarships to a public or private school of choice, if those students'

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academic progress in at least two areas did not meet expected levels for the previous year as set forth or determined by their Individual Education Plan (Florida Department of Education, 1999). Under the Supplemental Academic Instruction Categorical Fund, the funding for summer programs and dropout prevention programs was transferred from the FEFP to the categorical section to fund all supplemental strategies. The funding for full-time equivalent membership in programs beyond the 180-day regular school term in the FEFP was provided only for students in juvenile justice programs (Florida Department of Education, 1999, p. 2). An average daily attendance factor was to be utilized in the calculation of FEFP funding begimiing with the 2001-2002 school year. Since average daily attendance could only be determined following the completion of a school year, the 1999-2000 data, for example, were needed for the calculation of the next year's FEFP appropriation (Florida Department of Education, 1999). The General Appropriations Act of 1999-2000 and other legislation included major changes in the Florida finance model. The changes included the provision for inservice training being removed from the FEFP and subsequently funded with an appropriation of $34,000,000. Each school district was required to design a structure that had to be approved by the Department of Education for professional and staff development that would link and align inservice sessions appropriately with student and instructional needs. The needs were determined by school improvement plans and inputs from teachers and administrators and focused on subject content and teaching methods, including technology. These were also related to the Sunshine State Standards, data

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74 analysis and assessment, school safety, and classroom management. The legislation also provided for Juvenile Justice Programs to be funded for 250 days (Florida Department of Education, 1999, 2000a). In addition, the General Appropriations act provided $15,000,000 under Special Allocations to be utilized for School Recognition/Merit Schools to provide $100.00 per student for A schools and those schools that showed improvement. In 2000, this amount was raised to $60,000,000 to provide sufficient funds for these awards (Florida Department of Education, 2000a). Sources of Funds for Florida Public Schools Financial support for public schools in Florida came from state sources, local sources, and federal sources. During the 1997-98 school year, state sources provided the Florida school districts with 50.58% of their financial support; local sources, including the FEFP Required Local Effort portion, provided 41.94%; and federal sources provided 7.48% in 1994-95 (Florida Department of Education, 1999). State support . The state support for the public schools was provided predominately by legislative appropriations and distributed through the FEFP provisions (Florida Department of Education, 1996, 1999, 2000a). State funds appropriated to finance the FEFP in the 1999-2000 school year were $5,636,048,955. With the exception of $48,900,000, which was appropriated from the State School Trust Fund, the FEFP appropriation was fi-om the state's General Revenue Fund. Although the General Revenue Fund included a number of tax sources, the major tax source was the sales tax. The legal authorization was under Section 236.012-236.68, F. S., Item 109, Chapter 99226, Laws of Florida (Florida Department of Education, 1996, 1999, 2000a).

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75 There were also state funds appropriated for other special uses. Florida Lottery proceeds were used to finance the two appropriations of District Discretionary Lottery Funds, $151,535,000, and Pre-School Projects, $103,765,000. Lottery proceeds were also utilized to fund the appropriation of $180,000,000 that provided the cash and debt service requirements for Classrooms First and 1997 School Capital Outlay Bond Programs. Funds appropriated for categorical programs and special allocations were Supplemental Academic Instruction, Instructional Materials Program, Student Transportation, Public School Technology, Class Size Reduction (K-3), Florida Teachers Lead Program, Teacher Training, and School Lunch Match/Breakfast Supplement (Florida Department of Education, 1996, 1999, 2000a). The Florida Constitution, Article XII, Section 9(d) provided for capital outlay funds. It designated a stated amount annually to each district fi^om the revenue generated from motor vehicle licensing. Section 9(a)(2) of the State Constitution (as cited in Florida Department of Education, 1999) also provided for funds to school districts from gross utilities taxes, as set forth by legislative allocation. Racing Commission funds of $13,000,000 were distributed to each county commission in equal amounts, distributed by the state directly to the school districts (Florida Department of Education, 1996, 1999, 2000a). Local support. Local revenue for the public school funding structure was generated predominately from local property taxes. Each of the 67 counties is a school district. The FEFP required that the local school boards levy the required local effort millage rate in order to receive funds from the state. The millage rate, established yearly by the legislature, had to be applied to the aggregate assessed property value as part of

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76 the FEFP required local effort provision. This rate for each district was calculated by multiplying an equalization factor by the aggregate assessed property value for the district (Chambers, 1996; Florida Department of Education, 1996,1999,2000a). The Legislature set the amount of the required local effort each year and was determined by a statutory procedure, which was initiated by property tax valuation certification by the Department of Revenue. For example, the Legislature set the required local effort at $3.5 billion for 1996-97 and set the amount of $3,872,505,386 as the required local effort for 1999-2000 (Florida Department of Education, 1999). The rates, which were set in July of each year, were determined by dividing the dollar amounts of required local effort by 95% of the aggregated taxable value for school purposes of all districts. Therefore, each district's deduction for required local effort was the certified millage on 95% of the nonexempt assessed valuation of the district (Chambers, 1996). Since the required local effort could not exceed 90% of a district's total FEFP entitlement, the millage rates were sometimes adjusted (Florida Department of Education, 1996, 1999, 2000a). . — • V The Commissioner of Education certified each district's required local effort on July 14, 1999, based on the 1999 tax roll provided by the Department of Revenue. Due to the use of assessment ratios that equalized the effect on the FEFP of the varying levels of property appraisal in the different counties, the certifications for 64 of the 67 counties varied fi-om 6.560 mills to 5.940 mills in 1999, with 6.035 as the state average. Since there was a limitation that the local required effort could not exceed 90% of a district's total FEFP entitlement, the district millage rates of Collier, Monroe, and Walton were reduced fi-om 6.123, 5.963, and 6.147 to 5.164, 4.093, and 5.751 mills, respectively

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77 (Florida Department of Education, 1999; F.S. 236.081 (4) (b), as cited in Florida Department of Education, 1999). Local school boards could also set discretionary tax levies for capital outlay and maintenance and for current operations. As of 1999, the school boards could levy up to 2.0 mills. This levy produced funds for construction and remodeling, as provided in Section 235.435 (3) (b), F.S. (as cited in Florida Department of Education, 1999); site and site improvement; auxiliary or ancillary facilities; maintenance, renovation, and repair of existing school plants; and school bus purchases (Chambers, 1996; Florida Department of Education, 1996). Lease-purchase agreement payments for "educational facilities and sites were authorized for amounts not exceeding one-half of the proceeds of the millage levied under this authority. Payments could also be used to repay loans used for those authorized purposes (F.S. 236.25 (2), as cited in Florida Department of Education, 1996, 1999, 2000a). In addition to the required local effort millage, school districts were also allowed to levy discretionary operating millage. However, the Legislature set the maximum discretionary current operation millage for 1999-2000 at 0.510 mills. Districts, however, were able to set an additional levy, not to exceed 0.25 mill, that could raise an amount not to exceed $50 per FTE student (Florida Department of Education, 1996, 1999, 2000a). Qualified electors were also able to vote an additional millage levy for operations and capital outlay purposes for a period not to exceed 2 years. The tax levies for debt service were in addition to the levies for current operation, but they were limited to 6 mills and 20 years' duration, without specific State Board approval. These levies were limited by the State Board of Education Rule. While qualified electors could vote for a

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78 local bond issue to be retired by a millage levy, the Rules disallowed districts from issuing school bonds in excess of 10% of the nonexempt assessed district valuation without specific State Board approval (Florida Department of Education, 1996; Sections 236.31-236.42, F.S., Rule 6A-1.037, FAC). Developmental research schools at some state universities, known as lab schools, were classified for funding as special school districts. With no taxing authority, the districts were given the same funding dollar allocations per student as was generated for district students by the tax base of the district in which the school was located. Local required effort was not deducted from the FEFP calculation. For the 1999-2000 school year, the total contribution for discretionary and supplemental discretionary millage for the four schools was $578,650 (Florida Department of Education, 1999). Local revenue, therefore, to support schools was derived almost exclusively from ad valorem property taxes. There are no local nonproperty taxes that are levied specifically for school support. The local revenues for school funding were based on 95% of the district's assessed valuation, but the levy of discretionary millages brought about less equality into the Florida Education Finance Program, with the richer districts able to generate more revenue for the same effort than the poorer districts (Chambers, 1996). Funding, in gross dollars, for the Florida system of public schools had increased from both state and local sources since the beginning of the Florida Education Finance Program in 1973-1974. However, of the total monies from the combined state and local sources, the percentage contributed by the state decreased considerably (Chambers, 1996).

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79 Federal support . Federal support was part of the public school funding structure in the state of Florida. When the State Board of Education found collaboration advantageous, the Board approved plans for cooperating with the federal government in carrying out any phase of the educational program. The Board was required to provide guidelines for appropriate administration of funds allotted to the state from federal appropriations. The State Board was also responsible for developing and enforcing rules regarding contracts or agreements made with federal agencies. The Commissioner of Education was obligated to recommend methods of cooperation and policies for proper administration of the federal funds (Florida Department of Education, 1996, 1999). Federal funds went to school districts either directly from the federal goverrmient or through the state as an administering agency. Several of the federal agencies may have provided federal funds such as the Department of Labor, Veterans Administration, Department of the Interior, Department of Education, Department of Defense, and Department of Agriculture. Examples of federal program revenues for 1997-1998, included the following: the Adult Education Act ($7.8 million), the Job Training Partnership Act ($12,8 miUion), the Individuals with Disabilities Education Act ($141.1 million), the Elementary and Secondary Education Act ($351.7 million), the Carl D. Perkins Vocational and Applied Technology Education Act ($30.2 million), and the National School Lunch Act ($358.5 million) (Florida Department of Education, 1999). In summary, the Florida Education Finance Program (FEFP) had the goal of equalizing educational opportunity. The FEFP required that each district participating in the state appropriations must provide evidence of its effort to maintain an adequate school program throughout the district and must meet specified state requirements:

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80 Florida Equity Studies Several studies examined and analyzed the equity of the Florida funding structure for public schools. Vaughan sought to determine the equity in the distribution of revenues before and after the implementation of the FEFP and the extent to which the revenue levels available for public education were related to district wealth before and after the FEFP implementation. Vaughan concluded that the interdistrict per-pupil distribution under the implemented FEFP was relatively equitable. Vaughan also determined, however, that the FEFP was not wealth neutral, but he also found that wealth neutrality improved after the implementation of the FEFP (Vaughan, 1979, as cited in Owens & Maiden, 1999). Other researchers, Carroll and Park (1983), compared the interdistrict equity of the ftinding system under the FEFP with the funding distribution that existed under the earlier ftmding structure of the Minimum Foundation Program. They determined that there were increased disparities in instructional expenditures and per-pupil revenue availability after the FEFP. Their overall conclusion was that the implementation of the FEFP more readily benefited the larger and more urban districts. The largest benefit of the FEFP reached the school districts that were less poverty-prone (Carroll & Park, 1983). Shiver evaluated the differences between the FEFP and the MFP (Shiver, 1982, as cited in Owens &. Maiden, 1999). He found that that the range of the district revenues had increased with the change to the FEFP, that there was a stronger relationship between pupil wealth and state and local revenue per pupil, that there was no change in the relationship between state and local revenue per pupil and district property per pupil, and

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81 that there was "less equalization" in the funding plan than in earUer years. Shiver concluded, There was no evidence to indicate that the FEFP had achieved greater fis^^^^^^ equalization in the financing of Florida's pubhc schools. Data .suggested that FEFP, in fact, had resulted in some diminution of the equalization effects among the school districts. (Shiver, 1982, p. xiii) Stark et al. (1993) explored the interdistrict equity qualities of the FEFP in their study regarding the effects of the Florida lottery on the financing of pubUc schools in Florida. They found a high degree of interdistrict horizontal equity through the utiUzation of the FEFP. The equity of the distribution of FEFP funding was examined in 1992, by O'Loughlin, Wood, and Honeyman, with their emphasis on the effects of the revenues allocated through the scarcity supplement of the FEFP on interdistrict per-pupil equity. The concluded that overall the basic part of the FEFP was "relatively equitable," but there were disequalizing effects from the addition of supplements, discretionary dollars, and categorical supplements. The strongest effect was from the discretionary levy. Also, the funding distribution showed a strong inverse relationship to the districts' property wealth, with the scarcity supplement reducing this relationship (O'Loughlin, 1992; O'Loughlin, Wood, & Honeyman, 1992). In 1995 Maiden and Wood examined the collective disequalizing effects of unequahzed local discretionary fiinding as a component of the Florida Funding System. They found that the FEFP exhibited a relatively high level of interdistrict resource accessibility, with a lower level of interdistrict wealth neutrality (Maiden & Wood, 1995; Owens & Maiden, 1999).

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82 Performance-Based Funding The cornerstone of the Goals 2000 and Elementary and Secondary Act (ESEA), promoted by the Clinton administration, was the approach of systemic reform. As of 1996, more than 45 states asserted that they were engaged in setting new and challenging standards (Fuhrman & O'Day, 1996). It was hoped that assessments that were linked to the standards would give a clear picture of expectations to students, offer informational feedback to teachers, and provide an opportunity for valid accountability based on improvements in the schools and districts that were working toward specific outcome expectations (Fuhrman & O'Day, 1996). The interest in performance-based reform was a reflection of the general preoccupation with managerial efficiency and the best ways to utilize educational resources to get more educational output for the funding inputs (Fuhrman, 1999; Fuhrman & O'Day, 1996). The "new educational accountability" was the new model of state and local school governance. There were three major parts of this new model or approach: A primary emphasis on measured student performance as the basis for school accountability; ... the creation of relatively complex systems of standards by which data on student performance are compared by school and by locality; and the creation of a systems of rewards and penalties and intervention strategies to introduce incentives for improvement. (Elmore et al., 1996, p. 65) There were several challenging issues that had to be addressed in designing performance-based accountability systems, and a few states, such as Kentucky, South Carolina, Texas, Mississippi, Indiana, and Florida, tackled those issues in their efforts to create their own systems (Ladd, 1996a). These concerns included whether in constructing measures of performance, average student scores should be adjusted for differences in prior knowledge or socioeconomic background; whether the goals for

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83 students should be separated from measurements of performance of the district; whether performance-based accountability systems were compatible with the newer assessment forms that encouraged higher-order thinking and problem solving, or portfolios; whether the undesirable side effects of accountability could be kept to a tolerable level, with a balance being found so that the financial awards would be large enough to change behavior, but not so great that there would be outright cheating; whether a system could be designed that was understandable to the educators and political public, as well as implementing a model that was technically complex; the recognition that the success of such new systems was dependent on the stability of the state governance and the capacity of the state to provide required assistance and support to school districts, school, and teachers; and that the states that were gaining experiences with performance-based reforms and funding were not states with strong teacher unions, and there was little information known about implementation issues and effectiveness in those states (Ladd, 1996a). The Consortium for Policy Research in Education conducted a survey in 1993 of superintendents and commissioners in the 50 states. Responding to a variety of questions, respondents from at least 43 states expressed that they were changing, or planning to change, their accountability system. Most of them answered that in focusing more on performance outcomes, there were plans for standards (Elmore et al., 1996). According to the survey, the states of Georgia, Indiana, Kentucky, North Carolina, South Carolina, and Texas gave monetary rewards for school performance improvements above set standards. There were also research data regarding the Mississippi accountability program that awarded money to districts/schools that demonstrated marked improvement

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84 (Elmore et al., 1996). By 1999, Florida was awarding money to schools that were designated as "A" schools as part of its A+ Plan and Florida School Recognition Program (Brogan, 1999; Florida Department of Education, 2000c). In looking at the states that were attempting the new educational accountability system, it seemed clear that all the attempts to change the long-time relationships among the facets of the organizational structures entailed three major problems: the design, the implementation, and the politics of the new accountability systems (Elmore et al., 1996). In these strategies there was an emphasis on student outcome measures; school evaluation formats that were more complex; systems of incentives, penalties, and intervention methods to enhance school improvement; and an increased emphasis on higher academic and curriculum expectations (Ladd, 1996a). Selected States with Performance-Based Funding States, school districts, and even local schools have reacted to the national concern regarding the quality of American K-12 public education by undertaking many different kinds of reforms that focused on organizational structure and finance (Ladd, 1996a, 1999). Types of reforms included merit pay for teachers, changing the structure of financial incentives, and mandated standards and state report cards, all shifting the focus away from the inputs to measured student outcomes. Charles T. Clotfelter and Helen F. Ladd examined and described examples of programs in South Carolina and the Dallas Independent School District that focused on outcomes with the use of incentives that rewarded the schools that were most effective in meeting set standards or for making significant contribution to increased student performance. A comparison and contrast study of the accountability systems of Mississippi and Kentucky was conducted by

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V 85 Richard F. Elmore, Charles H. Abelmann, and Susan H. Fuhrman. In addition, Richard King and Judy Mathers conducted a study of states and the effects of incentives and disincentives central to many accountability plans (Elmore, Abelman, & Fuhrman, 1996; King & Mathers, 1996). In Florida, Governor Bush and Lt. Governor Brogan developed and implemented the A+ Plan of accountability (Brogan, 1999). South Carolina and Dallas. Texas . South Carolina was the first state to introduce a school performance incentive program, and it began with the South Carolina Improvement Act of 1984. This legislation included many initiatives that represented more than a 20% increase in state funding for education. The reforms in the Act were financed by a percentage-point rise in the state sales and use tax. The program included increased pay for teachers, tougher high school course and graduation requirements, a basic skills exit exam for seniors, a performance incentive program for principals, school improvement councils, statewide kindergarten, new tests and remedial support for low performing students, and increased capital expenditures (Clotfelter & Ladd, 1996). Dallas, Texas, had one of the most thorough and "sophisticated" accountability and incentive programs in the United States, with the program growing out of the work of a special group commissioned by the Dallas School Board in 1990. The goal was to hold all levels of the district accountable for results and to stimulate improvement. This group had strong support from the business community, and as part of the accountability system, the financial awards were given to the personnel in the high performing, most effective schools (Clotfelter & Ladd, 1996). The local business community fiinded half of the $2.5 million award costs. The Dallas schools were also affected by the Texas state recognition and reward program, as the state placed more emphasis on the absolute

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86 performance of students on the Texas Assessment of Academic Skills (TAAS). The complex system was facilitated by the statewide orientation toward accountability and the accompanying testings, the lack of strong teacher imions to oppose the program, and good district statisticians (Clotfelter & Ladd, 1996). Neither Dallas nor South Carolina based the school rankings on students' absolute test performance. Both systems started by determining the difference between each student's absolute score and a predicted test performance, and a gain represented a change from some predicted score. The two systems did determine the predicted score differently, as well as differed in how they incorporated background information into the school rankings and the determination of "wirmers." The next step was for the student "gains" to be aggregated into school "gains" for all students that were enrolled in a school for an entire year (Clotfelter & Ladd, 1996). In both South Carolina and Dallas, financial and other rewards were given to the "winning" schools, and this was determined by the schools' ranking. The schools were required to demonstrate higher performance on test scores to be eligible for awards. In each winning school in the Dallas system, bonuses were given to the staff, with the teachers and principals each receiving a bonus of $1,000 and $500 going to the nonprofessional staff. Also, the school activity fund was given $2,000. With about 20% of school personnel receiving awards each year and a fixed amount of money available, the proportion of schools that "won" depended on the number of personnel in the winning schools (Clotfelter & Ladd, 1996). In an effort to create more winners, a second tier of awards was established in Dallas for those personnel in the nonwiiming schools that exceeded predicted performance, and these won smaller awards.

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87 In contrast to Dallas, the funding awarded in South Carolina was given specifically to the schools, where the use of the funds was determined by the school in consultation with a local school committee, and the awards could not be given directly to teachers. Winning schools shared a pot of money in proportion to their enrollments, with winning schools that did not reach attendance goals receiving somewhat less. Schools generally received awards that were in the range of $15,000 to $20,000 per school. After a school was in a winning category, and it continued its high performance, it was excused from some of the complex paperwork that was required for requests for waivers regarding its operations and for exceptions (Clotfelter & Ladd, 1996). The school accountability systems such as these also provided significant information regarding the schools that demonstrated low performance. In Dallas, such low-performing schools received intense scrutiny from the superintendent, with much attention placed on the designed school improvement plan and progress toward education outcome goals. Along with this, the cenfral office monitored the school adminisfration more closely and sometimes provided additional resources or support to the school (Clotfelter & Ladd, 1996). Noteworthy, however, is the fact that low performance did not immediately indicate automatic sanctions, as it did in some state, like Kentucky. Comparing Kentucky and Mississipp i. Kentucky and Mississippi have both developed fully their accountability systems, even though they are actually in early stages of implementation. These two states represented relatively advanced stages of development when compared with other states, but they represent two very different policy environments. While Kentucky started the country's most complete reform in 1990 as a result of court action and the Kentucky Reform Act, Mississippi slowly

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88 evolved to its system through a series of small changes that took place from the early 1980s (Elmore et al., 1996). The Mississippi approach required lower costs for assessments and administration than Kentucky, and while they both contained accountability systems, the states were working with significantly different resource amounts. While their common focus was on striving to move from input and process regulation to a system of performance-based accountability, Mississippi was interpreted as the more basic model of the new state accountability, and Kenmcky was seen as the more complex version, with a higher cost (Elmore et al., 1996). Table 2-1 describes the major features of the accountability designs for Kentucky and Mississippi, as of 1995. Issues Related to Designs of Performance-Based Funding Given that there was substantial concern regarding the accountability of school districts and schools for the funds that were allotted to them and the achievement of the students within those districts, one would wonder why public officials had not demanded more school by school accounting and accountability (Guthrie, 1996, 1998). It had been technically possible to accoimt for school spending more precisely for some time. The school-by-school information was available with little technical or accounting complexity to decision makers in school districts (Guthrie, 1996, 1998). While this may seem like the obvious accounting methods that should have been followed, it was not. As of 1996, there had been no serious demand for a change in the accounting procedures. There were hypotheses set forth to explain the absence of more policy relevant fmancial data being made available for analysis, and most of these hypotheses were tied to political conditions (Guthrie, 1996).

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Table 2-1 Comparison of Kentucky and Mississippi Systems Design Feature Kentucky Mississippi Goal of System Every student, school, and district be at least proficient in twenty years (five student levels from novice to distinguished) Every school district be at least at level 3 (which is Successful) Level of Accountability School and Districts (Each school has its own threshold it must meet every two years) Every district is ranked each year (five different levels) Standard of Accountability Fixed standards Floating standard for normreference tests with absolute minimum and maximum values Types of Assessments Criterion-referenced and portfolios Criterion-referenced and normreferenced Subject Areas Reading, writing, mathematics, social studies, science, arts and humanities, practical living and vocational studies Reading, language, mathematics, high school subject tests Grades tested 4,5,9,11,12 4,5,6,7,8,9 Graduation test Not required Required Noncognitive Index Attendance, retention, dropouts, transition School process standards (different percentages for different leveK^ Rewards Cash rewards for teachers in schools that meet or exceed thresholds Process regulations lifted for level 4 and level 5 schools Sanctions or Assistance Distinguished educators go to schools in crisis; parents have the right to transfer a child out of the school; certified staff are placed on probation Office of Conservatorship, takeover provision Elmore etal., 1996, p. 72 Designing the new educational accountability systems required tackling a challenging set of technical and conceptual issues. Changes were taking place in the understanding of how to measure student performance, with a new emphasis on testing

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90 measures that that tried to test whether students understood and were able to apply knowledge to problem solving. States that were designing a new system had to decide (a) who should be held accountable, (b) what was the appropriate level of performance, (c) what were the appropriate performance indicators, and (d) what would be the consequences of performance above or below specified standards (Elmore et al., 1996). Clotfelter and Ladd posed the questions just a little differently. "What will be measured? Will adjustments be made for socioeconomic factors? How will the measures be linked to the rewards for educators?" (Clotfelter & Ladd, 1996, p. 24). As of 1996, researchers stressed that states needed to provide funding to experiment with performance-based funding systems in order to gather data and have the opportunity to evaluate and modify systems. Policymakers needed more reliable information on the contribution of different strategies that enhanced student learning so that it could be assured that appropriate resources were available. Schools that were identified as winners or exemplary in the state with performance-based accountability offered chances to see what was working and with what resources. Also, decisions that were made regarding the award funds in winning schools identified what these educators felt was important for student learning. While the success of these reforms was not guaranteed, the opportunities to improve educational performances would be enhanced with further research and studies related to the effect of specifically funded strategies on the educational output (Ladd, 1996a, 1996b). As of 2000, educational policymakers continued to explore the possibility of allocating a portion of state education funds to schools as monetary rewards for improvements in student test scores and other performance indicators. The rewards were

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91 outside of the state funds that were part of the school finance equaUzation programs and were relatively small amounts (King & Mathers, 1997). More states were implementing such a program. There were variations in standards and rewards, sanctions, and incentives, and some states had reduced the reward appropriations that were in place in previous years. The literature review also included studies regarding the use of resources and the implied direct relationship between additional money being given to districts/schools and the assumed improvement of test scores (Clark, 1998; Clark & Toenjes, 1998; Hanushek, 1997a, 1997b; Greenwald, Hedges, & Laine, 1996a, 1996b). Researchers disagreed on the statistical findings of these studies and debated the positive relationship between additional resources and student performance. Some, Eric Hanushek, in particular, believed that it was not the additional funding that was necessary for improvement. Rather, it was the use of the fimds more efficiently within the schools and organization (Hanushek, 1996, 1997a, 1997b). Nicola Alexander found in her New York study that the imposition of standards policies did not substantially change the association between race, poverty, and student outcomes. The findings represented important implications for equity, since it appeared that the students' achievements were tied to where they attended school (Alexander, 1997, 1998). Catherine Clark, in a Texas study, concluded that "even in the case of a large Texas district that appears to be distributing more resources to schools serving smdents with the greatest need, there is little measurable effect from the resources " (Clark, 1998, p. 389). Other researchers vehemently disagreed and said that more funding was definitely needed, although it should be allocated based on those areas of severe educational need.

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92 Clark described resource levels as still not adequate to overcome the handicap of a background of poverty and suggested that funding be directed to achieve strong academic performance for all students (Clark, 1998; Clark & Toenjes, 1998). Additional literature was reviewed that discussed alternative allocations of resources but did not necessarily discuss the subject from a performance-based budgeting viewpoint. The educational accountability models of the states reviewed usually consisted of some type of measurable student performance, standards for comparing the performance information by school or district, and a set of incentives and/or disincentives. These consisted of rewards, sanctions, and intervention strategies. Team-based rewards were being utilized by 14 states: Indiana, Kentucky, South Carolina, Texas, Connecticut, Florida, Georgia, Illinois, Maryland, New Jersey, New Mexico, North Carolina, Pennsylvania, and Washington (King & Mathers, 1996, 1997). These states also provided intervention assistance or imposed sanctions on low-performing schools through their accountability or accreditation processes. Performance indicators in reward programs varied among, but were not confined to, student achievement, performance assessments, student attendance, teacher attendance, dropout rate, retention rate, and transition fi-om high school. Some rewards were based on an absolute standard, and others were made on growth made toward achievement goals. There were interventions in place for technical assistance, corrective actions, removal of district and/or school administrators, and actions to withhold state funds (King & Mathers, 1996, 1997). Schools were compared for accountability purposes, sometimes according to annual improvements in the performance of all students and sometimes for improvements

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93 by distinct, specific student groups. Some states, such as Texas, South Carolina, and Indiana, had reduced, or suspended, their appropriations for rewards over the previous couple of years. The amounts of rewards have varied greatly from state to state, as well as how the rewards may be used and to whom they may be given (Hirth, 1998; King &. Mathers, 1996, 1997). King and Mathers reviewed four states' policies and interviewed almost 100 policymakers and "key influentials" to compare the accountability systems of Indiana, Kentucky, South Carolina, and Texas (King & Mathers, 1996, 1997). The staff from the Office of Program Policy Analysis and Government Accountability (OPPAGA) staff from Florida prepared a study on the Public Schools and Performance-Based Program Budgeting: Challenges and Opportunities to review the new Florida accountability system and make recommendations to the Department of Education and the State Legislature. This report also summarized the performance based plans in twelve of the states mentioned above (OPPAGA, 1998b). South Carolina. South Carolina incentive rewards were given as part of the 1984 Education Improvement Act (EIA) to "reward schools and school districts for exceptional or improved performance" (South Carolina Code, Section 59-18.10; South Carolina State Department of Education, 1996). This School Incentive Reward Program (SIRP) was based on measures of pupil performance, the state's Criterion-referenced Based Skills Assessment Program (BSAP), norm-referenced achievement test scores, as well as students' and teachers' attendance rates and student dropout rates (King & Mathers, 1996, 1997).

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94 The funding for the incentive system dropped from $6.9 miUion in 1985-1986 to $5 million allotted for the 1996-1997 school year. In South Carolina this money was divided among qualifying schools and vocational centers with School Improvement Councils (SICS) advising principals on how to use this money. Schools were compared with their own performance, with rewards based on an absolute standard and on progress made toward achievement goals. Interventions in South Carolina included several forms of technical assistance, a Review Committee recommending corrective actions, the State Board of Education declaring a state of emergency, withholding state funds, or the removal of a Superintendent (King & Mathers, 1996, 1997). Texas. The Texas incentive system, which also started in 1984, was based on the Texas Successful School Awards System (TSSAS) that recognized schools and districts that demonstrated gains or success in the achievement of state goals. The schools were rated for accountability but did not receive rewards during 1995-1997 school years when the legislature suspended rewards for 2 years. However, the appropriation was made for the 1997-1998 school year (King & Mathers, 1996, 1997). Texas schools were compared according to annual improvements by all students and also by improvements in the four student groups of African American, Hispanic, White, and Economically Disadvantaged. The performance ratings were based on the criterion-referenced Texas Assessment of Academic Skills (TAAS) along with the attendance and dropout rates, as compared in South Carolina. There were four rating categories, and expectations for required improvement varied among the four: exemplary, recognized, acceptable, and low performing. There was also a Texas Learning Index that was utilized to compare longitudinally the performance of matched students on a campus.

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That school was then compared with others in a unique group of 40 campuses, with variables of socio-economic status, ethnicity, past performance, limited-English proficiency, and student mobihty (King & Mathers, 1996, 1997). The Texas incentive funding was $20 million in 1992-1993, with rewards from $25,000 to $175,000 going to the deserving campuses, but in 1994-1995 the appropriation was for only $5 million. The funding was suspended in 1995 and replaced temporarily with a Principal Performance Incentive, but this was also rescinded before the first cycle. The reward funding was in place again for the 1997-1998 school year. Interventions or sanctions in the Texas plan included "accreditation sanctions" for districts and schools. These included hearings, after an initial year of low performance, to notify the public of deficiencies and plans for improvements. Special intervention teams may have been appointed to sponsor staff development and implement improvement plans. Continued low performance may have resulted in a board of managers or closing a campus (King & Mathers, 1996, 1997). Indiana . The Indiana School Improvement Award Program was part of the 1987 A+ Program for Educational Excellence that also included the Indiana Statewide Testing for Educational Progress (ISTEP). In this plan the award was given for at least two of four factors: proficiency in English/language arts, proficiency in math, average achievement scores, and student attendance (King & Mathers, 1997). The achievement scores were taken from the norm-referenced ISTEP and ISTEP+, which included application items in math and language arts, beginning with 1995-1996. Schools that demonstrated improvement of at least one-tenth of a percent in two of the four indicators

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96 received awards (Hirth, 1998; Indiana State Board of Education, 1989; King & Mathers, 1997). In 1996-1997, nearly all Indiana schools qualified for monetary or nonmonetary awards. The top "four star" schools received recognition, and the policy then directed funds to schools that were in greatest need of support and financial assistance. With many low-performing schools showing the greatest performance gains, they were able to benefit with larger rewards. As in South Carolina and Texas, Indiana incentive allocations were reduced. The program of $10.1 million in 1989-1990 was reduced to $3.2 million in the 1996-1997 school year (King & Mathers, 1997). Kentucky . The Kentucky legislature adopted the accountability system as part of the 1990 Kentucky Education Reform Act (KERA). This act changed the state and local governance, created statewide curriculum fi-ameworks, created a school finance equalization plan, and also provided the structure for rewards and sanctions. The Kentucky Instructional Results Information System (KIRIS) was a primarily performance-based assessment program, which included portfolios. In addition to the cognitive measures, the rewards system included indicators such as student attendance, retention and dropout rates, and (rare in the other states) transition fi-om high school (Kentucky Department of Education, 1995). Students in Kentucky were rated according to the achievement levels of distinguished, proficient, apprentice, and novice. The rewards were in place to recognize schools that were making progress toward students on average performing at a proficient level, as well as in the noncognitive indicator areas. Schools had to achieve at least 1% growth over "threshold levels," or move at least 10% of previous "novice" to students to

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97 a higher performance level, before they could qualify for reward money. Each school's performance level was compared with its own expected threshold (Kentucky Department of Education, 1995; King & Mathers, 1997). The first cycle of biennial rewards, which reflected student and school performance from 1992 to 1994, was allocated at $26 million in 1995. This resulted in a reward range from $1,845 to $3,690 per teacher. Two years later the appropriation had increased to $27.2 million. This represents 0.69% of the total state and local school funds, which was a somewhat larger proportion than in South Carolina, Texas, or Indiana. As more school qualified for rewards, the range of rewards was reduced (King & Mathers, 1996, 1997). Kentucky, as in the other states reviewed, had several assistance interventions and sanctions for poor performance. These included the requirement of improvement plans; the assignment of "distinguished educators" to the low-performing school; and primary sanctions such as probationary status for certified staff, parent options to transfer students to more successful schools, and distinguished educators evaluating and recommending the retention or dismissal of certified staff (Kentucky Department of Education, 1995; King & Mathers, 1996, 1997). Comparison and contrast among the four states . All four states used achievement and student attendance as performance indicators, but only Kentucky used required portfolio assessments; only South Carolina used teacher attendance; South Carolina, Texas, and Kentucky used dropout rates as an indicator; and only Kentucky used retention rates and transition firom high school as indicators (King & Mathers, 1996, 1997).

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98 During 1996-1997, the appropriations ranged from $5.0 million in South Carolina, $5.0 million in Texas (1994-1995), $3.2 million in Indiana, to $27.2 miUion in Kentucky. Although the funding continued in Texas for the 1997-1998 school year, a dollar figure was not known. The most current range of rewards given were $2,500$63,000 per school in South Carolina (1996-1997), $250-$30,000 per school in Texas (1994-1995), $4 15-$ 16,451 per school in Indiana (1996-1997), and $l,155-$2320 per teacher in Kentucky (1996-97) (King & Mathers, 1996, 1997). Each of the states dictated different uses of the reward funds. South Carolina allowed for the funds to be used for instructional improvement on the basis of the School Improvement Councils advising the principal; Texas approved the funds for academic enhancement, but no salary bonuses; Indiana prescribed the funds for educational purposes but not for athletics or salary bonuses; and in Kentucky where the most money was being appropriated, teachers could decide where the money should be put to best use. Other states distribute rewards to a variety of recipients (Table 2-2). Table 2-2 Distribution of Financial Awards State Recipient of Financial Awards Connecticut Districts Florida District and Schools Maryland School Improvement Team North Carolina Certified Staff and Teacher Aides Tennessee Faculty and Administration OPPAGA, 1998b. Florida . In Florida, the 1991 Legislature adopted the Florida System of School Improvement and Accountability, which was intended to improve the performance of

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99 public schools by holding them accountable for student performance. The Legislature, Department of Education (DOE), and school districts used the system to measure performance and distribute incentives and disincentives. As of 1998, there were several incentive programs, created by the Legislature that gave additional funding to districts and schools on specific performance indicators. There was also a highly visible disincentive that publicized the names of critically low-performing schools and then imposes sanctions on those schools whose performance does not improve (OPPAGA, 1998b). In Florida's first steps to implement performance-based program budgeting, there was a proposed public school program: the Public Schools Educational Program. With that program, DOE identified two major subprograms, the system-wide PreK-12 descriptive measures and targeted incentives. The targeted incentives were the three subprogram areas of prekindergarten, dropout prevention, and safe schools. The DOE planned to submit performance measures for these three areas and recommended that they receive incentive fimding. There was some concern fi-om the OPPAGA report that the Legislature might not be able to evaluate the performance of the sub-programs, since they serve children with different educational needs (OPPAGA, 1998b). Prior to 1996-1997 the financial incentive initiatives in Florida were in only a few areas: Advanced Placement and International Baccalaureate Incentives, Vocational Education Incentives; and Isolated High Schools. The 1996 and 1997 Legislatures created new incentives including Remediation Reduction Incentive, which rewarded districts for improved student scores in math, reading, and writing; Dropout Prevention/Educational Alternatives Incentive, to encourage districts to become more effective in serving

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100 students in dropout prevention programs; and the Florida School Recognition Program that would provide rewards to faculty and staff of schools that sustained high performance or demonstrated "exemplary improvement." In these programs, the school district received the fund rewards, except for the Florida School Recognition Program, but this program had not yet been funded (OPPAGA, 1998b). The School Recognition Program was later funded as part of the Bush/Brogan A+ Plan (Florida Department of Education, 2000c; Florida Office of the Governor, 1999). Until 1998, Florida had a nonfmancial disincentive initiative in the use of the highly visible sanction of "criticallylow school performance." These schools were those whose students failed to meet expectations on standardized tests for reading, math, and writing. Once a year, the Department of Education placed the names of these on highly publicized lists. The 1996 Legislature gave the State Board of Education authority to take actions to ensure that the low-performing schools would improve. These actions include interventions very similar to the other reviewed states, such as additional resources, implementing an improvement plan, contracting for education services, reorganization, moving students, or other appropriate action (OPPAGA, 1998b). As seen in perceptions of other policymakers in other states, the nonfmancial incentives could be powerful motivators for performance improvement. Incentives and disincentives in other states. As of August, 1998, there were recommendations from OPPAGA (1998b) that the Florida Legislature consider implementing financial incentives and disincentives that were similar to those being used in other states as the Legislature continued to develop the Florida performance-based program budgeting system (Table 2-3).

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101 Table 2-3 Examples of Other States with Incentive Examples State Incentive Connecticut Gives districts monetary awards based on the number of students scoring at or above goal level on state standardized tests, with no restrictions on usage. Georgia If the DOE approves a school's proposal for improved academic performance, and the school achieves its goals, then the school receives $2,000 per certified staff member. The staff determines whether to keep the money for bonuses or for school improvement. South Carolina Incentives are given to schools that are either in the top 5% on standardized test scores, or have shown significant gains, or both. School Improvement Councils decide how to spend the money, but funds cannot be used for bonuses. North Carolina Incentives of $1,000 for teachers and $500 for teachers' aides are given at schools that showed the greatest academic gains on standardized tests. OPPAGA, 1998b, p. 32. Other states that were using incentive plans were Illinois (nonfinancial exemption from regulations program), Maryland, Mississippi (nonfinancial exemption from regulations program), and Tennessee. Disincentives plans were being used in Michigan, where districts that did not produce school improvement initiatives, plans, and reports, could have 5% of their total school funds withheld, and in Tennessee where, if schools or districts did not show progress for 2 consecutive years, they could be placed on probation, and with continued nonperformance both the local board of education and superintendent could be removed from office (OPPAGA, 1998b). The evidence from the states included in the literature reviewed suggested that the performance-based budgeting/accountability systems did advance educational reforms, and obviously, the rewards and sanctions bring about incentive effects. However, the

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responses from the policymakers and educators included in the studies also suggested that intrinsic desires by educators to improve student learning had stronger effects than extrinsic rewards; good publicity and state-level recognition were valued more than monetary rewards; and the avoidance of sanctions and negative publicity of lowperforming or critically low schools was a stronger motivator for making instructional changes than the promise of rewards (King & Mathers, 1996, 1997; OPPAGA, 1998b). Directly related to performance-based budgeting, survey results in Indiana, Kentucky, South Carolina, and Texas produced insightful findings relating to motivation and rewards and sanctions. "The sanctions, possibly declaring a school 'in crisis' and dismissing personnel, are more incentive than any other part" of the Kentucky accountability system (Kentucky State-Level Office, 1996, as cited in King & Mathers, 1996, p. 62). "It's the rating, the label, that makes a difference. I want to hold my head up in comparison with other schools" (Texas District Office, 1996, p. 65). "An appropriate sanction is coming before the public. . . .Public hearings bring public press for improvement" (South Carolina Professional Association, 1997, as cited in King & Mathers, 1996, p. 64). Therefore, it may be that the contribution of financial rewards to school improvement is obscured by the fear of threatened sanctions and negative publicity (King & Mathers, 1996, 1997). There were some indications of unintended consequences. These consequences included the emphasis on test scores narrowed the curriculum; test results were used by the public and state for reward or sanction purposes; unethical or "illegal" practices or testing procedures were being utilized, so that schools would look better; and the

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=1 103 i financially directed accountability systems created moral problems, divisions among personnel, and increases in professional jealousy (King & Mathers, 1996, 1997). Considerations and Recommendations for Further Study Suggestions have been made by researchers to enhance the opportunity for schools to improve based on performance based rewards. School-by-school test result information had become available, and information should be used to determine improvements. Guthrie asserted that there should be more school-by-school accounting and accountability, since it has been technically possible to account for school spending for some time (Guthrie, 1996, 1998). It should be determined what will be measured, whether adjustments should be made for socioeconomic factors, and how measurements '< would be linked to rewards (King & Mathers, 1 996, 1 997; Ladd, 1 996a). To encourage all schools to work for performance-based rewards, there should be fair procedures for determining and comparing performance. Fairness demanded that gains in test scores and other indicators be considered, in addition to any absolute test standards; comparisons among schools/students/districts should take into consideration student socio-economic status (King & Mathers, 1996, 1997). Policymakers must identify the specific strategies that will have an effect on the educational process (Ladd, 1996a). Kentucky and Texas programs had provisions for considering student groups. Kentucky rewarded schools that reduced the percentage of their lowest ranking students (Kentucky Department of Education, 1995). Rewards in Texas depended on overall percentages of students that passed a given achievement test as well as consideration for improvements made by four student groups: African American, Hispanic, White, and

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104 Economically Disadvantaged (King & Mathers, 1997). As stated earlier, the Texas Teacher Association (TTA) took the position that incentives should not be added until there was a basic adequate program everywhere King & Mathers, 1996, 1997). Views differed regarding the motivation provided by monetary rewards and sanctions, as a result of the incentive program. The perceptions of key influentials interviewed in the King and Mathers study revealed the following: • there were reported effects of accountability systems that included rewards and sanctions, but intrinsic aspects of teaching and nonmonetary recognition had greater incentive effects than financial rewards; • accountability systems stimulated school improvement efforts and team building, particularly in elementary schools and low performing schools; • school-level personnel focused attention on needs of low-performing students • the avoidance of negative publicity and sanctions was a powerful motivator (King & Mathers, 1996, 1997). Researchers argued that for schools to be held accountable for the achievement of their students, they had to be given the responsibility for making relevant decisions and have the control over the resources necessary to support any needed changes (Guthrie, 1996; Wohlstetter & Van Kirk, 1996). This meant that in a context of school-based management, the school staff had to have the power to make allocation and budgetary decisions. They also had to have access to student performance data, and they must receive staff development training in the budget process. School-based budgeting is at the center of site-based decision making (Guthrie, 1996; Wohlstetter & Van Kirk, 1996). Anderson (1996) developed a model to address the meaning of school efficiency in order to effectively utilize rewards and penalties in performance-based funding. He used a comparison of urban and rural schools, recognizing weaknesses and strengths of

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105 each, to develop an operational definition of educational efficiency. He asserted that only when the aspects of schools that influence efficiency were identified, could policymakers and researchers be confident of what to reward or penalize through increased or decreased funding (Anderson, 1996). Questions asked about site-based decision making and reviewed by the researchers King and Mathers included the following: • How much and what kinds of budgetary and personnel discretion do schools have under school-based budgeting? • How are resource allocation decisions made across and within schools? Who is involved and how? • What do schools spend their discretionary resources on? • What factors affect how dollars are used in the school? After researchers King and Mathers surveyed educators and policymakers in the states of Indiana, Kentucky, Texas, and South Carolina with the following questions, they also suggested that the questions asked or issues needed to be investigated further (King & Mathers, 1996, 1997). As stated earlier. King and Mathers (1996, 1997) determined that there were some suggested indications of unintended consequences. These consequences included the emphasis on test scores narrowed the curriculum; test results were used for sanction piuposes; due to emphasis on test results, there were some unethical or illegal testing practices; due to emphasis on test results, there were teachers "teaching the test;" financial incentives/rewards created morale problems (between haves and have-nots); and financial rewards created professional jealousy (King & Mathers, 1996, 1997).

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106 They summarized their findings with statements that the lessons learned argued for accountability systems but not for monetary rewards. The concluded that "state and local recognition of school improvement efforts, public awareness of poor performance, and state assistance (or threatened sanctions) have stronger motivating effects (King & Mathers, 1996, p. 93). King and Mathers suggested that the money would have been put to better use in capacity building at low-performing schools. In summary, researchers asserted the need to identify the specific strategies that have an effect on the educational process, meaning improved test scores. There was a continuing belief that merit school awards and other performance-based policies motivate school improvement. Team-based rewards emerged fi^om the failure of individual merit pay plans to motivate teachers, and seemed to foster good performance and cooperation. It was only when policymakers could identify aspects of school that influenced efficiency, that they could be confident of what to reward or penalize through increased or decreased funding (Anderson, 1996; Fuhrman, 1999; Guthrie, 1996, King & Mathers, 1996, 1997). King and Mathers (1997) concluded also that more information was needed on learning styles, curriculum changes, strategies that might have brought about the improved test scores. They questioned whether the intent to reward or sanction schools or districts was based on set achievement scores or on progress. Hunushek and Meyer argued that if policymakers were serious about holding schools and districts accountable for their impact on growth in student achievement and performance, then it was crucial to quantify that contribution in a suitable and precise manner utilizing appropriate student outcome measures (Hanushek & Meyer, 1996). Cohen (1996) asserted that the few states

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107 that had explicit rewards and punishments for professionals attached to students' performance did so because of court ordered reform rather than political bargaining in the legislature. Cohen (1996) described obstacles that faced the states that were moving toward continued enactment of systemic reform with goals, higher standards, new assessments, curriculum with more substance, and widespread adoption of plans that rewarded performance. His view included two central problems including the "appreciable lack of professional capacity to respond constructively to serious effort to improve instruction" (Cohen, 1996, p. 124). He argued that standards-based reform was not likely to succeed unless educators and others concerned with schooling were provided with more incentives and opportunities to learn. In addition, the success of the schemes depended heavily on the ability of the state to enhance the capacity of the worst schools to respond constructively to powerful incentives, because those schools were the least likely to have the ability to respond well on their own. Cohen (1996) saw the second obstacle to reform as his belief that that while standards-based reform was promoted as a matter of "policy," the policy would not work without it being positioned in "enabling politics." In Florida, the governor, lieutenant governor, and legislature developed a standards-based reform plan with incentives, efforts to improve instruction, opportunities to learn, and was a plan situated in politics. Bush/Brogan A+ Plan for Education Under the leadership of Florida Governor, Jeb Bush, Lieutenant Governor, Frank Brogan, and strong legislative leadership, the Bush/Brogan A+ Plan for Education was developed and instituted. Florida's Lieutenant Governor, Frank Brogan, described A+

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108 Plan for Education as the most comprehensive state accountabihty, as of June, 1999. It was based on the conviction that all children have the ability to learn, was focused on student achievement, and started with high expectations of test scores. They further professed that "no child" would be left behind or abandoned to a substandard education in Florida (Brogan, 1999, p. 1, Tilley, 1999). There were three principal initiatives that were used to lay the foundation for the Plan in 1995. First, the Florida Department of Education adopted ambitious academic standards. The Florida Comprehensive Assessment Test (FCAT) was developed to measure these standards through student achievement. Brogan described this development as a 2-year process involving parents, teachers, members of the business community, as well as others. According to Brogan, the involvement of this eclectic mix, there was broad local support for the developed Sunshine State Standards (Brogan, 1999). More that 70% of the Florida tenth-grade students scored below the basic level in the first administration of the reading section of the FCAT, but public support for demanding public academic standards remained high. Brogan and Bush felt that the Sunshine State Standards provided the blueprint to reach the significantly higher expectations (Brogan, 1999). The second initiative provided choices to parents, teachers, and communities by permitting the development of public charter schools. These schools, being free from the burdens of possibly unnecessary rules and regulations, were stringently accountable for the achievement of their students. There were more than 70 charter schools serving a diverse group of about 1 1,000 Florida students. This included a significant number of students traditionally considered to be low achieving or at risk, along with Exceptional

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109 Student Education (ESE) students and minorities (Brogan, 1999; Center for Education Reform, 1999; Tilley, 1999). The third part of the foundation for the A+ Plan was the program initiated to remediate critically low-performing schools. These identified critically low-performing schools were sites where "two-thirds of their students scored below the proficient level on standardized tests of reading, writing, and math for two consecutive years" (Brogan, 1999, p. 1). Having put these schools on notice, the Department of Education and State Board of Education were empowered to aid schools in preparing improvement plans and to mandate changes in the staffs and curriculum structure if the designated schools did not demonstrate improvement (Brogan, 1999; Tilley, 1999). Therefore, the Bush/Brogan A+ Plan was a comprehensive accountability system that significantly raised the achievement standard. Florida schools began receiving report cards in 1999 and were graded on a scale of A to F, with grades based primarily on students' performance on the developed FCAT. However, schools were also graded on how well the lowest achieving students in each school learned, and it was asserted that the schools would not receive high marks if the low-performing students were left behind. The A+ Plan had, in its accountability package, significant incentives and rewards for successfiil results as well as disincentives and rigorous remediation for schools that were failing (Brogan, 1999; Tilley, 1999). Rewards for success included, in the first year, a bonus of up to $100 per student for those schools that received an A or improved by one grade level on the A to F scale. The legislature had appropriated $15 million for this purpose in the 1999-2000 school year. Additionally, the highest performing schools were deregulated by the state and

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110 rewarded with the freedom of site-based budgeting and innovating their curriculum as well as other strategies to further enhance learning at their schools (Brogan, 1999; Tilley, 1999). For the schools that did not receive high grades, there was additional assistance for remediation, and there were disincentives or consequences for repeated failure. Students became eligible for Opportunity Scholarships (voucher) if their school received an F for 2 years in any 4-year period. This allowed the student to take the voucher and attend any public school or qualified private school of their choice. The school chosen by the student received the state funds allotted for his/her education (Brogan, 1999; Tilley, 1999). There were mixed reviews on the plan from teachers, parents, students, and communities. A number of articles described differences in outlooks on the positives and negatives of the A+ Plan. Governor Bush and Lt. Governor Brogan took part in several question and answer sessions, particularly clearing up the question of teachers not losing 5% of their salaries for low student scores. Other articles reviewed plans being made by principals at the lower performing schools in their efforts to bring up the grades of the schools (Center for Education Reform, 1999; Hirschman, 2000; Schweitzer, 2000; Tampa Tribune, 2000). The Bush/Brogan A+ Plan, therefore, required increased accountability for student achievement from the state level, while it also pushed much of the power and control to the school district, school, and parent level. In summary, the key elements of the A+ Plan included "rigorous and measurable expectations for student performance, understandable information to parents about school performance, deregulation of budgets

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Ill and curriculum at the school level, remediation and unprecedented assistance to low performing schools" (Brogan, 1999, p. 2). The assistance funds included $527 million in flexible funds that could be utilized for Saturday or after school remediation programs, one-on-one tutoring, class size reduction, and other strategies to aid students in nonimproving schools (Brogan, 1999). The plan also included monetary awards through the Florida School Recognition Program (Florida Department of Education, 2000c). Summary This chapter contained a review of the literature on the concept of equity and a history of fiinding for education. In addition, the chapter provided an overview of selected equity court cases and the litigation related to school finance, a review of the statistical measures used in public school funding research on equity, a general overview of the Florida Education Finance Program, a review of performance-based fimding, and a general overview of the Bush/Brogan A+ Plan for accountability in Florida that includes reward funding for high performing schools. Equity, or fairness, was a major area of concern as resources for education were distributed (Brown, 1999; Goertz & Stiefel, 1998; Odden & Picus, 2000; Thompson et al, 1994). The principle of horizontal equity was described as the equal treatment of equals, and vertical equity was described as the unequal treatment of unequals (Odden & Picus, 2000; Thompson et al., 1994). A number of statistical measures were used to determine the degree of equity for a state's fiinding formula. The statistics included the range, restricted range, federal range ration, coefficient of variation, Gini coefficient, and the McLoone Index. The funding mechanism revenue per student and the use of these statistical measures were verified through a review of documented use in PreK-12

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112 education finance (Brown, 1999; Chambers, 1996; Odden & Picus, 2000; O'Loughlin, 1992; Thompson et al., 1994). The education finance structure for many states included performance-based funding or budgeting by the 1990s. The objectives of performance-based funding included accountabihty for student performance, rebuilding creditability with policymakers and the public, justification for the increased funding, and the guarantee of an optimum return of high outputs for educational input in resources (Brown, 1999). The performance-based additional fiinding allotted to districts and schools was determined by the achievement of specific performance criteria that was specified by state policymakers (Brown, 1999; King & Mathers, 1996, 1997). School districts in Florida received financial support fi-om federal, state, and local sources. As of the 1999-2000 school year, 61.60% of the total FEFP fiinding came from state ftinds, and 38.40 % of the FEFP came from local funds, with the FEFP calculated through the funding formula (1999-2000 FEFP) (Florida Department of Educafion, 2000a). By the late 1990s, several states, including Florida, began incorporating performance-based fimding with some dollars allocated based on individual schools' performance on determined indicators (Brown, 1999; Odden & Picus, 2000; King & Mathers, 1996, 1997). The school districts of Florida were financially supported by state and federal revenue as well as lottery proceeds. The fimds were appropriated by the state legislature through a funding formula mechanism. In the school year 1998-1999, the fimding formula also included an appropriation, through the Bush/Brogan A+ Plan, that was based on measures including school performance on the Florida (FCAT). The amount of

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113 allocation depended on the number of students at each "A" school multiplied by the amount of money appropriated for the measure, which was $100 for the 1998-1999 school year and subsequent years (Brogan, 1999; Florida Department of Education, 2000c). This chapter was a review of the literature related to school finance and performance-based funding. The next chapter describes the methodology utilized in the research of the problem to examine the change in fiscal equity resulting from the implementation of a performance-based funding system on a state preK-12 public school program.

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CHAPTER 3 RESEARCH METHODOLOGY Introduction The purpose of this study was to examine the change in fiscal equity resulting from the implementation of a performance-based ftinding system on a state preK-12 public school program. Using the statistical measurements for examining the degree of equity that were developed for public school finance studies, the researcher analyzed the degree of horizontal equity on the distribution of ftinds to all districts in a state's public school finance system prior to and following the implementation of performance-based funding. Florida was the state chosen for the study. The statistical measurements utilized in public school education studies were described by Berne and Stiefel (1984), Wood and Thompson (1993), Thompson et al. (1994), and Odden and Picus (2000). The measurements included the range, restricted range, federal range ratio. Coefficient of Variation, the Gini Coefficient, the Lorenze curve, and the McLoone Index. This research study was nonexperimental and used population data from Florida's public school finance system in which performance-based funding was introduced through the Bush/Brogan A+ Plan and monetary rewards that were given to schools receiving "A" ratings in the program through the Florida School Recognition Program (Florida Department of Education, 2000c). The level of equity within the state's fianding formula for public schools was analyzed the year before the implementation of the rewards in the accountability A+ Plan (1997-1998) and the second 114

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115 and third years that the funding system was implemented in the system (1999-2000 and 2000-2001). The funding formula was analyzed with and without the performance reward allocation for 1999-2000 and 2000-2001. The purpose of the study was to analyze the degree of equity for each year's funding formula to determine if the performance-based funding made a difference in the level of horizontal equity. The following question was involved in the study: How does the additional revenue generated by performance-based fimding, through the Florida A+ Plan of School Recognition Awards, affect the horizontal equity in the allocation program of the FEFP? Population of the Study The state of Florida public school system was chosen for the study. The funding for the 67 county school districts was determined and allocated through the Florida Education Finance Program (FEFP). The data were collected fi-om a database on the FEFP provided by the Florida Department of Education for each of the years of the study (Florida Department of Education, 1998, 2000b, 2001). The financial information included revenue allocated and distributed through the FEFP from the state's General Revenue Fund, lottery proceeds, and enrollment information in the form of fUll-time equivalents (FTE) and weighted full-time equivalents (WFTE). Performance-based fimding through the A+ Plan was not utilized for funding in the 1997-1998 school year but was used for all districts in subsequent years. The pilot year of 1998-1999 was not included in the study. Therefore, the years chosen for the study were the school years 1997-1998, 1999-2000, and 2000-2001. Raw data were provided by the Florida Department of Education websites and statistical reports.

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116 Methodology The 67 public school districts in the state of Florida for the school years under study— 1997-1998, 1999-2000, and 2000-2001— received funding through the Florida Education Finance Program (FEFP). The revenues for the FEFF were generated from state and local sources. Generated predominately through state sales tax, the state portion of the FEFP is the primary source of revenue and is provided through state legislative appropriation (Florida Department of Education, 1996, 1999, 2000a). Local sources of funds were generated substantially through local property tax levies. For participation in the FEFP, local school boards were required to levy local effort millage rates that were determined and set each year by the state legislature (Florida Department of Education, 1996, 1999, 2000a). The differences in the distribution of total revenue to each school district by means of a funding formula were examined in this study through the variable "total revenue per weighted full-time equivalent student (WFTE)." The full-time equivalent student count was calculated using the Education Administrative Rule 6A1.045 1(4), FAC (Florida State Board of Education, 1998). The total revenue was the sum of the General Revenue appropriation. The total revenue per WFTE was calculated by dividing total revenue by the weighted full-time equivalent student coimt (WFTE). The total revenue per WFTE was determined for each school district in the Florida public school finance system. Throughout the study the term "total revenue per WFTE" was often shown as "per-student revenue" or "revenue per student." Several of the most predominate statistical measurements used in public school finance research were used in this study to evaluate the degree of horizontal equity. The

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statistical measures included the range, the restricted range, the federal range ratio, the variance, the standard deviation, the Coefficient of Variation, the Gini Coefficient, and the McLoone Index. These measurements were described in the literature as the statistical measures accepted in the school finance studies (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). Measures of Equitv The following section describes the measures of equity used in the study. They include the mean range, restricted range, federal range ratio, variance, standard deviation, and coefficient of variation. These are measures that are utilized to evaluate resource accessibility. The Gini coefficient and the McLoone Index are two of the measures used to evaluate wealth neutrality (Thompson et al., 1994; Wood & Thompson, 1993). Each of the measures is explained in this section. Mean The mean is a measure of central tendency of the distribution, and it represents the average of the observation values in the distribution. It takes all observations into account and is calculated by the formula SUM Xi/N where SUM represents the sum of all districts, Xi represents the value of the variable, such as revenues per student, N is the number of districts (Thompson et al., 1994). The mean was calculated prior to the implementation of performance-based funding for the year 1997-1998. The mean was then determined for the revenue per

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118 student data for the 1999-2000 and 2000-2001 school years, with and without the performance-based funding that had been implemented. Therefore, the mean represented the average revenue per student among all districts for each of the years of the study, before and after PBF. The mean is sensitive to outliers, and was not as useful as other statistical measures. However, it did provide a tool to identify districts whose revenue per student values differed greatly from the average value (Thompson et al., 1994). Median The median is a measure of central tendency that consists of the middle value of a distribution, when the observations are sorted in ascending or descending order. While the median is not a measure of horizontal equity, it is described in this section because it is utilized in the calculation of the McLoone Index. The median can be utihzed to compare revenues per student for each of the 67 Florida public school districts. The median is not as sensitive to outlier observations as the mean; therefore, it can be a somewhat better measure than the mean. Range The range is the difference between the highest and lowest observations in a distribution and is used to analyze the spread of the revenue per student in the distribution (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). For each year in the study, the 67 public school districts were arranged in ascending order according to revenue per student. The range was then determined by subtracting the lowest perstudent revenue amount from the highest per-student revenue. Therefore, the formula for calculating the range is shown with the following formula: RANGE = Highest Xi Lowest Xi

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119 where Xi was the revenue per student for the school district in the given year. The smaller the value of the range, the smaller the variation in the distribution of total revenue per WFTE and the better the equity of the distribution of revenues per student (Thompson et al, 1994). Since the range is based only on two observations and ignores all other observations, it does not indicate any pattern of variation and is not sensitive to changes within the distribution (Thompson et al., 1994). The range was calculated on the provided data for the 1997-1998 school year, which was prior to the implementation of performance-based funding and A+ Plan rewards. The range was then determined on the revenue per student data for the 19992000 and 2000-2001, when the performance-based funding through the A+ Plan was implemented, with and without the rewards. Restricted Range The restricted range is a statistical measure utilized to analyze the spread of the distribution of observations by ignoring the extremes of the highest and lowest observations of revenues per student. The revenue per student values for each of the 67 school districts in the state of Florida were placed in ascending order. The restricted range was determined as the difference between the observation at the 95* percentile and the 5* percentile, ignoring the observations above the 95* percentile and those below the 5* percentile. The smaller the value of the restricted range, the smaller the dispersion in the distribution of revenues per student. The smaller the spread in the distribution, the better the equity. The restricted range is calculated by subtracting the observation at the 5* percentile from the observation at the 95* percentile and is shown by the following formula:

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120 RRANGE = Highest 95* % Lowest 5* % RRANGE = Xi at 95*^ % Xj at 5* % where Xi is the revenue per student in district i. Since this statistical measurement is based on only two observations, it ignores the variation in values in the middle of the distribution (Thompson et al., 1994). The restricted range was calculated on the data provided by the Florida Department of Education for the year 1997-1998, prior to the implementation of performance-based funding. The restricted range was also calculated for revenue per student for the school year 1999-2000 with and without performance-based funding rewards fi^om the A+ Plan. Federal Range Ratio The federal range ratio is determined by dividing the restricted range by the revenue per student observation at the 5* percentile. The value calculated is expressed as a ratio, and the smaller the ratio, the less inequity in the distribution of observations (Thompson et al., 1994). Therefore, the smaller the variation, the better the equity of the distribution (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). This also means that the federal range ratio expresses how much larger the observation is at the 95* percentile than the observation at the 5* percentile (Brown, 1999; Hirth, 1994). The federal range ratio is calculated using the following formula: Restricted Range / Xi at 5* percentile where Xi represents the revenue per student in district i. The federal range ratio was determined, using the data for the 1997-1998 school year, prior to the implementation of performance-based fiinding. The federal range ratio

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121 was then calculated on revenue per student for 1999-2000 and 2000-2001, after the performance-based ftmding in the A+ Plan was implemented. For those school years, the federal range ratio was determined for the revenue per student data with and without performance-based fiinding rewards. Coefficient of Variation Significant parts of the coefficient of variation are the variance and the standard deviation. The coefficient of variation is defined as the standard deviation of the observations divided by the mean or the square root of the variance divided by the mean (Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). Its value usually varies between zero and one. A coefficient of variation of zero indicates that the object, revenue per student for example, is distributed uniformly among all children. Variance. The variance is defined as the average of the squared deviations fi^om the mean, or average observation. The smaller the calculated value of the variance, the less the variation in the distribution of the revenue per student per school district, and, the less variation, the better the equity of the distribution. Variance has an advantage over other statistical measures, such as restricted range and federal range ratio, in that it takes all observations into account. The variance is determined with the following formula: where X is the sum of the students in all districts. Pi is the number of students in districts "i", Xp is the average revenues per student, and Xi is the revenue per student in district "i" ( Thompson et al., 1994). Standard deviation. The standard deviation is the square root of the calculated variance. The formula for the standard calculation is

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122 The smaller the standard deviation value, the less the variation in the distribution of the observations, such as revenues per student for each district. Also, with smaller standard deviations, the better the equity of the distribution. Standard deviation also has the advantage that all observations are included in the calculation. However, as with the variance, the standard deviation is sensitive to outliers (Chambers, 1996; Thompson et al., 1994). As stated above, the coefficient of variation is the square root of the variance divided by the mean or standard deviation divided by the mean. The mean (average) revenue per student is calculated by taking the sum of all of the school districts' revenue per student and dividing by the number of school districts (67) in Florida. 67 where 7, represents the revenue per student for the district. The Coefficient of Variation formula is shown as square root of the variance / Xp where Xp is the mean revenue per student (or FTE) for all districts. The Coefficient of Variation is described as being independent of the average observation and measured relative variation. This provides an evaluation of the distribution of revenues around the mean by indicating variations in revenues for specific proportions of students. Solving the formula gives a value between zero and one, with the smaller values representing smaller variations in the distributions. Therefore, this

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123 indicates greater equity (Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). The coefficient of variation (CV) was calculated by the revenues per student data for the school year 1997-1998, which was before the implementation of the A+ Plan for performance-based fiinding. The CV was then calculated for the school years of 19992000 and 2000-2001 when performance-based funding was implemented. For the years of 1999-2000 and 2000-2001, the CV was calculated on the revenue per student with and without performance-based funding in the A+ Plan. McLoone Index The McLoone Index, a statistical measurement unique to school finance, was created to provide a measure of the bottom half of a distribution. This examines and indicates the degree of equity only for the observations below the 50* percentile, or median (Brown, 1999; Odden & Picus, 2000; Thompson et al., 1994; Wood & Thompson, 1993). The McLoone Index is the ratio of the sum of the values of all observations below the median to the sum of all observations that would be required if all observations below the median had the value of the median. The formula was expressed as 2(i...j)P,Xi^Mp2(i...j)P, where ^ is the sum of pupils in all districts i to j, Pi is the number of pupils in the district i, Xi is the expenditure per pupil in district i, Mp is the median expenditure per pupil for all districts, and Districts i-j are below the median (Thompson et al., 1994).

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124 As stated above, the number calculated for the McLoone Index is usually a number between zero and one. The larger the value of the McLoone Index, the closer the lower half of the distribution was to the median of the distribution. As Odden and Picus (2000) stated, "The American political culture often shows more interest in the condition of those at the bottom, the McLoone Index is a statistic that reflects that perspective" (Odden & Picus, 2000, p. 64). The McLoone Index was calculated on the provided funding data for the 19971998 school year, before the implementation of performance-based funding. The McLoone Index was then calculated on the revenue data for the 1 999-2000 and 20002001 school years, when the performance-based funding was in place. For the 19992000 and 2000-2001 school years, the McLoone Index was determined for revenue data with and without performance-based funding and rewards from the A+ Plan. Gini Coefficient The Gini Coefficient is a statistic taken from economists' measures of income inequality and is used as a wealth neutrality test for public school finance studies (Odden & Picus, 2000; Thompson et al., 1994). Wealth neutrality is the relationship between the per-pupil expenditures of a school district and the school district's wealth of local support through taxes (Thompson et al., 1994). The Gini Coefficient is a measure of income equity that indicated how far the distribution of revenues is from providing each percentage of students with the same percentage of revenues (Kearney & Chen, 1989; Odden & Picus, 2000; Thompson et al., 1994). In this study, wealth was accepted as the state revenue for the school districts in Florida. The Gini Coefficient shows how far the distribution of revenue is fi-om

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125 providing each percentage of students with an equal percentage of revenue. The calculated Gini Coefficient is a number between zero and one. The smaller the value, the more equitable the distributions of revenue in providing a specified percentage of students with the same percentage of revenue (Thompson et al, 1994). The coefficient compares revenues at each level with revenues at every other level and is also sensitive to changes throughout the distribution, though not to extreme outliers (Thompson et al., 1994). The Gini Coefficient is calculated with the following formula: GiniCoefficient = SjSjPiPj (Xi X .) / 2(2iP.)^Xp where Ij is the summation of all districts "i"to "j" from "i"= 1 toNandfromj = 1 toN N = the number of institutions in the system Pi = the student WFTE (number) for institution "i" Pj = the student WFTE (number) for institution "j" Xp (or mu) = population mean revenue or expenditure per student Xj = expense or revenue per student for institution "i" Xj = expense or revenue per student for institution "j" (Thompson et al., 1994). Summary This chapter described the research design used in the study. This study resulted in univariate dispersion measures for the 1997-1998, 1999-2000, and 2000-2001 school years. The provided financial data were utilized and examined both before and after the implementation of performance-based funding with the A+ Plan rewards from the Florida

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126 School Recognition Program. The degree of horizontal equity was analyzed using the measures; the results were then compared; and inferences were made.

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CHAPTER 4 ANALYSIS OF DATA Introduction The purpose of this study was to examine the change in fiscal equity resulting from the implementation of a performance-based funding system on a state PreK-12 public school program. Using the statistical measurements for examining the degree of equity that were developed for public school finance studies, the researcher analyzed the degree of horizontal equity of total revenue per weighted full-time equivalent student (per-student revenue) for the 67 public school districts in the state of Florida prior to and following the implementation of performance-based ftinding. Total revenue was considered funding from the Florida Education Finance Plan from state and local sources. The years of the study were 1997-98, 1999-00, and 2000-01. Florida was the state chosen for the study. For the years when performance-based ftmding was implemented, the state's total appropriation from the Florida Education Finance Plan calculation was considered with and without the performance allocations for those years of 1999-2000 and 2000-2001. Revenue per-student was calculated by taking the total revenue and dividing it by the weighted full-time equivalent student coimt (WFTE). All public school districts in the state calculated student count according to the Florida State Board of Education Rules (Florida State Board of Education, 1998). Standard measures of horizontal equity were 127

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128 applied and per-pupil revenues were examined across the years of study to determine the degree of fiscal inequity in the Florida Education Finance Plan. The analysis of horizontal equity utilized a number of measures of univariate dispersion. These measures were defined in the previous chapter and included the mean, median, range, restricted range, federal range ratio, variance, standard deviation, coefficient of variafion, McLoone index and Gini Coefficient. The following secfions describe the results of the analysis for each horizontal equity measure. Equity Before and After the Implementation of Performance-Based Funding The findings for the research question, "How does the additional revenue generated by performance-based fiinding through the Florida A+ Plan of School Recognition rewards affect horizontal equity in a foundation education fimding allocation program, the FEFP?" were obtained through the use of horizontal equity measures. The results for each measure are described below and are summarized in Table 4-10. Mean The mean (average) amount of state and local fimding per weighted fiiU-time equivalent (WFTE) student increased from $3601.83 in 1997-1998 to $3901.10 in 19992000, and to $4604.68 in 2000-2001. Therefore, the mean increased by $1003.68 from 1997 to 2001, which represented a 27.8% increase over the period. The mean fimding per WFTE for 1999-2000 and 2000-2001 with performance-based fiinding (PBF) award dollars from the A+ Plan was calculated at $391 1.72 and $4634.96, respectively. While the mean was not considered an excellent indicator of equity, it did provide a measure to discuss trends in equity during the years studied.

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Median The median value of the distribution was a useful measure of central tendency, since it lessened the effect of outlier values. In this study of 1997-2001, the medians were somewhat smaller than the means for each year. This suggested that the distribution of revenue per WFTE was somewhat skewed toward the lower end of the distribution. However, the median followed the same general trend as the mean values. The median funding per WFTE increased by $998.90 from 1997 to 2001 without the PBF A+ award dollars. The median increased with the A+ Plan from $3571.59 in 1997 (with no award funding) to $4591.76 in 2001, for an increase of $1020.17 with A+ Plan awards over the years studied. See Table 4-1 for mean and median values. Table 4-1 Mean and Median for Per-student Total Revenue Statistical 1997-98 1999-00 1999-00 2000-01 2000-01 Measure Before PBF Without With PBF Without With PBF PBF PBF Median 3571.59 3863.10 3877.59 4560.49 4591.76 Mean 3601.83 3901.10 3911.72 4604.68 4634.96 Range The range is a measure used to examine the spread of the per-student revenue distribution and is the difference between the highest and lowest observations in the distribution (Odden & Picus, 2000; Thompson et al., 1994; Wood «&Thompson, 1993). The 67 school districts were arranged in ascending order according to per-student revenue. The range was calculated by subtracting the lowest per-student revenue from the highest per-student revenue. The smaller the range value, the smaller the variation in

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130 the distribution of total revenue per WFTE, and the better the equity of the distribution of revenues per student (Thompson et al., 1994). The range was calculated on revenue data for school year 1997-1998, before the implementation of performance-based funding, and for the years 1999-2000 and 20002001, when the A+ Plan was implemented, with and without the A+ reward dollars. Table 4-2 Range for Per-student Total Revenue Year Highest Lowest Range 1997-98 (Before) 1999-00 (Without) 199900 (With) 200001 (Without) 2000-01 (With) $4126.90 $4418.23 S4432.94 $5183.53 $5214.45 $3495.28 $3804.96 $3804.97 $4371.44 $4404.60 $631.62 $613.27 $627.98 $812.09 $809.85 Of the years studied, the range was smallest for 1999-2000 school year, without the performance-based funding through the A+ Plan. The range was largest for school year 2000-2001, using the total revenue that included PBF for each district. The range calculation indicated that there was a decrease in the range and a possible increase in equity from school year 1997-1998 to 1999-2000 (with and without PBF), when considering the spread in the distribution that was based on revenue per student. For the year 1999-2000, there was an increase in the range from $613.27 to $627.98, when PBF was included. For the year 2000-2001 ; however, there was a decrease in the range from $812.09 to $809.85, indicating that the equity for the spread in the distribution increased slightly when the performance awards were added to the ftmding formula for that year. The range of the FEFP was greater in 2000-2001 than it was in 1997-98, with and

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131 without performance-based funding, suggesting that the FEFP may have become less equitable over that time. However, since these values increased in 2000-2001 with and without the award dollars, it cannot be determined that the decrease in equity was due solely to PBF. The range by itself did not generate a completely accurate measure of the horizontal equity of a distribution. Since the range was based only on two observations for each of the years under study and ignores all other observations, it does not indicate any pattern of variation and is not sensitive to changes within the distribution (Thompson et al., 1994). Therefore, other measures of horizontal equity were also utilized in this study. Restricted Range As stated in the previous chapter, the restricted range is a statistical measure utilized to analyze the spread of the distribution of observations by ignoring the extremes of the highest and lowest observations of revenues per student. The restricted range consists of the arithmetic difference between the 95* and 5* percentiles of the distribution, ignoring the scores in the upper and lower 5* percentiles. The per-student revenues for each of the 67 school districts in the state of Florida were placed in ascending order. The smaller the restricted range value, the smaller the dispersion within the distribution, and the better is the horizontal equity. The restricted range was calculated using the per-student revenue for school years 1997-1998, prior to the implementation of performance-based funding. The restricted range was also calculated for the years 1999-2000 and 2000-2001, with and without the A+ Plan funding in the FEFP. See Table 4-3 for results.

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132 Table 4-3 Restricted Range for Per-Student Revenue Year Restricted Range 1997-98 (Before*) 1999-00 (Without*) 199900 (With*) 200001 (Without*) 2000-01 (With*) $270.98 $323.50 $321.74 $468.15 $526.08 "with regard to PBF A+ reward dollars 1200 1000 800 600 400 200 0 1997-98 1999-OONR 1999-OOR 2000-01NR 2000-01R -—RANGE -•—RESTRICTED RANGE Figure 4-1. Range and restricted range of revenues per student. The restricted range was smallest for 1997-98, the school year before performance-based funding. The restricted range was largest for school year 2000-2001, utilizing the revenue that included the A+ Plan rewards. The trend of increase in the restricted range calculations indicated that there was a decrease in horizontal equity from 1997-1998 to 2000-2001, the years of the study, when considering the spread in the perstudent revenue distribution at the 95* and 5* percentiles. In 1999-2000, there was a slight decrease in the restricted range calculation of per-student revenue when performance-based ftinding was included, indicating that the equity slightly increased. However, for 2000-2001, there was an increase in restricted range, from $468.15 to

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133 $526.08, when considering the per-student revenue without performance-based funding and with this A+ Plan funding. This $ 57.93 restricted range increase indicated that equity for the spread in the distribution decreased when performance-based funding was added within 2000-2001. Figure 4-1 represents the values of the range and restricted range over the years of the study, with and without the performance-based funding. These values increased in the years of the study for funding with and without award dollars, so it cannot be determined that the decrease in equity was due solely to PBF. Since this statistical measurement was based on only two observations, it ignored the variation in values in the middle of the distribution of per-student revenues for the school districts. Federal Range Ratio The federal range ratio is determined by dividing the restricted range by the revenue per student at the 5* percentile. The value calculated is expressed as a ratio, and the smaller the ratio, the less inequity in the distribution of observations (Thompson et al., 1994). A federal range ratio that is close to zero indicates an equitable distribution. The federal range ratio was calculated by using the data for the 1997-1998 school year, prior to the implementation of performance-based funding. The federal range ratio was then calculated on revenue per student for the school years 1999-2000 and 2000-2001, after the performance-based funding in the A+ Plan was implemented. For those school years, the federal range ratio was determined for the revenue per student data with and without performance-based ftinding. See Table 4-4 for results. The federal range ratio was lowest for school year 1997-1998 prior to the implementation of the performance-based funding with A+ rewards. The federal range

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134 Table 4-4 Federal Range Ratio for Per-student Total Revenue Year Federal Range Ratio 1997-98 (Before) 1999-00 (Without) 199900 (With) 200001 (Without) 2000-01 (With) 0.0772 0.0850 0.0845 0.1058 0.1182 ratio was higher for the school years 1999-2000 and 2000-2001, using the revenue per student that did include performance funding and the revenue that did not include this additional funding. In the early year of implementation, 1999-2000, the federal range ratio with the performance-based funding was slightly lower than for the revenue per student without the funding. The federal range ratio was 0.0850 for the per-student revenue without performance-based funding and 0.0845 for the per-student revenue with the performance-based funding. However, both of these calculations were higher than the 1997-98 federal range ratio of 0.0772. During the 2000-2001 school year, the federal range ratio was 0.1 182 for the funding with the award funding, compared to 0.1058 for the revenue per student without the performance-based funding. This meant that the school district at the 95* percentile received 10.58% more than the school district at the 5* percentile in 2000-2001 without the performance-based funding, but for that same year, when the revenue per student is studied with the performance-based funding, the district at the 95* percentile received 1 1 .82% more than the school district at the 5* percentile. This indicated that the degree of equity in the spread of the revenue per student, when ignoring the extreme

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135 observations, had decreased in 2000-2001 . The results indicated that the federal range ratio increased from 1997 to 2001. Since these values increased in these years with and without award dollars, it cannot be determined that the decrease in equity was due solely to PBF. Variance The variance is a measure of the degree to which observations are distributed around the mean. It is defined as the average of the squared deviations from the mean, or average observation. The smaller the calculated value of the variance, the less variation there is in the distribution of the revenue per student per school district. In school finance, a smaller variance indicates a higher degree of equity, meaning less variation between the wealthiest and poorest school districts. Variance has an advantage over other statistical measures, such as restricted range and federal range ratio, since it takes all observations into account. The variance increased over the years of the study, with the performance-based funding creating a greater variance of the distribution. Between 1997-1998 and 20002001 the variance increased from 12,538.25 in 1997-98 to 22,609.91 in 2000-01. Table 4-5 presents the variance during the years of the study, with and without the performance-based funding of A+ rewards. However, since these values increased with and without the award dollars, it cannot be determined that the decrease in equity was due solely to PBF. Standard Deviation The standard deviation is the square root of the calculated variance; therefore the standard deviation is also a measure of the dispersion of the data. The smaller the

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Table 4-5 Variance of Per-student Total Revenue Year Variance 1997-98 (Without) 1999-00 (Without) 1999-00 (With) 12,538.25 12,972.22 13,003.83 2000-01 (Without) 2000-01 (With) 21,884.98 22,609.91 standard deviation, the less variation there is in the distribution of observations, such as revenues per student for each district. Also, smaller standard deviations indicate better horizontal equity of the distribution of district per-student revenues. Standard deviation also has the advantage that all observations are included in the calculation and were reported in the same imits as the original data (Thompson et al., 1994). For the years under study, the standard deviation ranged from $111 in 1997-1998, before the implementation of performance-based funding, to $150 in 2000-2001 when performance-based funding was added into the FEFP. Each year of the study indicated a higher standard deviation, but there was an additional increase in the value with the inclusion of the performance-based funding for 1999-2000 and 2000-2001. Table 4-6 presents the standard deviations during the years of the study, with and without PBF. There was a trend toward larger standard deviations and less horizontal equity in the FEFP within the years of study, with the addition of the performance-based funding in the A+ Plan.

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137 Table 4-6 Standard Deviation of Per-student Total Revenue Year Standard Deviation 1997-98 (Without) 1999-00 (Without) 1999-00 (With) $111.97 $113.90 $114.03 2000-01 (Without) 2000-01 (With) $147.94 $150.37 Coefficient of Variation The coefficient of variation is defined as the standard deviation of the observations divided by the mean, which is the square root of the variance divided by the mean (Odden & Picus, 2000; Thompson et al, 1994; Wood & Thompson, 1993). It measures the variation in the distribution about the mean. Its value usually varies between one and zero. A coefficient of variation of zero indicates that the object, revenue per student, is distributed uniformly among all children. Therefore, the closer the coefficient of variation is to zero, the better the equity of the distribution. The coefficient of variation provides an evaluation of the distribution of per-student revenues around the mean by indicating variations in revenues for specific proportions of students. The coefficient of variation was calculated on per-student revenue for school year 1997-1998, which was prior to the implementation of performance-based funding. The coefficient of variation was also calculated on per-student revenue for school years 1999-2000 and 2000-2001, with and without performance-based funding. The calculated coefficients of variation are shown in Table 4-7.

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138 Table 4-7 Coefficient of Variation for Per-student Total Revenue Year Coefficient of Variation 1997-98 (Before) 1999-00 (Without) 199900 (With) 200001 (Without) 2000-01 (With) 0.0311 0.0292 0.0292 0.0321 0.0324 The coefficient of variation measure ranged from 0.031 1 in 1997 to 0.0324 in 2001. The net change of 0.0013 indicated an increase in the coefficient of variation and represented a slight decrease in horizontal equity. In the school year, 1999-2000 there was very little difference between the coefficient of variation calculated with performance-based fiinding and without performance-based fimding. The greatest value of the coefficient of variation, indicating the least amount of equity, occurred during 2000-2001, when the performance-based funding was added to the FEFP. At this point the coefficient of variation was calculated as 0.0324. The coefficient of variation values during the years of study stayed fairly close to zero, and the increase of 0.13% from 1997 to 2001 represented a shght decrease in the degree of equity in 2000-2001. This decrease in equity could be explained by increased PBF reward dollars in that year. McLoone Index The McLoone Index, a statistical measurement unique to school finance, was created to provide a measure of the bottom half of a distribution. This measurement examines the data and indicates the degree of equity only for the observations below the 50* percentile, or median (Brown, 1999; Odden and Picus, 2000; Thompson et al., 1994;

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139 Wood & Thompson, 1993). For this study, the McLoone Index measured the degree of inequity that was experienced by the school districts that had levels of funding below the median for the FEFP distribution. This was calculated for the years under study with and without the funding due to the performance-based funding in the A+ Plan. The McLoone Index is the ratio of the sum of the values of all observations below the median to the sum of all observations that would be required if all observations below the median had the value of the median. McLoone Index values that are close to 1.0 indicate a high degree of equity for the lower half of the distribution. The McLoone Index was calculated on the revenue data for school year 1997-1998, prior to the implementation of performance-based funding through the A+ Plan, and for school years 1999-2000 and 2000-2001 with and without performance-based funding. The McLoone Index values are shown in Table 4-8. Table 4-8 McLoone Index for Per-Student Revenue Year 1997-98 (Before) 0.9869 1999-00 (Without) 0.9877 199900 (With) 0.9859 200001 (Without) 0.9891 2000-01 (With) 0.9864 The high values for the McLoone Index were close to equitable for each of the school years under study. In addition, the McLoone Index values for the years of 19992000 (0.9877) and for 2000-2001 (0.9891) without the performance-based funding were higher than the McLoone Index for the first year 1997-1998, which was 0.9869. This

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140 increase from 0.9869 to 0.9891 represented only a 0.22% (0.0022) increase in the degree of equity for those schools below the median. However, when the McLoone Index values were compared for the years when performance-based funding was implemented, there was a trend toward less equity when the reward dollars were added in. For 1999-2000, the McLoone Index was 0.9876 without the award dollars, but it was only 0.9859 when the performance-based funding was added. The small decrease of 0.17% (0.0017) indicated that equity in the distribution decreased somewhat. For 2000-2001, the McLoone Index was 0.9891 without performance-based funding, but it was 0.9864 with the performance-based funding. This decrease in value for the McLoone Index of 0.27% (0.0027) again indicated a decrease in equity. Therefore, the results of the McLoone Index indicated that equity for those schools whose per-student revenue was below the median decreased within each year of the study when performance-based funding was applied. It is clear from Figure 4-2 that there is some slight disequalization, when performance-based funding is included in the FEFP. The McLoone Index indicates less equity for each of the years 1999-2000 and 2000-2001, when the A+ Plan reward dollars from the performance funding are included in the per student revenues within each year of the study. Gini Coefficient The Gini Coefficient is a statistic taken from economists' measures of income inequality and is used as a measure of equity and as a wealth neutrality test for public school finance studies (Odden & Picus, 2000; Thompson et al., 1994). Wealth neufrality is the relationship between the per-pupil expenditures of a school district and the school district's wealth of local support through taxes (Brown, 1999; Thompson et al..

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141 McLoone Index Years of Study: Shown with No Reward (NR) and Reward (R) Funding FijEoire 4-2. McLoone Index. 1994). The Gini Coefficient is a measure of income equity that indicates how far the distribution of expenditures is from providing each percentage of students with the same percentage of expenditures (Kearney & Chen, 1989; Odden & Picus, 2000; Thompson et al., 1994). The calculated Gini Coefficient ranges from zero, indicating perfect equity, to a value of one, indicating perfect inequity. The smaller the value, the more equitable the distributions of revenue are in providing a specified percentage of students with the same percentage of revenue (Thompson et al., 1994). In this study, the value of the Gini Coefficient ranged from 0.0143 to 0.0166. The low values for the Gini Coefficient indicated that the values were close to zero, and they indicated that there was a high degree of equity in the FEFP during the years of the study. Figure 4-3 indicates there was a slight increase in the Gini coefficient from the 1997-1998 school year to the 1999-2000 school year, but there was a greater decrease in the school year 2000-200 1 . The inclusion of the performance-based funding rewards in the calculation produced a slightly lower Gini coefficient for the years of the study. Table 4-9 shows the highest Gini coefficient was in 1 999-2000 when using revenue that 0.99 0.989 0.988 0.987 0.986 0.985 0.984 1997-98 1999OONR 1999-OOR 200001NR 2000-01 R

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142 Table 4-9 Gini Coefficient of Per-student Total Revenue Year Gini Coefficient 1997-98 (Before) 0.0158 1999-00 (Without) 0.0166 1999-00 (With) 0.0165 2000-01 (Without) 0.0146 2000-01 (With) 0.0143 Gini Coefficient 1997-98 1999-00 1999-00 R 2000-01 2000-01 R (NR) (NR) Figure 4-3. Gini Coefficient. Did not include performance-based funding rewards. The lowest Gini coefficient was for school year 2000-2001 using revenue that included performance-based funding. The decrease in the Gini coefficient indicated there was a slight increase in equity for school years 1999-2000 and 2000-2001 with performance-based funding rewards. During the years of the study the Gini coefficient decreased only slightly fi-om 0.0166 to 0.0143, when performance-based funding reward dollars were added to the formula. Therefore, the Gini coefficient indicated a slight increase in equity of the FEFP within each year of the study. 0.0165 0.016 0.0155 0.015 0.0145 0.014 0.0135 0.013 •

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143 Interpretation of Results The results of all data analyzed utilizing the statistical measures of horizontal equity established for educational finance indicated that the degree of equity was better, in most cases, prior to the implementation of performance-based funding, or in the years of the study without the reward dollars of performance-based funding applied. This indicated that the horizontal equity was better overall in 1997-1998, and better in 19992000 and 2000-2001 without the performance-based funding (PBF) (see Table 4-10). Adding the A+ reward dollars to the FEFP seemed to produce, in many cases, a slight shift toward disequalization in horizontal equity within the years of implementation. The range and restricted range calculation determined the spread in the per student revenue distribution over the years of the study. The smaller the values of each of these measures, the better the horizontal equity of the funding formula. For school year 1997-1998, the range and restricted range was slightly greater than for the 1999-2000 values. However, the 1997-1998 range and restricted range values were much lower than those for the values in 2000-2001, after 3 years of implementation of performance-based funding. Therefore, the horizontal equity of the funding formula decreased with regard to range and restricted range during the years of the study. However, these values increase in these years for funding with and without the award dollars, so it cannot be determined that the decrease in equity was due solely to performance-based funding. The smaller the federal range ratio, the better the equity of the funding formula. The federal range ratio of 1997-1998 was lower than the federal range ratios of 19992000 and 2000-2001 with or without the performance-based funding. While the federal

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144 Table 4-10 Statistical Measures for School Years 1997-98. 1999-00. and 2000-01 Statistical Measure 1997-98 Before PBF 1999-00 Without PBF 1999-00 With PBF 2000-01 Without PBF 2000-01 With PBF Median 3571.59 3863.10 3877.59 4560.49 4591.76 Mean 3601.83 3901.10 3911.72 4604.68 4634.96 Range 631.62 613.27 627.98 812.09 809.85 Restricted Range 270.98 323.5 321.74 468.15 526.08 Federal Range Ratio 0.07721 0.08502 0.08452 0.10576 0.11818 Standard Deviation 111.97 113.90 114.03 147.94 150.37 Variance 12538.25 12972.22 13003.83 21884.98 22609.91 Coefficient of Variation 0.03108 0.02920 0.02915 0.03212 0.03244 McLoone Index 0.98691 0.98766 0.98588 0.98910 0.98636 Gini Coefficient 0.0158 0.0166 0.0165 0.0146 0.0143 range ratio for the school year 1999-2000 was slightly smaller with the performancebased funding than without, the federal range ratio was higher by a greater amoimt in the school year 2000-2001 with the performance-based funding. This indicated less equity with performance-based funding for 2000-2001. The decrease in equity in 2000-2001 could be explained by the increase in PBF dollars in that year. However, since the federal range ratio increased in these years with and without award dollars, it cannot be determined that the decrease in equity was due solely to performance-based funding. Smaller variances and standard deviations of distributions indicate better horizontal equity of the funding formulas. The standard deviation and variance of the school year 1997-1998, before performance-based funding, was smaller than for either of

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the years under study with performance-based funding. Also, for the school years 19992000 and 2000-2001, the standard deviations and variances for the years without performance-based funding were smaller than for those years with performance-based funding. Therefore, the standard deviation values indicated that the funding formulas were more equitable without the performance-based funding within the year of the study. The coefficient of variation indicates better equity of the funding formula if the calculated value is closer to zero. In the school year 1999-2000, there was very little difference between the coefficient of variation calculated with performance-based funding and without performance-based funding. The greatest value of the coefficient of variation, indicating the least amount of equity, occurred during 2000-2001, when the performance-based fiinding was added to the FEFP. While the value was less in 19992000 than in the before performance-based funding year of 1997-1998, there was less equity in 2000-2001, with performance-based funding. The Gini coefficient indicates better equity of the distribution if the calculated values are closer to zero. During the years of study, this measurement increased in the first year of implementation of the PBF, but then it decreased slightly during the next year. Therefore, the inclusion of the performance-based funding rewards produced a slightly lower Gini coefficient within each year of the study, an indicator of increased equity. This may indicate a trend toward increased equity within each year of the study. The McLoone Index shows equity in the lower half of the distribution, and the closer the calculated value is to one, the better the equity for school districts below the median. The high values for the McLoone Index were close to equitable for each of the school years under study. The results of the McLoone Index indicated that equity for

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146 those districts whose per-student revenue was below the median decreased in the years of study, 1999-2000 and 2000-2001, when performance-based funding was implemented. The McLoone Index indicated less equity for each of the years 1999-2000 and 20002001, when the reward dollars from the performance-based funding were included in the per student revenues. For most of the statistical measures shown, the degree of equity for the funding formula for the 67 public school districts in Florida decreased slightly when performancebased funding was implemented (see Table 4-11). When comparing results for the statistical measures, the range, restricted range, and federal range ratio, variance, standard deviation, and McLoone Index were lower for the revenue distribution without performance-based funding, indicating equity was better without performance-based funding than with it. The coefficient of variation indicated very little change in the funding formula with and without performance-based funding. The Gini coefficient was closer to zero for school year 1997-1998, before performance-based funding than the Gini coefficient was for the 1999-2000 school year, with or without the PBF that had been included in the funding plan. The Gini coefficient indicated a slightly more equitable measurement for the 2000-2001 school year, with and without the PBF A+ reward dollars. The results for the McLoone Index for the years of the study became closer to one from 1997-1998 to 2000-2001, when calculated without the performancebased funding. However, in both years of implementation, the McLoone index was decreased by the performance-based funding.

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147 Table 4-11 Summary of Results Construct Measured Statistic Performance-based Funding Effect 1999-00 Performance-based Funding Effect 2000-01 Resource Accessibility: Range Distribution Range Decreased Equity Increased Equity Resource Accessibility: Range Distribution Restricted Range Increased Equity Decreased Equity Resource Accessibility: Range Distribution Federal Range Ratio Increased Equity Decreased Equity Resource Accessibility: Variability Variance Decreased Equity Decreased Equity Resource Accessibility: Variability Standard Deviation Decreased Equity Decreased Equity Resource Accessibility: Variability Coefficient oi Variation Slightly Increased Equity Decreased Equity Wealth Neutrality: Econometric McLoone Index Decreased Equity Decreased Equity Wealth Neutrality: Econometric Gini Coefficient Slightly Increased Equity-Negligible Slightly Increased Equity-Negligible Summary In summary, the following research question was asked: How does the additional revenue generated by performance-based funding through the Florida A+ Plan of School Recognition rewards affect horizontal equity in a foundation education funding allocation program, the FEFP? According to the findings of this study, although the percentage of

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148 funding due to the rewards is small in comparison to the districts' revenue each year, the addition of the performance-based funding had a disequalizing effect within each year of the study, although the shifts in measurements were small. For some measures the values increased over the years of the study with and without the award dollars, so it cannot be determined that the decrease in equity was due solely to performance-based funding. A discussion of the results of the study, including overall conclusions and implications are presented in Chapter 5.

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CHAPTER 5 CONCLUSIONS Introduction Public school finance has been, and will continue to be, a major policy issue and challenge at the state, local, and national level. As of 2001, the "big business" of financing public schools in the United States involves over $379 billion, 59 million children, 3.5 million teachers, and nearly 1.5 million administrators and staff (Odden & Picus, 2000, in press). Equity and adequacy continued to be issues in 2003. Also, the productivity of the use of the input education dollars and adequacy of those dollars was also at the forefront of the school finance policy discussions and debates (Odden & Picus, 2000). The education of the children of this country would have been negatively impacted if the importance of adequate and equitable resources had been neglected (Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996; Thompson et al., 1994). The question to many state legislators and policymakers was how to allocate and distribute the state funds with a method that was both adequate and equitable to the different school districts and the schools within the districts. As the twenty first century began, these policymakers wanted to know how much money was needed to teach average students to state standards (Odden & Picus, in press). The state financing structures for public schools needed to renovate the state public school finance systems to accomplish the challenging productivity standards and expectations to demonstrate accountability (Odden & Picus, 2000). There were ongoing 149

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150 concerns about public education, including the ever-increasing costs for educational services and growing dissatisfaction with student performance in the public school systems. While taxpayers believed there were educational benefits of education to society, funding the state public schools represented a heavy tax burden for taxpayers. The concerns about fiscal equity and the allocation of state appropriated resources were still being discussed and researched (Chambers, 1996; Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996; Thompson et al., 1994). Following the cornerstone of the Goals 2000 and Elementary and Secondary Act (ESEA) programs, more than 45 states asserted that they were engaged in setting standards for their public school students (Fuhrman & O'Day, 1996). These assessments provided an opportunity for valid accountability based on improvements in schools and districts that were working toward specific outcome expectations (Fuhrman & O'Day, 1996). Educational policymakers in many states explored the possibility of allocating a portion of state education funds to schools as monetary rewards for improvements in student test scores and other performance indicators (Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996). This approach of performance-based funding (PBF) allowed for the reward of a portion of education dollars to school or districts that demonstrated standards of achievement. The rewards were outside of the state funds that were part of the school finance equalization programs and were relatively small amounts (King & Mathers, 1996, 1997). The "new educational accountability" was the new model that provided "the creation of relatively complex systems of standards by which data on student performance are compared by school and by locality; and the creation of

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151 systems of rewards and penalties and intervention strategies to introduce incentives for improvement" (Elmore et al., 1996, p. 65). In summary, changes were brought about by educational reform, with a trend toward greater accountability where many states adopted a performance based budgeting or funding program with rewards and sanctions that encouraged schools and educators to make the necessary steps to see that student performance improved (Fuhrman & O'Day, 1996; Ladd, 1996a; Picus & Wattenbarger, 1996). Florida was one of the states that took the lead in developing standards and a plan for higher standards and performance-based funding (PBF). Governor Jeb Bush, Lieutenant Governor Frank Brogan, and members of the Florida legislature developed and implemented the A+ Plan in the late 1990s. This state accoimtability plan began with the high expectations of improvements in test scores. The first initiative of this A+ Plan was the Florida Comprehensive Assessment Test (FCAT), which was developed to measure academic achievement utilizing the Sunshine State Standards (Brogan, 1999). The second and third initiatives in the A+ Plan provided choice and opportunities for remediation for "critically low-performing" schools. The second initiative provided choices to students, parents, teachers, and communities by allowing the development of public charter schools. The third part of the foundation for the A+ Plan was the program initiated to provide remediation for "critically low-performing" schools, as identified by the Plan. Therefore, the Bush/Brogan A+ Plan was a "comprehensive accountability system" that raised achievement expectations (Brogan, 1999).

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152 Under the A+ Plan, schools began receiving report cards in 1999 with grades from A to F, with grades based primarily on student performance on the FCAT. However, the schools were also graded on the gains showed by lowest achieving students, and schools could not receive high marks if the low-performing students did not show notable and specified improvement. The A + Plan had significant incentives and rewards for successful results, as well as disincentives and rigorous remediation for schools that were failing to show improvement (Brogan, 1999). Rewards in the A+ Plan of School Recognition included a bonus of $100 per student for those schools that met the numerous requirements and received an "A" or improved by one grade level on the A to F scale. The financial rewards of $100 per student for "A" schools in the Florida A+ Plan may have had the effect of disequalizing the funding of the school districts. The Office of Program Policy Analysis and Government Accountability (OPPAGA) of the Florida Legislature asserted that "the Legislature can use the budgeting process to financially reward or sanction schools without jeopardizing equity if it limits the amount of funding it distributes on the basis of performance" (OPPAGA, 1998b, p. 1). The purpose of this study was to advance the level of knowledge in the field of education finance by conducting research and to study the measure of equity before and after the implementation of performance-based funding and to determine the effects of additional revenues on the equity of Florida's school finance system. The research used quantitative measures of horizontal equity to determine the degree to which additional revenues awarded to high-performing schools, through the A+ School Recognition

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153 rewards, corresponded to the principles of equity. The 67 public school districts in the state of Florida were chosen for the study. The study addressed only the effects of the dispersal of A+ Plan School Recognition funds for performance on the equity of the Florida state school finance system, the Florida Education Finance Program (FEFP). The study utilized school finance equity principles to answer the research question. Using the statistical measurements for public school finance equity studies, the researcher analyzed the degree of horizontal equity on total revenue per weighted full-time equivalent student (WFTE) for the 67 public school districts, prior to and following the implementation of performance-based funding. The total revenue was the sum of the General Revenue appropriation from state and local sources. For the years when performance-based funding was implemented, the state's General Revenue appropriation to the FEFP was considered with and without the performance allocation of School Recognition reward dollars. Per-student revenue was calculated by taking the total state and local revenue and dividing it by the weighted full-time equivalent student coimt (WFTE). The Florida Department of Education provided the financial information through the FEFP calculation reports for each of the years of the study (Florida Department of Education, 1998, 2000b, 2001). The objective of the study was to analyze the degree of equity for each year's funding formula to determine if the performance-based funding A+ rewards made a difference in horizontal equity. Therefore, the following question was asked: How does the additional revenue generated by performance-based funding through the Florida A+

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154 Plan of School Recognition rewards affect horizontal equity in a foundation education funding allocation program, the FEFP? The findings for the research question were obtained through the use of horizontal equity measures utilized for public school equity studies. The equity measures utilized included the mean, range, restricted range, federal range ratio, variance, standard deviation, coefficient of variation, McLoone Index, and Gini coefficient. The data that were obtained from the Department of Education FEFP calculation reports for the years of the study were analyzed for the school year 1997-1998 (prior to the implementation of the performance-based funding) and school years 1999-2000 and 2000-2001 (after the implementation of the PBF A+ reward dollars). Findings In the previous section, a summary of the study was presented. This section includes findings based on the values calculated from the measures of equity including the mean, range, restricted range, federal range ratio, variance, standard deviation, coefficient of variation, the McLoone Index, and the Gini Coefficient. The results of all data analyzed indicated that the degree of equity was better, in most cases, prior to the implementation of performance-based funding (PBF) or in the years of the study without the reward dollars of PBF through the A+ Plan. This indicated that the horizontal equity was better in 1997-1998, and better in 1999-2000 and 20002001 without the (PBF) (see Table 4-11). Adding the A+ reward dollars to the FEFP seemed to produce, in many cases, a trend toward disequalization in horizontal equity within each year of the study.

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155 Results from the measures of the range, restricted range, and federal range ratio indicated that the distribution range increased as the PBF was included during the years of the study. The 1997-1998 range, restricted range, and federal range ratio values were much lower than those values in 2000-2001, after 3 years of implementation of PBF. Therefore, the horizontal equity of the funding formula decreased within the years of the study, indicating a disequalizing effect on resource accessibility with the addition of the award dollars. However, since these values increased in these years for fiinding with and without the award dollars, it cannot be determined that the decrease in equity was due solely to PBF. Further studies will be needed to determine the true source of disequalization for this measurement. Results from the equity measures of variability including the mean, variance, standard deviation, and coefficient of variation suggested that the variability increased as the PBF of A+ reward funds were added. The mean increased over the years of the study and increased to a greater degree with PBF awards. The variance and standard deviation values for the school year 1997-1998, before PBF, were smaller than for either of the years under study with PBF. Also, for the school years 1999-2000 and 2000-2001, the variance and standard deviation for the years without PBF were smaller than for those years with PBF. Therefore, as the additional funds were introduced into the formula, there was an increase in the variance and standard deviation, and these values indicated that the funding formulas were more equitable without the PBF within each of the years of the study. Over the years of the study, there was very little difference between the coefficient of variation calculated with PBF and without PBF. The greatest value of the

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156 coefficient of variation, indicating the least amount of equity, occurred during 2000-2001, when the PBF was added to the FEFP. This indicated less equity in 2000-2001 with PBF. The increase in variability was most evident when the A+ School Recognition reward dollars were introduced into the FEFP. Therefore, this increase in the variability in the distribution of revenues per WFTE suggested a trend toward disequalization when measured by the mean, variance, standard deviation, and coefficient of variation during each of the years of the study. The results of the two econometric measures of wealth neutrality, the McLoone Index and the Gini coefficient, were mixed with regard to equity. The high values for the McLoone index were close to equitable for each of the school years under study, but the results of the McLoone Index indicated that equity for those districts whose per-student revenue was below the median decreased in the years of study when performance-based funding was implemented. The results for the McLoone Index indicated increased equity from 1997-1998 to 2000-2001 without the PBF rewards in the formula. However, the McLoone Index indicated less equity for each of the years 1999-2000 and 2000-2001 when the reward dollars from the PBF were included in the per student revenues. Therefore, the addition of the PBF indicated a frend toward disequalization within each year of the study. During the years of study, the Gini coefficient increased in the first year of the implementation of the PBF, but then it decreased slightly during the next year of 20002001. This indicated a slightly more equitable measurement for the 2000-2001 school year, with or without PBF. The inclusion of the PBF rewards produced a slightly lower Gini coefficient during each year of the study, as this measurement varied slightly from

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157 the value before the PBF. This may indicate a trend toward slightly increased equity, but it would have to be followed for later years of PBF. In summary, for most of the statistical measures utilized, the degree of equity for the funding formula for the 67 public school districts in Florida decreased slightly when performance-based funding was implemented during each year of the study (see Table 411). When comparing results for the nine statistical measures, the mean, range, restricted range, federal range ratio, variance, standard deviation, and McLoone Index were lower for the revenue distribution without PBF, indicating equity was better without PBF than with it during each year of the study. The coefficient of variation indicated very little change in the funding formula with and without performance-based funding. The Gini Coefficient indicated a slight trend toward equity within the years of the study with the PBF. For the school years of study— 1997-1998, 1999-2000, and 2000-2001— there were only small changes in the degree of equity or tendency toward disequalization with and without the performance-based funding of A+ reward dollars. One should consider that the performance-based funding was only a small percentage of the total revenue for each district for each school year under study. With these small percentages, one might predict that the effect of the performance-based funding on the equity of the funding formula would be small. Research results for a similar effect with the Florida Division of Community Colleges funding, with and without performance-based funding, determined that as the percentage of funding increased to close to 25% of total revenue, the degree of equity decreased (Brown, 1999). Further studies could investigate the effect of larger percentages of reward dollars on the equity of the funding program.

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The results of the study resulted in the conclusion that the data indicated that the degree of equity decreased, in that there were tendencies toward disequalization when PBF was added to the funding system within each year of the study. It may be that additional rewards or expanding the program may result in ever decreasing equity of the funding system. For some measures, the values increased with and without the PBF award dollars, so it cannot be determined that the decrease in equity was due solely to PBF. Therefore, these findings result in implications for public policymakers in public school fimding. Conclusions In the preceding section, the findings based on data analysis were presented. The next section includes conclusions about the effects of the PBF included in the FEFP and A+ Plan. 1 . Additional funding from the A+ Plan's rewards to schools with an "A" grade increased the revenues per weighted FTE in Florida's 67 school districts, when the FEFP for the school years 1997-1998, 1999-2000, and 2000-2001 were examined as indicated by the mean. 2. Additional revenues from the A+ Plan's rewards had disequalizing effects on the FEFP within the years of the study, as indicated by the resource accessibility measures, including the range, restricted range, federal range ratio, variance, and the standard deviation. 3. Additional revenues fi-om the A+ Plan's rewards had a slight disequalizing effect on the equity of the FEFP, as indicated by the value for the coefficient of variation during the 2000-2001 school year, as more performance-based funds were applied.

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159 Although the 1999-2000 school year indicated a slight increase in equity, the next year with more reward funds applied indicated a slight disequalization. 4. Additional revenues from the performance-based funding of A+ rewards had a somewhat disequalizing effect on the equity of the FEFP, as indicated by the McLoone Index, but a slightly increased equity as determined by the Gini coefficient within each year of the study. Since the addition of A+ Plan rewards seemed to have little effect on the Gini coefficient, this measure possibly indicated a fairly high degree of wealth neutrality. In summary, disequalization emerged when the performance-based funding through A+ reward dollars were applied within each year of the study. The disequalization is small due the amount of money involved when compared to the large amounts of funding that are already allocated to the districts through the FEFP. However, if a trend were to develop, there would be less equity in the FEFP. The horizontal equity should be monitored through future research studies to determine if the decrease in equity becomes more significant as more and more A+ reward dollars are sent to schools in Florida's 67 districts. The implications for further study are the focal points of the next section. Implications for Public Policymakers Conclusions about the effect of the performance-based funding of A+ Plan rewards on the equity of the FEFP were presented in the preceding section. The present section includes implications of this study and topics for consideration and discussion by public policymakers.

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160 The overall results of this study indicated that the degree of equity for the funding formula for Florida's 67 public school districts, the FEFP, decreased somewhat from school year 1997-1998 to 2000-2001. The study also showed that for year 1999-2000 and 2000-2001, when analyzing data with and without performance-based funding, the addition of the performance-based funding of A+ Plan rewards resulted in a decrease in horizontal equity. If Florida legislators are interested in the equity objective for the distribution of public school funding, they should consider the effect that the decrease of equity might have if the rewards continue to increase, although the shifts in equity are small at this time. The spread between the highest and lowest revenue per-student values increased over the years of the study and may continue to increase. Variations among school districts' per-student revenues about the mean increased over the years of the study and more so when performance-based funding rewards were applied. The bottom half of the distribution of revenues per-student would move farther away from the median perstudent revenue value. While too much funding to a school can make an institution less efficient, a higher level of funding can still sustain a high quality of education. Of course, funding that is too low can negatively impact the educational process (Brown, 1999; Chambers, 1996), and this in turn would adversely affect the country (Brown, 1999; Honeyman & Bruhn, 1996). To correct for inequities, Florida legislators should monitor and adjust the award allocations through the A+ Plan's School Recognition Program to evaluate "fairness" in the reward distribution. Supplementary funds for districts that are between the lowest and highest revenue per-student values would resuh in smaller variations aroimd the mean value, increase the median revenue per-student,

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161 improve the relative position for those distiicts where revenues per-student are below the median, and improve the FEFP's horizontal equity (Brown, 1999). Advocates of the concept of performance-based funding were concerned with institutional or school improvement and accountability for funding dollars. States had to determine what amount of reward would be sufficient to promote motivation among the educators and districts. Serban asserted that "performance funding allocations should not be at such a low level that institutional interest wanes or at such a high level that budget instability results" (Serban, 1998, p. 67). Brown determined, for Florida's community colleges, that "no changes in the degree of equity occurred until performance-funding levels were at 25%" (Br own, 1999, p. 117). The reward dollars for the Florida A+ School Recognition Program are such a small amount compared to the total dollars received by each distiict that Florida legislators could allocate even more funding for the program without affecting horizontal equity significantiy. Future Studies Future research studies should be conducted to monitor the continued use of reward dollars in the Florida A+ Plan and School Recognition Awards. Researchers should continue to analyze the degree of horizontal equity in the FEFP and the effect of performance-based funding on the degree of equity. Performance-based funding, as in the Florida A+ Plan, was implemented to the funding program to improve achievement in state schools and to hold schools accountable for funding dollars. The results of this study offer opportunities for future research.

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1 . Future studies could be done to determine how the performance-based funding continues to impact student achievement in schools and districts. Developmental scale scores have become an integral part of the FCAT scoring and can be used to determine growth. 2. Future research can be done to determine the horizontal equity among individual schools within districts. There is much variance between schools in revenue per-student within districts, where some schools receive significant amounts of School Recognition Award dollars. While the award dollars do not seem significant in terms of calculated horizontal equity values, in that they only seem to create trends toward disequalization, the awards do make a considerable difference at receiving schools in terms of programs and supplies that can be offered or implemented. The lack of School Recognition rewards does seem significant to the schools that do not receive these dollars, in that these schools with many struggling students are not able to fund programs that might be effective for student improvement. 3. Further examination of funding equity among districts, school, and students would illuminate the resource allocation patterns at these levels (Adams, 1997). While this study focused on the educational incentive of performance-based funding and the standard of improved learning outcomes the inter-district level, future studies could investigate the equity issues of expenditures per-student at the individual student level. The impact of A+ Plan School Recognition rewards could be analyzed to disclose variations in revenues per-student based on factors, such as school district wealth, ethnicity, socioeconomic status, and school size.

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163 4. While this study analyzed the effects of the performance-based funding, through the Florida A+ Plan of School Recognition, on the equity of the FEFP, there is a need for further studies regarding the adequacy of the Florida fiinding plan. The Florida Constitution guaranteed that an "adequate provision shall be made for a uniform system of free public schools" (Fla. Const., 1968, Art. IX), and the adequate provision would be a valuable topic for further study to investigate the sufficiency of the public school funding for each student's educational needs. 5. Future research could include similar studies of the effect of performancebased funding on horizontal equity, based on funding programs in other states. 6. This study was based on the effect of performance-based funding on the horizontal equity of the revenues per-student. Such fiinding plans of incentives and sanctions are being utilized in several states, as discussed in Chapter 2. The impact of such initiatives has caused many teachers, schools, and districts to change their curriculum and teaching strategies. While some studies have involved research into how educators have changed since the implementation of performance-based funding, future studies could continue to track changes as reward programs are expanded and state curriculum standards are imposed (Alexander, 1998). This chapter summarized the findings of the research study and suggested topics for further study. The study determined that performance-based funding through the Florida A+ Plan's School Recognition rewards has had a disequalizing effect on the horizontal equity of the FEFP within each year of the study. Using statistical measures for school finance equity studies, most of the measures indicated a slight disequalization within each year. Since there were some measures that increased over the years of the

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164 study, with and without the award dollars, it cannot be determined that the decrease in equity as due solely to performance-based funding. As performance-based funding continues to grow and affect funding formulas, public school equity studies will be essential to examine the economic success or failure of the FEFP and the equality in the allocation process.

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REFERENCES Abbott V. Burke, 100 N.J. 269 (1985); Abbott v. Burke, 1 19 N.J. 287 (1990); Abbott v. Burke, 136 N.J. 444 (1994); Abbott v. Burke, 149 N.J. 149, 168 {l991) Jbbott v. Burke, 153 N.J. 480(1998). Adams, J. E., Jr. (1997). Organizational context and district resource allocation: Does the setting matter? Journal of Education Finance, 23, 234-258. Alexander, K., & Alexander, M. D. (1992). American public school law (3"* ed.). St. Paul: West. Alexander, N. A. (1997). The growth of education revenues from 1982-83 to 1991-92: What accounts for the differences among the states. Journal of Education Finance, 22, 435-463. Alexander, N. A. (1998). The impact of curriculum standards on student performance: The case of New York state. (Doctoral dissertation, State University of New York at Albany, 1998). Dissertation Abstracts International. 59-05 A, 1770. Anderson, D. M. (1996). Stretching the tax dollar: Increasing efficiency in urban and rural schools. In L. O. Picus & J. L. Wattenbarger (Eds.), Where does the money go? Resource allocation in elementary and secondary schools (pp. 156-177) . Thousand Oaks: Sage. Berne, R. (1988). Equity issues in school finance. Journal of Education Finance, 14, 159180. Berne, R., & Stiefel, L. (1979). Concepts of equity and their relationship to state school finance p\ms. Journal of Education Finance, 5, 109-132. Berne R., & Stiefel, L. (1984). The measurement of equity in school finance: Conceptual, methodological, and empirical dimensions. Baltimore: Johns Hopkins University. Berne, R., & Stiefel, L. (1999). Concepts of school finance equity: 1970 to the present. In H. F. Ladd, R. Chalk, & J. S. Hansen (Eds.), Equity and adequacy in education finance (pp. 7-33). Washington, DC: National Academy Press. Berne, R., Stiefel, L., & Moser, M. (1997). The coming of age of school-level finance data. Journal of Education Finance, 22, 246-254. 165

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166 Bezeau, L. M. (1979). Measures of inequality of per pupil expenditure: Application to Ontario. Journal of Education Finance, 5, 133-148. Brigham v. State, 166 Vt. 246, 692 A.2d 384 (1997). Brogan, F. (1999, June). Testimony before the subcommittee on early childhood, youth, and families. Hearing on Academic Achievement, Washington, DC. [On-line]. Available: http://edworkforce.house.gov/hearing/106*/ecyfesea6999/brogan.htm Brovm, R. (1999). A study of equity in a multi-institution community college system prior to and after implementing performance-based fimding (Doctoral Dissertation, University of Florida, 1999). Dissertation Abstracts International, 60-09, 3248. Brown v. Board of Education, 347 U.S. 483, 74 S. Ct. 686 (1954). Burrus v. Wilkerson, 310 F. Supp. 572 (W. D. Va., 1969), aff d per curiam, 397 U.S. 44 (1970). Camp, W. E., & Thompson, D. C. (1988). School finance litigation: Legal issues and politics of reform. Journal of Education Finance, 14, 221-238. Campbell, D. F., Leverty, L. H., & Sayles, K. (1996). Funding for community colleges: Changing patterns of support. In D. S. Honeyman, J. L. Wattenbarger, & K. C. Westbrook (Eds.), A struggle to survive (pp. 172-186). Thousand Oaks, CA: Corwin. Carroll, S. J., & Park, R. E. (1983). The search for equity in school finance. Cambridge, MA: Ballinger Press. Cavaher, R. (1999). Recent moral philosophy. [On-line] Available: http//www./c/cmu.edu/CAAE/80130/partl/sect5/RMP. (14 March 2000). Center for Education Reform. (1999, July) Summary of the Florida A + plan. [On-line]. Available: http://edreform.com/press/flaplus.html (22 April 2000). Chambers, M. L. (1996). The effects of additional revenues fi-om capital outlay transfers on the equity of a state school finance system (Doctoral dissertation. University of Florida, \996). Dissertation Abstracts International, 57-09A, 3821. Clark, C. (1998). Using school-level data to explore resources and outcomes in Texas. Journal of Education Finance, 23,374-389. Clark, C, & Toenjes, L. (1998). Exploring alternatives for school-based funding. In W. J. Fowler, Jr. (Ed.), Selected papers in school finance ,1996. (pp. 109-134). Washington, DC: U.S. Department of Education, National Center for Education Statistics.

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175 Wohlstetter, P., & Van Kirk, A. (1996). Redefining school-based budgeting for highinvolvement. In L. O. Picus & J. L. Wattenbarger (Eds.). (1996). Where does the money go? Resource allocation in elementary and secondary schools (pp. 212-235). Thousand Oaks: Sage. Wood, R. C, Honeyman, D. S., & Bryers V. (1990). Equity in Indiana school finance: A decade of local levy property tax restrictions. Journal of Education Finance, 16, 8392. Wood, R. C, & Maiden, J. (1996). Resource allocation patterns within school finance litigation strategies. In L. O. Picus & J. L. Wattenbarger (Eds.), Where does the money go? Resource allocation in elementary and secondary schools (197-2 11). Thousand Oaks: Sage. Wood, R. C, &. Thompson, D. C. (1993). Educational finance law: Constitutional challenges to state aid plans— An analysis of strategies. Topeka: NOLPE.

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BIOGRAPHICAL SKETCH Sandra L. Jones received her public school education in Tampa, Florida. She obtained her bachelor's degree from the University of South Florida in chemistry and divisional sciences, with a certification in secondary education. She received a Master of Arts in Teaching degree from Emory University in secondary science education. Through 30 years as a teacher and administrator, she also studied accounting, administration, supervision, and education leadership in graduate schools at the University of South Florida, North Carolina State University, and Arizona State University. She worked and held certificates in teaching and administration in Florida, Georgia, Alabama, North Carolina, Texas, and Arizona. She has taught in both secondary and higher education and also has had experience in business and as a state auditor. Upon her return to the University of Florida, she began pursuing a Doctor of Philosophy degree in educational leadership, policy, and foundations. Her career plans include continuing to be a professional educator, working in educational leadership positions, and as a policymaker. 176

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I certify that I have read this study and that in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation for the degree of Doctor of Philosophy. DWid S. Honeyman, J/., Chair Professor of Educational Leadership, Pohcy and Foundations I certify that I have read this study and that in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation for the degree of Doctor of Philosophy. R. Craig Wood" ' ^ Professor of Educational Leadership, Policy and Foundations I certify that I have read this study and that in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation for the degree of Doctor of Philosophy. Professor of Educational Leadership, Policy and Foundations I certify that I have read this study and that in my opinion it conforms to acceptable standards of scholarly presentation and is fully adequate, in scope and quality, as a dissertation for the degree of Doctor of Philosophy. M. David Miller Professor of Educational Psychology

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This dissertation was submitted to the Graduate Faculty of the College of Education and the Graduate School and was accepted as partial fulfillment of the requirements for the degree of Doctor of Philosophy. December 2003 Dean, Graduate School