Debating Funding
of Public Education: The '65% Solution'

By Myrna Mandlawitz

With the reauthorization of the No Child Left Behind Act just over the horizon and education appropriations still unsettled for the current fiscal year, the debate about the relationship between education funding and academic achievement has intensified. As local school districts face rising operating costs, they are examining ways to improve student outcomes, while remaining solvent and getting the best return for the money they spend.

What is the "65% Solution" and Who Supports It?

One proposal that has surfaced in this debate is known as the "65% solution, promoted by a group called "First Class Education." The goal of this organization -- founded by Patrick Byrne, CEO of Overstock.com, Inc. -- is to pass laws in each of the 50 states by 2008 that would require school districts to spend at least 65% of their operating budgets on "classroom instruction." First Class Education proposes three potential benefits of this tactic: (1) increasing money spent in classrooms without raising taxes; (2) reducing wasteful spending on administrative costs; and, (3) improving student outcomes by focusing money to the classroom.

Currently across the nation, 61.5% of school district operating budgets is spent on direct classroom instruction, according to the National Center for Education Statistics (NCES), the data collection and analysis branch of the U.S. Department of Education. Only Utah, Tennessee, New York and Maine spend at least 65% or more of their budgets in classrooms.

One notable supporter of this initiative is Grover Norquist, who heads the anti-tax group Americans for Tax Reform. Norquist's group, which promotes Taxpayer Bill of Rights (TABOR) tax limitation measures, was the first to endorse the First Class Education campaign. TABORs have been defeated in a number of places because of their negative impact on education funding. The syndicated columnist and pundit George Will has also endorsed the "65% solution."

Legislative Activities

Legislative activities are already bubbling up across the country. In Texas, the Governor has issued an Executive Order requiring school districts to spend at least 65% of their budgets in the classroom. In Louisiana, the legislature has passed a resolution requesting the State Board of Education to revise its current funding formula. In Kansas, the legislature has passed a bill that codifies the "65% solution" as a state public policy goal. In addition, legislation has been or will be proposed in Ohio, Minnesota, Illinois, and Florida, and ballot initiatives are expected in Colorado, Washington, and Arizona in 2006.

Analysis and Possible Ramifications

While, on the surface, this "solution" may sound reasonable, it is important to look deeper at how "classroom instruction" is defined by proponents. Proponents say they have adopted the NCES definition of "classroom instruction." Actually, NCES does not have a "classroom instruction" data category. The closest NCES data category would most likely be "Instruction Expenditures." NCES defines this category to include the following:

• salaries of classroom teachers and instructional aides;
• instructional supplies, including computers and technology;
• co-curricular activities, including field trips and athletics;
• tuition paid to out-of-state districts; and,
• payments to private institutions for students with disabilities.

All "outside the classroom" expenditures are excluded. "Outside the classroom" expenditures include instructional staff support services, such as professional development, instruction and curriculum development, and library and media services. Also excluded from "instruction expenditures" are student support services, including counseling, school nurses, school and district administration, food service, transportation, and operations and maintenance.

[Columnist Rick Casey, writing in the Houston (TX) Chronicle, notes in his Jan. 5 column that using the NCES definition could produce results some might think are strange.]

Standard & Poor's has done an analysis of the "65% solution" and suggests that relying only on "Instruction Expenditures" would require school districts to cut funding to those excluded functions, which are critical to instruction (The Issues and Implications of the '65% Solution,' Standard & Poor's, Fall 2005). S&P notes that some critics of the "65% solution" recommend a much broader definition of "classroom instruction," one that would include the NCES data category of "Instructional Staff Support Services," as well as "Instruction Expenditures." NCES categorizes activities under "staff support services" as those activities designed to improve student well being and to supplement the teaching process, including counseling, library services, health and psychological services, and attendance services.

More important, the Standard and Poor's analysis looks at the relationship between spending and student outcomes. Using Minnesota as the test case, where the largest percentage of districts already allocate at least 65% of their budgets to instruction, the analysis concludes that there is no significant correlation between spending any minimum percentage on instruction and student achievement.

In fact, S&P notes that districts vary widely in overall district resources and fixed costs, as well as in district boundaries that might require increased transportation expenditures, lower income populations for whom the district might provide both breakfast and lunch services, and other factors that affect spending. Also very important, S&P notes, is not only how much money is spent, but how those funds are allocated, an equation that may more directly correlate to a positive impact on student achievement.

All of these variables may point to a more common-sense approach of allowing local decision-making on allocation of resources, rather than locking every district into a minimum spending percentage. As the American Association of School Administrators notes, local districts generally receive most of their funds from local sources and are governed by locally appointed or elected school boards. Those individuals have an obligation, both legally and to the electorate, to use those funds in the manner most appropriate to the particular communities and school populations they serve.

What You Can Do?

Stay informed in your own community about future ballot initiatives on education funding, and carefully weigh the pros and cons. A number of national education organizations have information and positions on this issue, including the American Association of School Administrators, state affiliates of the National School Boards Association, and the National Education Association. We will also continue to monitor this issue and keep you updated with information as it becomes available.

Myrna Mandlawitz is the president of MRM Associates, an independent lobbying and consulting firm based in Washington, D.C. The firm's clients include the state education departments of Colorado, Connecticut, Massachusetts, Pennsylvania, Oregon, and others, the National Research Council, School Social Work Association of America and many others. Prior to founding MRM Associates, Ms. Mandlawitz served as the Director of Governmental Relations and External Affairs for the National Association of State Directors of Special Education (NASDSE).