Rethinking "Costing Out" and the Design of State School Finance Systems: Lessons From the Empirical Era in School Finance

• In Event: Toward a Civil Rights Education Finance Research Agenda

Abstract

Purpose
We assert that the period from the mid-1990s through mid-2000s in school finance may be characterized as an empirical era—one in which legislators and state courts increasingly sought to link the design of state school finance systems to empirically derived estimates of “equity” and “adequacy” in school funding. Unfortunately, the body of literature generated during the empirical era is characterized by conceptual and empirical gaps, complicating current efforts to reinvigorate the conversation around the costs of achieving desired outcome levels and the extent to which empirical evidence might guide future reforms. To address this challenge, we provide a comprehensive review of the current state of methods and conceptual frameworks used for understanding the estimation of education costs, offering recommendations for strengthening education cost analysis and using those analyses to guide state school finance reform.

Conceptual Framework
We review the evolving conceptions of equity, adequacy, and equal opportunity in education finance, which provide the framework for understanding cost estimation.

Method
We present a critical literature review, beginning with a discussion of the evolving literature on the effects of substantive and sustained state school finance reforms. Next we provide a review and discussion of alternative methods for estimating education costs with emphasis on how those methods can be integrated toward strengthening reliability and validity. Finally, we discuss vignettes from the empirical era of school finance, and how states’ past experiences linking empirical evidence to policy design provide insights for the path forward.

Findings
A sizable and growing body of research demonstrates that state school finance reforms can have large positive effects on student outcomes, raising educational attainment and reducing gaps.
In our analysis of finance reform in five states, the first three cases represent policy adoption in varied degrees of compliance with input and outcome-based cost analyses, in each case conducted on behalf of state government. The second two cases represent thinly veiled attempts to characterize school finance policy as being driven by cost analysis, where in fact, the validity of the analyses in question is highly suspect. We argue that the input-based approach of Resource Cost Modeling and the outcome-based Education Cost Function are complementary and should be used as such. Neither is sufficient as a standalone approach especially given the stakes and dollars attached to financing entire state education systems.

Significance
By applying a critical lens to the cost studies and reforms of the empirical era, we provide guidance for strengthening and justifying future analyses of education costs to inform state school finance policies. Rigorously conducted cost analyses may provide ongoing guidance in the design and revision of state school finance systems, helping to inform those systems toward providing more equal and adequate opportunities for students.

Authors

• Bruce D. Baker, Rutgers University

• Jesse D. Levin, American Institutes for Research