Myths in School Finance

José A. Cárdenas, Ed.D.

Editor’s Note: The following is an excerpt from Texas School Finance Reform: An IDRA Perspective (San Antonio, Texas: IDRA, 1997; pp. 6-15) by Dr. José A. Cárdenas, IDRA founder and director emeritus.

Considering the lack of data and public information about school finance, it is not surprising that during the years that IDRA has been active as an advocate for the creation of an equitable program in Texas, our advocacy has been continuously hampered by erroneous public perceptions of the nature of the problem and the feasibility and desirability of solutions. Even today, the general public has a poor understanding of the current school finance system and its past and present flaws.

The following is a random listing of some of the myths of school finance that have surfaced repeatedly and are still widely perceived as reality by the general population.

Myth #1 Only the Privileged Care for Their Children

This misconception is not exclusive to school finance or education. Our entire society and its dysfunctional responses to societal problems is based on the myth that the rich and privileged have an interest and concern for their well-being and their children’s well-being that is not shared by the general population. The rich are able to do a great deal for their children because they have the time, the money and the power to do so. The disadvantaged seldom have the resources or the skills for the manipulation of social institutions.

It is erroneous to conclude that educational benefits accrue to the children of one economic level and not to the children of other economic levels because of concern and care. In many cases, social institutions, including the schools, tend to create more problems for the child and his or her family than they attempt to solve.

I also have found a strong sentiment that the children of the rich are entitled to a better public educational opportunity. I find this attitude, which is so contrary to our democratic principles, very pervasive at all social and economic levels, and it may be one of the fundamental reasons for a general lack of support for school finance reform over the years.

Myth #2 The Privileged Have Better Schools Because They Pay Higher Taxes

For decades we have heard a justification for the disparities in available educational resources based on the argument that schools for children of privileged families are better because their parents are willing to make the necessary financial sacrifices to provide better schooling through higher taxes. This myth persists in spite of years of school finance data that show that residents of low wealth districts make a much higher tax effort than residents of high wealth districts. The analysis of these data indicated early on the tax rates in the poorest school districts were commonly 50 times higher than the tax rates in the wealthiest districts.

Even after several years of court-ordered equalization, there remains a negative correlation between wealth and tax rates. The higher the wealth, the lower the tax rate; the lower the wealth, the higher the tax rate.

Myth #3 Expenditures in High Wealth Districts Have Little Effect on Low Wealth Districts

I believed then, and I believe now, that the effect of wealth disparities between school districts did not receive the attention it deserved during the entire reform period from the defendants, the courts, educators, the media, the general public or even the plaintiffs.

Edgewood is one of 12 independent school districts in metropolitan San Antonio. It does not exist in isolation, but rather in competition with the other 11 school districts. All 12 districts recruit teachers, special service personnel, supervisors, administrators and other staff from a common labor pool. Since Edgewood was the poorest of the 12 school districts, it was limited in the amount of enrichment funds that could be utilized to supplement the state minimum salary.

During my tenure as a teacher and principal in Edgewood, the state minimum salary was the salary schedule used. There was no supplement. As a result, Edgewood and other very low wealth districts became the training ground for school personnel who could then be hired in other parts of the city. If they preformed well, they were motivated to apply for a position in a nearby higher-paying district. Since few of the Edgewood professional personnel came from the district itself, moving to another district meant working closer to home, with a higher salary, better fringe benefits and superior working conditions.

Edgewood was forced to hire emergency non-certified teachers. If they completed their certification requirements, jobs were readily available elsewhere. This led to a trend of a constant outward flow of the best performing personnel.

Although the handicap in recruiting and keeping teachers was the most obvious hardship in the competition among school districts, there were other more subtle competitions, not generally recognized, but psychologically detrimental to the students. For instance, Edgewood participated in the University Interscholastic League activities. In each of the three high schools, the football, basketball and baseball teams were each coached by a single individual. The Edgewood teams competed against teams that had as many as six coaches. It was heartbreaking for me, as well as for the students and coaches, to see the Edgewood teams consistently defeated by other teams with superior coaching, along with superior equipment and practice fields.

Neither educators nor the general public appear to have given extensive thought to the psychological implications of kids being consistent losers, not necessarily because of a lack of talent, but because the system does not provide adequate resources for the development of talent.

Myth #4 Disparities in Spending Should Be Corrected Only by Upward Leveling

The apex of this argument came about when the state courts found the state system of school finance unconstitutional, and it was no longer a question of whether the system should be equitable, but rather, how the system was to be made equitable.

The argument that equity can best be achieved by leveling upwards sounds reasonable until one considers the resources involved. In the October 1991 issue of the IDRA Newsletter, I presented arguments showing that leveling upwards was not a feasible solution:

"High wealth districts concede that the state has limited resources to eliminate existing disparities, therefore the disparities can be slowly eliminated over a period of time. Leveling up would consist of the allocation of additional state money on the basis of low wealth until all districts are on a par with the wealthiest. Unfortunately, this will never come to be. Not only is the disparity so great that several generations of children would finish school under the present inequitable system prior to parity being achieved, but the failure to provide a practical cap for high wealth districts allows them to continue to increase disparities at the high end of the expenditure range as the state pours money in at the low end.

"In the past 40 years since the implementation of the current system of school finance, each attempt by the legislature to narrow disparities with the infusion of huge sums of money for low wealth districts has resulted in an increase in expenditures by high wealth districts which has actually increased the disparities in wealth." (Cárdenas, 1991)

Myth #5 Reform Efforts Result in Loss of Funds for Rich Districts

Every time that an attempt was made to reform the system to provide increased equity, the cost effects of the proposed change were estimated by the Texas Education Agency and reported in the public media. Inevitably, the projections in the reported data failed to take into consideration existing inequitable tax rates, and thus high wealth school districts were depicted as losing huge amounts of funds. In each case the amount reported as a loss was contingent upon a continuation of inequitable and low tax rates for the high wealth districts, a condition seldom or never mentioned in the report. This provided a distorted picture of the effects of the proposed change with extensive concern and sympathy for the children in high wealth districts.

Myth #6 Caps on School Expenditures are Unfair

Since its inception, the Texas system of school finance has always provided limitations on the amount that can be expended for education at both the state and local levels. Throughout its history there has been a limitation on the maximum tax rate that may be enacted to supplement with local enrichment funds the inadequate provisions of the minimum foundation program.

In middle wealth school districts, the cap on the tax rate has served as mild limitation on how much can be expended in support of the educational program. In low wealth districts, the limitation on the permissible tax rate has served as a severe constraint on the quality of education. Even at the highest tax rate permitted by state law, low wealth school districts could not compete for the acquisition of personnel and material resources. As more money was allocated for the low wealth districts, a slight increase in the tax rate in high wealth districts was re-established and, in most cases, exacerbated the disparities.

Since the state revenues available for equalization were finite, it was evident very early in the reform period that low wealth districts would never catch up unless the limitation on the tax rate was extended or replaced with a limitation on revenues. Each time such a recommendation surfaced, there was a loud cry from educators and patrons in high wealth school districts that it was detrimental to place a limit on the quality of education in the state.

It is difficult not to accept this argument, but it was evident that without such a limitation all efforts for the creation of an equitable system were doomed. As stated previously, it was extremely unfair to place a cap on local enrichment that served as a constraint on only the low wealth districts. A better alternative is to place feasible constraints on all districts and to place no limitation on the amount that the state can expend on education with all school districts receiving equal benefits.

For all practical purposes, limitations on the quality of education have always existed, even in the wealthiest school districts. Regardless of the amount expended for education in high wealth districts, local school campuses within a district have never had the prerogative of outspending other campuses within the district. It is difficult to accept the concept of unlimited disparities in interdistrict expenditures, when districts observe rigid limitations on intradistrict disparities.

Expenditures disparities are caused by unlimited local enrichment which in turn is extremely inequitable because of large disparities in local wealth. Until such time as these local wealth disparities are neutralized, there can never be an equitable system of school finance in the state.

Myth #7 Money Does Not Make a Difference

As the threat of fiscal equalization arose, there was a consistent reaction from high wealth districts asserting that there was no need for an equitable system since "money does not make a difference."

This argument first surfaced during the Rodríguez trail. When the federal court noted a much higher level of expenditures in the high wealth district than in the low wealth district documented in the court case, the immediate response by defendants was that the different levels of expenditures did not necessarily indicate a better educational program in the high wealth district. At one point, defendants argued that the excess wealth was used for the development of curricular materials that were than made available to low wealth districts, thereby nullifying the advantages of wealth.

This argument would have been difficult to accept even if it were true. Curriculum developed for affluent students in high wealth districts is usually not appropriate for use in low wealth districts with high concentrations of economically disadvantaged, minority, migrant, immigrant and limited-English-proficient students. Actually, many of the educational problems of such students can be attributed to the failure of the elitist U.S. educational system to develop and implement materials and methodologies compatible with the characteristics and needs of atypical school populations.

The additional funds available to high wealth school districts were not allocated to curriculum development, shared or unshared. The bulk of the additional funds were used in augmenting personnel salaries and fringe benefits to attract and retain the best trained, experienced and most successful school personnel. The next highest priority for enrichment funds was the purchase of instructional materials, equipment and facilities to augment the meager supply provided or completely absent in the foundation program.

My fundamental question during the school finance effort was, "If money does not make a difference, why are the rich districts fighting so hard to retain it?"

Myth #8 Recapture is Evil

Under strong pressure from the state courts, the legislature enacted a new school finance system in 1991 based on the creation of County Education Districts that provided an equalization within 188 county and multiple-county taxing entities that eliminated most of the expenditure disparities at a very low cost to the state. Both in efficiency and in cost to the state, this plan, enacted as Senate Bill 351, was the best response to state inequities in school finance developed during the entire reform period, even vastly superior to the current law.

Once the courts had established that the old system of school finance was unconstitutional, the goal of the reformers was to conceptualize a new system that would provide total equity and be affordable. One of the salient problems of the old system was there were many very high wealth districts with extremely low tax rates. In some, the tax rates were so low that they were commonly referred to as "tax haven" school districts.

Senate Bill 351 would use counties as the base unit for the assessment, collection and distribution of local enrichment funds.

The concept of various districts with varying wealth sharing tax bases was immediately labelled and addressed by the media as the "Robin Hood" plan. All of a sudden, Robin Hood changed from a boyhood hero into a Texas villain. In response to the negative publicity being given Senate Bill 351 by high wealth districts and the public media, my article appeared in the September 1991 issue of the IDRA Newsletter:

"During the formulation of the new law, Senate Bill 351, and subsequent to its passage, this piece of legislation has been identified in the local, state and national media as the "Robin Hood" plan for school finance equity. This sobriquet is invariably accompanied with the explanation that the new system of school finance takes money from rich school districts and gives it to the poor.

"This stigmatization of the new system of school finance is unfortunate, since it is erroneous. Senate Bill 351 does not take money from rich school districts and give it to poor school districts. Senate Bill 351 does create a new taxing unit in which taxes collected are used for the population of the unit. But, this is no different from city, county, state or national taxes in which the proceeds are expended according to perceived needs in the taxing entity.

"Under the new system the previously untaxed wealth is now being tapped so that all taxpayers share more equally in supporting area schools." (Cárdenas, 1991)

Myth #9 Consolidation is the Solution

Prior to the enactment of the Gilmer-Aiken legislation in 1949, there were about 6,000 school districts in Texas. Many of these districts were "dormant" districts, districts that had no students but continued as political entities without a need for taxation since no schools were operational. Gilmer-Aiken eliminated all dormant districts and provided for the elimination of districts that lost their enrollments. Since no minimum number of students was stipulated in the legislation, as long as a district had at least one student it remained functional.

On the other hand, consolidation has never been perceived by IDRA as a panacea for solving the school inequity problem in Texas. Research in school administration has shown that there is an optimum size for school districts, with a tendency for districts with a smaller number of students to be inefficient and ineffective. There is also evidence that there is an optimum size on the large end of the scale, with districts with excessive number of students tending to be bureaucratic, unresponsive, inefficient and ineffective.

Segments of the school finance reform movement in Texas focused early and exclusively on consolidation as a solution to existing inequities. I believe that the concept of huge tax savings by extensive consolidation is a myth. Wealth is distributed very unevenly throughout the state. In many communities, the consolidation of adjoining school districts would produce one large property-poor school district with a low tax base, a high tax rate and a low tax yield, the very characteristics that both the Rodríguez and Edgewood court cases attempted to eliminate.

As pointed out in a February 1988 IDRA Newsletter article on consolidation:

"Research in school finance indicates that the creation of a large school district does not result in significant savings in administrative costs. The need for a large bureaucratic administrative structure to operate the large district results in increased costs rather than savings. The elimination of a dozen school district superintendents would demand the creation of a dozen new positions in the new system at a similar cost.

"Past administrative assumptions that bigger is better have not proved true in contemporary research. Effective schools research has shown that very large schools are detrimental to students’ adjustment and performance." (Cárdenas, 1988)

The nine myths described above did not appear in any special order or sequence but appeared continuously in public opinion, legislation and litigation. Some of them were the result of public ignorance about the system of school finance and mistaken notions about the reasons for the existing inequities. In retrospect, it appears that no sooner had a specific myth been addressed and refuted by advocates of school finance reform before another myth surfaced or resurfaced in opposition to reform.

The myths were widely disseminated by educators in high wealth districts as well as the defendant state agencies in Texas. This was surprising because educators and agency personnel knew better. Professionalism was quickly and easily compromised on behalf of the preservation of the elitist system of education in Texas.

Resources

Cárdenas, J.A. "Is School Consolidation the Solution to Achieving School Finance Equity," IDRA Newsletter (San Antonio, Texas: Intercultural Development Research Association, February 1988).

Cárdenas, J.A. "Myths and Issues in School Finance: Parts I and II," IDRA Newsletter (San Antonio, Texas: Intercultural Development Research Association, September 1991).

Cárdenas, J.A. "Myths and Issues in School Finance: Parts III and IV," IDRA Newsletter (San Antonio, Texas: Intercultural Development Research Association, October 1991).

Cárdenas, J.A. Texas School Finance Reform: An IDRA Perspective (San Antonio, Texas: Intercultural Development Research Association, 1997).

José A. Cárdenas, Ed.D., is the IDRA founder and director emeritus. Comments and questions may be directed to him via e-mail at comment@idra.org.

[©2007, IDRA. This article originally appeared in the IDRA Newsletter by the Intercultural Development Research Association. Every effort has been made to maintain the content in its original form. However, accompanying charts and graphs may not be provided here. To receive a copy of the original article by mail or fax, please fill out our information request and feedback form. Permission to reproduce this article is granted provided the article is reprinted in its entirety and proper credit is given to IDRA and the author.]

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