Investors take note: Business intelligence that relies on a district’s budget and fiscal data will become a fast-growing K-12 market in the next five years. Today, that may not be the case; just brandishing the title of Chief Financial Officer at a conference tends to ward people off. There are few who relish discussions about ledger-transfers and the complexity of central versus school level per-pupil expenditures.
The problem is not that these conversations are dry. (They are.) It’s that most conversations about a school’s expenses don’t sync up to what’s happening in the classroom—the instruction, materials, and tools that shape the educational experience for teachers and students.
That’s soon to change. School finance is set to become an important lens into good schooling, and it’s very likely that there are three phases to this transition.
Phase One: Reaction
Many school leaders are about to be caught off guard by the fiscal transparency requirement in new Every Student Succeeds Act (ESSA). The law requires every state and district to publish, at the school level, per-pupil expenditures for actual personnel and non-personnel costs by each funding source (federal, state and local funds). The data are now being gathered and they need to be ready for publication on the 2019-2020 state and district report cards.
Some state education agencies are working with their districts to develop reliable and consistent processes to collect this data, but they are largely the exception. Most schools do not currently collect this kind of information or if they do, they have not had to report it to the public.
To get the information ready for the 2019-2020 report cards, the financial data will inevitably require scrutiny, revision, and repair. This will not be a trouble-free process. As Marguerite Roza, Director at the Edunomics Lab and facilitator of the state agency working group on this issue, observes: “Most principals have not been included in discussions about what things cost or about how to divvy up district funds that affect their buildings directly.” They have been acting as instructional leaders, not finance managers working to improve the return on investment.
This will also be a new communications challenge for school leaders. Beyond getting the data clean and reliable, there is the challenge of making sure everyone knows what they mean and how to discuss them. Questions will immediately emerge. For instance: Why is it that one elementary school gets $1800 more per pupil of state funds than the higher-needs school on the other side of town? Does this reflect an intentional investment decision, or is the higher spending the product of more teacher seniority, or is there something wrong in the data?
Taking the stakes even higher, the data will reside alongside academic proficiency and growth data on these reports cards. This information is manna for local education beat reporters, school board members, parents and engaged community members trying to figure out whether local leadership and policies are working as promised.
It will take school leaders time to iron out all of the errors and anomalies and to be able to talk about it in a way that parents, school board members, labor unions, and the community can understand. This will demand a careful communication strategy.
Phase Two: Strategic Response
School leaders will, over a year or two, likely shift from a reactionary relationship with this information to a productive and strategic one. One probable response will be to adopt a model of continuous improvement that considers whether investments in personnel and non-personnel matters are productive. Is the investment producing the anticipated learning outcome or behavior change among students, staff, and administration? If it is, the investment should grow. If not, then a reallocation of resources may be necessary.
This is the kind of work that Schenectady City Schools in New York has been advancing with their return on investment program evaluation model. At a recent education finance summit organized by Allovue, the district presented (PDF) on how it began the program when budgets were declining, and had to decide what to cut and what to keep. When the economy and their budgets recovered, they kept the model to help them invest only in programs that worked for their students. For example, if a program costs $81,000 to operate and there are 66 students who succeed, as defined by the district, then the cost of success is about $1,227 per student. That information is then central to program and investment conversations that the school has internally and with the community.
The Schenectady approach is likely to become more common because this is also what ESSA is asking of its grantees. Everything about the law encourages its grantees to make investments that are evidence-based, effective, and continuously scrutinized by a rigorous implementation program. In some cases, for both federal and state programs, it’s even a statutory requirement. Prudent strategic investment strategies are at the core of good ESSA grant management and program implementation.
Phase Three: Growth of the Market
After a period of tinkering and exploring approaches to investment strategies that manage the convergence of academic and fiscal data, some solutions will take hold. Financial models that align spending with student success will become more commonly understood. The topic will become a conference mainstay and, dare we say, even sexy.
That’s when the market for school business intelligence that incorporates fiscal data will become attractive. People will want to pigeonhole the chief financial officer into conversations. The loquacious ones will be sought after for panels and events. The mechanics of finance and expenditures will still be dry, but they will have a strong connection to effective educational investments and the classroom practices that can open minds and change the course of lives and communities.
