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«NATIONAL ACCESS NETWORK TEACHERS COLLEGE, COLUMBIA UNIVERSITY Maryland Enacts Modern, Standards-Based Education Finance System: Reforms Based on ...»

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Maryland Enacts Modern, Standards-Based Education Finance System:

Reforms Based on Adequacy Cost Studies

By Molly A. Hunter

May 2002

In a stunning victory for Maryland advocates of better school funding, the Maryland

legislature, in April 2002, enacted a new state education finance system that increases state funding for schools by $1.3 billion annually, to be phased in over the next six years, and targets a larger portion of the increase to lower wealth districts and districts educating high-need students. Of particular importance to proponents of educational funding reform, Maryland's overhaul of its school funding system links school finance litigation, advocacy, and the standards-based reform movement. Proponents of the reforms credit a coalition of advocacy groups with uniting the interests of rural poor and urban poor constituencies who persuaded legislators that the proposed bill would benefit students statewide.

This policy paper provides a brief historical background of events in Maryland, in part I. In part II, it summarizes the extent to which the new legislation relied on the report from the Maryland Commission on Education Finance, Equity, and Excellence and the extent to which the Commission relied on costing-out studies. In part III, it recounts advocates' successful lobbying efforts in the legislative session.


In 1983, Maryland's highest court rejected an "equity" challenge to the state's education finance system, in Hornbeck v. Somerset County Board of Education, holding that the state constitution did not mandate equality in per-pupil spending among the state's school districts. However, the court also concluded that the education clause of the Maryland constitution guarantees students the right to "an adequate education measured by contemporary educational standards."

In 1994, Baltimore City and the ACLU of Maryland initiated lawsuits against the State, alleging that the education finance system was violating students' constitutional rights because the city's schools were so underfunded that they could not provide an adequate education to their students. In a 1996 summary judgment decision, in the consolidated Bradford v. Maryland State Board of Education case, the trial court agreed that the education being provided to city students was inadequate, but the cause of the shortcomings was in dispute. On the eve of trial, the parties entered into a settlement, enacted into law in 1997, that provided a modest increase in state funding for the Baltimore City Public Schools in return for a new governing board appointed by the governor and the mayor.

The resulting Consent Decree included mechanisms for the new board to request additional funds from the State. If the State failed to satisfy those requests, plaintiffs could return to court for a determination of whether the funds were necessary to enable the city district to provide a constitutionally adequate education. The new board requested increases in state funding based on its own needs assessments, and outside experts prepared an interim progress report, required by the Decree and issued in February 2000, which identified funding needs of about $2,600 per pupil. The State did not fund the board's requests based on these needs assessments.

Therefore, plaintiffs went back to court, and in June 2000 the Circuit Court declared that the State “is still not providing the children of Baltimore City...a constitutionally adequate education," has failed to comply with the 1996 Consent Decree, and needs to provide "additional funding of approximately $2,000 to $2,600 per pupil" in 2001 and

2002.1 The State did not comply with this order (which was not yet a "Final Order"). By then, however, the State had established a commission to make recommendations on how Maryland should fund its schools.


In late 1999, Maryland created a bi-partisan, 27-member Commission on Education Finance, Equity, and Excellence (“Thornton Commission") to study and make recommendations to the legislature on how the State could, inter alia: ensure adequate school funding, reduce funding inequities among school districts; ensure excellence in school systems and student performance; and provide a smooth transition for recommended changes. During 2000, the Commission reviewed Maryland's funding system and funding systems nationwide, reviewed student/school performance and accountability, and held hearings where interested members of the public could comment and make suggestions.

In 2001, the Commission focused primarily on how to measure adequate funding and structure a finance system for a standards-based education system. The cost studies were finalized in September, the Commission's report submitted in January 2002, and the legislature acted in April.

A. Costing Out

At the Commission's initial public hearings, funding reform advocates recommended that the Commission hire experts to perform an adequacy costing-out study. In fact, because they thought this study was essential to the Commission's work, the New Maryland Education Coalition, a nonprofit citizens' advocacy group, hired Management Analysis & Planning ("MAP") to conduct such a study. Shortly thereafter, the Commission hired Augenblick & Meyers (A&M) to perform an adequacy costing-out   study. MAP and A&M are among the few firms with nationally recognized expertise in state education finance systems and costing-out studies.

In June 2001, the results of the studies were announced in a joint press conference.

Both studies recommended large increases in annual state aid to Maryland school districts

- up to $2.9 billion more. While MAP used the professional judgment methodology, A&M used both the "successful schools" and professional judgment approaches to analyze Maryland's school funding needs. Both studies analyzed operating costs, not capital outlays, and excluded transportation and teacher retirement, which are funded separately.

In September 2001, A&M issued its final report, which explained the assumptions and methodologies used and adjustments made and offered recommendations for additional adjustments. A&M's report began by noting that Maryland uses a per-pupil foundation amount to distribute the majority of state aid and the State is implementing standardsbased reforms to improve student performance. A&M reasoned that ensuring an adequate foundation level in combination with state performance standards "implies that a state will ensure that sufficient resources are available in school districts...so that [students] can reasonably be expected to meet state standards."2 On this basis, A&M developed a foundation level calculated to enable students without special needs to meet state performance standards and developed adjustments for three categories of students with special needs.

Using the professional judgment approach, A&M met with seven teams of educators, who designated the resources needed for a prototype school district with 40 to 50 schools and 30,000 students, who were representative of Maryland's statewide averages for highneed students (31% from low-income families, 13.5% in special education and 2% LEP).

A&M then calculated the costs of the designated resources. The result, combining all grades, was $10,631 per pupil. Analyzed by types of students and programs, the resources consisted of a per-pupil foundation amount of $6,612 and adjustment factors of

1.17 for special education students, 1.39 for low-income students, and 1.0 for LEP students. Applying these figures statewide, the total cost would have been $8.796 billion in 1999-2000, compared to the actual revenues available that year (from state, local, and federal sources) of $5.917 billion, a difference of $2.9 billion.

A&M's successful schools approach produced a foundation amount of $5,969 but no weighting factors because the 59 schools identified as successful had low proportions of students in special education and very low proportions of students from low-income families. A&M adjusted the figures using a cost-of-education index for each of the 10 districts in which the 59 schools were located. A&M also analyzed the foundation amounts of $6,612 and $5,969 from the two methodologies and found that the differences were attributable to 10 additional days of professional development, full-day kindergarten, more costs for student activities, and more technology and equipment in the professional judgment model. Finally, A&M applied the adjustment factors from the professional judgment study to the successful schools foundation amount and generated a   statewide total cost estimate of $7.939 billion, or $2.0 billion more than the $5.917 billion available.

In its final report, A&M stated that the special education factor was reasonable but low at 1.17, compared to the national average figure of 1.3, and the low-income factor was extraordinarily high at 1.39, compared to typical factors between.25 and 1.00 used across the country. A&M suggested that special education costs could be calculated using three or four different factors, depending on the costliness of the disability, that would average 1.17 overall. Also, for low-income students, A&M suggested that actual costs per-pupil increase with higher concentrations of poverty and low-income adjustment factors could be devised to reflect this assumption.

Finally, A&M's report warned policy makers that the approaches used in its studies were a combination of art and science and should be viewed as reasonable estimates, not precise figures. A&M noted that costing out methodologies are evolving and have actually been applied only in the past few years in a limited number of states.

The MAP costing-out study, on the other hand, used three professional judgment panels to develop total per-pupil costs, instead of a foundation level with adjustment factors for special needs. The MAP panels used the same student demographic assumptions, but also assumed that teacher salaries, district-level spending, and school technology were already adequate. MAP's three per-pupil adequacy amounts were $9,313, $9,215, and $7,461. This compares to a composite total per-pupil cost from the seven A&M panels of $10,631. Thus, all of the MAP results were significantly lower than the A&M professional judgment composite.

B. Commission Recommendations

When the Thornton Commission released its final report, in January 2002, it relied heavily on A&M's cost analyses. The Commission recommended that the State restructure its finance system and phase in, over five years, a $1.1-billion increase in its annual support for public schools - over and above what then-current law would have generated. (State aid for the 2001-02 school year was $2.9 billion, and current law would have resulted in $700 million more over the next five years.) The Commission proposal, along with recommended local maintenance of effort, would increase the state's share of education funding from 41% to 49%.

The Commission highlighted certain findings that helped guide its decision making.

For example, school districts with the largest "adequacy gap" - those farthest from the adequate funding levels calculated by A&M - also scored lowest on the state assessments (MSPAP). Recognizing that 'money matters,'the Commission recommended that a greater proportion of state aid be targeted to these districts. The Commission also addressed accountability in a standards-based education system, concluding that the State is responsible for establishing the standards, ensuring adequate funding, and holding schools accountable, primarily on educational outcomes, not inputs. The Commission

stated that:

  In light of... Maryland's nationally recognized performance standards..., the State should move towards developing a finance and accountability system that properly reflects the roles of State and local governments in a standards-based education system.3 For the new finance system, the Commission provided comprehensive and detailed recommendations. For accountability, however, the Commission merely proposed that each school district be required to develop a master plan outlining steps being taken to improve student achievement for each segment of the student population.

In its new finance model, the Commission identified four major goals that it sought to achieve: adequacy, equity, simplicity, and flexibility. To ensure adequacy of funding, the Commission concluded that the proper model for funding schools is based on the "costs associated with meeting State performance standards, including the... costs associated with providing services to students with special needs."4 To improve equity of funding, the Commission recommended increasing from 65% to 80% the proportion of state funding that is wealth-equalized. The Commission also addressed adequacy and equity in its proposal by: applying a geographic cost-of-education adjustment; proposing a guaranteed tax base program for districts with less than 80% of statewide wealth per pupil; and strengthening local maintenance of effort.

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