Letters 98
EPP December 1998 Letter on School-Based Budgeting and PCEN

December 11, 1998

Ms. Beverly Donohue
Chief Financial Officer
NYC Board of Education
110 Livingston Street
Brooklyn, NY 11201

Dear Ms. Donohue:

We thank the Chancellor’s office for affording members of the general public with the opportunity to comment on the November 3, 1998 draft of "School-Based Budget Regulations." I apologize for sending you these comments past the deadline of November 20, but the office of the Educational Priorities Panel did not receive a copy of this draft until November 18. With the Thanksgiving holiday and a multitude of other tasks on my plate, I have not had time until now to provide you with our comments.

In his cover letter to the draft, Deputy Chancellor Spence asks three questions: 1) Does it provide an effective bottom-up approach to budgeting for improving student performance? 2) Is the draft "user friendly"? 3) Does it communicate the information effectively? Let me first respond to the last two questions, which are easier to answer, and then give my response to the most important question. The draft is well written and user friendly, but it could be considerably improved by including a timeline for the different stages of the budget request process as well as a more detailed explanation of a second procedure that has been introduced, that is, proposals for changes in tax-levy allocation formulas.

Timeline

The draft, after stating that the Chancellor shall issue a budget request memorandum on November 15 of each year (which will mean issuing it the week prior to Thanksgiving most years), is silent about the following deadlines:

Since both the state and city budgets are to be adopted in April and June, respectively, we see no reason for not providing a timeline, even if they serve only as target dates (such as the deadline for the state budget adoption process, which is rarely met). In the legislature as well as in other institutions, timelines provide some measure of notice and due process.

Without set timelines, it is difficult for EPP to evaluate how the process will work in the real world. By setting the budget process in motion on November 15, will much of the public deliberations on the district level fall between Thanksgiving and the winter holidays when parents and community leaders have the least personal time to focus on the education budget? Even if the district hearings occur after the New Year, a seven-day notice of a public hearing seems to us inadequate. Having attended the Board of Education’s budget hearings for nine years, it is my experience that only organizations with professional education policy staff are able to prepare testimony within the short lead time provided for these hearings.

More importantly, how does this budgeting process coincide with the process in schools of developing a Comprehensive Education Plan? During the 1997-98 school year, schools had to submit their CEP’s in the spring. If school committees must prepare their budget requests first and then prepare their CEP’s later, will "school improvement," over time, degenerate into school budget proposals? On the other hand, if CEP’s are created in the fall followed by school budget proposals in the spring, this timing flies in the face of the Mayor’s and Governor’s budget planning process, which begins over the summer and early fall. If school-based planning to improve student achievement levels is to drive budget decision making and if school-based budget decision making is to be a genuine consultative process, it would seem to us necessary that schools must develop their CEP’s in September and October and that the Chancellor should issue the budget request memorandum by the end of October. While the Chancellor may have better information on city and state budget forecasts on November 15, as you are well aware, forecasts only become precise in the late spring.

EPP also sees no rationale for why the Chancellor cannot issue this memorandum directly to principals at the same time as he issues it to superintendents and members of community school boards. Why are principals and their school planing committees, the intended school-site budget decision makers, not provided this information at the earliest possible time? And why are superintendents individually and unilaterally allowed to set their own timelines for principals and school committees? This particularly concerns us because, as you know, some district superintendents have prohibited Title I schools in their districts from becoming Title I school-wide project schools. Since they have actively discouraged school-site decisions on the use of Title I and reduced the level of Title I funding available to these schools, it is conceivable that these same superintendents will provide the shortest time possible for budget deliberations by school planning committees. Over time, the superintendents’ review of the Chancellor’s budget request memorandum may inevitably degenerate into the superintendents’ presentation of the districts’ proposed budget, with only minor input by principals. In the next step of the budget process you outline, principals may no longer be informing their school committees about the budget request procedure but in actuality be telling their committees of decisions that have already taken place at the district office. EPP is of the opinion that universal timelines, even if only targets, provides some guarantee of an orderly and timely process in all community school districts and high school districts.

The Procedure for Recommending Changes in Tax-Levy Allocations

In the twenty-two year existence of the Educational Priorities Panel, there have been two five-year periods when the process for budget requests became largely irrelevant because of a city fiscal crisis. The central question from 1976-1980 and from 1991-1995 was not where there should be increases in the Board of Education budget, but where there should be cuts. In future years, unfortunately, changes in allocations may again take center stage in any budget decision-making process. EPP finds it odd that in a draft with "school-based budget" in the title, principals and school planning committees are not the recipients of a Chancellor’s memorandum on proposed changes in allocations nor invited to send comments to the Chancellor. Principals and planning committees at the school level need to have the greatest lead time in planning if staff attrition and /or excessing plans or OTPS funding reductions will be implemented. Where site-based management was successfully implemented in American corporations, employees at the lowest levels were able to suggest savings and efficiencies that were adopted system wide

What is particularly absent in this section of the draft proposal is language that ensures fairness in allocations to schools by objective empirical measurements and data. EPP has assumed from the initiation of draft legislative proposals for changes in governance that school-based decision-making would mean that 1) allocations would be directed to schools as the primary education unit, 2) that schools will have resources based on their relative student needs and 3) that schools will have more latitude on how to best marshal these resources to meet these needs. These student needs should not be based on a secondary analysis or worse, bias, of a superintendent. If the budget process is one of the mechanisms to produce better student outcomes, principals and their planning committees need to know the resources available to them and not have these resources determined primarily by superintendents.

When Frank Macchiarola was Chancellor a study was commissioned to evaluate school district allocations to schools (but never released publicly). The findings were that district superintendents reallocated a high proportion of state compensatory funds intended for the lowest achieving students to higher achieving schools in order to "compensate" schools with not enough poor students to be eligible for Title I funding. Despite the annual publication in the Board of Education’s Division of Budget Operations and Review Allocation Memorandum No. 1 of data on each school’s proportion of students testing below the bottom quartile of test takers, there is substantial anecdotal evidence that superintendents ignore these schedules and reallocate PCEN money to non-Title I schools, some with very small proportions of students in the bottom quartile. At Board of Education budget hearings on several occasions I have witnessed first hand community school district superintendents focus the majority of their testimonies on why they should receive more city tax-levy funding than other districts because they received less Title I funding. Needless to say, these actions and assertions fly in the face of needs-based funding and the reality that schools serving higher proportions of children in poverty require extra support in order for their students to begin to compete with their more advantaged peers. Superintendents and their budget staff continue to undermine through their words and actions the rationale for federal and state compensatory education. The only change apparent to EPP is that under Chancellor Macchiarola, the reallocation of compensatory funds to more affluent schools used to be treated as a shameful, hidden practice. Unfortunately, in first-hand reports of some district budget officials and community school board members participating in the school-based budget pilots, equal per-pupil allocations and equal staff-student ratios are held up as the ideal for districts without any regard for relative differences among schools in the demographics of the students they serve. The re-allocation of state compensatory funding is held out as the primary means of helping non-Title I schools, even though they educate far fewer students who are poor and/or need to learn English. At one Cross City Campaign workshop I attended, a NYC BOE staff person described how tax-levy funding was withheld from a school that received a Magnet grant, as though supplanting was a laudable budget objective that should be practiced by other community school districts.

EPP strongly urges the drafters of this document and the Chancellor to reformulate this section to put primary emphasis on allocations to schools, not districts, and to require that the Chancellor’s allocation memorandum specify allocations that must go to schools and allocations where there is a limited element of superintendent discretion. As drafted, allocations are assumed to go to superintendencies, which is a surprising assumption in a document intended to outline a school-based budget process. If allocation formulas are to reflect to the maximum extent possible the relative needs of students and to be determined by objective empirical measures and data, superintendents and their budget staff must not be allowed to continue to re-allocate these resources based on the principal of equal per-pupil funding.

There is some urgency in this matter. EPP believes that this pattern of district re-allocation undermines the reforms that have taken place at the state level to drive more compensatory funding to New York City based on the number of students in poverty and/or needing to learn English. Efforts to secure more funding for Extraordinary Needs Aid could be undercut by a persistent pattern in New York City of driving these funds to schools with less poverty and fewer English language learners. EPP would like to discuss with you at greater length suggestions we have for ensuring that compensatory funds reach targeted schools.

One final comment about this section of the draft is that I have learned from attending Cross City Campaign conferences that one of the processes that has taken place in other city school systems that have converted to school-based budgeting is that central allocation memoranda have had to become more understandable to school principals and planning committees. Simplification and streamlining of allocations are the result. In turn, the central office has become more knowledgeable about how allocations impact on the day-to-day functioning of schools. Since I have no knowledge about the details of the "Galaxy" system, my assumption is that it is a simplification of allocations. But this section of the draft, as written, describes a budget allocation and consultation process that continues current practices: central office budget staff directly communicating to district budget staff with principals and their planning teams left relatively uninformed and relegated to being passive recipients of budget decisions largely made at central and district levels.

I will now attempt to answer why, in my opinion, these draft regulations do not provide an effective bottom-up approach to budgeting for improved student performance.

Poor Performance, to Date, at the District Level in Creating a Consultative and Transparent Budget Process

Dr. Joan Scheuer, an education finance consultant and former BOE budget staff person, was retained to study how the community school district budget process actually functioned as part of a 1993 EPP report, Equity in the Funding of Public Elementary and Middle Schools in New York City. She, along with EPP members, interviewed superintendents, union representatives, parents and community school board members in 10 districts and found the decision process highly centralized in the superintendent’s office. With the exception of one district, attendance at budget hearings required by New York State Education Law was minimal, with only two or three people providing testimony that was largely irrelevant and treated as irrelevant. (In comparison, these hearing made the central Board of Education’s budget hearings look like robust examples of participatory democracy.) Since these hearings were tacked on to regularly scheduled community board meetings, most observers did not even know they were witnessing a budget hearing. While all superintendents spoke of "openness" of the budget process in our interviews with them, all responses from other stakeholders in all districts told a different story, even in the supposedly "model" and more "progressive" school districts. Principals, UFT representatives, parents, and community school board members told us that the superintendent "holds all the cards" and that they did not really understand the district budget, the allocations that came to the district or the district’s allocations to schools. Even where there was a divided community school board, the fights focused on hiring or local politics because few members knew enough to even raise budget issues. One superintendent said, "The parents are brought in at every step of the way, but their influence on decisions is nil." Essentially, EPP concluded that the community school district budget process was an empty, "going through the motions" exercise required by decentralization law and that the decisions were all "top down" even in the best districts.

After the governance changes in 1997, EPP has heard from numerous members of community school board members that they are now receiving even less information about the district budget and frequently no longer have a sense that they are knowledgeable about the districts’ programs and operations. At EPP, we attempted to review the superintendents’ budget requests, but abandoned the effort due to the poor quality of the presentations and the plethora of minor program funding requests without a coherent explanation of why these requested funds would lead to better student outcomes. Most districts merely produced laundry lists of "pet projects." We were pleased, nevertheless, that the Chancellor made funding of these superintendents’ requests a priority, but EPP has no idea whether these funds actually went for the school projects listed in each superintendent’s request and no evidence that any district has evaluated whether the "pet projects" raised student achievement at each school.

More recent anecdotal evidence of the pattern of budget decision making in the community school districts is not encouraging. This past spring and summer we interviewed principals for a study on high achieving elementary schools serving high poverty communities. Some of the schools were in districts that had piloted school-based management. Here is what one principal told us: "A disaster!" This principal was left with fewer options and less flexibility in the use of school allocations, even though it was a high achieving school. Another principal in a pilot district related that the one budget change his school committee had recommended had been approved at the end of the last school year. When the principal returned this September, he was informed that this approval was withdrawn because the district’s needed the school’s PCEN funds to be directed to a SURR school. Needless to say, this action has demoralized the principal and the school planning committee. Months of creating a CEP and then framing it into a budget request were wasted, and the result has been cynicism. Beyond these individual responses, there was an interesting pattern in the principals’ answers to the question asking them to list their biggest budget problems. Whether they were in a school-based pilot project or not, many of these effective principals reported that they resented the amount of time they had to spend at the superintendent’s office "dancing for dollars," "begging," and "making a royal pest of myself because they really don’t understand how a school works." Obviously, one of the levers that superintendents are continuing to use is their discretionary budget authority. But, this budget "lever" amounts to district micromanagement of school-based decisions even for the high performing schools and even in districts piloting school-based management. This is certainly not a "bottom-up" approach.

Just this week, we have been calling community school districts to learn when they will hold their hearings on the Board of Education’s proposed Five-Year Capital Plan. So far, out of ten called, exactly two districts (#2 and #3) could tell us the date right away. In two other districts (#8 and #26), after numerous phone calls, we got the date. Our calls to the other six (#5, #10, #13, #17, #19, #27) have meant being shifted between the superintendent’s office and community school board office several times and having to explain "the capital plan" and "the hearing" and often being told incorrectly to call the Division of School Facilities about the schedule of hearings. Most will "get back to us," but we already know that it means calling them back. In one district we were told, incorrectly, that a parent could not testify without being accompanied by a principal. Some districts are not even holding these hearing. The way community school districts are holding hearings on the proposed capital budget is undercutting support for the Board of Education’s capital budget request to the Mayor and the City Council. While the draft regulations on school-based budget regulations are "user friendly," EPP is fearful that the superintendents’ implementation of the regulations will be far from "user friendly," especially for parents.

In New York City, the Paradigm of Site-Based Decision Making Has Been Transformed into Middle-Management Decision Making In Chicago, school-decision making was accompanied by both a dramatic reduction in school district staffing and authority along with greater central power to monitor performance. This actually fit the pattern in American corporations that adopted site-based decision making. Local managers and workers were allowed far more discretion and flexibility at the plant or profit-center level in return for greater accountability for results. Layers of bureaucracies that used to focus on implementation of procedures, rather than effectiveness, were eliminated. Some divisions of General Electric Company, for example, now only have six levels of employees, from clerks to salespersons to managers and to the president, Jack Welch. EPP is certainly aware that collective bargaining, principal tenure, and the complexities of administering over 1000 schools and multiple programs precludes the Board of Education from adopting a pure model and that districts would still have to function as reporting mechanisms. On the other hand, this draft of the regulations where principals and their planning teams are notified only secondarily of the content of memoranda, makes it clear that the "site" at which decision making is to take place is at the district office. It took over forty years for the education reform community to rediscover that education takes place in the classroom, not at a planning committee at central or the district office.

I would be less concerned about this permutation of the site-based management if there was some evidence that the second part of the paradigm, accountability, was also in place. At the Cross City Campaign workshop two participants from the same pilot district proudly explained that as the result of their budget process, "every principal got their pet project funded" including one principal who wanted a Xerox machine in his office. When I inquired whether the "pet projects" were consistent with each school’s CEP, I was told that "there was no time" because the process was so complicated and so long. Following the workshop, a few individuals came up to me to communicate that they too had wanted a review of CEP plans but that I just had to understand how time consuming budgeting was. I found the disconnect between CEP’s and budget decision making at the district level just one more indication that district staff and community board members do not understand the concepts behind site-based management. In EPP’s recent interviews with principals, more than a few complained about the intense amount of district reviews and revisions of their school’s CEP’s. This does not jibe with site-based management, especially since these were reports from effective principals, most of whom had high-functioning school planning committees. The impression I have, based only on a few anecdotes, is of mid-level micromanagement of the CEP process followed by mid-level micromanagement of school based budgeting with "no time" to explore the connections between the two. This sounds very much like the old paradigm’s emphasis on procedures and top-down decision making with a "thin icing on the cake" of new rhetoric. If superintendencies really understood "accountability," they would stop second guessing site-based decisions and focus on whether there have been improvements each school’s students’ academic performance. Instead, the early indications are that, as usual, they are obsessed with the details and ignoring the results.

Will This Budget Process Be Genuine?

EPP, having taken an objective examination from 1991 to 1993 of how the high ideals of decentralization and community input into community school district budgeting had degenerated into perfunctory rituals, does not want to see the high ideals of school-based decision making meet a similar fate. Hopefully these initial pilot projects and these proposed regulations will be a transitory phrase. Or quite possibly, in the long run New York City’s strange permutation into district-level decision making will work better than other cities’ embrace of a purer model of school-level decision making. (So far, China’s slow transition to capitalism seems to be working better than Russia’s rush into the free market.) EPP has no crystal ball. Only student outcomes will tell the story.

But beyond issues of how superintendents implement school-based budgeting and their poor track record, there is another reason why we think middle-management decision making is a poor alternative to site-based decision making . It has not escaped our notice that in California, where school districts pioneered school-based budget management, the Governor (and the voters through referenda) has increased "top-down" decision making. The same is true in Chicago, where the Mayor and the Superintendent are making large-scale budget and program decisions. In New York City, we could see no evidence in our casual review of superintendent budget requests for creation of Project READ, Project ARTS, Project SMART or LADDER, etc. With purse strings controlled at the city, state, and federal levels, "bottom-up" budgeting is not the source of major initiatives and funding. The bottom line is that resource levels will continue to be determined at the top. EPP’s support of school-based budgeting is not premised on the naive expectation that a large system’s budget will be constructed through a myriad of local decisions "bubbling up." We are not advocating the rebirth of early twentieth century anarcho-syndicalism or 1960’s experiments in hippie collectives. We simply want to see school-level staff "buy into" higher performance by being given more of a sense of "ownership" of resources. In American corporations, where site-based management was successfully implemented, the result was better quality control than had been achieved previously through a ton of detailed memos. At the most recent Cross City Campaign conference, I was surprised to learn that in one city school district per-pupil allocations to each school was determined by each school’s student attendance rate (this state, like New York, allocated operating aid based on attendance). I was even more surprised by the result: it was reported that these schools, for the first time, developed serious plans to improve the student attendance because they wanted the 5% to 10% of their school budget lost through absenteeism. Attendance improvement was no longer merely a directive or a game. Until I heard this, I had always assumed that principals and teachers understood the connection between attendance and the level of state operating funds. Now I realize that "the attendance problem" is a pretty abstract proposition to everybody but the central-level budget staff. A light bulb went off in my head -- this is why Attendance Improvement and Dropout Prevention (AIDP) programs have been treated as peripheral in so many schools that EPP members have visited. Except at the high school level, AIDP programs tend to be treated as friendly CBO’s "doing their thing" off somewhere in a corner.

At the school level, where the education of children takes place, site-based budgeting has the potential to transform school staff and parents into problem solvers and, hopefully, more schools in New York City will become genuine learning communities despite a continuing lack of adequate resources -- if they have some degree of genuine "ownership" of resources. EPP does not believe that middle-management decision making over school budgets will achieve this sense of "ownership" by school staff. EPP is not concerned with the impact of pseudo site-based budgeting in the handful of districts where the superintendents are recognized as strong educational leaders and where each district’s principals share a common vision and educational approach. We are fearful, however, of pseudo site-based budgeting where the superintendents have had no prior experience in running a school or whose performance in running a school was less than exemplary. These proposed regulations allow superintendents the leeway to micromanage the school budget process because the regulations as drafted distance principals and their planning committees from the primary budget documents. This continues current budget practices.

EPP sometimes marvels at the sheer number of huge systemwide reforms that the Chancellor has had to undertake in a very short time. We can understand the need to delegate some authority to superintendents. These proposed budget regulations, however, give too much control to superintendents and too little information and decision making to principals and their school committees. EPP continues to believe that the most critical locus of needed "capacity building" is at the school level, not at the middle-management level.

Sincerely,
Noreen Connell, Executive Director

CC
Deputy Chancellor, H. Spence
Deputy Chancellor, J. Rizzo