ED 22
Reduce Administrative and Non-Instructional Operating Costs in School Districts
Summary
The state funds about 47 percent of Texas school district operating expenditures. The state’s funding system, however, is based primarily on student attendance, and ignores the relationship between expenditures for instructional and non-instructional purposes. School districts differ substantially in the percentage of funds they spend on classroom instruction as opposed to other areas. School districts that prioritize non-instructional expenditures over instruction are missing the point of their mission and using state funds inefficiently. The state has a constitutional responsibility to ensure an efficient system of public schools. The state should reduce funding to school districts that exceed the average for non-instructional expenditures and that rate lower than “Exemplary” in the state’s accountability rating system.
Background
The state funds school districts according to the districts’ average daily student attendance. School districts develop their own budgets, with most using a mix of state, local and federal funds. The Texas Education Agency (TEA) tracks audited school district expenditures by category of expenditure.Expenditures can be categorized as those related to instruction and those that are not. Instructional expenditures are tied closely to the classroom, while non-instructional expenditures include administrative and other operating expenditures such as student services and transportation, food services, security and monitoring, maintenance, data processing and extracurricular activities.
Statewide, non-instructional operating costs represent about 36 percent of districts’ total operating costs; sparsely populated districts and small districts have averages slightly higher than the state average, while large districts tend to have a lower average. Sparsely populated and small districts tend to have higher shares of non-instructional costs because they only need a small number of teachers but still must comply with various state regulations and require some of the same administrative support as large districts.
Nearly 500 Texas school districts are rated lower than “Exemplary” in TEA’s accountability system and also have non-instructional costs that are more than the state average for their size.[1]
Recommendation
State law should be amended to decrease state funding to school districts that have administrative and non-instructional costs of more than the state average for their size, if they are rated below Exemplary in the state’s school district accountability system.Statewide, Texas has about 267,000 full-time equivalent teachers. The savings from this recommendation would be equivalent to a bonus for each teacher of about $800 in each year of the biennium.
Fiscal Impact
This recommendation would save the state an estimated $216.1 million in general revenue in fiscal 2004 and $216.1 million in fiscal 2005.This estimate assumes a reduction in the amount school districts are entitled to under the state’s school funding formulas by the amount that their percentage of non-instructional costs exceeds the average for similar-sized districts.[2] The estimate also assumes that school districts would adjust their non-instructional spending to current averages, thereby precluding the need for reduced funding after fiscal 2005.
To achieve these savings, state Foundation School Program (FSP) appropriations in fiscal 2004 and fiscal 2005 must be reduced accordingly. The commissioner of Education shall implement these savings on a district basis in a manner consistent with this proposal, including pro-rating statewide reductions to individual school districts as needed. If necessary, the commissioner is required to use the mechanisms provided in Chapter 41 of the Education Code to enforce district reductions. School districts must use the amount of these reductions only to reduce non-instructional expenses. Schools rated “Exemplary” in the state’s accountability rating system and five sparse or small school districts with data issues were excluded from the estimate.[3] Administrative costs to the Texas Education Agency would be negligible.
Beginning in fiscal 2006, the commissioner would adjust district funding levels through the settle-up process to account for previous improvements in the non-instructional cost ratio, as defined by this recommendation. Fiscal estimates for 2006 and later account for improved district compliance with this recommendation.
Fiscal Year Savings to General Revenue 2004 $216,144,000 2005 $216,144,000 2006 $108,072,000 2007 CBE 2008 CBE
Endnotes
[1] All data used in this issue paper were derived from TEA’s Public Education Information Management System (PEIMS).
[2] Instructional operating costs include TEA’s Public Information Management System (PEIMS) function codes 11, 12, 13, 21 and 95; non-instructional operating costs include codes 23, 31, 32, 33, 34, 35, 36, 41, 51, 52, 53 and 92.
[3] Independent school districts excluded due to data issues are Grandview-Hopkins ISD, Big Sandy ISD (Polk County), Allison ISD, Sabine Pass ISD and Prairie Lea ISD.
