Stateline Story

Hawaii Adopts New School Funding

When its new school year begins tomorrow, Hawaii will become the first state to use a weighted student funding formula statewide. Although Hawaii only has one school district, the program is designed to ensure that money for education is spread more equitably among its 287 schools.

But the funding system has drawn fire from the state's small schools that stand to lose the most funds, charter schools, and critics who say Hawaii's formula is hardly an improvement over the previous system.

"They made a mess. They did it in haste," said William Ouchi, a UCLA professor who consulted with Hawaii Gov. Linda Lingle on weighted student funding (WSF) initiatives. "The way it's being interpreted by the state department of education has really ripped the guts from it."

WSF is based on three principles: funding follows each child to whatever public school that child attends; per-student funding is based on a child's specific needs, with students who are considered more costly to teach - like those studying English as a second language - carrying bigger "weights"; and principals control their school's budget.

Many states already distribute money to districts using some weights, but they rarely require funds to follow each student to their school, Ouchi said. A district that receives extra money from the state for its disabled students could still pour that money into its more affluent schools with few disabled students, causing large inequities between schools. By forcing the money to follow the child, WSF is designed to rectify those inequities.

In Hawaii, the base amount per student is $4,292 under the WSF system .The weights include an extra $429 for poor students, $809 for those studying English as a second language, and $107 for transient students, such as children of military personnel.

The Edmonton School District in Canada pioneered weighted student funding in 1974, but the formula has gained more exposure in recent weeks after the Thomas B. Fordham Institute, a Washington, D.C.-based education think tank, released a report supporting its application. The report received bipartisan endorsements from education experts and policymakers, including three past U.S. secretaries of education and two former governors, Michigan Gov. John Engler (R) and North Carolina Gov. James Hunt (D).

So far eight U.S. school districts, including Seattle, Houston and San Francisco, are using WSF in pilot schools or throughout their school districts. The Louisiana legislature passed a budget this year that set up a weighted funding system in the Recovery School District, a designation for schools that fail the state's accountability program for four or more years.

In Hawaii, WSF has been plagued with controversy since the legislature passed a comprehensive education reform law in 2004 that included implementing WSF in the 2006-2007 school year. Under the previous system, the state's department of education controlled each school's budget and additional staff could only be added if enrollment increased.

Hawaii's initial WSF plan didn't include a base amount to make sure schools of any size could operate - one of Hawaii's first mistakes, Ouchi said. Last summer the board of education unveiled a weighted formula whereby 77 schools would gain more than $100,000 while 94 schools would lose more than $100,000 each year. Many schools panicked.

The uproar forced the Department of Education to announce it would phase in WSF slowly so that no school's budget could rise or fall more than 10 percent in the system's first year, 25 percent in its second, and 50 percent in its third. By contrast, when Houston phased in WSF, it capped first-year changes at 30 percent.

Then the Hawaii legislature decided in April to grant a one-time bailout of $20 million to be used as foundation grants, meaning no school will lose money and some will gain money in the system's first year.

Those moves caused critics to say the new system was moving too slowly. A report commissioned by the Hawaii board of education to review Hawaii's system stated that the pace of implementation meant that "first-year funding is expected to be only marginally more rational than current funding."

One of the report's authors, Bruce Baker, an associate professor at the University of Kansas, also said the system didn't assign large enough weights for high-need students. According to the report, Hawaii allocated an additional $429 for poor students. But other studies cited in the report noted that improvements were likely only if allocations for each student were at levels of $1,160 to $2,830.

The majority of Hawaii's 27 charter schools plan to opt out of the plan, said Jim Shon, executive director of the state charter schools administrative office. Charter schools traditionally receive less per-pupil than other public schools and should, in theory, benefit under WSF by receiving the same amount. They also have high percentages of the weighted students who draw more money to schools.

But Shon said the current formula is too uncertain for charters to give up their independence.

"It's a work in progress," he said. "Why should charter schools go leaping off the cliff into darkness here?"

Ouchi, who has written a book, "Making Schools Work," on WSF, questions how much autonomy principals have under Hawaii's system. He is researching how principals in WSF districts use their financial freedom. Many cut back on office personnel such as registrars and clerks and hire more teachers instead, he said.

But the Hawaii department of education mandates that a certain amount of funding go to some categorical programs, such as ROTC or vocational education. Although more than 70 percent of the education budget will be spent at the schools, it doesn't mean principals have total control.

Catherine Payne, principal of Farrington, Hawaii's largest high school, said she has more fiscal autonomy, but it remains limited. She is not able to cut any positions or to replace tenured teachers, she said. Farrington received about an extra $100,000 under WSF and used those funds to add a reading position and some tutors.

Eighty percent of schools have made staff changes using WSF funds, said Robert Campbell, the state Department of Education's project manager for WSF. Principals control two-thirds of the money that comes to their school, he said, adding that principals also decide how categorical funds, which are used to teach topics such as Hawaiian culture, are spent.

Implementing WSF in Hawaii posed geographic challenges for the state because schools are scattered across islands. "If you're allocating within the city of Seattle or Houston, you shouldn't necessarily have to consider funding schools that are too small to be scale-efficient," Baker said.

California and Colorado both proposed WSF bills during the 2005 legislature, but neither made it out of committee. WSF supporters opposed the 65 percent solution, another funding approach that pushes for 65 cents of every education dollar to be spent in the classroom. Four states have applied the 65 percent solution, and Oklahoma and Colorado have initiatives on the November ballot.

Supporters of the 65 percent solution say the two funding methods are compatible because extra money can follow hard-to-teach students to their schools, which then have to spend 65 percent of that in the classroom. The 65 percent solution, however, wouldn't give principals the same autonomy as under the WSF program.

Tags: Education