Rethink District Budgeting – Part III

In?Rethink District Budgeting - Part I, we describe three budgetary forces that drive and shape how we have been approaching budgeting: 1) needs-based framework, 2) how district finance is managed, and 3) our human nature.

In the second installment, we introduce three new "budget dance" moves that allow leaders to better leverage the budgeting process to continuously improve coherence and quality of programs and services to increase student achievement.

In this post, we revisit the key concept of differentiating between investment and operation expenditures with examples in both historical and contemporary contexts and conclude this long article with some final thoughts.

Investment and Operation Expenditures Revisited

It is apparent that all the new “budget dance” moves start with differentiating between operation and investment expenditures. While Table 1 can be readily applied to make the distinction for most expenditures, there are cases where the distinction is not that clear cut. For certain expenditures, people may have genuine differences in opinion regarding whether they are necessities without which the district cannot provide the mandated or expected services, or options selected by the district among many choices to target certain areas for improvement.

For example, some people believe a one-to-one technology initiative is a must-have to equalize the digital divide as well as help students become prepared for the new economy and society where digital literacy and citizenship are key. In the eyes of others, it might be perceived as one very expensive investment option for increasing student academic achievement through expanding access to resources and extending learning to outside school hours. As another example, people might not be able to reach consensus regarding whether class size reduction is operational in nature or an investment by choice.

Fundamentally, there is no absolute separation between operation expenditures and investment expenditures. Where to draw the line is fluid and conditional, depending on political, cultural, historical, and economic contexts in general and idiosyncratic situations in particular. Historically, principals were first introduced as “experiments” in western metropolitan areas of the United States to “ascertain the most efficient organization of large schools and also for groups of schools” during the late 1800s (Pierce, 2018). Counseling was not established as a school service until the beginning of the 20th century to help students with their development in response to the Industrial Revolution (Schmidt, 2008). These positions are now considered essential operation expenses but probably would have been classified as investments as they first emerged.

Reversely, expenses used to be treated as operational necessities can become investment choices. After the Indiana Supreme Court ruled that school districts are not required by the state constitution to provide transportation for students (Kardish, 2015), transportation becomes a choice district leaders in Indiana weigh against other spending options for delivering return on student outcomes. Another example is school resource officers (SROs). SROs first began in the United States in the early to mid-1950s and became more widely adopted following various school shootings in the 1990s (Weiler & Cray, 2011). With racial equity becoming a prominent focus of school reforms, however, some districts no longer consider SROs indispensable and are looking into reinvesting the resources in other strategies such as restorative practices (Kopsa, 2022).

This conceptual switch from classifying a spending item as operation to investment and vice versa, albeit implicit, is often evidenced by the questions we ask about that expense. Generally speaking, efficacy is not a major concern for operation expenditures but at the center for investment expenditures. It is unknow whether questions were raised about spending money on principals or counselors back in those early days, but now we don’t doubt their value and necessity. When computers were first introduced into the classroom, many questioned whether they are effective in helping students learn. With computers becoming almost ubiquitous in American schools nowadays, no one seems to be interested in that question anymore.

In contrast, SROs have been either assumed or believed to be the solution for school safety until people started to question in recent years whether they are truly necessary for making schools safe given their impact on disproportionality and school culture. Facing dwindling budgets, districts in Indiana are asking themselves whether spending on transportation or spending on staff would give a bigger bang for the buck for their students (STN Editor, 2014).

Instead of being problematic, this at-times ambiguity and fluidity in classification of expenses afford leaders flexibility to manage financial resources differently, depending on whether they want a spending item scrutinized and its funding based on the results and alignment. For example, if a program classified as investment is found to consistently produce expected return after two to three investment cycles, it can be re-classified as an operation expenditure and thus no longer subject to EOC reviews. Reversely, converting a legacy program into an investment expenditure can compel and foster improvement with renewed attention, strengthened theory of change, better coordination and support from other departments, together with accountability pressure. In a similar vein, a spending item classified as an operation expenditure due to its political necessity can be re-classified as an investment after the political clout is no longer present. In this way, these programs are provided an opportunity to prove or improve their value and their discontinuation due to lack thereof can be less controversial and disruptive.?

Conclusion

The annual budgeting process is a valuable opportunity for district leaders to 1) systematically examine both resource use and district programming and 2) use the findings to inform and drive change to optimize resource use and improve program efficacy that will lead to increased student achievement. However, we have not been able to capitalize on the full potential of this opportunity due to three forces.

With a needs-based framework, each established expense is first legitimized and then perpetuated for meeting a high-priority need. When it is difficult to identify and justify one need being more important than the other, adjusting resource use becomes very challenging if not a mission impossible. The accounting system districts rely on for managing their financial resources embodies this lack of differentiation between improvement needs and operational needs, and creates departmentalized space for siloed practices. As a result, there is lack of a fair and transparent structure for leaders to systematically review resource use and program impact as well as make nuanced flexible adjustments based on the analysis in a collaborative way. Coupling these two conceptual and infrastructure constraints is our human nature, which favors addition over subtraction for problem solving and biases against subtractive changes when it comes to decision making.

To overcome these challenges, district leaders can integrate three new moves to their existing “budget dance”. To start, district expenses need to be differentiated between operation expenditures and investment expenditures. In fact, we are already making the distinction when we pose the question “does it work” for some spending items but not the others, only without making the classification decision explicit and tied with continuous improvement implications that involve potential changes in program budget and implementation.

Differentiating between operation and investment expenditures lays the conceptual foundation for improvement. Tracking expenses on alignment, outcome, and improvement turns the improvement opportunity into concrete tasks and processes that can be executed and, more importantly, sustained. Specifically, it helps systemize continuous improvement in three ways. First, collecting and using data described in Table 2 adds rigor and discipline to the decision-making process, which should lead to better decisions on adoption, planning, implementation, evaluation, and discontinuation of investments. Second, by linking financial data with outcome data and program activities through a logic model, it brings together all parties needed for making an investment successful to ensure efforts are concerted, coherent, and calibrated throughout the implementation and, eventually, resources are allocated based on alignment with priorities and return on investment. Third, it helps make the new “budget dance” moves annual routines, regardless of the political environment and even when the district is flush with money.

Traditionally, adopting a new program or launching a new initiative has been employed as the primary means of improvement. The new budget dance moves discussed in the paper promote and foster an improvement approach that is a bit more conservative about addition. Leaders should take extra precautions when adopting new programs and interventions to avoid the “presence of too many disconnected, episodic, piecemeal, and superficially adorned projects”, which is a bigger problem than absence of innovation (Fullan, 2001, p. 109). It is important to understand that adopting a new program is not an isolated improvement event. Leaders should take advantage of the information collected through the tracking to make sure new investments are congruent with the overall strategy and complement and support the existing programs.

Often times, the decision of approving a new investment marks the end of engagement from district leaders. Other than talking about it at a high level, they usually take a hands-off approach and delegate most, if not all, responsibilities to the program director and staff. While it is appropriate to leave execution to mid-level administrators, it is district leaders’ responsibility to set expectations, provide the condition needed for the investment’s success, and take actions if the investment fails to produce return. Leaders should seize the opportunity created by EOC review to re-engage with the investment of their or previous administration’s decision and make new decisions that are important for improving its impact or lead to better use of the resources.

District leaders are often accused of wasting money on things that do not work instead of spending limited resources on research-proven programs. However, improvement is more than replacing an ineffective program with another innovation. In many situations, continuously improving a lack-of-return program is a better strategy than simply cutting it. Discontinuing an ineffective program is not a solution but can sometimes cost significant institutional energy and leaders’ political capital. In reality, it is unlikely that a program works for no one (Yan & Slagle, 2011). Already interwoven with the system, many times, what the program needs to succeed is more focused and better executed implementation, which require district leaders to remain engaged and pull levers that only they are capable of. (e.g., narrow the focus to students for whom the program is most effective based on evidence and ask other programs to make adjustments). If the program fails to deliver return after repeated efforts, leaders can use the cumulative evidence documented in multiple EOC reviews to communicate and justify the discontinuation decision.

While budgeting is the focal point of the discussion, we should not lose sight that money is not the central issue here. Ultimately, it is about how district can develop disciplined “self-management of improvement” (Elmore, 2003) to provide coherent and coordinated services to students. These new “budget dance” moves offer new hope and possibilities.?

References

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