Part 4: OUSD & FCMAT – Mixed Grades, Mixed Feelings

This is the last of our mini blog series on the Fiscal Crisis and Management Assistance Team’s (FCMAT) Fiscal Health Risk Analysis of OUSD, issued in August. So far, we have provided context, summarized seven areas in OUSD “passed” and 8 areas that OUSD “failed.” This blog is about the 4 areas in which FCMAT gave OUSD a “Mixed” grade.

Before we wrap up this series about OUSD’s FCMAT report, we want to acknowledge the pain, frustration, anger and worry that so many people feel in the current situation – and expressed at last night’s board meeting.  All of us who live, work, and raise our families here in Oakland, want our children – all children, no matters their zip code, race, income, immigration status, or country of origin – to have a great public education. And that takes adequate, stable, and wisely-used resources.

Using resources well requires robust and reliable financial systems. Below are four areas in which OUSD has some work to do but that OUSD also has some strengths:

  • Enrollment and Attendance: This area covers how the district forecasts and manages student enrollment, whether it staffs appropriately for the number of students, and how it tracks and boosts student attendance. Average Daily Attendance (ADA) is the basis by which California distributes per pupil revenue, so this is critical. Of the 10 questions, OUSD received a “Yes” (positive) on 6 questions and “No” (negative) on 4 questions, although we saw two important inconsistencies between these answers and the text. The first inconsistency is related to the enrollment trend. FCMAT reports “the district has lost 55 students from 2013-14 to 2016-17” and shows a chart that shows minor enrollment fluctuations around 37,000 students over the past 4 years.[1] But the report also answers “No” to the question “Has the district’s enrollment been increasing or stable?” This fuels the misperception that OUSD enrollment has declined over the past several years, which then could divert attention from the poor decision-making and weak financial systems that produced the current situation. The second inconsistency in the report is related to enrollment tracking. The report describes “cell formula irregularities” in Excel spreadsheets used to project enrollment that “once realized, did not cause management to reduce staffing accordingly.” This seems like a series of serious missteps, but FCMAT didn’t seem to take data quality into account in its answers to questions about enrollment projections and analysis.
  • Cash Monitoring: This section covers how the district manages its cash flow. It’s not enough to have a fund balance on paper; the district also needs cash in the bank to pay bills on time. During the recession, this was hard because the state provided IOUs instead of cash, but the state is now paying districts on time – and yet OUSD “is experiencing cash flow shortages requiring temporary borrowing.” Some of the borrowing is internal, between funds. OUSD has also “borrowed from the county treasurer to meet cash flow needs for general fund operations.” But at least, the district repays inter-fund borrowing as required, and balances its checkbook every month.
  • General Fund: This section looks at whether the district matches the duration of revenue sources with the duration of expenses. Unfortunately, OUSD regularly uses one-time or time-limited funds for ongoing salaries and doesn’t reduce expenses even when revenues might not be available to cover them. The overall rating is mixed because, on the plus side, the percentage of the district’s unrestricted general fund spending on salaries is at or below the statewide average, and no material changes in litigation are anticipated.
  • General Ledger: This section covers some standard accounting practices, like recording financial activity accurately and in a timely manner. Fortunately, FCMAT says the district is heeding these (i.e. “Yes” answers to 4 of 6 questions). OUSD receives a mixed overall rating because the district recorded its beginning balances incorrectly and failed to make some accounting adjustments to reflect actuals inflows and outflows.

Phew. That’s it on the specifics of this important FCMAT report: the good, the bad and the mixed up. To summarize: budget cuts alone will NOT keep us from ending up back here again. To restore fiscal vitality, OUSD must make significant changes to its fiscal management, governance practices, managerial practices, and culture.

So Now What

For those of you who are wondering: “What can I do?” here are a few ideas:

Keep paying attention. Our public school system needs taxpayers and voters to get informed, stay engaged and become active. Don’t blindly concur with simple slogans. The situation is complex and the solutions require real tradeoffs and more critical thinking than a catchy chant can capture. Read more, visit OUSD’s fiscal transparency website, and track OUSD Board discussions and decisions.

Contribute to the Oakland Public Education Fund’s A-Z Fund. Some schools have PTAs that can raise enough money to make up for the cuts; others don’t. This Fund will steer donations towards schools that are serving students with the greatest needs.

Volunteer your time. Many schools still need tutors and classroom assistants. Mid-year budget cuts also mean fewer enrichment programs and fewer field trips. Make up for that gap by finding ways to share your passion – whether its watercolor painting or Afro-Cuban drumming or culinary science – with students. And if you have professional experience working in finance, personnel, or technology, your expertise would be valuable to OUSD’s Board and leaders. (Does OUSD need a Finance Advisory Council?)

A few final thoughts:

We need to get back to focusing on improving educational outcomes for student in our classrooms.  Righting the ship financially is important, but it is the means not the end. Too many Oakland schools are not adequately educating our children, and numerous improvements can still be made on a shoestring budget.

Superintendent Kyla Johnson-Trammell is a leader we all need to support. She inherited this mess, and is taking on the challenge with courage, poise, intelligence, and care – exactly what we would expect from an alumna of Oakland public education.

Oaklanders are tough fighters, creative entrepreneurs, and compassionate citizens. We can use these assets to be part of the solution – and we will all need to work together to support our students through this adversity.

[1] OUSD’s 20 Day Count report showed that enrollment is 302 students higher than the 20 Day Count last school year.

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Potential Solutions to OUSD’s Budget Crisis

As soon as we launched our #OUSDBudget series, people started asking: “But what can the District do?”

Being solution-oriented is one of our organization’s core values, and OUSD leaders are actively discussing options – so we felt it was time to offer some specific ideas in the spirit of partnership.

We start with ways to increase revenue, which seem to have gotten less attention and yet are particularly important to pursue because they can improve the quality of education our students receive, while also improving our fiscal solvency.

But increasing revenue may not be enough, and cuts may be unavoidable. All of the expense reduction options will be controversial and unpopular – as is always the case in unfortunate situations like this. Of course, we’ll want to keep any cuts as far away from the classroom as possible. But any cuts will inevitably affect students – which no one wants. And unfortunately, they will affect teachers and staff who are working hard to serve our students.

Effective leadership requires making tough decisions. OUSD’s current budget crisis was created over many years by a revolving door of Superintendents. We now have a strong, home-grown leader with the potential to provide stable long-term leadership. She will need to make hard choices, weighing tradeoffs within and between multiple unpleasant options. The path back to fiscal vitality will not be easy. State receivership is not inevitable, but it will take solidarity, compromise, and sacrifice.

Revenue

Strategies to increase revenue still require tradeoffs but could simultaneously strengthen the district’s finances and improve education quality for students:

 

  • Maximize attendance: CA public schools are funded based on “Average Daily Attendance” – not enrollment. Every day a student is absent, the district gets $85 less. A 1% increase in the average daily attendance would translate into over $5 million more in revenue. The practices that maximize attendance and minimize chronic absenteeism are well-known; not-for-profit Attendance Works has loads of ideas and resources. Call families promptly. Buy alarm clocks. Get bus passes. Install washing machines. Provide flu vaccines. Use short-term independent study. Ask other families to help. Create incentive programs. OUSD is probably doing some of this but might be able to do more. In addition to financial benefit for the district, this approach provides clear academic benefits for students.
  • Increase enrollment by expanding the most popular schools: We all know that some OUSD schools are in high demand, and that some students who don’t get into these OUSD schools leave the public system entirely. Over 17,000 Oakland students enroll in private or parochial schools, or transfer to a nearby district (officially or through creative addressing). OUSD could keep some of these students in the district by expanding enrollment capacity of the most in-demand schools. Some in-demand schools have small campuses, so the district may need to get creative: reconfiguring existing space or adding portables; opening a satellite campus with the same program under the same management team; or swapping campuses with a nearby school with a larger facility. Any of these approaches would require the district to work closely with school leaders to understand what is possible, what a successful expansion would require, and what might be some unintended consequences. The brilliant folks on OUSD’s Research, Data & Assessment team have already compiled helpful data in the Strategic Regional Analysis, and these conversations hopefully are part of the district’s Blueprint. If a dozen high-demand schools each added 30 more students each, that would result in a 1% increase in OUSD enrollment, bring in $5 million more revenue, and give more students access to our strongest schools. The time to make these decisions is now: enrollment for the 2018-2019 school year launches November 13!
  • Sell under-utilized assets: OUSD has more land and buildings than it has ever used – even at peak enrollment. It has properties that have been unused for years and are declining into disrepair, depleting resources and leading to blight. It’s a sellers’ market now, though selling to maximize revenue would likely require state legislation. Even if the district doesn’t want them to go to a private developer, OUSD might be able to find another public agency that could put those properties to good use – affordable housing, health clinics, parks, art studios, not-for-profits. The going price for one parcel could be millions of dollars. If the district doesn’t want to sell, some public agencies or not-for-profits might be willing to take a long-term lease, providing a steady unrestricted revenue stream. These assets can get more money into our classrooms rather than being a drain on resources.
  • SELPA reform: OUSD’s Special Education programming requires millions in additional funding from the General unrestricted fund. Thanks to the recent ERS report, it’s also now established that Oakland’s special needs students receive $10 million less for services because most charters have left OUSD’s SELPA (Special Education Local Planning Area). Redesigning the SELPA so charters return can be a win-win-win: more revenue for both OUSD and charters, and more importantly, better services for all Special Education students in Oakland.

Expenses

Increasing revenue may be insufficient; cuts may be unavoidable. We hope that cuts are made in strategic ways that enable long-term viability.

  • Cut top executives’ pay: The senior leaders in OUSD work very hard, are deeply committed to Oakland students, and are incredibly talented; capable district leaders for big urban districts like OUSD are too scarce and absolutely deserve to be paid well for the difficult jobs they do. But in a daunting situation like this, we think it’s important to send a strong message that everyone needs to sacrifice. If the top 20 leaders take a 5% pay cut, it could save the jobs of a several employees working at minimum wage without affecting students in the classroom.
  • Benchmark for infrastructure: As we have pointed out in previous blogs, OUSD spends more on central office services on a per pupil basis than comparable districts (about $400 per pupil more or $14 million total), so reducing expenses will require cuts to OUSD’s central office. For core “infrastructure” departments (like finance, personnel, legal), detailed headcount and budget data for several districts similar in size and student composition could inform these “right-sizing” decisions. It’s worth a reminder that since OUSD’s expenses are about 80% personnel costs ($435M out of $547M in the General Fund, according to OUSD’s Annual Statement of Receipts and Expenditures for 2016-2017), there is no way to do significant expense reductions without layoffs. Good and hard-working people – our neighbors, friends, relatives, and our students’ family members – will lose their livelihoods. No one in education can possibly take these decisions lightly. If layoffs are necessary, we hope the district will do so in a way that is as respectful and considerate as possible – providing lead time, options, and as much support as possible.
  • Prioritize “school support” services based on school requests: In addition to classic “central office” departments (like finance and HR), part of OUSD’s centralized spending includes what it calls “shared services” or “school support,” such as Professional Development or Parent & Community Relations. Because not all districts centrally organize all these functions, OUSD needs a different strategy other than benchmarking to identify potential expense reductions. We’d recommend determining the scope of support that these departments provide, calculating the cost-per-pupil, and asking principals if they would pay for that service if the money were in the school’s budget under the principal’s direct control. If school leaders don’t believe these “school support services” merit the costs, perhaps OUSD and school leaders can deploy those resources more strategically?
  • Maximize staff utilization at sites: Before consolidating or closing any schools, OUSD should first ensure that each teacher in each individual classroom is teaching the maximum student caseload that the contract allows. This might require consolidating classrooms, creating multi-grade classrooms, or getting waivers to create hybrid roles for some teachers. I know this may sound harsh: some students require more time and attention than standardized ratios allow, and it would mean asking even more of teachers who are already working hard and doing their best with limited resources. Sadly, this degree of attention to the cold hard numbers may be what is required for OUSD to avoid state receivership. And it could lessen the greater disruption that would come from school closures or consolidations.

Like everyone else in Oakland, we are dismayed to find OUSD in this precarious position again – despite three consecutive years of per-pupil funding increases providing 28% more in General Fund revenues even with flat enrollment. Yes, the state needs to fund public schools at higher levels – but that’s not an excuse for us to spend beyond our means. We hope that these ideas will contribute to a more comprehensive discussion of options, spark some creativity, and get all hands on deck to explore what it will take to avoid OUSD going back into receivership.

Does Oakland have too many schools?

7 Facts to Consider

It’s a new school year, and OUSD still faces major financial challenges. We are picking back up on our #OUSDBudget series. Superintendent Kyla Johnson-Trammell has prudently named “Fiscal Vitality” as priority #1 in her draft workplan for the year. The work plan also prioritizes creation of the district’s Blueprint for Quality Schools, intended to be kind of a master plan for the district. Both these priorities raise the big question: Does Oakland have too many schools?

IMHO, the answer is: YES.

But, like so many other aspects of public education, the answer is actually not so simple. It is possible to have a city-wide portfolio of many small schools (like OUSD has) and be financially viable as a district – but it requires flexibility, prioritization, and purposefulness, none of which are strong suits of large bureaucracies. The real issue is under-enrollment of many schools, combined with a persistent failure to make trade-offs.

Here are seven facts to consider:

FACT 1: Oakland has more schools than comparably sized cities.

In its 2016 report, Educational Resource Strategies provides the numbers: OUSD operates nearly double the number of schools as districts serving comparable numbers of children. Getting to the median would require OUSD to reduce its portfolio by approximately 30 schools.

FACT 2: More schools typically require more central office staffing to oversee.

In the state bureaucracy, every public school has a unique, 14-digit California Department of Education-assigned County-District-School (CDS) code, which is used to report Average Daily Attendance, disburse funding, and report on student outcomes. Each unique CDS code represents a different budget to keep track of, a different code to use for classifying employees, additional reports to file, additional row or columns on every spreadsheet for every activity where information needs to be gathered, analyzed and reported. It means an additional principal or office manager to contact and inform and support and follow-up with. This all results in additional work – and therefore additional staff – in every central office function: more budget analysts, more HR generalists, more IT people. This can be mitigated through technology, but unfortunately, because OUSD has not historically invested in technology, many tasks are unnecessarily manual (and time-intensive) processes. And certainly, there are some central office activities that cannot be automated, like coaching principals. The relatively high number of schools is one of the reasons that OUSD spends more on its central office compared to similar-sized districts.

FACT 3: Small schools can be more expensive to operate (on a per pupil basis) than large schools.

On average, OUSD spends one-third more per pupil at its small (<350 students) schools than at larger schools. The difference is much bigger at the middle and high school levels than at elementary schools. Again, from the 2016 ERS report:

In some cases, small schools are operating in buildings that could house many more students – in which case we’re paying for heating and lighting and maintaining more space than we really need for that number of children. But this is not the main driver of the cost difference between small and large schools. In any school, personnel (i.e. salary and benefits) comprise the vast majority of the budget, so it should be no surprise that this is where the difference lies.

In classic “factory model” schools (which, let’s face it, most of our schools still are), specialization and economies of scale go hand in hand. Secondary schools require subject-specific teachers (i.e. different teachers for math, English, science), and these subject-specific teachers are more likely to be “fully utilized” at a large and fully enrolled school with a typical schedule (i.e. where you have enough students for a Physics teacher to teach 6 periods of Physics, and each Physics class is enrolled at maximum capacity). In contrast, a small school may end up employing teachers who teach fewer periods or smaller classes (which is arguably better for teachers and students, although it is not fiscally “efficient”).

FACT 4: Small schools can be financially viable, even at relatively low California per pupil funding levels.

Small schools are not necessarily more expensive than large schools. Within Oakland and across the state, there are many examples of small public schools that are financially viable on the average per pupil funding levels. To do so, they must be frugal and flexible with their resources. For example, a small school might hire a part-time teacher as a reading interventionist, partner with a community organization to provide art or music lessons in exchange for weekend space, or ask a math teacher to teach coding in addition to algebra. This can be hard to pull off (can you find a teacher who is credentialed to teach both biology and art?), and labor contracts might constrain some “creative” arrangements. It also usually means making some trade-offs. For example, it can be very hard on teachers to prepare for and teach multiple courses, cross-subject collaboration is harder with part-time staff, and limited funds may mean fewer special subjects and extra-curriculars.

FACT 5: School districts can be financially viable at all levels of enrollment and numbers of schools (up to a point).

California has about 1,000 school districts, ranging in size from 6 students in Little Shasta Elementary to Los Angeles Unified at nearly 640,000 students (see ) [1]. The 20 CA districts closest in enrollment to OUSD operate an average of 47 schools, representing a wide range: from 20 to 76 schools. OUSD operates the most schools by far: 93 (including Adult Education and other specialized schools) –22% more schools than the next highest district.

[1] In this link, as in some of the CDE data sets, they include in-district charter enrollment.  Notice OUSD shows up at almost 50K students.

As far as we know, all these districts are financially solvent, although some (like our neighboring Fremont) have also made budget cuts. So while OUSD’s enrollment and budget may be smaller than it was 10 years ago, theoretically it should be able to structure itself so that expenses don’t exceed [1]revenues. Of course, that will take organization-wide fiscal discipline and doing lots of things differently.

[1] In this link, as in some of the CDE data sets, they include in-district charter enrollment. Notice OUSD shows up at almost 50K students.

FACT 6: Smaller schools can be good for students, families and community. So can bigger schools.

Nearly 20 years ago, Oakland embarked on a deliberate strategy to improve the quality of schools by making them smaller, based on the belief that smaller schools could become more tight-knit communities in which students and families were known well and supported. Known as the Small Autonomous Schools Movement, this effort subdivided large schools into multiple small schools, each with a school leader that was given flexibility with budget, staffing, and program decisions to execute a vision collaboratively created with teacher leaders and the community. Many (but not all) of these schools outperformed their predecessors, creating nationally recognized proof points of the benefits of this approach.

Subsequently, OUSD launched its Full Service Community Schools initiative. This brought other public agencies and community organizations into schools to provide a host of additional services to students – health and wellness, counseling, family engagement, etc. This work has also gotten results and is viewed as a national model. It is also a model that requires scale: partnering service providers of all types need to serve many families to be financially viable.

Lucky us; we have two effective models for serving our families. But they are different approaches and both require resources to implement well. This is why the work to create the “Blueprint” is so important: how are we going to decide which schools and communities need a Full Service Community School, and which need a small school, and which need something else?

FACT 7: Not all small schools are small for the same reasons.

Some were deliberately designed to be small; if they are serving students well, can they grow without losing what makes them special? Some can’t get bigger because of the physical constraints (e.g. a small building); can we add another floor to an existing building? Some are in hard-to-get-to locations with fewer children in the area; can the district or city provide transportation?

Financially, some schools have the “luxury” of remaining small because they are getting extra dollars per pupil – through district subsidy or parent fundraising or philanthropic grants (although these sources don’t always address the additional central office burden). The district’s practice of cross-subsidization means that school and district leaders may not make the same financial and program trade-offs as they would if they had transparent information and direct access to the public dollars generated by their students.

But some schools are small because very few families are choosing them. Often, but not always, it’s because families have legitimate concerns about school safety or academic performance, despite years of hard work to improve them. Sometimes, they are also important neighborhood institutions. Often, even when students have gone elsewhere, these schools are staffed as if they were fully-enrolled – so they end up with more expenses than the revenues warrant. These under-enrolled schools contribute to the district’s financial woes and present a real conundrum for our leaders and community.

If we, the citizens of Oakland, want the district to be financially viable, AND we want many good schools representing a variety of models to meet the needs of different families and communities, we need to ask a different set of questions. “Does Oakland have too many schools” over-simplifies the challenge. Instead, we need to ask what mix of schools (of varying sizes and models) do we need as a city to serve all our students well? What types of school, at what quality levels, will ensure full enrollment at the schools we do have (whatever the size)? What trade-offs will we need to make to operate a mix of excellent schools AND be financially viable as a system? And what will we do together to make this new approach a reality?

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OUSD Budget – Long-Term Obligations; Near-Term Impact

In case it hasn’t already become clear, the challenges of the current 2016-2017 fiscal year are not the end of OUSD’s financial woes. Among the biggest of the looming issues: benefits and ballooning pension costs.

Robust benefits and the opportunity to participate in the State’s defined benefit pension systems can help OUSD attract talent and are an important investment in the people serving our children. Nevertheless, OUSD has limited resources – and expenditures for employee benefits come from the same pool of funds as base salaries and books. Over the next several years, increasing pension costs in particular will require increasingly difficult trade-offs, in part because of factors outside of OUSD’s control.

Current Expenditures on Benefits & Retirement

OUSD offers very generous health and welfare benefits. For example, OUSD pays the complete cost of health, dental, and vision insurance for the entire family of each employee. Compared to other similar districts, OUSD benefit costs are 50% more per full time equivalent employee. (See slide 110 of the ERS report from June 2016.)

Nearly all OUSD employees also participate in one of two state pension systems: California’s State Teachers Retirement System (CalSTRS) for teachers, principals, and others with a teaching credential, and California’s Public Employee Retirement System (CalPERS) for everyone else (e.g. buildings and grounds, noon duty staff, office administrative staff).

This school year, OUSD is contributing to 12.58% to CalSTRS and 13.89% to CalPERS for eligible employees. (Employees themselves also contribute a mandatory amount: 9.2% or 10.25% for CalSTRS depending on hire date, and 6% for CalPERS). This all adds up: in 2015-2016 OUSD spent $30.4 million total on contributions to CalSTRS and CalPERS – 6% of the General Fund.

What’s Coming [Cue Ominous Music]

Unfortunately, both CalSTRS and CalPERS don’t have enough funds to cover payments to future retirees. This is a result of years of overly optimistic projections on investment returns that have not materialized and show no signs of doing so soon. So, both have mandated that employers (such as  school districts) steadily increase their contributions each year, to 19.5% for STRS and 28.2% for PERS by 2021. In other words, over a 10-year period, the district’s pension contributions rates will double.

For OUSD, this means that next year, at least $10 million more of the general fund will go to pensions. By 2021, if total salaries are the same as in 2015-2016, it will be a total of $26 million more than today – 11% of the general fund. If total salaries continue to go up, then the benefits contribution also goes up. And remember, the current year budget cuts aimed to reduce expenses by $11 million.

These required pension contributions will likely constrain the district from spending money on anything else, including field trips, classroom supplies, extra services for high-need students, technology, and raises, which is unfortunate because our teachers remain underpaid compared to the average across Alameda County school districts .

A Perfect Storm

CalSTRS and CalPERS contributions are climbing at precisely the same time that state funding is expected to plateau – a recipe for financial disaster for districts across the state. The recent California Schools magazine published by the California School Board Association had a piece on this issue with this sobering infographic:

Even wealthy districts like Piedmont are worried. Former Piedmont Unified School Board President Richard W. Raushenbush recently wrote a clear and compelling – but largely overlooked – opinion piece, published in the East Bay Times:

School districts spend about 60 percent of their budgets on teacher and staff compensation, so a 10 percent increase in retirement contributions means roughly 6 percent of the entire budget has to be reallocated from educating children to paying off underfunded pension plans.

Oakland is in an especially difficult position. David Crane, formerly with the California Governor’s Office, recently wrote a brutal analysis of San Jose, which has a “Positive” rating for its finances. In it, he notes:

Worse off are “Qualified” certification districts, which host more than 1 million students, including in LA, San Diego and Oakland. They expect they may not meet financial obligations for the current or next two fiscal yearsand thats after already shortchanging students and teachers.

In other words: this year’s budget cuts were just the beginning. Despite painful cuts this spring for both schools and central office, OUSD is expecting to dip into its state-required 2% reserve to end the 2016-2017 fiscal year in the black. To balance next year’s books, OUSD will need to cut enough to cover previously-committed salary raises, make the higher required pension contributions, AND restore the reserve.

Clearly, district leadership will need to make some tough decisions ASAP, including: restructuring central office and making better use of District facilities and assets. We also need to push for state-level changes that will help cities and students across California. These are some big rocks, and the only way they are going to move is if we push together.

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Equity & OUSD Budget

So far in our #OUSDBudget Real Talk series, we have asked and answered the following questions:

  • How much money does OUSD spend overall and per pupil?
  • How much does it spend on schools versus centrally?

Now we look at the question of equity.

“Equity” is a frequently used term in Oakland; some might even say it’s over-used and misused. OUSD’s Deputy Chief for Equity, Chris Chatmon, provides a definition that is succinct, free of jargon, and spot-on: Provide everyone access to what they need to be successful.

So, when we ask if OUSD’s spending is equitable, we’re asking: is OUSD allocating more resources to students who need more support to be successful? This is a complex and challenging question, but fortunately, last year’s ERS report was quite illuminating. And unfortunately, the answer is: not really.

The key slide is #36.

This slide shows the per pupil spending for schools at each grade level, after weighting the spending based on the student needs at each school, arranged by grade level and then by percentage of Free/Reduced Lunch (FRL) participation, the most commonly used indicator for the poverty level of students need. In a perfectly equitable system, the weighted per pupil spending would be even across all schools in the system.

It’s worth noting that the variation in per weighted spending in OUSD is less than the variation without weighting, suggesting that the incremental supports for needier schools are creating a somewhat more equitable environment, but there’s still a surprising amount of variability and certainly no obvious trend showing needier schools getting more.

The state of California’s new Local Control Funding Formula (LCFF) is intended to provide more resources to students who need more support. So OUSD receives more dollars per student for high need students – low-income, English learners, and foster students. OUSD also receives more dollars for the schools that have a high concentration of low-income, English learners, and foster students.

So why would we see so much variability in per pupil spending between sites? Because the money all goes to Oakland Unified as a district, not to each individual school, and district staff use internal allocation formulas to determine the resources that each school receives. At OUSD:

  • schools receive a certain allocation of Full Time Equivalent (FTE) people of different job types (e.g. teacher, assistant principal) based on student-to-staff ratios;
  • Those FTE are added to school budgets based on average salaries, not actual salaries.

The result of this “base allocation” approach is that the district spends less per pupil in schools that have a higher proportion of beginning teachers (i.e. those with lower salaries). And unfortunately, in general, schools with higher poverty levels tend to have more novice teachers. You can see this information yourself- look up teacher experience data by school on OUSD’s public dashboards.

And, while there are exceptions, schools with a higher proportions of English Language learners also tend to have fewer experienced teachers and thus lower per pupil expenditures, as visible on Slide #26:

According to OUSD, the reason they use average not actual salaries in the base allocation is to prevent principals from hiring new teachers instead of experienced teachers for financial reasons– although actual salaries were used several years ago.

After the “base allocation” of staffing is completed, OUSD then distributes remaining funds available to each school via several district-created allocation formulas– based on the grade levels served

($175-$300 per pupil), number of “LCFF eligible” students,[1] current School Performance Framework tier ($70-$215 per pupil), and on “Z score,” which the district uses to measure challenging “environmental factors” such as neighborhood crime ($25K – $100K per school). This part of the budgeting process is commendable, delivering on an intention that students with higher needs should receive some additional resources. But, because running schools requires a lot of people, the “base staffing allocation” uses up more than 85% of unrestricted General Fund resources,[2] leaving less for this equity-driven redistribution. And, school sites end up with less flexibility on how they spend the governmental funding that their students generate for the district.

When talking about school site funding equity, many people wonder about the impact of parent fundraising as well. Parent fundraising tends to exacerbate inequity, since schools with more affluent families are able to raise much more per student. Here’s a slide similar to what we’ve seen before, but ordered by total school funding, including private fundraising. With few exceptions, the biggest raisers seem to extend their “lead” in terms of funding:

There are some nascent efforts to address this inequity in private fundraising, but nothing on the multi-million dollar order needed to truly tackle the problem. We hope to see more efforts, but any will likely face serious challenges as described in this recent NY Times article.

In any case, sharing the wealth of bake sales and walk-a-thon dollars isn’t enough to get schools to an equitable distribution of resources. And, these

patterns of funding inequity are not unique to OUSD. Researchers recently found that LAUSD has diverted money from high need elementary students, and Public Advocates filed a complaint against Long Beach USD for not equitably using resources to serve high-need students. The highly regarded Oakland-based research and advocacy group EdTrust-West recently released a report highlighting the challenge.

However, some California districts have found ways to use their budgeting and internal resource allocation process to increase equity and ensure students get “access to what they need to be successful.” We call on OUSD’s leadership to do the same for Oakland students.

Next in the series: unpacking some other big financial challenges, including Special Education, pension obligations, and the impact of facilities. We’d also love to hear what questions you’re hoping we’d write about. Please let us know by commenting on our Facebook and Twitter– or just e-mail us. We’re also open to elevating the voice of others who would like to offer a perspective on the #OUSDBudget as a guest author. Let us know if you’re interested!

[1] After reviewing OUSD budget presentations, we found formulas for most of the allocations but couldn’t find the formula for how LCFF supplemental funds are allocated, nor Title I and other federal categorical monies. These funds can be significant for some Oakland schools.

[2] Thank you to OUSD for their work to increase fiscal transparency; this calculation come from OUSD’s new Fiscal Transparency website. Click on “Budgeted Expenses Dashboard,” select “General Fund” from the “Fund” drop down menu, select “Unrestricted” from the “Resource Type” drop down menu, and add up the Certificated salaries (43.3%), Classified salaries (17.5%) and Employee Benefits (25.6%).

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Central Office Spending

If you read our last blog post, you know how much money OUSD spends every year. Now you might be wondering: How much gets to schools and classrooms? The short answer is: not enough.
The long answer involves how much is spent centrally, and we’ll get into that in a second. First we want to again ground ourselves in a challenging reality: Behind the vast majority of “central office” spending are real people who work hard every day in service of our children. So when we talk about “cutting” central or even re-allocating resources, people’s jobs and livlihoods are involved. Nevertheless, we must confront this challenge, which brings us back to the question of this blog post…
To answer the question of how much funding gets to schools and classrooms, we need to dig back into the largely overlooked report by Education Resource Strategies, presented to OUSD’s Board in June 2016. This was a comprehensive and detailed look at OUSD’s resource use (from 2014-2015) in comparison to similar districts in California and around the country. ERS is a well-respected not-for-profit group, OUSD paid a lot for the work, and staff spent a lot of time providing the underlying data – so let’s put it to use!
The ERS report confirmed what many have suspected: OUSD spends much more on the central office – about $30 million more – than comparable districts. Here’s the most striking slide to ponder:

Some details to note:

  • The comparison is among California districts, all of which are operating in a similar state funding and policy context (and, as we know, most of education policy and funding in the U.S. is driven by states).
  • These districts have similarly high-need populations, with many low-income students, and English language learners.
  • Many are also urban districts.
  • The comparison group includes comparably-sized cities such as Santa Ana and Sacramento.
  • Oakland has the dubious distinction of rivaling Los Angeles Unified and Stockton Unified with nearly the highest central office spending per pupil.
  • OUSD spent TWICE as much per pupil on central office as a district like Riverside, which has a similar student population and somewhat better outcomes on some measures, according to the new state dashboard.
  • If OUSD reduced its central office spending to the comparison group average, it would produce almost $14 million in savings: enough to completely close the current year budget gap and then some.

The ERS report makes the specific reason for this higher-than-average central spending even clearer in this slide: OUSD has more people and higher cost per person in several central office areas.

Those of you who have seen District financial presentations might be surprised by this information. The District has reported that over the past few years they’ve been directing more money to sites and away from Central. Some of you might not be surprised; other than long-overdue and much-needed double-digit salary raises for teachers and other school staff, school sites probably have not felt this shift.

We believe the disconnect can be explained by looking at a different set of publicly available numbers. Specifically, we think that the “shift” to reduce central office expenditures over the last few years have been achieved mostly through accounting decisions, rather than substantive changes in budgetary control to move dollars closer to students. We’ve reached this conclusion by looking at the Fast Facts provided by OUSD over the past few years:

In 2013-2014, the District had about 37,000 students served by 1,911 teachers, 1,391 “Other School Staff”, and 940 Central Office Staff. Then…

Suddenly, in 2014-2015, Central Office Staff has about 300 fewer people and Other School Staff has that many more! Our conclusion: the District simply changed the budget categorization for some staff from central to “other site”[1]. To be fair, this kind of change can theoretically help district staff feel more connected with and provide tailored service to school sites. We do know, from talking with school leaders, that sites didn’t receive a commensurate increase in budgetary authority. Principals could not say, “Instead of using these central services, we want to use those funds in a different way.”

[1] This is the fiscal year that ERS analyzed, and ERS used transaction-level information to categorize expenses in a way that would be consistent across the districts they studied.

In 2015-2016, there was not much change in the Central and Other School Staff numbers. So, despite the perceived and reported decrease in central office spending, it’s likely that OUSD continued spending significantly more centrally than similar districts.

The current year’s Fast Facts are bit surprising. Central Office Staff headcount increased by 13% or 88 employees, its highest level in three years. There’s not a corresponding decrease in Other School Staff. Did the Central Office really grow that much?

Conclusions:

OUSD has been spending too much centrally and not enough at school sites. We hope the District has been making substantive (rather than accounting) changes in this area since the ERS report came out last year, and we would love to hear more from District staff on this.

It’s also probably not surprising that we’re having a budget shortfall if enrollment – which drives revenue – has been essentially flat and yet every year we’ve been adding more staff of all types.

Next week we are going to delve into variances in spending across school sites, exploring the equity question: is more money going to the students and schools who most need extra resources? What’s your prediction?

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