I am writing to request information from the
Department in connection with the hearing held by
the Subcommittee on September 29th on H. R. 1138 and
equalization efforts, at which Dr. Joel Berke and
Dr. Alan Ginsberg testified. Although both Dr. Berke
and Dr. Ginsberg included in their testimonies a few
options for Federal activity to further the goal of
equalization, I believe it would be very useful to the
Subcommittee if the Department could provide us with a
memorandum listing a more extensive range of options
in this area.

We would like this memorandum to encompass options ranging from those of low cost to the Federal Government which might stimulate State activity, through options of moderate expense intended to partially reduce existing inequities in school finance, to options of high cost, such as the program proposed in H. R. 1138, intended to promote wide-scale reform. I understand, of course, that since the Administration has not as yet adopted a position in this area, your listing and discussion of those options should not be interpreted as an endorsement of any or all of them.

We would suggest that in developing the memorandum

some of the following criteria be considered:

Dr. Mary Berry
Page 2

October 3, 1977

whether the option would result in greater

fiscal neutrality within a State

-

whether the option would aid in reducing the disparity in expenditures between local districts in a State

---whether the option would take into account the needs of children with greater educational costs and of districts with greater educational costs.

In order that this memorandum be made part of the hearing record, we would appreciate receiving a response by October 31st. Thank you for your cooperation, and I look forward with a great deal of interest to your response.

In your letter of October 3, you asked me to assist the committee by
providing a memorandum which would expand on the testimony presented
on September 29 on H.R. 1138 by Dr. Joel S. Berke and Dr. Alan
Ginsburg. In particular, you requested a memorandum which would
present a more extensive range of federal options to further the
goal of equalization than was included in the original testimony.
I hope that the following discussion will be of use to the committee
as it continues its deliberations on this important topic.

Background

As Drs. Berke and Ginsburg indicated when they appeared before your committee, and as you recognized in your letter, the Department of Health, Education, and Welfare and this Administration have not established a formal position with regard to the Federal role in the reform of State and local school finance. But the absence of an Administration position does not mean that we are not concerned with the issue. Reform movements addressing inequities in raising and distributing State/local financial support for elementary and secondary education have received widespread public attention and have accomplished substantial changes in public policy. At the Federal level, there have been two key action dates. One, the five to four Supreme Court decision in the 1973 Rodriguez case decided that school finance reform was not required by the Equal Protection Clause, although even the majority opinion forcefully called attention to the need for repairing the typical fiscal inequities illustrated by the Texas case. Two, beginning in 1974 with P.L. 93-380, Congress passed several provisions which either harmonize Federal aid formulas with reformed State laws, provide encouragement to States to revamp their traditional school finance legislation, or require the funding of research in school finance. In carrying out these Congresssional purposes, the Department of Health, Education, and Welfare has been supporting studies by State governments and private researchers to understand the problems and develop solutions for finance inequities.

At the State level, between 1971 and 1977, traditional school finance systems have been struck down under State constitutional guarantees by courts in at least seven States and serious challenges are approaching decision in two others. Approximately twenty States have overhauled their State/local finance systems in the last five years to accomplish one or more of the following purposes: to equalize local property tax capacity, to reduce spending disparities among districts, and to recognize greater financial need of atypical pupils and districts. In a few States, the new laws have been accompanied by substantial narrowing of tax and spending disparities and by a greater focus on meeting the added costs of atypical pupils. But the record is uneven, and because many of the reform laws were underfunded, substantial inequities have continued to occur in more than forty States today.

The basic problem of State/local school funding that has received most public attention is the dramatic variation in expenditures among the districts within States, differences that in most States reach one and a half or two to one. Such spending differentials result in marked educational disparities, as measured by pupil-teacher ratios, training and experience of staff, availability of facilities, equipment, and counseling services.

Traditional State equalization formulas fail to recognize the special problems of the largest urban districts because their capacity to support education under the traditional measure of property value per pupil is frequently above the average for their States. Yet many large cities, particularly those in the Northeast, Midwest, and others scattered throughout the nation, have unusually heavy demands against their deteriorating tax bases for other municipal services, which make their problems of raising revenues substantial. Further, these cities have high proportions of pupils with costly educational needs that require added spending, and the high prevailing urban price levels compound their financial dilemma. Although several of the recent State school finance laws correct for these urban problems, either in the way they measure taxable capacity or by providing extra funds for Title-I type pupils, large cities in many states continue to have special problems. Another unmet problem of State/local school funding for urban, suburban, and rural districts is that high cost pupils in large proportions require costly educational services that are not recognized by traditional school finance systems. Poor children, low achieving students, the non-English speaking, those in higher cost curricula, and the handicapped are among the pupils who impose high costs. Because these pupils are not randomly distributed, their costs pose particular problems for selected districts in every State. A number of reform States have introduced pupil weighting systems or new categorical programs to meet this problem, but such States are in a very small minority.

Implications for a Federal Role

What the above discussion (and the more extensive Berke-Ginsburg testimony) suggests is that while the shortcomings of traditional school finance systems create serious denials of educational opportunity, the solutions to those shortcomings are complex and, in the current state of knowledge, extremely difficult to devise. Thus in providing a series of options ranging from (1) research and developmental activities; (2) adjusting federal categorical programs; and (3) providing direct assistance for equalization within States, I see these categories as a necessary progression, as well as alternatives. If we can (1) develop answers and build analytic capacity over the next few years; and (2) if, in the meantime, we can adjust existing federal aids to overcome disparities, or to avoid contributing to finance inequities or interfering with state efforts at reform, we may (3) be able thereafter to propose carefully constructed federal programs specifically designed to encourage the equitable funding of elementary and secondary education in and among the states.

Before presenting these alternatives, I would like to share with you the conflicting views which must be resolved before a formal determination can be made for support of an enlarged federal role in this area. The arguments, in abbreviated form, which suggest an enlarged federal effort in the school finance arena are: (1) school finance inequities serve as barriers to equal educational opportunities for large numbers of school children; (2) traditional school finance patterns frequently work at cross purposes with Federal aid programs; (3) that the Federal government cannot continue to ignore the central core of educational support and expect that its add-on categorical aids can of themselves make a substantial difference in the quality of American public education, and (4) Federal research and incentives could bring about major changes, especially in cases where States have demonstrated that feasible approaches to reform are possible.

Countering these views are the arguments that (1) the limited federal role in education should continue to focus primarily on target groups comprised of economically disadvantaged and handicapped children; (2) that the basic support of education is a State/local concern, and federal involvement in school finance reform would open the door to federal general aid; (3) that the problems of educational finance are inter-twined with general State/local finance and cannot be dealt with in isolation; and (4) that systems of finance are so individualized to particular States, the state of the art so uncertain, and the amounts of aid necessary to bring changes so large, that no effective federal leverage is possible. With the understanding that that debate remains unresolved at present, let me turn to what some possible alternative federal actions to encourage useful change might be.