Orange County Register, November 17, 2003

Waste occurs when government agencies fail to spend tax dollars in ways required by law. The recent and widely publicized state education audit addressed that problem. However, the audit did not address the kind of waste that occurs from spending that is legal but fails to achieve the results lawmakers claimed would occur.

The review by the Bureau of State Audits was initiated in response to a series in the Sacramento Bee that detailed the failure of the state Department of Education to oversee the distribution of funds earmarked for specific purposes and to determine whether program dollars were actually helping students. State education officials admitted that these earmarked tax dollars, called categorical program funds, were being sucked into a black hole of waste.

Take, for instance, the state's Tenth Grade Counseling program, which received $11 million in the last fiscal year. A state education consultant acknowledged that "[w]e don't know how the money is being used. ... No one knows if this program is effective ... ."

With marching orders from a legislative committee, the state auditors examined how the state monitors its 113 categorical programs, which received $17 billion in 2001-02. The auditors found that the Department of Education has no department-wide monitoring plan and no internal monitoring committee to ensure that information is shared between various departmental divisions. The result, concluded the auditors, is that there's only limited assurance that the department "uses its resources efficiently to monitor entities receiving state and federal funds."

State lottery dollars dedicated to education, to take one example, must go to the classroom education of students and cannot be spent for acquisition of real property, facility construction, finance of research or any other non-instructional purpose. Yet according to the audit, the state disbursed $854 million in lottery funds in 2001-02 to local districts, but the Department of Education "provides no oversight of these funds" and does not review expenditures of lottery funds to ensure that local districts do not spend those funds on prohibited purposes.

Without an effective oversight system, state officials can't identify entities receiving taxpayer funds that consistently violate spending rules. For those supporting big spending education budgets, however, this ignorance is not unwelcome. After all, if the public knew of the waste problem, then people might ask the education establishment to live within its means and produce better results. For its part, the state audit, unfortunately, avoided the issue of results.

To be fair, auditors weren't told to conduct performance evaluations of education programs. Such evaluations, though, are desperately needed since, as the Legislative Analyst's Office notes, "Most programs are never evaluated," so there's no "conclusive evidence of success of categorical programs."

Take the English Language Acquisition Program, which is supposed to help limited-English-proficient students, and which has received $226 million since its creation in 1999. When asked by the Sacramento Bee where the money goes or what the program accomplishes, a state education official says: "I have no idea. There's no audit. There's nothing." In contrast, class-size reduction, which has been researched and evaluated, has been shown not to improve student performance.

Student achievement is education's bottom line, but California spends billions of tax dollars every year on education programs that, in all likelihood, don't raise student test scores by a single point. Gov. Schwarzenegger and legislators should dismantle the current funding system and transform categorical funds into block grants with accountability provisions. Local schools would have the flexibility to use funds to better meet the needs of their students, but they would also have to show better results. A targeted school-choice voucher option should also be included that would allow students to exit public schools that fail to produce good results. Flexibility plus incentive to improve is a better formula for success than putting Band-Aids on a funding system that has clearly failed.

Lance T. Izumi is a Senior Fellow in California Studies.