Orange County Register, January 27, 2003

SACRAMENTO – Governor Gray Davis’s budget plan has been justifiably criticized for accounting sleights-of-hand and punishing tax increases. Davis, however, does get one thing right. His proposal to turn many special-interest education spending programs into a flexible block grant is a good idea – but it doesn’t go far enough.

Of the $28 billion the state spends on education from its general fund, close to $13 billion consists of so-called categorical programs, which earmark money for specific purposes such as desegregation and adult education. The state Legislative Analyst’s Office (LAO) has taken these programs to task for restricting needed local flexibility, demonstrating no conclusive evidence of success, fragmenting local programs, creating negative financial incentives, and blurring accountability for meeting student needs.

The LAO and others have advised that most categorical programs be eliminated and the money be turned into a block grant that would give local schools greater discretion to meet the needs of their students. Davis now proposes something similar.

The governor wants to consolidate 64 categorical programs into a $5.1 billion block grant that schools could use for teacher professional development, instructional materials and technology, specialized and targeted instructional programs, school safety, and student services. Davis correctly believes that the added flexibility will help make up for any education spending reductions that are enacted.

Although the governor’s proposal is on the right track, it has two key problems. First, it fails to include a number of expensive and ineffective categorical programs. For example, the Davis scheme exempts class-size reduction.

From 1996-97 to the current 2002-03 budget, the state has spent more than $10 billion to reduce class size. Last February, a research consortium consisting of RAND, the American Institutes of Research, and other organizations issued a report that found that, based on California test scores, “no strong relationship can be inferred between [student] achievement and [class-size reduction].”

This comes as no surprise since the study also found that class-size reduction hasn’t fundamentally changed the content or methods of K-3 instruction. In other words, schools that reduce class size but still use ineffective curricula and teaching methods are likely to continue to perform poorly.

Over the summer, the consortium released its final report on the state program and again found that there was no conclusive evidence that class-size reduction was responsible for a rise in test scores. Further, class-size reduction creates financial hardships on local districts.

According to the consortium’s February study, two-thirds of school districts reported that state funding wasn’t enough to cover the cost of reducing class size. Because class-size reduction requires more teachers, the cost of teacher salaries often grows faster than the state reimbursements given to local districts to reduce class size. Other local programs are cut in order to pay for reducing class size.

An even more important problem than exempting ineffective categorical programs is the lack of a tough accountability consequence for local districts that use their newfound spending flexibility unwisely. For instance, Sacramento school superintendent Jim Sweeney says that although he welcomes the increased flexibility he worries that block-grant dollars could simply land on the collective bargaining table and end up increasing union employee salaries and benefits instead of buying textbooks, maintaining buildings, and providing specialized services to students.

In order to ensure that the needs of students are given priority, schools must be given a real incentive to use their funds effectively. One such incentive would be for California to couple increased spending flexibility for local districts with an exit voucher for students at under-performing schools.

As part of its school accountability system, Florida offers exit vouchers to students at failing schools so that they can attend local private schools. Public schools in that state have responded by, among other things, switching to more effective curricula, improving instructional methods, and requiring weekend tutoring. A school-choice accountability measure in California would avoid intrusive rulemaking from Sacramento and allow parent-driven market forces to ensure that block-grant money be used to improve student achievement.

Governor Davis is right that the budget crisis will require hard choices. He will have to make more hard choices if education spending is to be truly reformed. Now is not the time for half measures.

Lance Izumi is a Senior Fellow in California Studies at the California-based Pacific Research Institute for Public Policy. He can be reached via email at lizumi@pacificresearch.org.