empower local educators, support innovation, increase transparency and align resources with new learning goals. T he changes now facing Cali- fornia's public schools seem unprecedented both in terms of number and magnitude. In particular, the Common Core Standards, accompanied by new curriculum, new tests, and a new accountability system, promise to affect the core of the educational enterprise. But in many ways the reform of the state's school funding formula could result in even more dramatic changes. The effects of linking school districts' funding directly to the students they serve and providing local school districts and communities with more control over how that money is spent could ripple through the entire K-12 system, from the state Capi- tol to the classroom. For district leaders anxious to improve their schools and bet- ter support learning for all students, it could also represent a real opportunity to depart from business as usual in the areas of finan- cial management and budgeting. State leaders hope this reform will em- power local educators, support innovation. increase financial transparency, and pro- mote the use of limited resources in ways that align more closely with new learning goals. In a public school system that has had its financial hands tied for decades, realiz- ing those goals will require district leaders to re-examine their processes and policies related to resource allocation. Over many years, student-based bud- geting has often been promoted as a strat- egy that would facilitate that kind of local finance reform. That optimism is based in part on successful examples outside of Cali- fornia and based in part on experiences in the charter school sector. In 2009, a California-based project set out to learn what it might take to move to- ward both a student-based process for allo- cating resources and a site-based process for budgeting in school districts. Pivot Learn- ing Partners and the American Institutes for Research formed a partnership with the B y M a r y P e r r y 8 Leadership Twin Rivers and Los Angeles Unified School Districts to create the Strategic School Fund- ing for Results project. The goal was to im- plement and evaluate a new way for districts to allocate funds to school sites and for site leaders to create their school budgets. The experiences of the participants in this proj- ect provide some important lessons for dis- trict officials who want to take advantage of the new funding formula state leaders seem likely to adopt. The Strategic School Funding for Results project was designed to translate the ideas of per-pupil resource allocation tied to student characteristics, site-level budgeting and fi- nancial autonomy into more transparent budgeting processes and increased local ac- countability for results. A key question was whether site-based budgeting could also foster innovations that would improve effi- ciency and student performance. The pilot involved real schools and confronted the on-the-ground realities in California. Coin- ciding as it did with dramatic cuts in school budgets, the project also supported local leaders' efforts to run an acceptable school system on substantially reduced funding. In the process, the SSFR partners identi- fied some strategies likely to prove useful to any district leaders wanting to find effective ways to put more budget control into the hands of their school principals, staffs and communities. 1 Rethink district and school site budget development and planning calendars. It was an "aha moment" when Pivot and the partnering districts in SSFR recognized that the timing of school site budgeting needed to change if principals were to con- duct a more deliberate and strategic process in which educational planning could actu- ally drive budgeting. Traditionally, while districts might begin some budget planning in the fall, they do not give school sites an estimated budget to work with. As a result, schools don't start working on their budgets until after state projections are available in February or later. At this point in the year, time is short and budgets are finished quickly before school plan de- velopment even begins. Rethinking the site and district budget planning calendars - and accelerating the site-level budget development to begin in the fall - changed this. The new schedule gave principals and school site councils the time to begin with a needs assessment and goal setting, think about the innovative strategies that would achieve their goals, and develop a time for planning and budgeting, plus more effective tools for doing so collaboratively, improved the principals' capacity to man- age their budgets. Through control of this software system, the districts placed their own overarching goals - and specific out- come measures - into each site's planning documents and thinking. This process also school plan that could then drive the budget development process. The schools were thus able to allocate their available dollars toward the goals and strategies they had already ad- opted. 2 Create an online environment where budgets and emerging school plans can be easily accessed and readily shared. The SSFR study found that principals and school district officials approached the budget process more thoughtfully and col- laboratively when they could share their thinking as they developed their budgets. The key was to create a powerful, common set of software tools that meet principals' planning and budget development needs and that are integrated with the district's data management system. Putting the tools online also helped principals by making it possible for them to access their plans and budgets at whatever time and from wherever it was convenient, including after regular work hours. The combination of a longer window of helped the districts and schools develop a shared vocabulary. And principals began to see their plan development as a process of designing programs to meet specific goals, rather than just as a compliance activity. The SSFR study showed that the right tools can help turn the annual site planning and budgeting process into an experience that increases site leaders' knowledge, and promotes communication and collabora- tion. In the study, district officials had access to principals' planning processes online. As a result, they were able to assess and respond to any professional learning needs that emerged for those principals. The principals found they had more time to be strategic and that they benefitted from being able to confer with district officials and their peers throughout the process. Providing transparency into school plan- ning in real time can also give district office staff confidence they can identify and solve problems as they occur. They are thus em- powered to focus on supporting local priori- ties instead of enforcing district rules. They May/June 2013 see a new and promising alternative to the choice between centralization and loss of control that faces district leaders in most places. 3 Use new systems to make it easier for principals to meet their current responsibilities. With the right set of software tools, site leaders can fulfill state and federal report- ing requirements around their school plans more easily. A template-driven system for accessing past plans, writing the current plan, and communicating effectively with staff and community members can save principals time. That frees them to spend their energies identifying key improvement goals, developing innovative strategies for meeting those goals, and testing ways they can allocate scarce resources to support those strategies. These kinds of tools also facilitate prin- cipals' ability to make the budget process more transparent to their site-level constitu- ents. Standardized reports, the automated creation of charts, and even such mundane details as meeting agendas and minutes can all be incorporated into the software tools and help make communications easier. 4 Giving principals power over al l of thei r resources can be a game changer. Within the traditional school district structure, it is almost revolutionary to talk about giving principals control over all the resources that go into running their schools. But the experiences of several Los Angeles USD principals demonstrate some of the benefits that result. In reports on their site-based budget- ing experiences, these principals recounted what happened when the district gave them full budgetary control. For example, under the new system each site would have to pay for the cost of substitute teachers out of its budget. As a result, the school staff saw the cost of teacher absences as directly affect- ing their school and the result was a marked reduction in those absences. An immediate outcome was that the school had more dol- lars available to meet other needs. Similarly, each site - rather than the dis- trict as a whole - realized the financial ben- efit of better average daily attendance, since the increased revenue generated by better attendance ended up in the school's budget rather than the district's. Principals were able to communicate this to their staffs, stu- dents and parents with a resulting improve- ment in student attendance as well. Giving principals a full understanding of the resources needed to run their schools is consistent with how many other enterprises function, and it can build capacity and con- fidence. For example, when Brent Givens began working as principal at Norwood Junior High in Twin Rivers Unified, he was stunned to find that he did not have any soft- ware tools for managing a school budget of more than $4 million a year. He was looking for a tool, even something akin to what he used for his personal checking account, but the district's systems were designed for ac- counting and compliance, not budget man- agement. "I was craving a tool that would help me w hile Stone & Youngberg's name has changed to Stifei, our core values have not changed. Integrity, client service, and on-the-marketing bond pricing remain the cornerstones of our success. As we move beyond the Great Recession, we continue to serve the needs of our public sector clients, financing K-i2 schools, community colleges, and other key public infrastructure projects. Whether your needs are for new construction, modernization, or renovation, our customized solutions will help you with your financing needs. Visit wyvw.stifel.com/publicfinance or contac member of our School Finance Group: SAN FRANCISCO Bruce Kerns Managing Director (/,i5) 445-2332 bkerns@stifeLcom Anna Van Degna Vice President (415) 445-2681 avandegna@stifel.com LOS ANGELES Dawn Vincent Managing Director (213) 443-5006 dvincent@stifeLcom Erica Gonzalez Vice President (415) 445-2337 egonzalez@stifel.co Roberto Ruiz Associate (415) 445-2381 rruiz@stifel.com John R. Ba r a c y Managing Director (213) 443-5025 jbaracy@stifel com Stifei, Nicolaus & Company. Incorporated Member SIPC & NYSE | www.stifel.com/publicfinance 10 Leadership manage a significant amount of money, one easy-to-use management tool that had all the information I needed," he said. Once he was able to access the software developed through the SSFR project - the Planning, Budgeting and Resource Allocation tool - "I was doing the happy dance." Principal Eric Davidson, at University High in LAUSD, notes in a written descrip- tion of his school's experiences that site- based budgeting "respects the position of the principal as somebody that can make school-based decisions based on data and student needs. .. .1 think it is just a matter of having mutual respect and trust. I trust that the process is going to be consistent and [the district office trusts that] the decisions that I am going to make are going to be for the benefit of my students." Steve Jubb, SSFR project director for Pivot Learning Partners, said, "Through our work on this project we saw clearly that site- based budgeting can create a new appetite among principals for site-level autonomy. When school principals and communities are given the opportunity to develop strate- gies and to allocate the resources they need in support of them, they expect to have the flexibility to put their strategies into action. The onus is then on district officials to find out how to make things possible. "The district can experience this as un- wanted pressure or can use it to begin to shift the district culture from one of compliance to one that focuses on supporting schools. One result can be a new and constructive, but not always easy, dialog about how the district itself makes decisions, develops im- provement strategies, creates spending pri- orities, and supports school sites." 5 Build in a robust set of data and management tools to support evalu- ation and continuous improvement. A valuable by-product of developing new systems and software to manage site-based budgeting is that they can also provide a tool for tracking high priority student outcomes over time and tying outcome data to site- level improvement strategies and expendi- tures. Districts can thus use this change in budgeting practices to inform their work and examine which expenditures provide the best return on investment in terms of student learning. If the experience ofthe SSFR project is any indicator, a district that wants to move to true site-level budgeting will need to pro- ceed carefully and begin by laying a strong Local finance reform - defined as budget transparency, school autonomy and accountability, and equity in allocation of resources - requires substantial change in district culture. foundation within the district office and out at its school sites. The first requirement is that a district is seriously interested in and committed to local finance reform, defined as increased budget transparency, school autonomy and accountability, and ultimately greater eq- uity in the allocation of resources among schools. This work requires technical, pol- icy and process changes that together also prompt substantial change in school and district culture. It takes a sustained effort and a willingness to change anything from the budget calendar to the union contract. It may also make sense to get outside expertise and support from organizations that have had experience going through this change process. Although these challenges need to be taken seriously, site-based budgeting could represent a critical strategy in the new age of school district finance that appears to be on the horizon in California. And the potential pay-offs for district officials, school site lead- ers and students could be substantial. M a r y P e r r y , a n i n d e p e n d e n t e d u c a t i o n c o n s u l t a n t , s e r v e d a s d e p u t y d i r e c t o r o f E d S o u r c e f r o m 1 9 9 3 1 0 2 0 1 1 . S h e h a s w r i t t e n a w i d e r a n g e o f p u b l i c a t i o n s o n t h e s u b j e c t o f t h e s t a t e ' s s c h o o l f i n a n c e s y s t e m . also make office calls, restaurant calls and teacher lounge calls Make your appointment today. CLICK Call 1-916-780-6000. VALIC.com CALL 1-800-426-3753 VISIT your VALIC financial advisor Annuity contracts are issued by The Variable Annuity Life Insurance Company and distributed by its affiliate, American General Distributors, Inc., member FINRA. VALIC represents The Variable Annuity Life Insurance Company and its subsidiaries, VALiC Financial Advisors, Inc. and VALIC Retirement Services Company. find us on Facebook Copyright The Variabi Annuity Life insurance Company. All rights reserved. VC 23622 (07/2011) J82963 EE VALIC May/June 2013 11