After three years of fruitless and contentious wrestling, people here would understand if Sen. Carl A. Parker compared the issue of school finance to a bottomless pit or, perhaps, a bed of nails. Instead, the powerful Texas lawmaker rocks back in his chair and calls to mind a much different image.

From Risk to Renewal:
About This Series

Part 1

February 10, 1993

• • Charting a Course to Reform: The Next 10 Years
• • Mission Impossible? Educators Confront Tough Task of Rethinking Goals
• • Obstacle Course: Barriers to Change Thwart Reformers at Every Twist and Turn
• • The Future of School

Part 2

February 24, 1993

• • Intro: The Balance of Power
• • Time and Space
• • The Coherent Curriculum
• • States Move From ‘Inputs’ to ‘Outcomes’ in Effort to Regulate Schools
• • Basic Training
• • Dollars and Sense
• • Signing Up the Public

Part 3

April 21, 1993

• • Charting a Course: The Next 10 Years
• • Kentucky Moves To Enact Reform Plan
• • Policymakers, Educators Seek Strategy

A sailboat race, he says.

Senator Parker gave up his seat as the chairman of the Senate education committee this year hoping that a new face would bring results: specifically, a law sufficient to satisfy a court order to reduce school-spending disparities between wealthy and poor districts. But even once it clears that hurdle, Mr. Parker says, the state will be far from providing its districts with the fairly and efficiently funded education system mandated by the state constitution.

“It ought to be like how you handicap a sailboat race,’' he explains. “Everybody gets the exact same boat, the same wind, and they traverse the same course. The only difference between the winners and whoever finishes in last place is how the crew works together and how efficiently they use what they have.’'

“In Texas, we’ve got yachts racing against dories,’' Mr. Parker quips.

Across much of the country, attention to school finance remains a debate about which district has the best boat, not about how local officials harness the wind or navigate the course.

Funding for elementary and secondary schools is routinely the single largest pot of money that state lawmakers approve. Yet, distribution of that money often bears only a distant connection to what policymakers say students need and what they expect schools to provide.

More often than not, the amount of state aid to schools represents little more than a historical buildup of money. The total gets run through tedious and cryptic formulas that adjust for economic and demographic factors and, in the end, usually provide districts with a bit more aid than they got the year before.

After fighting for increased state aid, districts in turn add that money to local tax receipts, which mirror local wealth or poverty. They take that total and pay for the same staff and programs as last year and, if the increase was higher than inflation, maybe more.

New Round of Lawsuits Forces New State Thinking

The recent success of state school-finance lawsuits has forced state officials to take a fresh look at local inequities, outdated formulas, and overall spending. Nevertheless, the court pressure has generally pushed states into political gridlock and produced variations on the existing funding system--not a wholesale rethinking of how the state might buy the kind of public schools it wants.

Critics complain that state and district officials treat public school funding--a total of about $252 billion this year from all sources--like fuel to stoke a hungry furnace. Instead of using funding increases to maintain the status quo, they say, it could be used as a powerful force to bring about real school change.

“School finance in the 1990’s must push beyond fiscal inequities and determine connections among student outcomes, education programs, and education funding,’' Allan R. Odden, the director of the Center for Research in Education Finance at the University of Southern California, has written. “School finance ducked those issues in the past; the issues cannot be dodged in the future.’'

Adds Kern Alexander, a school-finance researcher at Virginia Polytechnic and State University: “Court decisions are forcing a rethinking of the whole thing--focusing on the system when legislatures would just like to increase funding and go home. It is forcing them to think more about what they are spending and what they are buying.’'

A Buzz Saw of Competing Interests

Tremendous hurdles lie between today’s entrenched political parochialism, with its skittishness toward budget reforms, and the goal of smarter spending.

“I have become discouraged that my fellow politicians in Texas are ever going to make the commitment to public education that they need to make,’' Mr. Parker says. “There is not a single group looking out for the long-haul interest of students. If that were the case, we wouldn’t have 1,040 school districts in Texas, and we would have long since solved our school-finance problem.’'

Lawmakers, Mr. Parker and others say, can often be blamed for being blind to the good of the state because of their preoccupation with how it will play back home. But educators, too, are guilty of seeing school funds as they relate to their own needs and concerns, not the interests of the system as a whole.

After being bombarded by people speaking out for large districts, medium-sized districts, small districts, wealthy districts, poor districts, urban districts, suburban districts, rural districts, principals, superintendents, and teachers, Mr. Parker says, it is not hard to see why school-finance reforms are difficult to achieve.

Although the drive for greater equity has brought the school-finance system into the spotlight, lawmakers and public officials may have a hard time steering public debate away from the scramble for dollars to make some sense of the system--to define a vision, map out an action plan, calculate the costs, and fight to build it.

“The strongest force in the school-finance world is inertia,’' says John Augenblick, a Denver-based school-finance consultant. “Everything is based on what happened before and what people used to do.’'

Responses to Outspoken Courts

The tide of state school-finance lawsuits that began in California in 1971 and was renewed in the 1980’s in Kentucky, Montana, New Jersey, and Texas has served primarily to shed light on wide disparities in the spending power of local schools.

State courts have issued landmark opinions not only decrying the deplorable state of schooling for children who live in poor districts, but also reminding state officials in strong terms of their obligation to maintain a fair, efficient, and adequate public education system.

Many of the recent court decisions “are documents in true ethics,’' says Jonathan Kozol, whose 1991 book Savage Inequalities describes the circumstances of children in a host of wealthy and poor districts. “Some of these decisions are an avowal of all the good things America is supposed to be about, but there is a terrible falling off by the time it reaches the legislature, where they haggle and nitpick.’'

Indeed, observers say, many of the recent bold court opinions have been followed by mundane state responses. Lawmakers in Texas have twice been ordered to try again, a New Jersey court is reconsidering the remedy adopted by the legislature, and the Montana case was back before a judge this month. Even in Kentucky, where the state supreme
court overturned the entire state school system, and lawmakers came up with a landmark school-reform plan that blazes many new trails, the finance system was not vastly changed.

“Despite the sweeping nature of their court cases, especially the Kentucky case,’' Mr. Odden concluded in a 1992 report, “the finance structures enacted are similar to those that many states have been using for years. For policymakers and analysts looking for innovative ways to design general aid programs, these state programs offer little guidance.’'

Gov. Roy Romer of Colorado adds, “People have been reacting to the pressure, but we haven’t had a lot of creative thinking.’'

To date, much of the grappling with school-finance issues at the state level has been an exercise in finding a balance between local funds--mostly property taxes--and state revenues.

Local funds still account for a sizable chunk of total spending, about 45 percent, compared with 49 percent from state taxes and about 6 percent from the federal government.

Many states are only now beginning to sort through the complicated issues raised by state courts on such issues as the role of property taxes and the definition of local control.

Wrestling With Disparities

While legislators who have been drawn into the recent school-finance battles see an increasingly complex job before them, they contend that their first task must be to assert authority over the disparity problem.

“The issue is going to get resolved because the court has put the hammer on us,’' Mr. Parker says. “We have to focus on equity and get that in place, and then we need to unify people in seeking quality.’'

The equity problem can be traced to states’ heavy reliance on local property taxes to fund education, and to district boundaries that tend to follow economic patterns. Using the same tax rate, a district with neighborhoods of $100,000 houses can raise five times as much revenue as a district filled with the same number of $20,000 homes. Even after state and federal aid is added, the poorer district usually comes out significantly behind.

The result is a gap in spending power that observers say translates into marked educational differences, with state finance systems giving wealthy districts a head start while dealing poor districts a weak hand from the start.

For many poor districts, the results of state finance systems are displayed in the poor condition of school buildings, aging laboratories, bare-bones curricula, a dearth of foreign-language and arts courses, and a teaching corps made up of beginning and unprepared teachers, says Arthur E. Wise, the president of the National Council for Accreditation of Teacher Education.

Mr. Wise was the author of a 1967 book, Rich Schools Poor Schools, that exposed many school-finance problems and triggered a decade of litigation.

“It isn’t just that a child in a poor district is faced with one unqualified teacher; that child might go through a whole career without a good teacher,’' Mr. Wise says. “Well-off districts hire an ample number of well-qualified personnel, while poor school districts are stuck with the leftovers.’'

“It’s not automatic that money is going to improve the system,’' Mr. Parker says. “But it’s almost automatic that a lack of money will destroy or degrade it.’'

Tinkering vs. Innovation

States thus far have pursued a variety of approaches to reduce the inequalities.

In Kentucky, lawmakers provided incentive funds for districts with high local tax rates, placed a cap on local spending to limit budget increases in wealthy districts, and raised state taxes to boost the buying power of poor districts.

Texas officials, meanwhile, are working to modify a plan that bypasses the politically explosive issue of district consolidation by creating regional taxing districts that levy and collect a minimum property tax and spread the total local aid among member districts. Lawmakers in Kansas have moved toward a statewide property tax, while Gov. Mario M. Cuomo of New York this year proposed giving districts the option of replacing local property taxes with income taxes.

Also this year, a Vermont task force detailed a host of tax-reform options and raised the idea of removing residential property taxes as a school-funding source. Property taxes currently account for 60 percent of school funding in the state.

“If you believe in equality of educational opportunity, we are not able to provide that under the current system,’' says David Wolk, the chairman of the commission on tax reform and the chief of policy for Gov. Howard Dean.

But reducing property-tax reliance is an area in which states have made more noise than change.

“Local spending is not only an idea that people have held, it’s an idea that’s been reinforced,’' says Billy D. Walker, a finance researcher and the executive director of the Texas Association of School Boards. “Changing a tax system that has been in place for 150 years isn’t easy.’'

The evidence is mixed on whether such a shift is under way.

Researchers at the Center for the Study of Educational Finance at Illinois State University have found that states with pending finance litigation have seen greater school-spending increases than those without it. Where poor districts have won their cases, most of the new money has come from state taxes. Where the plaintiffs have lost, the funding increases have been drawn from local property taxes.

The move away from property taxes is slow and uneven, explains G. Alan Hickrod, the director of the center.

While many lawmakers see the need to increase funding for poor districts, they are not convinced that reducing the overall reliance on property taxes is wise.

“It is advantageous to have locally applied taxes because it ties local taxpayers to local schools,’' argues John L. Myers, the education-program director for the National Conference of State Legislatures.

Others believe, however, that a stronger move away from property taxes is necessary to give all children the same opportunity for success and to galvanize support for school improvements.

“Reliance on a property-tax system has very deep traditional roots,’' Helen Hershkoff, the associate legal director for the American Civil Liberties Union, says. “But in a period where we’re talking about change, it’s important to revisit the ways we fund education in this country.’'

Complex Formulas Envisioned as Reform Reinforcement

After creating a balanced tax system that puts districts on the same plane, school-finance experts suggest, lawmakers should turn their attention to the formulas that sort and divide school money.

State formulas are often a hodgepodge of calculations that have grown up over time and usually involve a tangle of programs past and present.

Generally understood by only a handful of people in each state, the formulas convert total state spending into smaller morsels that go out to districts. Experts who have dissected the formulas bear witness to their complexity and inefficiency.

“The formula can be a very important statement of what a state’s priorities are,’' says Steven Gold, the director of the Center for the Study of the States at the State University of New York in Albany. “But some of the most important issues facing the states now are not reflected in the formula; they’re at the local level--questions of how money is going to be spent.’'

Current state formulas, which have been shaped by politics and demographic pressures, offer little help in speeding reform, Mr. Gold and others say.

“Most of the discussion in the state legislatures with respect to school finance is about taxing and spending,’' Mr. Wise says. “It is not connected to reform.’'

Toward Smart Spending

Lawmakers could go a long way toward tying school finance to reform efforts by envisioning their distribution formulas as an instrument for underscoring policy aims and calculating sensible investments in students.

Since 1979, South Carolina officials have kept a close watch on their formula, which was written to provide districts with enough funding to support an agreed-upon pupil-teacher ratio and to pay for such necessary expenditures as supplies, personnel, and maintenance.

The $700 that the state earmarked for each student as a base cost in 1979 has risen to $1,576 this year. That calculation is modified by formula weights for disadvantaged and handicapped students, as well as for local property wealth, before
providing the district allocation. Beyond that base, which accounts for about $850 million, $300 million more in state funding is portioned out to districts according to other criteria.

Unlike many states, where aid figures result from a division of whatever lawmakers have become accustomed to providing, South Carolina has set a reasoned bottom-line amount, according to Dan F. Chandler, the finance director for the state education department.

“We are confident the formula is a good tool for getting the money out, even though I don’t think there is so much confidence that we’re doing all that we need to do,’' Mr. Chandler said. “Like every state, we need to keep looking at equity and what the child’s needs are.’'

Tying Funds to Policy Missions

Indeed, South Carolina and other states could do more through their funding programs to make sure schools meet their policy aims.

“There’s not a lot of thinking that links finance structures to program structures,’' says Mr. Odden of U.S.C.

In a 1992 book, Rethinking School Finance, Mr. Odden and his fellow authors recommend that states break sharply with current finance patterns.

It calls on state leaders to directly fund local schools in an effort to foster school-based management, revamp teacher-compensation strategies to reward experience and skills over tenure, create school-performance incentives aimed at achievement goals, provide funding for social services, and pay for expanded teacher recruitment and staff development.

Inspired by the new thinking from the state’s tax-reform commission, Vermont legislative leaders recently unveiled a school-finance bill that would require the state to take over collective bargaining and become responsible for teacher pay.

Sponsors of the plan describe it as a natural outgrowth of the need for finance changes and classroom improvements.

“As long as school boards and teachers are investing enormous amounts of time negotiating, not only do they not have the time and resources to deal with restructuring, but their attitude isn’t there,’' says Rep. David C. Larsen, the chairman of the House education committee.

The bill has already drawn criticism from the leaders of the state teachers’ union, who regard it as an attempt to cut teacher pay.

The plan would shift about half of the funding of local schools onto state shoulders and, Mr. Larsen says, increase equity among districts while freeing local administrators to consider policy and reform issues.

“This says your services are valuable no matter where you are teaching and levels the playing field for property-poor or income-poor towns,’' Mr. Larsen, a teacher and a union member, says. “They would be able to compete for teachers.’'

Frustration in Illinois

But reformers have learned that school-finance changes, even in the name of making sense of the system, come hard.

Last fall, 57 percent of Illinois voters approved a constitutional amendment that would have declared education a fundamental right in the state and charged lawmakers with funding the majority of the system.

The state share of public school funding has dropped from a high of about 48 percent to nearly 33 percent this year.

The amendment, which would have replaced the vaguely worded education article of the Illinois constitution, fell short of the 60 percent majority needed. It was backed up, however, by a state task force’s plan that defined the elements of an adequate education and set their cost.

But state education leaders, initially gleeful over the progress in a state that has some of the nation’s biggest school-spending disparities, have quickly become pessimistic as political pressures have unwound the prospects for implementation of the task force’s work.

“We have an education President, an education Governor, everyone elected to office says that education is their number-one priority, and 57 percent of the voters here said they were willing to change the system,’' says State Superintendent of Education Robert Leininger. “So the question is, What the hell is the problem here?’'

A finance-equity lawsuit has run into an initial setback, and policymakers and legislators do not seem much interested in providing what officials have deemed necessary to maintain adequate schools.

The Illinois plan examines elementary, middle, and high school programs. It includes desired pupil-teacher ratios for classroom teachers (one for every 24 students) and other personnel, ranging from art instructors (one for every 500 elementary pupils) to district administrators (one for every 800 children).

For elementary schools, general aid--funds that do not include categorical state and federal programs--could range from $3,118 to $4,678 per student, depending on local cost factors. The average would be $3,898 per child, of which 54 percent would be devoted to school- and district-personnel costs.

Based on those targets, the task force concluded that about 80 percent of the state’s districts fell below the funding necessary for an adequate education.

“In the beginning, it appeared our task was to tackle a technical, mathematical dilemma,’' Sen. Arthur L. Berman, a co-chairman of the task force, has written. “But task-force members quickly realized that it was children--not dollars--that were ultimately at stake.’'

Observers of finance-reform efforts in Illinois and other states wonder whether state leaders understand the weak foundations of their existing funding programs.

“We know the answers, we just don’t seem to be able to crank up the political support,’' Mr. Hickrod says.

“A lot of people just haven’t arrived there philosophically,’' notes Mr. Walker of Texas. “There are basic normative values involved in these things, and what people are talking about is a radical departure from the practice of 110 years. Plus, these people never understood school finance in the first place.’'

Local Spending Questions Add New Dimension to Debate

As state leaders have focused on broad questions of finance equity and formula, buses have continued to roll, teachers to teach, and children to study. It is in the schools, observers say, that the most important chapter in the school-finance revolution may soon be written.

As lawmakers may have only a tenuous grasp of the real impact of their finance formulas, so too local school officials are in the dark about how their money is being spent and whether their programs are worth the cost.

Whatever answer local educators might give when asked where their money goes, Bruce S. Cooper, a professor of educational administration and urban policy at Fordham University, says, he would not believe it.

“It’s all a load of rubbish and double talk, because you can’t follow the money,’' says Mr. Cooper, who has come up with a method of doing exactly that. “When I first started I thought that the educators knew where the money was going, but the truth is that they didn’t. Everybody thought it was O.K. to be sloppy as long as they were not illegally sloppy.’'

Under the current finance system, the state apportions money to districts, which then combine it with local revenues and divide the funds among their central office, support operations, and individual schools. By the time the funds reach the classroom, it is hard to retrace the logic of how and why they got there or to know what the dollars buy.

“What’s so stunning about the fact that we don’t know this is how critical it is,’' says Sue Berryman, an education specialist for the World Bank and the chairman of the Consortium on Productivity in the Schools based at Teachers’ College at Columbia University.

“Somehow, the school and classroom are not in the view,’' says Mr. Cooper. “Historically, states were the fiduciary agent in every community and in exchange, the district agreed to make reports periodically. But in the end, the numbers don’t tell you much because the state averages are just local averages that become national averages.’'

“It’s an average of an average of an average, and then we wonder why we don’t know where the money goes,’' Mr. Cooper says.

Mr. Odden, who also has initiated a study of school spending, says accounting for school funds has never been demanded of local administrators. Rather, the focus has been on winning greater funding to keep programs operating.

“Maybe some people could tell you where the money goes, but the orientation is ‘We want to keep what we’ve got now, and we want to do more,’ '' he says.

Documenting School Costs

That attitude, some observers say, has led to the public education system’s ability to swallow up any size funding increase without much hint of where it ends up.

Indeed, Mr. Odden says, for all the talk about making ends meet, public schools have been the beneficiaries of a windfall in each of the past three decades. Despite the tight education budgets of the early 1990’s, he says, policymakers should expect that avalanche to continue.

Real expenditures per pupil rose from $1,621 in constant 1989 dollars at the end of the 1950’s to $2,743 a decade later. By the end of the 1970’s, the figure reached $3,345, and rose by another 48 percent to $4,960 by the 1989-90 school year.

“A Nation at Risk called for higher funding, which we got,’' Mr. Odden says. “It may be hard to think this way, but the question is did we use that to fund those reforms.’'

Much of the increase logged in the 1980’s can be attributed to new programs, smaller classes, and salary increases. In addition, a sizable portion of the money has been devoted to special education and other mandated programs.

“Everytime I hear people say they need more money, I think, if you only knew what you have,’' Mr. Cooper says. “Even though we know school is important, society hasn’t had any way of tracking the money to the classroom.’'

A Suburb Under the Microscope

The Reynoldsburg city schools sit on the east side of Columbus, Ohio. Once a quaint village of a few hundred people, the town has quickly become a popular suburb and home to 25,000. The school district operates seven schools serving 4,300 students on a budget of $29 million.

The district has been an eager and active participant in school reform.

Enrollments in advanced-placement courses are booming, teachers work in teams, student mentoring is encouraged, multi-age classrooms are being tested at an elementary school, and the district is seeking grant money to expand its service-oriented program. Several courses have been integrated into concentrated double blocks, such as a senior political-studies class connecting high school English and government.

But Reynoldsburg officials discovered how little they really knew about their district only after Mr. Cooper studied their budget as a demonstration for Ohio officials, who are considering mandating the cost analysis statewide.

“People need information they can understand, not a labyrinth nobody can read or decipher,’' says Richard A. Ross, the district superintendent.

After removing about $10 million from the budget tied to fixed costs, the analysis showed that the district spends 59 percent of its operational funding on classroom instruction, which includes teacher salaries. About 17 percent is spent on building support, including maintenance and transportation; 12 percent on student support, which includes supplemental programs such as sports and libraries; 11 percent on administration at the central office and schools; and 1 percent on teacher support and training.

Dividing the pie in another way, the analysis found that 6.4 percent of the district’s funds are spent in the central office, with the remainder being spent at the school level.

The average per-pupil cost in Reynoldsburg, after subtracting fixed costs, is $4,363, the study revealed.

Comparing School Spending

Digging a layer deeper, Mr. Cooper’s analysis also enabled officials and residents to compare spending at individual schools, in the process sparking a number of management and policy discussions.

The figures show that per-pupil spending at the district’s high school was $5,079 in 1990-91. That level dropped to $4,564 at the two middle schools, and $3,375 at the elementary schools. Spending on classroom instruction ranged from more than $3,000 per student at Reynoldsburg Junior High to just over $1,500 at the Graham Road Elementary School.

While such factors as the seniority levels of teaching staffs and the concentration of kindergarten students readily explain some of the more glaring differences, the analysis also opened the district to new questions and to a new level of awareness and understanding about what it provides, officials say.

“We have found the whole exercise a very powerful stimulus for a lot of discussion,’' Mr. Ross says. “This allows the public to see where the money is going, and we need to show that.’'

“I would like to see it broken down even finer and tied to learner outcomes, and we also need to take a look at how our expenditures compare to how they are spending the same money in other countries,’' the superintendent says. “Then we can make comparisons, and I would imagine some things would really jump out at us.’'

Mr. Cooper says the cost comparisons he has undertaken so far have had a wide range of side effects. In many cases they have raised community interest and shown that money is being used responsibly--news that has helped win bond elections in three districts. More importantly, however, the analyses have informed school decisionmakers and educators and helped shift school debates from raw amounts of money to the services and outcomes being bought.

“We’re really beginning to compare schools, which sends up flags and forces questions about why some things are costing more than others,’' says Ms. Berryman. “Asking that question doesn’t mean it is inefficient or that there is fraud or abuse. It may mean that in inner cities, with so many damaged students, you need more for support services.’'

In the 30 district analyses to date, spending on instruction has held near the overall average of 61 percent. For other categories, such as administration, the range swings more widely.

Mr. Cooper says that after the analysis, one district sold its expensive board headquarters and reduced the central-office staff by a third to improve efficiency.

“I don’t think there was a conspiracy not to tell people, they just didn’t know what was happening,’' he says. “Once you turn the focus to schools and classrooms, it flips the whole school-finance system on its head.’'

Pushing for Productivity

The focus on school costs may lead to greater attention to program effectiveness and begin to force officials to rationalize overall school funding.

“I see school finance as the spine that runs through the system, but right now we’re not using it to see how the system functions,’' says Ms. Berryman, whose productivity consortium hopes to find the links that turn funding and policy into action and achievement.

“We need to try to relate the variations to the learning that goes on, because that is the bottom line, and nobody has a clue on it,’' she says. “This is nothing complicated; it’s very straightforward. But we can’t do it right now.’'

Such a focus would begin to raise questions about the effectiveness of reform strategies, with the goal of determining how to build an efficient school system and figure its cost.

“It’s amazing to me that the whole issue of student-faculty ratio is still unresolved, because it is big bucks,’' Ms. Berryman points out. “The dollars are a real way to get a handle on the system. Obviously that can be misused--to just hammer away at money instead of saying what are we getting for our investment. We’ve got to be much more analytic.’'

School-based management and other reforms are almost doomed to dwell on trivia and be ripe for criticism without a good accounting system and an understanding of school spending.

“With this kind of direction, we can begin to answer questions like which is better: higher teacher salaries or lower class size,’' Mr. Odden observes.

A productivity and investment focus “goes right to the heart of the matter,’' says Mr. Ross of Reynoldsburg.

“Right now, we’ve got programs operating that we don’t ask are they worth the expenditure,’' he says. “We’re doing that here now, and sometimes we don’t like the answers. But we need to really look at whether we are being successful and not just adding layers.’'

Other observers suggest that the focus on spending and cost benefits should not obscure the mission of schools, which is to educate children well, not cheaply.

“We make the assumption that children are of equal worth, so we will have a difficult time talking about return on investment,’' notes R. Craig Wood, the chairman of the department of educational leadership at the University of Florida and a consultant to school-finance litigants in several states.

Using ‘Outputs’ to Guide ‘Inputs’

If educators and researchers succeed in discerning what strategies work and, by examining local costs, put a price tag on those ingredients, observers see the beginnings of a system where local school funding would be tied to policy goals and program outcomes. State officials, in turn, would have to begin to justify their current scattershot finance systems.

Assume, for example, that research showed that a low pupil-teacher ratio, new teaching and grouping strategies, longer school days, and increased professional development combined to produce a quality education. If analyses showed the cost of such a program in a given state was $5,500 per student, lawmakers would have an awkward time showing why they were budgeting $4,000 per pupil, while allowing local spending to range from $2,500 to $8,000.

Identifying and defining desired outputs better, Mr. Wood says, could force drastic changes in the way policymakers decide funding and other inputs.

“For state legislatures, most of the variables right now are input variables, things like what amount has been spent on students over a number of years,’' Mr. Wood explains. “Generally, we don’t have any clear outcome measures. Once those are developed, then you really have a nightmare for legislatures because the question becomes are you going to spend it where you need to spend it.’'

“I see the courts saying equality of opportunity is still a question of inputs, but that could change with more reliable production-function studies,’' Mr. Alexander of Virginia Tech says. “Right now, the state of the art is that you cannot rely on them for public policy.’'

“The facts show that, in more cases than not, the calculation of the formula and level of appropriation is not the result of deliberations about what a child needs, but the result of politics, plain and simple,’' Ms. Hershkoff of the A.C.L.U. argues. “Legislatures are picking amounts out of a hat, which is the epitome of arbitrary and capricious action.’'

Political Obstacles Remain Despite New Ideas

In addition to being pushed from the local level through productivity studies and new cost-accounting programs, states may also be forced to alter their finance structures by the federal government, which is beginning to show interest in influencing the finance arena.

Early discussions about reauthorization of the Elementary and Secondary Education Act have brought suggestions from education advocates and lawmakers that equalization and finance reforms be encouraged by changes in the rules of the Chapter 1 and Chapter 2 programs.

In some cases, “federal aid may tip the balance, inducing states that would not have done so otherwise to adopt major school-finance reforms,’' says Iris C. Rotberg, a senior social scientist for the RAND Institute on Education and Training.

Ms. Rotberg suggests setting aside several billion dollars under the Chapter 2 block-grant program for equalization-incentive grants, which would be awarded to states that showed progress in closing local disparities.

Current school-finance inequities have undermined efforts to raise the achievement of poor students with Chapter 1 compensatory-education grants, she argues.

Congressional leaders, however, are waiting for a sign from President Clinton. Although Mr. Clinton said during his campaign that he favored federal attempts to push state school-finance reforms, no specific plans have been mentioned.

Even so, interest at the federal level appears to be gaining momentum.

Sens. Paul Simon, D-Ill., and Christopher J. Dodd, D-Conn., have mentioned a federal tax to offset some local property taxes as a funding source for education.

Others have suggested that if the federal government opts at some point for a new value-added tax, a portion of the receipts could be set aside in a fund for local education improvements in poor areas.

National Involvement Looming

Mr. Odden also predicts that increasing federal and state interest in open enrollment could push finance changes to make funding uniform among districts.

He suggests that states establish a foundation funding level sufficient to enable students to achieve the national education goals. On top of that base level, parents from individual schools could opt for an income-tax surcharge to fund enhancement. The aid would be sent largely to the school level and could be supplemented with federal funds.

The focus on national goals, standards, and assessments make it almost inevitable that the federal government will take a stronger role in the issue.

“As we become increasingly interdependent as a nation, the problem will become apparent to national leaders and others,’' predicts Mr. Kozol. “It will become increasingly bizarre to say kids in Mississippi get $2,500 and kids in Connecticut get $8,000 and all of them have to take the same test.’'

“Even if Mississippi created the most egalitarian system, they are still going to have third-world schools compared to Connecticut,’' he says.

Mr. Kozol argues that state lawmakers should seize leadership of the finance issue, before they are forced by local or federal pressure, and begin making substantive changes. But it is a job that will take a large dose of political courage.

“I don’t see anyone stepping forward to say we’ve got a system that doesn’t work,’' says Mr. Leininger, the Illinois schools chief. “It’s not the get-me-through-the-night problems that I worry about. It’s the long range, the vision--saying here’s where we need to be in three or five years.’'

In addition to balancing the demands of competing interest groups, state reform efforts must contend with the long-established tradition that dictates school funds be raised and spent locally.

“This is a big part of state budgets and every single one of these legislators represents a school district,’' explains Mr. Augenblick, the Denver consultant. “Some can be statesmen, but everyone of them is affected somehow by these decisions.’'

“Ultimately,’' argues Mr. Kozol, “this is not an issue for school-finance experts, it is an issue for civic heroes and heroines--people who can rise to the occasion. We need a good shot of transcendence in our legislatures.’'

‘Pulling the System Around’

Analysts express the hope that viewing school finance as a system that equitably invests in schools geared toward efficiency and performance could help realize a multitude of reform plans of the past decade.

“You see very little in the journals about accounting and costs and governance, but those may be the big issues in pulling the system around,’' claims Ms. Berryman. “Little things come out from the Education Department and other places about what works, but the bigger issue is if you have a pot of money, where do you invest it.’'

“These are decisionmaking issues that are not being addressed by anybody,’' she says.

Finance reforms are seen as holding the key to rationalizing education reforms, by tying funding to policy and achievement goals and lending purpose to the massive amounts of tax dollars spent each year.

“Much of the country thinks about education as our school or our project, and lots of teachers turn their noses up at the mention of what they think are cold notions of how the dollars are spent and the questions of are we getting results,’' Ms. Berryman says. “I wouldn’t expect parents and teachers to see it all, but I would expect school boards and legislatures to. They need to think in system terms and ask where we invest our money.’'

Senator Parker agrees that it is time for state leaders to settle equity concerns and move on to performance issues and finance plans that focus all of the school players on the sailboat race he envisions.

As lawmakers strive to make sense of school finance, he says, education leaders and policymakers must also determine what strategies work and how to design local schools that better educate students.

“We need to unify people in seeking quality, that is the missing ingredient,’' Mr. Parker says. “We still don’t have a definition of what quality is. We’re off on a quest without knowing what we’re looking for.’'