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Who Has Control of Money in Schools?

In this blog, we will describe who controls the money in K-12 schools.

I often compare budgeting to the process of remodeling a home. There are structural issues to consider, availability of funds and a multitude of decisions to be made along the way to design and implement a plan. Imagine if you set out on that remodel with a set amount of funds, but you only got to pick out the paint colors. Would the end result be the home of your dreams?

Budgeting in K-12 school districts is often a similar process where the total school budget is calculated by a series of decisions at the central office to allocate a set number of teachers and other full-time staff, a pre-determined curriculum, part-time supports, school administration and office staff, custodial and maintenance schedules and staffing, and so on. The school principal is typically given a small pool of funds for supplies and other consumable materials to make decisions on throughout the year.

It’s commonly believed that the central office is best positioned to make the determination of what resources each school needs in a given school year. However, we’re starting to see more and more districts move away from this practice by decentralizing resources to site-level leaders and allow for decisions to be made by those most closely in tune with the needs of students in a specific school.

Often, a district finance team makes allocations to schools based on perceived need. When this happens, a principal is usually told what their budget is, often through a report that has come down from the district’s central office finance staff. More often than not, these central offices are who controls money in schools. However, in schools that employ site-based budgeting, central office decentralizes this control and school principals hold the autonomy to decide how funds are allocated based on enrollment numbers and needs of their individual school. Going back to the house remodel - they not only get to pick the paint color, but they can decide on the new layout, too.

Site-or School-Based Management (SBM)

SBM is a system by which some level of autonomy is given to site leaders (e.g., principal, teachers, community) in the budgeting process.

There is a growing trend where more and more districts are starting to recognize that it does not always make sense for the central office to make all the decisions, and maybe the principal does know what is best or needed most for their school. The key question when discussing when a district is interested in shifting control of funding for schools to the school level, is: Which resources the central office is going to be buying and managing, and which resources are actually going to be under the control of the principal? The core school operating costs that are calculated are teachers, principals, clerical staff, administrative supplies, and core-operating costs of the school.

The benefits of SBM include:

  • Those who best understand needs have the authority to make decisions

  • Resources allocated to individual sites

  • Creates a pool for R&D to test new strategies

  • Drives a service based culture in which central services are desired based on quality

  • Allows for alignment of goals with financial resources

Making the change to SBM and granting autonomy is something that in most cases would have to be proposed and approved by the local school board. When a central office divolves resources and passes the decision making power to the schools, they are essentially saying, “here’s what we would’ve allocated to you, you can make the decision on what best serves your school.”

The Case for Centrally Managed Resources

It is rarely the case that all resource decisions are made at the site level and there are some very valid reasons not to do so.

  • Need for Consistency: It is important, especially in highly mobile districts, that the educational experience and pacing is consistent school to school. Textbooks could be one example where it makes more sense for the central office to determine which curriculum will be adopted for the entirety of the district. Then the central office purchases the textbooks and distributes them to the schools.

  • Cost Effectiveness / Economies of Scale: Many costs are driven on an economy of scale (size of school/enrollment) and in most districts tend to be the things that people believe should be managed centrally. Transportation costs, for example, could grow exponentially if each school had the ability to set routes or determine student walk zones independent of other schools in the district.

  • Process Efficiency: There is also a need to ensure certain processes are standardized school to school. HR and financial systems, for example need to be cohesive across the district to ensure the system of record is of quality. While districts may choose to allow for some decision making in the financial support they receive, it is unlikely that the district would allow for site-level choice of a financial or HR system.

It is important that a district contemplating SBM develop specific set of guiding principles to weigh the various decisions around central vs. site based resources.

Building Tools and Capacity

As districts are contemplating granting decision making authority to schools on certain resources, it’s important to understand that the principal takes on a more business-like role; managing people, process and funding that is likely not their primary area of expertise. These new responsibilities often include making sure they have resources to appropriately track, expense, or plan for as well as forecast expenses that they’re not used to making decisions on. For example, if a central office said to a school that they now control all of their own custodial or grounds crews, that would put the principal and staff in charge of areas that they have no prior experience in managing.

Where there are resources that have heavy compliance requirements such as special education, the central office is no longer ensuring compliance by controlling the inputs or staffing requirements, rather they have to be able to coach and monitor the decisions that a principal makes, while ensuring that they’re still compliant. There is always a need for a support structure to make sure that those business type decisions can be made effectively. Tools like Balance Manage can help both school and central office leaders monitor the outputs and ensure compliance while shifting decision making to schools.

Consider This…

Regardless of which type of budgeting a district employs, the answer to the question “who controls money in schools,” boils down to the philosophy in a given district. The funds will either be allocated by the district’s central office for every school, or directly to individual schools so principals can determine how to use that money to meet their school’s unique needs. To be effective, districts must settle on what course of action to take that will be in line with their philosophy in weighing these decisions. In part three of this series, we’ll discuss how to implement a new funding model, which could help inform your district’s philosophy.

Did you miss the first part of this series?

You can check out Three Ways to Fund K-12 Schools here!


About the Author

Image of Kate Kotaska Kate Kotaska is a Senior District Partner for Allovue, Inc. Before joining Allovue, Kate spent the majority of her career in Denver Public Schools shaping the district’s resource allocation model and building a backbone of financial support known as the Financial Partner Network. Kate earned her undergraduate degree from Pace University in Pleasantville, NY.