Theory


Investment and Operation Expenditures Revisited

A few readers wrote to me asking for further clarification on the differences between investment and operation expenditures. For example, should a one-to-one initiative be classified as an operation or investment expenditure. This short post helps answer such questions. After reading Rethink District Budgeting Part I and Part II, it is apparent that all the new “budget dance” moves start with differentiating between operation and investment expenditures. While Table 1 can be readily applied to make the distinction for most expenditures, there are cases where the distinction is not that clear cut. For certain expenditures, people may have genuine differences […]


Rethink District Budgeting – Part II

In previous post, my colleague Dr. Tom Aberli and I discussed three forces that shape and influence district budget decisions: 1) needs-based framework, 2) existing financial management practice, and 3) human nature. In this post, we present how we can build on the existing infrastructure and processes with a new lens and framework to overcome the challenges brought about by those forces. Specifically, we propose to: 1) differentiate between operation and investment expenditures, 2) track expenses on alignment, outcome and improvement, and 3) re-orient how improvement is practiced. Operation vs Investment Expenditures As noted above, needs play a prominent role […]


Rethink District Budgeting – Part I

In this essay, my colleague Dr. Tom Aberli and I discuss three forces that shape and influence district budget decisions. Next, we present how we can build on the existing infrastructure and processes with a new lens and framework to overcome the challenges brought about by those forces. This is a long essay and will be posted in two installments. In this first post, we discuss the three budgetary forces: 1) needs-based framework, 2) existing financial management practice, and 3) human nature. We welcome and appreciate your critiques and suggestions. Every winter, school and district leaders have the daunting task […]


Academic Return-on-Investment (AROI) and School Improvement

Three years ago, we started working on an IES funded research project in collaboration with Dr. Fiona Hollands at Teachers College of Columbia University and Dr. Robert Shand at American University. The goal was to explore: 1) whether A-ROI metrics, developed as a compromise between rigor and practicality, can be used to improve decision-making regarding education programs, and 2) how to embed A-ROI results into district operations through a Cycle-based Budgeting model. This report shares our lessons learned from that project. https://www.jefferson.kyschools.us/sites/default/files/IES_AROI_Brief_3_Final_Dec_2021.pdf In this report, we talked about how we applied some of the lessons learned when developing a new version of our […]


End-of-cycle (EOC) Review

In this article, I explain what end-of-cycle review is about and how leaders can use the process to better manage program implementation and resource allocations. You might find this discussion on some key concepts of Cycle-based Budgeting helpful as a reference. You can also find an end-of-cycle review summary template with two examples on the CBB Toolkit page. End-of-cycle (EOC) is an opportunity created in cycle-based budgeting (CBB) to routinely scrutinize existing investment items for continuation and/or adjustments. When an item reaches its end of investment cycle, two things must take place. One is that the investment must be reviewed […]


Re-engineer Choice Architecture to Improve Budget Decisions

Each year, district leaders make many decisions about school and district finances. Hidden behind those myriad decisions is a choice architecture, which, explicitly or implicitly, defines and shapes leaders’ decision-making. Learning from behavioral economics, this article offers a new perspective to look at the functions and tasks school business officials (SBOs) perform in relation to the choice architecture and calls for rethinking the role SBOs can and should play in facilitating those decisions. Specifically, three essential components of choice architecture are highlighted: default, anchor, and framing. For each component, prevalent design features and their impact on budgetary decisions are discussed. […]


Five Issues around Using Academic Return on Investment (A-ROI) to Inform and Improve Decisions: Part III – Commensurability

COMMENSURABILITY Assuming that we have obtained valid A-ROI estimates for multiple investments, there remain issues to be considered and addressed when using those results for investment comparisons and decisions. The issues center on the extent to which those different A-ROI estimates can be compared to gauge relative cost-effectiveness and, if the answer is yes, how to compare them properly. First, there is the issue of different outcome measures. For example, A-ROI is calculated for three investments that are intended to increase reading achievement, reduce suspension, and improve sense of belonging, respectively. It is apparently inappropriate to compare the results directly […]


Five Issues around Using Academic Return on Investment (A-ROI) to Inform and Improve Decisions: Part II – Uncertainty

In the first post of this series, I discussed validity of A-ROI as a measure of cost-effectiveness. In this post, I focus on uncertainty embedded in A-ROI results. In the business world, ROI is largely treated as an accounting measure with certainty, but the certainty only applies to the accounting period. That is, for a three-year investment, the ROI result is a both accurate and precise representation of its profitability over those three years only. Consumers of ROI information are admonished about risks when applying it to the future or other contexts. Generally, little is provided about those risks other […]


Five Issues around Using Academic Return on Investment (A-ROI) to Inform and Improve Decisions: Part I – Validity

You can download a pdf version of this article at https://eric.ed.gov/?id=ED603587. Please note that this web version was updated later with the following reference added. Biancarosa, Gina, Anthony S. Bryk, and Emily R. Dexter. “Assessing the Value-Added Effects of Literacy Collaborative Professional Development on Student Learning.” Elementary School Journal 111, no. 1 (September 2010): 7–34. https://doi.org/10.1086/653468. INTRODUCTION Return on investment (ROI) is a concept that originated in the business world in the early twentieth century. According to the Hagley Museum and Library, the concept and the formula were first developed in 1914 by Donaldson Brown, the Assistant Treasurer of the […]


Ten Key Concepts of Cycle-based Budgeting — Part I

Cycle-based Budgeting (CBB) is built on ten key concepts, which you will see throughout this web site and in the toolkit. You can use these ten terms to help explain to your colleagues what CBB is about, why it can be helpful, and how to do it.  Due to its length, this post is divided into two parts. In this part, the following five key concepts are presented: Operation Expenditures vs. Investment Expenditures Investment Item Investment Item Owner Investment Cycle Expected Return OPERATION EXPENDITURES VS. INVESTMENT EXPENDITURES Differentiating certain budget items as investments sets the conceptual foundation for approaching those […]