As stewards of the taxpayer money, district leaders often take most, if not all, of the blame for not using those tax dollars effectively and efficiently to improve student outcomes. What the public does not always recognize and appreciate, however, is how difficult it is for district leaders to make informed budget decisions and how much they may be hampered by system deficiencies.

Making budget decisions is a demanding task. It involves looking at both new investments and existing spending from multiple angles. With regard to new investments, district leaders must examine the alignment of proposed new budget items with district priorities, evaluate their potential effectiveness, and assess fiscal soundness and sustainability. For existing spending, they must recheck alignment and scrutinize effectiveness and costs. Then, district leaders need to compare and synthesize this analysis to select a limited number of new programs to fund and some existing programs to possibly defund.

During the process, district leaders are expected to be critical of their own and one another’s work and judgment. Moreover, they are expected to be able to justify and explain their decisions to their direct reports and constituents, which is critical for gaining buy-in to implement new programs and discontinue existing programs.

SYSTEM DEFICIENCIES

Although blaming district leaders for poor budget decisions is easy and convenient, and rightly justified in some situations, the root cause often lies in two system deficiencies that fail to provide the conditions for district leaders to perform this demanding task successfully:

1. Lack of linked program alignment, budget, and outcome data that provide a complete picture of resource allocation and return on investment.
2. An organizational structure and process that fall short of institutionalizing routine scrutiny of spending using such data.

With a few clicks of a mouse, today’s technology allows most districts to ascertain such information as how much money is allocated to instruction, personnel, and infrastructure and how much money goes to elementary, middle, and high schools. Such information provides an important perspective to understand resource use, but it has limited value when making budget decisions that revolve around programs.

To make informed decisions about which new programs to fund and which existing programs to cut, district leaders need information to answer the following questions:

1. How much money has been invested in which areas (e.g., student behavior, literacy, social-emotional skills), through what programs, and for how many years to improve what student outcomes?
2. Does redundancy exist among those programs?
3. Are programs that target the same area coherent, complementing and supporting one another, or are they incoherent, competing for time, attention and resources?
4. What is the return on the investments?

Unfortunately, the budget infrastructure in many districts, which has developed over the years mainly for compliance purposes, is inadequate for providing such data. The absence of accurate information about spending, its alignment with district priorities and its effectiveness makes it difficult for district leaders to make an objective assessment of how limited resources have been used, what adjustments are needed for existing programs, and what new programs should be funded.

While data deficiency presents a big challenge, most districts do have some data that can be used to inform certain budget decisions. For example, it is not that difficult to compile data on the costs and outcomes of a few intervention programs. In practice, however, districts scarcely use such data to examine cost-effectiveness of existing programs and to make decisions on whether those programs should be continuously funded or what adjustments are necessary to improve program outcome.

This process deficiency is primarily due to the fact that budget decisions on new programs and initiatives are largely driven and determined by needs assessment. Rarely does the deliberation involve setting program success metrics and timeframes for delivering the results for new programs, which should be part of the budget decisions. Without these two critical elements, no system check in place to make sure new programs will be reviewed at a certain time point for return on investment. And district leaders have no incentive to raise issues over existing spending or to propose cuts, especially when money is available. In fact, the system disincentivizes leaders to be courageous and responsible because doing so often makes them “unsupportive of teachers” or “uncaring about the kids”.

With these two system deficiencies, we should not be surprised when district leaders rely on passion, perception, or anecdotal stories for budget decisions; the squeaky wheels get the grease (people who cry loudest and most often get their programs funded); wasteful spending gets funded year after year; and across-the-board cuts instead of strategic cuts are implemented when there is a budget crunch.

OUR SOLUTION

To address these two system deficiencies, we developed and implemented a new budget process called Cycle-based Budgeting (CBB) supported by an online tracking system two years ago. For any new initiative or program, district personnel must submit a budget request online, specifying: 1) alignment with district priorities, 2) budget needs and intended use, 3) target measurable outcomes (either academic or non-academic), and 4) time needed to achieve the target outcomes, which becomes the cycle for the program to be implemented and reviewed.

This online system fills the data deficiency and allows us to easily track how $48.7 million new investment has been made in which strategies through which programs in the past two years. Figure 1 shows clearly that some strategies (e.g., “Eliminate achievement, learning & opportunity gaps” and “Provide equitable access”) received significantly more new investment than some other strategies (e.g., “Improve communication” and “Develop leaders”).

Figure 1 New investment in 2016-17 and 2017-18 by vision 2020 strategy

In 2017, we also rolled $20.4 million of existing programs into the Cycle-based Budgeting model. As a result, we can show how $69.1 million dollars of the district budget is invested in which strategies to target which areas for improvement. As Figure 2 illustrates, the $69.1 million CBB-accounted budget has put more focus on academic-related areas, including “Academic Achievement” and “College & Career Readiness”, rather than on areas such as “Physical Health” and “Arts”.

Figure 2 CBB-accounted spending by Vision 2020 strategy and target area

With the cycle associated with each budget request, we are able to address the process deficiency by institutionalizing routine return-on-investment review with the CBB-accounted existing programs, based on their cycles and the target measurable outcomes program owners set for themselves.

If a program has no or low return on investment at the end of its cycle, it does not necessarily mean it will be automatically discontinued. However, CBB does ensure that discussions and debates about what should be done to such programs and how to best spend that budget take place in an open and safe environment and are anchored on tracking evidence rather than perceptions, anecdotal stories, or political influence.

IMPACT ON THE DISTRICT

By addressing the two system deficiencies, we could provide data on how our district has made $48.7 million new investment to implement district priorities during the last two years; district leaders used the data to set funding priorities for the 2018-2019 school year. Not only did district leaders make informed new year funding priority decisions, but also they were able to explain those decisions to their direct reports and constituents to gain support and buy-in.

At the same time, we have set expectations for the CBB-accounted spending over success metrics and timeframes for delivering results. District leaders expect to review a certain number of end-of-cycle programs each year (and know what those programs are), and to make funding or adjustment decisions. Program owners realize that money is not unlimited and that district support is not unconditional.

As a result, we have created the conditions to transform spending on programs from entitlement into time-bound conditional commitment. For the 2018-2019 school year, we are scheduled to review 105 programs totaling $33 million and to make decisions based on their return-on-investment data. This opportunity will propel us to make adjustments to some programs. In addition, we can potentially save some money by discontinuing or downsizing some ineffective or low-impact but high-cost programs, which will give the district more resources to meet the unmet needs and fund innovations.

EMPOWERING FISCAL LEADERSHIP

Making sound budget decisions is not an easy task. When leaders are the focus of the blame for wrong decisions or indecision, the solution tends to be replacing existing leaders with new ones. However, that solution often sends us back to the same situation, only with different leaders and programs. The fact is that if one or a few leaders are making bad decisions or avoiding tough decisions, then the problem is personnel and replacing those leaders is the right path. However, if most leaders behave in that same way, then it is usually a system issue.

By addressing the two system deficiencies through Cycle-based Budgeting, we have empowered our leaders to make informed and tough decisions, which will lead us to more optimal use of the taxpayer money to improve student learning.