Getting real value for money is always a laudable goal, but even more so in today's tough economic environment. This is especially critical in education, the linchpin of our state's prospects for future growth. The Oklahoma economy is making strides, but we still struggle to fund government services while maintaining a competitive environment. It is especially vital for the state to get value for the money it spends on education.
For approximately three times, OCPA research fellow Steve Anderson, a Certified Public Accountant and a former state-certified teacher with 17 teaching certifications, has attempted to calculate just how much money Oklahomans really pay for their schools.
Following generally accepted accounting principles, Mr. Anderson compiled the federal, state and local expenditures for Oklahoma's public schools. He discovered that Oklahoma's per-pupil expenditure for the 2007-08 school year -- the latest year for which data were available -- was not $7,615, the oft-cited "official" number. Rather, he estimated it was $10,257.
If the CEO or chief financial officer of any public company disseminated misleading financial data to the same extent as Oklahoma's education officials, they would be subject to criminal and civil prosecution. Indeed, according to Frederick Hess, a former public high school teacher and current director of education policy studies at the American Enterprise Institute, "school accounting guidelines would bring smiles to an Enron auditor."
How, you may ask, can the "official" reports be so far off the mark?
It's really quite simple. When computing expenditures, the government's school accounting systems simply exclude many significant costs. A few examples:
• depreciation of buildings and other capital assets;
• spending via "dedicated revenues," which are funneled directly to schools without going through the appropriations process;
• retirement benefits as a cost in the year incurred; and
• interest on unfunded pension obligations resulting from our repeated failure to fund benefits as they are earned.
Disturbingly, there are even more costs, which could have been included but were not. For example, there are many public-school costs that are carried on the budgets of other government agencies, such as the cost of remedial instruction borne by the higher education system.
When Mr. Anderson's first study was published, the late Nobel Prize-winning economist Milton Friedman called it "splendid." He said it represented "a real public service."
By contrast, the president of the state's most powerful labor union, the Oklahoma Education Association, called the study "highly suspect." OCPA has repeatedly challenged the union to a public debate on the matter but to no avail.
But there is more to education than spending. What value do we get for what we spend? The reality of scarce resources demands that we prioritize wisely.
For instance, Oklahoma has traditionally used its resources to keep its class sizes small. Some would argue that we would get better results with better-paid teachers even if we had one or two more pupils per class. The point is that we face options in how to spend any level of appropriation. We should systematically measure our performance against our costs and emphasize those strategies that get the best results.
We should consistently ask how we are doing. For example:
• What is our yearly retention rate?
• What percentage of each class graduates from high school in four years?
• What percentage of high school graduates go on to college?
• How many of those who start college are able to do so without remediation?
• How well do our students perform on standardized tests?
The approach of measuring performance, measuring cost and comparing performance to cost is one we should follow throughout government. Given the important role education plays for our state, it is especially important that we get it right. Bringing transparency to the process and holding our officials accountable are indispensable.
We must strive for high levels of performance in every school. Most families are trapped if the local public school fails to do its job since most parents have few viable options. And the failure to educate has terrible consequences.
In addition, with schools, the whole is more than the sum of the parts. Potential employers find a well-educated labor pool highly desirable. The availability of good schools is also an important factor in recruiting and retaining key employees.
Every school district should report its schools' performance. Every district should report the real cost of achieving that performance. The report should be audited. We should encourage our major media outlets to cover these reports, comparing the progress and efficiency of different school districts.
Oklahomans already do much for public education. As our state seeks to build on the economic progress it is making, we should consider what we can do to provide our children the nation's finest schools -- and do it. Every dollar we spend, we must spend wisely.
Tom Daxon, a Certified Public Accountant, has served as Oklahoma's elected state auditor and inspector and as secretary of finance and revenue for Gov. Frank Keating. He was recently appointed to a task force of the Federal Accounting Standards Advisory Board. His latest study, "Enhanced Financial Reporting for State Government: Comparing Cost to Performance," was published by OCPA in July 2009.
Brandon Dutcher is OCPA's vice president for policy. A version of this article originally appeared in "Getting Ready for Work: Education Systems and Future Workforce," published in September 2009 by The Oklahoma Academy.
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