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Sell Your Schools

Figuring out your schools’ return on investment can be a big selling point when it comes to board and public buy-in.

After six years as a superintendent, James Merrill felt like the CEO of a mid-size company doing business with one arm tied behind his back. He knew his schools benefited the community, but despite the reams of data his Virginia Beach district churned out every year he hadn’t found a way to demonstrate just how valuable they were.

“I was hearing more and more criticism of education funding, that all schools do is consume and spend,” Merrill says. “And our city council was getting stingier. Those two forces together made me want to flip the image of public education. I wanted some proof that for every dollar spent, there’s more than a dollar accrued.”

Merrill did what directors of public health care, transportation, and higher education have been doing for years: He hired an economist to determine the school district’s economic value to the community.

Last year, Merrill presented the economist’s findings to the Virginia Beach City Council at its annual summer retreat. Turns out, Merrill reported, that the city’s schools produce more than they consume. Specifically, for every dollar the city puts into the school system’s operating budget, the community gets $1.55 back in regional spending. Also, for every $1 million spent on school capital improvements, 13 local jobs are created.

Merrill wasn’t reluctant to pay a consultant about $20,000 to look hard at his school system’s worth. While he knew that no study could quantify the value of educated young people, he also knew that the community leaders who make financial decisions are usually from a business background.

 “It’s all about the dollar,” he says. “You can talk about achievement and graduation rates, but you get hammered on the financial expense of public education. We’ve never had a defense for that.”

Quantifying Worth
Virginia Beach uses a somewhat unusual revenue-sharing funding mechanism to finance its public schools. For the past 15 years, the system was allo­cated 51.3 percent of seven city tax ­revenue streams. But—no big surprise—budget negotiations got more heated when state funding for the city began to dry up. Over three years, the city council dipped into the school system’s savings, using millions of dollars to build an animal shelter and a recreation center.

When Merrill, who took over as superintendent in Virginia Beach six years ago after as many years as a school administrator in North Carolina, decided to figure out his schools’ worth to the city, he didn’t know of any other district that had conducted a similar return-on-­investment study. He figured there had to be a way to do it, so he contacted an economist at North Carolina State University.

Professor Michael Walden had previously studied the economic benefits that the N.C. State campuses bring to their state’s economy. He is quick to note that educational institutions can’t be evaluated like companies. Businesses have one objective—to maximize profits—while schools have goals that are much more complex. But, he adds, when a superintendent can drop a document on the table that demonstrates good return on investment, he stands to fare better in the fight over public dollars.

“Public decision makers always have limited budgets, and every group that addresses them wants more,” says Walden. “It’s just the nature of budgeting. If you can quantify areas where you have major impact, that helps decision makers evaluate the competing needs.”

Walden divided the Virginia Beach study into two parts. In the first phase he looked at the input side of the Virginia Beach school system as an economic entity. With an operating budget of about $680 million, the system serves 70,000 students and employs 16,000 people. From here, he calculated that the return for every dollar the school system spends is slightly better than 150 percent. In addition, for every dollar spent from the system’s capital budget, there is a return of $1.55 spent in the regional economy.

More important from Walden’s point of view is the study’s second phase. He broke the school system’s outputs into three categories: the economic value of graduating with a high school ­diploma; the public funds saved by a community of typically healthier and more law-abiding high school graduates; and last, but definitely not least, the ­higher property values in a city with good schools (see sidebar “Crunching Virginia Beach’s Numbers”). One key highlight: Graduating classes from Virginia Beach schools will collectively earn up to $900 million more as a result of their high school diplomas.

“We wanted our city council to see that right in the middle of a tourist town, they’ve got great schools,” says Merrill. “It’s not just about summer vacationers from Ohio. You’ve got a huge military presence looking at quality of schools. We want a little respect and not to be taken for granted. You can’t whittle away at us and continue to see us succeed.”

No More Preaching to the Choir
It’s nothing new for administrators to feel as though they have to justify the expense of education—year after year. Dan Domenech, executive director of the American Association of School Administrators, says bigger districts that could do these types of studies internally have done them before.

“It’s a smart thing to do,” Domenech says. “If you can make the connections between quality schools and job creation and quality of life, those connections all resonate with taxpayers.”

Domenech served as superintendent of Virginia’s Fairfax County Schools from 1997 to 2004. During that time, district staff conducted its own return-on-investment study, showing the connection between the district’s quality and the community’s high real estate values.

“We got an endorsement from our business community when the chamber of commerce put schools down as a main attraction for the county,” he says. “We pointed out that the county could attract top-level employees because of the schools. It was a no-brainer.”

One thing that has changed, he adds, is the graying of the taxpayer base. Nationally, fewer and fewer voters have children in any school system. Typically, when a bond measure is on the ballot or when it’s budget time for local schools, the biggest local support comes from parents. As the birth rate declines, schools face a less receptive public. Administrators, in turn, have to work harder to make their case.

“In those communities, more voters are going to ask, ‘Why am I paying $20,000 a year in school taxes?’ ” Domenech says. “And you have to come back and ask them if they like the million-dollar home they live in, because it won’t be worth that much if the schools go downhill.”

Efficiency, Not Just More Money
The Virginia Beach study is part of a national trend to think about education funding in terms of economic payoff. Borrowing frameworks from the business sector, both conservative and liberal think tanks have weighed in recently about how and why public education should be more accountable for what it spends in terms of return on public investment. The underlying question: Do schools always need more money to do their job better?

In 2011, the Center for American Progress released a study that attempted to assess the efficiency of almost every major school district in the country. The report, which took a year to complete, looked at the relationship between district productivity, as measured by academic achievement, and education spending, controlling for factors like cost of living and students in poverty.

Among the findings: Efficiency varies widely among districts within the same state. Some spend thousands more per student to obtain the same level of academic achievement. The range in California, for example, among districts scoring in the top third of achievement was nearly $8,000 per student.

In Florida, only 17 percent of districts in the top third in spending were also in the top third in achievement.
Ulrich Bosser, the researcher who led the study, acknowledged that test scores don’t provide a perfect assessment of a district’s success, but he says it’s important to think about costs and outcomes.

“People care where their dollars go,” says Bosser. “Superintendents have a keen sense that there is less money from the states for education. Increasingly, they need to go to people in their jurisdiction and be able to say, ‘If you give us this money, you’ll see these outcomes.’ ”

—Winter 2013—

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