Improving State School Finance Systems: New Realities Create Need To Re-Engineer School Finance Structures. CPRE Occasional Paper Series, OP-04.

This paper presents strategies for designing and implementing new and more effective approaches to school-finance structures. The first section discusses state school-finance systems, their inadequacies, and how they have changed dramatically in several states. It explores how varieties of standard school-finance formulas may actually exacerbate fiscal disparities and suggests that fiscal inequities have become an outdated problem in school finance. The second section claims that a new "driving problem" must structure a discussion of school-finance policy in the future, proposing that this problem should determine the level of funding needed to help both average and special-needs students to reach high standards. This section demonstrates how school-finance structures could be reengineered to accomplish this goal, thus shifting school-finance-policy analysis away from fiscal equity and toward educational adequacy. Section 3 details several elements of a new school-finance system, such as school-based performance incentives, that could be created to enhance the performance of schools. This section outlines why a new federal role in school finance might be needed to ensure that all schools have an adequate level of funds to educate their students to high performance standards. (Contains 90 references.) (RJM)