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Principals need more
control of school funds

Last month we looked at a new way of distributing funds to Hawaii's public schools called Weighted Student Funding. It is part of a package of school reforms passed by last year's Legislature.

Another reform in the package gives principals control over 70 percent of the Department of Education's operating budget (excluding debt servicing and capital improvements). The intent of this provision is to place a greater number of decisions and a much higher percentage of money directly in the hands of principals and their schools.

In other words, the Reinventing Education Act of 2004 (Act 51) seeks to replace a top-down management system with a bottom-up model where a principal and his or her advisory council decide how money should be spent at their school.

A Committee on Weights made up of teachers, principals, parents, community members and others met this fall to decide what money in the DOE budget should go into the 70 percent pot.

The committee's recommendation is that 72 percent of the DOE budget be "expended" by principals. The word "expended" is used in Act 51, but, as we will see, it does not necessarily mean that principals will have discretionary control over how money will be spent.

One-third of the 72 percent will be expended by principals but without discretionary control. These funds, mainly for categorical programs, must be used for specified purposes.

Categorical programs are primarily mandated by the Legislature. For instance, included in Act 51 is a mandate that all high schools be staffed with a full-time, year-round student activity coordinator.

Two-thirds of the 72 percent, amounting to $771 million, is in weighted student funding over which principals will have some discretionary control. Thirty percent of this amount will go to schools as a lump sum, primarily for salaries. Ten percent will be for lump sum employee fringe benefits, and 8 percent will be for telephone, cleaning, minor repairs and maintenance, comprehensive student support services, and programs including gifted and talented.

Will principals really have discretionary control over $771 million? The answer is no. For various reasons, principals will have discretionary control over only 38 percent of the DOE budget, which is about what they currently control. A feasibility study prepared by the DOE in 2003 spotlights the reasons for this.

First are the categorical funds that must be spent in specified ways. Second, if a school chooses to leave vacant a position, it is not credited with the fringe benefits saved. Third, cumbersome procurement laws make it difficult for schools to operate efficiently, and fourth, contractual obligations place limits on principals' staffing decisions.

Last year's school reform legislation added new contents to the education box but didn't change the dimensions of the box. Will the Legislature be willing to take the next step? Will it do away with categorical funding? In California, categorical funds were turned into block grants. Will it allow schools to turn vacant positions' fringe benefits into dollars? Will it change state contracting rules that shackle schools, and will unions and the Board of Education/DOE work together on school personnel issues?

Unless the box is reconfigured, the DOE and its principals will remain handcuffed. As a member of the BOE says, "Expenditure means nothing; control means everything."

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