City school dollars cost more than other school dollars

* Problem 1: When is a dollar not a dollar? When it is used to compare the cost of a service in the suburbs with an identical service in a city. For example, more dollars are needed to buy the same amount of automobile insurance in densely populated Chicago than in sparsely settled Cairo, Ill.

* Problem 2:

Not only does it cost more to provide the same service in a city, but often, more service is actually needed. Police and fire protection are requisite in any locale. In a city, both forms of protection are more expensive than in the suburbs are in greater demand.

* Problem 3:

Urban public school systems not only contend with Problems 1 and 2 -- greater cost and greater demand than their suburban counterparts -- they also compete with more public agencies for the same tax dollar.

I called on Kern Alexander, of the Institute for Educational Finance at the University of Florida, for help in explaining this problem. Dr. Alexander said, "The big-city education picture has not changed much in the last 15 years. On paper cities look reasonably wealthy according to state formulas, but when you pay for actual services the cost is so much higher, because city schools have the kinds of children that have unique and high cost problems." [Bilingual ed, special programs for the handicapped, compensatory instruction, desegregation issues, to name a few.]

* Two basic questions:

First, revenues: How much have the schools got to spend?

Second: How do they spend it?

Revenue figures represent a complex of decisions by a local school board, a local community, a state, and the federal government about the way to raise and distribute education funds.

The expenditure figures deal with the part of the school budget that most directly affects a district' actual plans and spells out the specific instructional goals and educational priorities. The itemized expenditures, though more numerous than those in the revenue column, also provide the all-important measure for determining the efficiency of operation of the school system.

The goal, of course, is for the total revenue figure to exceed or equal the total expenditure figure.

When more is spent than taken in, it's a fiscal problem, or what cynics call "a typical urban school budget."

* Where do the funds come from for city schools?

Although there is no single average source or figure, revenues are generated from the following sources:

Forty to 50 percent comes in the form of state aid, primarily state income and sales tax, with some states, rich in natural resources, collecting severance taxes on minerals and oil, or fees for lease of state-owned land.

Forty to 50 percent form local taxes, primarily property taxes, although some localities are moving toward a sales tax or user fees in an attempt to replace the property tax.

Five to 10 percent in federal aid, with the lion's share currently serving inner-city schools.

* Given the complexity of education aid formulas, how can an equalization of funding that takes into account the special needs of city schools be made?

The need for the equalization of educational opportunities among the 16,000 -plus schools districts throughout the United States stems from the fact that some localities are rich, others are poor.

According to school funding experts, it is up to the states to undertake the challenge of equalizing sources of revenue.

Several court cases, some going as far as the Supreme Court, have dramatized this need for "equalizing funding," while allowing for a wide disparity of actual allocations of funds.

On one side of the US, San Diego gets as much as 80 percent of its budget from the state. Cities in New England receive on average less than 50 percent of their budget from the state.

Dr. Alexander notes: "When you pile up special services on the cost side of the ledger; formulas should place minimum dollar amounts on per-child needs."

* What constitutes adequate funding in urban schooling?

No one figure exists, but state and city averages help when viewed in comparison with like communities. Wisconsin would rank as a state with a higher than average rate, whereas Alabama would rank lower. Atlanta residents would be more likely to compare themselves with Mobile, Ala., people and Detroit residents might compare themselves with those in Milwaukee.

Large cities face what is called by tax specialists "municipal overburden" -- the competition for tax dollars among a number of vital services.

Urban residents often place a higher premium on police and fire protection than those in suburban and rural communities, leaving less revenue available for education. There is only so much tax that can be levied no matter how many legitimate uses it can be put to in a city.

Dr. Alexander asks, "Shouldn't there be a minimum for education, rather than a competition for funds?" Along with many other educators, he believes cities would have fewer problems if schools were funded adequately.

* What is the proper federal level of financial involvement?

This has never been adequately or clearly defined. The federal government under the Reagan administration has made it clear it is not going to do as much as in the past. Federal retrenchment will occur.

Even after a dollar figure for federal expenditures is determined, the question of how federal involvement will take place must also be answered. Will federal dollars enter as general or specific partners, i.e., with categorical [ funds earmarked for a specific program] or block grants [funds disbursed in a lump sum, leaving it up to the state to decide how best to use it]? The Reagan administration favors the blockgrant approach.

* What happens when a city school system is bankrupt?

Repercussions are felt throughout the city, not only on the personal level of parents, teachers, and students but also throughout the city's financial institutions, business community, and on the front page of newspapers and on the 6 o'clock news. The quality of education suffers, and those least responsible for causing the problem are most penalized -- the city's children.

Despite a history of independence from the traditional political and economic structures of their resepective cities, the local autonomy and viability of shcool systems are challenged. Local control by elected officials is diminished , if not altogether abrogated, by court-or state-appointed receivers.

Joseph M. Cronin, president of the Massachusetts Higher Education Assistance Corporation, puts it more bluntly: "The state and the banks, or both, tell [city ] school officials to file reduced budgets as a condition by which to obtain financial relief at a time of crisis."

When a fiscal crisis occurs, and financial institutions --major local banks and municipal pension funds, primarily --are called on to bail out a city, these institutions have priorities different from education. First and foremost, they are concerned that their loans are protected ad repaid in a sound and orderly manner. This is the pattern that has evolved in the urban bankruptcies of the ' 70s.

But when retrenchment comes to education, "It does not entail the most judicious educational principles to have banks have the dominant say," Dr. Cronin says. "Banks are instruments of a capitalistic economy and by no means can afford to behave as charitable organizations . . . banks want to minimize risks and in the financing of public enterprises will call for a 'guaranteed revenue stream to eliminate risks.'"

* In lieu of a crisis is there any more money for city schools without having to raise taxes or dip into the federal Treasury?

Of the 50 states in the US, about 15 have large urban school systems. For the foreseeable future, many of them face the possibility of a fiscal crisis in which they cannot either raise taxes or borrow money on their own good name.

In the recent past, New York, Chicago, and Cleveland city schools have, because of fiscal crises, experienced a breakdown of services to children.

Boston is in the midst of a similar fiscal breakdown.

Large cities in California, though not threatened to the degree that large Northeastern school systems are, must face the next school year with the pre-Prop. 13 state budget surplus exhausted.

Though the prospect of avoiding bankruptcies for some cities appears gloomy, the State of Ohio has established a special fund to cope with just such a crisis.

The Ohio Emergency Education Advance Bank for all school districts, rural or urban, will step in with temporary funding when a school district runs out of money and must close its doors.

Rogers Lulow, assistant superintendent for instruction in the Ohio Department of Education, says that "a school district is required to develop a plan to balance its budget within 18 months."

The plan can include either raising local taxes, retrenching staff and programs, doing both, or other measures. "State Board of Education staff would review the plan before state advances would flow to the city school district," he says.

He cites some of the benefits of such a plan: Continuity of children's schooling is guaranteed and control of the crisis remains closer to the local level and in the hands of professional educators, rather than with the financial community, with its differ ing priorities.