As a school district’s chief financial officer, I often struggled with how best to spend the limited incremental resources available for a new school year. That dilemma was exacerbated in years when our district was forced to cut resources to balance the budget.
AROI can be the hero when school districts use it as a customized measuring stick in deciding how to fund or trim budget line items in both short- and long-term planning.
Collaboration Across Departments
Employing a strategic measurement versus an “in the black or in the red” gauge can help depoliticize the process and give credibility to the decisions made for funding operations. Similar to our own personal budgeting process where we save for our children’s college fund or for a dream vacation, we need to assess our current budget procedure and introduce a new filter that demonstrates how our resource allocation (budgeting) process reflects our goals and priorities. We must also realize that assigning flat increases or decreases in budgets across the board is not strategic.
AROI can be the hero when school districts use it as a customized measuring stick in deciding how to fund or trim budget line items in both short- and long-term planning.
AROI requires district leaders to come together to discuss and define this metric. Without an understanding and buy-in by leadership, integrating an AROI approach is difficult. Reviewing the strategic plan and school improvement plans with the curriculum and instruction team can be a great place to start.
The Every Student Succeeds Act (ESSA) encourages the collaboration of sometimes-siloed teams in finance and curriculum. Equity reports require administrators to examine how and why they budgeted dollars and assigned staff to programs. ESSA also suggests that school finance professionals should be key players in the strategic planning process. The budget should mirror the district’s strategic goals.
Deeper Program Evaluation
An example of AROI comes from the Palm Beach County (Florida) School District as described in the Harvard University Strategic Data Project’s report “The Hidden Truth in ROI” (https://sdp.cepr.harvard.edu/blog/hidden-truth-roi).
The district used AROI to evaluate a specific program: Advancement via Individual Determination (AVID). The AVID program was well respected in the Palm Beach County district. Applying the fundamentals of AROI led to some strategic questions: Is this program being administered in the most effective way? How much is this program comprehensively costing per student? The answers led the administrative team to a much deeper evaluation of AVID and a more pointed approach to effectively using the resources to the greatest advantage.
Specifically, the district developed a clearer picture of who should be participating in the program. The district had been enrolling students most likely to succeed in the program rather than those who were most in need of the program. That difference may seem subtle, but the adjustment resulted in a more targeted use of funds and a much more pointed strategy for meeting the district’s goals.
The lessons learned in that process were key to continuing this work:
- Don’t be intimidated. This work is complex and getting started can be daunting, but established criteria can become more repetitious than difficult.
- Find opportunity costs. Opportunity costs are the line items that don’t appear in your budget. One outstanding example is teacher and administrative time required by a program. With a finite amount of time in each employee’s day, the allocation of effort matters with regard to efficacy and effectiveness.
- Standardize the approach. Develop and maintain a framework that reflects your district’s goal and priorities.
Initially, AROI will elicit more questions than answers if administered correctly. That result is exciting in that it fosters conversations about how and why choices are made and how they may be improved on. It also defines district targets and provides an understanding of how to develop a financial and staffing blueprint to make things happen.
To get started, districts may have to examine current processes. Critical components include financial coding that is consistent and aligned. Cost tracking must include all costs involved and a determination of which costs are “sunk costs” and which are incremental costs.
Measuring the effectiveness of programs requires that specific desired outcomes be delineated and measurable (think SMART [specific, measurable, achievable, realistic, and timely] goals). Are programs implemented with fidelity? As the analysis becomes more granular, it will be important to consider such factors as teacher experience and credentials. Those factors reflect a larger expense and may be pertinent to success. What are the costs of professional development related to the project? What factors determined which teachers and students would be involved in the program?
A multiyear budget and staffing plan can reduce anxiety and build confidence in how the district is operating and what lies ahead.
The result can be an administrative team that is engaged and enlightened by a deeper understanding of how the district operates and succeeds. The massive amounts of data that districts are required to collect and report can be harnessed and shaped to guide the process. A multiyear budget and staffing plan can reduce anxiety and build confidence in how the district is operating and what lies ahead. Sharing those plans and measured strategies with stakeholders and the public can foster trust and confidence in the district’s leadership and can build a foundation for bond referenda or tax requests that demonstrate alignment with the community’s goals for education.
Critical Questions
Ask yourself this series of questions: As a school finance professional, do I understand the district’s philosophy on instruction and goals for educating students? Can I demonstrate that our budget aligns and supports those goals? How do we measure success and prioritize accordingly? When we cut budgets, are we certain that we are doing the least harm? What story does the current budget tell about the district’s priorities? Is it consistent with what we are saying in our communications and in our strategic plan?
AROI is a process, not a project. It will require a deeper look at district operations and their use of human and financial resources. AROI is also a springboard for data-driven discussions and enhanced understanding of operations and decision making across the district. It can be a unifying framework for district accountability and management of scarce resources.