STREAMLINING AND COST-SAVING OPPORTUNITIES
IN ARKANSAS' K-12 PUBLIC EDUCATION SYSTEM

The report of the Murphy Commission's
subcommittee on streamlining
Arkansas' public education system
and identifying potential savings
and efficiency gains

September, 1998

The information in this report is offered to the public freely for educational purposes only and is in no way intended to influence legislation.

* Karen Henry

Jackson T. "Steve" Stephens, Jr.

Martha Adcock

Tim Brooker, Ph.D.

Senator John Brown

Kin Bush

Ronnie Cameron

Ann Die, Ph.D.

Jeanne Earl

Tom Easterly

Scott Ford

Ronn Hy, Ph.D.

Senator Peggy Jeffries

Bob Jolly

Marilyn Latin

Greg Nabholz

Kaye Ratchford

Lisenne Rockefeller

Senator Stanley Russ

Dub Snider

Sister Deborah Troillett

Gary Wekkin, Ph.D.

Harold "Wit" Witman

Margaret Gammill

Chris Pyle

Donna Watson

Mike Watson

Chris Carnahan

This study is dedicated to Karen L. Henry (10/23/51-9/16/98),

Arkansas Policy Foundation board member

& Murphy Commission Education Team co-chair.

She was a passionate crusader for education reform.

Karen will be dearly missed.

TABLE OF CONTENTS

PREFACE

The Virginia Department of Taxation was honored. So were Xerox, Planters Peanuts and a telephone company. But the biggest prize-the 1996 U.S. Senate Award for Continuing Excellence-went to a public school district. That's right, a public school district!

All the winners were cited for "performance and accountability", concepts once attributed almost exclusively to American businesses. But on this Spring evening, the award was being used to honor a small Virginia public school district straddling tomato farms and the suburbs about the city of Richmond.

With low per-student cost ratios, a high percentage of the district's middle-school students taking algebra and a foreign language, and a district dropout rate of just one percent, this award winning school district was justifiably recognized for its "high standards and accountability", the award said.

Is there a single Arkansas school district with similar "high standards and accountability" achievements? Have any recent "one size fits all" models for reforming the K-12 education system in Arkansas included high standards and accountability measures? Should the State Board of Education and the Arkansas Department of Education impose strict accountability standards for school districts, where no such accountability standards now exist?

Underlying such questions are fundamental concerns: whether the General Assembly, the State Board of Education and the Arkansas Department of Education have the political courage to impose accountability standards and turn reform into meaningful and measurable results. And whether Arkansas school districts, rich or poor, urban or rural, can begin to consistently deliver on their core responsibility to the citizens of Arkansas of advancing student learning.

In this report, we examine some of the facts and figures on which these questions turn. Readers will find in the following pages, recommendations on several key indicators of school district and student success in Arkansas, such as financial management, educational cooperatives, administrative restructuring of school districts, competitive outsourcing, and performance-based contracting.

Readers will also find proposed legislative initiatives for the General Assembly. One such initiative, an Accountability Act for the K-12 education system, encompasses such accountability and resource issues as goal-setting, financial analysis modeling, long-range planning, budgetary standards and community and parent involvement, plus an analysis of several other factors that shaped the subcommittee's recommendations.

Implementation of these recommendations will surely require bold leadership. The reform challenges facing the K-12 education system in Arkansas are enormous indeed, but a number of the pieces for success are already in place. Some of those pieces are tied together herein, and we fervently hope the General Assembly, the Arkansas State Board of Education and the Arkansas Department of Education will find this report useful in the overdue and urgent work that lies ahead.

In early summer of 1997, the Murphy Commission's "Streamlining and Cost-Savings in the K-12 Education System" subcommittee was formed by the Chairman and Vice-Chairman of the Commission to address an important objective: to identify opportunities to streamline operations and generate cost-savings in the Arkansas education system.

After considering the above, eight Arkansas citizen-volunteers accepted the challenge and became members of the Subcommittee. The membership included a retired university professor, a retired college professor, a former public school administrator, a former private school administrator, a current university department head, two retired public school teachers, a current member of a central Arkansas public school board, three business owners, an executive assistant, a retired legislative analyst, and a retired Air Force officer.

With so much talk about what is wrong with the K-12 education system in Arkansas, some might think we're raising generation after generation of Arkansas students doomed to under achievement and failure. The Subcommittee feels some of this talk is not justified. On the other hand, some of it is--and education's non-performance needs to confronted honestly in order to achieve needed change.

It is clear to this Subcommittee that education bureaucrats in Arkansas possess an almost infinite capacity for denial. For most of the 1990s, education officials have reassured themselves that social and cultural factors mitigate children's ability to learn and that expectations must be lowered. At the same time, they adhere, correctly, to the notion that "all Arkansas children can learn."

But ask the follow-up question, "Can Arkansas' children be exposed to a more rigorous curriculum," and the education establishment offers excuses and consistently dodges this important issue. And the profuse explanations for lowered expectations in the K-12 system are masked by what the Arkansas Democrat-Gazette, in a recent editorial, characterized as "educanto - a lot of multi-syllabic language and number games designed (by educrats) to disguise the new creed of (Arkansas) mediocrity."

Sadly, the General Assembly, unlike the Democrat-Gazette and this Subcommittee, seems disturbingly comfortable with the use of gobbledygook by educrats to explain any need for K-12 education system reform. Here's how the application of a renowned teaching technique (the Socratic method) might fare in an educanto laden culture (and here we paraphrase a certain nationally respected columnist):

No less a "non-certified" teacher than Socrates once took an illiterate slave boy, step-by-step through the solution of a complex mathematical problem simply by asking him the proper questions in the proper sequence. Some Arkansas educators, undoubtedly, would conclude that the major point of this demonstration was to "make the young man feel good about himself." They would report his improvement in self-esteem as " solid achievement gains" to the General Assembly. In the meantime, much talk about teaching "tools"--meta-congnitive skills, critical thinking, higher order thinking skills, etc.--would rage in an environment where education form has more bearing than substantive curricular content based on facts to be learned.

Educanto aside, K-12 system reform proposals abound. They are swirling across Arkansas from podiums, "think tanks", print and other media, and even radio talk shows. Such proposals include federal testing programs, a more diverse K-12 curriculum, national certification of Arkansas teachers, more "early learning" programs, more money, more technology and even character education.

Sadly, none of these proposals will cure the manifest ills of the K-12 education system. Nor do any of these proposals approach the sensitive, but absolutely crucial, topics of performance-based standards and accountability. Hence, this Subcommittee believes that it would be pointless to search for coherence among these and other proposals to which we have grown weary and circumspect. To be "for" and "against" them would be meaningless.

In fact, most proposals for improving the K-12 system are so general in scope they may be likened, writes a former U.S. Assistant Secretary of Education, "to a list of unrelated courses offered to a brainy, undisciplined national merit student in order to fulfill 'diversity' requirements at a second-rate college with no core curriculum."

Where, then, and in which K-12 system areas to concentrate the Subcommittee's efforts?

First, the Subcommittee opted to disregard the many reform theories being marketed to the General Assembly, families, and taxpayers alike. Second, the Subcommittee opted to confront one of the most pressing K-12 system challenges relevant to major reform: Huge amounts of education dollars are being spent year after year without decent academic returns because the K-12 system has no true accountability, few satisfactory measures of performance, and a baseless, inexplicable faith among the education establishment that "more of the same" will produce improved results. Third, it was determined that each Subcommittee recommendation must provide fundamental, cost-effective alterations of existing K-12 policies, practices and procedures. Simply tinkering around at the edges will never make reform happen.

A second task of the Subcommittee centered on how to inform, then convince, the Governor, the General Assembly, and the State Board of Education that they must become more committed to sound performance-based and accountability proposals.

The mission of the Subcommittee was to closely scrutinize the K-12 education system in Arkansas, identify those components of the system most amenable to streamlining and cost-savings, and to recommend proposals for bringing accountability to the system.

To accomplish its mission, the following objectives were established:

evaluate components of the K-12 education system and determine whether or not statutes and all management policies reflect a systemic commitment to education performance and cost-effective measures.

evaluate components of the K-12 education system and determine whether or not emphasis is placed in all management decisions to bring accountability to the K-12 system

make accountability and cost-savings recommendations for system component accountability, planning and budgeting, new programs, system restructuring, and programs to abandoned or scaled back.

insure that such recommendations are made in the context of "how does this contribute to higher performance-based standards and accountability in the K-12 education system?"

A majority part of the Subcommittee's research was gleaned from interviews with various sources important to the tasks at hand. Personal interviews with both Arkansas and out-of-state sources were commonplace.

Arkansas interviewees or stakeholders, included Department of Education employees, Directors of Educational Co-operatives (Co-Ops), superintendents of school districts, administrators, members of district school boards of directors, teachers and parents of public school students. Out-of-state interviewees included current or retired superintendents from South Carolina, Texas and Colorado.

Important data sources included the University of Arkansas at Little Rock (UALR) study of the Arkansas Department of Education. This outstanding study is referenced in this report as the "UALR Study".

Additionally, the published works of Paul Vallas, CEO of the Chicago Public Schools; E.D. Hirsch, renowned educator and author; Dr. Anne Fox, Idaho Superintendent of Instruction; Dr. Myron Lieberman, Chairman, Education Policy Institute; Marva Collins, educator and author; and others, were valuable references.

The membership of the Subcommittee was as follows:

Bob Jolly, Fountain Lake District Board of Directors, public school teacher and administrator, (Retired), college professor (Retired), Chair.

Marilyn Latin, Public school teacher (Retired).

Greg Nabholz, Vice-President, Nabholz Properties.

Dr. Ronn Hy, Chairman, Department of Geography, Political Science and Sociology, University of Central Arkansas.

Kin Bush, President, MMB Technologies.

Tom Easterly. Legislative Analyst, Illinois Senate Staff, and Illinois Department of Transportation (Retired).

Harold Witman, Consulting Headmaster, teacher (Retired).

Donna Watson, Education Policy Analyst, Arkansas Policy Foundation, Murphy Commission Staff.

Each year, Arkansas school districts receive a torrent of federal, state and local funds. Exactly where and how this is expended, however, is often something of a mystery, embedded most often in unfathomable school district budgets that may as well have been written in Sanskrit.

Like other government agencies, school districts in Arkansas use an accounting system called fund accounting. This system is designed to measure money spent against money budgeted. The system tracks process but not end results. Thus, to determine costs for a single school activity or function, one must research several separate budgets for the data.

For school districts, fund accounting systems have been designed to reassure taxpayers that tax moneys are being spent legally and within, where they exist, budget guidelines. However, these same accounting systems are not set up to assist education policy-makers at any level make better fiscal decisions or allocate scarce resources most effectively.

Simply stated, fund accounting as practiced in Arkansas school districts emphasizes accounting for expenditures according to who controls the spending, not who benefits from such spending. Sadly, these fund accounting systems and associated reports required from school districts by the Department of Education are not set up to allocate costs--teacher salaries and benefits, maintenance, and supplies--to end results, like a middle school math program, or high school sports programs, or maintenance in each of several elementary schools. Additionally, fund accounting reports always focus on district-level data, not school or classroom levels, where education is really delivered.

These inadequacies prevent those closest to Arkansas schools from making wise decisions about how to spend existing education dollars. And even with the much-heralded, ultra-expensive $25 million-plus Arkansas Public School System Computer Network (APSCN), which is mandated for use at the school district level, information is not presented in a format that makes sense to district school board members, parents or taxpayers.

As a group of Northwest Arkansas school board member interviewees stated, "Because of our accounting system, our district is data rich, but information poor. There is an old management adage with which the Department of Education should become familiar. We cannot manage successfully what we cannot measure. And we cannot improve what we cannot manage. Board members and superintendents alike know exactly where every district dollar originates, but not a single one of us can tell you how many of those dollars reaches a classroom in our district."

In October 1996, the U.S. Department of Education's National Center for Education Statistics (LACES) released Working Paper 96-19, "Assessment and Analysis of School-Level Expenditures," which reported on the research done in support of a model school-level finance data collection system in the United States. The LACES report studied two state accounting systems in depth, Texas and Ohio, because both states had implemented statewide school-level accounting systems in 1984-85 and 1994-95, respectively.

Further, the NCES study provides three good reasons for states to implement school-level activity-based accounting systems: 1) Vital management information is produced showing the distribution of expenditures and resources; 2) Funding equity questions can be evaluated for cost-effectiveness when the distribution of resources between districts and among each school within each district, is known; and 3) By linking school-level expenditures and outcomes can be explored more effectively.

Arkansas should take heed of the recommendations of the NCES and the Governmental Accounting Standards Board and start now to implement school-level, activity-based accounting. Augmentation of the APSN system throughout the K-12 education system in Arkansas will insure that all expenditures allocated at the school-level for each program, each function, location and level will provide invaluable data to education policy-makers.

A relatively new accounting software add-on has been designed to address the policy-making shortcomings of the Arkansas K-12 fund accounting system. This product, known as In$ite, was co-developed by the U.S. Chamber of Commerce, Center for Workforce Preparation and the accounting firm, Coopers and Lybrand L.L.P. following four years of research and testing of the methodology and software. (Appendix 3.1)

The In$ite software product is specifically designed for K-12 education which translates general ledger data into management information. All K-12 education expenditures for a school district from all sources and all funds are analyzed for school based expenditure information. In$ite complements rather than replaces a school district's current accounting system including a district's existing accounting software.

Additionally, In$ite is capable of producing 270 reports which display to policy-makers comprehensive financial data on every aspect of a school district's operations. The reports can, once individual school data has been created, combine dollars for single schools into grade level totals (elementary, middle, high and magnet schools). With this information, school boards and administrators can review expenditures for every school in a district and determine whether certain schools provide services more effectively than others. Analyzing the same district data, the Department of Education could determine the relationship between school district expenditures and student outcomes.

This finance analysis model, In$ite, requires only one personal computer with Windows software, which most districts already own or which can be purchased locally for approximately $1,500. The list price for the In$ite program is currently $2,500 per school district, which includes software, license agreement, reference materials and 12 weeks of implementation support.

In$ite is being implemented in all districts statewide in two states, South Carolina and Rhode Island. It has been implemented in districts in Maryland, Pennsylvania, Nebraska and other states.

South Carolina was the first state to implement the ln$ite system. It allows the South Carolina Department of Education, each of 91 school districts, and 1,100 schools to track every dollar allocated for education from federal, state, and local sources and explain in clear language where the dollars go.

According to South Carolina Superintendent of Education Barbara Nielsen, who provided impetus for the In$ite implementation, "Our state needed a better awareness of how funds are spent at the district level and in schools, because that's the only way to know if we're making decisions that fit specific South Carolina needs." The South Carolina School Boards Association was Superintendent Nielsen's strongest ln$ite supporter.

Rhode Island, following a state financial crisis in 1992, cut funding for education aid. Accountability became a major issue to the Rhode Island General Assembly and Board of Regents and new ways to determine what are appropriate education expenses and ways to adjust how state aid was distributed were sought. At the time, the Department of Education required only a single financial report from each school district which was designed for two purposes: to obtain state aid and to respond to federal government reports.

Frustrated by the lack of adequate financial data available to the Department of Education, the Rhode Island General Assembly appropriated money to implement ln$ite software in 10 pilot school districts in 1996. First draft reports from the 10 pilot districts were presented to the General Assembly last year. The General Assembly is expected to appropriate money to implement the program statewide by FY 1999.

Another In$ite user, Lewisburg School District, Pennsylvania, School Board President states, "We don't have time to do the analysis work that In$ite can do. This is going to change the way the school districts do their financing."

As of the third quarter of 1995, more than 600 chambers of commerce, and school districts in all 50 states and in seven foreign countries had expressed interest in the In$ite program. Prior to the release of the software, Coopers and Lybrand had provided finance analysis model services to the New York City Public Schools, the Omaha Public Schools, the Milwaukee Public Schools, and the St. Louis Public Schools, among others.

In October 1995, 18 Arkansas districts, with financial assistance provided by the Bentonville-based Walton Family Foundation, underwent In$ite software training as part of a test project sponsored by Coopers and Lybrand and the Center for Work Force Preparation (Appendix 3.2). A draft report, dated October-November 1996, depicting report data generated by the ln$ite program for one Arkansas school district, Bryant, which participated in the Coopers and Lybrand -Walton Family Foundation pilot project, is shown in Appendix 3.2.

Since Arkansas' education resources are limited, any proposal to improve educational outcomes must talk about the potential unit cost and be able to present program proposals and their costs. Implementing the use of a finance analysis model--In$ite or similar software--to make a small change in accounting capabilities cold reap big dividend for Arkansas legislators, educators, school managers, teachers, taxpayers, parents and their children.

The recommendation here is not a new or onerous state mandate in the usual sense, where the General Assembly adds new and expensive programs to school districts which must be funded year after year. The state already "mandates" that school districts use accounting procedures approved by the state and districts must report data in a state-required format. The change proposed by this recommendation is merely an accounting change which may cause some additional work for some office personnel in its initial year, but thereafter should require no additional work or expense.

The cost of a finance analysis model accounting product add-on would not be prohibitive. For example, the In$ite product lists at $2,500 per school district or a one-time cost of approximately $778,000 for Arkansas' 311 districts.

"You know," said a current board president, "Ford Motor Company can tell you how much it costs to produce an ashtray or a headlight; I can't tell you how much it costs in my district to teach a ninth grade History class. Best money the Department of Education could ever spend."

Compare these nominal costs with the cost for purchasing and implementing the APSCN computer system. Originally authorized by the General Assembly for purchase by the Department of Education, subsequent to the General Assembly directing the Arkansas Teacher Retirement System to loan $25 million at eight percent interest from the Teacher Retirement Trust Fund to the Department of Education, the APSCN system has or will cost Arkansas taxpayers more than $90,000 per school district.

In order to make the implementation of this recommendation go smoothly, the Department of Education may desire to implement it on a "phase in" basis for select "administrative units" or districts.

The lack of any significant improvement over the last decade in student achievement in Arkansas, in spite of substantially rising costs, indicates that the education establishment in Arkansas remains moribund. Decades old education agencies and their reforms, now tested--such as Education Service Cooperatives--and once trumpeted to be the breakthroughs that would help to spur a renaissance in K-12 education in Arkansas, have failed.

Fifteen Education Service Cooperatives (Co-ops) were established by the General Assembly and the Education Service Cooperative Act of 1985. Additionally, two other Co-ops, the Boston Mountain Co-op established in the late 1970s and the Arkansas Education Service Center established in 1993, are also operational.

Each Co-op is governed by a board of directors consisting of one representative of each school district within the Co-op boundary of jurisdiction. Traditionally, the one representative of each district has been the district superintendent, although Arkansas Attorney General Opinion 94-253 clearly stated that members of each Co-op board would be comprised of school board members from the Co-op member districts. To date, this opinion has been regularly ignored.

Each Co-op board employs a Co-op director and meets as a corporate body at least eight times each year to exercise general Co-op fiduciary responsibilities. Specific boundary size limitations and some vaguely defined annual budget procedures are established by the Arkansas State Board of Education. Annual audits of Co-ops are conducted by either private accounting firms or by the Arkansas Legislative Joint Auditing Committee as may be determined by each Co-op board.

Currently, the Co-op Director, a former superintendent or superintendent-certified individual, and the Co-op boards composed of district superintendents within the Co-op boundaries, comprise the governing body of each Co-op. Further, this governing body is responsible to the State Board of Education for only those "policies, rules and regulations which may be promulgated by the Board." Therefore, the Co-ops are not directly responsible to either the Department of Education or any other agency within the K-12 education system in Arkansas.

Further, the General Assembly in 1997 created the Cooperative Education Services Coordinating Council, members of which are to consist of the directors of each Co-op. A council Chairman, as selected by simple majority vote of the members--initially Rep. Ed Thicksten, D-Alma--with the consent of the Council members shall "govern all duties, responsibilities and operations of the Council."

Hence, this "umbrella" Council, not unlike the 17 Co-ops, neither reports directly to the Director, Department of Education or any other agency within the K-12 education system for any defined education function. The irony here, of course, is that Co-ops and the "umbrella" Council-headed by superintendents, ex-superintendents and perhaps term limited ex-legislators--are spending millions of education dollars without input from the education patrons they serve or the Department of Education which is responsible for K-12 education in Arkansas.

Based on visits to several Co-ops, on-site and phone interviews with Co-op directors, school district superintendents, district board members and administrators, the stated functions of Co-ops are, depending upon the Co-op, varied and manifold indeed.

"My Co-op focuses," pointed out one current Director, "on staff development activities and parenting education for families of children 0-5 years of age." Another Director cited his Co-op's major function to be that of furnishing "laminating equipment and lettering machines to teachers within the Co-op." Still another Director described a major Co-op component to be that of "media delivery and pick-up services with our Co-op owned van."

Obviously, with only limited State Board of Education or Department of Education oversight, each individual Co-op may adopt as many or as few functions as it so desires. Vision statements and long range plans for all Co-ops were non-existent.

Several programs conducted by some Co-ops are indeed laudatory, if not in an educational, in a humanitarian sense. The Home Instruction Program for Pre-school Youngsters (HIPPY), Pre-School Program for the Disabled, Carl Perkins Vocational Program, Drug Education Programs, Programs for Disabled Children, Ages 3-5, and Parents as Teachers Programs are cases in point.

Each Co-op has an annual budget of varying size and scope with revenues received from the General Assembly, federal funds "passed through" the Department of Education and other funds collected from member school districts within the Co-op membership.

Audit data compiled by the Legislative Joint Auditing Committee, State of Arkansas, indicates the 15 Co-ops authorized by the General Assembly and the two remaining Co-ops, for audit years 1995 and 1996, had total annual revenues exceeding $35 million. These revenues included annual state revenues exceeding $16 million and federal revenues exceeding $10 million.

In addition to an initial $10 million "start up" authorization by the General Assembly in 1997 for the Cooperative Education Services Coordinating Council, another $11 million, a one-year increase of 10 percent, was earmarked for this "umbrella" group in 1998.

Co-op audit reports are in a variety of formats, thereby making management analyses difficult. However, the following major management discrepancies were noted in 1995 and 1996 audit reports for two or more Co-ops:

uninsured and uncollateralized deposit of funds. unauthorized and undocumented disbursements. no construction bonds required for construction contracts. no bids required for construction contracts. duplicate payments to vendors. no bids taken on computer/printer purchases. fixed asset controls were inadequate and records not maintained in a manner to ensure accountability.

Additionally, audit reports cite the following "unauthorized" disbursements by one Co-op Director: meals for Director's spouse, airline tickets, entertainment tickets, pen set gifts, purchase of art object, purchase of groceries, airline ticket for Director's spouse, gasoline for private car, railway tickets, tires for personal car, party barge rental, golf fees, golf outing, and lodging for spouses/children of Co-op employees.

How important is the current Co-op system and the Co-op Coordinating Council to the K-12 educational infrastructure in Arkansas? According to the outstanding UALR Study, "there are strong Co-ops and weak Co-ops.

Co-op Directors admit freely that some Co-ops are strong and some are weak." One current superintendent interviewee suggested, "All Co-ops are weak and some are weaker than the others."

One Co-op Director interviewee noted, "The Coordinating Council is nothing more than a $IO million per year political waste of education dollars."

It is not difficult to identify the paramount and unsolvable weakness of the Co-op system. That is, where Co-ops are composed of marginal school districts managed by marginal superintendents, these same Co-ops are limited to marginal assistance to the school districts they serve, since the marginal superintendents govern the Co-op itself.

While the law which established the Co-op system also requires a Co-op system evaluation every five years, there is no evidence that such evaluations serve any useful purpose. The UALR Study states, "We note no evidence indicating that these evaluations are meaningful or that improvements result."

The average annual cost of each Co-op is $2.3 million and the average annual employee and retirement cost is $950,000. In the face of such costs, the co-op system has no designated K-12 education authority to which it is responsible. It is essentially autonomous. And, because services offered by the Co-ops provide few tangible benefits to administrators, teachers and students (though some would argue the point), it is essential to recognize and correct this accountability problem.

Over 60 percent of the member interviewees of district boards of directors, superintendent and principal interviewees feel that services currently offered by Co-ops could be better performed by the Department of Education. A number of principals said that the Co-ops were a waste of money and should be eliminated. A retired South Carolina superintendent, when interviewed by this Subcommittee, stated, "Co-ops were not efficient or cost-effective in South Carolina and have now been abolished."

Two remarkable recommendations cited in the UALR Study are also of critical note here. One of those recommendations states that "a much more meaningful and substantial evaluation system for Educational Cooperatives" must be developed. Another recommendation, assuming the prior recommendation is accomplished, calls for the "elimination or merger" of any Educational Cooperative that has no demonstrated record of providing strength to the region it serves.

We overwhelmingly concur with the findings of the UALR Study. We differ only in the action which must be taken to solve the Co-op dilemma--no current Department of Education oversight, no visions or long-range Co-op planning, no well-defined functions, poor fiscal management, and exorbitant costs which siphon $45 million annually from Arkansas K-12 classrooms and teacher salaries.

The following proposals reflect this Subcommittee's solidarity behind the critical need for a professional-educator staffed AERSC which will function to assist in the improvement of education for the children of Arkansas.

Further, over a ten year period, total savings would be $370 million. It is noteworthy to assume that a substantial portion of this amount would be earmarked for K-12 classrooms to include equipment, elementary classroom libraries, technology, science labs, more teachers, teacher aides for K-3 classrooms and other needs which directly impact on student achievement in Arkansas.

Additional proposals relating to the functions and staffing of the AERSC are contained in Appendix 4.7.

The good news continues to pour out of state capitols these days, in sound bites and press releases touting the placement of key state education leaders under performance-based contracts. Another trend toward performance-based contracts for district superintendents is also rapidly picking up steam as an accountability reform issue across the country; that is, except in Arkansas.

The quest for greater state education department accountability and public demands for key education leaders to adapt market place ideas to K-12 school systems have made performance-based pay an emerging education reform.

"This concept is 20 years late in Arkansas," commented one current board member in Central Arkansas, "incentive systems that work for Acxiom, Alltel and Wal-Mart executives will work in the Department of Education as well. We should reward people who can and will get the job done under difficult circumstances."

Many states-Arizona, South Carolina and Florida among others-elect their directors of public education. Accountability for student performance in these states is measured not by performance-based contracts, but rather by education system consumers at the polls. In states where directors of K-12 systems are political appointees, a growing number of these appointees are working under pay-for-performance contracts, which link bonuses, and in some cases even salary decreases to specific indicators, such as student test scores. A few years ago, such contracts were rare-only a few state directors of public education and two or three high profile school superintendents had them.

Today, superintendents are working under performance-for-pay contracts in Houston, Cincinnati, Minneapolis, Philadelphia, Palm Beach, and many other, smaller districts across the country.

There is hardly a consensus on the merits of performance-based contracts, according to recent nationwide surveys. A recent American School Board Journal survey indicates that 55 percent of board members believe such contracts "would improve student achievement in U. S. schools." Both board members and superintendents, 66 percent, say "such contracts would garner greater respect and trust with business."

Steve Scovic, Superintendent of City schools in Kettering, Ohio, operates under a performance-based contract: 20 percent of his salary depends on achieving 16 performance criteria, including academic progress. Scovic observed that for the first time in his career one of his administrators approached him with ideas for improving student achievement in a low-performance elementary school.

"Our superintendent works on a base salary with merit bonuses based upon goals set by our district goals committee," says an Alief, Texas board member. "The goals this year include increases in test scores by grade as well as an increase in graduates going to college."

"The value of a pay-for-performance contract for the key education leaders in Arkansas, from the top down to superintendents," says a current superintendent, "is that it would help the Director, superintendents and board members clarify top priorities for the K-12 system. A merit raise or bonus tied to these priorities would help us stay focused."

On the other side of the ledger, an Arkansas teacher said, "I hope our association never gives in to the tyranny of testing. I think the Director of the Department of Education and even superintendent's job performance and students' academic performance is too tenuous to base a pay-for-performance schedule on."

A Northwest Arkansas board member scoffed at that teacher's argument. "The logic in that argument," said the board member, "is that you can't expect performance from educators, whether at the Director or superintendent levels. Everyone knows that some educators at every level are better than others. So performance-based contracts are not unreasonable. In fact, it is the right way to reward an excellent director or superintendent who is able and willing to be held accountable."

Performance-based contracting for key K-12 education leaders is a reform that would re-focus the attention of K-12 education in Arkansas on classroom results, not just money. The Director, Department of Education can, if serving under a performance-based contract, break from out-moded Arkansas political allegiances and other education theories to concentrate on the goal of K-12 system reform: the best education for Arkansas children in the most cost-effective way. This Subcommittee's earnest desire is see Arkansas' K-12 system leadership identify what works in Arkansas schools and what doesn't. Then it should strengthen the successful programs and abandon the failures.

The State Board of Education should link an earnable salary and bonus for the Director to improvement on the Stanford Achievement Test (SAT) or other nationally norm-referenced tests. In no case, should "in-house tests" developed by the Department of Education be used as evaluation indicators for salary or bonus. For example, for the Director should and may receive an annual bonus--if earned--when statewide average district SAT scores improve annually by a margin determined by the State Board of Education in each grade tested.

Other evaluation indicators to use in the Director's contract could include drop-out rates, graduation rates, and college remediation rates. The Director could receive a certain number of dollars as a bonus per percentage point of increase per evaluation indicator. Bonuses should exceed 10 percent of the Director's base salary and be capped at 15 percent. Penalties should meet similar guidelines as well.

Likewise, the Director should be encouraged to use performance-based contracts--as a minimum--for each Deputy or Assistant Director under his span of authority.

It would be just as easy to argue that outsourcing is the free market savior of public education in Arkansas as it is to argue that outsourcing will cost jobs and "hurt" our schools, but as with all ideas to improve and streamline the operations of our schools, the key question is... "Is the idea in the best interest of the student?" If the answer is in the affirmative, then the next key question is. "Is it in the best interest of the Arkansas taxpayer?" Regardless of what realm of education one is talking about, if one answers "Yes" to both of these questions, then the idea should be implemented. Concerning the subject of outsourcing in the public schools, we believe there is a resounding "Yes" to both questions.

Nationally, more than one-third of the nation's school children will ride to and from school today on private buses. Interestingly, and also at the national level, public school districts are outsourcing--contracting out by competitive bidding--a fair amount of their support services: bus transportation, janitorial work, building maintenance, food service and administrative support services.

Outsourcing is not a novel idea, it is simply an idea that has not been fully exploited. According to a September 1997 issue of Investors Business Daily, 39% of public schools outsource facilities maintenance, 32% outsource food service, and 31% contract out transportation. Translating this, it states, 61% of public schools do not outsource facilities maintenance, and over two-thirds of public schools do not outsource food service or transportation. We believe that where feasible and cost effective, these and many other school operations in Arkansas should be outsourced. We believe it should be done for functional, financial, and philosophical reasons.

Outsourcing of all these types of services and more have been implemented in various programs in school districts throughout the country, and there is evidence that this trend is growing. In California, over one-third of the districts in the state have outsourced their transportation service. Many districts in Alabama have outsourced their food services. In Tuscaloosa, Alabama, for instance, school officials estimate that $200,000 is saved annually by utilizing private contractors. Facilities management is outsourced to some degree everywhere. At our own Arkansas School for Mathematics and Sciences (ASMS) in Hot Springs, the total facilities management for its facilities was outsourced in its third year of operation saving the state taxpayer a quantifiable $75,000 over a three year period.

About one-third of Ohio's public schools currently outsource one or more support services. Yet, the Ohio Legislature is calling for more outsourcing. The Buckeye Institute calculated that statewide savings in 1997 from expanding competitive bidding for more support services could have reached between $180 million and $360 million annually.

There are other intangible but perhaps equally important advantages of outsourcing. With care in procuring these services the quality can actually improve as with the case of ASMS by implementing performance-based contracting. In keeping with its mission to become a model institution, ASMS has not confined itself to classroom instruction to accomplish this goal. It has also striven to do so in its operations by essentially contracting out every operational function that could conceivably be outsourced, giving administrators more time to manage core functions of the school.

To expand on the idea of outsourcing facilities management, it should be noted that a 1995 General Accounting Office (GAO) study found that $112 billion is needed to repair schools throughout the U.S., roughly four times the U.S. Education Department's annual budget. Of this amount $3 billion is needed in the next year and a half to bring schools up to federal safety standards. A possible solution to this dilemma is to explore the idea of allowing the private sector to provide direction on regular performance-based maintenance programs. Purely in the context of saving taxpayer dollars in Arkansas, by exploring this idea, the savings on a state wide basis could be truly massive. These savings could be of such magnitude to actually consider the funding of the construction of new facilities.

Arkansas school districts are behind national trends toward using outsourcing to private companies to save tax dollars, and then reinvesting that money in Arkansas classrooms. Here are three good reasons to outsource.

As stated in section 6.0, the intangible benefits can be more time available for managing core functions and a higher quality of service. If time and energy of school administrators were unlimited, there would be less advantage to outsource. But as more regulations are imposed on these personnel, time becomes more and more constrained. Any idea that can offer more time for these professionals should be considered.

The core competencies of school administrators are (or should be) providing educational opportunity for the student. Why should it be for maintaining mechanical equipment, lighting systems, or food service? It should not and in reality it is not. The quality of services provided by private companies in the marketplace have to be excellent or these enterprises are no longer in business. By specializing in their business they generally can perform these tasks in a much more superior fashion than those without that degree of expertise. Performance-based contracting with these entities ensures quality, in many cases, superior quality to in-house services.

There is only one way to assess whether outsourcing costs less than in-house procurement, and that is to make a fair comparison. It is possible the private option may not exist, particularly in rural Arkansas, and if there is only one private option (a monopoly) to compare with, it is very possible the in-house procurement may be in the best interest of the student. Nonetheless, we believe the private alternative should be fully exploited, as the demand for these services can spur the creation of businesses to supply them.

One outsourcing success story is noteworthy here. Take the case of the Springfield Local Schools in Sangamon County, Illinois. After dipping into the state's education loan fund for twenty years, the Springfield District began contracting out bus transportation in 1994. To date, the District has saved $376,778. That money saved allowed the District to invest $130,000 in a new language arts program, invest $120,000 in a new social studies and music programs, and up-grade classroom supplies and materials.

Certain operational support functions of educational institutions are not essential core functions of state government, so why should they necessarily be solely provided by the public sector? According to the Murphy Commission "The Role and Function of State Government in Arkansas," the fourth essential function is "to assure educational opportunity exists for all citizens." This does not specifically imply public or private. Concerning public institutions, the fifth essential function is "to act as a responsible steward of public property and the environment." We believe a policy which fully exploits the outsourcing option can provide a better stewardship of educational related public property.

Failure to evaluate the advantages or engage in outsourcing drives up costs while making it more difficult to educate our Arkansas children. Support functions which can be outsourced include but are not limited to:

1. Food Service
2. Transportation
3. Health Services
4. Facilities Maintenance
5. Facilities ownership - Design/Build/Operate
6. Equipment Repair
7. Support Personnel - Administrative and other.

Nothing in the debate over outsourcing, of course, answers the question of how many dollars can be saved for the classroom. It does, however, raise the possibility that, without strong leadership from the State Board of Education, Arkansas will never find out. We have identified the following advantages and disadvantages for outsourcing in Arkansas.

1) Possible Direct Cost Savings

2) Fewer Personnel to Manage

-Less Personnel Management

-Possible Indirect Cost Savings

3) Possible Higher Quality

1. Possible Loss of Employment of Existing Personnel
2. Loss of Tort Immunity
3. May not be a Private Alternative in Rural Areas

A proper education of our children is the best investment we can make as a society to ensure the future success of this country. Despite the overwhelming tax dollar support Arkansas state education receives, much of these dollars go to the general category of non-instructional spending. In fact, Forbes magazine recently cited a study by the National Bureau of Economic Research which indicates this category of spending has grown to over 50% of education costs on a national level. If more than 50% of all Arkansas tax revenues is earmarked for the K-12 system then the buzzer just sounded. It's not time to go outside for recess, it's instead time to streamline Arkansas public school operations by initiating an aggressive policy of outsourcing. Sadly, outsourcing is significantly under-utilized as a reform measure of savings and efficiency in the K-12 system in Arkansas.

Arkansas Code Annotated, Subchapter 8, established an Office of Accountability with a Coordinator position and staff within the Department of Education. This subchapter also charges that office with issuing an annual "school report card" which is an index of each school district's performance against various statewide standards for comparable districts.

Thus the General Assembly, State Board of Education and the Department of Education have an "accountability program" framework in place and are to be applauded for this effort. Yet, an examination of that framework strongly suggests that much remains to be done in the accountability program component areas of standards and consequences.

Accountability is not a new idea in education in Arkansas or the nation. If Arkansans want improvements in student achievement, they must insist on more accountability for results, or lack thereof, throughout the K-12 system and in the halls of the State House. And the sooner the better. As one group of board member interviewees so aptly stated, "there will be no reform in our K-12 school system without a top-notch, top-to-bottom K-12 accountability program."

Research data indicates that while some "education experts" within the General Assembly work aggressively to meet the needs and protect the interests of those who work in the K-12 system, while giving only lip service to K - 12 education system reform, what has become lost is the recognition of just who is responsible for what.

Make no mistake. Establishing educational accountability at each level of the K-12 system in Arkansas will be difficult. For some, namely a share of the superintendents and board members interviewed on the subject, it may even be gut-wrenching. But accountability has to happen. In fact, Arkansas children need more than educational accountability reform, they need and deserve an educational accountability revolution!

Education writer Chester Finn states that there are three critical interdependent components of an effective educational accountability program: standards, information systems for determining whether the standards are being met, and consequences. How then, do we assess the effectiveness of these components in the accountability program for K- 12 schools in Arkansas?

A paradigm shift is critical if the General Assembly and the educational establishment are to develop and implement standards to insure that Arkansas children can, as Lewis Perelman cited in Schools Out, "learn anything, anytime, anyplace."

Compare Perelman's statement with that of a current superintendent interviewee concerning standards: "My district can't go along with increasing standards. You people just don't understand that the ability levels of the students we serve here don't allow us to have higher standards." Like it or not, this superintendent's only one of too many educators who take the view that if Arkansas children are poor or non-white, there is only so much that can be expected of them.

Wrong. We must have the highest of expectations for all Arkansas children.

Current Arkansas law requires that about 90,000 of the state's students in grades five, seven and ten take the nationally standardized Stanford Achievement Test (SAT) each September. Results from the 1997 SAT9 testing cycle are revealing:

• Less than 50 of 311, or only 16 percent of all Arkansas school districts, exceeded the national average 50th percentile in each of the grades tested.

• Another 34 percent of the 311 school districts failed to achieve the 50th percentile score in any grade tested.

• Another 26 percent, or more than one of four of all Arkansas districts, failed to achieve even the lesser state average score in any grade tested.

Yet, year after year, with these test results indicating otherwise, Arkansas children are advanced through the K-12 education system who cannot read, write, add or subtract. Two consensus recommendations have emerged from superintendent and board member interviews regarding accountability program standards. "We must use the SAT tests in grades three, five and say eight, not grades five, seven and ten as now mandated. It's better to fix the problems at an early stage," say superintendents, "they can't be fixed later."

"Consistent with earlier grade SAT testing for Arkansas students, must come clear, definitive standards for promotion," said one board member of the focus group, "our students are going to meet only those expectations we layout for them."

A second accountability program component requires the development of information systems to determine whether standards are being met. An effective system focuses on reporting the right indicator of student performance to the right audience. That is, academic standards must be closely linked to assessments capable of providing educators, legislators and the public at large with detailed information about what Arkansas students are learning and how much money actually reaches the classrooms (Recommendation 3.5) to produce that learning.

Arkansas Code Annotated, Subchapter 8, charges the Office of Accountability, Arkansas Department of Education with the issuance of "annual report cards" which is an index of each school district's performance measured against statewide standards for comparable districts.

Thus, the existing Arkansas Accountability Program has an outstanding information system vehicle in place. The Department of Education is to be applauded for the "report card" as an information system. Still board members suggest more standards-relevant data must be included on the report to aid educators, legislators and the State Board of Education in their decision-making processes.

Do educators and legislators know how many elementary school students, by race and gender, in Arkansas are reading below grade level by grade? Or among eighth grade students, how many, by race and gender, have shown the ability to apply higher order math skills in estimation, measurements and geometry? Or the number of girls enrolled in high school science, Algebra or higher math classes? Or the proportions, by race and gender, and composite SAT scores for each district's talented and gifted enrichment program?

A good report card vehicle can be made better by the inclusion of these and other indicators of student performance.

The third, and most important, component of any accountability program is consequences. In a report called "First Things First: What Americans Expect from Public Schools," by the Public Agenda, the authors affirm that there is no accountability program where there are no consequences if state standards are not met. And board member proponents of accountability program reform are also quick to point out that unless the program bears a bold negative consequence for failure to perform, improvement of student performance in Arkansas will continue to be impossible.

School board members and students are certainly aware of the notion of educational accountability consequences. Should board members fail in their duties, they know exactly what will happen. They will not be re-elected. Every time students are tested to measure their achievement, they are highly aware of the consequences of not preparing for such assessments -- that is, they will fail.

On the other hand, education bureaucrats, administrators and teachers in Arkansas have no sense of consequence for inferior or mediocre performance. Everyone gets paid whether the children learn or not. "Ours is the typical district in our part of the state," opined two parents in response to any known accountability consequences, "where everybody here knows full well that if you put your child in school here that very little learning will take place with that child. Yet, every year we have to put our children back in the same schools, and nothing ever happens to those running the school."

These parents were describing one South Central Arkansas school district, unfortunately, there are many others which typify the urgent need for an improved K-12 educational accountability program. Research shows that this district, with an enrollment of less than 3900 students, has eleven administrators linked to the district's academic standards responsibilities. With one superintendent and four assistant superintendents, with average annual salaries of $60,000, this district has the highest administrator-to-student ratio in Arkansas.

Yet, scores by this district's students on the 1997 SAT9 and previous year SAT tests are not only consistently below the U.S. average but several points below the lower Arkansas average as well. Are Arkansas K-12 academic standards being met by this district? Absolutely not. And the consequences meted out to this district by the Department of Education? None.

To date, according to the Southern Regional Education Board's "Accountability in the 1990s: Holding Schools Responsible for Student Achievement," the threat of consequences or sanctions seems to serve as an incentive to improve student performance. Early anecdotal evidence suggests that state departments of education sanctions, including the threat of firings and removals when districts fail to improve, are creating significant pressures. Some non-Arkansas leaders believe that the mere threat of sanctions is an even more powerful motivator than the payment of financial rewards. One non-Arkansas legislator put it this way, "We live in a society today where people react more from the potential loss of their job than they do from making a little more money on their job."

"New district ratings and academic trigger benchmarks for sanctions must emerge from the Arkansas Department of Education which unequivocally state that any district failing to meet achievement standards will receive the Department's assistance while the Department reserves the right to take over these failing districts, to fire administrators, to dismiss school boards, and even close school doors," said one current superintendent.

Clearly, any accountability process for the K-12 system in Arkansas must place greater emphasis on local problem solving and decision making. And to do that, the General Assembly, State Board of Education, and the Department of Education must mandate attention to vision and planning where such attention currently fails to exist.

No less an authority than the biblical scholar, Solomon, warned us, "Where there is no vision, the people perish." Likewise, educator Dr. Howard Mehlinger, warns that "public education, too, could perish without a vision." The K-12 system in Arkansas lacks powerful visions for the future. We must begin to visualize what school districts and schools could accomplish if educators would only take full advantage of the resources available to them today. Arkansas can, within limits, obtain the future of education they want, if only we are willing to visualize and plan for it.

Of 16 districts evaluated for vision statements, none had a vision statement available for review. When queried as to his district's non-availability of a vision statement, one superintendent remarked, "My vision statement is to retire with 28 years service."

President Dwight D. Eisenhower once stated, "Plans are nothing, planning is everything." That statement is also applicable to Arkansas school districts. Preparing vision statements requires careful planning, but unfortunately, many school districts fail to plan for ways to use available resources to meet either academic or accountability standards.

The process of planning for academic improvement in each district gives members of the school community the opportunity to develop a vision of what they want their school district to become, to decide on goals and objectives, short and long-range, to,assess the resources available, and to evaluate the results of their efforts.

Of 16 districts evaluated for planning, only two districts had a plan available for review. "Our district is not required by the state to have a plan, so we don't plan on paper," was a common response from both superintendents and board members.

The K-12 system accountability process being proposed requires that:

- The General Assembly and State Board of Education set higher statewide goals for K-12 system improvement.

- Each local district develop its own vision, goals, plans and accountability program tailored to its community and consistent with the state's standards and goals.

- Each school in a district with an enrollment of more than 300 students develop its own goals and accountability program consistent with the state and district goals.

- Each accountability program--at state, district and school level--be guided by a representative advisory committee which reviews improvement plans, makes recommendations and reports its progress clearly to the appropriate audience whether it be the general public, State Board of Education, the local school board, or the school community.

- Annual reports be made by each school to its public, and by each district to the community and the Sated Board of Education on progress toward local and state goals and improvement plans for the next year.

The following recommendations take a truly comprehensive approach to establishing an accountability program for the K-12 system in Arkansas - higher expectations for students, higher standards for promotions, consequences and sanctions, and district and school reporting to parents and the public. With enough General Assembly commitment, the ambitious accountability reform efforts outlined will gain the time and resources they need to prove their worth.

RECOMMENDATION 7.5 The General Assembly should repeal Arkansas Code Annotated, Subchapter 8, Office of Accountability, and enact the proposed Subchapter 8, Education Accountability Act (Appendix 7.2), inclusive of the provisions of recommendations 7.1, 7.1.1, 7.3, 7.4 and 7.4.1, to be re-titled as "The Arkansas Educational Accountability Act of 1999."

Of the nation's 14,881 school districts, 311 are located in Arkansas. Only 16 states, including our nation's most populous, have more school districts than does Arkansas. And when compared to the number of districts in nine other Southeastern states, the 311 districts in Arkansas simply dwarf the average 118 districts in those states. (Appendix 8.1)

Why does Arkansas maintain so many school districts when other states are legislating fewer and fewer districts? Most Arkansas historians agree that the large number of Arkansas K-12 school districts is a product of Arkansas school history. Dr. Philip Besonen, then-professor, College of Education, University of Arkansas, wrote several years ago, "because of poor transportation and communication, the distance which an Arkansas child could walk or ride a horse at that time was very limited."

Thus, Dr. Besonen concluded that the same rationale for maintaining school districts in Arkansas back in the 19th Century still exists even though the 21 st century is rapidly approaching.

Former Senior Editor of the Arkansas Gazette, James Powell, once said: "No other state in the South, rich or poor, indulges itself in such an inherently wasteful clutter of school districts in administering and financing its public education. In Arkansas, governors come and go, along with legislators, but the basic operating pattern in public education is an enduring scandal."

Dr. Kern Alexander, a nationally recognized University of Florida education leader, conducted a major study of Arkansas School districts and their associated system of financing as early as 1977-78. Fifteen years ago, Dr. Alexander stated his study's conclusion: "The merger of school districts in Arkansas is absolutely essential. Arkansas cannot afford to have 300-plus districts. A rich state can't afford 300 districts. The dis-economics of scale, are so obvious."

In a related study, the Governor's Task Force on Financial Management of Arkansas Schools estimated in its report that $50 million a year could be saved by mergers into 100-110 districts. In addition to the need for cost-effective organization of Arkansas school districts, some have lingering questions of long standing as to the constitutionality of a 311 school district system.

For example, retired University of Arkansas Business Professor, Kermit Moss, in a statement issued to a Pine Bluff newspaper several years ago, opined, "Article XIV, Section 1, the Arkansas Constitution directs in part, 'the State shall ever maintain a general, suitable and efficient system of free schools', I contend that it is not 'suitable and efficient' in counties of less than 20,000 population to have three sets of administrative offices and personnel when one set could efficiently handle the job. It is not 'suitable and efficient' to fragmentize our educational efforts and resources as we are now doing, when we could combine and concentrate our efforts and resources and do much better. Based on the clear and unambiguous language of the Arkansas Constitution, I believe that what we are doing is unconstitutional."

Comparing public school systems in Arkansas with those of another state, Utah in this case, reveals some surprising data that highlight the magnitude of the problem in retaining a 19th century rationale for maintaining 311 school districts.

Utah at present has merged its districts into 40, largely county-wide districts, in the late 1960s. Utah, not unlike Arkansas, is not a wealthy state, is mainly rural and many of its people live in isolated mountainous communities. And some areas of each state have limited transportation, which complicates the busing needs of school children.

Utah's population of 1.7 million reside in 29 counties with 40 school districts spread over 82,076 square miles. Arkansas has a comparable population of 2.3 million residing in 75 counties with 311 school districts spread over 52,082 square miles. Demographically, Utah school districts average 43,000 people and 2,050 square miles per district, while Arkansas school districts average 7,595 people and only 694 square miles.

The average per-child expenditure in 1995-96 for education in Utah was $3,431 per child; for Arkansas $3,303. This is a difference of only $128 per child. The average teacher salary was $28,676 for Utah - $28,409 for Arkansas. The pay differential is only $267.

Utah with 40 districts serves 471,447 K-12 students with 21,788 teachers; Arkansas with 311 districts serves 432,317 students with 28,789 teachers. Thus Utah serves over 39,000 more students than does Arkansas and with 7,000 fewer teachers. Arkansas non-teaching positions per student at 1-to-18 far exceed the Utah ratio of 1-to-29.

The graduation rate for Arkansas students is 76.5%. In Utah it is 83.4%. Utah students score above the national average on the Stanford Achievement Test and the ACT College entry exam and Arkansas students score below the national average on both tests.

It would appear from this data that our 311 K-12 districts are not working nearly as well as Utah's 40 K-12 districts. Utah's 40 districts serve more students with fewer teachers and administrators, graduate more students, and Utah students score much higher on norm-referenced tests. (Appendix 8.1)

When it comes to schools in Arkansas, more centralization threatens many Arkansans who harbor fears over loss of community identity and lower student achievement. These fears are unfounded.

A comparison of academic data for the 40 largest school districts in Arkansas versus the 40 smallest school districts is important; let the statistics speak for themselves. The 40 largest districts represent over 224,000 students, about one-half of Arkansas' 452,000 students, and average 5600 students per large district. The 40 smallest districts represent about 9300 students, and average only 230 students per small district.

The 1997 SAT-9 results for grades 5-7-10 in the state's 40 largest districts were 48-50-49, the Arkansas averages were 47-49-48, while the 40 smallest districts averaged 40-45-45. Although the 40 largest districts average-per-grade level tested were below the U.S. average-per-grade level, these scores exceeded the Arkansas averages and the average scores of the 40 smallest districts by four to seven points per grade level tested. (Appendix 8.2)

Similar results are noted in the 1997 High School Proficiency Examination data. This test, required by Act 1172 of 1997, was administered in October to 27,517 Arkansas high school juniors. Statewide, only 13 percent of the students passed the math portion of the test.

A comparison of the 100 percent failure rates between the state's 40 largest districts versus the 40 smallest districts is as revealing as the previous SAT-9 results. Of the 40 largest districts, none had a 100 percent failure rate for students tested. Of the 40 smallest districts, 18 districts or 38 percent of the 40 districts had 100 percent failure rates.

A similar comparative analysis of the highest and lowest performing Arkansas school districts reflects similar data to the 40 largest districts versus the 40 smallest districts data.

Of the "10 highest performing" school districts, only one district had a student enrollment of less that 300 students and thus, is the single district included in the "40 smallest district" category above. Similarly, only one district identified on the "10 lowest performing" school districts list also appears on the "40 largest district list". (Appendix 8.3) Clearly, when student achievement versus school district size is the issue, bigger is better!

Conflicting theories abound about the administrative merits of large school districts as opposed do small school districts. Proponents insist larger school districts save administrative costs while others swear they raise costs. Since Arkansas has not had significant consolidations or annexations since 1984, little recent data exists on administrative costs for large versus smaller school districts.

Therefore, student achievement should serve as the catalyst for a review of why test scores and other factors are significantly higher in larger rather than smaller districts. Administrative re-organization, inequities in both curriculum and funding, and the elimination of small academic or enrichment programs that do not add significantly to student achievement must be examined.

As one Arkansas principal stated, "Administrative annexation of many of our smaller districts would provide our students with the best of school worlds. They'd have all the attention you get at a small elementary school and all the benefits of a larger high school and middle school with a much broader curriculum, band and other extra-curricular programs."

Following the marriage of three small North Carolina school districts into one large district under a single administrative staff, the current superintendent has reported: "Four years after our merger, students have improved in the core subjects of reading, writing and math; our dropout rate has fallen to a lower level; student performance on the ACT has increased for the past three years; local costs per child have dropped 4.5 percent while teacher salaries have risen 18.5 percent."

In 1984, a young Okolona, Arkansas mother and teacher wrote, "How long will parents in large school districts continue to let their children be penalized by allowing millions of tax dollars to flow into small, inefficient systems? We cannot solve our educational problems by simply pumping dollars into our present inefficient systems. I am writing this as a plea not only for my children but every child in the state."

Like that Okolona mother who wrote years ago, our research lends support to her theory that Arkansas can and must take action. Here's one proposal on how to do it:

This recommendation does not require the consolidation or annexation of any school districts. Nor does this recommendation require any reduction in teaching positions or non-certified, non-administrative positions in any district. Additionally, no district transportation systems will be impacted and no school sites will be closed. Every school can keep its mascot, football and basketball team and preserve long standing rivalries with other schools.

This recommendation simply urges that approximately 174 existing full-time and part-time superintendents now serving 177 of Arkansas' 311 smaller school districts be reduced in number to not more than 134 "administrative units": with each of these units being restructured to simultaneously serve two or more districts. With few exceptions--proximity and mileage restrictions--existing large districts and county-wide districts remain unaffected by such re-structuring.

For example, Benton county in Northwest Arkansas has seven school districts with seven superintendents serving approximately 22,000 students. Three of these districts-Gentry, Decatur, Gravette--are located on a 13 mile stretch of Highway 59. By this recommendation, the three superintendent positions would be restructured into a single "administrative unit" capable of administratively serving all three districts and their 3200 or so students simultaneously.

The proposed reduction in superintendent and administrative staff positions into far fewer "administrative units", if enacted, can commence in school year 1999-2000. School year 1999-2000 will serve as a transition, superintendent attrition and contract expiration year. Thereafter, state moneys to pay out-going superintendent salaries will be prohibited. Districts may elect to expend district moneys for such salaries.

No reductions in district school boards will be required by this proposal unless mutually accepted by the districts served by an "administrative unit". For example, and as noted above, Gentry, Decatur and Gravette currently have individual school boards. In school year 1998-99, the Gentry School Board would appoint two of its members to serve on a joint Administrative Board, as would the Decatur School Board, then the Gravette School Board, having the largest student population of the three districts, would appoint three of its members to the joint administrative Board serving the three districts.

The General Assembly, the State Board of Education and the Department of Education must work hard and smart to utilize every dollar as cost-effectively as possible. By re-structuring existing superintendent positions into "administrative units" with multi-district responsibilities in most cases, we can reallocate millions of dollars back to the classrooms for instructional programs, teacher salary increases, better qualified certified personnel and technology.

This proposal would re-structure approximately 311 existing superintendent positions into 134 superintendent positions for 134 "administrative units". According to data compiled by the Arkansas Association of Educational Administrators (AREA) research, the average 1997-98 salary for an Arkansas superintendent was $61,444. (Appendix 8.5) Likewise, 1997-98 fringe benefits for Arkansas superintendents reported by the AAEA--insurance premiums, school owned cars, school owned houses, utilities for houses, annual expense allowancess--when coupled with Social Security and retirements was on average, $12,903. The average annual cost of each Arkansas superintendent: $74,347. A reduction of approximately 175 superintendent positions would mean an annual savings of $13,011,000 dollars.

Re-structuring of superintendent positions into "administrative units" would also re-structure the staffing and other requirements for operating the existing 311 offices of the superintendents. Given a decrease of at least one secretary or bookkeeper ($15,500) and fixed charges, utilities, supplies, equipment, custodial care, telephone, travel and convention expenses ($5,100) for each of the 175 re-structured superintendent offices, another projected $20,600 annual savings per office or $3,605,000 would be realized.

Arkansas lawmakers and other education "stake-holders" love words that can serve as fudge factors-- words that enact K-12 system legislation and then allow ample wiggle room to deny hidden agendas. A lack of any professional development incentives for Arkansas teachers, lack of accountability for the use of bond millages by school districts, and the use of public funds for "incentive funding" to school districts are three excellent examples of fudge factors at work.

Education "stake-holder" groups in Arkansas--educators and educator-financed lawmakers--who sometimes chair the education committees in the General Assembly have worked out their own modus vivendi: In order to divide the pieces from the education resources pie, they band together to accommodate each other's vital interests and to repel all intruders, including the Arkansas public.

Many of these vital interests to the "stake-holders", such as mandated annual teacher salary increases for 15 consecutive years, mandated use of surplus bond issue moneys for other than bond principal and interest repayments, and mandated use of state education funds for "incentive funding", have been codified into Arkansas laws which often seem impossible to repeal.

Yet, some non-establishment board members and administrators and knowledgeable members of the public-at-large believe that the legislative reform measures above have not worked as originally perceived. Still, all proposals are mooted to revise or repeal them. Establishment interests have elephantine memories and the fiscal and political clout to reward friends, punish foes, and sway public attitudes in Arkansas.

These findings have prompted this Subcommittee to address the following issues because as three property owners and taxpayers lamented, "We have no viable means of influencing the decision making process. We have no public organization in Arkansas to rival the education establishment. We must rely upon our representatives to the General Assembly and both owe debts to the establishment rather than to those of us who have children in the schools."

A journey of a thousand miles, of course, starts with a single step. That step is now up to the Arkansas General Assembly.

As the Subcommittee team examined the K-12 system in Arkansas, both external conditions and trends and internal strengths and weaknesses, the identification of a number of strategic legislative initiatives has emerged.

And strategic legislative initiatives are issues and "change challenges" that should be elevated above the realm of "things to do in the future." They are K-12 system issues that should not indeed cannot be left to business as usual. These issues tend to involve such high educational, financial or political stakes that they cannot sensibly be left to normal routine.

The following issues, if resolved, will produce concrete results in the near term. And that's exactly why superintendents, board members, the public and this committee alike have identified the following K-12 system issues as "change challenges". What's more, these same "change challenges" will enable the General Assembly, the State Board of Education and the Department of Education to contribute their intelligence, wisdom and experience in a meaningful way. And most of all, they put the General Assembly where it should be: in the driver's seat of K-12 system change.

When a Long Island, New York school district board of directors decided earlier this year to hire more teachers for their schools, they began the hiring process by requiring that the teacher applicants--all graduates of education schools--demonstrate the ability to answer the reading comprehension questions on the New York High School English Regents Test, which the school's own students had been tested over the years.

Of the 758 licensed teachers who took this multiple-choice test, only 202, or 27%, could correctly answer the required 80 percent of the questions.

A 1996 study done in Houston, Texas showed that applicants for teaching positions scored lower on basic skills tests in math than the average for Houston's high school students. Elsewhere, in a Florida county-wide school district, one-third of the teachers could not pass a skills test for eighth-graders.

These are indeed startling insights into the institution of teacher competency. And while the need to test applicants for teacher positions in Arkansas may be uncharted and unclear, its worth a great deal of time and analysis to reflect on the competency and professional development of those teachers already teaching in Arkansas schools. And its abundantly right that we should do so. "To be clear," stated a current and long-time Arkansas district superintendent interviewee, "the fear of teacher competency in our Arkansas Schools is no myth."

The question inevitably occurs: What should be done to enhance the competency of Arkansas teachers? Answers to the question, however, have long been taboo in Arkansas and are generally equated in most General Assembly and education quarters with slapping a grandmother or spitting on the flag.

"The major problem, with an obvious solution," stated one trio of current Arkansas board members, "is that Arkansas teachers, once certified and employed, are neither required nor financially encouraged to enhance their competence levels by seeking professional development avenues available to them!"

"First of all, we must educate our legislators", stated an Arkansas superintendent, "that in-service training and professional development programs for teachers are as different as apples and oranges. In-service is training-oriented while professional development is competency enhancement-oriented."

An Arkansas principal added, "In-service training for my teachers is required from Little Rock, so I do it. It may consist of preparing bulletin boards or even how to self-prepare better student work sheets."

Another principal commented, "One of the biggest jokes in Arkansas schools is what we call in-service training for teachers. If businesses like Alltel and Wal-Mart trained their professional people like we train teachers, they would soon be bankrupt. We do not require or provide they incentives for our teachers to improve their competency levels on a continual consistent basis."

A Personnel Policy Committee surveyed at a Southeast Arkansas district gave this proposal, "Each of our Colleges of Education should be mandated to establish satellite campuses at high school sites across Arkansas to provide needed professional development programs for teachers and administrators on a year-around basis. If you expect us to figure out how to be more effective teachers on our own, we're telling you it will never happen."

The warnings issued by interviewees are loud and clear. Yet, acts created by the General Assembly continue to exacerbate the lack of a definitive professional development program for Arkansas teachers. Arkansas Code Annotated 6-17-1001 mandates that all teachers receive minimum salary increases of not less than $400 each year for fifteen-consecutive years.

Simply stated, each Arkansas teacher is guaranteed by the General Assembly, a minimum of $6,000 in salary increments, whether or not the teacher ever again darkens the doors of an institution of higher learning.

Simply stated, each Arkansas teacher is guaranteed by the General Assembly, a minimum of $6,000 in salary increments, whether or not the teacher ever again darkens the doors of an institution of higher learning.

The objective of this recommendation, to enhance the competence level of Arkansas teachers by requiring the completion of formal professional development course work at an institution of higher learning, should be incorporated into the existing mandated teacher salary schedules. That is, to receive the minimum $400 annual salary increases, a teacher must complete each year, dependent upon years of experience and type of certification, a minimum of either three of six semester hours of professional development course work from an accredited college or university.

For example, teachers with less than two years teaching experience would be required to complete only three semester hours annually, while other teachers would be required to complete six semester hours of professional development courses annually.

Loosely translated, the Arkansas motto, "Regnat Populus", emblazoned on the Great Seal means "the people rule". And because of that motto, most Arkansans consider it vital that all public business be conducted in an open, forthright and public manner. And in no public business is it more vital and less heeded than in school district business.

"But how can the people rule," chides none other than Arkansas Attorney General Winston Bryant, "if they don't have access to information?" This subcommittee's research indicates that members of the General Assembly should join General Bryant in seeking the answer.

School district financial management and financial accountability issues continue to demand attention. Huge amounts of tax money are being spent without decent returns because the General Assembly has failed to establish accounting standards and no true financial accountability requirements. As a result, financial accountability horror stories abound in many Arkansas school districts.

At the school district level, stolid, leaden and retrograde, and sometimes incapable, boards of directors and superintendents have established, according to one Northwest Arkansas business owner, "money monopolies" in which the "financial interests of the monopoly outweigh those of the taxpaying citizens, where truly bad accounting procedures are conventional wisdom and ineffectual accountability is the norm.

At the General Assembly level, a few legislators, with familial ties with teacher and other special interest education organizations, have initiated, promoted and cajoled into existence various governmental rules and bureaucratic procedures to bypass common-practice accountability responsibilities for school districts. Such legislation is generally designed to buttress "money monopolies" in the school districts, discourage accountability, waste school district money, and help shield the boards of directors and superintendents from responsibility for conducting school business in an "open, forthright and public manner."

General Bryant and the citizens of Arkansas cannot solve accountability problems in the school districts, but the General Assembly can - - and stop making matters worse. Here's an example of what this Subcommittee found a financial accountability horror story to look like.

"A Central Arkansas school district seeking approval for a millage increase for the purpose of adding a multipurpose (gymnasium), administrative, auditorium and other buildings in the district, pledged to the patrons of the district, 10.8 mills for the retirement of all bonded indebtedness. The referendum was approved by district patrons on March 12, 1985.

Within several years of the approval of the 10.8 debt service mill pledge, the district's total assessed valuations for real, personal and utility property--bolstered by reappraisal increases as high as 29 percent--increased by 400 percent. Likewise, district revenues gained from the 10.8 debt service mills, pledged by the district board of directors to be used to retire bond debt and interest, ballooned 400 percent.

Currently, only 3.2 mills are required to meet this district's annual debt service obligation, yet, the district continues to collect 10.8 debt service mills annually. As a result, on June 30,1997, this district had collected and spent $5.1 million in "surplus" bond debt revenues for "other school purposes" as authorized by the General Assembly.

A Subcommittee review of this district's audits indicate that a majority of the $5.1 million "surplus" was used to increase teacher and administrator salaries, while the remaining funds were, according to one member of this district's board of directors, "just spent". How much of the $5.1 million found its way to the classroom? "I think some of it did", commented another board member.

Of twelve school district audit reports examined, eleven exhibited little or no financial accountability whatsoever for the expenditure of "surplus" bond debt revenues. Comparisons were also made relative to Arkansas bond revenue accountability statutes versus similar statutes in six other states. The results of these comparisons are best summarized by the comment of a Texas legislator who, when apprised of the Arkansas statutes, stated, "You gotta be kidding."

The following recommendation is this Subcommittee's "masonry and mortar" to be used by the General Assembly to erect an accountability requirement for all "pledged" debt service revenues in each school district.

Similarly, this accountability requirement will restore a long overdue measure of confidence in each school district's ability and responsibility for conducting financial matters in an open, candid and public manner.

There are many different ways to express the cost of public schooling in Arkansas, mostly on a per pupil basis. Yet, until the General Assembly met in 1997, it had never been expressed as an "incentive" cost. Not only did the General Assembly create "incentive" funding for school districts, it created a different category for expressing the cost of public school. Another Arkansas "first", another "first" for the country!

The General Assembly enacted, Arkansas Code Annotated 6-20-324, to reward school districts with tax dollars, categorized as "incentive revenues" - funds additional to those normally received from state comers - provided the board of directors of a school district would either maintain or increase existing tax levies.

In other words, should district patron taxpayers agree by vote to increase their local district taxes, then the Department of Education would increase state funding to that school district by distributing "incentive funds", a sum of which is also paid from taxes paid by those same district patron taxpayers.

A subcommittee survey of sixty-one current members of boards of directors, representing thirty Arkansas school districts yielded the following "incentive funding" responses. Forty-four members had no knowledge of incentive funding for districts. Five such members remarked, "we can use all the money we can get." Twelve members reasoned the "incentive statute" to be "unconstitutional". Five members rationalized the statute to be "obscene and less that honorable, even for Arkansas."

Over the past several months, this Subcommittee's work has been illuminating, somewhat smooth, somewhat boring, never uneventful, but it has always been very fulfilling. Our Subcommittee's journey covered many areas of K-12 education in Arkansas, to be sure, but the Subcommittee's bottom-line goal never wavered: how can we contribute to helping thousands of Arkansas children secure access to a better education?

The subcommittee has presented a number of key issues that, we feel, cry out for debate among members of the General Assembly, the State Board of Education, and the Department of Education. The Subcommittee believes our arguments to be thoughtful and, hopefully, persuasive.

A major goal of the Subcommittee was to identify ways in which significant savings in education dollars could be made. We have accomplished that goal and we are convinced that by simply reducing administrative costs in the K-12 system there will be sufficient funds available from current resources to reduce class sizes in the elementary grades, hire additional teachers to staff those classrooms, and to renovate and build additional school facilities.

We also give thanks to the really great teachers in Arkansas' K-12 classrooms, who despite incredible odds from the time they began their teaching careers, still remarkably convey knowledge and a sense of respect to a healthy quantity of our Arkansas children.

And to those education officials, political leaders, citizens, and others who are content to settle for educational mediocrity and failure in Arkansas' public schools, we commend the poetic admonition of CBS's Charles Osgood.

There once was a pretty good student,

Who sat in a pretty good class

And was taught by a pretty good teacher,

Who always let pretty good pass.

He wasn't terrific at reading,

He wasn't a whiz-bang at math.

But for him, education was leading

Straight down a pretty good path.

He didn't find school too exciting

But he wanted to do pretty well,

And he did have some trouble with writing,

And nobody had taught him to spell.

When doing arithmetic problems,

Pretty good was regarded as fine.

Five plus 5 needn't always add up to be 10,

A pretty good answer was 9

The pretty good class that he sat in

Was part of a pretty good school.

And the student was not an exception,

On the contrary, he was the rule,

The pretty good school that he went to

was in a pretty good town.

And nobody there seemed to notice

He could not tell a verb from a noun.

The pretty good student in fact was

Part of a pretty good mob.

And the first time he knew what he lacked was

When he looked for a pretty good job.

It was then when he sought a position,

He discovered life could be tough.

And he soon had a sneaky suspicion

Pretty good might not be good enough.

The pretty good town in our story

Was part of a pretty good state,

Which had pretty good aspirations

And prayed for a pretty good fate.

There once was a pretty good nation,

Pretty proud of the greatness it had,

Which learned much too late,

If you want to be great,

Pretty good is, in fact, pretty bad.