K12 Fundamentals: Centralized vs. Decentralized Budgeting
Welcome to Fundamental Central! Just as every school district has its own priorities and policies, each also has its own way of managing school finances. The styles are somewhat of a spectrum; at one end, some schools have completely centralized operations, where the district headquarters is the main decision-maker for financial decisions. On the other end, there are decentralized operations, where school principals control their budgets in order to adhere to their school’s principles. (No pun intended.) Many school districts fall somewhere in the middle, and some are regularly experimenting with new models!
Both have their strengths and pitfalls, making them effective (or not) based on the context of each district. Since we also know decentralized vs. centralized budgeting is a hot-button, top-of-mind issue that often causes spirited debate around the Thanksgiving table, we’ll cover them alphabetically to avoid any appearance of bias.
When education budgeting is centralized, the district office, which manages every school site in that district, controls the finances. All school districts have a superintendent-- the head-honcho who reports to the school board-- and most districts have an assistant superintendent specifically in charge of finances (sometimes also called a Chief Business/Financial Officer). While their titles vary, their job descriptions mostly remain constant: manage money to help the district meet its goals and stay compliant with regulations.
Having high-level administrations and their teams run the show certainly has some advantages. An administrator in charge of district finances would ideally be highly trained in school budget planning, something not always true for principals or other school leaders. Having one clear finance leader means that there are fewer “cooks in the kitchen” when it comes to budget planning and eases compliance concerns. Centralized budgeting also promotes standard curriculum and instruction district-wide, increased buying-power when districts negotiate large contracts with vendors and more free time for school leaders to spend on student and staff affairs rather than finance and operations.
But as any freshman econ major will tell you, there’s no such thing as a free lunch, and these advantages are counterbalanced by definite setbacks.
There are around 13,000 public school districts in the US, and many of them are, for lack of a better word, ginormous: more than half of US students go to school in districts enrolling over 10,000 kids, and these districts often have wildly varying needs from school to school. Centralizing budget operations make it impossible to truly understand the nuances of school sites that need different resources and interventions to achieve equitable outcomes. Standardized staffing formulas (a hallmark of centralized budgeting) generally fail to consider unique school needs like additional socio-emotional supports and English as a Second Language (ESL) professionals.
The above reason is, in part, why Houston Independent School District, which enrolls 214,000 students (roughly the population of Des Moines, Iowa), moved from a centralized system to a decentralized one in the early 2000s — a move that still produces controversy today. Why? To understand, we have to explore the other pole of the K12 finance management spectrum...
Decentralized budgets give school leaders most of the power over their school finances. In Houston ISD’s case, the district wanted principals to own 80% of their site’s budget, with the rationale that principals were the ones best positioned to meet their students’ specific needs.
This, in effect, is the main advantage of decentralized budgeting: If those closest to the problems are the ones closest to the solutions, then giving school-level leaders control over their finances will let them allocate resources in a way that most benefits their sites. In fact, researchers found that Title I funds generated “a substantial improvement in student achievement” in decentralized situations compared to centralized ones.
Moreover, bureaucracy is a perennial staple of education organizations. Reducing the number of hurdles a school leader must clear to utilize funds makes decentralized budgeting an appealing option for districts large and small, especially given the additional challenges in the age of pandemic schooling.
These advantages are compelling, but some argue the drawbacks are greater. For example, many believe this system disadvantages districts by helping school leaders dodge accountability—something that Houston ISD still grapples with even 20 years after their switch. As we said before, many school leaders also lack a strong background in financial management, which makes it more difficult for them to make optimal resource decisions. (This is not necessarily always the fault of principals; rather than timely, efficient systems to optimize spending, school leaders often inherit mind-bendingly complicated spreadsheets, sometimes designed precariously enough that one deleted formula can crash the entire file.) Other disadvantages can include the lack of standardized service delivery across a district, meaning that children may have widely varied experiences depending on which school they attend.
Luckily, Edstruments has spent an enormous amount of time and energy researching these issues to create a product that streamlines school administration. No matter where a school system falls on the centralized/decentralized K12 finance spectrum, having clear and timely data that integrates with existing platforms and is easily shared with the right leaders can help them make better decisions faster. When principals spend less time managing payroll, purchasing, and work orders, they have more time to spend on what really matters: supporting staff and students.
In what will be arguably the most unusual school year the US has ever seen, strong K12 finance management will be paramount to successfully achieve educational goals. Here at Edstruments, we’re committed to collaborating with organizations — both centralized and decentralized — to ensure their school budgeting is as efficient and equitable as possible. Want to see for yourself? Visit our site to request a complimentary demo today!
Edstruments exists to equip education leaders with the knowledge and tools to most effectively and equitably serve their students. To learn more about how we can help your school administrators make better financial decisions, email us at firstname.lastname@example.org or fill out the contact form on our main website.