Smarter School Spending

Smarter School Spending - 3A - Apply Costs to the Budget Process

Staffing Analysis

An analysis of staffing should show the actual full-time equivalent (FTE) positions for each school site, including the associated compensation for each position. Critically, the analysis should also show how personnel are allocated to specific types of services within the school. Ideally, personnel would be grouped by programs, which are defined as a set of activities with a common goal.

  • Identify a clear analytical question to be answered from the staffing analysis.
    A staffing analysis can take any one of a number of possible focuses and districts should, therefore, specify the question it wants to answer with a staffing analysis and then structure the analysis accordingly. A clear analytical question helps districts focus its data gathering and analysis activities.
  • Use actual compensation
    Analyzing cost using actual teacher salaries unmasks these inequities. Further, adding the cost of benefits (e.g., health care, pension, etc.) to this analysis (which is a substantial portion of staff compensation) provides a fuller picture of staffing costs and distribution of staffing costs. Districts need to understand how differences in teacher compensation drive differences in spending across schools.
  • Develop policy on how to account for centralized personnel.
    Staff that provides direct services to students (e.g., nurses, psychologists) should be included in the staffing count for each school (partial FTEs, if necessary), even if they aren’t under the direct supervision of the school principal. This shows the complete portfolio of resources available to each school.
  • Include all staff, not just those funded by the general fund operating budget.
    Although the general fund operating budget usually is the largest budget in a district, a substantial amount of the district staff is often funded by separate “sub-budgets,” such as state or federally funded programs. An analysis of the total staffing at the district’s disposal would be incomplete without including these staff in the school sites that they serve.

Cost-of-Service Analysis

The objective of a cost-of-service analysis is to provide a more accurate portrayal of the cost of providing a service by highlighting key cost drivers

  • Fully Loaded Cost of Compensation
    Districts often only consider employee salaries when making resourcing decisions, neglecting benefit costs (e.g., employee health care, pensions, etc.), which are a substantial portion of employee cost. Adding benefit costs to an employee’s salary enables the district to make a more informed decision among budgeting alternatives.
  • Per Unit Costs
    The budgets for routine business and operational services, as well as services that impact students directly, can be broken down into per-unit costs (e.g., cost per student served). This can enhance communication and reveal differences in costs.

Cost Effectiveness Measures

  • Cost per Outcome
    This measure is defined as the district’s total spending in pursuit of a given outcome (e.g., reading proficiency) divided by the number of proficient students.
    This measure provides insight into the overall efficiency of the district’s spending and will likely be the easiest measure for a district to calculate of the three measures
  • Relative Cost per Outcome
    This measure is defined as a school site’s actual cost divided by the expected cost of the school site if all funding was allocated purely on per student basis.
    The result is a matrix that compares school sites in the district on their relative cost and their relative achievement, such that a school could fall into one of four categories relative to other schools
  • Academic Return on Investment (A-ROI)
    This measure is defined as the cost of a given programmatic element divided by the student outcomes achieved as a result of the spending on the programmatic element. A-ROI will likely be the most challenging of the three measures to calculate for most districts, but will have the most use for guiding detailed budgetary decision making.

    Due to the nature of Academic Return on Investment (A-ROI) a more complete discussion is included


  • Level 1: Develop staffing analysis that is consistent with the Best Practice.
  • Level 2: Develop cost of service analysis that is consistent with the Best Practice.
  • Level 3: Develop cost-effectiveness analysis (e.g., Academic Return on Investment, cost per outcome, relative cost per outcome) that is consistent with the Best Practice

Quick Wins

  • Quick Win: What is the district trying to answer? And agreement on this question.
  • Why important? Define a problem before seeking solution - sets target for what district is trying to answer.
  • How does this help district control/own process? Provides clarity on the direction of the analysis.


Best Practice 3A - Applying Cost Analysis to the Budget Process

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Case Studies - Traverse City Area Public Schools, IL

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