A school district uses its money to purchase a variety of goods and services that produce the educational programs available to their students.  In some cases, a district also provides a variety of services for nonpublic school students.  Spending will vary between districts due to the uniqueness of each district.  The uniqueness is defined by local preferences and student needs within the district.
 
Two different approaches can be used to describe just what a district purchases.  One approach is to examine the function and sub-function spending of the district.  Using the function and sub-function approach presents a view of the district's expenditures in a summary and program structure.  Second is to discuss specific elements of spending such as salaries and benefits, books and supplies. Combining the two different approaches in a matrix allows an understanding of the interrelationships between programs and elements of cost, such as salaries.

Functional spending in school districts is reported annually by each district through the district's annual financial report (AFR).  The functions defined by the school accounting system are instruction, support, non-instruction, facilities, debt and all other.  Within each of the functions are a number of sub-functions that provide details of the types of services each district provides, depending upon the needs of the students.  Based on a review of 459 of 501 annual financial reports for the 1999-2000 school year, more than 90 percent of all district spending is for instruction and support functions.

The functional area of instruction is designed to track expenditures related to instruction of all students.  Sub-functions within instruction identify several specific educational programs: regular education, special education, vocational education, other education, adult education and support of community colleges.  Regular education includes all classroom activity for grades K through 12.  Special education records many of the costs associated with providing educational opportunities, other than regular classroom, for any child with special needs.  Special education includes costs for both gifted and impaired students under the Pennsylvania School Accounting System.  Vocational education includes costs for both district vocational instruction and tuition payments to area vocational-technical schools.  Other education includes the required educational services of homebound instruction, alternative education for disruptive students, summer school and driver education.

The support functional area includes the costs of activities and programs directly related to assisting both the teacher and the student, but are not directly associated with classroom activity.  Sub-function expenditures classified as support include guidance, attendance and psychology services.  Other support services designed to assist students include speech and audiology services, pupil health services (school nurse) and school libraries.

Among the other costs listed as support sub-functions and typically viewed as administrative costs are: superintendent, principals and related central office support; legal costs, business office, and tax collection activities.  This area also includes costs related to buildings such as utilities and cleaning services, as well as transportation costs.

The remaining functional areas of facilities, debt and other all pertain to costs of acquisition and renovation of buildings, purchase and repair of equipment and the payment of principal and interest on any borrowed funds.

Salaries typically represent the largest single item of expenditure in a school district.  Teacher salaries are subject to collective bargaining at the school district level.  The initial requirement for collective bargaining was the passage of Act 195 of 1970, and modified by Act 88 of 1992.  This legislation and related court rulings have produced salary schedules for professional staff that are based on educational level and number of years of service of the individual.  Also included in collective bargaining requirements are employee benefits.

In many cases, when a district experiences an increase in student enrollment, it requires increasing the number of teachers or the adding classroom aides.  The interesting aspect is that as the number of students declines, the number of teachers employed by the district is subject to arbitration and documentation to show that enrollment has declined significantly.  Further, districts reach a point where reductions in the number of students must result in an alteration of the education program.  Therefore, while local boards may increase the number of teachers without review, to reduce the number of teachers is subject to potential litigation.  Additionally, the Pennsylvania School Code prohibits reduction in the number of teachers for purely financial reasons.

Within the functional and sub-functional areas are a series of specific costs for salaries and wages, individual costs of benefits, purchased services, utilities, supplies and materials.  The instruction function contains the largest single item of expenditure, which is the compensation paid to individual teachers and classroom aides.  Salaries and wages are recorded in most of the function and sub-function areas, as are the benefits to be provided as part of the contractual obligation related to employment.  Other costs in the functional area of instruction include costs for substitutes, materials and supplies, as well as textbooks for classroom use.

Spending by school districts can be examined by element (such as salaries), by function (such as instruction), or by sub-function (such as special education).  Looking at only one structure for spending can be misleading about the specific purpose of the anticipated benefit of such spending.

The only purpose of a school district is to provide public education.  This means that the district must provide for classes such as math, reading, physical education and social studies.  All of the specific course requirements are established by the State Board of Education, although a district can make additional locally determined requirements.
 
Other sources of required spending results from federal and state laws.  Costs incurred by districts because of federal and state laws are not always supported by increased revenue.  Also outside of the control of the district is expense of legal action against not only the district itself, but against other districts (this may alter the requirements for all districts).

Summary
School spending is the result of a mix of federal, state and local actions and decisions.  The primary focus is the provision of educational services to public school students.  In some cases, there is either limited or no financial support.  Tracking of school expenditures is subject to a specified structure designed to reflect accountability for school district spending.  The structure, while useful for consistent reporting, does not always disclose why spending occurs.  The interrelationship of spending, student needs and complex laws and regulations is intended to meet the local demand for public education. 

For questions or comments, please contact David W. Davare, PhD at (717) 506-2450 ext. 3372 or (800) 932-0588.