COLUMN ONE : Where Do School Funds Go? : Only half the spending is in the classroom, but there are wide variations among districts. If the most streamlined systems were the norm, annual savings would total $1 billion.

In many of California’s public schools, students are packed 35 or 40 to a room. Teachers face layoffs or pay cuts. Music and art instruction has been curtailed. Paint peels from the buildings. Parents donate everything from photocopy paper to paper towels. And business leaders complain that many graduates cannot read or write well enough to do an entry-level job.

Yet in 1990-91, the last fiscal year for which complete spending reports are available, the state’s public schools spent more than $25 billion--an average of nearly $5,000 for every student in kindergarten through high school. For a class of 30 students, that was enough to pay the teacher and still have $100,000 remaining for everything else.

Where is all that money going?

To find out how schools spend the money they receive from state, federal and local sources, The Times analyzed state budget documents and school district reports to track the path of a typical education dollar. The study showed:

* About 54 cents out of every education dollar goes directly to the classroom--to pay for teachers, books and supplies and for services to students with special needs, such as the disabled, the gifted and potential dropouts. Of this amount, about one-third reaches students in the special programs.

* About 14 cents on the dollar is spent on administration, which includes school principals and their assistants, supervisors at district headquarters, and the secretaries, payroll clerks and accountants who support the educational staff.

* Much of the remaining 32 cents goes for the cost of operating the schools--from maintenance and utilities to buses and cafeterias--and managing these functions.

These numbers do not show whether schools are spending their money wisely, a question that has vexed experts, educators and critics of public education in the United States since the 1800s. “Since there is very little standard by which to judge,” said UC Berkeley education professor James Guthrie, “we almost never have an answer.”

For many, the debate has focused on whether too much money is spent outside the classroom--on administration, or what former U.S. Education Secretary William J. Bennett once called “the bureaucratic blob.” That argument has frequently been voiced in California, where school spending has become an increasingly contentious issue. In Sacramento, Gov. Pete Wilson and Republican lawmakers insist that the schools could put more money “in the classroom” even if they get less money to spend this year.

Education’s backers argue that California’s public schools are, if anything, underfunded. Even with Proposition 98’s constitutional guarantee that public schools receive about 40% of the state’s general fund budget, California still ranks 32nd in the nation in per-pupil spending, well behind such states as New Jersey, New York and Pennsylvania.

The records show, however, that California schools’ spending on administration and other support services grew faster than enrollment and inflation between 1982 and 1991.

Moreover, records and interviews show, the level of non-classroom spending varies considerably from district to district. The Times’ analysis found that if every district could run as efficiently as the most streamlined school systems the savings statewide would total nearly $1 billion a year, which could be shifted to instruction.

Tracking the dollars coursing through California’s school system is no simple task, because each of the more than 1,000 districts accounts for expenditures in its own way.

But the state recently began requiring every district to produce an annual report detailing how it spends every penny it receives, using uniform standards to ensure that the spending is reported consistently from one district to another.

In 1990-91, the schools spent $25.2 billion. This averaged about $4,830 per student.

This is how that allotment was spent on the “average” student:

If the student was in a regular, no-frills program, The Times’ analysis of state and district documents shows, about $1,788 went for salaries and benefits for the teacher and an aide, books, supplies and classroom equipment.

Another $819 supported the instruction of students in programs known as “categoricals.” These are government funds earmarked for students with special needs, such as those who are poor or low achievers, deficient in reading, or in a school with an integration program.

The classroom had to be heated, lighted, repaired and cleaned and the school grounds maintained. These maintenance and operations services cost $459 per student.

There were tabs for counseling and nurses ($156), bus transportation ($149) and school lunches in the cafeteria ($158).

Other expenses were operating school libraries ($53), designing and building classrooms ($185), adult education ($100), child care and preschool ($57), health benefits for retired teachers ($33) and other local costs ($170).

Local administration--at schools, district offices and county education offices--totaled $674 per student, or a little more than one dollar for every four spent on instruction.

This included $355 for principals, assistant principals and their support staffs; $275 for central office management, and $44 for the county office of education, which loosely supervises districts.

Finally, at a cost of $29 per student, local school operations were overseen by state Supt. of Public Instruction Bill Honig and his staff of 2,511 administrators, planners and regulators.

Short of boosting public education’s share of the state budget--an improbability given the budget battle going on in Sacramento--can California’s schools find ways to shift more money to the classroom?

Wilson and his Republican allies in the Legislature have one answer: eliminating state requirements for a dozen of the categorical programs, reducing the money allocated to those programs by 20% and allowing districts to decide how to spend what is left. Proponents say this would help the schools manage an overall reduction in funding from this year to next even as enrollments climb.

“We think local school boards ought to be able to manage,” Wilson said. “They ought to have the flexibility so they can see to it that the cuts they make don’t affect classrooms.”

But the categoricals’ defenders note that most of the programs exist because Congress and the Legislature found that some students with specific needs were falling through the cracks.

“What happened is that people looked around and said it costs more to educate certain kinds of children,” said Assemblywoman Delaine Eastin (D-Union City), who chairs the Assembly Education Committee. “You really put some districts at a disadvantage if they have a lot of these children--special ed kids, kids who don’t read well, kids who don’t speak English, blind kids.

“We said we want to target some special care to those kids so they don’t wind up shoved in a closet somewhere.”

The other spending area that could be squeezed is school support, including administration. Could these costs be pared?

Not by much, school officials say. State schools chief Honig said his department surveyed other organizations and determined that only funeral parlors had a lighter administrative burden than the schools. Still, Honig said, he considers the quality of school administration more important than the quantity.

“It’s not the magnitude, it’s what people do,” he said. “If you like what the person is doing, you call it good management. If you don’t like what the person is doing, you call it bureaucracy.”

Only about 14%--or $3.5 billion--goes for administration at all levels, from Honig’s office down to the school principals’ secretaries. Most of that is spent at the school site.

The Los Angeles Unified School District, the state’s largest school system with more than 600,000 students, spent only 13% of its total general fund budget on administration in 1990-91, according to state and district documents.

Public education’s defenders say that the statewide average of 14% is proof that the schools are lean.

The level of administration varies widely among districts, however, and can make a major difference in the amount they have left to spend on the classroom. Education experts cite a number of reasons for these disparities: the age of the administrative staffs, the size of the district and its schools and the district’s geography, among others.

“Size is probably the most important characteristic,” said Kenneth F. Hall, president of School Services of California, a Sacramento-based consulting firm. “Small districts will have relatively greater administrative expenses than larger districts.”

But state figures show that overhead costs vary widely even among fairly similar districts.

Take two suburban unified school districts--Pomona in Los Angeles County and Garden Grove in Orange County. The districts are similar in size, and both have large numbers of poor and non-English-speaking students. But the two districts represent opposite ends of the spectrum when it comes to administrative spending.

Pomona spent $804 per student on administration in 1989-90, more than 24% of its general fund budget. Garden Grove spent $451--or less than 12% of its budget--on administration.

Pomona officials contend that their administrative costs are higher because they have more special programs to manage. But the district spent more per student than Garden Grove on every category of administration, from the school site to the superintendent’s office. For central administration, Pomona spent $332 per student while Garden Grove spent $141.

If Pomona had spent as much of its budget on instruction as did Garden Grove, the district would have had $4.6 million more to use in the classroom--enough to hire 100 experienced teachers.

San Francisco Unified is another district that stands out by getting more of its money into the classroom. One reason may be that just-retired Supt. Ramon Cortines has been a harsh critic of the education Establishment despite 36 years within it.

Cortines, who ran the Pasadena and San Jose schools before arriving in San Francisco six years ago, referred to his district headquarters as the “puzzle palace” and spoke derisively of administrative “tea parties” and bureaucrats who “like to play school.”

Cortines required all “resource teachers” to have contact with students every day. He had no full-time administrator applying for grants, but gave teachers and supervisors time off to do so. He reduced the staff that provides services to private and parochial schools with poor and low-achieving students, who are entitled to the same federally funded programs as disadvantaged public school pupils, by combining those responsibilities with other work that administrators were doing. He folded the special schools for juvenile delinquents--separate programs in many counties--into San Francisco’s high school division. Cortines had no public relations office and acted as his own spokesman.

According to the state’s most recent review of school district expenditures, San Francisco was spending more of its budget on instruction than other large urban districts. In 1988-89, San Francisco spent 69% of its general fund budget on direct instruction. Most large districts--including Los Angeles Unified--spent about 60% of their general funds in the classroom that year.

“We push the money as far as it will go,” Cortines said.

Similarly, Garden Grove officials say there is no secret to what they do.

“Our philosophy is that the money gets spent as close to the classroom as possible,” said Ron Walter, the district’s top fiscal officer. “We keep our number of administrative personnel at a level we feel is proper to support those activities.”

Statewide, school districts spend about 23 cents on administration for every dollar they spend on instruction. Garden Grove spends 16 cents. An analysis by The Times found that if every district could run at Garden Grove’s level, they would generate $960 million more per year for classroom use--a hefty boost in these times of tight budgets.

The Times analysis also shows that in 1990-1991, schools spent about 17% more on all non-instructional functions--administration and support services--than necessary to keep pace with enrollment growth and inflation since 1982.

Administration salaries are only a part of that support budget, but they also grew faster than needed to keep pace with enrollment growth and the cost of living. (Because of the way state records are kept, it is not possible to know whether the increase resulted from increases in salaries or in the number of administrators, or both.) In 1982, records show, schools statewide reported paying administrators and their clerical support staff a total of $1.1 billion--not including benefits. To keep even over the course of the decade, they would have needed to spend $1.9 billion on the same salaries in 1990-91, but actually spent $300 million more than that. The biggest growth came not in academic administration but in the salaries of those who oversee the business and operations side of schools.

Instructional expenses also outpaced enrollment and prices during the 1980s--by about 20%. Part of that increase was the result of deliberate moves by the state to increase the length of the school day and school year and to encourage districts to pay teachers more in hopes of attracting better instructors.

But that policy decision to improve teachers’ salaries may have had the unintended consequence of increasing administrators’ salaries, which in most districts are linked to instructors’ pay.

“Administrators are part of the overall leadership and instructional component of a school district,” said Wesley Apker, executive director of the Assn. of California School Administrators. “You don’t just freeze their salaries.”

Many districts began to cut back on administrative spending in the last year or two, as school budgets leveled off after nearly a decade of steady growth. The reductions made in the last 12 months are not reflected in the statewide figures provided here.

But some districts have found that administrative cuts can have unintended consequences. Los Angeles Unified recently cut budget analysts and then found itself $130 million short after an errant fiscal forecast. San Diego Unified cut administration by 21% last year, and Supt. Thomas Payzant said he gets more complaints about the bureaucracy’s slow response time from parents who call for help.

“They want to be able to call somebody up and get 30 minutes of individual attention to their problem,” Payzant said. “They want high-level people who can make the decisions. (But) we don’t have as many people as we once did to do the trouble-shooting.”

Holding Education’s Purse Strings

The history of education finance in California has been a progression from local control of spending to a system shaped largely by decisions made in Sacramento. Here are the key events that resulted in that shift:

SERRANO VS. PRIEST: After more than 100 years of mostly local control of school district finances, two California Supreme Court decisions, in 1971 and 1976, began a steady shift of that control to the Legislature and the governor. The Serrano decisions found that the state’s system of funding schools based largely on the local property tax was unconstitutional because it discriminated against students in poorer communities. The decisions forced the Legislature to reduce district-to-district variations in basic funding to less than $100.

PROPOSITION 13: The 1978 measure limited the property tax rate to 1% of assessed value, lowering property taxes statewide by 60%. The reduction forced schools to seek state aid to make up the difference. The state bailed out the schools, first using a budget surplus and later shifting its fiscal priorities. But the change dramatically increased the state’s say over how local schools are run.

SENATE BILL 813: Passed in 1983, the legislation increased state funding for schools by $1 billion a year for four years in exchange for stiffer high school graduation requirements, longer school days and years, and increases in minimum teacher salaries.

STATE LOTTERY: Passed by the voters in 1986, the lottery must give at least 34% of its revenues to the schools. The lottery money has added about 3% to school district coffers.

PROPOSITION 98: This 1988 voter-approved amendment to the California Constitution guaranteed public schools and community colleges about 40% of state general fund revenue. Intended to provide a floor below which public school funding would not fall, it has become more of a ceiling because of lagging state revenues during in the recession. While the guarantee can only be suspended with a two-thirds vote of the Legislature, the funding level is tied to changes in state revenue. This means that when state tax receipts are stagnant, as they are now, school funding levels off as well.

How the Money is Spent

To find out how schools spend their money, The Times analyzed a typical education dollar. The following breakdown shows how much of each dollar that goes to California’s public elementary and secondary schools reaches the classroom and how much is spent on other functions. Basic Instruction (K-12): 37 cents Other classroom instruction: 17 cents Administration: 14.5 cents Maintenance/Operations: 9.5 cents Facilities: 3.8 cents Nurses/Counselors: 3.2 cents Transportation/Food Services: 6.4 cents Adult Education/Preschool: 3.3 cents Libraries: 1.1 cents Other: 4.2 cents

Source: State Department of Education

How California Ranks

Every year, the National Education Assn. releases a ranking of the states on public school spending, class size and other indicators of school performance. Here is how California compares to other industrial states in two key areas.

Estimated expenditures per student (1991-92)

STATE AMOUNT RANK New Jersey $9,940 1st in nation New York $8,603 2nd Pennsylvania $6,980 6th Massachusetts $6,687 8th Michigan $5,671 15th Ohio $5,451 21st Illinois $5,248 27th Florida $5,235 28th California $4,866 32nd Texas $4,593 36th National average $5,452

Pupils per teacher (1989)*

STATE NUMBER OF PUPILS RANK California 23.0 2nd in nation Michigan 20.1 5th Ohio 17.4 17th Florida 17.2 19th Illinois 17.0 25th Texas 16.4 29th Pennsylvania 15.7 35th New York 14.0 45th Massachusetts 14.0 46th New Jersey 13.5 49th National average 17.2

* Includes special as well as regular classroom teachers.

SOURCE: National Education Assn.

Growth in Spending

In 1990-91, schools spent nearly 20% more than they would have needed to keep pace with enrollment increases and inflation since 1982. A Times analysis of state Department of Education documents shows how each category of spending has grown during the past decade. The amount needed figures are based on 1982-83 spending plus inflation and enrollment growth.* All figures show general fund spending in millions of dollars.

NEEDED IN SPENT IN ‘90-’91 TO SPENT IN DIFFERENCE SALARIES ‘82-’83 KEEP PACE IN ‘90-’91 (PERCENTAGE) Teachers 4,520 7,776 9,088 +16.88 Instruction Aides 340 584 669 +14.46 Librarians 38 65 63 -3.38 Counselors, Nurses 275 474 520 +9.85 Administration and Clerical 1,118 1,924 2,232 +16.03 Maintenance and Operation 560 964 1,002 +3.89 Other, incl. Food and Transportation 313 539 728 +5.12 SUBTOTAL 7,164 12,326 14,302 +16.03

NEEDED IN SPENT IN ‘90-’91 TO SPENT IN DIFFERENCE BENEFITS ‘82-’83 KEEP PACE IN ‘90-’91 (PERCENTAGE) Teachers and Aides 868 1,493 2,044 +36.86 Non-Instructional Employees 556 956 1,249 +30.65 SUBTOTAL 1,424 2,449 3,293 +34.44

NEEDED IN SPENT IN ‘90-’91 TO SPENT IN DIFFERENCE MISCELLANEOUS ‘82-’83 KEEP PACE IN ‘90-’91 (PERCENTAGE) Books 51 88 131 +48.50 Instructional Supplies 157 269 340 +26.22 Other Supplies 220 378 339 -10.49 Other Services 906 1,559 1,878 +20.45 TOTAL 9,921 17,069 20,283 +18.83

* From 1982-83 to 1990-91, enrollment statewide has grown about 25%, from 4,231,431 to 5,249,175. The inflation rate, based on the California consumer price index, has grown about 39% over the same period.

SOURCES: State Department of Education, California consumer price index