A COSTING-OUT PRIMER

What is Costing Out?

A costing-out study determines the actual amount of money needed to provide every child a reasonable opportunity to meet state education standards by, first, identifying the specific resources and conditions necessary and, then, systematically calculating the amounts necessary to fund each of these prerequisites. In recent years, many states have undertaken costing-out studies, including Alaska, Illinois, Maryland, Ohio, Oregon, Kansas, Montana, New Hampshire, and Wyoming --- in some cases as part of the development of a new funding system ordered by a state court.

How is Costing Out Done?

Although a variety of methodologies have been devised in the states that have already performed cost-based funding studies, these approaches tend to fall into two main categories: "successful schools" and "professional judgment." The successful schools approach identifies school districts that have actually achieved a specified level of student performance, such as meeting state standards. The average level of expenditures in these districts is then used to estimate the level of expenditure that would be required to achieve a similar level of student performance in other districts across the state. Typically, differences in cost of living and in the numbers of students who are low-income, disabled, or English language learners are also taken into account in these calculations.

The professional judgment approach accepts as its premise that the determination of an adequate cost basis involves a large number of judgments; it seeks to establish a process to review the range of judgmental factors involved and ensure that those judgments are made openly, fairly, and independently. Typically this is done by assembling panels of educators to identify the specific instructional components deemed necessary to meet state standards and then having economists determine the price of each of the identified components.

Recently in Maryland, costing-out studies were performed using both the successful schools and professional judgment methodologies. The studies relied on costs in 59 successful schools and on panels of experienced educators. A Maryland commission on education finance reviewed the studies and used results from both methodologies in its recommendations to the legislature to restructure the state's school finance system.

Additional Resources