Applying Reason to Hawaii’s Education System

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I was dropping my kids off at The Growing Place and I see the owner/principal, who is also my son’s first grade teacher, unloading a truck full of toys.

She explained how she was shopping at California’s newest department store, Kohls, and noticed that all Fisher Price toys were 50 percent off. So she bought $1,000 worth of toys for her school. She didn’t have to fill out any paperwork or go through a cumbersome procurement process or wait 6 months for her request to be approved — she just bought the toys and the kids will begin playing with them immediately. Unfortunately, in most public schools financial decisions at the local school level are rare and there is more at stake than just toys.


Professor William G. Ouchi and his colleagues at UCLA’s Anderson School of Management have done some excellent new work comparing management practices of large school districts and how those practices effect student achievement.

Recently members of Hawaii Gov. Lingle’s education brain trust were looking for a model to reorganize Hawaii’s school district. I sent them William Ouchi’s research and Reason Public Policy Institute Fellow and Hawaii correspondent Cliff Slater wrote a terrific column for the Honolulu Advertiser summarizing Ouchi’s work and applying it to Hawaii’s unique centralized education system.

Hawaii Education: Here’s the Answer

By Cliff Slater

With fortuitous timing for Hawaii’s legislators, Professor William G. Ouchi (one of Hawaii’s own) and his colleagues at UCLA’s Anderson School of Management have published the first ever comparative study [i] of the management practices of large school districts.

For the purpose of comparing centralized and decentralized districts, the authors chose three of each. The three centralized school districts chosen were, Los Angeles, New York and Chicago. The three decentralized districts selected were Seattle, Houston and Edmonton, Canada, which have recently changed to the type of decentralized plan that was first implemented in Edmonton in 1977.

The study essentially first determined how centralized each district was based on: (1) the relative number of employees directly controlled by the central office (many of whom may work in schools but not for the principal) [ii] ; (2) the percent of the school’s budget that is controlled by the school principal; and (3) what share of budgets reach the classroom.

Each decentralized school makes its own decisions of who to hire, how many part-time or full-time staff, which books and materials to purchase, how much to spend on electricity and computers, and how much of the budget to allocate to teacher training.

The small central office staff takes advantage of economies of scale only where it is efficient, such as handling insurance, payroll, and information technology. In addition, it monitors and audits the financial and educational results for the individual schools. Reflecting this greater local discretion, the central office also provides extensive budget training to school staff and has teams of experts available to answer questions. [iii]

The decentralized districts monitor the schools by using an “exceptions” approach, calibrating the degree of scrutiny to the past performance of a school, intervening only when they spot problems from financial and management reports.

The decentralized districts have adopted Weighted Student Funding (WSF) which provides each principal with funding arrived at by calculating, for each student, an amount that is the basic per-student allocation adjusted plus any state and federal funding available for gifted students, emotionally disabled or autistic students, poor students, and non-native English speakers.

That funding follows each student to the school they choose since these districts have all adopted a policy allowing students to attend any public school in the district.

Here are the effects of decentralization:

They found that while the school principals in centralized districts only control 10% of their budgets, those in the decentralized districts control 75%. In fact, Edmonton’s principals control 92% of their budgets. [iv]

And because each principal in these schools is responsible for, and has authority over, most of their budget, there are few excuses they can make for failures of student performance.

In Seattle, Houston, and Edmonton, the authors said they rarely met a principal who did not know the details of student achievement in every classroom, while in New York City, Los Angeles, and Chicago, they rarely did. Nor did they know how much money was in their budgets, while in the three decentralized districts; they knew it down to the last dollar. [v]

They found that decentralized districts put more money in classrooms. For example, Los Angeles District spends only 45% of its resources in the classroom, while Edmonton, Canada, had 60.5%. Thus, if Los Angeles were as efficient as Edmonton, it would have an additional $2,200 per student annually. [vi]

Principals are easy to recruit in decentralized districts. In the centralized system principals are held responsible for student outcomes, yet they have no control over the staffing or budgets of their schools, without which they cannot take the steps that will produce improvement. Thus, principals positions are much sought after in Edmonton, Seattle, and Houston whereas recruitment has become a problem in centralized districts. [vii]

This study found superior performance for all students, particularly minority ones, in the decentralized schools.

The authors concluded that they were able to “clearly and dramatically to establish that decentralized systems give principals greater control over their resources and that these systems drive more personnel and financial resources down to schools and classrooms