Dr. Dawn C. Wallin

March 26, 2014 4:52 PM


































































































































































































































































































































































































































































































































































































































































































































CHAPTER FIVE: Resources for Education


This should be interesting, thought Linda Chartrand, as she entered the conference room at the board office. She had hesitated only briefly before agreeing to the request from the assistant superintendent to serve on the district’s new strategic-planning committee. Partly she had agreed because the meetings would be held during the daytime, and substitute coverage for her class would be provided. Between school committees, the district teachers’ association, professional development activities, and marking and class preparation, Linda already had so many after-school commitments that she was rarely home before 6:00 p.m. But mostly she’d been fascinated by being part of the process of thinking about where their organization would be going in the years ahead.

The first meeting had been gentle and noncommittal. Everyone was introduced, and all had a turn mentioning long-term issues they felt were particularly important to the district. Today they were to try to prioritize a small number of critical issues the district would have to face. There were a dozen people on the committee, including teachers, principals, the assistant superintendent, the superintendent, two school trustees, and two parents. As each person had said her or his piece, Linda had been struck by the diversity of views around the table. Most people seemed to feel that the main problem was the inadequate resources provided by the provincial government, although some also seemed to think that the schools would be fine if only parents did their job properly.

Within a few minutes, the conversation turned to the question of funding. “I’ve been teaching for 20 years,” said Alice Kubota, a teacher at one of the elementary schools, “and it’s getting harder each year. First of all, we have to try to keep in touch with new developments in teaching, such as cooperative education and student assessment portfolios. Then the province keeps adding things to our program, such as family life education, drug prevention, and computer education. Parents are more demanding about teachers being able to justify what we’re doing and why. On top of that, there are more children with severe problems in our classes than ever before. Some of these kids need pretty well full-time attention all by themselves, and if they don’t get it, they can disrupt the entire class. At the same time, we’re hearing that there is no more money, and we’ll have fewer staff, less professional development, and smaller budgets for supplies and materials. Teachers are committed and hardworking, but there is a limit, and we’ve reached it. If we’re going to cope with the pressures, there will have to be more money.”

Grace Volcy, one of the trustees, then spoke: “I understand the pressures that teachers are feeling. You may sometimes think that the school board isn’t sympathetic to the problems, but we are. But we have problems too. We can only spend what the province gives us. We’re not allowed to run a deficit and we no longer have any ability to raise funds locally through property taxes as we used to. The province is increasing our funding, but not as quickly as our costs are rising. We have really tough choices to make and we need help from teachers, too, in terms of what you’re demanding in salary increases and workload changes.

“Why should teachers pay the cost of problems they didn’t create?” asked Azim Khan, the president of the local teachers’ association. “It’s typical of our society for business to make mistakes, throw people out of work, causing all kinds of social problems, and then to suggest that teachers should pay for it by accepting contracts with no wage increases. Our salaries have been falling steadily behind inflation the last few years. We’ve accepted it because teachers are committed people who care about kids. But it can’t go on any longer. The school board needs to explain clearly to the public that good education costs money, but poor education is a hell of a lot more expensive in the long run.”

“Maybe it’s not just a matter of how much money,” chimed in Lori Pambrun, one of the parents. “People in this community care about education, and we’re prepared to pay for good schools. But do people see the link between the amount of money we spend and the quality of education? Schooling costs much more than it did 20 years ago, yet we seem to have more problems than ever before. Now I know that these aren’t necessarily the schools’ fault. We’ve already said that, as society changes, so do the problems facing schools. And heaven knows there are plenty of problems outside the schools. But doesn’t that suggest that maybe we need to do things differently? For example, Tamara over there is a community liaison worker. She’s done a great job of getting things going in that school, things regular teachers don’t have time to do. One of them is bringing many more volunteers into the school, which frees teachers’ time to work with students. Isn’t there a way we could think again about how we use our resources, and whether we couldn’t do it better?”

As the discussion went on around her, Linda found herself thinking about Lori Pambrun’s comments. They made sense to her. She knew that money would continue to be important, and a source of controversy, but already she could see ways in which her school might rearrange staffing duties to meet some needs.

This chapter addresses the following questions about money and education:
1.   What do we mean by resources for education?
2.   How is education presently funded, and how has this system of funding come about?
3.   How do governments at various levels raise resources for education and allocate them?
4.   How are resources used within schools and school systems?
5.   Does the education system get enough money to adequately perform its functions?
6.   How much impact do resources (or the lack of them) have on schools and on students?

These questions are especially pertinent today when issues of spending, taxation, and the role of government are very much in the public eye. There is much debate about the relative importance of reducing public spending, cutting taxes, paying off our debt, or maintaining or enhancing services such as education. It is especially important for teachers to understand the basic economics of the education system.

The chapter will show that there are many kinds of resources available for education, and that these resources are not necessarily used as effectively as they might be. Societies, through governments, make decisions about how important education is, and these decisions are political ones. There is no simple and right answer as to how much money to provide for education, how best to raise that money, how best to provide it, or how best to use it in schools. These are questions that require and deserve public attention and debate.

When people think about resources for education, they are most often talking about money. People tend to measure the quality of our schools in terms of how much money is spent on them. Thus, educators may argue for additional funds to meet new needs, and critics of schools may talk about the perceived lack of value given the increasing amounts spent on education. School boards may talk about the programs they can or cannot deliver because of public resistance to tax increases. Teachers are particularly aware of the ways in which their work is constrained by lack of money or other resources.

All this is not surprising; money plays an important role in education, and in our society generally. It is often seen as the common denominator of value for many things. In education, however, it is misleading to use money as the only, or even the most important, indicator of value or quality.

An educational system contains many kinds of resources. Many of these are purchased goods, such as buildings, equipment, books, and supplies of various kinds. Here it might be reasonable to assume a link between spending more and getting more: more money buys more library books, or more computers, or a bigger or better-equipped building. But goods are not the critical part of education. Far more important are the people who work in a school, the students who attend a school, and the people who live in the school’s community, along with their skills, interests, motives, and effort. These resources cannot easily be counted but are nonetheless critical to the process of education. Two teachers may command the same salary yet be quite different in their ability to work with students. The students themselves will need or want quite different kinds of teaching or support services from the school. A community that sees schooling as an essential route to success is quite different from a community that sees schools as irrelevant to their needs and lives, or even as oppressive institutions. There are very important resources whose nature and impact cannot be translated into monetary terms. The data on spending levels tell us very little about them.

Thus, the conventional view of resources as involving only money is too narrow. Before returning to the question of how resources are used, however, it is important to understand the basic framework through which education in Canada is currently financed—where the money comes from, and how it is allocated and spent.

The funding of education has changed dramatically in Canada over time, and especially in the past decade. When Canadian schools were first established, most of the funds were provided locally through fees, property taxes, or, in the case of religious schools, support from the church. During the twentieth century provincial governments took on a steadily increasing role in governing and financing education. Tuition fees were eliminated and a growing share of costs for schooling were paid from provincial rather than local tax sources. Still, until recently school boards in most of the country continued to levy local property taxes to meet the budgets they set.

During the past two decades, however, most provincial governments have eliminated local taxation by school boards in favour of providing almost all the funding from provincial revenues. As recently as 1994, about 40 percent of total school funding in Canada came from local property taxes raised by school boards. Since then Alberta and Ontario both moved to 100 percent provincial funding, so that now only Quebec, Manitoba, and Saskatchewan have significant local property taxes (see Table 5.1). These changes in the relative roles of the various providers indicate a change in our national beliefs about education. At one time, students and their families were regarded as the prime beneficiaries of education and therefore as the appropriate sources (through fees) of revenue for education. We now accept, as a country, that we should provide elementary and secondary education free of charge to all students.

Table 5.1 Provincial and Territory Education Funding by Source and by Province, 2002


locally levied property tax—% of total

provincially levied property tax—% of total

total portion of school funding raised from property tax

provincial general revenue contribution to educational costs—% of total

total provincial share of education costs—% of total

British Columbia




































New Brunswick






Prince Edward Island






Nova Scotia












Northwest Territories


















1 for Manitoba: 1. the combined local and provincially levied property tax total is reduced by 11.5% to reflect the application of a property tax credit for a net total of 34.9%. 2. the combined figures for total property tax and provincial general revenues does not add to 100%. this is because 4.5% of school division revenues come from non-provincial sources such as the federal government and first nations bands.

Source: Saskatchewan Department of Education. Minister’s working group on education finance, 2002. reprinted by permission of Saskatchewan Learning.

This policy change is not self-evident. Rather, it reflects the view that education is not simply a benefit to the student who receives it. Instead, we think of education as a public good from which every member of society benefits. It is an integral part of our understanding that all of us should pay for education through our taxes because we believe that a more educated population will be better for all of us.

Yet clearly there is a private benefit to be derived from education. For example, we know that those who receive more education generally tend to earn more. In 2001, the average income of persons with a university degree was more than $48 000, while the average income of those with less than a high-school graduation certificate was about $21 000, a difference of more than 200 percent <www.statcan.ca/IO1/cstO1/labor50a.htm>. One possible implication of these differences in average income for future funding practices is that those with more education might pay part of the cost directly, since their potential earning power is much greater. The retention of tuition fees in colleges and universities is a partial reflection of this view. In public schools, however, the absence of fees reflects several other beliefs, including that no student should be prevented from obtaining an education because of poverty, and that our tax system will, in any case, result in those who earn more paying more. As we shall see, the evidence does not necessarily provide a high level of confidence that either of these assumptions is correct.

Students are not the only beneficiaries of education. What about employers, who are provided through public funds with an educated labour force that they employ to earn profits? In Canada, companies do not pay for the school system directly, and pay only a small proportion of the total taxes governments use to support education. Moreover, the total share of taxation raised through corporate taxes has been declining in Canada for many years. An equity argument might also justify more financial support for education from private industry. Thus, there is nothing magical about our current division of the financial burden of education, even though we tend to take it for granted as the natural way of organizing things.

In recent years, there has been much argument in some countries, though less so in Canada, about the virtues of market systems and the desirability of having education conducted through market mechanisms. Advocates of this approach, as noted in Chapter 1, believe that education would be improved if people had more choice about the schools their children attended. (See, for example, in Canada the publications of the Fraser Institute <www.fraserinstitute.ca>.)

Chapter 3 discussed some aspects of markets as social-policy devices. The argument for applying market approaches to the financing of education has a certain appeal, but it has also been subject to much criticism. Given the important public benefits of education, inevitably there will be a significant degree of public regulation of schools, a position acknowledged by even the staunchest advocates of market systems. There is no country in the world in which the state does not play the major role in providing and financing primary and secondary education. Thus, the issue that is usually debated in education concerns the degree of choice people should have in selecting schools and the extent to which funding is based on enrollment rather than the imposition of a market system.

Since governments are, and will likely remain, the predominant source of funds for education, it is important to understand something about how they obtain and allocate their money. We will begin with some general comments about taxation, and then consider in turn each of the three levels of government in Canada: federal, provincial, and municipal. Because of the political and constitutional makeup of Canada, each level is intimately connected with the others.

While a thorough consideration of principles of taxation is beyond the scope of this book, it is important for those in education to have some basic understanding of taxation, since this is how public schools (and, to a considerable extent, private schools) are financed. It is impossible to discuss educational expenditures without a sense of where the money comes from. There is no agreement on an ideal tax system, any more than there is agreement on the ideal education system. People disagree quite strenuously about such matters as the role of taxation, the kinds of taxes that should be levied, and who should pay how much. Decisions about how many and what kinds of taxes to levy are political decisions made by governments.

In recent years there has been a great deal of discussion about whether Canadians pay too much tax. Business groups and some media outlets, among others, have argued strenuously that tax rates in Canada must be reduced. A number of political parties have made tax reduction a central part of their program. Tax-competitiveness with the United States has been especially prominent as a political issue. Most provinces and the federal government have reduced some of their taxes in response to these concerns. However, in comparison with other industrialized countries, Canada’s taxes are moderate. Taxes as a percentage of the overall economy in Canada in 1997 were 36.8 percent, which put us 15th among 28 countries—higher than the United States or Japan but lower than most of Western Europe (Lin, 2001).

As Table 5.2 shows, the different levels of government in Canada rely on different kinds of taxes to generate revenue. For the country as a whole, income tax is by far the most important, although property taxes are still important for municipal governments.

Table 5.2 Main Revenue Sources of Canadian Government

federal (1999/00) total $172 billion

provincial (1999/00) total $192 billion

municipal (1999) total $44 billion

Income tax 63%

Income tax 33%

Transfers 22%

Consumption tax 20%

Transfers 15%

Consumption tax 1%

Social insurance premiums 11%

Consumption tax 23%

Property tax 54%

Other 6%

Property tax 4%

Sale of services 20%

Other 25%

Other 3%



•     Municipal includes school districts.

•     Transfers are from one level of government to another—e.g., federal to provincial; provincial to municipal.

•     Consumption taxes include the GST, provincial sales taxes, cigarette and gasoline taxes, etc.

•     Other includes fees, service charges, natural resource royalties, etc.

Source: Adapted from the Statistics Canada publication, Public sector statistics, 2003–2004, catalogue 68-213, July 28, 2004.

In considering taxation, it is important to think not just about a single tax, but to keep in mind the entire flow of revenues from people to governments, and vice versa. In Canada, as in other industrialized countries, government is inextricably bound up with the entire operation of the economy. There can hardly be a person in Canada who does not receive some substantial portion of his or her income from public funds, either directly or indirectly. Hundreds of thousands of Canadians work for one of the levels of government, or work in services (e.g., health care or education) that are almost entirely funded by governments. Teachers are, of course, among this group; their salaries are paid from tax revenues. Millions of people receive payments from government through such programs as family allowance, pensions, or employment insurance. Others receive benefits through taxation incentives such as deductions for retirement savings, investments of various kinds, political contributions, and tuition fees. Many private companies derive much of their revenue from supplying goods or services to government, whether these take the form of consulting, supplies, equipment, office space, construction, or the many other items that governments purchase. And all of us benefit from at least some of the services that government supplies (education, health care, transportation, law and order, environmental protection, and so on).

Thus, people not only pay taxes but benefit from them as well, a point that is often ignored when concerns are raised about taxation levels in Canada. The question is not simply one of who pays taxes—although this is very important—but of how much one pays in relation to how much one benefits. It may be reasonable to believe that a given distribution of taxation is wrong, that the money raised is not spent as well as it could be, that the wrong people are paying, or that the wrong people are benefiting, but these questions should involve consideration of the total picture rather than just a small part of it.

Approaches to Taxation
Governments are generally seen to have three approaches to taxation available to them. They can tax income (how much we take in), wealth (how much we have), or consumption (how much we spend). Income tax is, of course, an example of the first of these. Taxes on inheritances, property, and capital gains are examples of the second, and provincial sales taxes or the Goods and Services Tax (GST) are examples of consumption taxes. Governments typically use some combination of the three approaches.

In Canada, there is a general belief that taxation should be based on ability to pay. We have generally accepted (though not always put into practice) the principle that those who have more should contribute proportionately more. This concept is termed progressive taxation. Thus, the rate of income tax goes up as income rises, meaning that higher-income earners should pay a larger proportion of their income in taxes. Most Canadians believe that our tax system should shift money from those with more to those with less, although there is growing disagreement on the extent to which this should be done. However, the application of the principle of progressive taxation depends a great deal on the particular form of taxation. This is because wealth, income, and consumption are distributed quite differently among people.

Income tax is still the single biggest source of government revenue. In Canada, in 1995, the top 10 percent of families earned an average of nearly $100 000 and received 17 percent of all income, while the bottom 10 percent earned an average of $15 000 and received less than 2 percent of all income (Rashid, 1998, 1999). This distribution has been getting more unequal over time. Governments have attempted to compensate for inequalities in income by raising tax rates for those with higher incomes, and by offering tax deductions or credits for those with lower incomes. Tax money is also distributed directly to those with lower incomes through various social programs. This redistribution does make a difference, resulting in a substantial transfer of income to poorer families (Rashid, 1998, 1999). However, income remains highly unequal, even with taxes and government transfers.

The distribution of wealth is far more unequal than the distribution of income. In 1999 the average family in Canada had net wealth (assets minus debts) of about $81 000 (Statistics Canada, 2001a). However, the richest 10 percent of families had an average worth of more than $700 000 and owned 53 percent of all wealth, while the poorest 10 percent had no wealth at all, having debts greater than their assets. The higher the level of education of the head of the family, the higher the average family wealth. Families headed by a single parent had an average net worth of less than $15 000, and tended to have low incomes. Family wealth also varied greatly across the country, with the average family in Ontario having almost twice as much net assets as the average family in Newfoundland. There have been some important changes in family assets in recent years. For example, more than half of Canadian families now have investments in registered retirement savings plans (RRSPs), in contrast to only a quarter of families in 1984. Also, debt from student loans has tripled in 15 years; more than 1.4 million families now have student loans to repay, totalling $14 billion. However, wealth is still distributed much more unequally than income, as shown in the previous paragraph. Because most wealth is not in the form of annual income, a change in patterns of wealth would require much higher taxation of assets, not income. For example, Canada currently has few taxes on inheritances, even though inherited money has been the most common way in which people become rich (Osberg, 1981).

Property tax, which is a form of tax on wealth, is particularly relevant because in some provinces it is an important source of funds for education, either through a provincial or a local property tax. There has been a general feeling that property tax is unfair, especially to farmers, senior citizens, and others on fixed incomes. Farmland may produce very little annual revenue but have a high value if sold and thus be taxed at a rate that stretches the farmer’s income. Moreover, because farms occupy large amounts of land, even a relatively low tax per hectare may mean a high total tax bill. Most people would see this as unreasonable taxation, even though the land does represent wealth. On the other hand, an individual or business may generate substantial revenue yet pay little tax because of various deductions and reinvestment provisions. Property tax can thus be a way of taxing wealth that would otherwise avoid taxation. Some provinces have attempted to deal with this quandary by providing programs of tax rebates that reduce or refund property taxes to target groups such as farmers, seniors, or others with low incomes.

Property tax is also a good example of the intermeshing of various taxes, since property owners who rent out their property for income can deduct the cost of property taxes from their taxable income, and thus pay less income tax than those who live in their own homes. On the other hand, profit from the sale of one’s own home is not taxed, whereas profit from the sale of a revenue property is subject to capital gains tax. What, then, is the real impact of a particular level of property tax? The answer is that it depends very much on individual circumstances.

Consumption taxes are yet another matter. One might assume that the less money one has, the greater the share one would spend on goods and services, and therefore the harder hit one would be by consumption taxes such as sales tax. This is the belief behind the program of federal tax credits and rebates for the GST. On the other hand, proponents of the GST argue that it actually brings in more revenue from the wealthy because it taxes spending on previously untaxed services such as travel, eating out, and even the services of tax accountants.

As we have seen, each form of taxation has its own advantages and disadvantages, and each is based on a certain view of what constitutes fairness. Most economists believe that some combination of all three forms of taxation is needed to achieve the best balance and greatest degree of fairness.

An anomaly in the Canadian federal system is that the federal government has the largest share of revenues related to economic growth, such as income tax, while the provinces have the main responsibility for the most important and expensive services in Canada, especially health and education. This creates a significant imbalance for provinces in their revenues in comparison to pressures on spending. The federal government has been an important provider of revenue for many provinces, with some provinces receiving as much as 40 percent of their total revenue in the form of transfers from the federal government.

For the last 60 years, our national fiscal arrangements have reflected the belief that all Canadians are entitled to a basic standard of services. If provinces had to rely on their own resources to finance services such as health or education, poorer provinces would be hard pressed to provide services at nearly the same level as the richer provinces. So the federal government, which has greater taxing power, used some of its funds to provide extra assistance to those provinces through a number of different avenues, some related to specific services such as health care or social assistance, and others giving provincial governments the ability to spend the funds on whatever their priorities were.

During the 1990s, as part of its effort to reduce spending, the federal government reduced significantly its financial support to provinces. Federal cost-sharing in the area of social assistance was limited, and cash transfers for health and postsecondary education largely disappeared. (Federal equalization payments, however, remained a very important source of funds for some provinces.) Reductions in federal support created budget problems for the provinces, which had to decide whether to cut their own spending, levy higher taxes to make up the shortfall, or transfer the problem to hospitals, school systems, and municipalities by in turn reducing provincial grants to those bodies. Most provinces chose primarily the first and third of these options as there was, and still is, great reluctance to increase provincial taxes.

In the last few years the federal government has put more money into social programs, but primarily in new areas such as early childhood or university research. This has reversed the trend of the 1990s, but provinces continue to argue that the federal government still needs to provide more support to basic services such as health and education, which continue to constitute by far the majority of all provincial government spending.
Reductions in federal funding also reduce the ability of the federal government to influence programs and services in

Canada. In education the federal role has always been quite limited, but provinces are even less inclined to look at federal proposals or national programs given cuts in the financial support they are receiving from Ottawa.
For all these reasons, financial relationships between the provinces and the federal government are both important and controversial.

As noted earlier, provinces now provide almost all the funding for education in most of Canada. They provide financial support for education just as they do for other services such as health care or highways. These funds are usually drawn from the general revenue of the province, which includes all federal government transfers and the revenue that the province collects through such means as income taxes, sales taxes, property taxes, fees of ­various kinds, taxes on products such as gasoline, tobacco, or alcohol, and so on.

Each provincial government determines as part of its annual budget how much money it will spend on education in that year, just as it does for any other service. The budget process generally involves the provincial Cabinet deciding how much money is available and how much of what is available should go to each of the various areas of expenditure. There is no simple or easy way of making these decisions, which have to do with the conflict between the desire to keep taxation levels as low as possible and the desire to have services that are of as high a quality as possible. Both are important political objectives that a government must balance in some way.

In determining how much revenue is available, a government must not only estimate the revenue from existing sources but also determine whether it wishes to change any tax rates, which will further alter revenue. In Canada, the prevailing climate of opinion (which, we have tried to show, is not necessarily well justified) is that taxes are too high, which puts pressure on governments to reduce taxes and therefore limit expenditures. Many provinces have recently passed legislation that requires a balanced budget every year.

At the same time, governments must balance many competing demands for expenditure. In making spending decisions, ministers have to consider various public priorities for services, the built-in increases in costs (such as inflation), changes in the demand for a service (e.g., an increase in the number of elderly people who require hospital beds), and the government’s own beliefs and commitments as expressed in election promises. For at least the last 10 years, governments across Canada have faced serious problems of trying to reconcile the demand for services with the desire to avoid tax increases. During the 1990s most provinces cut spending sharply in order to eliminate their deficits. Almost all provinces now have balanced budgets, which is allowing spending to grow again as revenues increase. However, many provinces have also reduced tax rates in the past few years. When one province cuts taxes, there is pressure on others to do the same for fear that residents and businesses will leave for a lower-tax jurisdiction. Though the spending cuts of the 1990s have produced serious pressures for increases in spending, lower taxes mean less revenue to accommodate those pressures. Health-care expenditures, which are the largest single item in provincial budgets, have grown especially rapidly because of public concerns about the quality of care. So even though the past few years have been years of economic growth, provincial governments are still struggling with how to balance revenues and expenditures. Some provinces are also trying to reduce their accumulated debt from earlier years.

Table 5.3 shows the main sources of revenue and expenditure for several provinces and for all the provinces together. The table illustrates several issues in provincial finances. Some provinces are highly dependent on federal transfers. Newfoundland has very high income tax rates but still doesn’t raise much revenue because average incomes are low. Alberta has both the lowest proportion of federal transfer revenues of the provinces shown and the lowest tax rates (and no provincial sales tax). In large part this is because the province benefits greatly from non-renewable resources revenues (mainly oil and natural gas) that made up more than 20 percent of Alberta’s revenues in 2004. Each province has a different revenue situation. Variations in expenditure are less significant; provinces tend to have roughly similar sorts of services and so have roughly similar patterns of expenditure.

Table 5.3 Main Sources of Revenue and Expenditure for Several Provinces

sources of provincial revenues, 2003–04

newfoundland ($4.4 billion)

ontario ($72 billion)

alberta ($26 billion)

all provinces ($225 billion)

Income tax





Property tax

Less than 1%




Consumption tax





Federal transfers





provincial expenditures, 2003–04

$4.7 billion

$78 billion

$23 billion

$233 billion

Health care










Debt service





Social services





Population (2004)

519 000

12.3 million

3.2 million

31.8 million

Source: Adapted from the Statistics Canada publication, Public sector statistics, 2003–2004, catalogue 68-213, july 28, 2004.

Determining the total provincial amount to be spent on education is only part of the process. Most of the money spent by the provinces is actually given to school boards. This occurs through a funding formula, whose purpose is to provide a basis for determining how much money will be given to each school district. While each province has a different formula, almost all have the same basic components.

Components of Formula Funding
There are three basic formula elements through which most provinces provide funding to school districts. In most cases, the first and largest amount of money takes the form of a block grant based on the number of students. Sometimes the student count is weighted, such that students in more expensive programs (e.g., special or vocational education) or those who are taught in more expensive-to-maintain settings (e.g., small or remote schools) are given a higher value in the count than other students in recognition of the extra costs of educating them.

The second component is categorical funding, in which a province provides additional funds for particular programs or services. There are two reasons for categorical grants. First, they may be based on the assumption that school boards would not spend enough on such activities of their own accord—hence the province ties its money to the activities it wishes to support. Examples of categorical grants include those for special education, language education, and computer purchases. Second, a province may provide categorical funding as a way of recognizing that the costs of certain services, and therefore the provincial contribution to those costs, will vary a great deal from one district to another. An example would be the cost of transporting students by school bus. An urban district may have quite low transportation costs, while those of a rural district might be much higher. If each received the same funding per pupil, the rural division would have less available for instruction after it paid necessary transportation costs. Thus, most provinces tie transportation funding to actual costs through a categorical grant.

The final major component is equalization funding, which is important in those provinces (Manitoba and Saskatchewan) where school boards raise a significant share of their revenue through taxes levied on local property (discussed more fully in the next section). School districts with more industry or more expensive homes will have more money per pupil available from local property taxes than other districts, giving them an unfair ability to have more programs or to charge lower tax rates.

Vertical and Horizontal Equity
The importance of the various components within the total provincial funding scheme varies from province to province. Some provinces put more weight on block grants, while others emphasize categorical grants or equalization. It is important to realize that there is no perfect funding formula.

Two different notions of fairness are recognized in the literature on education finance. One is horizontal equity, the idea that everyone should be treated the same. The principle of horizontal equity suggests that per-pupil spending should be roughly the same in all schools and all school districts.

The concept of vertical equity means that fairness lies in recognizing that different people have different needs, and that to treat everyone the same is patently unfair. For example, because rural schools may spend much more money on transporting students, to give them the same amount per student as urban schools is not equitable. Nor does it seem reasonable to assume that students who grow up in wealthy families, with access to good housing, plenty of food, and a steady family income, should have the same amount spent on their education as students who grow up poorly housed and poorly fed. Some students will clearly require more time and attention if they are to be successful learners. If schools are to promote equal opportunity for all students, the principle of vertical equity suggests that they will need to pay attention to and support some students more than others. Equalization grants attempt to create both horizontal and vertical equity by providing for equal spending per pupil in the same category (e.g., elementary, secondary) and differential spending per pupil across categories(e.g., special or vocational education).

Provinces contain many kinds of school districts—urban and rural, richer and poorer, with smaller or larger schools—and people disagree about which aspects of education are most important. These factors make it impossible for any funding formula to take all the differences into account in a way that all parties will perceive as fair. Such decisions, like so many others considered in this book, are political choices that are informed by people’s goals and values. Most provinces make at least some changes in their grant structure almost every year, and may introduce entirely new formulas every five to ten years to try to meet changing conditions.

Independent Schools
All provinces have at least a few independent (also called private) schools. An independent school can be defined as a school that is not governed by a public school board, and that is selective about whom it admits as students, whether the selection process is based on grounds of ability, religion, or some other criterion. Students are usually charged tuition fees. Most private schools in Canada are religious in orientation.

Provincial policies on the funding of private schools vary a great deal. Provinces such as Ontario, Nova Scotia, and New Brunswick provide almost no support for private schools, whereas Quebec and the western provinces do provide some public funding for private schools under certain conditions. As discussed in Chapter 2, many provinces have publicly funded ­dissentient schools; the difference is that these schools are not considered private under the terms of the definition given here.

In no province do private-school enrollments make up more than a small fraction of the total enrollment. The highest proportion is found in Quebec, with about 9 percent of students educated in private schools. Despite the relatively low enrollment figures, however, public funding of private schools is still a matter of controversy since it raises many fundamental questions about what it means to have a public school system.

Capital Funding
Capital generally refers to durable items such as buildings or major pieces of equipment. Most provinces fund school buildings (either new or renovated) through a separate funding process. Typically, school districts must submit proposals justifying their requests to build new schools or to renovate existing ones. Provincial governments then approve or reject such projects on a case-by-case basis. Once approval is given, the province pays most or all of the cost, depending on the policy in each province, up to a specified level. Provinces usually have a set of standards for determining what can be included in a building, and how much the province will contribute. However, the actual responsibility for construction, including hiring architects and contractors, usually lies with the school board.

A new school can cost anywhere from $1 million to $15 million to build depending on its size, facilities, and location. Of course, schools in remote northern areas are much more expensive, as are schools that contain vocational facilities, laboratories, or swimming pools. A smaller province, such as Manitoba or New Brunswick, has around 800 schools. If a school lasts approximately 80 years, then such a province would need to replace some 10 schools a year, at a total cost of $40 to $80 million. At the same time, other schools could require extensive renovations or additions. If most of the school buildings are old, pressures for capital spending will naturally be higher.

During the 1990s many provinces reduced spending on school capital as part of their overall effort to cut their budgets. The result is that Canada now has many older schools that require extensive repair or renovation, putting yet another pressure on provincial budgets.

Provinces may spread out the cost of building through amortization, which is essentially what a family does when it buys a house and repays the cost plus interest over a number of years through a mortgage. In 1996–97, the provinces spent approximately $2.2 billion on capital and debt-servicing costs (Statistics Canada, 2000b, p. 188).

As noted earlier, school boards in most provinces now have no direct role in raising revenue, so their financial role is limited to setting the budget within the money given to them by the province.

In recent years, school boards have faced increases in costs that are often greater than their available revenue. Cost increases come from several factors. Salaries, by far the largest single area of expenditure, rise to reflect cost of living and also contain increments as employees gain more experience. Many districts made cuts in staffing and programs in the 1990s and are now facing pressure to restore some of these. At the same time, pressures for new or expanded programs are never-ending. School boards face very difficult problems of how to balance finite revenues with the many demands on them. The budget exercise at the end of this chapter explores some of these issues more fully.

Property Tax and Mill Rates
Even in provinces where almost all funding comes from the provincial government, property taxes remain an important revenue source either specifically for education or for the province generally.

Property taxation is a complex endeavour, but the main elements are straightforward. Each property in a province has what is called an assessed value. In some cases, assessment of property is done by local governments, while in other cases it is province-wide. Assessment is an attempt to give a fair relative value to all property so that property taxes will be fair.

It can be very difficult to determine the relative value of properties, especially if they are of different kinds. How does one equate the value of a farm with the value of a city house or a factory? What about the fact that two similar houses may have very different values depending on property prices in a given community? It is not surprising, then, that there are constant debates about property-assessment schemes, and that under almost any scheme there will be appeals from property owners who feel that their assessment is unfair.

The total value of all property in a given school district or province is the basis on which property taxes are levied. A school district or municipality will charge taxes at so many mills, with a mill meaning $1 in tax for every $1 000 of assessed value. One can obtain the same amount of revenue regardless of the actual assessment of a property simply by changing the mill rate; to the property owner, a higher mill rate on a lower assessment is the same thing as a lower mill rate on a higher assessment. This is why the actual assessed value of any single property does not matter, but fairness in assessment across properties does.

Debates about changes or improvements in education invariably turn to questions of money. Many people working in education feel that not enough money has been spent on public education in recent years, and that, as a result, the quality of education provided is falling.

The question is: How does one determine how much money is enough? One of the first possible steps to take is to look at the total amount spent. We pointed out in Chapter 2 that public education is a large enterprise. In 1999–2000, some $37 billion was spent on elementary and secondary schools in Canada. An additional $18 billion is spent by the country’s colleges and universities, while the amount spent on education and training by private and public companies, non-profit organizations, and individuals, though it has not been estimated with any accuracy, may well be as large as the spending on schools (Statistics Canada, 2001a, p. 50). However, it is hard to judge what these numbers mean: Is $37 billion an appropriate amount to spend on education or not?

One standard sometimes invoked is that of comparisons with other countries. Because countries use quite different methods of accounting for their spending on education, however, international comparisons of this kind are very difficult to make with confidence. Moreover, differences in geographic conditions, such as population density or climate, can create significant variations in transportation, construction, and heating costs, to name a few. Nonetheless, international comparisons are frequently made. Canada is often said to be among the higher-spending countries in the world on education. However, this comparison includes postsecondary education, where Canada has a high participation rate and primarily public funding. If the comparison is limited to public schools, Canada ranks in the bottom half of the industrialized countries. Table 5.4 compares Canada with the 28 other members of the Organisation for Economic Co-operation and Development (OECD).

Table 5.4 Public Expenditure on Education in Canada Compared to That in Other OECD Countries


canadian value and rank



oecd average

Public expenditure on educational institutions as a percentage of GDP

5.4%—tied for 10th of 28




Public expenditure on education as a percentage of total public expenditures

8.6%—12th of 19




Percentage of education spending from private sources

11%—6th of 13



(Insufficient data)

Definitions: Public expenditures—Money spent by all levels of government. GDP—Gross domestic product; a measure of the overall size of the economy.

Source: Education at a glance, 2000 edition. Paris: OECD, 2000.

A more frequent standard is to compare past and present spending levels. This can be done in many different ways, and the results one gets depend in part on the indicator chosen. Table 5.5 (page 164) gives six ­different spending comparisons utilizing 1971 and 1991 numbers with some added data. Using some of these indicators, spending appears to have increased substantially, while by using other indicators, spending appears to have decreased. How can this be?

Indicators such as those in Table 5.5 always involve more than one factor. Consider expenditure per pupil. Changes in per-pupil expenditure levels may be due to changes in funding levels, but they may also be due to changes in the number of students. Thus, if the number of students decreases, costs will not necessarily decrease proportionately, in which case per-pupil spending would rise even though no deliberate change has been made in the level of service to students. Similarly, if enrollment rises, per-pupil spending may fall with no change in the level of service. If a school has, say, 10 teachers, 200 students, and a total budget of $1 000 000, the per-pupil cost would be $5 000. If the following year there were only 190 students, the per-pupil cost would rise to $5 263 per pupil even though nothing had changed in the school’s operations. Similarly, if the enrollment rose to 220 and all the new students were accommodated in existing classes by making each class slightly larger, the per-pupil cost would fall to about $4 545, again with no real change in the school’s program. Thus, per-pupil costs are a reasonable measure of relative spending only when enrollment is stable. Economists would say that unit costs in education (with each pupil considered a unit) are inelastic with regard to enrollment, meaning that they do not change in either direction as rapidly as enrollment can change. In Canada, per-pupil expenditures in real dollars rose rapidly after 1970, but a large proportion of the increase was due to the substantial decrease in school enrollment from 1970 to 1980, which occurred without a corresponding reduction in numbers of teachers.

Table 5.5 Indicators of Education Spending over Time





Gross pupil–teacher ratio (the total number of certified teachers, including administrators, divided by the total number of students)

20.8: 1

15.8: 1


Explanation: When student enrollment fell rapidly in the 1970s, the number of educators stayed the same or increased, allowing schools to mount new programs and provide additional specialist and support services.




Total spending on elementary/secondary education

$5.3 billion

$33.3 billion

$37.5 billion

Explanation: Over this time, the consumer price index (CPI) grew by 295%. Teachers’ salaries (see below) also grew rapidly as a young teaching force became more qualified and more experienced.




Spending on elementary/secondary education as a percentage of total provincial government spending




Explanation: School enrollments have decreased since 1971 while governments face mounting demands in other areas, such as health care, and debt costs have risen sharply.




Total spending on elementary/secondary education as a proportion of the total economy (GDP)




Explanation: As the number of students declined, education took up a smaller share of the total economy. However, had spending remained at 1971 per-pupil levels, education would have been 3.9% of GDP in 1991 rather than 5%.




Expenditure per pupil as a proportion of economic capacity (GDP per capita)



Explanation: Most of this increase occurred as a result of the recession of 1991–93, in which the economy shrank while education expenditures stayed even or rose slightly.




Average salary per educator

$10 029

$55 979

Explanation: Salary scales for teachers grew by 7.3% per year, but actual average salaries increased by 9% per year because educators gained additional qualifications and experience and thus moved higher on the pay scale. Over the same period, the consumer price index grew by 7.1% per year and the economy as a whole (GDP per capita) grew by 8.8% per year.




Source: Adapted from the Statistics Canada publication, Education Quarterly Review, catalogue 81-003, vol. 1, no. 4 and vol. 7, no. 2.

Similarly, changes in the number of students can affect other indicators. The pupil–teacher ratio fell quite sharply in the 1970s because enrollment fell (in total by about 25 percent), but instead of reducing the number of teachers in proportion, school systems kept their staff and launched new programs and services requiring more staff, such as librarians, guidance counsellors, and increased special education. However, the slower growth in education spending related to declining enrollments did lead to education dropping in terms of its share of total provincial spending.
Governments have been facing significant pressures to spend more in other areas. Health care is one field that has taken an increasing share of provincial expenditures in recent years. Spending has also grown in relatively new areas of government activity, including the environment and workplace safety. Another factor to consider is that such comparisons depend a great deal on the year with which one starts. In this case, 1970 marked a high-water point for education expenditures in Canada: the baby boom was at its height, educational facilities were expanding rapidly, and teachers’ training, experience, and salaries were growing rapidly. One would expect that, as the system matured, the rate of increase in spending would level off somewhat.

In looking at the data in Table 5.5, it is also important to understand the impact of changes in the economy. For example, a large part of the increase in overall spending on education is accounted for by inflation; that is, it costs more to do exactly the same things. To eliminate the impact of inflation, analysts use the concept of real dollars: converting the amounts from different years to reflect the same amount of actual purchasing power.
Another set of indicators compares spending on education to the size of the economy as a whole. This is typically measured in relation to gross domestic product, or GDP, which is essentially the total value of all the goods and services produced in the economy. Here problems arise when the economy shrinks, as it did in the recession of the early 1990s. When this happens, spending on education accounts for a larger share of the total economy even if education spending remains constant.

The indicator on teachers’ pay shows some other complexities of measuring change over time. Teachers’ salary scales—the amounts paid to teachers depending on their qualifications and experience—rose from 1971 to 1991 by an average of 7.3 percent. However, the actual pay of teachers rose by about 9 percent per year because teachers gained additional qualifications and experience that moved them up on the scales. Which is the “true” measure of teachers’ pay? In fact, there is no single true measure; each has to be considered in its overall context. Had the teaching force maintained the same qualifications in 1991 that it had in 1971, average salaries would have been significantly lower. However, the 1971 teaching force was relatively young and relatively poorly qualified. For example, many teachers in 1971 did not have university degrees, while this qualification is practically universal now.
Finally, it should be noted that using a 27-year comparison is potentially misleading for several reasons. Real spending on education rose most rapidly in the 1970s and more slowly in the 1980s. In the 1990s real spending per pupil fell in many provinces, while pupil–teacher ratios rose for the first time in 30 years. As well, the situation varied considerably from province to province, as shown in Table 5.6, page 166. The table shows that schools in Prince Edward Island reduced real spending by more than 10 percent during these years while real spending fell by about 5 percent in Ontario and rose slightly in British Columbia.

The comparative standard for government expenditure on education also depends on what is being compared. In one sense, $37 billion is a great deal of money. It is about $7 000 per student per year (or more than $1 000 per year for every person in Canada). It is equal to about 5 percent of Canada’s gross domestic product (Gendron, 1994), which is the measure of the total size of the Canadian economy. In other words, we spend 5 percent of our national wealth on elementary and secondary education.

Table 5.6 Provincial Expenditures per Pupil vs. Inflation, 1993–1997


Expenditure per pupil, 1993

Expenditure per pupil, 1997

Inflation factor, 1993–1997*


$6 815

$6 861


Prince Edward Island

$5 181

$4 843



$7 306

$7 236


British Columbia

$6 650

$7 054


* Inflation based on the education price index.
Source: Adapted from the Statistics Canada, Education in Canada, 2000, catalogue 81-229, May 22, 2001, Tables 67 and 68.

In another sense, $37 billion is not all that much. It amounts to about $35 per student per school day, or about $7 per hour based on a five-hour day. This isn’t that much more than one would pay a baby sitter. To take another perspective, in 1993 Canadians spent about $55 billion on new automotive vehicles, and General Motors of Canada alone took in revenues of more than $21 billion (Canadian World Almanac, 1995).

Another common approach to judging the adequacy of education funding is to invoke standards of service. We might argue that education needs more money in order to provide better special education services, to hire more counsellors in elementary schools, or to buy more computers. Of course, this argument assumes that such services must be added on top of all the existing services and programs, and that nothing now in place can be changed or replaced. Similarly, one might say that more spending is needed in order to achieve such goals as reducing the number of drop-outs or improving reading levels. This assumes that there is a direct correlation between the amount of money spent and educational outcomes.

Finally, there is an economic approach to calculating whether we are spending enough on education. We can think of spending money on education as an investment that yields a return in the form of more educated people, higher earnings, more economic activity, and so on. In theory, one can calculate the return on this investment just as one knows that a bank deposit pays 3 percent or a Canada Savings Bond pays 5 percent. Economists have made just such calculations, with the most recent Canadian evidence indicating that a university graduate can expect a return of about 10 to 15 percent in earnings above what she or he would have earned with only a high school diploma (Human Resources Development Canada, 2000). Once the return on education is estimated, it can be compared with the return on spending in other areas, such as health care or highways; then, if education is a better investment, we should spend more on it—if it is less rewarding, we should transfer spending to other areas.

This seems like a straightforward and eminently sensible approach. The difficulty is that return on investment requires the translation of all the outcomes of schools—and the outcomes of whatever other service is used for comparison—into monetary equivalents. The calculations involved require not only arbitrary assumptions but also information that is not readily available. Given that many of the goals of education are intangible and long term, how are the results to be calculated? How do we measure whether people have come to love to learn as a result of their education? And even if this could be measured, how much weight should be assigned to it in calculations of return on investment? Moreover, return on investment varies for different programs and for men and women. Does this mean that programs with lower returns ought to be reduced or eliminated? Or that people should be streamed into programs with higher returns?

In short, the debate about whether we spend enough money on education cannot be resolved through information alone. People’s beliefs about the value of education relative to other spending priorities will have a major share in determining how they view the issue—whether they see the glass as half full or half empty.

Another way to consider the adequacy of funding is to ask what we buy with the money spent on elementary and secondary education. There are two usual ways of thinking about expenditure patterns. One is to organize them by functions. In all school systems, as illustrated by the Toronto District School Board 2004–05 budget (see Figure 5.1, page 168) by far the largest item of expenditure was salaries for educators.

A second way to think about spending has to do with the distinction between purchased and hired resources. Purchased resources are the things one buys—buildings, equipment, supplies, and so on. Hired resources are essentially people. Education expenditures are heavily focused on people, which is what is meant by calling education a labour-intensive activity. In schools, things are far less important than people. All salaries, including those of secretaries, caretakers, bus drivers, and others, total 80 percent or more of education spending. Most of the spending on non-salary items occurs at the provincial or school district level, as shown by the school budget (based on an elementary school in Manitoba) in Table 5.7.

In this respect, education is like other services (e.g., health care), but unlike those economic activities that have switched resources from labour to capital in the form of equipment. A good example of the latter is agriculture, which has vastly reduced its work force by using more machinery. Most industries, too, have steadily reduced the number of workers required for a given level of production by using more machinery.

Figure 5.1 The Toronto District School Board—Net Expenditure Budget 2004–2005
source: school matters: a parent’s guide to the tdsb, p. 3. reprinted by permission of the toronto district school board.

Table 5.7 A Sample School Budget for an Elementary School (Enrollment = 550)

1 principal, 0.3 vice-principal

$ 115 000

25 classroom teachers

1 700 000

2 kindergarten teachers

130 000

1 ESL teacher

65 000

1 resource teacher

65 000

1 librarian

65 000

1 special education teacher

65 000

Total instructional staff

$2 205 000

3.5 special education support staff

$ 80 000

4.2 teacher aides

80 000

2 clerical support staff

70 000

5.5 caretakers

250 000

Total support staff

$ 480 000

Supplies and equipment

$ 60 000

Textbook purchases

30 000


$2 775 000

Note: These figures do not include expenses incurred by the school district, such as transportation costs, larger maintenance projects, professional development, and other items. school budgets account for about 80% of total spending on education. the staffing costs shown here include not just salaries but also related benefit costs—pension, extended health care, and so on, that constitute the full cost of each position.

What Is the Impact of Resources on Education?
Closely tied to the question of whether we spend enough on education is the question of how much difference money makes. Obviously money is important; without it we would not be able to build schools, hire teachers, purchase textbooks, and so on. Just as obviously, as was pointed out at the beginning of this chapter, money is not everything. A wonderfully constructed building is not a school without good teachers to work in it; and teachers who do not know their subject, or who do not care about their students, will not be effective no matter how much they earn. Nonetheless, it is important to ask how well we use the money that is available for schools.

One problem we face in studying the impact of resources on education is that learning is not a production process, despite the frequent use of factory metaphors such as “producing capable students” (Levin, 1994b). Rather, education is a process of development. Cars or houses are produced by people doing things to raw materials such as metal or wood. But becoming educated is something students must do for themselves, although many other people may help them along in the process. Thus, while there are agreed-upon ways of making products, ways of becoming educated are likely to vary as much as people vary. We can’t say that if we just did a, b, and c, every student would become educated; indeed, such a claim is antithetical to the meaning of education. The impact of resources on educational outcomes, then, is likely to be a difficult subject on which to produce firm evidence.

Another problem we encounter in studying the effectiveness of education resources is that there is little variation in school spending and organizational patterns across Canada, which makes it difficult to judge what might happen under other arrangements. Just about all schools have a principal, a number of teachers assigned to grades or subjects, some specialist or support teachers (such as resource teachers), one or more secretaries, and one or more caretakers. Almost all schools organize students in grades in elementary school and by subjects in secondary school. The organization of time tends to be quite similar across the country. Even class sizes do not vary greatly across school districts or provinces. If schools varied more in their use of resources we might be able to get a better sense of which combinations of resources were most effective.

Given the diversity in students, in communities, and in the subject matter of education, this standardized approach seems rather puzzling. One might well think that it would make sense to organize schools quite differently depending on the students, the setting, and the subject matter. Yet we do not do so. As a result, we simply do not know very much about how resources affect the work of schools. There has been great debate in the educational research literature about whether the funds devoted to education have been spent to the greatest benefit (a good example can be found in Review of Educational Research, 66(3)). Twenty years ago, the conventional wisdom was that more money meant better education (i.e., by providing better facilities, more equipment, smaller classes, and better-qualified teachers). However, research evidence suggests that per-pupil spending levels are not strongly related to student outcomes in the form of test scores. Nor has the research linked spending levels to other outcomes of education, such as employment, career success, or life satisfaction (H. Levin, 1998). The research does not show that money is unimportant, but it does indicate that current spending patterns may not be optimal (Odden & Busch, 1998).
More than 80 percent of the money in education is spent on people, particularly teachers and other instructional staff. The overall ratio of students to teachers declined in Canada for more than 20 years, from 21:1 in 1971 to as low as 15:1 in 1991. It then rose for several years as provinces reduced education funding so that by 1997–98 the ratio nationally was back where it had been ten years earlier, at about 16.4:1. The latest data, for 1998–99, show a reduction once again to 16:1 (Statistics Canada, 2000b, p. 176).

The impact of reduced class size on pupil outcomes has been the subject of a great deal of controversy. Recent evidence does suggest that significant reductions in class size may have a positive impact especially in primary grades (Ziegler, 1999). As a result, a number of jurisdictions, including British Columbia and Ontario, have committed to controlling the size of classes in the primary years.

Changes of this order are both difficult and expensive to make. To give an indication of the financial impact of changes in the pupil–teacher ratio, at current staffing levels and salaries, a further drop of 1 in the ratio of students to educators in Canada—from 16:1 to 15:1—would cost another $1 billion per year, or about 3 percent of total current operating expenditures. Class size matters a great deal to teachers, who find teaching less stressful when classes are smaller. Teachers’ views and preferences are important, but from another point of view, it would be surprising to find that class size was linked firmly to educational outcomes. After all, would we not expect the impact of class size to depend on the teaching methods used, the students in the class, the subject being taught, the quality of the curriculum and resource materials, and other such factors?

One would also want to compare the relative benefit of smaller classes with using the same amount of money for some other purpose, such as improved professional development for teachers or developing stronger links between parents and schools.

No single educational practice is likely to be effective all the time. Thus, it is probably not the best policy for us to focus all our resources on a single approach to schooling, whether it be smaller classes, more computers, or new curricula. But there are two related ways in which to consider improvements in the use of educational resources. The first is to employ a broader conception of the resources that are available to us. The second is to use our resources in more diverse ways to meet the diversity of educational needs and settings.

We noted at the outset of this chapter that schools have tended to employ a narrow definition of resources, focusing on money and on paid staff. Yet there is good reason to believe that other factors are at least as important in affecting the success of our schools (Levin, 1994b). If one were to try to list those things that will have an important impact on the kind of education students obtain, one would probably begin with aspects of the students themselves—motivation, background, self-concept, and so on. Also very important would be the students’ families and living situations (Levin, 1995a).

We do not ordinarily think of students or their families as resources that we might use for educational purposes. Yet an increasing body of research points to ways in which, by altering our view of students and families, education might be strengthened—for instance, by working more closely with parents schools can help them to develop their children’s skills and knowledge. Chapter 8 discusses these issues in more detail.

It is also the case that schools currently organize their resources around teaching, though, as we have said, education is better viewed as a process of development and learning by students. If schools were to take seriously the idea of students as active learners, they might be far more receptive to making more use of other organizational practices. Among those practices that appear to have support from the research are peer tutoring, student work groups, cooperative learning, and independent study. Approaches that emphasize the role of students as learners also have the advantage of stressing self-direction and intrinsic rewards for learning, which are universally cited as important educational goals.

Even within the usual focus on teaching, there may be ways of bringing new resources into play by modifying organizational and instructional practices. For example, the way in which time is used in schools could be reconsidered. Time allocations to subjects are relatively standard across classes and grades. In other cases, time allocations are based on our view of which subjects are most important. But evidence indicates that students simply require more time for some subjects, particularly those, such as second languages or mathematics, that are primarily learned in schools. Time requirements depend not on the priority of the subject, but on the background, interests, and needs of students (Holmes & Wynne, 1989). To use another example, the idea that every secondary-school course should consist of an equal number of hours of instruction seems quite out of step with what is known about learning. If some subjects are harder to learn, presumably they should have more time devoted to them.

There are many other possibilities. Research shows that such common practices as retention in grade and ability grouping do not appear to be helpful and may actually waste resources. The assignment of students to particular teachers is often made on bases other than the learning styles and preferences of the students or teachers. Classes tend to be of similar size in most subjects, even though different subjects may well lend themselves to teaching styles that work better in smaller or larger classes. And so on.

Experiments with a variety of practices such as those mentioned, with careful assessment of the results in comparison with more standard practices, would be an appropriate way of learning more about the relative merits of alternative uses of resources. Later chapters examine some of these questions from the standpoint of teachers and administrators in schools.

Questions of taxation, federal and provincial budgets, formula funding, and mill rates seem far removed from the world of the classroom teacher. Yet teachers are only too aware of the impact of resources on their work. The extra couple of students in the class, the absence of a teacher’s aide, the lack of a music teacher in the school, the lack of course options resulting from fewer teachers, inadequate science equipment or library collections—all of these have direct effects on everyday teaching. Yet without knowing how the overall financing system works, teachers remain in the dark about how and why decisions are made, and how they might be influenced or altered.

Teachers see the need for more money and resources for schools because they see how these things could make their work more effective. It is important for teachers to explain to parents (and the public) why spending on education matters to students. But Canadian schools are facing real budget pressures, so in addition to pressing for more funds, educators also have to give careful thought to how resources can be used most effectively. Every teacher has the potential to change the use of resources in ways that are not only efficient but also educationally sound.

Key Terms
Assessed value p. 161
Block grant p. 158
Capital p. 160
Categorical funding p. 158
Consumption p. 153
Equalization funding p. 158
Gross Domestic Product (GDP) p. 165
Hired p. 167
Horizontal equity p. 159
Income p. 153
Labour-intensive p. 167
Mills p. 161
Progressive taxation p. 153
Public good p. 150
Purchased p. 167
Real dollars p. 165
Vertical equity p. 159
Wealth p. 153

1.   Central to the funding of education are the concepts of public and private goods that result from education. What do these concepts mean? Give examples of public and private goods resulting from education. Which of these do you see as being more important? Why? How might the funding of different levels of education reflect both public and private benefits?

2.   Provinces have been providing an increasingly large share of education funds. Is this appropriate, or should local school boards be responsible for a significant share of revenue? Defend your answer.

3.   Should property taxes be a significant source of revenue for education? Why or why not?

4.   Analyze your province’s current funding system. To what extent does it embody concepts of horizontal or vertical equity? Illustrate with specific examples. (Your class may want to consider inviting someone from the provincial Ministry or Department of Education to respond to these questions.)

5.   Conduct a class poll of spending priorities. Given a number of areas (e.g., health, highways, environment, child welfare, agriculture, economic development, tax incentives for business, and others), where would those in the class rank education? Where would people outside the university rank education? Why?

6.   What outcomes of education might we want to use in attempting to determine the value of education spending as an investment? How might we measure these outcomes?

7.   Interview a school official or school trustee to determine the authority over budgets, both revenue and expenditure, that school districts have in your province.

8.   Attend a school board budget meeting. Report on the ways in which the board made budget decisions. What criteria were used? Which issues seemed to be of greatest importance? Was the process used an effective one?

9.   Obtain the staffing and budget data for a local school. Consider alternative ways in which the same amount of money might be used. What are the reasons for the existing distribution?

10. In groups of about five to ten people, work through the following budget exercise. One person in each group is to act as a neutral observer who does not take part in the discussion but watches how it proceeds. One person is to play the role of superintendent. The others should play the role of school trustees.

School Board Budgeting Exercise
Task: You are to constitute yourselves as an elected school board. Your task as a board is to determine the budget for your district for the coming year and submit it to the provincial government. The problem you face is that your revenues are going to be significantly smaller than your expenses because costs are increasing more quickly than provincial funding.

Background: You are part of an elected school board of nine members, governing a school district that has a mix of suburban and rural schools. Your district has an extensive range of programs, including French immersion, special education, music, vocational programs in your high schools, and alternative multi-graded elementary programs. Your district includes 18 schools, 3 of which, being located in the rural part of the district, have fewer than 100 pupils. These schools have been kept open because of strong pressure from parents in those communities. The schools vary quite a bit on provincial tests, with some schools well above provincial norms and others, including one of the small rural schools, falling below. Due to the province’s support for families to pick their school, some of the district’s schools, especially those with poorer records on provincial tests, have been losing enrollment steadily, while others have been growing and are now quite full.

Collective bargaining in your province is done by each district. Your teachers earn salaries that are a little above the provincial average, and your district is proud of the good working relationships with teachers. Your support staff, on the other hand, earn less than their peers in many other districts and are disgruntled. Your current collective agreements with both teachers and support staff will run out within the coming year. The next school board elections are the year after that.

Your board is elected by ward, and the current board contains strong advocates for a variety of different positions. Some board members are highly concerned about keeping small schools open. Other board members advocate strongly for programs such as music, while two members are primarily concerned with ensuring a balanced budget.
Your superintendent, hired just 18 months ago, has proposed a number of initiatives that will require additional funds in addition to built-in costs for salary and other increases. You will need about 3.5 percent more in your salary budget (about $1.2 million) to cover the cost of the pay increase negotiated two years ago and the cost of increments for staff. Your board will also have to set aside some funds to pay for the estimated cost of the new collective agreements. Your superintendent is suggesting you set aside another 3 percent, of which only half (about $500 000) would be needed in this budget, as the increases will only take effect halfway through the year. In addition, the superintendent has suggested spending an extra $300 000 for more computers and teacher training on computers, and another $500 000 to improve achievement levels in the schools that are having the most difficulty by increasing staffing and strengthening staff development and parent communications. The draft budget also calls for $300 000 more in spending as a response to the increased number of foster children with special needs who are being moved into your district by child-welfare agencies.

Accordingly, the draft budget currently before your board is as follows:
•     Previous base—$42 million
•     Salary increases from previous agreements—$1.2 million
•     Reserve for new collective agreements—$500 000
•     Increases in fuel and other operating costs—5%—$400 000
•     Computers and training—$300 000
•     Low-achievement schools—$300 000
•     Increases for special needs—$300 000
•     Total—$45 million, or 7%

However, the provincial government has increased your funding by only 3 percent, or $1.2 million, so you are short about $1.8 million. Provincial regulations require a balanced budget by your board, but at least two board members have suggested that the district should run a deficit in defiance of the province because of the shortage of funds.
Your board has already asked the superintendent for suggestions of areas where expenditures could be reduced. She has put forward the following options:
•     Close one of the small rural schools. The children could all be bussed to other schools within 20 kilometres. This would save about $200 000, because most of the staff of the small school would be laid off.
•     Attempt to negotiate a new collective agreement with teachers that would have smaller increases in order to bring your district a little closer to the provincial average salary. This would require $500 000 less than your initial budget provides.
•     Reduce staffing in secondary schools by increasing class sizes slightly and eliminating some courses with low enrollments. Savings of 10 staff positions, or about $600 000, are estimated. A larger increase in class sizes would produce a reduction of 15 positions, or about $1 million.
•     Increase the distance from school at which bussing is provided to students. More students would have to walk or be driven by parents. Savings estimated at $150 000.
•     Restrict access to schools of choice; do not allow choice where an extra class or teacher would be required. Savings by keeping students in existing classes instead of having to start new ones—about 8 teaching positions or $500 000.
•     Reduce some optional programs such as extracurricular music and art, and close two of the vocational programs in high schools. The superintendent argues that students wanting vocational programs can take them in community colleges after they graduate. Projected savings of 6 teaching positions and $300 000.
•     As an alternative to the last suggestion, charge fees to students to participate in some options or extracurricular programs. Estimated additional revenue of $300 000 based on a charge of from $50 to $100 per program.

Budget Information—Average School District
current-year data
Total enrollment—6000 students
Pupil–teacher ratio—16.5:1 (staff: 365 professionals)
Expenditure per pupil—$7000 (total budget: $42 million)
Salaries and benefits—80% of budget ($33.6 million)

expenditure by category
Regular instruction—61% (included immersion 8%)
Exceptional (special education)—10%
Support services—7%
Operations and maintenance—11%
Choose nine persons from your class to play the board members, and one to play the superintendent. Use one hour for a board debate leading to a motion and decision on what budget to set for the coming year. You may also want to discuss how you will explain your decisions to your schools, parents, and community.

Further Reading
Many issues around finance and economics are the subject of considerable controversy, some of which have been noted and referenced in the text (such as class size). Among the main parties in the debate on the impact of resources are Eric Hanushek and Larry Hedges. U.S. writers who have examined the way resources in schools are used or might be used more effectively include Allan Odden and Karen Hawley Miles. Several chapters in Levin, Fowler, and Walberg, Organizational Influences on Educational Productivity (1995), also deal with these issues.
In Canada the Fraser Institute has published a number of papers advocating funding systems that are tied more closely to parental choice in schooling and on select student outcomes.

•     David Monk’s book Educational Finance: An Economic Approach (1990) provides a sophisticated treatment of educational finance, with an especially thorough discussion of resource allocation issues in schools and classrooms, but it is quite focused on the United States.
•     Steven Lawton’s Financing Canadian Education (1996) provides the best overview of education finance in Canada.
•     Y.L.J. Lam’s Education Finance: Current Canadian Issues (1998) contains a collection of Canadian chapters on current issues in ­educational finance and alternative approaches to addressing the funding of education.
•     Canadian education finance statistics can be found on the Statistics Canada website and their publications, through the Council of Ministers of Education (CMEC), and on provincial Department of Education websites. The Organisation for Economic Co-operation and Development (OECD) provides comparative international data in its annual Education at a Glance publication.