How much education funding should go directly to classrooms?

Patrick Byrne, of Overstock.com, is one of America's young philosopher CEOs and a man with eccentric ideas: The Stanford-educated executive has biked cross country four times, turned a flea-market supply company into a major Internet player, and founded Worldstock.com, aimed at eradicating global poverty.

One of Mr. Byrne's latest groundbreaking ideas is how to tackle school funding reform. "The public debate over school spending is typically over more or less," he says. "The real debate should be: What are we spending it on?"

His organization, First Class Education, aims for all 50 states and the District of Columbia to reallocate school spending so that at least 65 cents on every dollar goes directly into the classroom - on books and teacher pay - by the end of 2008.

The concept is taking hold: The "65 percent solution" has already swept through state capitol domes in Texas, Kansas, and Louisiana. Earlier this month, Georgia Gov. Sonny Perdue (R) introduced legislation, joining 17 other states that have proposed bills to meet that 65 percent threshold. Currently, the national average classroom spending is about 61.5 cents on the dollar, according to the National Center for Educational Statistics (NCES).

Despite the idea's liberal fount, other Republican governors such as Minnesota's Tim Pawlenty, and Florida's Jeb Bush are also throwing their weight behind the plan. Meanwhile, education researchers question whether it will make a difference in raising student test scores. Some critics, including many school superintendents, say it violates the local control model of funding schools by adding new state standards that do not allow for flexibility.

"The 65 percent solution is the equivalent of a chicken in every pot," says a disapproving Jeanne Allen, president of the Center for Education Reform (CER).

Byrne doesn't agree. In his view, school districts have become the new Tammany Hall, fortresses of cronyism that waste taxpayer dollars while bemoaning the plight of children and teachers. The 65 percent solution addresses discontent taxpayers and teachers have about how money gets spent inside the classroom.

It originated, Byrne says, after he crunched data from the NCES, and found that the five states with the highest student standardized test scores (Massachusetts, New Hampshire, Vermont, Minnesota, and Connecticut) on average spent 64.1 percent in the classroom. The five worst- scoring states (Louisiana, Alabama, Mississippi, New Mexico, and the District of Columbia) on average spent 59.5 percent in the classroom. Georgia ranked 13th, spending about 63 cents on every dollar.

The Georgia proposal uses the federal definition for classroom funding, which includes textbooks, teacher salaries, field trips, and special education as classroom expenses, but excludes "support" funding of speech therapists, librarians, and administrators.

Its proponents say the plan is not a punitive measure and that Georgia school districts would have time to achieve the goal. They would be required to increase spending by two percent a year until they reach 65 percent. If the plan is passed, school districts that now meet academic standards and spend less than 65 percent in the classroom would be eligible for a waiver, says Heather Hedrick, a spokeswoman for Governor Perdue.

Nationally, public opinion supports the school reform measure. A Harris Interactive Poll last November showed that 70 to 80 percent of all demographic groups backed the 65 percent solution and the politicians who bring it to the table. "I've never seen an issue this popular," says Tim Mooney, spokesman for First Class Education. "I love it, how the [school superintendents] who are crying most for funding of education are the ones who now say putting dollars in the classroom won't make a difference," he says.

But education researchers are not sure whether the plan will work. Although nationwide statistics show a correlation between percentage of money spent statewide and standardized test scores, that correlation is not clear at the local district level.

"I have not seen any solid evidence as to, if all other things are equal, that a school district spending 70 percent in the classroom as opposed to a school district spending 60 percent has higher performance," says Joydeep Roy, an economist at the Economic Policy Institute, a nonpartisan think tank in Washington.

Moreover, what may seem like overspending by school districts is usually part of mandated services or fleets of cars used by school security officers that voters demand, says Bruce Hunter, of the American Association of School Administrators in Arlington, Va. The average US school district now spends 81 percent of its budget on personnel, including teachers, support staff, and administrators. A "one-size-fits-all" limit at the state level would ruin the existing system of local control over how money gets spent, says Mr. Hunter.

"People need to realize that local school district budgets are scrutinized by boards and taxpayers, and whenever they get out of whack, taxpayers bring them back into whack," he says.

Local funding flexibility that adheres to current state educational standards is already slowly improving math and reading scores in big cities, Allen points out. One is Atlanta, which allocates about 56 percent of its budget for classroom expenses. To some, the 65 percent solution will let school districts off the hook for student performance. "School districts are more clever than any legislator who can put this into existence," says Allen. "[Districts] can spin the data any way they want."

However, for Wanda Barrs, chairwoman of the Georgia State Board of Education, the attempt to adjust classroom funding is part of a valuable national discussion on how the local school house functions.

"The key is to stay focused on student achievement and open a debate about how we're directing resources toward that," says Ms. Barrs.