John A. Williams
Uinta County School District #1
8 March 2011
AN ANALYSIS OF SCHOOL BUSINESS PRACTICES
TO INCREASE AVAILABLE SLACK RESOURCES FOR
CONTINGENCIES AND OTHER MANAGEMENT CONCERNS
Introduction
As the economy, since about 2009, deteriorates leading to declining local and state
revenues, school districts throughout the nation have been scrambling to shore up their balance
sheets and profit and loss statements. While their short-term actions may be grouped into
revenue, productivity and efficiency, and cutting or retrenchment activities (Higgins 1984), few
studies have examined the individual tactics practitioners use to improve their financial
conditions at the district level (Hess 2010). This paper seeks to address this deficiency by
reporting the practices that New York school districts have used to increase available slack
resources in the pre-recessionary time of 2005.
A potentially useful concept circulating in business and organizational behavior fields is
slack resource theory. Originally described by Cyert and March (1963), slack resources are
underutilized resources that can be either obtained or redeployed for use by an organization. The
underlying idea of slack resources is that no organization operates one-hundred percent efficiently
and that a degree of extra resources is beneficial, since excess resources or slack allows
organizations to have the wherewithal to respond to contingencies or to make programmatic
changes. This paper addresses four general questions. First, what are slack resources? Second,
what is the relationship between slack resources and general district conditions?
Third, what
practices do district business managers use to increase available slack resources for contingencies
and other management concerns? Fourth, what can practitioners and policy makers learn from
the results?
1
What are slack resources? A literature review
The concept of slack resources first arose out of organizational theory with Chester
Barnard describing slack resources in his Functions of the Executive (1938). He stated that
executives might receive inducements greater than what they contribute to their company. In
1963, Cyert and March put a name to this construct of excess contribution calling it slack
resources. However, they added additional features to the concept that have clouded the concept
ever since. They stated that slack resources could include all not fully utilized resources,
including reserves, excess capital equipment, and staff. Cyert and March’s delineation generated
two competing camps of scholars. One group claimed that slack resources was either a tool of at
least a benign benefit to allow organizations increased flexibility to respond to internal and
external conditions (Bourgeois and Singh 1983), whereas the second group countered that slack
resources was an evil that created efficiency and principal-agent demons (Jensen 1986).
The two positions are not irreconcilable; Bourgeois (1981), Nohira and Gulati (1996),
Tan (2003) and Tan and Peng (2003) have attempted to show that moderate amounts of slack
resources benefit organizational productivity and either too much or too little decrease
productivity. Some scholars (Nohira & Gulati 1997; Cheng & Kesner 1997; Daniel et al. 2004)
have classified slack resources two ways: as a useful tool for management that allows
organizations to improve, and secondly as a wasteful source of inefficiencies. This paper will
examine slack resources through the first paradigm: slack resources as a useful tool with the
understanding that a high or excessive amount of slack resources in any organization is
inefficient, undesirable and wasteful.
Those with management responsibilities may be inclined to increase or maximize slack
resources, since slack resources provides greater management flexibility (Bourgeois & Singh
1983). This flexibility is often, but not always, in the form of cash resources that managers can
use in their organization. Examples in education include school leaders using excess cash
2
resources to hire or purchase additional staff, services, or equipment to accomplish new programs
or directions. Those scholars that agree with the conceptualization that slack resources benefit
organizations tend to use ideas of satisficing from March and Simon (1958) as an argument.
Economists in this group look at slack resources as resources that have utility in “smoothing”
difficulties that arise in organizations (Cyert & March 1963). They imply that resources used in
flush times can bolster needs in more austere circumstances. These scholars point out that there
may be some long-run advantages of having some amounts of slack resources within the
organization. Stipak and O’Toole (1993) and Higgins (1984) both state that the concept of slack
resources is an associated idea as a solution to retrenchment and fiscal stress.
Slack resources definitions
There is no universally accepted definition of slack resources (Riahi-Belkaoui 1994).
Scholars define slack resources emphasizing particular factors, and have described general
characteristics and then used narratives to refine further their definitions. Definitions of slack
resources coalesce on the idea that organizations have marginal or surplus resources either
assimilated into an organization (such as excess buildings), or in reserves (such as savings or
equity accounts).
The following is a list of definitions of slack resources partially adapted from Bourgeois
(1981) and Singh (1986):
•
Cyert and March (1963): “The disparity between the resources available to the
organization and the payments required to maintain the coalition” [p. 36].
•
Child (1972): “The margin or surplus [performance exceeding ‘satisficing’ level] which
permits an organization’s dominant coalition to adopt structural arrangements which accord with
3
their own preferences [vs. ‘goodness of fit’ dictates of contingency theory], even at some extra
administrative cost” [p. 12].
•
Cohen, March, and Olsen (1972): “The difference between the resources of the
organization and the combination of demands made on it” [p.12].
•
March and Olsen (1979): “The difference between existing resources and activated
demands” [p. 87].
•
Dimick and Murray (1978): “Those resources which an organization has acquired which
are not committed to a necessary expenditure. In essence, these are resources which can be used
in a discretionary manner” [p. 616].
•
Pfeffer and Salancik (1978): “Slack resources [is] apparent in the form of extra profits or
resources” [p. 274].
•
Wilson (1979) [quoted in Singh 1986]: “Every organization can be said to have a set of
functions which define that organization . . . It is also possible to consider some quantity or
threshold of resources . . . that is necessary to perform these functions . . . slack [is] any
organizational resource or asset beyond that threshold” [p. 5].
•
Nohria and Gulati (1997) define slack as “the pool of resources in an organization that is
in excess of the minimum necessary to produce a given level of organizational output” [p. 604].
Perhaps the most quoted definition (Sharfman et al. 1988; Tan & Peng 2003) of slack resources
comes from Bourgeois (1981):
Slack resources is that cushion of actual or potential resources which allows an
organization to adapt successfully to internal pressures for adjustment or to external
pressures for change in policy, as well as to initiate changes in practice with respect to the
external environment.
4
Bourgeois’ statement implies that organizations can use slack for contingency relief and strategic
innovation and problem solving for internal and external activities and challenges.
Wasted resources, such as damaged inventories, are not slack resources (Mayrhofer
1997); rather slack resources are resources that are in reserve or not effectively deployed.
Reserves, savings, and unobligated cash are examples, but slack resources may also include
surplus employees in a particular department (Williamson 1963), excess overhead (Daniel et al.
2004), or spare capital equipment (Bourgeois 1981) to be utilized later under changed economic
circumstances. Thompson (1967) noted that buffers to external environments (a form of slack
resources) allow organizations to withstand emergencies and economic downturns.
For slack resources to be useful to managers and leaders, two necessary conditions must
be present according to Sharfman, Wolf, Chase and Tansik (1988). First, slack resources must be
identifiable to administrators. Second, slack resources must be accessible and deployable by
managers. Resources that do not meet these categories are not slack until that happens.
“Accessibility” means that managers can capture and use identified resources. Inaccessible
resources in the education setting may include resources that are difficult to convert into money
such as overstaffed but legally mandated positions. Moreover, resources must be deployable to
be slack resources. Deployable implies that managers have the legal authority to reassign a
resource for a needed use.
Bourgeois and Singh (1983) categorized types of slack resources along a continuum of
ease of deployment. They state that there are three types of slack resources: available slack,
recoverable slack, and potential slack. Available slack is slack resources that is readily available
such as cash and marketable securities (Bourgeois & Singh 1983). Recoverable slack represents
slack resources that an administrator can use, but requires some effort or organizational changes
to capture the slack. Sale or redeployment of surplus capital equipment or buildings is an
example of recoverable slack. Both available slack and recoverable slack focus on resources
5
within an organization and are often indexed to expenditure budgets. Potential slack focuses on
revenue sources external to the organization. Bourgeois and Singh (1983) identified potential
slack in excess resources created from debt or equity markets. In the public sector, they may
include additional grants (such as the recent ARRA education grants) and new government
funding.
Using Bourgeois and Singh’s definition, the three forms of slack resources graphically
and algebraically show as follows:
Figure 1 Three types of slack resources
Potential
Slack
Ŕ
Available Slack
Ř
Recoverable
Slack
Organization
Expenditures
E
Revenues
R
Necessary
Expenditures
Ê
Expenditures
Revenues, Fund
Balances, and Reserves
If E = expenditures,
Ê = expenditure payments necessary to maintain organization coalitions,
R = revenues and,
Ŕ = new amount of organizational resources (often in the form of grants and
extraordinary revenues), then recoverable slack for a firm or organization = R – Ê given
that E > Ê
Available Slack (Ř) = reserves, unused assets, and fund balances
Potential slack resources (Ŕ) = grants and unanticipated revenues
6
The figure has two conceptual Achilles heels. First, organizations are collections of
coalitions or temporary economic, political, or social alliances (such as between management and
teachers unions or between a district and their vendors), each with various degrees of information
and preferences (Stevenson, Pearce, & Porter 1985). Second, organizational leaders may suffer
from information deficiencies as they attempt to measure accurately slack resources.
Returning to above Figure 1, it is difficult for inside managers or outside observers to
know exactly the actual amount of necessary expenditures of an organization; observers estimate
Ê – the necessary expenditures (Bourgeois 1981). Second, there is no accurate measure of
potential slack – potential slack is limited by internal resources (such as grant writing staff) with
the funding markets and sources where organizations seek additional resources including, in
education, the grant competition market. Education observers and managers could possibly
estimate the munificence of these markets (and one might expect the perceptive education
manager to do so), but would never know for certain how many resources are available. Where
do slack resources show on balance sheets and statements of revenues and expenditures? As
Figure 1 emphasizes, slack in a current year is the relationship between fund balance, revenues,
and expenditures, and offset each other to determine relative slack amounts. The same can be
said about slack resources on the balance sheets; excess assets are only excess in relation to the
liabilities and equity. For example, an underutilized building is not specifically noted in audited
financial reports, although its net financial capitalized value is listed as a capital asset on the
government-wide balance sheets; its presence becomes slack only as related to the net effect of
other buildings and space requirements. Costs of excess teachers would show up as expenditures
in a statement of revenues and expenditures, but need to net against revenues and fund balances.
A similar measure to Bourgeois and Singh’s three types of slack, Sharfman et al. (1988),
Tan and Peng (2003), and Busch (2002) categorize slack upon a scale of “absorbed” and
“unabsorbed” slack, with absorbed slack being excess costs in an organization, and unabsorbed
7
slack being un-deployed resources. This characterization is analogous to two of Bourgeois and
Singh’s three types of slack resources, with unabsorbed slack being similar to available slack and
absorbed analogous to recoverable slack. If one substituted terms “available slack” for
“unabsorbed” and “recoverable slack” for “absorbed,” one would likely arrive at the same
conclusions with the two sets of terms.
Stipak and O’Toole (1993) and Higgins (1984) both state that slack resources is an
associated idea with retrenchment and fiscal stress. Fiscal stress often influences leaders of
organizations to seek slack resources as a remedy to economic challenges. While the literature is
growing on the affects of fiscal stress on organizations, there are few studies on how governments
and organizations respond to fiscal stress according to Maher and Deller (2007). Maher and
Deller state that only four studies have addressed practices and fiscal stress in governmental
settings: Wolman (1982), Morgan and Pammer (1988), Schick (1988) and Maher and Deller
(2007). Wolman (1982), Morgan and Pammer (1988) and Schick (1988) wrote about and during
the fiscally turbulent 1970s and 1980s. Wolman’s study outlined practices, and used archived
financial information on fiscal practices during retrenchment periods. Morgan and Pammer and
Maher and Deller, in contrast, did cross sectional surveys of municipality practices to relieve
fiscal stress.
Wolman and Morgan and Pammer empirically measured their lists of practices
differently. On one hand, Wolman used his list of practices as a framework to examine city
budgets and fiscal reports of 23 United States cities from 1977 to 1980. The archival study
reported that most cities sought to both increase revenues, of own-source and intergovernmental
funds, as well as decrease total spending. On the other hand, Morgan and Pammer’s study asked
city mangers to rate their list of practices in terms of importance (measured in dollars). Their
analysis concluded with regression models that looked at independent variables of environmental
decline, fiscal stress, organizational structure (strong or weak city manager), group pressure,
8
spending preferences, administrators’ perception of problems, and administrative sophistication.
They reported that management practice importance was “unstructured” and “difficult to predict,”
since their models accounted for only eight percent of variation for revenue-type practices, nine
percent of variation for productivity practices, and fourteen percent of variation for
cutting/expenditure practices. They ascribed the unexplained variance to crude measures and to
Cohen, March, and Olsen’s (1972) “garbage-can model” of management decision making.
Morgan and Pammer surveyed medium to large cities throughout the nation on
retrenchment practices. Maher and Deller likewise surveyed cities and municipalities. However,
the latter study’s surveys were limited to significantly smaller cities, towns, and municipalities in
the State of Wisconsin. Both Morgan and Pammer and Maher and Deller asked municipal leaders
to respond to a battery of Likert questions about fiscal conditions, demographics, and the
practices they use and summarized factors using factor analysis. In Morgan and Pammer’s study
the responses were factor analyzed into component variables of revenue, productivity, and
expenditure practices. Maher and Deller’s factor analysis found five component variables:
productivity improvement, increased revenues, avoidance/defer/borrow, service cuts, and reduced
spending. The two studies then used these factors as outcome variables in regression analyses.
On the independent variable side, Maher and Deller used predictor variables of the degree of
fiscal stress with socio-economic factors. There were some similarities in model design (using
factor analysis and regression) and dependent variables (revenue, expenditure, and productivity);
the models in both studies have relatively low prediction power (Adjusted R2 range from .006 to
.23 in Maher and Deller and .08 to .14 for Morgan and Pammer). While factor analysis
statistically combines variables, the studies do not address the practices singularly.
Schick’s (1988) study was a comparison of budgeting and management practices of
governments in developed Organisation for Economic Co-operation and Development (OECD)
countries. The qualitative report compared practices of various nations. While Schick reports
9
many of the same practices, such as revenue, productivity/efficiency, and cutting/expenditure
practices, its scope of study differs from the other three studies since it reports at the multinational level. Schick concludes that as executives recognize greater fiscal stress, they are more
likely to respond with retrenchment practices, and as they perceive lowered amounts of resources,
they are more likely to use retrenchment practices.
The sample
This current study is similar to these fiscal stress studies in that it uses practices drawn
from the fiscal stress research of Morgan and Pammer. However, it differs in that it focuses
examining school district practices to free up available slack resources rather than to decrease
fiscal stress. This study sampled school business officials in New York State through an email
survey in 2005. The e-mail addresses came from membership records of the New York State
Association of School Business Officials (NYSASBO). About 900 members were on their
membership database in early 2005. The NYSASBO membership directory contains the name,
district, title, and e-mail address of current dues paying members. For this study, the school
business membership of NYSASBO stands as a proxy of all New York school districts. Since it
is a statewide association joined by many school business officials representing school districts of
various sizes, wealth, and geographical locations, surveying its membership approximated the
population of all New York school districts.
By choosing the NYSASBO membership to survey, what selection biases may result?
First, there may be districts with no employees who are NYSASBO members. Smaller school
districts may have this situation, since a school with small enrollment (e.g., enrollment of 50
students or less) may employ only a part-time school business official also serving as a
superintendent who may join NYSASBO. This was the case in that the sample underrepresented
some types of districts. There may also be school business officials who have not kept their
10
membership dues current, and NYSASBO excludes them from membership. Districts that had
more than one member of NYSASBO could have had more than one response from a single
school district; the number of single districts with multiple respondents was 33 from the 290
initial respondents.
The study excluded members of NYSASBO having job titles of school board member or
chief information officer since they would most likely not know the day-to-day financial
decisions that a district takes; the number excluded was small (n = 5). The study also excluded
Board of Cooperative Educational Services (BOCES) school business officials as well as special
legislative school districts (mostly single school districts with special missions such as
incarcerated youth). Lastly, the study also excluded surveys from New York City since
demographically and financially New York City is an outlier from other New York State school
districts. In addition to the above base model, the study controlled for three district demographic
factors as categorized by New York State: district location (upstate, downstate, suburb, etc.),
district wealth or needs (large city, high needs rural, high needs urban, medium need, and low
need school districts), and district size (large, medium, or small city school districts, and large,
medium, and small central school districts).
The study sent 903 surveys to members of NYSASBO; 290 responded to the survey for a
32 percent response rate. However, of the respondents, the survey had a high incompletion rate
with about 100 incomplete surveys, possibly due to the length of the survey and the busy
schedules of business officials. Using state supplied financial, demographic and socio-economic
information about school districts, and comparing those population parameters to the sample
using one-way ANOVA, the sample compares favorably to the state school district populations
on some dimensions used by the New York State Education Department. The sample and the
population are not significantly different in unallocated fund balance per pupil, wealth (using
New York State district needs index), and county representation. There were significant
11
differences in setting; the sample had significantly fewer downstate suburban and rural school
districts. The sample had significantly different community types, with under-representation of
small central school districts (which are also located only in rural areas).
What is the relationship between slack resources and general district conditions?
Fiscal stress. The study asked respondents to rate the amount of fiscal stress. Those surveyed
could respond in one of five categories: “no fiscal stress” (1.0), “little fiscal stress” (2.0), “some
fiscal stress” (3.0), “quite a bit of fiscal stress” (4.0), and “heavy fiscal stress” (5.0). Table 1
shows the frequencies reported for fiscal stress. The average amount of fiscal stress in New York
schools was 3.32, which is between “some” and ‘quite a bit” of fiscal stress. The standard
deviation for the fiscal stress distribution was .97.
Table 1 Degree of fiscal stress
Frequency
Valid No fiscal stress
Little fiscal stress
Some fiscal stress
Quite a bit of fiscal stress
Heavy fiscal stress
Total
11
29
104
60
23
227
Valid Percent
4.8
12.8
45.8
26.4
10.1
100.0
Amount of slack resources. The survey found variation of districts reporting the current amount
of slack resources among districts. On a Likert scale of “1” being no slack resources, “2” being
some slack resources, “3” representing sufficient slack resource and “4” being ample slack
resources, the average respondent indicated that their district had 2.3 (somewhat more than some
slack resources) with a standard deviation of .81. Table 2 reports the frequency to the question
the relative amount of slack resources in their respective district.
12
Table 2 In terms of dollars, amount of slack resources sampled districts
currently have for contingencies or other management concerns
Frequency
Valid Percent
Valid No slack resources
Some slack resources
Sufficient slack resources
Ample slack resources
Total
41
135
74
22
272
15.1
49.6
27.2
8.1
100.0
The four categories of slack resources (no, some, sufficient and ample) have significant
associations with other variables. The mean scores of each category is inversely related to fiscal
stress, with those reporting no slack reporting high amounts of fiscal stress, and those with ample
slack resources reporting lower fiscal stress (see Figure 2). As slack resources decrease in school
districts, fiscal stress increases.
Figure 2 Slack resources and fiscal stress
Mean scores of slack resources compared with fiscal
1= no fiscal stress
5= high fiscal stress
stress
5.00
4.00
3.00
2.00
1.00
-
4.00
No slack
resources
3.48
2.82
2.39
Some
Sufficient Ample
slack
slack
slack
resources resources resources
Voter relations. Bourgeois & Singh (1983) claimed that there is a positive association between
slack resources and voting public who approve yearly operating budgets. This assertion was
confirmed with the survey. As relations between district administration deteriorate between
voting public, it may be due to fiscal constraints evident in the amount of available slack
13
resources. This study asked district leaders to rate the relationship between their respective
districts and the voting public. Reponses included “poor” (1.0), “tolerable” (2.0), “good” (3.0)
and “excellent” (4.0). The average response was rated at “good” (3.04) with the standard
deviation being .73.
1= poor
4= excellent
Figure 3 Slack resources and voter relations
Slack mean scores and voter district relations
4.00
3.00
2.00
1.00
0.00
2.88
2.99
3.25
No slack Some slack Sufficient
resources resources
slack
resources
3.22
Ample
slack
resources
Generally, the relationship is positive with slack resources and voter relations showing
that as slack resources increase in a district, the relationship with the voting public also
increases (see Figure 3), although there is a slight decrease in voter relations with districts
that have ample slack versus districts that reporting sufficient slack.
Coalitions. As noted in the previously, Cyert and March (1963) first associated internal
organizational coalitions with slack resources, although Gulick and Urwick (1937) were among
the first to research coalitions in organizations (Stevenson, Pearce, & Porter 1985). Bourgeois
(1981) discussed the possible relationship between slack resources and coalitions. In
management literature, Stevenson, Pearce, and Porter (1985) summarize literature to arrive at
eight definitional characteristics of organization coalitions: (1) interacting group of individuals,
(2) deliberately constructed, (3) independent of the formal structure, (4) lacking formal internal
14
structure, (5) mutual perception of membership (a knowledge of who is in the coalition and who
is not), (6) issue oriented, (7) external focus, with (8) concerted member action. Their
enumeration, while summarizing coalitional literature, too broadly defines coalitions since it may
exclude some coalitional participants on point number 3. Coalitions may be independent of
power structures, but they may also be part of the power structure, such as a management team or
oversight board. This exception is in harmony with Cyert and March’s (1963) listing of
coalitions composed of employees, managers, stockholders, etc. within and without formal
organizational structures.
Bourgeois (1981) proposed relating coalition building to slack resources. As contention
rises, often because of or over resources, it may foretell limited slack resources. Coalition
building may indicate a politicized atmosphere whereby organizational members create coalitions
to use scarce resources. Thus, as coalition building increases, slack resources decreases. Later, in
Bourgeois and Singh (1983), they reported that the two factors do relate to slack resources by
empirically showing that slack resources and coalitions are inversely proportional. Coalitions
increase in membership or intensity as they compete against other coalitions for fewer resources.
The survey allowed respondents to rate the amount of coalition building in their
respective districts. They could respond in one of five ways to the question: “How often has it
been necessary for you to join forces with other school leaders (as a coalition) to influence a
policy decision in your district?” They could respond with “never” (1.0), “infrequent” (2.0),
“sometimes” (3.0), “often” (4.0), and “always” (5.0). The mean amount of coalition building was
2.65, between infrequent and sometimes. The standard deviation was 1.00.
15
Figure 4 Slack resources and coalitions
1= no coalition
3= some coalitions
Mean slack resource scores compared with
degree of coalition amounts in district
3
2.75
2.71
2.63
2
1
2.18
0
No slack
resources
Some
Sufficient
slack
slack
resources resources
Ample
slack
resources
Slack resources and funding. Slack resources relate with the amount of funding district
receives, and it appears that it is more a function of local resources on the revenue side. The
amount of total revenue per pupil (Figure 5) shows that as slack resources increase there is a
corresponding increase in total revenue. However, the slack resources associate more strongly
with local resource revenues and revenue capacity. Figures 5 and 6 show positive relationships
between local revenue and perceived amounts of slack resources. Assessed valuation divided by
total weighted pupil units (AV/TWPU) and slack resource further confirms that slack resources
and local revenue generating capacity is proportionally related as illustrated in Figure 7.
16
Figure 5 Mean slack resource categories and total revenue/pupil
Total revenue/pupil
Dollars
20000
15000
14995
15090
14859
16691
10000
5000
0
No slack
Some slack
resources
resources
Sufficient
Ample slack
slack
resources
resources
Figure 6 Mean slack resource categories and local revenue/pupil
Local revenue/pupil
Dollars
12000
9000
6000
6794
6829
8064
9629
3000
0
No slack
resources
Some slack
resources
17
Sufficient
slack
resources
Ample
slack
resources
Figure 7 Mean slack resource categories and assessed valuation
Assessed valuation/Total weighted pupil units
600,000
500,000
400,000
300,000
200,000
100,000
-
512,328
399,620
300,039
No slack
resources
302,121
Some slack
resources
Sufficient
slack
resources
Ample slack
resources
On the expenditure side, it appears that there is a slight increase at both ends of the slack scale
with respect to the amount of dollars expended per pupil as shown in Figure 8.
Figure 8 Mean slack resources versus expenditures/pupil
Expenditures/Pupil
Dollars
20,000
15,000
15,034
14,818
14,888
16,691
10,000
5,000
No slack
resources
Some slack
resources
Sufficient Ample slack
slack
resources
resources
Fund balance per pupil. As governmental entities, school districts follow a modified accrual
accounting system that starts with an amount of fund balance, or net assets, and adds revenues
and subtracts expenditures against it as the year progresses (Everett, Johnson, & Madden 2007).
18
This basis of accounting focuses on the organization’s position—where it is in relation to the
beginning fund balance. New York State had an un-obligated fund balance limit of 2% in 2005
(the legislature subsequently raised it to 4% in 2009) (Knight & Levinson 1999; New York State
Real Property Tax Law Section 1318 1977); fund balance in excess of 2% should have been
returned to voters or can be placed in a dedicated reserve (such as a capital reserve, tax certiorari
reserve, or workers compensation reserve). These reserves are not easily deployable for other use
outside of voters’ approval. Unallocated fund balance has no obligations against it (Everett,
Johnson, & Madden 2007), and is a logical location for slack resources (Singh 1986).
The New York State Education Department publishes unreserved fund balance
information collected on the annual ST-3 report on its website (NYSED 2005). Combining this
information with the survey shows that per pupil fund balance is proportional to slack resources;
as an organization decreases fund balance the amount of slack resources also decreases. Table 3
shows the percentile distribution of unallocated fund balance per pupil of the districts that
responded to the survey.
19
Table 3 Statistics of Unallocated fund balance per pupil
N
Valid
Missing
Standard deviation
Minimum
Maximum
Deciles
288
1
691.45
(968.12)
5,118.35
10
20
30
40
50
60
70
80
90
265.30
386.02
500.79
561.97
636.55
738.26
866.30
1,116.55
1,561.50
There is a positive association of mean slack resource categories with unallocated fund balance
per pupil. Figure 9 shows that the unallocated fund balance dollars doubles from the relationship
of no slack resources to ample slack resources.
Figure 9 Slack resources and unallocated fund balance/pupil
Unallocated fund balance/pupil
Dollars
1500
1277
1000
500
678
875
961
0
No slack
resources
Some slack
resources
20
Sufficient
slack
resources
Ample
slack
resources
What practices do district business managers use to increase available slack resources for
contingencies and other management concerns?
The study reports what practices have district leaders have used in the past five years
prior to 2005 to increase slack resources for contingencies and other management concerns. Of
the three practice types, respondents reported using efficiency/productivity practices the most as a
type, with a combined average percentage of 66%; the range of districts using particular
productivity practices was between 15% for shifting to other government units and 89% for
improve through better management practices. The second highest practice type, taken together,
was cutting/expenditure practices with the average score of 57% using them. These scores
ranged from reduce administrative expense at 83% to 8% reporting that they use wage freeze.
Revenue-type practices had the least high average as a group at 53%. The high and low
percentage scores were seek grants at 93% and litigate for revenues at 15% usage, respectively.
In addition to answering questions about what types of practices school business managers use,
the responses were also used as an independent variable (used or not used in the last five years).
Table 4 shows the percentage of respondents that have used revenue-type practices in the
past five years. School districts look locally to property taxes (83% using) to relieve financial
difficulties, to lobby the state legislature for funding (82%) and member-items (legislative
amendments granting specific aid to a school district) for relief (79%). Seeking grants can come
from many sources and levels: government, nonprofit, and for profit sources as well as locally,
state, and federal levels. The respondents indicate that districts used practices, such as grants,
increase property taxes, and funding changes that generate large dollars, and use less frequently
practices that result in smaller amounts of revenue such as selling district assets or practices
involving conflict such as litigation.
21
Table 4 Past five year users of revenue-type practices
Total Respondents Users Valid Percent
USER Seek grants
USER Increase property taxes
USER Lobby legislature for
increased funding
USER Seek special legislative
(member item) grants
USER Seek local revenue
sources (e.g., district
foundations, donors)
USER Obtain additional
intergovernmental revenue
USER Increase long-term
borrowing
USER Increase short-term
borrowing
USER Defer some payments
USER Sell district assets
USER Increase student fees
(e.g., student parking, activity
fees)
USER Litigate for increased
revenues
221
217
205
181
92.76
83.41
219
179
81.74
216
170
78.70
221
135
61.09
210
121
57.62
221
102
46.15
222
215
218
92
59
59
41.44
27.44
27.06
218
45
20.64
216
33
15.28
More than eighty percent of school business officials reported using four
productivity/efficiency practices: close to 90% reported using improving productivity through
better management practices. Adoption of energy conservation practices, and joint purchasing
agreements, and labor saving techniques each had about 84% use in New York school districts.
Table 5 shows past five-year use of productivity/efficiency practices.
22
Table 5 Past five year users of productivity/efficiency practices
Total Respondents Users Valid Percent
USER Improve productivity
through better management
practices
USER Adopt energy
conservation practices
USER Enter joint purchasing
agreements
USER Improve productivity by
adopting labor saving
techniques
USER Contract out services
with other government units
USER Contract out services
with the private sector
USER Shift responsibilities to
other units of government
218
196
89.91
222
193
86.94
220
185
84.09
217
181
83.41
216
118
54.63
217
94
43.32
214
33
15.42
Table 6 lists the percentage of past five year use prior to 2005 of cutting/expenditure
practices to slack resources. New York districts have used cutting/expenditure practices that
involve operating expenditure reductions, such as reduction of administrative expenses (82%) and
employee exiting, such as attrition (78%) and early retirement (73%) much more frequently than
practices involving worker reduction of wages. For example, districts used practices of wage
freezes (8%) and hiring freezes (37%) much less frequently. With the high cost of health care,
reduction in health care benefits (76%) was a popular practice. District leaders used across-theboard cuts more often (65%) than other programmatic cuts such as elimination of programs
(55%), cutting least productive programs (51%), or reducing programs funded by
intergovernmental revenue (24%). The study used the variable of past five year user as a
predictor of present practice plans, with the hypothesis that past users of practices would plan to
use practices in the future.
23
Table 6 Past five year users of cutting/expenditure practices
Total Respondents Users
USER Reduce administrative
expenses
USER Reduce overtime
USER Attrition
USER Reduce expenditures for
supplies and travel
USER Negotiate reductions in
costs of health care benefits
USER Encourage early
retirement
USER Impose across-the-board
cuts
USER Reduce capital
expenditures
USER Layoff personnel
USER Eliminate programs
USER Defer maintenance of
buildings or capital equipment
USER Keep expenditures below
inflation
USER Reduce employee
compensation (such as benefits)
USER Cut least productive
departments/programs
USER Reduce services funded
by property taxes
USER Impose hiring freeze
USER Reduce services funded
by intergovernmental revenue
USER Institute wage freeze
24
Valid Percent
213
218
216
175
175
169
82.16
80.28
78.24
218
168
77.06
213
161
75.59
211
155
73.46
214
141
65.89
211
210
210
127
116
116
60.19
55.24
55.24
211
114
54.03
207
110
53.14
207
107
51.69
210
107
50.95
209
214
91
80
43.54
37.38
200
48
24.00
208
17
8.17
What can practitioners and policy makers learn from the results?
At a time when school district resources are contracting, practitioners may look within
their organizations to convert recoverable slack resources into available slack resources to be
used to alleviate fiscal stress and difficulty. The surveyed business managers in New York State
report that they have used revenue, productivity/efficiency, and cutting practices to free available
slack resources in their districts. The results show that past revenue practices include seeking
grants and increasing property taxes to increase available slack. Past efficiency measures include
finding available slack through better management and labor practices and conservation; popular
past cutting practices include reducing overtime and administrative expenses and attrition. The
respondents imply that New York school districts have focused on low political cost practices.
Those practices that have higher transactional costs or lower return are used less frequently such
as litigation, selling district assets, or wage freezes. For practitioners these practices are road
maps of what practices are most popular and presumably can provide a degree of available slack.
While practitioners may look to particular practices, the survey data also indicates that there are
socio-economic and geographic factors that influence the amount of slack resources a district has.
Slack resources seem to be largely a function of assessed valuation per pupil; those districts with
larger assessed valuations also report higher per pupil fund balances, per pupil expenditures, and
lower amounts of fiscal stress and coalitions.
I don’t believe that it would be wise for state policy makers to deliberately seek to fund
excessive amounts of slack resources; because government monopolies are by nature inefficient,
over the course of time, slack resources have lodged within schools and school systems.
However, in the current economic conditions, through funding decisions state legislative and
policy makers may influence practitioners to look within for productivity and efficiencies, use
cutting retrenchment practices and seek for new revenues as a way to decrease their recoverable
25
slack and increase their available slack as a means to finance contingencies and other
management concerns.
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