Notwithstanding that public elementary and secondary education historically has been a state and local responsibility, DOD has also operated such schools at selected U.S. and overseas locations to educate military dependents residing on military bases. Collectively, the domestic and overseas programs operate over 200 dependent schools in the United States, U.S. territories, and overseas, with 59 schools operated in the continental United States. (See appendix II for a listing of these DDESS school locations.) Approximately 105,000 students are enrolled in these combined programs, with approximately 24,000 students attending the 59 schools in the continental United States. DDESS schools mostly serve elementary school-aged students in the United States, with older students attending public schools off the installations. The overseas DODDS system has approximately 12,000 employees while the DDESS system has approximately 5,700 employees. The combined operating budget for both systems and headquarters in fiscal year 2005 is about $1.49 billion of which approximately $367 million is for operating DDESS schools. As we have previously reported, the federal government’s operation of elementary schools in the continental United States to educate military dependents residing on military bases traces its history back many years and to locations where a suitable free public education was not available. There were a variety of reasons for establishing schools on military bases, including military installations that were located in sparsely populated areas and efforts to avoid racial segregation at the neighboring school districts. From 1951 to 1981, funding responsibility for the domestic schools resided with the Department of Health, Education, and Welfare, and subsequently with the Department of Education. The Omnibus Budget Reconciliation Act of 1981 (Public Law 97-35) transferred funding responsibility to DOD. Today, DODEA, the umbrella agency created in 1994 to administer the overseas (DODDS) and domestic (DDESS) systems, operates under the direction of the Deputy Under Secretary of Defense, Military Community and Family Policy, and the Under Secretary of Defense, Personnel and Readiness. The DDESS model is but one of several approaches to providing elementary and secondary education to dependents of military personnel residing on military bases in the United States. There are 33 Department of Education-owned schools located on military bases but operated by LEAs, providing education for military dependents residing on those bases. The Department of Education has been gradually transferring these schools to LEAs as funds are available to upgrade the condition of the schools to encourage acceptance of the schools by LEAs. In other instances, LEAs own and operate schools located on military bases. Finally, in a limited number of instances, DOD directly funds LEAs to educate military dependents at schools operated on military bases. Periodically, questions have arisen within the Congress concerning the continuing need for such schools within the continental United States, and various studies were commissioned in the 1980s and early 1990s to evaluate the potential for transferring the schools to LEAs. In December 1986 we examined three methods to educate military dependents, then in selected use, which were viewed as alternatives to the DOD-funded and operated schools. They included: (1) operation by local school districts, with funding from federal, state, and local governments; (2) DOD contracting with local school districts for educational services; and (3) coterminous operation, whereby dependents’ schools operated as local school districts whose boundaries were the same as the military installations’ boundaries, and where funding for those districts was shared by the Department of Education (through the federal impact aid program) and the responsible state government. We reported in December 1986 that creation of school districts coterminous with military installations appeared to be the best of the three alternatives, in part because such an approach would likely minimize the transfer of students from existing schools and eliminate costs to DOD. However, according to a DODEA official, most states have since passed laws that prohibit the creation of new school districts, which eliminates the coterminous option from consideration. We also reported that jurisdictional, legal, and other issues could impede consideration of all three alternatives. Subsequent studies by others offered varying degrees of insights regarding these alternatives and difficulties likely to be encountered in trying to implement them, and often identified multiple issues that would have to be addressed—including legal and financial issues, and strong opposition from affected military families—if a transfer of responsibilities were to be attempted. As a result, school transfers were not considered feasible. (See app. III for a synopsis of each of the prior studies.) In 2002, DOD’s attention again turned to studying the potential for transferring DOD’s domestic elementary and secondary education program over to LEAs. DODEA officials have indicated that the new effort was the result of questions raised by the then chairman of the House Appropriations Military Construction Subcommittee regarding whether there was a continuing need for DOD to operate these schools triggered by a request for funding for a school-related project on a military base. We also note that in 2002, as part of its focus on improving management of the department, DOD’s Senior Executive Council endorsed a core competency-based approach for DOD sourcing decisions—that is, the decision to use a public or private sector source to perform a necessary agency function or activity was based on whether the function or activity was core to the agency’s mission. The Senior Executive Council believed that the department should focus its energies and talents on those functions that were core or directly linked to its warfighting mission. These core functions must be performed by the agency, with the expectation that necessary products or services associated with non-core functions should be obtained from other government agencies or the private sector. A DDESS press release, announcing the planned transfer study in 2002, indicated that the study would “focus largely on the ability and willingness of LEAs to assume educational responsibility for the students currently enrolled in DOD’s domestic schools.” This transfer study was performed in multiple phases that included: A facility condition assessment performed by Parkhill, Smith, and Cooper, Inc., and contracted through the Army Corps of Engineers. Field observer site visits were made to document the current physical condition of each school, estimate probable costs for remediation, and assess whether renovation or replacement was needed. This assessment identified about $125 million in remediation costs for all 58 DDESS schools surveyed and about $33 million to replace 4 of the schools. A data collection and analysis phase conducted by the Donahue Institute of the University of Massachusetts to examine the feasibility of transferring 58 DDESS schools operating in the continental United States to local school districts. A set of transfer alternatives was developed and analyzed for each of the DDESS schools. Use of a three-person expert panel, approved by DOD and contracted by the Donahue Institute to independently assess the Institute’s data and analysis and make recommendations regarding transfer alternatives. A quality-of-life assessment, based on an October 2003 meeting in Peachtree City, Georgia, with representatives of the domestic DDESS schools and installations where their views were solicited and documented. Participants included installation commanders, students, parents, union leaders, and special interest groups. The recommendations of the panel of experts were submitted to DODEA in December 2003, but remained closely held without widespread dissemination inside the department and without public dissemination until February 2005. At the time we completed our work, DOD had not made a decision regarding adoption of the panel’s recommendations, postponing such a decision until later this year after decisions related to the 2005 base realignment and closure round are completed. While DOD has previously urged its components to examine for potential divestiture or outsourcing of functions not core to warfighting efforts to the private sector, neither DODEA nor DOD has policy guidance related to closing the dependent elementary and secondary schools operated by the department. While expansion and contraction of the number of domestic schools operated by DOD occurred between the 1950s and early 1970s, relatively few have been closed or transferred since then, and most of these have been related to base closure activities. For affected military families, the retention of these schools is seen as a quality-of-life issue, but there are varying perspectives on this issue within DOD. DODEA officials told us they had eliminated only three domestic schools in the past few years; one in 2001 in Georgia as the result of military housing privatization initiative, and two others in 2004 as the result of a base closure in Puerto Rico. This contrasts with an earlier period between the 1950s and 1970s when there was a more robust expansion and contraction in such schools. Per the 2004 defense appropriations act, the Roosevelt Roads Naval Station in Puerto Rico was closed in 2004 and, as part of that closure, the DDESS schools on that base also closed. The only other instance of a DDESS school being eliminated in recent years occurred in 2001 as a result of the department’s housing privatization efforts. In that instance, land associated with on-base housing at Warner Robins Air Force Base, Georgia, was transferred to a contractor and the land transferred included one of the base’s two schools. As a result, the school was subsequently transferred to the LEA, which became responsible for educating students at that school. DOD housing privatization officials indicated they do not currently anticipate similar transfers of schools in the future. Earlier transfer studies point to expansion and contraction of DOD operated schools on military bases between 1950 and 1970. Schools were added to the DDESS system as a result of the racial integration of the military during the time when the schools in the neighboring LEAs remained segregated. At one point, about 100 military installations reportedly had schools that belonged to what is now the DDESS system. Various studies report a subsequent contraction in the number of these schools due to a variety of factors including successful implementation of integration policies in many instances that allowed base schools to rejoin their former LEAs, pressure from the U.S. Department of Education on states and localities to acknowledge responsibility for the education of military dependents, and commercial and residential development adjacent to some bases that enabled the LEA to provide a viable educational program. Survey and other data from the current and earlier studies on transfer issues clearly indicate that affected military families, whose dependents attend DDESS schools, view their retention as a quality-of-life issue. While their children represent a very small percentage of the dependent school- aged population, affected servicemembers’ views of the quality of education and related services provided by the dependent schools makes clear that the retention of these schools is very important to them. An October 1997 Defense Manpower Data Center study noted that “the loss of the DDESS schools would undoubtedly be viewed as another loss of a military quality-of-life benefit. But unlike many other benefit cuts… that affect all or most military servicemembers, the loss of this benefit would affect a small proportion of military servicemembers.” The Defense Manpower Data Center report also indicated that DDESS students comprised only three percent of all school-aged children of active- duty servicemembers. DODEA provided us with data that indicate that figure remains current today. Moreover, only 23 percent of all school-aged dependents of military members assigned to the installations served by DOD’s domestic dependent schools in the continental United States attend the schools. This can be attributed to the fact that many military families reside in local communities—that is, not on the base—and thus are not eligible to attend DDESS schools, and the fact that relatively few DDESS schools provide education for high school students. DOD’s guidance for deciding what functions the department performs that could be considered commercial in nature and readily available in the private sector, has exempted DOD schools from outsourcing consideration. DOD’s guidance stipulates that principals and faculty at DOD dependent schools perform functions that could be performed by the private sector “but without the same effect—i.e., military performance of these activities carries special meaning for military personnel, and their families.” The guidance also notes that principals and faculty at DOD Dependent Schools demonstrate family support, promote quality-of- life and foster camaraderie for recruitment and retention purposes. Accordingly, DOD dependent schools were exempt from private sector performance comparisons. In addition, in recent years, DOD has sought a more aggressive look at whether various functions are core to the department’s warfighting mission, and to increase the number of functions that might be performed by the private sector. Dependent schools are one such function that has sometimes been questioned regarding its connection to DOD’s core mission. Conversely, in July 2002, DOD published A New Social Compact: A Reciprocal Partnership Between The Department of Defense, Servicemembers and Families. The document was issued under the auspices of the Deputy Assistant Secretary of Defense (Military Community and Family Policy). It noted that in 2001, the President had issued a National Security Presidential Directive requiring the Secretary of Defense to undertake a review of measures for improving the quality of life for military personnel and provide recommendations for their implementation. While the new compact did not specifically address the issue of whether DOD dependent schools should be retained or transferred to LEAs, it did include a section devoted to enhancing educational opportunities provided through DODEA worldwide. The panel of experts recommended transferring most educational responsibilities from DDESS schools to LEAs at 10 of 14 installation areas studied. The institute sought to contrast DDESS and LEA schools to guide the panel’s analysis and process for making recommendations. Nonetheless, the basis for these recommendations is difficult to ascertain based on study report documents. The study indicates that DOD could incur significant costs, as well as face legal and other issues related to the transfer of schools to LEAs. Finally, the panel recognizes that such transfers would have to be done on an individual, negotiated basis. The Donahue Institute study built on the work of prior studies, examining many transfer alternatives previously considered in earlier studies ranging from the status quo to the transfer of educational programs to LEAs. While various issues addressed in the study were similar to those previously studied—such as facility conditions and remediation costs and identifying transfer options and impediments to their use—it sought to make a comparative assessment of DDESS and surrounding LEA schools to provide the basis for informed decision making. The report noted that the expert panel established the following guiding principles to guide its recommendations: All students transferred from DDESS to local public schools must be provided comparable educational programs, services and facilities. School communities gain from diversity. Cost effectiveness of government. Any transfer alternative must be cost- effective not only to DODEA, but to the state and local entities involved. Deference to the needs of younger students. It is rarely advisable to transfer or otherwise disrupt the educational process of very young students. Any transfer of DDESS will include just and reasonable compensation to the LEA for operational and facilities costs. Each installation/LEA will be considered separately. The report noted that the experts stressed that while each one was important, no single principle or criterion would necessarily rule in or out a transfer alternative. Rather, the totality of all financial and non-financial factors was carefully considered, evaluated, and factored into each recommendation. The panel also developed feasibility rules associated with any transfer decisions to help assure basic equity and fairness for the students, families, and communities that might be affected by the study. Appendix IV includes summary information on the rules and alternatives considered. The expert panel recommended that the educational responsibility for most schools in 10 of the 14 installation areas be transferred to the LEAs, and with use of DDESS operated facilities in most instances, as noted in table 1. The expert panel recommended transferring most school programs to LEAs with use of existing school facilities on the military installations, but with DOD continuing to be responsible for funding maintenance, operations, and improvements for most facilities. The panel of expert’s recommendation for continued DOD responsibility for the facilities was attributed to legal difficulties the expert panel believed existed in some states that could prohibit LEAs from expending funds for schools located on federal lands, as well as the recognized need to provide reasonable assistance to the LEAs. In total, LEAs were projected to use 45 DDESS operated schools, but take title to only 1 of them. The recommendations included just a few exceptions to the recommended transfer approach wherein DOD would continue to maintain the school facilities. For two South Carolina (Laurel Bay area) school programs recommended for transfer, one school would be retained by DDESS to continue educating Pre-K through grade 3 students, and one school would be transferred to the LEA through a title transfer—the only title transfer recommended. In another instance—involving Quantico, Virginia schools and the Prince William County Schools—responsibility for educating about fifty percent of the school children would be transferred, but without any of the school facilities. The Prince William County LEA reportedly had indicated an unwillingness to use the DDESS school facilities. At West Point, New York, responsibility for educating all children would be transferred to the LEA and it would use only one DDESS facility. Notwithstanding the panel of expert recommendation that DOD continue to fund maintenance and operation for most of the school facilities, we found that clarification of ownership of DDESS-operated school facilities between DOD and the U.S. Department of Education needs to be addressed. In completing this review we found that despite DOD having assumed responsibility for operating the current DDESS facilities from the U.S. Department of Education many years ago, a majority of the 58 school facilities had not been formally transferred to DOD. U.S. Department of Education officials told us they were working to transfer the schools to DOD. Resolution of this issue is important to ensure proper accounting for property in the appropriate agency’s property records. At the same time, we also learned that any efforts by DOD to transfer schools to LEAs where it has clear ownership of the property could be more difficult and time consuming than for the Department of Education since the latter has specific legislative authority authorizing such direct transfers. While the methodology used by the Donahue Institute and its expert panel reportedly guided data gathering, analysis, and development of recommendations, the expert panel’s summary comments and various binders of data comprising the study report do not always make clear the basis for the panel’s recommendations. The report stated that the panel agreed that no single factor would be the basis of a decision to accept or reject a specific alternative. How the panel of experts evaluated the various factors in order to come up with recommendations is not always clear based on information provided in the various study documents. Two of the expert panel members we contacted acknowledged that the recommendations were subjective but based on all the members’ collective expertise and experiences. Moreover, we found instances where data for selected quality measures such as teacher to student ratios and teacher qualifications included in various study report documents provide mixed pictures of comparative quality factors between DDESS and LEA schools. For example, in a few instances, the panel recommended transfers to LEA districts even though the district schools were considered to be “underperforming” while another adjacent LEA’s schools were considered “overperforming” and with lower per pupil costs; or a LEA was recommended over DDESS even though the LEA’s per pupil costs were higher and its schools were cited as mostly “underperforming.” Appendix V highlights examples of the divergent information contained in various transfer study documents for four installations. In transferring the education responsibility to LEAs, DOD would achieve savings in costs it currently incurs by operating schools, but many of these costs would be shifted to others. However, study data indicate that DOD could incur costs of about $125 million to repair and upgrade existing DDESS school facilities,. Moreover, DOD would also continue to have ongoing costs to maintain the school facilities as the education programs are operated by the LEAs under the alternative recommended by the panel of experts. At the same time, given various pending changes in basing arrangements that will likely increase the number of dependent students at bases in the United States, we believe that the facility costs contained in the study would be subject to change before any potential decision to approve the study recommendations was implemented. The study, based on data provided by the Department of Education, assumes that many costs would be passed on to the state and local governments, and that LEAs would be eligible for impact aid from the federal Department of Education. While the study makes various assumptions about likely impact aid to LEAs, we are not able to affirm the reliability of those estimates based on the data provided. Impact aid is a program that is subject to annual appropriations and not an entitlement; and, based on our discussions with Department of Education officials, the amount of impact aid to which an LEA would be entitled is formula based, and not easily calculated in advance. Also, as we note elsewhere in this report, various communities surrounding military bases in the United States are expected to experience a significant influx of military dependents over the next few years as DOD restations many military personnel from bases overseas to ones in the continental United States. This could place an increased burden on the Department of Education’s impact aid program as it distributes resources across more LEAs. In addition, states and LEAs would bear an additional burden if impact aid funds were not increased. The recent study, as did prior studies, found unique circumstances that could impact costs and would require resolution on a site-by-site basis, should an effort be made to transfer educational responsibilities from DDESS to LEAs. For example, Fort Campbell has a large DDESS student population, with eight schools in two states, and agreements would have to be worked out to permit the students to cross jurisdictional boundaries to attend the LEA administered school. In a couple of other instances, DDESS schools for an installation may fall within the jurisdiction of two counties and special arrangements would be needed to enable students whose on- base residency falls in one county to attend schools in the other county. In other instances, the study report noted limitations or caps on numbers of students eligible for special education in certain LEAs compared with those in DDESS schools that would need to be addressed. Thus, individual negotiations at each DDESS location and LEA would be required to address these and other issues. Apart from issues identified in the transfer study, there are other factors/issues that were not present when the transfer study began that could impact DDESS and LEA schools and further complicate school transfer decisions. These factors relate to planned overseas basing changes, major force structure changes planned by the Army, the domestic base closure process, and DOD efforts to privatize housing. The study did not consider ongoing DOD plans to realign U.S. bases overseas and announced plans to restation about 70,000 military personnel and approximately 100,000 family members currently stationed overseas to bases in the United States. However, the details on where many of these personnel and associated units are likely to be restationed will not be known until the 2005 base realignment and closure decisions are made later this year. Nevertheless, this rebasing effort could result in significant increases in populations of various bases with many new students requiring education by LEAs. To the extent DDESS programs are affected, this could complicate any negotiations with LEAs regarding assumption of on-base DDESS programs. Likewise, the extent to which DDESS installations will be impacted by the base closure process will not be known until later this year. The study also does not reflect efforts under way by the Army to reorganize its force structure, creating new units of action with the potential for increased numbers of personnel assigned to selected military bases in the United States. A recent Congressional Research Service report summarized the magnitude of this effort. It noted that, “…in what the Army describes as the ‘most significant Army restructuring in the past 50 years,’ the Army intends to redesign its current 10 active duty division force to a 43 or 48 brigade-level unit of action or UA force by FY 2007.” This conversion is expected to add over 2,000 personnel to many of these former brigades at various installations. A few of these new units of action tentatively have been identified for installations in the United States where some DDESS schools operate. DOD has appropriately said that it is postponing decision making on the results of the transfer study until after base closure decisions are finalized later this year. Importantly, the transfer study, in examining educational expenditures, largely considered the cost impact on LEAs from a potential transfer decision on an incremental cost basis. A large influx of students into LEA or DDESS schools as a result of the above factors could require a fuller assessment of funding and facility needs than provided for in the existing study. The transfer study partly touched on current DOD efforts to privatize housing on its military bases, but study officials recognize that the full impact of that initiative was not available for consideration in their report. Additionally, DOD housing officials told us that previous plans for housing privatization may need to be adjusted as efforts are made to ensure adequate housing for the thousands of military personnel scheduled to be redeployed to the United States. The transfer study has a number of limitations that present less than a clear-cut answer to the feasibility and desirability of transferring educational responsibilities from DDESS to LEAs. Moreover, there are important issues not addressed in the study such as the anticipated restationing of thousands of military personnel and their dependents from overseas to U.S. bases, the Army’s planned force restructuring, and the domestic base closure process that could stress existing educational capacities and require expanded capabilities at affected bases. DOD has appropriately said that it is postponing decision making on the results of the transfer study until after base closure decisions are finalized later this year. Until DOD obtains a fuller understanding of all these plans and time frames the likely financial impact on DDESS and LEAs remains unknown. Without that assessment, the financial assessment completed by the current transfer study is incomplete. Fundamentally, a decision on whether to transfer educational responsibilities from DDESS to LEAs is a policy decision that requires balancing fiscal, educational, and other quality of life considerations. Once the results of the domestic base closure process and overseas rebasing plans are known, a decision on the school transfer issue should be made sooner rather than later to ensure adequate planning, funding and siting of new school facilities in the United States that may be needed to support increasing populations of military dependent students. Regardless, there needs to be proper accounting for the school facilities in federal property records. Should a decision be made to transfer some or all of DDESS domestic schools to LEAs, we recommend that the Secretary of Defense, in conjunction with the Under Secretary of Defense for Personnel and Readiness require that such efforts be accompanied by a more complete assessment of the impact of troop redeployments and other force structure changes on educational facility requirements on affected installations and surrounding communities to facilitate needed facility and operational planning by DOD, the Department of Education and LEAs to meet changing needs. Regardless of transfer decisions, we recommend that the Secretary ensure DDESS school facilities are properly reflected in DOD’s property records and removed from the Department of Education records. In commenting on a draft of this report, the Principal Deputy Under Secretary of Defense (Personnel and Readiness) concurred with our recommendations. The department’s response indicated that any decision to transfer educational responsibility to local educational authorities would occur after the base closure process is complete and would involve consultations with the military services and Congress, and that it is working with the Department of Education to ensure school facilities are properly recorded in real property records. However, the department took exception with the title of our report because it believed we raised issues that were related to events occurring after the study began such as the formulation of the rebasing plan, which were outside the scope of the transfer study. We believe, however, that the title correctly captures the limitations of the DOD-sponsored study as both having to do with external issues affecting the study that became known after the study began as well as limitations with the study that made unclear the basis for the transfer recommendations. Therefore, we did not change our title. The department separately provided various technical comments which are incorporated where appropriate. DOD’s comments are included in appendix VI of this report. To determine the extent to which DOD has established a school closure policy and the effect such policies have on quality-of-life issues for servicemembers and their dependents, we discussed the issue with cognizant officials within DODEA and other departmental officials. We obtained and reviewed data on DDESS school closures in prior years and the basis for those closures, as well as similar information from the U.S. Department of Education concerning schools owned by that department serving military dependents. We also met with education officials to discuss administration of federal impact aid and learn about their experience in transferring federally owned schools to LEAs. To obtain DOD perspectives concerning the issues of dependent schools as a quality of life issue, we obtained and reviewed the Department’s July 2002, publication entitled A New Social Compact: A Reciprocal Partnership Between The Department of Defense, Servicemembers and Families. The document was issued under the auspices of the Deputy Assistant Secretary of Defense (Military Community and Family Policy) providing departmental perspective on a range of quality of life issues, including schools. We contrasted that with information obtained from the Department’s Housing and Privatization Office on criteria for considering commercial activities performed by the department for potential public/private competitions under OMB Circular A-76. Likewise, we contrasted that information with other information regarding departmental efforts to more rigorously assess what functions are considered core to warfighting efforts with policy direction to consider those not designated for potential outsourcing. To assess the transfer study completed for DODEA by the Donahue Institute, including the clarity of the basis for conclusions reached, the overall financial impact, and issues identified but not resolved by the study, we first reviewed the various summary reports prepared by the Donahue Institute, the results of the facility condition assessment performed by Parkhill, Smith, and Cooper, Inc., and a summary of the phase 3 quality-of- life assessment. We discussed the transfer study design and methodology with officials of DODEA, the Donahue Institute and two of the three members of the panel of experts employed by the institute to review its data and to develop study recommendations. Likewise, we also reviewed the results of previous transfer studies to understand similarities and differences between previous studies and the recent study effort. To assess the basis for recommendations made by the expert panel, we examined the data developed for the panel’s use that was contained in the Donahue Institute’s various study summary documents to try to gauge the basis for the recommendations and determine how clearly the recommendations were linked to the summary information provided. Given time constraints, we did not attempt to validate financial and other quantitative data included in the study, but we did review the steps taken by the Donahue Institute to verify its data and analysis and to compare some key data against other available data sets to corroborate its relative accuracy. We also reviewed summaries of interviews completed by the institute with leaders in affected DDESS schools and local education agencies to confirm and better understand the range of issues associated with the issue of potential transfer of the schools to LEAs—as well as similar information contained in prior studies. We obtained other relevant statistical data about DDESS schools from DODEA and made limited checks to assure ourselves that the data was sufficiently accurate for the purposes of our review. To frame other issues not addressed in the transfer study that could impact decision making regarding the future of DOD’s domestic elementary and secondary schools, we relied on insights gained from other ongoing GAO assessments in the Defense area that had the potential to impact dependent educational requirements on military bases and confirmed our assumptions through discussions with cognizant Defense officials. We conducted this review from January to April 2005 in accordance with generally accepted government auditing standards. We are sending copies of this report to the Chairmen and Ranking Minority Members, Senate Committee on Appropriations, Subcommittees on Defense and Military Construction and Veterans Affairs; Chairmen and Ranking Minority Members, House Committee on Appropriations, Subcommittee on Quality of Life; Secretaries of Defense, the Army, the Navy, and the Air Force; the Commandant of the Marine Corps; the Secretary of Education; and the Director, Office of Management and Budget. Copies will be made available to others upon request. In addition, this report will be available at no charge on our Web site at htt://www.gao.gov. Please contact me at (202) 512-5581, or my Assistant Director, Michael Kennedy, at (202) 512-8333 if you or your staff have any further questions regarding this report. Major contributors to this report were Maewanda MichaelJackson, Hilary Murrish, and R.K. Wild of GAO’s Defense Capabilities and Management team, Dr. Nagla’a D. El-Hodiri of GAO’s Education and Workforce team, and Julia Matta, Office of General Counsel. The DDESS Transfer study completed by the Donahue Institute of the University of Massachusetts indicated that the results of its data and study component analysis were presented to a panel of three leading national experts on educational administration and finance. The study report provides the following information regarding the three experts: Kern Alexander, Ed.D. Dr. Alexander is a national expert in the field of school finance. He is Chair of the Board of Editors for the Journal of Education Finance. He served as director of the Institute for Educational Finance at the University of Florida, and as Director of the National Educational Finance Project while it conducted a nationwide study of educational fiscal policy involving all 50 state education agencies. He has published numerous books, book chapters and articles on school finance. He is currently a professor at the University of Illinois at Urbana-Champaign; Richard Salmon, Ed.D. Dr. Salmon is a nationally recognized expert in the fields of school finance and Federal Impact Aid issues. He is a professor at Virginia Tech and has authored numerous textbooks, book chapters, and articles on public school finance. Dr. Salmon is a member of the Board of Editors for The Journal of Education Finance. He also consults for the U.S. Department of Education Bureau of Impact Aid and has testified for the department in several federal trials. He served in the United States Navy for more than 20 years, retiring as Commander from the Naval Reserve; and Deborah A. Verstegen, Ph.D. Dr. Verstegen is a national expert in the field of school finance. She is a professor of education at the University of Virginia, where she teaches a number of courses including Educational Finance Policy and Practice, School Finance, and Educational Policy Analysis. She has authored many books, book chapters, and refereed journal articles and monographs on education finance. She is past editor and currently serves on the editorial staff of The Journal of Education Finance. She has completed a study of all 50- state school finance systems for the Education Commission of the States, entitled “School Finance at a Glance.” Adjacent Local Education Agency(ies) A December 1986 study entitled DOD Schools: Funding and Operating Alternatives for Education of Dependents, by GAO. Congress, in enacting the Military Construction Authorization Act, 1985 (Public Law 98-407), expressed the view that the exclusive federal responsibility for funding and operating the military dependents’ schools might no longer be necessary, and directed us to determine the most suitable alternative for funding and operating these schools. A July 1988 study entitled The Transfer Of Section 6 Schools: A Case by Case Analysis. The study was completed by Rand under the sponsorship of the Assistant Secretary of Defense/Force Management and Personnel as the result of Congress incorporating into the Military Construction Authorization Act, 1986, a request to the Secretary of Defense to submit a plan “which provides for the orderly transfer, not later than July 1990, of all Section 6 schools to the appropriate local school districts of the states in which such schools are located.” DOD later reported to the Congress, in December 1988, that based on the results of a detailed study of the schools, it had decided to suspend efforts to transfer educational responsibilities for the schools to LEAs. A 1991 study entitled Section 6 Schools in Six States: Eleven Case Studies of Transfer Issues. This study was also completed by Rand under sponsorship of the Assistant Secretary of Defense (Force Management and Personnel), as a supplement to the earlier Rand study. A March 1995 study entitled Construction, Repair, and Rehabilitation Needs of Dependent School Facilities Located on Military Installations in the United States. This study was jointly prepared by the DOD and the Department of Education. According to the study, it was the result of language contained in the House Committee on Appropriations Report on the Fiscal Year 1993 DOD Appropriations Bill, Committee Report Number 102-627, dated June 29, 1992, which requested DOD and the Department of Education to conduct a study to assess: the condition of school facilities on military installations in the United States; the requirements for remedial maintenance to bring school facilities up to an acceptable condition, including meeting applicable building codes; the feasibility and desirability of transferring ownership of facilities to local school districts that provide educational services at military installations; and a funding plan for correcting the maintenance backlog over the next 5 years and the new construction backlog over the next 10 years. The study included existing on-base dependent school facilities owned by DOD or the Department of Education and operated by DOD or LEAs. An October 1997 study entitled A Study of Schools Serving Military Families in the U.S.: Education Quality, Federal Administration, and Funding. The study was completed by the Survey & Program Evaluation Division of the Defense Manpower Data Center. It was conducted in response to a request contained in the Conference Report on the National Defense Authorization Act for Fiscal Year 1995 (Public Law 103-337), asking the Secretary of Defense to collect information concerning the possibility of transferring DOD dependent schools to local education agencies. The study included results of a survey of military parents on the quality of education provided by DOD dependent schools and local education agencies and their perspective on the transfer issue. The transfer study notes that “the deeper the study team got into the data collection and site visit process, the more evident it became that a limited set of universal principles or rules was needed to help all parties achieve two important and complementary purposes. The first purpose was to assure basic equity and fairness for the students, families and communities that might be affected by the outcomes of particular transfer alternatives; the second was to assure that the panel of national experts ends up with a package of findings and analysis that was sufficiently manageable so it could produce its recommendations. It noted that while exceptions might be appropriate on a case-by-case basis, applying the following rules to all installations helped achieve these dual ends of equity and practicality: It would be unfair for some students at the same grade level to transfer to the LEA district while other students in the same grade remain on base. Therefore, at any installation, any decision affecting one DDESS school shall apply to all DDESS schools with the same or overlapping grade levels; To maintain continuity and effective education, it is not feasible to transfer students at a particular grade and then return them to the DDESS curriculum at a higher grade. Therefore, if a transfer is made at one grade, all succeeding higher grades must transfer as well; If a DDESS elementary school with a pre-kindergarten (pre-K) program is transferred to an LEA that does not offer a pre-K program, DDESS will continue to offer pre-K services, using either on-site or off-site resources; and It would be both inefficient and detrimental to educational consistency to have some DDESS schools run under contract with the LEA while others on the same installation do not. Therefore, if a contract or coterminous alternative is chosen for any DDESS school, that alternative should apply to all schools on the installation. The study team developed a set of transfer alternatives for consideration including: Maintaining the status quo, i.e. DDESS schools would continue to operate as they have in the past. Transfer responsibilities for the educational program to the LEA along with facilities being used by DDESS. The LEA would accept full responsibility for educating military children and for the future upkeep of the facilities. It assumed the installation school facilities would be brought up to LEA maintenance and building standards prior to LEA occupancy. Transfer without facilities. DDESS students would transfer to the neighboring LEA and integrated into the existing school facilities. Contract with the LEA to provide educational services on the installation. Create a public school district within the installation, coterminous with its existing boundaries (coterminous alternative). Under that assumption, all DDESS schools on base would be included in the newly created LEA. DOD would provide the LEA with title of DDESS facilities (except where noted otherwise), and buildings and facilities would be brought up to LEA standards before being transferred to the LEA. These were similar to alternatives considered in some prior studies. The DDESS Transfer Study Report prepared by the Donahue Institute with its supporting data is contained in multiple binders. The recommendations report, prepared by the panel of experts, are contained in a binder sometimes referred to as the “green book”. Underpinning that were additional binders prepared by the Donahue Institute staff. They included a so-called book of narratives—referred to as the “white book”--providing an overview of each domestic DDESS school and adjacent LEAs. Additional information on individual DDESS schools and adjacent LEAS is contained in multiple “blue binders” summarizing financial, performance, and data on the educational quality of individual schools. Additional financial information is then contained in multiple “yellow binders” labeled appendixes. Our examination of individual recommendations and supporting information provided in individual study binders sometimes provided what appeared to be divergent pictures of school performance, quality, and cost factors that did not always fully comport with information contained in the recommendations report. Below are key examples. Fort Benning The Recommendations Report suggests transferring responsibility for schools to Chattahoochee County vice Muscogee County (five of seven DDESS schools are within Chattahoochee County). It noted that installation officials had expressed concerns about quality of Chattahoochee County Schools, but noted DDESS students would represent the vast majority of student enrollment within the LEA. It expected that most students would still be educated on base and most teachers still have opportunity to teach. It said the pupil-teacher ratios and the per pupil expenditures of the DDESS and Chattahoochee County are already comparable (GAO note: data suggest less comparability in costs than stated here). The White Book points out that salaries and benefits make up 90 percent, 86 percent, and 84 percent of the Fort Benning DDESS, Chattahoochee County, and Muscogee County school budgets. The White Book indicates per pupil expenditures of approximately $8,244, $7,345, and $5,956 for Fort Benning DDESS, Chattahoochee County, and Muscogee County respectively. The White Book points out that Fort Benning DDESS students test results ranged from the 52nd to 65th percentile for grades 3, 5, and 8. Chattahoochee County and Muscogee County test scores were mostly above predicted scores for grades 3, 5, and 8. The Blue Book shows that four of the Benning DDESS schools were deemed underperforming and three overperformed. It confirms Muscogee test scores were mostly deemed over performing for 5th grade but some underperforming for 8th grade, while Chattahoochee’s were deemed underperforming for 8th grade. Fort Campbell The Recommendations Report suggests transferring responsibility for schools to LEA, Christian County versus Clarksville- Montgomery County. The report notes that considering all factors, Christian County, Kentucky has higher quality measures than Clarksville- Montgomery County, Tennessee. The White Book notes salaries and benefits make up 88 percent, 64 percent and 64 percent respectively of the Fort Campbell DDESS, and Clarksville- Montgomery County and Christian County school budgets. Fort Campbell’s per pupil expenditure, which is projected to be about $7,962 in fiscal year 04, has been rising in recent years due to increasing costs and decreasing enrollment (reason for decreasing enrollment not indicated). Clarksville-Montgomery’s per pupil expenditure in fiscal year 2004 is $5,166 but will decline because of recent budget cuts. Christian County’s per pupil cost is about $ 6,589 in fiscal year 2004 but notes escalating salary costs coupled with relatively stable enrollment will likely lead to increased per pupil expenditure. The White Book indicates that Fort Campbell DDESS students performed at or above the 60th percentile for most subjects and grades. Performance of LEA schools of both districts was mixed. Clarksville-Montgomery matched or exceeded predicted scores in seven of nine instances cited. The Christian County matched or exceeded in five of nine instances cited. However, the White Book also notes that Fort Campbell schools have a lower student-to-teacher ratio than either LEA and have a higher percentage of DDESS teachers (82 percent) with advanced degrees than Christian County (68 percent), or Clarksville (52 percent). The Blue Book rates Fort Campbell schools as mixed in terms of over or under performing. Same was true for Christian County schools. The Blue Book rates Clarksville-Montgomery County schools as primarily underperforming. Fort Jackson The Recommendations Report suggests status quo notes reductions in state funding of education over recent two years. It notes that Richland County’s schools are already over capacity, and the LEA has little physical room to expand its facilities. (GAO note: Why this is a discriminating factor is unclear since most transfer recommendations are based on use of DDESS schools.) The Green Book also notes that “a transfer to the LEA could jeopardize the quality of education now received by students at Fort Jackson, who, as mostly younger students, would face substantial disruption of educational services in the event of a transfer.” (GAO note: report is not clear why younger students at Jackson would face substantial disruption yet the same issue is not raised in most other transfer recommendations.) The White Book notes that because Fort Jackson does not track salaries and benefits for each type of school employee, salaries and benefits were allocated based on the teaching roster and an average salary and benefit expenditure. School costs were not laid out comparably to those at other installations. However, it projects approximately 90 percent, 73 percent of Fort Jackson DDESS and LEA budgets respectively to be spent on salaries and benefits. It indicated there was per pupil expenditures of $10,700 for DDESS versus $6,165 for LEA. The White Book shows Fort Jackson scores on Tera Nova tests scores reported were lower than recorded for many other DDESS systems for grades 3 and 5. LEA schools were shown in the White Book as exceeding predicted test scores for grades 3 and 5. The Blue Book does not contain school level testing for Fort Jackson schools so doesn’t indicate whether they were viewed as over or under performing. It shows LEA mixed in terms of over or under performing for grade 6 but over performing for grade 8 (at one school). Fort Knox The Recommendations Report recommends transferring responsibility to adjacent LEA, Hardin County, versus LEA Meade County. However, the report notes that while the level of education quality indicators for the two LEAs is generally comparable, Hardin County’s per pupil expenditure exceeds that of Meade County in the instructional area. This indicates Hardin County is larger and more capable than Meade County to absorb DDESS students, and the executive leadership of Hardin County appeared more receptive to a transfer of DDESS students. The White Book indicates Hardin is geographically closer to installation housing and because of this proximity, Hardin has a closer relationship with Fort Knox. The White Book projects that 88 percent, 78 percent, and 75 percent of Fort Knox DDESS, Meade County and Hardin County LEAs school budgets respectively were spent on salaries and benefits. This indicated per pupil expenditures of $8, 454 for DDESS versus $5,108 in Meade County, and $5,493 in Hardin County. The White Book shows Fort Knox students scored above the 50th percentile for all subjects and grades in Terra Nova testing. At the same time, the performance information provided indicated that many Hardin County grades scored lower than predicted on testing, while Meade County grades nearly always scored higher than predicted. The Blue Book indicates that Fort Knox DDESS schools presented a mixed picture in terms of over or under performing on performance tests. At the same time, all Hardin County schools were cited as underperforming in testing for grades 3 and 6 and over for one school with grade 9 scores; at the same time, while Meade County schools were identified as over performing for grades 6 and 9. West Point The Recommendations Report suggests transferring responsibility to LEA, Highland Falls Central School District, but grades PK-4 remain in the current school. The report notes that in this case, the LEA had a higher per pupil expenditure and a lower pupil-teacher-ratio than DDESS, both of which are quality indicators. The report said the recommendation for transfer was due, in part, to the fact that the middle school facility needs to be replaced immediately. The White Book projects that 84 percent and 76 percent of West Point DDESS and Highland Falls school budgets respectively were spent on salaries and benefits. However, it notes that the LEA’s budget has seen 10 percent growth, with costs for health and liability insurance and special education and retirement system costs rising. It also indicated per pupil expenditures of $10, 957 for West Point DDESS (among the highest of all DDESS districts mainly due to salaries) and $11,196 for Highland Falls. It notes that this is the only district where the per pupil expenditure is greater than the corresponding DDESS per pupil expenditure. The White Book shows West Point DDESS schools scored in the 70-80th percentiles in Tera Nova testing. Conversely, Highland Falls Schools indicated almost all (three of four) test scores were lower than predicted. The Blue Book indicates that West Point DDESS schools over performed on performance tests while Highland Falls schools were mostly cited as underperforming.

Summary: The Department of Defense (DOD) operates 59 elementary and secondary schools serving over a dozen military bases in the continental United States Periodically, questions have been raised concerning the continuing need for such schools. In 2002, DOD commissioned the Donahue Institute of the University of Massachusetts to examine the potential for transferring these schools to local education agencies (LEAs). GAO's assessment focused on (1) the extent to which DOD has established a school closure policy and the effect such policies have on quality-of-life issues for servicemembers and their dependents; and (2) the transfer study, including the clarity of the basis for conclusions reached, the overall financial impact, and issues identified but not resolved by the study. GAO's report also identifies issues not addressed in the transfer study that could impact the future of DOD's domestic schools. Officials in the DOD Education Activity, which administers the DOD school program, said that neither DOD nor Department of Defense Education Activity has specific policy guidance related to closing domestic dependent elementary and secondary schools. While some expansion and contraction of the number of domestic schools operated by DOD occurred between the 1950s and early 1970s, relatively few have been closed or transferred since then, and most of those have been related to base closure activities. For affected military families, the retention of these schools is seen as an important quality-of-life issue. The basis for the expert panel recommendations to transfer selected DOD schools to LEAs is difficult to ascertain. Specifically, it is often unclear how various analytical factors examined led to recommendations being made. For example, in one instance the panel recommended transfer of educational responsibilities to the neighboring LEA even though the LEA's per pupil costs were higher than DOD's and the LEA schools were cited as mostly "underperforming." Moreover, the study data indicate that DOD could incur an estimated $125 million to repair and upgrade existing schools. Under the panel's recommendations, DOD would also have a continuing obligation to maintain the schools even after program transfers to the LEAs. Some long-term savings in operating costs could accrue to DOD, but many of these costs would need to be absorbed by LEAs or other federal programs. The transfer study also indicates that various legal restrictions in some states would need to be resolved. Finally, ownership of the schools DOD operates needs to be clarified in order to ensure that it is properly reflected in property records. There are other factors, most not present when the transfer study began, that could further complicate school transfer decisions, including ongoing DOD plans to relocate about 70,000 military personnel and approximately 100,000 family members currently stationed overseas to bases in the United States within the next few years; Army efforts to reorganize its force structure, with the potential for increased numbers of personnel assigned to selected military bases in the United States; and the impact of the 2005 base realignment and closure round. Likewise, current DOD efforts to privatize housing on its military bases could also impact future requirements for schools serving military dependents. DOD has appropriately said that it is postponing decision making on the results of the transfer study until after base closure decisions are finalized later this year. However, the impact of troop redeployments and other force structure changes on schools has not yet been fully assessed. Given the expected increase of school age military dependents on various stateside military bases over the next few years, a clear decision on school transfer issues should be made after the results of the base closure process and overseas rebasing plans are known to ensure adequate planning for facilities by DOD and LEAs.