School Funding Part I: State Policies and Structural Inequities
Election Day is just around the corner, and as voters go to the polls to cast their ballots, in many states, they vote on more than just candidates. Most voters will have several ballot referendums to vote ‘yay’ or ‘nay’ on, and the consequences of those decisions influence policy. Take as one example the recent vote on gay marriage in the state of North Carolina. It is no different with ballot referendums on public school funding. This fall, five states have some such type of ballot initiative, the largest number in two decades: Arizona, Missouri, South Dakota, Oregon and California. Whether extra revenue is approved or not will have a tremendous effect on each state’s public schools. In this respect, voter turnout and participation is crucial.
Voting for more money in the system, however, doesn’t necessarily solve funding inequities. A report, The Stealth Inequities of School Funding: How State and Local School Finance Systems Perpetuate Inequitable Student Spending, recently released by the Center for American Progress, sheds light on both systematic inequities in state aid and how local revenue policies affect funding disparities among individual students. The report features two separate sections. The first outlines how state aid formulas may actually cancel out funding designed to equalize per pupil expenditure funding among students from different income backgrounds and undermine educational equity efforts in states; the second discusses the role of local revenues and how structural factors may contribute to funding inequities among districts outside of differences in the available resources. Today, I will examine the first in depth. I will take on the second tomorrow.
The report defines a state school finance system as “the set of rules, regulations and policies, which combine state aid with local resources to fund schools so they can meet a given educational goal – usually having at least something to do with improving equity and adequacy of resources for children of the state.” State aid typically flows through formulas that usually seek to fulfill two objectives simultaneously: first, to account for differences in costs of achieving equal educational opportunity across districts, and second, to account for variances in the ability of local public school districts to cover those costs. For purposes here, achieving equity can be thought as ensuring common educational outcomes in different settings and for different children.
For example, a more effective state aid system might function as follows: States provide aid to compensate for differences in local capacity to raise revenue and then also provide more support to districts with greater educational needs (often districts serving greater numbers of low-income students). So a district with a lower fiscal capacity should receive more state aid (often known as state equalization aid). State systems defined as having regressive school funding distributions feature a combined state and local revenue that is systematically lower in higher-poverty districts. Educators might look at New Jersey and Ohio as examples of state aid systems that are more effective than most in equalizing school funding among students of various income backgrounds.
But just because state aid exists does not mean that it is distributed equitably among districts of varying poverty levels. Many policies contribute to inequity. Take the following three: minimum aid provisions, hold-harmless provisions and block grants for additional aid. While in theory state aid systems should provide no aid for districts with sufficient local capacity, most states have a minimum aid provision that guarantees low-need high-capacity districts some amount of state funding. And the hold-harmless provision, in one manifestation, means that no district should receive less aid or less in total funding than in a baseline comparison year. So even if a state is moving away from a minimum aid formula, a 100 percent hold-harmless provision still guarantees that the state has a minimum in effect. Finally, while a state’s general aid formula may be progressive and improve equity, additional state aid may be given in block grants; in some cases, the general aid is a small enough portion of the overall state aid that the additional block grants cancel out the improvement effect of the progressive state aid.
There is one additional piece worth highlighting: property tax relief. Property tax relief is a politically palatable policy. However, it disproportionately benefits districts with high fiscal capacity and can effectively counteract the state equalization aid directed towards poorer districts. Plus, lower capacity districts still have higher nominal tax rates and lower total revenue per student than their more affluent counterparts, which are better equipped to have lower tax rates without state tax property relief aid. Details of these policies at work on the state level, specifically in Missouri, Texas, New York, Pennsylvania, Illinois and North Carolina, can be found in the full length report.
All funding decisions are political and local, yet as a nation, we must demand that each child be given an equal opportunity to succeed. For voters, there is often no easy solution or answer. Schools and districts are already working diligently to provide students with a high-quality public education, and the time and effort involved in analyzing finance systems is no small commitment. But as Winston Churchill once said: “It is not enough that we do our best; sometimes we must do what is required.” In an era of tightening budgets and an increasing need to prepare children for the 21st century environment, we must examine and contend with these stealth inequities that are deeply rooted in our public school system, and we must insist that our elected officials not only provide additional funding for our schools but also make hard decisions about politically popular school funding policies.
Click here to browse dozens of Public School Insights interviews with extraordinary education advocates, including:
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