11 May 2018

The equitability of K-12 funding in the U.S.

Tory writes:*

Public school in the United States is funded through three main channels: the federal, state, and local government budgets. However, there is often an inequitable distribution of funding between poor and non-poor districts, limiting the country’s economic growth and development. To clarify, ‘equitability’ of funding does not necessarily mean that all districts will receive the same amount of money. Due to the diversity of socio-economic backgrounds of households, districts are at unequal starting points, and allocating the same amount of money to each district will not make up for existing differences. Matthew Chingos, director of the Urban Institute’s education policy program, suggests a focus on students living below the poverty line. Those students may require more funding to provide for social and education services that are more difficult for them to attain (i.e. recruiting high-quality teachers). Therefore, funding should be ‘fair’ and reflect the socioeconomic backgrounds of the households within a district, thereby ensuring all students have the same opportunity to achieve.

One reason for the regressive distribution of funds in the United States is due to local funding for education being financed through property taxes. The Chicago Tribune recorded that in 2016, local taxes made up 67.4 percent of funding for districts across the state. The reliance at the local level for funding places great importance on property values and businesses within a school district, widening the gap in per-student spending across districts. In Illinois, for example, affluent districts spend an average of five times more per-student relative to poorer districts. This occurs in many states [pdf] where a reliance on property taxes to fund education benefits districts with higher property values.

Chingos and his colleagues at the Urban Institute published a research brief illustrating how state funding often makes up for the regressive local spending by implementing a progressive state spending plan. Thus, attempting to make district funding equitable across a state by ensuring that poor districts can ‘catch-up’ to wealthier districts. The importance of state funding has continued to increase due to the decline in national funding for education. Currently, the state and local governments are nearly equal in their share of school funding, with an average of 10 percent coming from the federal government.

In her article [pdf] on the relationship between property taxes and school financing, Joan Youngman cites the complexities associated with a centralized education finance system as support for the ‘decentralization’ of funding. She argues for more focus on the local level, where representatives can focus on education without the challenge of coordinating other national needs. This decentralization can allow for greater attention to the differences between districts and the resources they need; however, a progressive state system must exist to account for these differences. In a policy brief examining the stability of the property tax as a source of revenue for school districts, Andrew Reschovsky highlights the importance of the state/local balance, hypothesizing that the U.S. will continue to see declining federal aid for education. He cites Trump’s proposed budget cuts to non-defense discretionary spending as proof of this. Policy-makers and government officials should pay careful attention to per-student aid, ensuring that districts are not only compensated (progressively) through state funding, but provided with sufficient resources in their schools. By focusing on equability, as defined above, students will have improved access to resources regardless of background, improving the quality of education across the country.

Bottom Line: Unequal local resources mean that decentralized funding of public education needs to be "balanced" by progressive spending at the state level to ensure that funding helps students whose socio-economic backgrounds differ within and across school districts.

* Please help my growth and development economics students by commenting on unclear analysis, other perspectives, data sources, etc. (Or you can just say something nice :)