Public Education Finance

Public education institutions are funded primarily by the state and local governments, with some money coming from the federal level. The systems set in place to ensure adequate funding are complicated and as a result, many schools do not receive the funding they should. Low income students particularly do not receive the funding that is earmarked for their use. State vary in how they fund wealthy as well as impoverished education institutions, and some measures are being taken to ensure greater equity. Higher education funding differs greatly from primary and secondary school funding and higher education tuition costs have been on the rise. Some controversy also surrounds the funding of charter schools.

Keywords Charter School; Equitable Funding; Low Income; Per-Pupil Spending; Public Education; Revenues; Tax & Expenditure Limitation; Title I; Wealth Neutrality

Politics, Government, & Education > Public Education Finance

Overview

Public schools in the United States receive the bulk of their funding from taxpayer dollars. Specifically, local and state governments supported by taxpayers provide funding for schools within their community districts. As is typically the case, wealthy communities are able to provide ample funding for neighborhood schools enabling these institutions to recruit and retain quality teachers, to maintain facilities and equipment and to buy the latest computers and library resources. Not surprisingly, students at these schools tend to receive a better education and are more likely to graduate and attend college. Cash-strapped communities typically struggle to provide adequate funding for their schools, which causes an assortment of problems such as dilapidated facilities, lack of quality teachers, and outdated computer equipment and library resources. Along these lines, students at such schools are more likely to drop out and less likely to attend college (Wood & Theobald, 2003, p. 719).

Systems Used for Funding Schools

The funding of public schools has been and continues to be a complicated matter. Increasing per- pupil spending has historically been seen to be the solution for improving student performance. Yet, as U.S. student performance continues to lag behind that of other nations and stagnate, many have wondered if this solution is effective. In many ways, school funding and operations have changed little in the past fifty years. Though advances in information technology have affected almost every aspect of society from commerce and the economy to communications and transportation, education systems (including what students learn) has changed little (Hess, 2007, p. 78).

Whether public education financing is sufficient, and whether it is applied equally to all school districts and all students, has been a cause of many lawsuits and much public debate in the U.S. Determining how much money states spend on public education, how much goes to each student, and what programs are funded at the cost of others remains decidedly elusive. Complicated formulas and equations are used to determine the funding of programs. To further obscure the matter, political, economical, and social factors heavily influence funding though ideally the numbers and statistical analyses should alone determine appropriate financing. However, it is not uncommon for one area or program to receive financing because it has been deemed as "in-need" by a politically motivated administrator even though the numbers do not support such a claim. Overfunding one area at the expense of another area, particularly when that area truly lacks sufficient financing, hurts the overall school and its students (Hoffman & Hayden, 2007, p. 366).

Businesses & Public Education Funding

It seems as though everywhere a business leader, board member, or politician has a formula for improving the performance of the nation's schools. The relationship between the business sector and the public education sector is tumultuous. The education system is wary of big business financing education reform programs, often mistrusting their intentions. Yet schools readily accept donations from businesses in the form of monetary donations, training, computers, and equipment (Hess, 2007, p. 80).

Education leaders' primary concern about businesses providing equipment to public schools has to do with separation between private and public funding. If schools have an established curriculum to teach, its content could be too heavily influenced by a business. Alfie Kohn, author and expert on school finance, says,

There may be some sort of shadowy business conspiracy at work to turn schools into factories, but this seems unlikely if only because no such conspiracy is necessary to produce the desired results…. To an extraordinary degree, business's wish becomes education's command (as cited in Hess, 2007, p. 81).

Rather than serving the public good, Kohn and others believe that businesses' investment in education serves their own purpose. In this way, businesses want an educated workforce that will support their enterprises, but they are often less concerned with pedagogy or providing a quality education to all students.

Supporting of the greater good, community, corporate citizenship, or securing the future are some reasons given by business executives for supporting educational endeavors. Businesses give $2.5 billion each year to public education, which is still quite small when compared to total spending. Moreover, some businesses support educational endeavors through mentoring programs or other service related programs other than monetary support (Hess, 2007, p.82).

Competition for Education Funding

In 1983, a report was published by the National Commission on Excellence in Education that called attention to the gaps and shortcomings in the U.S. public education system. The report, titled A Nation at Risk, caused schools across the nation to increase their per-pupil spending, to raise their level of accountability, to increase their district equity while reducing disparity, and to improve student achievement for all (Murray, 2007, p. 325). Though the states' commitment to public education spending increased at that time, it has remained relatively stable since then. Though education counts for about one quarter of the average state's spending budget, it has had to compete against other costly projects such as Medicare and other social services used primarily by senior citizens. According to Murray (2007), as the baby-boomer generation continues to age and depend more and more on such social services, it will compete heavily for financing earmarked for education. As the elderly population will not directly benefit from education programs, they are less likely to vote for education spending (Murray, 2007 p. 329).

Though most education spending comes from state and local governments, the federal government's role in this spending has increased in recent years with the passage of the No Child Left Behind Act of 2001 (NCLB). The Act has forced states to spend more money on teacher preparation programs, student assessments, and training programs. If schools fail to perform according to NCLB's standards, they risk losing their federal funding. In this way, many have argued that NCLB forces schools to spend money on overhead, assessment, and other costs rather than student learning (Murray, 2007, p. 331).

Various waivers for aspects of the NCLB standards have been offered by the federal government at different times. For instance in 2011, President Barak Obama announced that states could have waivers on two major requirements of NCLB (the gains students are expected to make annually in math and reading, the the requirement that by 2014 almost all students must score as proficient in both subjects). However, in order to be eligible for this waiver, states would have to accept several other requirements, including a teacher evaluation system based on test scores, which would impose additional costs on the school districts and which some districts perceive as interfering with their rights to make decisions regarding education in their district. However, according to the U.S. Department of Education, as of December, 2013, 42 states, the District of Columbia, and Puerto Rico have been granted waivers on some NCLB requirements, with an additional three states having proposals for NCLB waivers under review.

Further Insights

Examples of Spending by State

According to the National Center for Education Statistics, in 2010, states spent an average of $10,636 per pupil for public elementary and secondary schools; in inflation-adjusted dollars, average per-pupil spending has increased gradually over the years, from $7,967 in 1995, $8,849 in 2000, $9,768 in 2005, and $10,611 in 2009. However, per-pupil spending varies widely between states: in 2010, the District of Columbia spent the most ($20,910), followed by New York state ($18,167), and Idaho spent the least ($7,100).

Each state's government makes efforts to appropriate funds equally to all of their school districts using "per pupil" revenues. Such systems attempt to make sure that each student is allocated a certain number of funds regardless of their local school district. However, because of politics and other factors, equitable funding is not always realized. In forty-three states, lawsuits have been filed alleging that funds have been misappropriated (Wood & Theobald, 2003, p. 719). Typically, more conservative-leaning states give the local governments more control and decision-making power. Such entities are less concerned with across the board equity in terms of providing funding for all students regardless of their neighborhood's revenue generating capacity. More liberal-leaning states give the local authorities less control and are more concerned with equity and with allocating per pupil funding in a way that is more democratic (p. 721).

School Funding for the Wealthy, Poor

Because each state manages its own financing for public schools, one can examine different states in order to get a glimpse of how such affairs are handled. For better or worse, the wealth of a student's immediate neighborhood is typically a good predictor of the quality of his or her public school education. Wealthy neighborhoods tend to adequately fund their schools, while poorer communities often must put their money into other programs, leaving schools under funded. To obtain greater equality across the nation and across each state, lawsuits have been filed in attempts to force the states to provide more adequate funding regardless of district or property wealth. Martin Feldstein and others have argued for "wealth neutrality" among school districts where a state-local matching-grant scheme brings about greater equity between wealthy and poor school districts. In this way, education for wealthy communities would cost more and education for poorer communities would cost less. He argues that by each community paying within the range of what they can afford, the wealth-education disparity would greatly diminish. The state would attempt to match the equivalent of property taxes from wealthy districts and provide this funding to poorer ones (as cited in Black, Lewis, & Link, 1979, p. 157). Though grant-matching proposals may sound appealing to many, the state of Delaware has tested such a plan, yielding mixed results. All things being equal, Feldstein's theory for providing greater equality for schools across a state proved much more complicated in actuality than in theory (Black, et al., 1979, p. 163).

Funding Intended for Low-Income Students Often Misused

Under President Lyndon B. Johnson in 1965, anti-poverty legislation was passed in order to help the poor escape cycles of poverty and improve their quality of life. Title 1 funding, part of this new legislation, was established to better finance impoverished K-12 schools and thereby enhancing their educational quality. When the act was established, the hope was that in a generation or so, low-income students could attain similar levels of quality education as their higher income counterparts. However, this vision has never been fully realized due to intentional or unintentional misappropriation of funds. For better accountability, a clause was added to Title 1 stating that "school districts must equalize educational services purchased with state and local funds" before dipping into the barrel of Title 1 (Rosa, Miller, & Hill, 2005, p. 3). This stipulation sought to better ensure that funding was used for schools in need rather than for "general use," a frequent cause of past mishandling. Another stipulation forbade districts from subtracting state and local funds as Title I funds became available. This was commonly referred to "supplement, not supplant" and served as a reminder that the Title 1 funding was designed to add to existing funds rather than replace them. Regardless of school administrators' intentions, mishandling of Title 1 funding is commonplace. Because public school financing is so complicated, multi-layered, and open to interpretation, it is easy to accidentally or purposely over or under fund. According to Rosa, Miller, & Hill (2005),

District budgeting practices systematically favor schools with the fewest educational challenges, to the detriment of those with the most. In some cases, arcane district funds-allocation practices can actually funnel Title I funds to schools in the wealthiest communities (p. 5).

For instance, experienced, better quality teachers and their higher salaries often go to wealthier school districts as low income, large population schools cannot afford them. When comparing five sizable Texas school districts and eliminating categorical spending (special education or English as a Second Language programs, for instance) the results showed how wealthier schools received more Title 1 money in terms of per pupil spending. According to Rosa, Miller, & Hill (2005),

In four of the five districts, schools with the greatest need (that is, those with the highest concentrations of students from low-income families) receive considerably less money from the school district's non-categorical or basic resources. They range from $296 less per student in Fort Worth to $472 less per student in Houston (p. 7).

Administrators, board members, teachers, parents and others are often unaware that low-income students actually receive less funding and that this disparity is in part created by the complicated funding system of the nation's public schools. Because they are often in the dark about this disparity, they are not able to take steps to find solutions to repair the problems (p. 8).

Public Funding for Higher Education

Similar to the role they play for public primary and secondary educational institutions, the states are responsible for higher education funding at a ratio of four to one over federal dollars. Since the late 1970s, state funding for higher education has decreased. According to the National Center for Education Statistics, comparing 2010-11 with 2005-2006, tuition and fees constituted a larger proportion of funding for public higher education (19 percent) in the later period, as compared to the earlier period (17 percent), while the percent of funding from public sources decreased over the same period from 48 percent to 46 percent. While many factors have caused this lackof financing, the passage of the Tax and Expenditure Limitation (TEL) bill may be partially to blame. The bill puts limits on the growth of state revenue when compared to growth of personal income (Archibald & Feldman, 2006, p. 618). Higher education institutions must compete with funding for Medicare, correctional facilities, transportation, health services, and other priorities in order to receive their share of state dollars. Depending on opinions of voters, their political leanings, and what they see as a priority, higher education funding is oftentimes not given top precedence (p. 629). However, a study by Archibald & Feldman (2006) found that when overall state revenue was up, spending for health services, corrections, and higher education increased equally. Politics also plays a significant role as liberal states tend to budget to spend more on higher education than more conservative states (p. 634).

The cost of tuition is closely linked to how much taxpayer dollars fund public universities and colleges. With less money from the state going to institutions of higher education, some colleges have had to increase their tuition rates, which makes a college education more formidable for high achieving, low income students. Scholarships, grants, and more friendly financial aid programs have been implemented in some states to overcome such barriers. Despite such efforts, research has shown that high tuition costs prevent fewer low-income individuals from applying to state universities, which reduces overall accessibility. This is counter intentional because state institutions historically have given greater opportunity for those of low income. Archibald & Feldman (2006) argue, "Low tuition for all creates a broad base of political support for spending on higher education, and it keeps the price down for low-income students" (p. 639). When state universities raise their tuition too much when compared to inflation, it negatively affects education quality because it reduces diversity and the pool of qualified applicants. University leaders today continually struggle to generate sufficient revenues to keep their institutions afloat while maintaining quality standards. In many ways such institutions are forced to act as private enterprises, listing one tuition cost for the general public but offering discounted rates for students of special circumstances (Archibald & Feldman, 2006, p. 640).

Examples in the State of California

Once a leader in student learning, California's current public K-12 education system represents one of the most fragmented and disjointed systems in the nation. Recognizing its numerous failures, groups from both political parties have come together in order to figure out how to turn around the system for both the short and long term, by commissioning a large group of studies by top researchers. According to the reports, summarized by Jacobson (2007), one of the problems has been that money would be spent in one area or another but little if anything was done to oversee its specific use. Furthermore, no one made assessments to determine if throwing money at a problem did anything to solve it. In this way, ineffective practices continued with little monitoring or examination (Jacobson, 2007, p. 2). Another issue was that resources were distributed in such an unequal fashion that students in near identical types of school districts might receive very different levels of funding. A summary of the conclusions of one report says,

Spending formulas are tied to arcane and complicated criteria established in the 1970s and are combined with a confusing mix of categorical programs that do not systematically address differences in needs across districts or allow districts and schools to spend resources in a way that help students achieve their goals (Jacobson, 2007, p. 4).

While the reports highlight in detail the many quandaries of California's current school financing system -- poor-performing school districts' inability to retain quality teachers, for example -- solutions to the problems remained more elusive and convoluted. Different political and educational leaders continue to argue about how best to go about repairing and even overhauling the state's educational financing system (p. 7).

Viewpoints

Public Funding & Charter Schools

From the time when charter schools were first launched, their existence has been the source of much debate and controversy. Those in favor of the institutions have argued that charter schools have made it possible for low-income and minority students to obtain a quality education, something that traditional public schools have been failing to do. Those against charter schools contend that the institutions have an agenda and do not provide an orthodox, sound education to the majority. Much of the disagreement regarding charter schools stems from the fact that they are publicly funded yet have mission statements, visions, or specific educational goals rather than broad educational purposes. Charter schools have also been controversial because they have engendered a new type of segregation where students of a particular ethnic group or of a certain political or religious persuasion attend their own schools. Though charter schools have an open door policy, as is required by publicly funded institutions, their mission statements tend to dictate the population of students who attend their institutions. Moreover, teachers and administrators at charter schools are given much leeway in regard to the curriculum that is taught, which has drawn both praise and criticism (Community Dividend, 2006).

In Colorado, much controversy was generated over a bill proposal that would have given more than half of state funding to charter schools. While charter school representatives and advocates said that the move was to make up for years of inadequate funding, others contend that taxpayer dollars should not be used for agenda-driven learning institutions (Albanese, 2002).

The state of California has Charter Management Organizations (CMO) to manage its High Tech High charter schools which also serve as teacher training institutions. Financially supported by the Bill & Melinda Gates Foundation, High Tech High emphasizes hands-on learning that is technology driven. While many have pointed to its successes, administrators concede that the program probably could not sustain itself or work without the private support it receives. Publicly funded dollars simply would not be enough to sustain these schools (Robelen, 2007). This evidence supports the argument that because charter schools have such specific education goals, they cannot truly be successful when supported only by the state.

In the Los Angeles unified school district, charter schools have filed lawsuits against the state alleging inadequate funding and lack of access to charter schools for those of low income. Because facilities typically need to be built for charter schools, states are partially responsible for covering these costs. States in turn argue that funding of new facilities for charter institutions is not feasible given other, more pressing costs. Given over crowded conditions in the district's existing schools, which often need add-on facilities, public schools argue that the charter schools' requests for more space is "unreasonable." However, state law stipulates that somehow, both charter and standard public schools must share the limited funding that is available (Miners, 2007).

Terms & Concepts

Charter School: A charter school is a publicly funded school that, in accordance with an enabling state statute, has been granted a charter exempting it from selected state or local rules and regulations. It is typically governed by a group or organization under a contract with the state (http://nces.ed.gov/nationsreportcard/glossary.asp).

Equitable Funding: Equitable refers to just, impartial and unbiased position. In education it is used to determine how funding is allocated equally to all students regardless of income.

Low Income: Students are considered low income when the annual income of the household is less than 80 percent of the area’s median income, taking into consideration the size of the family. Low income is often used to determine Title 1 and other types of funding.

Per-Pupil Spending: The amount of money that is spent on each student via public funding; it is also the amount of money used to compare spending from one state to the next or one district to the next.

Revenues: Revenue is the income of a government from taxation, excise duties, customs, or other sources, appropriated to the payment of the public expenses (http://www.reference.com/browse/all/revenue).

Tax & Expenditure Limitation: A Tax and Expenditure Limitation (TEL) restricts the annual growth in state government spending. Most TELs limit the government expenditure to the combined rates of population growth and inflation.

Title I: Formerly known as Chapter 1, Title 1 is part of the federal Elementary and Secondary Education Act of 1965. Its mission is to close the achievement gap between low-income and other students and allocate additional resources to states to provide remedial education for low-income students. The 1994 reauthorization of Title I shifted the program's emphasis to helping all disadvantaged children meet state academic standards. In return, school districts and states must meet accountability requirements for raising student performance (http://www.naeyc.org/policy/federal/title1.asp).

Wealth Neutrality: Within the realm of education, wealth neutrality means that no relationship should exist between the education of children and their wealth or family wealth.

Bibliography

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Black, D. E., Lewis, K. A., & Link, C. R. (1979). Wealth neutrality and the demand for education. National Tax Journal, 32 , 157-164. Retrieved August, 2007 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=4584576&site=ehost-live

Charter School. (2007). National Assessment of Educational Progress. Retrieved August 21, 2007, from http://nces.ed.gov/nationsreportcard/glossary.asp

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Hoffman, J. L. & Hayden, F. G. (2007). Using the social fabric matrix to analyze institutional rules relative to adequacy in education funding. Journal of Economic Issues, 41 , 359-367. Retrieved August 17, 2007 from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=24847388&site=ehost-live

Jacobson, L. (2007). California's schooling is 'broken'. Education Week, 26 , 1-20. Retrieved August 17, 2007 from EBSCO Online Database Education Resource Complete. http://search.ebscohost.com/login.aspx?direct=true&db=ehh&AN=24487166&site=ehost-live

Miners, Z. (2007). L.A. unified and charter schools butt heads. District Administration, 43 , 20. Retrieved August 21, 2007 from EBSCO Online Database Academic Search Premier. http://search.ebscohost.com/login.aspx?direct=true&db=aph&AN=25782846&site=ehost-live

Murray, S. E., Rueben, K. & Rosenberg, C. (2007). State education spending: Current pressures and future trends. National Tax Journal, 40 , 325-345. Retrieved August 17, 2007 from Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=25977868&site=ehost-live

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Wong, K.K. The design of the Rhode Island school funding formula: Developing new strategies of equity and accountability. Peabody Journal of Education , p. 37-47. Retrieved December 27, 2013 from EBSCO Online Database Education Research Complete. http://search.ebscohost.com/login.aspx?direct=true&db=ehh&AN=85221490&site=ehost-live .FT.-Wright, S. (2013). Two steps forward, one step back: The Kentucky Education Reform Act a generation later. Journal of Law & Education 42 , p. 567-573. Retrieved December 27, 2013 from EBSCO Online Database Education Research Complete. http://search.ebscohost.com/login.aspx?direct=true&db=ehh&AN=88929281&site=ehost-live

Suggested Reading

Evers, W. M., Clopton, P., Hirsch, E. D., Lindseth, A. A., & Hanushek, E. A. (Ed.). (2006). Courting failure: how school finance lawsuits exploit judges' good intentions and harm our children Stanford, CA: Education Next Books.

McCluskey, N. P. (2007). Feds in the Classroom: How big government corrupts, cripples, and compromises American education. Lanham, MD: Rowman & Littlefield Publishers.

West, M. R. & Peterson, P. E. (Eds.). (2007). School money trials: The legal pursuit of educational adequacy. Washington, DC: Brookings Institution Press.