America’s school funding is more progressive than many assume

IN 1647, the Massachusetts Bay Colony passed a law mandating the establishment of publicly funded schools. Puritans were worried that otherwise children would fail to learn the Bible and become susceptible to the wiles of “that old deluder, Satan”. To pay for the schools, the colony levied a tax on local dwellings.

Although the aims of public schooling have changed since the 17th century, the critical role of property taxation in funding education has endured. The share of school funding that comes from local taxes such as levies on property is twice as high in America as in the rest of the OECD club of mostly rich countries. It is an approach with many critics, who argue that children who need the most help in school in fact receive the least, since they live in areas with cheap housing and correspondingly small tax takes. Arne Duncan, Barack Obama’s first education secretary, once said that the use of property taxes was the main cause of the country’s “inequitable school funding”.

It is true that public education is no engine of social mobility. Of young Americans whose parents did not finish high school, only 5% get a degree, compared with nearly 20% in the OECD as a whole. But the way schools are funded is not as egregious as widely believed, according to recent data. In all but three states, poor pupils on average receive equal or greater funding than their richer peers.

There are two reasons why a reliance on property taxes does not automatically lead to horribly regressive allocations of money. First, in many districts (including, for example, Boston), poor children live close to a lot of valuable commercial property, which is also taxed.

Second, states and the federal government have increased how much they contribute towards school funding, offsetting the regressive effects of local taxation. In 1920, 83% of public-school funding came from local sources, according to data from the National Centre for Education Statistics. The latest numbers show that local collections are no longer the largest source of money—they contribute 45% of the haul, slightly less than state funds. Federal programmes account for a further 9%.

The rise of other funding sources is a fairly recent development. Though the Supreme Court ruled in 1973 that unequal funding of schools as a result of property taxes was not unconstitutional, a subsequent wave of court cases led to more egalitarian spending. From 1990 to 2012, funding for the bottom fifth of school districts (measured by household income) increased by 50%, bringing them roughly in line with high-income districts.

Studies that look only at the spending by different school districts neglect the full picture. For example, if New Jersey’s schools were funded entirely locally, poor children would on average receive just $0.66 for every dollar spent on educating the better-off, the biggest gap in any state. But taking account of state funding, poor children receive $1.06 for every dollar going to richer peers. That figure rises to $1.08 once federal top-ups are included, suggesting that New Jersey is in fact among the most progressive states (see chart).

Nor do individual districts allocate their funding in an uneven way. According to a recent paper by Simon Ejdemyr and Kenneth Shores that examined districts across the country, poor and minority pupils receive 1% or 2% more in funding than better-off and white ones. Affluent districts and those with lots of rich and poor people living close together were the most progressive when doling out dollars. Although there are still many examples of neighbouring districts with widely different funding settlements, on average poorer children do not lose out as much as many critics allege.

More worrying is that some states spend vastly more on public education than others do. Children in Vermont receive 2.8 times the funds of those in Utah, even after adjusting for differences in the costs of running a school. After the Great Recession pinched states’ budgets, many dramatically decreased their education spending. In Oklahoma, state general funds, the main source of spending on primary and secondary education, have plummeted 28% per head since 2008. Fully 19% of districts have four-day weeks, and another 9% are considering moving to one as well. States like Texas, Kentucky and Alabama have also seen large cuts.

Education researchers once hotly debated whether additional funding would boost performance for low-income or minority pupils. But recent studies comparing the outcomes for pupils after increases in financing targeted on poor districts have found impressive effects. A study published in 2016 found that 10% in additional spending increased the future earnings of pupils by 7% and reduced their likelihood of ending up in poverty. Increased spending of $1,000 per pupil in Michigan was linked to a rise in university enrolment. 

All this suggests that higher spending for the poorest children could make a big difference, not least because richer parents are quite willing to produce funds for trips, tutors and test preparation outside the classroom. Yet schools are relying on federal programmes like Title I, which provides additional cash to poor districts, simply to achieve parity, when these funds were meant as a top-up.

School funding in America may not be as regressive as many of its critics contest, but the model still lags behind that of other rich countries. Through its “pupil premium”, England, for example, does a much better job of directing resources to children who need extra help. America still has many lessons to learn.

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