Perspectives: How Local Funding Policies Can Lead to Inequity
Edstruments is grateful for the reporting of EdBuild, without which this report would not be possible.
In previous posts, we explored how state and federal funding policy often underserves our most vulnerable K12 students. To round out this funding, the average public school district receives 45% of their revenues from local sources. Because costs-of-living are far more similar throughout a county than they are through a state or the nation, county-level data gives particularly good insights into local funding equity.
Crucially, local revenue comes largely from property taxes, which is the root cause of persistent school funding inequity in districts across the nation. How do we know? The proof is in the numbers. Specifically, a groundbreaking report from EdBuild discovered that, nationwide, the average difference between the poorest and richest districts in the same county is about $6,000.
In some areas, the gap is much larger: California’s Alameda County has 18 school districts and a gap of $22,000 in per-student revenue between the richest and poorest. The average gap in local revenue per student between the richest and poorest districts of the same county is just as high in New York State.
How did these astonishing gaps happen? While the full answer includes complex concepts like local control and white flight that could easily constitute a semester-long education history class, in this post, we’ll explain the basics by looking at Berryella and Fromagio: two fictional states in which school districts receive funding from federal, state, and local sources (just like those in the US).
The state of Fromagio has six counties. All but one, Brie County, have a single public school district. This means that Brie is the only locality in which districts have different per-pupil revenues since those districts draw funding from different sub-sections of the county. Still, in the spirit of emulating the other counties, Brie County distributes local revenues at the county level rather than the district level. As a result, though Brie has both wealthy and poor areas, the difference in local revenue per student between its wealthiest and poorest district is just $250.
Over in Berryella, there are also six counties—all of which have multiple school districts. Unlike Fromagio, Berryella does not require its counties to pool local district revenues and then distribute them at the county level. As a result, each county in Berryella has a wide gap in local revenue per student between its wealthiest and poorest districts (typically from different property taxes). In fact, the average gap of all the counties is $20,000 —80x the gap in Fromagio.
Fromagio's policies pool revenues then spread them throughout its districts equitably. Berryella's policies allow wealthy districts to keep their local revenues to themselves, leading to large funding inequity.
Because Fromagio has its counties distribute revenues across their entire area, the number of districts in each county won’t lead to big gaps in per-student spending: the revenues each district collects pool together to support every student in the county, no matter if that county has 1 district or 100. Because Berryella doesn’t require counties to pool revenues and split them evenly, wealthy districts in a county can raise far more and keep it completely within district boundaries: even if a school from a different, poorer district were only a block away, the gap in per-student funding between those schools could easily climb to tens of thousands of dollars.
The fictional states of Berryella and Fromagio reflect the current district boundary situation in the US. In Fromagio-states like Georgia, Florida, and Louisiana, districts usually follow county lines (meaning most counties contain just one school district), or else distribute funds at the county level rather than district level. This means richer areas aren’t able to keep their wealth within their neighborhood, as the district uses revenue from their higher property taxes to equitably fund students in poorer areas of the county.
In Berryella-states like Arizona, New York, and Maine, however, differences between highest and lowest revenues-per student in the same county can reach $20k; the way these states don’t require counties to pool district revenue allows wealthy neighborhoods to keep their funds cloistered in their neighborhood district.
From an NPR story on the subject: "The average difference in local revenue per student, between the highest and lowest-wealth districts in the same Georgia county is $186. In New York, that difference is $22,006 per student."
Remember: just under half of total K12 funding comes from local sources. The other half comes from state and federal sources, both of which collect revenues from sales and income taxes. This means the COVID-19 pandemic—which decimated jobs and economic activity-- will be much more damaging to state and federal revenue than it will be on local revenue; for better or worse, American property owners pay property taxes no matter their employment status.
In wealthier districts, the higher property values lead to higher property tax collections, which means that local revenues provide a larger percentage (and dollar amount) of total funding in that particular district. As we’ve shared in a previous post, state and federal funds are often used to make up for the gaps created by disparities in local funding. Since these state and federal funds already weren’t sufficient to achieve funding equity between school districts, the current fiscal reality for K12 funding has experts rightfully concerned. As public education braces for a historic recession, EdBuild recommended revising local funding policies so property tax wealth can equitably serve all students—not just those who live in the right zip code.
According to EdBuild, 70% of students (and 76% of low-income students) would receive the same or more school funding if governments widened their tax borders to encompass entire counties—not just specific neighborhoods therein. This means that the rest of the municipal system (school boards, enrollment boundaries, etc.) could remain in place while simultaneously moving districts drastically closer to funding equity; the $23B funding gap between white and non-white districts would be reduced by nearly 60% to $9.5B.
Moving $13.5 billion closer to equity sounds good, right? How could anyone object to that?
The answer, as you may have already realized, lies in the fact that tax revenue distribution is somewhat of a zero-sum game. Changing tax boundaries won’t change the money collected, so if 70% of children stand to gain (or stay constant), that means 30% stand to lose. (For example, if California’s Santa Clara County were to adopt EdBuild’s recommendation, local revenue per student in Palo Alto, where the median home value hovers around $3M, would decrease by $8,500). As you also may have guessed, the 30% of students that stand to lose also probably have parents with the resources and incentives to organize against such ideas. In fact, most of the country allows them to do just that: 30 states have policies that allow neighborhoods to secede from school districts, regardless of implications for students they would leave behind. As unlikely as that may sound, between 2000 and 2019, 73 communities successfully seceded from their local district in these states.
As the original report authors state: states cannot outrun the problem of local funding inequity. Some states have tried novel solutions—Texas, for instance, enacted a “Robin Hood” law that takes money from districts with high property values and gives it to poorer districts. But it’s not enough: Trying to close the local funding gap with state and federal money simply isn’t realistic given our age of astronomical wealth inequality, and EdBuild presents a compelling case for addressing this problem at the root. States that pool all the property tax within a county to equitably fund students are far less likely to have districts that are segregated by per-pupil spending and race. These states are also far less likely to contribute to the shocking $23B racial funding gap. For the families of the 30% of students who would lose funding, however, such changes might (understandably) seem unfair. (Texas’ Robin Hood Law has been on the books for 27 years, and wealthy Texans are still eager to repeal it.) For this reason, such ideas continue to be the topic of spirited debate.
Something that shouldn’t be up for debate, however, is the importance of wise K12 finance management. Given the current political climate, large scale change in how school districts collect local revenue seems unlikely in the foreseeable future, so our software aims to give education leaders the tools they need to make the best of their current funding situation. No matter your relationship to K12 education, we hope you have a better grasp on the concept of local funding, as ensuring the public can understand this important issue is crucial to our work of making K12 finance more accessible, transparent, and equitable.
Edstruments exists to equip education leaders with the knowledge and tools to most effectively and equitably serve their students. To learn more about how we can help your school administrators make better financial decisions, email us at firstname.lastname@example.org or fill out the contact form on our main website.