RSFN Special Series:
Financing Rural Schools: Characteristics of Strong Rural School Finance Systems

Last Updated: July 23, 2010

This article appeared in the July 2010 Rural Policy Matters.

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In this series, Rural School Funding News is reviewing general principles of school finance and sharing information about school funding systems that support rural schools and their unique characteristics and needs. While there are no easy answers to questions about how to fund schools, especially in this economic climate, we hope that these articles will provide you promising practices, ideas for advocacy, and guidelines that are easily transferable in your analysis and work on your own school finance systems. If you are new to the series, you can review a brief introduction to the subject and discussion of Characteristic 1: A Strong Foundation Formula, here, and Characteristic 2: Effective Use of the Judicial System, here.

Characteristic 3: Fair Accounting for Cost of Living and Geographic Differences

States are increasingly incorporating some variable in their school funding formula that tries to account for regional differences in the cost of providing an education. These variables have the potential to help cover costs associated with specific regional characteristics such as population sparsity, rough terrain, isolation, or even severe climate conditions. Unfortunately, many of these provisions are biased against rural areas. Therefore, it is important to learn what factors are in your state’s formula and whether they are helping or hurting rural schools.

Geographic Difference Factors. Factors that help cover costs associated with geography can mean schools don't have to divert money ( or as much money) from instruction to cover extra expenses associated with necessary but non-instructional items. (Think things like transportation expenses in sparsely populated areas and costs for meeting state administrative and curriculum delivery mandates in isolated places.)

When you read the provisions of state law that contain the funding formula, look for key words like “remote,” “sparse,” or “geographically isolated” to find out if schools that meet the specified criteria are getting extra state aid. Further research can help determine whether additional aid is rationally calculated or large enough to make a difference and whether it is going to the all the rural schools that need it.

Cost-of-Living Adjustments (COL). Cost-of-living factors are supposed to help districts that have trouble recruiting teachers because living costs, often pegged to average housing costs, in the area are high. However, the way these costs are calculated can make a huge difference in who benefits, and many COL factors favor wealthy districts with high property values or high average salaries.

For example, many COL measures assume that housing costs are lower in rural places and therefore teachers can live on a lower salary. But these same measures are usually developed without knowledge of what resources are actually available in rural places. Housing costs are lower, on average, in many rural areas because the available housing stock is poor or limited. In such cases new rural teachers may discover that there is no appropriate housing available; longer term rural teachers often find that new construction costs are higher than in urban places and that rural homes are less likely to appreciate in value in normal housing markets than are houses in more urban locales.

Other amenities are unavailable in many rural places and teachers may encounter hidden costs associated with accessing health care, shopping, and services taken for granted in prosperous urban areas.

In such circumstances as well as in rural and lower-wealth schools that are located near wealthier suburban areas, higher salaries are needed to attract and retain teachers.

The bottom line is that unless funding levels account for the actual “cost” of getting teachers to accept an assignment in a high poverty school with many disadvantages, COL adjustments generally send more state aid to places that already have a wealth advantage.

Making a Difference in Your State Working on cost factors can be tricky. In states where no acknowledgement is made of the differences in financial needs of rural schools, advocates can work for inclusion of appropriate measures. However, it is equally important that cost factors do not discriminate against rural schools.

The Rural Education Finance Center can help with this analysis, locating experts who can help calculate measures that will make your state’s school finance system more supportive of rural schools, and in strategizing for advocacy.

For more discussion of COL adjustments, read the Rural Trust report on the effects of Pennsylvania’s “location cost metric” here.

For more information on the impact of adjusting teacher salaries to other salary averages, see “Options for Fixing Title I Inequities: Tying Allocations to Average Local Salaries Makes Things Worse.”

Read more from the July 2010 Rural Policy Matters.