Education Funding Reports Grade States and Districts: Rural School & Community Trust

Education Funding Reports Grade States and Districts

Last Updated: June 26, 2012

This article appeared in the June 2012 Rural Policy Matters.

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Several reports released this month profile dramatic differences in school spending levels across districts. The reports document lower levels of school spending in districts with low wealth and/or high poverty than in high wealth districts where students tend to be affluent.

The reports include one from the Education Law Center that focuses on state funding systems, a census report that analyses district level spending, and a widely-circulated report by the website 24/7 Wall St. that compares wealth and spending levels in the ten districts with highest and lowest median incomes. RSFN takes a look at each of these reports and interprets the rural takeaway.

"School Funding Fairness"

Earlier this month, the Education Law Center (ELC) and Rutgers Graduate School of Education released the second edition of their report, "School Funding Fairness: A National Report Card." The report finds that most states need to make significant improvements to their school finance systems and better policy decisions to support schools and districts.

The report defines "fair" as a state finance system that ensures equal educational opportunity by providing a sufficient level of funding distributed to districts within the state to account for additional needs generated by student poverty.

The 2012 report uses funding data from 2007, 2008, and 2009, the most recent data available at the time of the study. It evaluates states on four "fairness indicators." These include overall funding level; funding distribution to districts; state fiscal effort, or how much state-level economic productivity is allocated to public education; and public school coverage, a factor measuring the number of students enrolled in public as compared to private schools.

On the funding level and coverage factors, states are ranked, rather than graded. Grades are assigned for funding distribution and and fiscal effort because those measures are heavily influenced by choices made by state policymakers.

The report's focus is on students in poverty. Although it does not focus on rural places, the report raises several important issues that also impact rural school districts.

Measuring funding levels

In order to create a valid national comparision, ELC developed a predicted "funding level" measure that controlled for variations in spending among the states. One of the factors that causes significant variation in funding is wide ranges in salaries, as represented by regional wage indices. Higher wages in mostly urban and suburban areas cause state spending on average to look higher than it is. Rural Trust research has found that increasing salaries or other school funding elements based on most available cost of living indices actually worses funding isadvantages for rural systes. One of the study's authors, national school finance expert Bruce Baker makes a similar point: "Under-funded high-poverty schools and districts simply cannot compete with well-funded low-poverty districts when large salary disparities exist, or even when salaries are merely comparable."

On the other hand, some state funding systems incorporate supports to make up for costs associated with geography and low population density. These provisions, known as remote, isolated, sparse, small school/district, and "necessarily small" school factors, benefit some rural districts. ELC concluded that these rural facotrs and geographic cost of living adjustments tend to offset one another, and the report neither rewarded nor penalized states with these approaches.

The authors point out that the report is based lagely on data from the school years before recession's full impact took effect.

Fund distribution to districts

The "funding distribution" measure gauges how sensitive state formulas are to poverty; that is, how progressive they are.

Only 17 states have progressives systems that provide more funding for higher poverty levels, according to the ELC report. Many states are under-funding high-poverty schools and districts. Sixteen states are clearly regressive in that they provide less funding to districts with more students living in poverty, and fifteen states are "flat," with no provisions either way. The report identified New Jersey, Massachusetts, and Vermont as notable exceptions to the overall trend.

Baker highlights an even more damaging effect. Several aid formulas actually increase funding inequities by allocating more money to the wealthiest districts with the fewest students in need. North Carolina and Texas, two states with very large rural student enrollments, fall into this category.

Some states argue that it costs more to educate a student in wealthy districts and less in a poor community, an argument often based on cost-of-living indicators. Research, however, confirms that it takes about double the funding to achieve the same results in a low-wealth place. Often state systems make a minimum aid guarantee to districts, or have a hold-harmless clause, both of which provide aid to districts even when they do not need it.

State funding systems are key

In addition to weights for poverty, the report makes a case that a fair and equitable funding system must provide higher state aid to districts with less local capacity to raise it on their own. The Rural Trust notes that such provisions can make a huge difference in rural districts because rural districts usually have much less ability to raise revenue locally due to lower property values and other factors.

Although mentions are made of federal aid, the report focuses squarely on state funding systems because state and local funds make up the majority of funding for schools and districts.

"School Funding Fairness" is authored by David G. Sciarra, ELC Executive Director, Bruce Baker, Rutgers University Graduate School of Education, and Danielle Farrie, ELC Research Director.

Census Report

According to the just-released Public Education Finances 2010, state funding was down an average of 6.5%. The report uses U.S. Census data to detail 2009-2010 district level finance information for the more than 15,000 elementary-secondary school systems with enrollments of 10,000 or more.

The decrease in state funding is the largest since the Census has been publishing this report and only the second time in the history of the report that state funding has decreased from year to year. Notably, local share of education funding outpaced state share, demonstrating the pressure on local districts.

Rural Trust notes that state funding is usually based on relatively volatile revenue sources like income and sales taxes. State cuts tend to be especially hard on rural districts because of their much more limited capacity to raise local revenues. These limitations also mean that state funding generally makes up a larger share of their total per pupil funding. For these reasons, a balanced finance system is important.

Public Education Financed 2010 is authored by Mark Dixon.

24/7 Wall St. report

A report by the financial news website 24/7 Wall St. has drawn much media attention for its focus on disparities between very high and very low poverty districts. The authors used Census data to compare the ten school districts with the highest median income to the ten districts with the lowest median incomes. It then overlaid that information with National Council for Education Statistics (NCES) data on per-pupil funding, test scores, rankings of schools by other press outlets, and property taxes.

The resulting compilation is a stark picture of the disproportionate allocation of wealth and resources in this country. All but one of the richest districts are in commuter communities of New York City; average incomes top $200,000 and per-pupil spending is over $20,000. On the other hand, the poorest districts are rural and small town districts; average incomes fall below $20,000.

Another important difference between the two groups is the percentage of school funding that comes from local income. In most of the high-wealth districts, property values are high enough to provide over 80% of school funding from local property taxes. But, in low-wealth places, local communities are unable to subsidize their local schools to that degree, and local funding makes up between 6% and 51% of school funding.

Conclusion

These analyses demonstrate that the forces fo inequity are weighing most heavily on our nation's most vulnerable students in the most vulnerable communities. Remedying this situation requires continuing work to ensure adequacy and equity in school funding. The challenge is great, but not insurmountable.