Report Finds Negative Effects of Recession on School Funding

Last Updated: March 24, 2014

This article appeared in the March 2014 Rural Policy Matters.

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Earlier this month when the Kansas Supreme Court found the state in violation of its constitutional duty to fund schools equitably, it was acknowledging a problem that has become worse since the Great Recession. That problem is one that many states are facing, according to a recent report from Education Law Center (ELC).

Is School Funding Fair? A National Report Card is the third edition of the ELC report. The report notes that at least 34 states are providing less funding per student in 2013–14 than in 2007–08. Further, the share of state budget devoted to education is down in most states.

The impact of funding reductions falls most heavily on schools with high percentages of students living in poverty. Those percentages climbed drastically during the Recession. In 2011, 21% of children ages five to eighteen were living in poverty, a 30% increase from 2007 levels and an additional 2.5 million children. The federal poverty line is $23,492 for a family of four.

Is School Funding Fair? also notes that poor children are increasingly concentrated in schools with other poor children. It is well established in research that very poor children who attend schools with high concentrations of poverty face higher barriers to educational success than do similar students who attend schools with lower poverty levels. Between 2007 and 2011, the percentage of students who attend high-poverty schools (those with over 30% of students living in poverty) doubled from 7% to 16%, according to the report.

The effect of recession-era school funding cuts has made school funding systems in many states more regressive, that is, they provide less funding to school districts with high levels of student poverty than to other districts. Is School Funding Fair? found that 27 states became less fair, particularly in the period from 2010–11; twelve states improved fairness.

Four measures of school funding fairness

The report defines fairness as whether or not the state “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 report makes no attempt to determine how much funding is necessary or to set thresholds for which states could be considered fair or not. Rather, it explores four measures that offer a lens for considering and comparing state funding systems.

The report does not provide analysis in terms of district locale. However, some of the fairness measures use statistical techniques to control for cost-affecting conditions and other variables. RPM notes that several of these variables, including district size, population density, and wage comparisons, are often incorporated in statistical analyses in ways that are harmful for rural schools and districts. For example, wage comparisons are sometimes used to justify the lower salaries of rural teachers. Further, rural districts typically have less local revenue generating capacity than other districts of similar income levels, making rural districts more vulnerable to inequities in funding. For these reasons, it is possible that the report underestimates unfair funding conditions faced by high-poverty rural districts.

The four measures used in Is School Funding Fair? include funding level, funding distribution, effort, and coverage.

Funding level measures the overall level of state and local revenue provided to school districts per student compared to other states. The report finds that funding levels vary widely from a high of $17,397 per student in Wyoming to a low of $6,753 in Idaho. Per pupil revenues in 26 states have fallen since 2010.

Funding distribution measures how funding is distributed to districts relative to student poverty. In other words, it considers whether more (or less) funding is available to districts with higher concentrations of student poverty. Fourteen states have funding systems that provide more funding per student to districts with higher concentrations of student poverty. Nineteen states have systems that are regressive, that is they provide less funding for schools with higher poverty levels, though differences in 12 of those states are not statistically significant.

Effort measures how much the state spends on education relative to its fiscal capacity defined as the ratio of spending to state gross domestic product (GDP). The recession had a significant effect on GDP in most states, declining an average of 3% in 43 states between 2008 and 2009. Because school funding is tied to revenue capacity reflected in GDP, the recession reduced state revenues overall. Only fifteen states have seen their GDP return to or exceed 2007 levels. Many states reduced effort during the recession, with only six states increasing effort since 2007.

Coverage measures the proportion of school age children enrolled in public schools compared to those enrolled in private schools; the report also looks at the median income levels of public and private school families. Coverage affects public and political will to fund public schools, especially if high-income families are not participating in public schools. Coverage is also an indicator of distribution of funding as it relates to student poverty. The report found that coverage rates are highest in Utah at 94% and lowest in Hawaii at 78%. It also found that income levels of private school students are higher on average that those of public school students, ranging from 104% in Alaska (where incomes are nearly the same) to 199% in Louisiana (income levels are twice as high for private school students). In Washington, DC, the income level of private school students is more than three times (367%) higher than public school students.

Fairness consequences

In addition to considering the condition of school funding as depicted by its four fairness measures, Is School Funding Fair? examines the impact of fairness on three key areas of educational quality: early childhood education, pupil to teacher ratios, and wage competitiveness. Not surprisingly, states with better funding systems also do better on these indicators.

Early Childhood Education Research consistently demonstrates that high-quality preschool education is one of the most important ways to boost academic achievement and life-long opportunity and to close opportunity gaps. Nevertheless, the report found that only 47% of three and four year olds in the U.S. are enrolled in a preschool program. The enrollment rate for low-income children is just 38%.

The report finds that preschool participation correlates with other measures of funding fairness. For example, many of the states with the lowest preschool enrollment rates for low-income children are also states with low funding levels; states with highest enrollment rates tend to be among those with higher funding levels. Enrollment of low-income students in preschool is also correlated to the effort levels of states, with high-effort states generally doing a better job of providing educational opportunity for very young children living in poverty.

Pupil-to-Teacher Ratios Low ratios of students to teachers have a positive effect on educational achievement, especially for students living in poverty, according to a number of studies. In addition, schools with high rates of poverty benefit from additional staff like academic coaches, literacy specialists, and counselors. Therefore, the pupil-to-teacher-ratio is an indicator of the fairness of funding at the district level. The report finds that 32 states provide greater staffing resources in higher-poverty districts, although these are minimal in many states. The recession's impact on budgets negatively affected staffing. Pupil-teacher ratios increased in 34 states and became less fair in 32 states between 2009 and 2010.

Wage Competitiveness The report found that teacher salaries are on par with or exceed those of other similar professions in only six states. States with higher levels of funding also tend to have higher average teacher salaries.

Is School Funding Fair? concludes with a call to advocacy. “The unfair condition of school funding in far too many states demonstrates again the importance of sustained advocacy to convince elected officials and policymakers to undertake meaningful and enduring school finance reform.”

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Education Law Center

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Read more from the March 2014 Rural Policy Matters.