How does public school funding work

With rare exceptions, the state apportions education dollars to districts based on a calculation known as the Local Control Funding Formula , explained in Ed Lesson 8. In a moment, we'll examine how California's education funding system evolved to its current form. But first, a quick recap:.

The source of funds for schools in California changed dramatically in the late s. The amount raised for local schools varied a lot, depending on the local tax rate and the assessed value of local homes and commercial properties. County assessors held the important job of determining the taxable value of each property.

Those communities had to set very high property tax rate to provide schools with as much money per student as their more fortunate counterparts. Serrano v Priest , the first in a series of landmark court decisions, challenged this arrangement in Is it really fair, the case asked, that some districts can tax themselves at a lower level and still enjoy more funding per student than others?

After all, kids have no say in the wealth of their parents. The case led to court-mandated revenue limits , which were meant to equalize funding per student at the district level over time. Voters passed Proposition 13 in The measure removed the power of school boards to levy local property taxes for local schools. To prevent education funding from plummeting, the state legislature stepped in, allocating state funds from a budget surplus to protect schools from what would have otherwise been massive cuts.

Suddenly, school districts had no local control over the amount of money available to fund their schools.

Among the unintended consequences of Proposition 13, it centralized power over the education system in Sacramento. The state legislature and the governor became responsible for determining how funding would be distributed to districts.

School boards, once powerful and independent, were left with the narrower job of playing the hand dealt to them by the state. For more on Proposition 13, continue on to Lesson 8. Public schools in California are often thought of as local schools , but in many ways it has become more accurate to think of them as state schools. As discussed in Lesson 7. The old system was nuts. Until , education finance policies apportioned funds to districts based on a bizarre system of revenue limits.

If you have a masochistic interest in California's historical school finance laws, knock yourself out. It's a simpler and fairer system that replaced the rusty old plumbing of revenue limits and categorical funds.

Nowadays virtually all school districts in California rely on state funding, because local property taxes are insufficient to generate funding at the base level per student guaranteed by the Local Control Funding Formula LCFF. There are some exceptions. For example, if the boundaries of a school district include valuable commercial property, the property taxes generated are sometimes enough to fund the district beyond the base level.

In about of California's nearly 1, districts had the local capacity to fund their schools without state assistance. In California education jargon, these are officially known as community funded districts.

For historical reasons they are also inaccurately referred to as basic aid districts. For more on these districts, see Lesson 8.

Nobody likes paying taxes. Passing a tax measure requires political will — a level of collective agreement that can overcome apathy, distrust, and competing priorities.

It requires trust, too — not just that the money to be raised is needed, but that it will be spent well and make a difference. There are all kinds of reasons to say no. Most voters are more inclined to support taxes that benefit their local community schools than ones that apply to the whole state of California. This is a big, diverse state.

It is hard for voters to trust that decisions made in far-off Sacramento will really benefit families locally. Serrano and Proposition 13 flipped California's education funding system from a local system reliant on local property taxes to a state system reliant on state income taxes.

It made the system fairer, but it also made the system more politically distant. The old system was unacceptably inequitable, but in aggregate it was better at raising funds. Concerns about inadequate school funding started almost immediately after Proposition 13 was passed. As discussed above, Proposition 13 triggered a big switch in the source of funding for public education from property taxes to income taxes. This shift brought a new challenge to California school budgeting: volatility. Property values and therefore property tax receipts vary with the economic cycle, but they don't tend to change massively.

Income taxes, by contrast, are very exposed to the booms and busts of the stock market. Individual fortunes can change a lot from year to year, but they tend to have something in common: the stock market. To smooth out some of the effects of the high volatility in state revenues, in California voters passed Proposition 2 , which requires the state to spend a minimum amount each year to pay down its debts.

The proposition also changed the rules for the state's rainy-day fund , an amount the state puts into a budget reserve to protect against years when revenues fall.

Keeping reserves is politically difficult. There are always real needs and worthy investments — and if a district builds significant savings it carries the risk of becoming a lucrative target for a lawsuit. For people interested in funding for their local schools, the most important thing to know about California's system is that it can be terribly fickle.

Education is an important priority, but not the only one. Especially in a stock market swoon, funding for schools cannot be assumed safe. The next lesson, Lesson 8. Beginning in Lesson 8. Updated August Updated October Updated July Updated May Updated November Updated January Answer the question correctly and earn a ticket.

Learn More. To comment or reply, please sign in. Change your mind? Although the road to advocacy was a long one, which involved a series of compliance suits following the original court decision, the ultimate remedies implemented were substantial. In , the state legislature made another attempt to equalize funding with the Comprehensive Education Improvement and Financing Act, but the court found this effort insufficient.

In later rulings, the court began mandating funding for specific programs that could improve student outcomes and close achievement gaps. The court also granted districts the right to seek additional funding for on-site social services and other supplemental programs as needed.

The court order for whole-school reform in elementary schools also spurred the New Jersey commissioner of education to implement Success for All, a literacy initiative for low-income, at-risk students, statewide.

The Abbott decisions have been critical in improving both fiscal equity and school quality in the state. New Jersey consistently ranks high in education performance and quality, as well as progress in narrowing the achievement gap.

In Massachusetts, McDuffy v. Secretary of the Executive Office of Education propelled education funding reform. One hallmark of the bill was its introduction of a foundation formula, which aimed to bring all Massachusetts school districts to an adequate level of per-pupil funding by or over a seven-year phase-in period. Commissioner of Education that the state had established a system that sufficiently addressed inequities and met the constitutional standard.

Student outcomes remain strong. Massachusetts has some of the highest growth rates of any state. For example, a NBER study showed that of the various approaches to school spending reform, fiscal initiatives that guarantee a baseline amount of per-pupil funds—otherwise known as foundation plans—were the most effective in increasing overall per-pupil spending and reducing funding disparities between poor and affluent districts.

Foundation plans are similar to the adequacy framework; compared with equalization plans, they tend to result in increases in spending across all districts over time. To be sure, adequacy has its limitations as a policy. When defined narrowly, the reforms can serve as a barrier to progress. For instance, the U. The nation needs a third way to understand school funding.

Drawing from this analysis, the authors recommend that school finance reform emphasize a high-quality education program for all students. To reach this aim, students with greater needs must receive additional funding, and that funding needs to be targeted at the reforms that matter. Finally, accountability systems and academic standards are necessary to measure quality and shine a light on inequities. The issue of quality has long been a part of the school funding debate.

Justice Marshall mentioned the delivery of high-caliber education in his dissenting opinion in the Rodriguez case. In short, low-income students need more than equity or adequacy; they need sufficient funding to ensure success—which means more funding, not equal funding—as well as equal access to core services with accountability for outcomes.

The following principles should guide school finance reform based on quality at the federal, state, and local levels, but states must drive reform to school funding systems, as local and state dollars account for the vast majority of overall education funding.

Using this as a model, school finance advocates should identify the core components of a high-quality education and ensure equal access to those services as a check on a weighted student funding formula. Specifically, policymakers should fund critical programs to increase the quality of all teachers. Policymakers and school funding advocates should protect and increase funding for teacher compensation and professional development, targeting low-income schools.

Programs designed to reduce the cost of teacher preparation—such as the federal Teacher Education Assistance for College and Higher Education TEACH loan forgiveness program—should be enhanced for those willing to teach in high-poverty schools.

The federal government and state policymakers must play a role in ensuring an equitable distribution of skilled and experienced teachers. Under the recently passed Every Student Succeeds Act ESSA , states are required to describe how they will ensure that low-income students and students of color are not more likely to be taught by teachers who are less effective or experienced.

Some states took this requirement seriously and used it as an opportunity for developing clear goals and timelines for reducing these inequities, as well as specific strategies for reaching these goals and reporting requirements that ensure transparency should the state fail to reach their goals.

Access to rigorous standards, curricula, and courses is also a key ingredient to a high-quality education. At a minimum, states should ensure that all students have access to algebra in eighth grade and to Advanced Placement AP or similar rigorous courses in high schools. Indiana provides one such example. Indiana wanted to incentivize and support its low-income students to complete rigorous coursework.

Finally, policymakers and school funding advocates must ensure equitable access to early childhood programs and other programs that offer child care. This would require federal and state governments to increase their investment in early childhood in order to ensure that all families, regardless of income, are able to access high-quality early childhood programs.

States with successful remediation efforts have provided more total funds to their low-income students, and in some areas, low-income students receive more than 20 percent more in total funding than their affluent peers. Weighted student funding can help navigate the balance between higher-quality and better supports.

Funding is allocated to schools based on the number and demographics of students they serve. Principals can build their school budget, staff, and program options to best serve their students.

Several states, including California and Rhode Island, have rolled out comprehensive school funding reforms that include weighted student funding.

The impact of these programs is yet to be determined, but early results show at least some promise. Weighted student formulas should be tied to accountability frameworks that look at outcomes as well as equal access to core services, including early childhood education, effective teachers, and rigorous college- and career-ready curriculum. Indeed, research has shown that states that adopt rigorous academic standards are more successful in increasing outcomes of low-income students.

For example, a analysis found that states that fully embrace standards-based reform are more successful at improving the academic outcomes of low-income students, while states that are more resistant to adopting rigorous assessments post poorer results.

In other words, school funding reform is not a replacement for accountability systems. ESSA requires all states to adopt rigorous standards and hold schools accountable for student performance. It also maintains a requirement that every school must disaggregate student performance by student population—such as students from low-income families, English language learners, homeless and foster youth, and more.

Relatedly, weighted student funding also works best in conjunction with other reforms that emphasize quality and outcomes. In the last decade, many districts have implemented weighted student funding, including Houston, Baltimore, and New York City. The districts that have also included thoughtful indicators on student performance and maximized principal budget autonomy appear to be most successful in narrowing achievement gaps. Given the level of flexibility afforded to local actors in most weighted student formula frameworks, accountability for outcomes is essential to ensuring that the additional resources reach the students most in need.

In addition, there must be a check to ensure that weighted formulas increase access to fundamental core services such as early childhood education. Accountability systems should also require districts to report transparent school-level outcome data. Such reporting must also be married with efforts to turn around low-performing schools and ensure support for schools that need the most help.

Moreover, President Donald Trump has advocated to reduce federal funding for other child welfare programs, including Medicaid. They also supplement their budgets to provide medical services to students with disabilities. With less Medicaid funding, however, schools may further struggle to provide a quality education for students who do not have access to vision or hearing screenings or have an undiagnosed chronic condition.

Since Rodriguez , state litigation and legislative action have increased awareness of the importance of fiscal equity in education. Much can be learned from these efforts, and it is clear that neither equity nor adequacy alone is enough. School finance systems should be progressive and student-centered. States must set clear expectations, align funding and programming with these standards, and recognize the extra support that disadvantaged students need in terms of effective programs.

Carmel Martin is a distinguished senior fellow at the Center for American Progress. Bayliss Fiddiman , Lisette Partelow. Neil Campbell , Abby Quirk.

Colin Seeberger Director, Media Relations. Peter Gordon Director, Government Affairs. Madeline Shepherd Director, Government Affairs. In this article. InProgress Stay updated on our work on the most pressing issues of our time. Overview of the findings Based on an analysis of school finance litigation and research on school funding, the authors found the following: Money matters for student achievement. A growing body of evidence shows that increased spending on education leads to better student outcomes.

When states invest in their public schools and create more equitable school finance systems, student achievement levels rise, and the positive effects are even greater among low-income students. States, districts, and schools must spend their money wisely, targeting their funds toward evidence-based interventions, such as high-quality early childhood programs.

Overall, efforts to cut funding for education or services that support children are short-sighted and defy current research. Students in high-poverty communities continue to have less access to core academic services that increase student outcomes. Core services that have a significant influence on instructional quality and student performance are systematically unavailable to students in low-income schools relative to students in higher-income schools.

These critical services include early childhood education, quality teachers, and exposure to rigorous curriculum. Districts, states, and the federal government play crucial roles in equity. States will have the greatest opportunity to guarantee that all students under their purview have access to a high-quality education, but local, state, and federal governments all play important roles in minimizing inequities in education funding.

School funding advocates have won a slew of court cases over the past four decades. Many fiscal equity lawsuits were important and led to additional resources for students; however, some cases had unintended consequences on overall levels of spending, for example, in California.

Evaluating school finance policies based on equity or adequacy is insufficient. Moreover, neither framework requires courts and policymakers to consider the quality of education, including teachers, curriculum, programs, and social supports.

Next steps The school funding debate is as important today as it was in when Rodriguez demanded a better education for his children. The authors propose that the following key principles should guide school finance reform at the federal and state levels: School funding systems should ensure equal access to core educational services. School equity debates must go beyond funding, and states and local actors must support access to robust services. Using this as a model, advocates should prioritize increased access to high-quality educational opportunities that raise student achievement as part of an equitable education financing system.

School funding should provide significant additional resources for low-income students. It costs more to educate low-income students and provide them with a robust education. To overcome issues of poverty, low-income students need significant additional funds. Weighted student funding—which differentiates school budgeting based on the demographics that each school serves—can fund quality programs that will have the greatest impact on the student population.

Outcomes-based accountability should serve as a check on school funding systems. Student achievement and outcomes matter. Any approach to supporting school finance reform should ensure that the money supports the resources, programs, and services that all students need to be prepared to fully participate in the workforce and their community.

Policymakers must simultaneously refine education standards so they are aligned to the changing society and implement rigorous accountability systems to assess if schools are meeting these goals. States should use these outcomes, rather than dollars or other inputs, to evaluate if schools are providing all students with a high-quality education.

Education and child welfare programs should be fully funded. Research shows that money matters, especially for students in poverty. States should restore, and exceed, funding to pre-Great Recession levels to allocate sufficient funding.

In addition, the federal government should maintain or increase funding for necessary programs to support children and working families. The argument for a new framework for school finance reform. A high-quality education is fundamental to our modern economy and democracy The goals of public education must evolve with the changing world, and today, schools must prepare students for college, career, and civic engagement.

States also provide categorical grants that are more similar to federal funds, in that they are restricted to specific kinds of expenditures.

About half of district funding comes from local revenue sources, the most common of which is property taxes. Higher property values can yield more property tax revenue per student, even at lower tax rates. The dependence on property tax revenues to support schools often reinforces inequity by ensuring that wealthier communities have better-funded schools.

State funding is often meant to equalize these differences between local school communities but is rarely successful at overcoming these differences. Once the district has the total revenue projection from each of these sources, districts have broad autonomy over how dollars and staffing resources are allocated to each school in the district federal grants are often an exception because they have very rigid guidelines.

Understanding why funding inequities exist between schools requires understanding both interdistrict inequalities generated by federal, state, and local policies and intradistrict inequities, driven by district-controlled resource allocation methods and processes.

The new ESSA regulations require reporting per-pupil actual expenditures at the school level, which is a break from reporting average per-pupil spending across the district or state. Inequities are easily obscured in averages, and allocation methods are often the culprit for perpetuating school funding inequity.