Press Release

(Washington, D.C.) – School finance policy choices at the federal, state, and district levels systematically stack the deck against students who need the most support from their schools, according to a report released today by the Education Trust.

The report, Funding Gaps 2006, builds on the Education Trust’s annual studies of funding gaps among school districts within states. For the first time the report includes data and analysis on:

  • How federal Title I funds widen rather than narrow the education funding gaps that separate wealthy states from poor states; and,
  • How funding choices at the school district level provide enhanced funding to schools serving higher concentrations of affluent students and white students at the expense of schools that serve low-income students and students of color.

“With the help of two noted scholars, Goodwin Liu and Marguerite Roza, this year’s funding gap report paints a fuller – and even more painful – picture of how funding choices made at every level shortchange low-income students and students of color,” said Kati Haycock, the president of the Education Trust. “And while fairer funding systems will not alone redress all of the inequities in our education system, getting the funding right—at every level—will  begin to make real our national aspiration of a fair shot for every child.”

How the Federal Government Makes Rich States Richer

Goodwin Liu, Assistant Professor of Law at Boalt Hall School of Law and co-director of the Chief Justice Earl Warren Institute on Race, Ethnicity and Diversity at the University of California at Berkeley, analyzed the distribution of Title I funds and shows that the program’s state allocation formula reinforces rather than reduces funding gaps between wealthy and poor states.

Liu’s analysis finds that the state expenditure factor in the Title I formula results in highly unequal allocations of federal aid per poor child.  For example, Maryland has fewer poor children than Arkansas but receives 51 percent more Title I aid per poor child, even though Arkansas dedicates more of its taxable resources to education than wealthier Maryland. Similarly, Massachusetts has fewer poor children and exerts less effort against its tax base to fund education than poorer Oklahoma, but receives more than twice as much Title I aid.

In short, Title I tends to reward wealthy states that can raise funds for education with relatively little effort while shortchanging poorer states, including those that make relatively greater effort to fund education.

“Poor children are concentrated in relatively poorer states.  Instead of providing relatively more help to these kids, Title I provides less,” Liu said.  “If we are serious about ensuring that every child in America meets high standards, then we must develop a federal school finance policy equal to the task.”

How States Shortchange the Districts that Most Need Help

In the paper’s second analysis—an update of the annual Education Trust funding gap analysis –co-authors Ross Wiener and Eli Pristoop of the Education Trust examine patterns in state and local funding across districts in the same state . Wiener and Pristoop find that in about half of the states studied, the highest poverty and highest minority districts received fewer resources than the lowest poverty and lowest minority districts.  On average, states and localities spend $908 less per student in districts educating the most students of color, and $825 less per student in districts educating the most low-income students as compared to what is spent in the wealthiest and whitest districts.

After a 40 percent adjustment – the same adjustment used in the Title I formula to analyze state funding policies to low-income students – six states have funding gaps between the lowest and highest poverty districts that exceed $1,000 per child:  Illinois, Michigan, Montana, New Hampshire, New York, and Pennsylvania.

Based on the same adjustment, 12 states have funding gaps between highest and lowest minority districts that exceed $1,000 per child: Colorado, Illinois, Kansas, Montana, Nebraska, New Hampshire, New York, North Dakota, South Dakota, Texas, Wisconsin, and Wyoming.

However, other states—including Massachusetts and Kentucky – target more money to high-poverty districts, and use meaningful accountability measures to ensure that the funds are used to make real progress.

“Ignoring or condoning funding gaps only makes it harder to tackle the substantive problems and inequities in public schools,” said Wiener, vice president for practice and policy at the Education Trust.  “There are many complicated issues in reforming the current system, but fairly funding schools is not one of them.”

How Districts Shortchange Low-income and Minority Students

The final analysis in the report looks at distribution of funds within school districts.  University of Washington Research Assistant Professor Marguerite Roza shows that, despite district bookkeeping practices that make funding across schools within the same district appear relatively comparable, substantially less money is spent in high-poverty and high-minority schools.

Teacher salaries are the clearest example.  Roza looks at salary expenditures in a variety of districts and finds troubling inequities in the allocation of this key resource among schools in the same district.  For example in Austin, a city with one of the largest salary gaps, the gap in average teacher salaries between the highest and lowest poverty schools within the district amounted to $3,837.  In a school of 25 teachers that gap amounts to $95,925 less per year for a low-income school; in a school with 100 teachers, the gap increases to $383,700 per year.

Roza’s analysis also shows that salaries are not the only problem: districts routinely assign a larger share of their unrestricted funds to lower-poverty schools, as well.  Although districts distribute earmarked funds such as Title I mostly to higher need schools, they undercut the purpose of those dollars—to provide “extras” for low-income students—by sending a higher percentage of flexible state and local funding to lower poverty schools.

“The spending patterns and funding gaps within districts exacerbate educational inequalities for low-income and minority students.  Sadly, these funding inequities are buried in widely accepted and outmoded district-level accounting practices,” said Roza.

Among the report’s recommendations:

  • At the Federal Level: The state expenditure factor in the Title I formula should be eliminated, and Title I funding should compensate for differences in state capacity to fund education.
  • At the State Level: States need to assess relative challenges across districts and ensure that funding is commensurate with the challenges, and set equity standards for all school districts.
  • At the School District Level: Districts need to publish transparent budgets and allocation figures to provide for greater accountability of local spending patterns.

“The funding inequities documented in this report, though deeply ingrained in our education systems, are not immutable. We can and should change these distribution practices so they direct resources first to the areas of greatest need,” said Haycock.