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December 20, 2013

New York sends statewide tax dollars to wealthy communities with low property tax rates. Texas drains resources from school districts educating high-need children and supports districts with lower student need. North Carolina commits both of these follies, failing to provide "either taxpayer or student equity" in school funding.

In their report, "Stealth Inequities in School Funding," Bruce Baker and Sean Corcoran explain how state funding laws can undermine opportunity and fairness. After an introduction that frames the issues, the report provides real-world examples that typify stealth inequities in many states.

The report begins with a "primer" on state school funding systems and reminds us of two crucial goals of modern school funding systems:

  • to target funding to address differences in student need, because students with higher needs cost more to educate;
  • to target funding to school districts with lower property values because they have less "fiscal capacity," that is, less ability to generate local revenues.

The first goal acknowledges the fact that higher poverty school districts require more funding for programs and services that can soften the impacts of poverty on children and provide them with the opportunity to succeed. Similarly, students learning English and those with disabilities need programs that address their needs. The second goal recognizes that lower wealth communities, although they routinely tax local property at higher rates, are unable to generate sufficient revenues for their schools.

The "Stealth Inequities" report points out that many state school funding systems---which control both state and local funding---try to distribute funding to address both of these needs, at least to some extent. The authors provide brief examples of the few states that succeed in this endeavor, such as New Jersey, where state funding overcomes low fiscal capacity and high student needs in the state's highest poverty school districts.

But Baker and Corcoran note that most states need to change their funding formulas to ensure that all schools have adequate educational resources. That's necessary for students to be able to reach state academic learning standards, graduate from high school, and become contributing members of society.

After the introduction, the report shifts to its primary focus, examining aspects of some "regressive" state funding systems. Regressive systems provide less funding to school districts with low property wealth and high student need. In regressive states, the school districts and children who need the most get the least. Unfortunately, many state systems are regressive.

Basic Guidelines for Better Funding Systems

The report concludes that "basic guidelines are in order for directing state school finance deliberations and creating federal pressure on states to mitigate the vast stealth inequities in school funding." For example, states need to understand that tax relief to property-rich communities promotes inequity and encourages inefficiency in these high spending districts.

The report also urges federal agencies to create pressure for change in those states, such as North Carolina, that make little or no attempt to operate a school finance formula that follows basic principles of equalization and needs-based targeting. For those states that do have equalization formulas, they "should run as large a share of state aid as possible" through those formulas because outside-the-formula funding is "among the most common drivers of stealth inequity."

"Certainly," the authors advise, "when states are looking to cut budgets ... , they should refrain from delivering those cuts through the more equitable aid programs while protecting the inequitable ones."

Finally, the report notes that education is lauded as "a key to unlocking the American Dream." But, it argues that "too many children ... are denied access to high-quality education because they attend schools that are underfunded and under-resourced. ... too often the schools serving students with the greatest needs receive the fewest resources."

Related Stories:
New York's Funding among Nation's Most Unfair
Texas: Another State Failing to Provide Fair School Funding
The Garden State: A Beacon of Educational Equity in the Region
Education Justice Press Contact:
Molly A. Hunter, Esq.
Director, Education Justice
email: mhunter@edlawcenter.org
voice: 973 624-1815 x19

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