The Stealth Inequities of School Funding: How State and Local School Finance Systems Perpetuate Inequitable Student Spending

In the education world, the existence of funding inequities has long been a known fact, but the sources of these inequities have not always been obvious. Typically, local property tax variation has been blamed as the sole, or at least primary, cause of inequalities and called for greater state funding as the solution. In practice, however, it is seen that states providing a large share of state aid are not necessarily more equitable in their distribution of school funding. There must therefore be more to the story behind funding inequities. This report tries to provide a fuller picture of the problem so that more is known about what stands in the way of equity. The two chapters that follow explore stealth inequities in school finance, which are defined as often-overlooked features of school funding systems that tend to exacerbate inequities in per-pupil spending rather than reduce them, and that do so in a way that favors communities with the least need. This report begins by identifying those states where combined state and local revenues are systematically lower in higher-poverty districts--that is, states with "regressive" school funding distributions. Based on this analysis, the authors focus on six states--Illinois, Texas, New York, Pennsylvania, Missouri, and North Carolina--where children attending school in higher-poverty districts still have substantially less access to state and local revenue than children attending school in lower-poverty districts. With these states in mind, the authors then go beyond recent reports on school funding inequities to uncover some nontraditional causes of these imbalances. The first chapter, "How State Aid Formulas Undermine Educational Equity in States," written by Rutgers University professor Bruce Baker, explores how state aid formulas--often designed to promote equity and adequacy--can work against their own stated objectives. In the second chapter, "The Role of Local Revenues in Funding Disparities Across School Districts," written by New York University associate professor Sean P. Corcoran, takes a closer look at the role local revenues play in resource disparities across low- and high-poverty school districts. Appended are: (1) Data compiled for identification model; and (2) Decomposition of inequality in local revenues, by state. (Contains 25 figures, 21 tables and 94 endnotes.)