Most discussions of school funding focus on “how much.” There is a good reason for this: the end goal of any finance system is for all school districts to have enough to meet their students’ needs. Yet achieving this goal is as much about how money is allocated as it is about how much is raised (or spent) overall.
On average, about 45 percent of all K-12 revenue comes from state sources (e.g., sales and income tax), about 45 percent comes from local sources (mostly property tax), and the remaining 10 or so percent is federal aid. Yet these three revenue “streams” are typically handed out to districts in very different ways, and states vary widely in terms of their state/local “splits.” As a result, two states serving similar student populations might spend the same amount per pupil but exhibit vastly different adequacy and equity outcomes depending on the source of those funds and how they are allocated.
In a couple of recent Shanker Institute reports (here and here), we’ve been looking into this “revenue side” of the school finance equation, with a focus on finding better ways to collect and distribute all three sources of K-12 revenue (federal, state, and local), without necessarily increasing the overall amount of funding.