School Finance

One Page Summaries Of Your State's School Finance System

For the past few years, the Shanker Institute has been collaborating with Bruce Baker and Mark Weber of Rutgers University to publish the School Finance Indicators Database (SFID), a collection of finance and resource allocation measures for policymakers, journalists, parents, and the public. 

The State Indicators Database (SID), the primary product of the SFID, is freely available to the public, but it includes about 125 variables. So, even if you know exactly the types of measures you are looking for, compiling the data for a state or a group of states might present a challenge. While we have tried to make the data accessible for non-researchers, we realize that it can still be difficult for a lot of people. 

We have therefore just published 51 state school finance profiles (with help from ASI fellow Lauren Schneider), which pull together a digestible amount of information into one place for each state (and D.C.). You can download the profiles individually or as a group.

State Budget Cuts And School Districts With Pre-Existing Conditions

The Center on Budget and Policy Priorities has published projections of state budget shortfalls due to the pandemic. The total estimated shortfall for fiscal years 2020-2022 is $555 billion. This includes $290 billion in FY2021 alone, a deficit over 25 percent larger than that in the worst year of the Great Recession (2009). 

Compared with the sickness and death caused by Covid-19, state budget shortfalls are just collateral damage (though remember that states spend a lot on healthcare). But it could be a lot of damage. Unlike the federal government, virtually all states are required to balance their budgets every year. They cannot spend more than they raise in revenue, which means any deficits must be balanced out by cuts. Suppose we take these CBPP projections at face value, and subtract from them existing federal aid forthcoming and total state budget reserves. That, according to CBPP, still leaves states about $400 billion short for this past fiscal year and the next two (and there could easily be shortfalls in subsequent years).

Virtually all public school districts will feel this pain, but it will not be felt equally. Higher poverty districts are more dependent on state revenue, since more affluent districts generate more revenue from local sources (mostly property taxes). But the situation is even worse: higher poverty districts are already spending far less than they need to be. In a sense, the pandemic is going to be particularly harsh on districts with pre-existing conditions.

The Crucial Role Of State Policy In The Impending School Budget Crisis

Last week, we published a report on the probable implications of the coronavirus pandemic for K-12 education funding. My co-author Bruce Baker and I present a bunch of data on the impact of the 2007-09 "Great Recession" on education funding, as well as outcomes illustrating states' responses to the budget crisis caused by the recession. Using insights from these descriptive analyses, we offer a set of recommendations for minimizing the harm of the coronavirus recession on school budgets. 

I won't go through our findings and recommendations individually; you can download the full report, or read the executive summary. I do want to discuss on one overarching theme of the recommendations, and it's very simple: any truly effective response to the impending budgetary crisis cannot consist solely of a federal assistance package. The way states fund public schools has to change, with a forward-thinking focus on faster recovery from this crisis as well as systems better equipped to handle future crises. Chess rather than checkers.

To be clear, federal funding will be absolutely crucial in smoothing the large decreases in revenue that will occur. Without this federal help, there will likely be cuts to school budgets (and those of other public services) so severe that recovery in many states may be a matter of decades rather than years. Moreover, districts serving larger shares of disadvantaged students will bear a disproportionate amount of the harm. Accordingly, we recommend that federal funds be drawn out in two "phases" over a 5-7 year period, and that states be required to distribute them in a manner that targets assistance to those districts that need it the most. But this won't be enough.

Interpreting School Finance Measures

Last week we released the second edition of our annual report, "The Adequacy and Fairness of State School Finance Systems," which presents key findings from the School Finance Indicators Database (SFID). The SFID, released by the Shanker Institute and Rutgers Graduate School of Education (with my colleagues and co-authors Bruce Baker and Mark Weber), is a free collection of sophisticated finance measures that are designed to be accessible to the public. At the SFID website, you can read the summary of our findings, download the full report and datasets, or use our online data visualization tools.

The long and short of the report is that states vary pretty extensively, but most fund their schools either non-progressively (rich and poor districts receive roughly the same amount of revenue) or regressively (rich districts actually receive more revenue), and that, in the vast majority of states, funding levels are inadequate in all but the most affluent districts (in many cases due to a lack of effort).

One of the difficulties in producing this annual report is that the our "core" measures upon which we focus (effort, adequacy, and progressivity) are state-level, and it's not easy to get attention for your research report when you basically have 51 different sets of results. One option is assigning states grades, like a school report card. Often, this is perfectly defensible and useful. We decided against it, not only because assigning grades would entail many arbitrary decisions (e.g., where to set the thresholds), but also because assigning grades or ratings would risk obscuring some of the most useful conclusions from our data. Let's take a quick look at an example of how this works.

The Progressive School Funding Option

One of the more striking findings in our recent report presenting data from the School Finance Indicators Database concerns funding progressivity, or fairness. A state’s finance system is considered progressive (or fair) to the degree districts serving higher-needs students (e.g., lower-income students) receive more funding than districts serving lower-needs students.

The graph below is taken directly from our report (my co-authors are Bruce Baker and Mark Weber), and it provides a rough illustration of progressivity in the U.S. as a whole. The numbers in the graph are state and local per pupil revenue by district poverty quintile. They are not dollar amounts because they are centered around the average for each district’s labor market to make them more comparable. If funding were progressive, the bars in the graph would slope upward left-to-right, since it would indicate that higher poverty districts receive more revenue than lower poverty districts. Regressive funding, in contrast, would be characterized by a downward right-to-left slope. Instead, what we find is that the bars are virtually flat – that is, higher-poverty districts receive no more or less state and local revenue than lower-poverty districts. Moreover, this has been the case for 20 years.

I would reiterate that this is just an approximation of the national average. But it is consistent with what you see if you examine the situation state-by-state – there are a handful of truly progressive states and a few that are truly regressive, but most states are basically flat. It is also consistent with other analyses that use alternative methods (e.g., Chingos and Blagg 2017).

The Role Of States In Teacher Pay Gaps

We recently published a research brief looking at gaps in pay between teachers and comparable non-teacher professionals. These gaps are sometimes called “teaching penalties.” The brief draws on data from the School Finance Indicators Database (SFID), a collection of school finance and resource allocation measures published by the Shanker Institute and the Rutgers Graduate School of Education. 

The first part of the brief presents our estimates of teaching penalties, by state, for young (age 25) and veteran (age 55) teachers. We find that the gaps between teachers and similar non-teacher professionals range between 5-10 percent in states like Pennsylvania and Montana to 35-40 percent in Arizona, Oklahoma and Colorado (the latter three are all states in which there were recent major teacher strikes). To be clear, these estimates do not include benefits, although our rough calculations (discussed in the brief) suggest that the inclusion of benefits would not come close to closing these gaps in most states.

Our primary focus, however, is on the relationship between these teaching penalties and states’ school finance systems. 

Specifically, we find a significant relationship between the size of the penalties and adjusted state K-12 spending. In other words, states that spend more exhibit smaller gaps. We find a similar relationship between the penalties and states’ fiscal effort, which measures how much of their total “economic capacity” they spend on K-12 education – i.e., states that put forth more “effort” tend to have smaller gaps.

Federal Educational Investments Are Essential

Our guest author today is Stan Litow, a professor of Public Policy at both Duke and Columbia University. He is a former deputy chancellor of schools in New York City, former president of the IBM Foundation, a trustee of the State University of New York, and a member of the Albert Shanker Institute’s board of directors. His book, The Challenge for Business and Society: From Risk to Reward, was published last year.

The Trump Administration’s recent education budget proposal got a lot of attention for trying to eliminate all federal support for the Special Olympics. In response to bipartisan opposition to this foolish proposal, the cut was restored. This is good news, but the bigger story of the Administration’s proposed cuts to educational programs—and their impact on the most critical issues facing the nation—got lost in what appeared to be a positive result. The cut to the Special Olympics was misguided, but hardly unique. The overall cuts represent 12 percent of the education budget, or approximately $7 billion.

Among the most misguided cuts are those that would negatively affect college affordability, including reductions in student aid programs such as College Work Study, as well reduced funding for teacher professional development. As with the Special Olympics, there are advocates on both sides of the aisle who are likely to fight hard to reverse these cuts, but reversing the cuts would only represent a modest victory. They would not solve the underlying problems exemplified by the cuts.

Dispatches From The Nexus Of Boring And Important

School finance is one of those education policy topics located at the extreme ends of the important continuum as well as the boring continuum. On the one hand, school funding is relevant to virtually all major education policy decisions at the state-, district-, and school levels - at least in the background, but usually in the foreground. And the finance research literature is increasingly clear that there is a causal relationship between increased and/or progressive funding and better student outcomes (e.g., Jackson 2018; Baker 2016).

And yet, on the other hand, school finance is probably among the least sexy topics in our public education discourse, in part because the money behind policies is never as exciting as the policies themselves, but also because finance research is complicated and esoteric, and reading the research sometimes feels like reading audited financial statements.

Yesterday, the Shanker Institute, in collaboration with Bruce Baker and Mark Weber from Rutgers, released a new report and public dataset on school finance in the U.S. 

It's still not sexy. Just to make sure, we called it the School Finance Indicators Database.

But we did try to make it more accessible and useful to the general public than the typical finance fare. The report presents key findings from the database, specifically state-by-state results on three “core” indicators: fiscal effort, adequacy, and progressivity. We feel that these three indicators provide a pretty good summary of states’ school finance systems. Rather than going through the report’s findings, here are a few things to keep in mind when reading it.

A Myth Grows In The Garden State

New Jersey Governor Chris Christie’s recently announced a new "fairness funding" plan to provide every school district in his state roughly the same amount of per-pupil state funding. This would represent a huge change from the current system, in which more state funds are allocated to the districts that serve a larger proportion of economically disadvantaged students. Thus, the Christie proposal would result in an increase in state funding for middle class and affluent districts, and a substantial decrease in money for poorer districts. According to the Governor, the change would reduce the property tax burden on many districts by replacing some of their revenue with state money.

This is a very bad idea. For one thing, NJ state funding of education is already about 7-8 percent lower than it was in 2008 (Leachman et al. 2015). And this plan would, most likely, cut revenue in the state’s poorest districts by dramatic amounts, absent an implausible increase in property tax rates. It is perfectly reasonable to have a discussion about how education money is spent and allocated, and/or about tax structure. But it is difficult to grasp how serious people could actually conceive of this particular idea. And it’s actually a perfect example of how dangerous it is when huge complicated bodies of empirical evidence are boiled down to talking points (and this happens on all “sides” of the education debate).

Pu simply, Governor Christie believes that “money doesn’t matter” in education. He and his advisors have been told that how much you spend on schools has little real impact on results. This is also a talking point that, in many respects, coincides with an ideological framework of skepticism toward government and government spending, which Christie shares.

New Research Report: Are U.S. Schools Inefficient?

At one point or another we’ve all heard some version of the following talking points: 1) “Spending on U.S. education has doubled or triped over the past few decades, but performance has remained basically flat; or 2) “The U.S. spends more on education than virtually any other nation and yet still gets worse results.” If you pay attention, you will hear one or both of these statements frequently, coming from everyone from corporate CEOs to presidential candidates.

The purpose of both of these statements is to argue that U.S. education is inefficient - that is, gets very little bang for the buck – and that spending more money will not help.

Now, granted, these sorts of pseudo-empirical talking points almost always omit important nuances yet, in some cases, they can still provide important information. But, putting aside the actual relative efficiency of U.S. schools, these particular statements about U.S. education spending and performance are so rife with oversimplification that they fail to provide much if any useful insight into U.S. educational efficiency or policy that affects it. Our new report, written by Rutgers University Professor Bruce D. Baker and Rutgers Ph.D. student Mark Weber, explains why and how this is the case. Baker and Weber’s approach is first to discuss why the typical presentations of spending and outcome data, particularly those comparing nations, are wholly unsuitable for the purpose of evaluating U.S. educational efficiency vis-à-vis that of other nations. They then go on to present a more refined analysis of the data by adjusting for student characteristics, inputs such as class size, and other factors. Their conclusions will most likely be unsatisfying for all “sides” of the education debate.