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Education Funding

To the four ongoing education funding issues-equitable education funding, adequate education funding, high property taxes, and school vouchers-the financial crisis of the fall of 2008 has added basic questions about solvency. For more details, read on. Equitable Education Funding

With the publication of Rich Schools, Poor Schools by Arthur E. Wise in 1968, the possibility that unequal school funding could be seen as a failure to equally protect the rights of all children came to the public's attention. Scholarly research began to focus on the relationship of dollars spent to outcomes, and with the documentation of the inequalities, lawsuits were filed in 45 states, challenging the policies that governed school funding.

By the time the late 1990s rolled around, legislation like Vermont’s Act 60, the Equal Educational Opportunity Act, signed into law in 1997, were on the books, and a grand effort was being made to equalize the funding. But it then emerged that the equalization of funding was not having the desired results. That is, the students on whose behalf the funding equalization had taken place were not, in many cases, the recipients of increased educational spending, opportunities, etc.

Adequate Education Funding

In the new millennium, the discussion has moved on to the question of  “adequate” education, so that more can be understood about the parameters of an adequate education, necessary funding to support those parameters can be planned, and appropriate taxes can be levied. The results of such an approach may, however, be unexpected.

For example, in Minnesota, in the 2004 study “Cost of Adequacy in Education,” adequacy is defined by eight educational standards involving standardized test scores and high school graduation. When the Governor’s Task Force studied the state with these standards in mind, it was discovered that compensation for teachers with advanced degrees was not justified in an “adequate” system, and that the best student teacher ratio for return on investment is 18 to 1, higher than the state average of 15 to 1.

Property Taxes and Education Funding

Many state education funding systems rely heavily on property taxes for public school revenues. For many homeowners, this is and/or has become a hardship, as property taxes have escalated across the country.

Other suggestions for local funding have included sales taxes, but many feel that property taxes are more stable, especially in today’s volatile economy, in which consumer spending is dropping. Michigan tried such a switch in 1993, and went back to including some property taxes in the formula the following year.

But there’s another problem, even with property taxes included in the formula, some argue that current funding models are not providing “adequate” funding. With the current model unduly burdening the taxpayer and yet not, according to some, meeting the need, it’s a difficult situation in which to find a viable alternative.

School Vouchers and Education Funding

School vouchers are privately or publicly funded system to allow school choice opportunities, particularly for students in failing schools to be able to have an alternative. Among the issues discussed when vouchers come up are the fate of public schools whose students leave and the separation between church and state which - some people feel - should keep any school with a religious affiliation from being an alternative to the public schools in a voucher system.

The Financial Crisis of 2008 and Education Funding

The financial crisis playing out in the fall of 2008 will impact education funding in multiple ways:

  • There are fewer bond buyers to help fund school districts’ capital projects, such as major repairs and new schools.
  • States are experiencing budget deficits on account of the slump in the real estate market.
  • The wave of home foreclosures will, sooner or later, reduce the bottom line of state property tax receipts.

The good news is that the bail out that Congress has authorized includes specific legislation targeting schools. In the second bail out package, the Secure Rural Schools and Community Self-Determination Act - a source of Federal aid to schools in districts that have national forests - was extended. The Qualified Zone Academy Bond program - which provides tax credits to holders of school bonds was also extended. And the income-tax credit for teachers to buy materials and books for their classrooms has been extended as well. But this is a story that is still unfolding . . .


Minnesota Center for Public Finance Research (MCPFR) online “Cost of Adequacy in Education”

Education Week “Cross-Currents Roil School Finance Debate,” “Districts’ Borrowing May Face Hit From Continued Financial Crisis,” “Financial-Rescue Measure Includes Provisions for Rural Schools, Facilities,” “The End of School Finance as We Know It”

Public Broadcasting Service (PBS), Frontline, “The Battle Over School Choice”

Written by Mary Elizabeth