Executive Summary – 3rd Edition (2014)
"Is School Funding Fair? A National Report Card" analyzes the condition
of state school finance systems with a focus on the fair distribution of resources
to the neediest students. The Report Card makes a number of assumptions about
how school funding systems should be designed:
- a fair funding system should provide levels of funding based on student
- student poverty is the most critical variable affecting funding levels
and can serve as a proxy for other measures of disadvantage, such as racial
segregation, limited English proficiency, and student mobility;
- fair funding systems are designed "progressively" so that funding
increases relative to student poverty;
- a sufficient overall level of funding is a crucial starting point for any
funding formula to be successful.
This 3rd Edition of the Report Card provides five years of school funding
data, from 2007 through 2011, during the critical period before the start of
the Great Recession and through the beginning of a slow recovery. Schools across
the country were affected by a significant decline in state and local revenues
that primarily fund education. To prevent major layoffs and cuts in essential
programs and services, the federal government created a stimulus package to
support public schools through the American Recovery and Reinvestment Act (ARRA).
But when ARRA funding was depleted many states were left with enormous budget
shortfalls. The National Report Card examines how states managed these difficult
economic circumstances and their impact on the fairness of state school finance
The Fairness Measures
The report evaluates states on the basis of four separate, but interrelated,
fairness measures. These measures are designed to provide meaningful comparisons
among states by taking into account factors that influence education costs,
such as geography, regional labor markets, and population density, when appropriate.
The measures are:
- Funding Level: Using figures adjusted to account for a variety of
interstate differences, this measure allows for a comparison of the average
state and local revenue per pupil across states. States are ranked from the
highest to lowest per pupil funding.
- Funding Distribution: This measure shows whether a state provides
more or less funding to schools based on their poverty concentration. States
are evaluated as "regressive", "progressive", or "flat" and are given letter
grades that correspond to their relative position compared to other states.
- Effort: This measures differences in state spending relative to
the state’s fiscal capacity. States are ranked according to the ratio of
state spending on education to gross domestic product.
- Coverage: This measures the proportion of school-aged children attending
the state’s public schools and also addresses the income disparity between
families using public and nonpublic schools. States are ranked according
to both the proportion of children in public schools and the income ratio
of public- and nonpublic-school families.
Summary of Findings
The table below presents results for the four fairness indicators as of 2011,
with arrows signifying changes from the baseline year of 2007. It is important
to consider each of the four measures together to capture the complexity of
each state’s finance system, which is embedded in a specific economic and political
context. The report’s findings demonstrate that poor economic conditions have
a direct impact on school funding:
- Most states have largely stagnant or declining funding levels, and
vast disparities among states remain. In fourteen states, funding levels
in 2011 were below 2007 levels, even without adjusting for inflation. There
is over a $10,000 gap between the highest funded state (Wyoming) and the
- The majority of states have funding systems with "flat" or "regressive" funding
distribution patterns that ignore the need for additional funding in
high-poverty districts. Recent trends show an increase in the number of
regressive states and a decline in the number of progressive states. For
example, Utah and New Jersey, both of which previously were among the most
progressive states, experienced a significant erosion of equity.
- Most states experienced a decrease in overall revenue resulting in a declining
financial base from which to fund schools; most states also further reduced effort by
lowering the share of economic productivity dedicated to education. The largest
reductions in effort were seen in Maine, Hawaii and Florida.
- Coverage is a relatively stable indicator, but it demonstrates the
degree to which wealthier families in some states opt out of the public education
system, potentially affecting the public and political will necessary to
improve school funding. A relatively large share of students in Louisiana
and Washington, D.C. attend nonpublic schools. These children tend to come
from far wealthier families than their public school counterparts.
- Only Minnesota, New Jersey, and West Virginia are positioned relatively
well on all four indicators, though all three have areas in which they could
- Two states -- North Carolina and Missouri -- received low ratings in each
of the four indicators.
The 3rd Edition of the National Report Card includes three new indicators
that exemplify how state policies on education funding determine the resources
available for schools and staff and the families they serve.:
- Early Childhood Education: Enrollment of low-income students in
early childhood education lags behind that of their wealthier peers in nearly
all states. States that rank high on the four main indicators of funding
fairness also have greater participation by low-income families in early
childhood education programs. These states include Massachusetts, New Jersey
- Pupil-to-Teacher Ratios: An equitable distribution of school staff
in districts and states is one of the most meaningful outcomes of fair school
funding. The majority of states put greater staffing resources in high-poverty
districts, though in many cases the differences among high- and low-poverty
districts are minimal. States that are labeled "progressive" are
able to leverage additional funds to provide greater staffing resources in
high-poverty districts and create a fair distribution of teaching staff (for
example, Minnesota and South Dakota), while "regressive" states,
such as Nevada, Alabama and Illinois, have fewer staffing resources in the
highest poverty districts.
- Wage Competitiveness: A fair school funding system should provide
districts with the opportunity to attract and retain high quality teaching
talent. But average teacher salaries in most states are below those of their
non-teacher counterparts. States with higher overall funding levels are able
to offer teachers more competitive salaries (for example, New York and Wyoming),
while poorly funded states have teacher salaries that lag behind other professions
(for example, Colorado and Arizona).
This edition of the National Report Card demonstrates the susceptibility of
states’ school funding systems to larger economic conditions. The fiscal cliff
faced by many states after the depletion of federal stimulus funds often resulted
in stagnant or declining resources devoted to education, as well as a retreat
from the equitable distribution of funds. The data provide a clear warning
to elected officials, education stakeholders and concerned citizens that they
must be diligent to ensure that states (even those with the best track record
on fair school funding) do not retreat from funding equity.