How Public Schools Are Funded
In the United States, public schools are funded by a number of sources at the local, state, and federal levels. These funds are then distributed to school districts, which then hire staff, buy supplies, and conduct classes.
Historically, the American education system has relied heavily on local funding and locally controlled school systems. These systems create perverse incentives that lead to inequities in how funds are distributed.
State Funding
State funding for public schools is an important part of how the United States equitably distributes resources and ensures that every student receives an education. This funding is provided through a combination of state and federal programs, as well as local funding.
State school finance mechanisms vary from state to state, and often come with an extensive set of regulations that dictating how, where, and on whom these funds can be spent. For example, most state general aid funding formulas take into account district enrollment, student characteristics, and community wealth, and some of these funds are specifically targeted to students from low-income families or areas.
Funding from these formulas is also used to help pay for a variety of other services that support students with special needs and academic challenges, such as special education and English language acquisition programs. It can also be used to implement and fund individualized education programs (IEPs), school health services, salaries for service providers, assistive technology equipment, hearing assistance technology, professional development and instructional supplies, materials, and software.
In addition, some states provide federal grants to districts, such as the Individuals with Disabilities Education Act (IDEA), which allots money to states to help students with disabilities receive a quality education in the public school system. These grants are targeted largely to students from low-income families and areas, as well as to schools with large concentrations of English-language learners.
Some states also use their State Aid funds to offset the difference in the capacity of different districts to raise locally raised revenues, a practice known as wealth equalization. This can be effective in ensuring that all school districts have access to the same amount of State Aid, although it does not address the disparities in income and property values that are often present in different parts of the state.
State funding for schools can also be a countercyclical spending program that helps to stabilize the economy, helping it recover after an economic downturn. While it may be difficult to measure how much school funding is a contributing factor to economic recovery, it is likely that public education spending can boost the economy when it is not already thriving, particularly in areas where public investment is low.
Local Funding
Funding for public schools is a complex and multifaceted process that begins with state-level decisions and ends with local district revenue sources. School districts are tasked with raising local property tax revenues and providing educational resources to students, including teachers, administrators, equipment, and instructional materials.
As state funding systems and school finance formulas are developed, they often aim to equitably distribute funds across districts. These formulas consider locally raised revenues and the needs of students in each district, attempting to redress the disparities that arise when school districts are economically or demographically disadvantaged.
The local portion of school funding is raised by levying taxes on residential and commercial properties within the boundaries of each school district. Most school districts are not subject to constitutional tax limits, and therefore must raise all of their revenue from local sources.
Once local property taxes are raised, district staff calculate the available funds and determine how to allocate them among various school locations. Some LEAs use a traditional method of allocating funds and resources to individual schools, while others are moving toward weighted student formulas that allow for more flexibility in allocating these dollars.
Despite their broad autonomy, most LEAs are required to comply with federal laws and regulations regarding the use of funds. These regulations include ensuring that all students receive equal access to quality education and are held accountable for their academic performance, regardless of race, economic status, or ZIP code.
Many states require that school districts report per-pupil actual expenditures for all students in each school. The data provided is critical for assessing the effectiveness of school finance policy.
School finance research has found that equitable school funding can improve student outcomes, particularly for low-income students. This is because more money spent on educating poor students leads to higher test scores, better grades, and more academic achievement.
However, school finance systems are often inequitable because of a variety of factors that are beyond the control of districts and schools, such as interdistrict inequities generated by federal and state policies and intradistrict inequities caused by district-controlled resource allocation methods and processes.
Federal Funding
Public schools receive funding from a variety of sources, including federal, state, and local governments. This combination of funds helps ensure that students have access to a wide range of quality programs and services. However, many states face funding challenges that affect school quality.
In some cases, a lack of funding makes it impossible to meet state and federal education mandates. This is a significant problem because of the importance of public education to economic prosperity and social mobility.
The federal government provides a significant amount of funding for K-12 schools, which makes it a crucial source of financing for public school systems. It is a major component of state and local spending on elementary and secondary education, accounting for about 10% of the overall budgets of schools in most states.
States use a variety of formulas to equitably distribute education funds to local school districts. These formulas account for locally raised revenues, local needs, and the different student populations in each district.
While these formulas are designed to ensure that each district gets enough funding to meet its minimum level of resources, they cannot completely address the wide range of needs within and across districts. This means that in some cases, high-need students in a district are not getting the amount of resources they need to succeed in the classroom.
Likewise, when there is an economic downturn, schools in low-income communities tend to lag behind those in high-income ones. This is because of both interdistrict and intradistrict inequities.
Even after recovery begins, inequities persist. Typically, it takes years for schools to recover from the impact of recessions on their funding levels.
This is why it is so important to improve the quality of state and local school funding. A better funding system will help schools improve student achievement and close gaps in opportunity.
In addition, an increased federal investment in public education could also serve as a tool to help speed the broader economy’s recovery from downturns. In fact, a recent study by Zandi and Yaros found that countercyclical fiscal spending on public education that was set to kick in when certain unemployment targets were reached could have a 1.34 fiscal multiplier effect, which would disproportionately benefit low-income families.
Private Funding
Private funding for schools often comes from private corporations or organizations who wish to support the educational needs of their employees and their families. These donations can be used for specific programing and extracurricular activities as well as school supplies, playgrounds, media centers and other resources.
A key benefit of increased private funding is that it allows a greater number of children to be educated, particularly those from low-income families. For example, research has found that a 10% increase in per-pupil spending for all 12 years of public schooling results in 0.27 additional completed years of education, 7.25% higher wages and a 3.67 percentage point reduction in the annual incidence of adult poverty.
In addition to generating overall fiscal savings, these programs also provide an important financial cushion for districts and states when budget pressures are high. For example, a study from the Institute for Education Sciences has found that when states and districts offer school choice programs, they are able to use this money to offset their costs of providing services to students who switch to a private school.
However, private money in K-12 is not always a perfect fit. For example, a recent study found that private schools in New York City have significantly higher tuitions than other schools in the state.
This is why it is essential for the New York City Department of Education (DOE) to monitor the impact of private funding on education outcomes in order to ensure that these funds are distributed in an equitable way and that the resources available for each child are maximized.
Private funding for public schools is an important and growing source of funding. Without these contributions, many of the resources that make up an education experience would not be possible.
The most common sources of private funding for public schools are donations from parents and organizations who have an interest in their children’s education. These donations can be in the form of cash or items, such as books and sports equipment.
There is a growing trend toward increasing private fundraising efforts by schools. This can include donations from local companies or organizations, as well as parent organizations such as PTAs. These groups are a great resource for communicating with and supporting teachers. They can help keep schools updated on the latest education issues and news. They are also a great resource for teachers to get assistance with implementing new curriculums and addressing student needs.