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Fiscal Health of Urban Districts Tied to Costs of Teaching Poor

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The ability of urban school districts to identify and address the higher costs incurred in educating poor children may be the major determinant of their fiscal health in the coming years, according to a draft report of a new study by the U.S. Education Department's School Finance Project.

The districts most likely to meet that challenge, according to the report, are characterized by higher-than-average per-pupil expenditures, heavy reliance on local revenue sources, and low proportions of children under 5 years of age.

And, not surprisingly, the prospects for large-city districts correlate closely with the outlook for the states in which they are situated, although the research team did find exceptions. Some districts with otherwise poor prospects were upgraded, the report says, because they can reasonably expect to benefit from their states' better outlook.

The report, "The Financing of Urban Public Schools: A Report on Selected School Systems," which is expected to be issued in final form within a month, is a supplement to the project's assessment of state prospects for funding education. Both are part of a comprehensive, four-volume study of school finance ordered by the Congress in 1978.

The urban-schools study is based on 1980 data from 44 districts, including five county districts that take in large cities. The sample represented about 13 percent of the nation's public-school children in 1979-80 and over half the systems enrolling more than 50,000 pupils, according to the report.

A district characterized as having "good prospects" cannot necessarily expect to see its absolute level of resources increase; instead, it is one that is considered likely to maintain or improve its average per-pupil expenditure over time. Hence, an expected increase in enrollment is considered a burden, since it is unlikely that resources will be increased accordingly; stable or declining enrollment is seen as an advantage.

"You couldn't say the cities were so broke that they needed help for school purposes, because [the situation] varied so much," said Esther O. Tron, principal author of the report. "It was the composition of the pupil population that might require more resources. I think that's the way to handle the problem. ... We should concentrate on the kinds of kids who go to those schools."

By 1980, the pupil composition of the sample districts had already changed considerably, and the trend is expected to continue.

"Over the decade, the population of large cities has become less wealthy, with an increased concentration of minorities and a growing incidence of elderly," the report says. "Urban school systems reflect some similar demographic features: they are increasingly composed of children who are poor and from minority backgrounds. ... What is clear is that central cities have a high incidence of educationally needy children and that their numbers are likely to grow."

In the majority of the sample cities, public-school enrollment declined by more than 20 percent--or nearly twice the national average--between 1969 and 1979. But the rapid decline produced a financial cushion for many cities, particularly those that were not heavily reliant on enrollment-driven state aid, leading to increased per-pupil expenditures. By 1978-79, all but four of the sample cities had per-pupil expenditures at least equal to their states' averages.

At the same time, however, the cities became poorer, as measured by per-capita income, with urban income declining relative to states' average income.

The study included two other dimensions in its analysis of funding prospects: the proportion of children living in poverty (the national average is 4.5 percent) and the proportion of children under age 5 (the national average is 7.2 percent). Where the proportions exceeded the national averages, districts were presumed to be "burdened."

"To what extent cities will be able or willing to raise additional revenues for schools may be the critical issue," the report says. "The current urban population composition does not suggest a strong constituency for increasing school taxes. In addition, cities are constrained in levying taxes on businesses because of concerns about business flight. While at the present time most central-city school districts in the sample appear to have favorable levels of expenditures per pupil, it is likely that more than average resources are needed to educate their student populations."

The final factor in the analysis was "weighting" expenditures to reflect each district's proportion of poverty-level students. Drawing on the practices of several states that provide extra aid for such children, the researchers concluded that it costs about 25 percent more than the average to educate a child from a poverty-level family.

Ms. Tron cautioned that the study does not take into account developments since 1980, such as Proposition 2 in Massachusetts and cuts in federal aid, that might have affected the fiscal position of the districts.

Based on expenditures, state prospects, and demographic factors as of 1980, the researchers categorized the sample districts according to prospects for funding and identified characteristics common to each of the categories.

The types of districts and salient characteristics are:

Districts with good prospects. These spent more than 10 percent above the national per-pupil average in 1980 and maintained this advantage even when the expenditure was weighted to reflect incidence of poverty in the district. Per-capita income in these cities is around the state average, but revenue efforts are higher. These districts tend to rely heavily on local revenue for schools (which is why they are higher-than-average spenders) and are best able to absorb declines in state and federal aid. Most have lower-than-average incidence of children under 5, suggesting they will not be strained by sudden enrollment increases. They tend to be located in the northern half of the country and in states with good or average funding prospects.

Examples: Denver, Minneapolis, Pittsburgh, Seattle.

Districts with average prospects. These were spending within 10 percent of the national average or more than 10 percent above average, but the high incidence of poverty offset that advantage. They did tend, however, to spend well above their states' averages. They include four of the five county districts in the sample and are located in the Mid-west, Southeast, and West.

Examples: Charlotte-Mecklenburg, N.C., Dallas, Indianapolis, St. Louis.

Districts with poor prospects. These spent more than 10 percent below the national average or spent close to the average but "appear seriously deficient when their excess incidence of poor children is taken into account." They tend to have per-capita incomes below their state averages and higher-than-average tax efforts, and they tend to be located in states with poor fiscal prospects.

Nearly all the districts in this category had higher-than-average incidences of children under 5, and several were in the Southeast, where state equalization formulas tend to work to the disadvantage of the relatively wealthier cities.

Examples: Hartford, New Orleans, Newark, Salt Lake City.

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