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GAO Documents Persistent School Inequities

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State and federal money has narrowed the funding gap between high- and low-poverty school districts, but failed to equalize spending in the states with most of the nation's poor children, according to a report from Congress' research arm.

The U.S. General Accounting Office concludes that the heavy reliance by schools on property-tax revenues is unfair to poor areas.

"Despite state and federal efforts to close the funding gap, the most important factor determining the size of the gap was the tax effort of high-poverty districts compared with low-poverty districts," says the report, which was set for release to the public Feb. 28.

The results echo what plaintiffs in school finance lawsuits often argue in court: Funding mechanisms that rely on property taxes are unfair to low-income areas. The findings also show that some states will need to play Robin Hood with local tax dollars to level funding across districts, according to one expert.

"High-wealth districts are always going to be able to raise more money," said Lawrence O. Picus, the director of the Center for Research in Education Finance at the University of Southern California in Los Angeles. "The state can't afford to give everybody what they want."

Equalization Progress

In an earlier report on school finance, the GAO found that wealthy districts outspent their poorer counterparts in 37 states. ("Study Reveals Funding Gaps Across States," March 19, 1997.)

The new study discovered that state and federal grant money eliminated funding gaps in 16 of 37 states. The analysis was based on data from 1991-92, the latest school year for which such information was available.

For every dollar spent on every student of average wealth, states spent $1.62 on poor children and federal officials allocated $5.73 per impoverished child. On average, the two sources allocated $2.10 for the education of an impoverished child for every dollar spent on a middle-class child.

While the extra money was enough to eliminate funding inequities in 16 of 37 states, it fell short of helping most of the nation's impoverished students. Almost two-thirds of poor children live in the 21 states with inequitable spending, according to the GAO. The size of the grants from state and federal programs was more important in eliminating the spending gap than special formulas targeted to helping impoverished areas, the report says.

For example, the California state government funds 64 percent of the school budgets in the state. That large share partially offsets the unfair advantage that well-to-do areas have because of their property-tax revenue, the GAO says. The result is a 5 percent funding difference between affluent and poor districts.

Such gaps are leading states to move away from property taxes as the main school revenue source, said Chris Pipho, a spokesman for the Education Commission of the States, a Denver-based coalition of state officials.

For example, Illinois last year raised new money for high-poverty schools by increasing taxes on cigarettes, gambling, and telephone services. Outgoing Republican Gov. Jim Edgar wants to continue to decrease the reliance on property taxes.

Utah officials are debating eliminating property taxes altogether in response to escalating home values that are increasing homeowners' tax burden, Mr. Pipho said. "Gradually, this is coming along," Mr. Pipho said.

But it is unlikely that property taxes will be abandoned as the main source of school aid, both Mr. Picus and Mr. Pipho said in interviews.

Property taxes contribute about $150 billion a year to schools nationwide, Mr. Picus estimates. "Where are you going to find that money elsewhere," he said. "I don't see many alternatives."

The solution, if politically feasible, is to add so-called recapture clauses that allow states to help spread property-tax money among school districts, Mr. Picus said.

Federal Influence

In addition to informing state policy, the GAO says its report will contribute to the debate over federal block grants.

Many Republicans, led by Sen. Slade Gorton of Washington, want to merge most federal K-12 programs into one grant that would give districts wide discretion on how to spend the money. Other proposals would expand the existing Title VI program, a $350 million state-based block grant.

Any proposal that does not retain the federal emphasis on funding for low-income areas will add to the finance inequities that exist in almost half the states, the GAO concludes. In such cases, "the federal funds--and the combination of federal and state funds--might become less targeted to poor students," the report says.

"School Finance: State and Federal Efforts to Target Poor Students" is free from the U.S. General Accounting Office, P.O. Box 37050, Washington, DC 20013; (202) 512-6000.

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