Few aspects of education have generated as much attention and dispute as how schools are financed. Since 1971, courts have found school finance systems in 17 states unconstitutional because of disparities in spending between rich and poor districts, the National Center for Education Statistics reports. With several states still in litigation, there is little doubt that policymakers will continue to struggle with the issue well into the future.
Education Week has graded each state on the equity in its school spending system since Quality Counts was first published three year ago.
The primary measure the report has used, called the “coefficient of variation,” focuses on how much education spending differs across all the districts in a state. States earning the highest grades had the least variation in spending per student across their districts--meaning that districts’ spending clustered around the statewide average. States with the greatest variation earned the lowest marks. This simple but illuminating statistic will continue to be reported in future editions of Quality Counts.
But variations in actual district spending are just one way of looking at the question of equity. In an effort to measure more precisely the role that states play in eliminating funding disparities, Education Week plans to introduce a new system for grading equity in next year’s Quality Counts. The following offers a preview of that more sophisticated equity-grading system. On the facing page, a table shows how states would have performed.
Statistics such as the coefficient of variation can measure the differences in spending between rich and poor districts. But they cannot tell policymakers what is causing the differences. That’s partly because less wealthy districts can keep up with their better-off peers in two ways: by increasing their tax rates or by accepting supplemental funding from their state governments.
Starting with next year’s report, Education Week plans to look more closely at the state role in promoting educational equity. Even though states generally have assumed more of the K-12 funding burden in recent decades, in many states local property taxes remain a major source of education dollars. As a result, districts with higher property values are able to generate greater revenue than those with lower values even if both tax property at the same rate.
A critical question in the evolving debate on equity is whether states target financial aid to poorer districts to help them remedy difficulties in generating local dollars from a low tax base. Newer measures of equity can examine whether a state is doing its part to help property-poor districts keep pace with wealthier districts.
In an effort to find a more sophisticated approach to measuring equity, Education Week hosted an advisory meeting in the summer of 1998. Six top school finance scholars were brought together to share their thoughts on how to devise a new set of equity indicators. The advisory group recommended that Quality Counts grade the states on three measures:
- “State equalization effort,” a sophisticated, multivariate-analysis technique developed by Jerry Fastrup of the U.S. General Accounting Office that measures the extent to which a state’s finance system allows districts to achieve a certain level of funding for the same effort, or tax rate;
- A “wealth-neutrality score,” which measures the extent to which education funding is related to property wealth; and
- The “McLoone index,” which measures the gap between what the bottom half of districts spend per student and what they would spend if they spent as much as the district in the middle of the funding pack.
State equalization effort. States can help equalize school funding either through the percentage of total funding they provide or by concentrating their efforts on poorer districts.
Using a database with more than 200,000 pieces of data from more than 15,000 school districts nationwide, Education Week researchers created a model designed to determine how much states are targeting their efforts to poorer districts. The analysis examines the extent to which a district’s property wealth affects state aid after taking into account other factors that also influence state funding, such as student enrollment, the physical size of the district, and the number of students who are poor or in special education. A negative targeting score implies that, generally, districts with relatively less property wealth are receiving more state aid. In essence, a negative score is good news.
Idaho, for instance, provides about 68 percent of the total funding for its districts, which could lead to wide disparities in spending. But its targeting score is -0.338, meaning that it focuses much of its funding effort on poorer districts. If all of Idaho’s districts chose to tax themselves at the same rate, those poorer districts would garner up to about 91 percent of the average per-pupil spending in the state, after targeting. The new measure would grade Idaho based on that 91 percent figure.*
Alabama, by contrast, does not target poorer districts at all, for a targeting score of 0. So its final grade would simply be based on the state’s total share of district funding.
Keep in mind that since localities choose how much to tax themselves, states can still see inequities in funding even with a high equalization effort. A high state equalization effort simply means that districts have been given a more equal chance to finance schools.
Wealth-neutrality score. This measure assesses the amount of inequity in a state that is related to property wealth. A positive number here indicates that wealthier districts, as measured by their property values, generally receive more funding than poor districts when state and local dollars are combined.
Ohio, for instance has a positive wealth-neutrality score of 0.204, meaning that wealthier districts by and large have more per-pupil revenue than poorer districts. Although the state has a targeting score of -0.165, indicating that it generally provides more aid to its poorer districts, wealthier districts still end up raising far more money when state and local revenues are combined.
The McLoone index. The final indicator for next year’s new grading system examines the variability in spending per pupil. It’s based on the assumption that if all the pupils in the state were lined up according to the amount their districts spent on them, perfect equity would be achieved if every district spent at least as much as was spent on the pupil smack in the middle of the distribution. The measure, named for education finance scholar Eugene P. McLoone, focuses entirely on how much effort it would take to get districts in the bottom half of the spending distribution up to that point.
The measure calculates the actual dollar amount needed to bring each pupil in the bottom half up to the midpoint in per-pupil expenditures. The index, then, is the amount of dollars spent by districts in the bottom half divided by the amount of dollars required to raise those districts up to the midpoint.
Vermont has a McLoone index of 0.863, based on data from fiscal 1995-96, the most recent year for which information is available. Together, the districts in the bottom half of Vermont’s per-pupil spending distribution spent about $236 million. If each of those districts spent $5,287 per pupil (the midpoint for per-pupil spending in the state) the total cost would be about $274 million. The ratio between what is actually spent and what needs to be spent to achieve equity is the McLoone index.
Together, the three indicators paint a fuller picture of the inequities in individual states and how far states have gone to eradicate them. Even so, such an analysis has its drawbacks. One weakness involves the availability of data.
To determine a district’s property values, Education Week used the aggregate value of owner-occupied housing for each district, based on the 1990 U.S. Census. Unfortunately, the data do not include information on the aggregate value of commercial property within a district, which also affects a district’s ability to raise revenues. In addition, a lack of timeliness is clearly a problem. Despite the continuing debate over the effects of relying heavily on property taxes to generate school revenues, no coordinated national effort exists to gather data on district property wealth in a more complete and up-to-date fashion.
Quality Counts plans to continue refining its equity measures in the future, and to seek even better and more timely data to measure each district’s tax base. In addition, the editors hope to undertake more reporting on how states target their efforts toward low-income students and those in need of special education services. A more detailed description of the way Education Week plans to compute its new equity indicators for Quality Counts 2001 is available online at www.edweek.org.
