Report Finds No Easy Solutions for Disparities in School Funding

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For anyone waiting for the policy elixir that will level the fiscal playing field between rich and poor school districts--forget it. That's the word from federal researchers who just issued a report on state school finance.

In their third study in two years on school funding equity, the U.S. General Accounting Office found that the biggest impact on disparities comes from an imprecise blend of targeted funds, higher state aid, and tinkering with taxes. States have a role to play in increasing equity, but they must be willing to adopt multitiered solutions, the GAO argues.

For More Information:

Read "School Finance: State Efforts To Reduce Funding Gaps Between Poor and Wealthy Districts" in full text or as a PDF file. Or, for a copy, call the GAO: (202) 512-6000.

"To more successfully address funding gaps, most states would have to increase state equalization efforts and impose some constraints on local tax efforts," the report concludes.

While the report adds that the federal government could do more to equalize school funding through its existing programs, it warns that even well-intended efforts--at the state and local levels--can backfire.

"The bottom line is that there is no perfect mix," said Jerry C. Fastrup, a supervisory economist at the congressional investigative agency who worked on the reports. "There's a constant rejiggering of dynamics, and it's overlaid with politics."

Different Routes

Based on 1991-92 school year data, which provide the most recent national figures, tax contributions by poor districts made the greatest impact on closing funding gaps between themselves and well-to-do districts.

In that period, poor districts in 35 states made a greater tax effort than their wealthy counterparts, the report says. In nine of those states, those contributions helped erase funding gaps. Compared with the richest districts, however, poor districts in those nine states put a higher rate of their taxable wealth toward schools, ranging from 106 percent more in Delaware to 407 percent more in Wyoming.

"It certainly isn't the most effective way to close the gap," John G. Augenblick, a partner in the Denver-based school finance consulting firm of Augenblick & Myers, said in an interview. "But economies have been so good that states have done a lot since [1991-92]."

Some states also closed their spending gaps by raising their share of total school spending and by targeting aid to poor districts.

"In general, the larger the equalization effort in these states in school year 1991-92, the smaller the funding gaps between poor and wealthy districts," the report says.

For example, West Virginia's equalization efforts brought per-pupil funding to $4,859 in the poorest districts and $5,044 in the wealthiest, a difference of just 4 percent.

In contrast, Illinois made little effort to equalize funding. As a result, the poorest districts there spent an average of $4,330 per pupil while the wealthiest spent $7,249 per student, a difference of 67 percent.

But state policies can bring unintended consequences, as happened in Louisiana and Rhode Island, two of four states singled out by researchers for a review of spending patterns from the 1991-92 through 1995-96 school years.

Before 1992-93, Louisiana targeted more aid to low-income districts. By contrast, Rhode Island tried to close its gap by raising its share of school spending.

But Rhode Island's greater state spending failed to close the gaps because the increase in state revenues allowed the poorer districts to decrease their local tax burden, thus nullifying the benefits of the state funding boost.

In Louisiana, affluent districts raised taxes, so that, by 1995-96, funding for students in wealthy districts rose from their 1991-92 rates by $724, compared with $503 in the poor districts.

While it commits funds to educationally disadvantaged students, the federal government does relatively little to encourage states to craft equitable finance systems, the GAO report contends.

For example, under the formula for impact aid, which reimburses local jurisdictions for their tax-exempt federal properties, states are rewarded for having equitable school finance systems. But that program reaches relatively few districts.

And, the report notes, the Title I Education Finance Incentive Program would award federal money to states based on their levels of equity, but it has not been funded.

Vol. 17, Issue 41, Page 23

Published in Print: June 24, 1998, as Report Finds No Easy Solutions for Disparities in School Funding
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