Budget & Finance

2023 in School Finance: Legal Fights, School Choice Debates, Persistent Inequities

By Mark Lieberman — December 22, 2023 6 min read
Conceptual illustration of business people, a roll of paper, and the people using computers, a magnifying glass and telescope with the year 2023 as a shadow below them.
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Two states saw their school funding systems deemed unconstitutional. Education savings accounts went mainstream as the latest wrinkle in the movement for private school choice. The end of federal COVID aid loomed large.

These were among the most notable developments in school finance over the last 12 months. Students continued to struggle both academically and emotionally in the long aftermath of the COVID-19 pandemic. And as ever, funding the efforts to address those struggles presented a panoply of complex puzzles.

Much has changed over the last 12 months, as the articles below will illustrate. But much also stayed the same.

Massive funding disparities persist from state to state, from district to district, and even from school to school.

District leaders struggle to cobble together resources from disparate funding sources and entice qualified workers to fill crucial positions.

The federal government, as always, plays a minimal role in financing K-12 education, ceding the vast majority of the obligation to state governments and local taxpayers. But the massive, pandemic-era infusion of federal aid for districts presented an unprecedented opportunity—and now a challenge as districts figure out how to sustain the investments they made.

Here’s a sampling of themes from the year that illustrate the value of paying close attention to what’s happening in school finance—and the structural problems that hold schools and students back.

States have a lot of work to do to ensure school funding systems fairly serve all students.

The year kicked off with a landmark ruling from a judge in Pennsylvania, who said on Feb. 7 that the state’s approach to school funding violates the state’s constitution, putting students in low-income districts at an enormous disadvantage.

Rounding out the year, a judge in New Hampshire issued a similar ruling on Nov 20. The state ought to be investing, at a minimum, nearly twice as much as the current per-pupil state aid, the judge said. Unlike in Pennsylvania, top state officials are contesting the ruling.

Similar lawsuits over school funding inequities will continue to play out next year in Arizona, North Carolina, and Wyoming.

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Charter schools are here to stay, but scrutiny of the model continues.

Funding for charter schools remains contentious even as proponents of school choice have shifted much of their attention to vouchers and other forms of publicly subsidized private education.

Many charter school advocates argue their students deserve more fiscal support from states, particularly to ensure that they’re learning in well-maintained facilities. Critics, meanwhile, argue that certain approaches to setting up charter schools divert resources from traditional public schools and shield their alternatives from accountability.

Those debates are playing out in courts and state legislatures across America.

Private school choice gained visibility—and scrutiny.

Nine states allow, or are poised in the coming years to allow, the majority of K-12 students to apply for public funds to pay for private school and homeschool expenses.

Education savings accounts gained significant momentum this year as a vehicle for states’ private school choice initiatives, racking up high-profile wins in Republican-led states like Florida and Iowa. These programs provide state funds parents can spend on private school tuition and fees, as well as other education expenses outside of public schools.

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But private school choice faced plenty of obstacles as well: skeptical rural lawmakers in Texas; a messy legal challenge in Arkansas; cost overruns in Arizona; delayed delivery of funds to families in Florida; and constitutional challenges in Ohio, South Carolina, and Wisconsin.

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School buildings are in serious disrepair—but governments are trying to help.

Thousands of school buildings nationwide need new mechanical systems, more classroom space, improved ventilation, and a reduction in high levels of hidden toxic chemicals.

These problems, and the estimated cost to fix them, have only piled up as years of insufficient investment pass by.

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Several efforts to address these issues got underway in 2023. The federal government launched several funding opportunities for school facilities following last year’s passage of the Inflation Reduction Act, a massive spending package geared toward fighting climate change.

On top of some traditional grant programs, schools are also eligible through a provision called “direct pay” to receive substantial reimbursement for completing solar and renewable energy projects, and for rebates for buying electric buses.

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Meanwhile, Vermont persisted with ongoing efforts to find and remediate the toxic chemicals known as PCBs hidden within school building materials. And Michigan became the first state in the nation to mandate filters for heavily used water stations, whether they test positive for lead or not.

ESSER is on its way out—and a “perfect storm” of financial trouble could move in.

The federal government sent three rounds of relief aid to school districts during the first year of the pandemic totaling $190 billion—well more than the federal government typically sends to schools each year. The deadline for districts to commit the second round of funds for particular expenses passed in September 2023. Districts must finalize their planned expenses for the last and largest round of funds by Sept. 30, 2024.

The wind-down of this crucial financial lifeline for districts has led many top administrators to ponder significant cuts, or shifts in strategy over how to spend funds most wisely.

Some prominent leaders are pushing the federal government for more time to spend the remaining money, or more money to continue offering vital services students continue to need.

Some districts are cutting administrative positions to protect the classroom experience for students. Most are looking for alternative sources of funding, including district reserves, increased state aid, or support from nonprofits and foundations.

Reparations efforts, including some focused directly on K-12 education, gained momentum.

The generational effects of racism continue to define some of the most pressing challenges in K-12 education today, including heated debates over curriculum content and funding equity.

Efforts to study reparations for Black Americans who have suffered the effects of those systemic inequities moved forward this year. Lawmakers in California and New York approved statewide commissions to study the question. Several cities appointed current K-12 students to working groups exploring reparations.

And a small handful of school districts—most notably the Berkeley district in California—started examining their potential role in offering reparations and atoning for past harms.

Studies are only the first step. Soliciting community feedback, implementing policy proposals, and studying the effects are still to come.

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