Education Funding

Schools Lost Ground on Funding in Recent Years. The Recovery Could Be Slow

By Mark Lieberman — December 08, 2023 5 min read
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Schools in many states lost funding in the early days of the pandemic—and they may not fully recover for years to come, especially as federal relief aid goes away.

That’s one of several takeaways from the 2023 edition of the research and advocacy nonprofit Education Law Center’s annual “Making the Grade” report, which assigns grades to all 50 states on the progress schools have made toward robust and equitable funding for K-12 schools.

The latest report, published Dec. 11, covers the 2020-21 school year—the first one that took place entirely during the pandemic.

States and local districts were preparing budgets for that school year in the early months of 2020, just as the COVID-19 pandemic shuttered America’s schools and plunged the country into massive economic uncertainty. The bulk of federal pandemic recovery dollars—colloquially known as “ESSER funds”—didn’t arrive until months later.

Schools in 14 states saw a decrease in state and local revenue that year compared with 2019-20. In recent years, the same was true for only three or fewer states.

Many states have increased education funding since then on the strength of surpluses helped by the massive infusion of federal economic stimulus funds. But education funding from state and local coffers—the primary sources of education funding in the United States—likely hasn’t fully bounced back even now, said Danielle Farrie, the Education Law Center’s research director and the report’s co-author.

The Education Law Center conducts research and supports litigation with the aim of ensuring states meet their constitutional obligations to adequately fund schools.

“When states pull back on funding, it happens oftentimes rather quickly, but the recovery from that is often very slow,” Farrie said. “What we fear is whether we’re going to see a repeat of what happened during the Great Recession.”

Farrie believes some states have rushed to take political advantage of rising revenues to provide tax relief to residents. While a number of states have also devoted portions of their surpluses to boosting aid for public schools, the education sector could suffer in the long run as surpluses dry up, she said.

“Now we’re in a position where a lot of these states have lowered their tax rates and are now going to say that they don’t have enough money to increase investments in education,” Farrie said. “But they have made specific policy choices that are leading to these outcomes.”

Here are three other takeaways from the report.

1. Some states are getting worse at funding schools equitably

In most states, schools in high-poverty areas—where at least 30 percent of students come from families living in poverty, according to the U.S. Census Bureau—receive on average the same amount of, or less, state and local funding per student than schools in low-poverty areas, the report shows. The report considers a low-poverty district to be a district where 5 percent or fewer students live in poverty.

A wide body of research shows students from low-income families need more resources to achieve the same academic outcomes as their high-income peers.

Most state education formulas include provisions that attempt to direct more aid to high-need students or schools. But those efforts don’t always play out as planned. In Washington state, for instance, researchers have found that school funding reforms from the 2010s have directed more aid to wealthy districts than poor ones, even though the goal was to do the opposite.

High-poverty schools in only 22 states receive more money on average per student than low-poverty schools, the ELC’s report shows.

Lower-poverty schools in 16 states got more funding per student from state and local sources than schools with higher levels of poverty. And schools in five states—Alaska, Nebraska, Oregon, Utah, and Wyoming—saw funding gaps between low- and high-poverty schools grow from 2019 to 2020, the report shows.

In Oregon, for instance, high-poverty districts got $11,357 per student on average, while low-poverty districts got $16,492 per student.

2. In most states, school funding lagged behind broader economic growth

Education funding from states and local governments typically grows each year. But the rate of growth nationwide in the years examined by the Education Law Center was smaller than in previous years.

Meanwhile, national GDP grew by 10 percent in 2021, compared with annual growth of 3 to 5 percent in the preceding years. And many states saw better-than-forecasted returns.

As a result, nearly every state’s level of “effort"—the percentage of a state’s GDP that goes toward state and local funding for schools—decreased between the 2019-20 and 2020-21 school years. Missouri was the only exception.

3. Even the best-performing states need major improvement

Each edition of “Making the Grade” reinforces the same point: School funding differs wildly from one state to the next.

In states like Maine, New York, Pennsylvania, and Wyoming, school districts get an average of more than $20,000 per pupil from state and local sources. In Arizona, Idaho, and Utah, the same funding streams provide only slightly above $10,000 per pupil.

But even the states where schools get the most money, and where funding is most effectively targeted to higher-need districts, have more work to do, Farrie said.

Pennsylvania schools, on average, get $20,000 per pupil from state and local sources. But in September, a researcher for Pennsylvania State University presented state lawmakers with an analysis showing that the state is underfunding public schools by at least $6 billion.

The findings support a judge’s conclusion from earlier this year that, despite a large overall investment in K-12 education, the state is failing to provide adequate funding for students from districts in areas without a substantial base of local property tax revenue.

And litigation is currently challenging the constitutionality of existing public school investments in Wyoming, another state ranked highly in the report. The Wyoming Education Association, which filed the lawsuit, argues the state has failed to provide school funding that keeps up with inflation and other new costs.

“Just because a state is performing relatively well on our indicators, there’s still so much more room for growth everywhere,” Farrie said.

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