The Equity Roadmap: Governance & Finance

School finance is a critical part of educational equity. In an equitable state funding system, public schools would receive enough funding to provide a high-quality education that meets the needs of all students, regardless of the property wealth of communities. However, across the country no state has fully achieved this. 

These inequitable funding systems impede efforts to improve educational outcomes, particularly for students with disabilities, students from low-income families, and multilingual learners. Across the country, only 10 state’s funding systems provide at least 10% more in funding to high-poverty districts than low-poverty districts. 

Funding inequity also disproportionately impacts students of color. Across the country, districts serving the largest populations of Black, Latino, or Indigenous students receive 13% less in per-pupil state and local funding than those serving the fewest students of color. 

These inequities matter. Not only are schools with more resources able to do more for their students, but some students need additional resources and support to achieve their best. Recent research has used lawsuits and policy changes to measure student outcomes before and after large-scale funding changes. Overall, these studies found that more money does improve student outcomes. Specifically: 

• Increasing school spending by $1,000 per student increased graduation rates for low-income high school students by 1.9 percentage points and college-going rates by 3.6 percentage points.
• Effects of school finance reforms on student achievement in lower-income districts accumulates for at least a decade after the reform and can help close achievement gaps between lower-income and middle-income districts.
• Raising state funding for low-income districts translates to higher rates of educational attainment in high school and beyond, especially for Black students, and higher earnings in adulthood.

It also matters how the money is spent. The most effective way to use money depends on local context, student needs, and measures of success. 

Three factors determine how much funding districts receive and from which resources: 

• Property value of homes and businesses within district boundaries;
• How many students are enrolled in the district and educational needs—low-income, multilingual learner, rural, disability. 
• State policies, including if and by how much the state funding formula adjusts for differences in student population amongst districts and in the ability for the district to raise funding through their local taxes. 

There are three types of state school funding formula structures: 

• Student Based: 36 states and DC receive funding based on the number of students enrolled or in attendance. Districts may receive additional funding based on the characteristics of their enrolled students: low-income, multilingual learner, rural, disability—or their geographic location.
• Resource Based: 17 states receive funding based on the anticipated cost of resources and inputs—like staff salaries and instructional materials—adjusted for student enrollment. 
• Program Based: Four states allocate dollars to districts based on the cost of educational programs within those districts.  

• How adequate and equitable is your state’s school finance system? 
• What data can you use to show how state funding aligns with student needs, particularly for students from low-income families, students with disabilities, and multilingual learners? 
• What would you need to change in your state’s funding formula to improve finance equity?
• What does your state constitution say about public education and state funding obligations? 
• How does your state account for differences in local funding? 
• How much does total funding per student vary amongst school districts? What differences amongst districts have the most influence on funding? 
• What kind of school funding formula does your state use? 
• If your state does not currently have a student-based formula, how does the existing formula consider students’ different learning needs? 

Nearly every state has its flaws in how it funds their public education systems. While challenges vary by state, there are five common areas in education finance inequity. 

Formulas do not fully account for differences in student learning needs

Most states use a student-based funding formula, which provides a more direct link between student enrollment, learning needs, and state funding allocation. But other states take a different approach, using resource based or program-based funding formulas, which allocate funding based on the cost of inputs and can constrain how district leaders spend money to meet students’ needs.

There are too many districts, and they’re segregated by wealth

The number of school districts varies significantly among states. For example, Florida and New York both serve a similar number of K-12 students (2.8 million and 2.7 million students, respectively) but take vastly different approaches to drawing school district lines. The entire state of Florida is served by 67 school districts, while New York serves 10 times as many districts (689). 

District boundaries are deeply intertwined with systemic school and community segregation by race and class. A larger number of smaller school districts typically means more disparities in property wealth across district lines, which is the primary driver of local tax revenue for schools. This creates a heavier lift for state funding formulas and also generates funding inequities by race because of correlations between racial and economic segregation among districts. 

Some schools are funded in an entirely different way 

Many states have separate funding mechanisms for different kinds of public schools, like magnet schools and charter schools. As students change schools, their movement could have a significant impact on the per-pupil funding that supports their education. There may be good reasons for some of these distinctions, but policymakers should ensure that schools have equitable funding to support students’ learning needs, regardless of the kind of public school they attend.

States do not provide enough funding to adequately address student learning needs 

In states with a student-based funding formula, there are often “weights” that drive increased funding tied to districts based on their students’ additional needs. But how do policymakers know what the right weight should be? There is no single correct answer for how much weight ought to be granted for different types of students. Instead, policymakers and advocates alike should examine the opportunities a formula creates for students with different learning needs. 

States use outdated or insufficient methods to account for local tax revenue

State formulas often attempt to account for how much tax money school districts generate locally. This way, state dollars go farther for equity: State funds help even the scales for students in less wealthy districts, and states will not allocate state money inefficiently to wealthier districts that do not need it. Many states do not do enough in practice to account for the vast disparities in the tax base among school districts. They may not account for true local tax capacity or get the full picture on differences in local wealth. 

In other cases, states fail to constrain districts that outraise the amount of local revenue that state formulas assume. If states do not cap local contributions to school district funding or otherwise adjust for them, affluent districts can generate significantly more local money than their neighbors and still yield extra dollars from the state.

• The State of Funding Equity Data Tool: Look up state education funding by level of poverty and enrollment of students of color

• Splitting the Bill: A series of briefs that provide a crash course in the fundamentals of education finance and in key questions to ask in their states and communities.

• EdBuild’s FundEd: An overview of state education funding policies for all 50 states

• Edunomics Lab: Edunomics Lab provides timely, relevant and actionable analysis of education finance policy and resource allocation strategy and decisions