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Finance & Taxation        < Previous        Next >


State & Local Taxes Pay for More than 90%


Q. I saw a chart that showed that federal funding for local K-12 schools has really not increased all that much in our area. Local funding has gone up quite a bit, but it's had nowhere near the explosion that we've seen in state taxes that are flowing in to our schools. What's up with all this statewide funding of what are supposed to be locally-run public schools?


History happened, and equity is important. Federal funding of local public schools is now at 9.1% nationally, according to the National Center for Education Statistics, U.S. Department of Labor. It's far more in states with large pockets of poverty, such as Mississippi, since helping disadvantaged children learn is the mission of federal educational involvement. (See chart in today's Homework, below)


When we had "white flight" from urban school districts in the 1960s and '70s, we left them with much less property valuation per student than they used to have. But these two words define school finance issues today: adequacy and equity. Revenues must be enough to provide a constitutionally-sound level of education for each student, and educational opportunity must be equitable from place to place.


To try to equalize this, state legislatures and, increasingly, state courts have decreed that states must adopt the "Robin Hood" style of school finance.


That means state lawmakers are supposed to "take from the rich" - suburban and rural taxpayers - and "give to the poor" - mostly inner-city school districts, in an attempt to equalize the amount of revenue that a student has access to, no matter where he or she lives in the state.


Naturally, there has been a lot of controversy over these categorical funds, weighted formulas and sliding scales, and most everybody feels cheated or slighted in some form or another. Then there's the whole spectre of homeschooling, which spends a minute fraction per pupil of public schools but whose students do better on all measurements. And then there are the faith-based private schools, whose students also do better for far less than the public schools spend, and for tougher-to-teach student populations as well.


But gradually, you can see the ratio of funding beginning to shift away from local tax sources --- chiefly property taxes - and more to statewide sources, chiefly sales and income taxes.


Also in the mix are newfangled revenue sources, including lottery revenues, casino revenues, NGO (non-government organization) funding, user fees, private donations, and many more.


Once the U.S. Department of Education was created in the 1960s, its mission was also to try to equalize educational opportunity for disadvantaged children and youth. And so came the federal subsidized lunch program, the Title I remedial program for disadvantaged students, special education funding, and much more.


Basically, conservatives and moderates want to keep property taxes as a major revenue source because they are more stable and predictable than other taxes and fee sources. With politics in the mix, some districts have seen a huge variance in the amounts of state aid to education which they receive from one year to the next. That makes planning a nightmare. Also, property taxes are thought to be much more recession-sensitive than other funding sources. Note, too, that online spending is currently unrealizable as tax revenue, and "sin taxes" are controversial in terms of ethics, for many Americans.


Meanwhile, while social liberals prefer a shift toward statewide funding sources, and economists can make a fairly good case for that, even though in Hawaii, the state with no local funding revenues for schools, there's one of the highest rates in the country for private-school enrollment because of a lack of perceived quality in the state-funded schools. For those who want more information on state funding sources, see:



Homework: Here's a state-by-state look at the ratios of local, state and federal tax revenues for K-12 education from the National Center for Education Statistics, U.S. Department of Education:



By Susan Darst Williams Finance & Taxation 02 2008


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