School funding disparities should alarm all, not just those who lean left

A recent study by EdBuild, a think tank researching education spending, found widespread disparities in education funding along racial lines, with predominantly white school districts receiving $23 billion more in state and local dollars than their nonwhite peers across the country. On Twitter, Rep. Alexandria Ocasio-Cortez (D-N.Y.) cited the funding inequality as an example of systemic racial discrimination, and other left-leaning advocates followed suit. However, policymakers from across the political spectrum also should be concerned.  

States have been trying to eliminate funding gaps since at least the 1920s because school district boundaries often create unfair funding patterns. Nearly every state’s education funding formula has some form of equalization mechanism attempting to close gaps between school districts in high-income areas and low-income areas.

{mosads}Unfortunately, despite these efforts, horizontal equity — the notion that students with similar needs should receive the same resources — rarely is achieved and many school finance formulas still shortchange low-income communities. For example, Texas’s controversial “Robin Hood” mechanism redistributes some of the local dollars raised by property wealthy districts, but other aspects of its formula make it easier for these districts to generate and retain enrichment funding.

The funding problems are only going to worsen as more parents and students look for better options than their residentially-assigned schools. About one in five of the nation’s public school students attend a school of choice, including the 5 percent who are enrolled in charter schools. Additionally, more than half of the states also offer some form of private school choice such as an education savings account, voucher, or tax credit scholarship to help students seek other options.

As the relationship between a child’s school and zip code untethers, as it should, school finance systems that were designed to fund neighborhood schools are becoming increasingly obsolete since most don’t allow local education funding to follow students who choose to cross district boundaries. This diminishes the monetary incentive for districts to accept transfer students because they tend to receive fewer per-pupil dollars for those students. Thus, funding disparities no longer are solely a troubling equity issue; they’re also incompatible with school choice policies that give families more options, and are viewed by many conservatives and libertarians as a way to advance educational freedom and improve outcomes.

To address this problem, policymakers should look to Indiana, where the state largely abolished property tax levies as a source of general fund education revenue in 2008. While local dollars are still used for things such as school buildings and buses, the state’s general fund revenue now largely covers operational expenses such as teacher salaries and classroom supplies. This transition to a full-state funding model paved the way for a more equitable school finance system and led to substantially more options for families.

The number of students crossing district boundaries to attend school increased from fewer than 3,000 in 2009 to more than 11,000 by 2011, with about 82 percent of the students seeking schools in districts that rank high in the top accountability categories. And today more than 52,000 students in the Hoosier State attend schools outside of their residentially-assigned districts, as more families are able to choose schools that better fit their needs.

Indiana’s education reforms are paying off academically; it has increased its average score and national rank in all fourth- and eighth-grade National Assessment of Educational Progress assessments in both math and reading between 2007 and 2017.

Counterintuitively, the shift to state funding is a foundational step toward, not away from, more local control over education. A school finance system that allocates funding based on students, rather than property wealth, provides the foundation needed for robust school choice policies that put parents in the driver’s seat.

Education leaders and policymakers, not just those who lean left, should be alarmed by funding disparities that favor some students over others. Not only are they manifestly unfair, but they also prevent educational freedom from flourishing.

Aaron Garth Smith is director of education reform at Reason Foundation, a nonprofit policy group advancing free markets. He previously was senior director of analytics at YES Prep Public Charter Schools, a charter management organization serving over 12,000 students in Houston. Follow him on Twitter @AaronGarthSmith.