Feb 18 2019

Why Our Education Funding Systems Are Derailing the American Dream

This blog is part of the series, Money Matters, exploring research on the role of school funding in advancing equitable opportunities and outcomes for all students and elevating evidence-based policy and practice solutions.

 "Do the math: 28 seats, 44 students, 89°, 0 books. CPS classroom."
—Protest sign at Chicago teachers’ march, spring 2018

There’s an underlying truth to teacher strikes that have happened of late and those looming on the horizon: We live in an era of extreme income inequality and one of the places it’s hitting hardest is in our schools.

What many people don’t realize is that this economic inequity is hard-wired into our school-funding systems. Most of these systems developed over the decades through a process that relied largely on local property tax bases. As a country, we inadvertently instituted a school finance system similar to red-lining in its negative impact. Grow up in a rich neighborhood with a large property tax base? You get well-funded public schools. Grow up in a poor neighborhood? The opposite is true.

The highest-spending districts in the United States spend nearly 10 times more than the lowest-spending, with large differentials both across and within states. In most states, children who live in low-income neighborhoods attend the most under-resourced schools.

Grow up in a rich neighborhood with high property taxes? You get well-funded public schools. Grow up in a poor neighborhood? The opposite is true.

On average, school districts serving the largest concentrations of students of color receive approximately $1,800 less per student in state and local funding than those serving the fewest students of color, and the differentials are even greater within states. For example, in Illinois, per-pupil funding ranged from $8,500 to $32,000 in 2016, with suburban districts in Cook County outspending nearby Chicago by more than $10,000 per pupil.

The great divide in funding comes largely from reliance on local property taxes. Districts with higher property values bring in more property tax revenues and provide correspondingly higher funding for schools than poorer districts do. States typically offset these disparities to some extent, but rarely provide an equitable system that can respond to student needs. Funding disparities are so acute and widespread that lawsuits have been filed in more than 40 states in an attempt to remedy inequities.

Inadequate school funding derails the future for students already struggling against the odds—intensifying disparities that harm society as a whole by reducing young people’s capacity to contribute to society. When we provide adequate funding for resources such as well-prepared teachers and school leaders, smaller class sizes (especially in the early years), and extended learning time, we see returns in the form of improved student outcomes.

Inadequate school funding derails the future for students already struggling against the odds—intensifying disparities that harm society as a whole by reducing young people’s capacity to contribute to society.

One large-scale study on this topic looking at school finance reforms across the country for 15,000 students over 40 years found that, for low-income students, a 10% increase in per-pupil spending for all 12 years of public school resulted in an increase of 10 percentage points in graduation rates and a reduction of 6 percentage points in adult poverty rates. This study estimated that a 22% increase in per-pupil spending throughout the school years for low-income children would be large enough to eliminate the educational attainment gap between children from low-income and nonpoor families.

Estimates of benefits to society of increased graduation rates suggest that each additional high school graduate adds hundreds of thousands of dollars to the economy as they earn better wages and pay higher taxes, while contributing to reduced costs for health care, unemployment, crime, and incarceration. The contribution climbs dramatically with the attainment of an advanced degree.

With economic segregation in the United States worsening, it is imperative that states and districts find new, equitable approaches to school funding. In a new report from the Learning Policy Institute, author David Hinojosa explains how creating equitable and adequate school finance systems is a "challenging but achievable task." And he’s right. Many countries, and some U.S. jurisdictions, have succeeded in funding high-quality education for all their students. Not surprisingly, these jurisdictions are among the highest achieving in the world.

Here in the United States, Massachusetts, Minnesota, and New Jersey are among those that have implemented promising reforms. The reforms all feature three key practices: funding underserved students at higher levels, investing in educator capacity and equitable distribution, and ensuring access to quality preschool.

All three states undertook reforms providing significantly more funding to districts serving larger proportions of students from low-income families. All three also increased salaries and standards for teachers and principals and instituted widespread professional development. And all three made significant fiscal investments in pre-k programs, so that they could reduce the achievement gap before kindergarten. In New Jersey, for example, the state responded to a school finance lawsuit by funding high-quality, full-day pre-k programs for 3- and 4-year-olds in the state’s highest poverty districts and investing in certification and training for all preschool teachers. Children who receive these 2 years of high-quality pre-k showed significant gains well into their elementary school years.

Studies in all three states found that their revised finance systems increased student achievement and reduced achievement gaps significantly. These gains have shown up on national assessments. Massachusetts has become the nation’s highest achieving state since adopting its reforms. New Jersey—a majority minority state—climbed to #2 nationally in 8th grade reading and #4 in 8th grade math after it equalized its funding system. Minnesota has climbed to #2 in 8th grade math and is now tied for 11th place in 8th grade reading.

There is no doubt that money matters to school quality and student achievement, but investing in schools also matters to society. Our country benefits by having fully participating citizens and suffers when we don’t. In addition to increased costs of welfare and crime, our failure to educate all students well has produced a widening gap between the rising number of job openings in our increasingly high-tech, knowledge-based economy and the number of workers skilled enough to fill them.

And despite the headlines about national politics, state and local legislators from both parties care about this issue, as do most Americans—73% of whom said in a recent poll that increasing federal spending on k-12 public education is an “extremely important” priority for Congress in 2019.

We all love a good viral video about the poor kid who beat all the odds and managed to get into an Ivy League school, but instead we should be asking ourselves why we accept a system that makes that story such a rarity.

Money spent on schools alone will not entirely level the playing field for low-income students and students of color, but it's an essential step. Providing every child with a quality education is not just a moral imperative, it's a pragmatic necessity if we are to thrive as a country.


Linda Darling-Hammond is President of the Learning Policy Institute and Charles E. Ducommun Professor of Education Emeritus at Stanford University.

Jeff Raikes is the co-founder of the Raikes Foundation, which he and his wife, Tricia Raikes, established in 2002.