Trends in Educational Funding - Litigating School Funding Equity

Beginning in the late 1960s, school-funding gaps between wealthy and poor districts — arising from reliance on property taxes — led to litigation. Lawsuits challenged the constitutionality of state school finance systems. One by one, state judges are telling state legislatures to find more equitable ways to fund education, and/or to ensure that every child receives an "adequate," "efficient," or "effective" education.

The states usually respond by shifting the burden from local property taxes to state sales taxes. Other levies are used too. Strictly local control of schools, the American way since the 19th century, is giving way to more state control. This trend is likely to continue as state equalization efforts increase.

On the plus side, when the states assume responsibility for funding schools, property taxes go down. Voters stop seeing local millage increases. On the minus side, wealthier school districts, whose voters are more than willing to raise their own taxes — for better schools, in their own district — are unable to do so. They say the quality of their schools is declining.

In 1994, Michigan became the first state to voluntarily move away from property taxes as the root source of education funding. The issue was not equity so much as very-high property taxes. The graphic shows what happened to per-pupil expenditures in Michigan between 1994, when Proposal A was adopted, and 2001. Proposal A boosted revenues for Michigan's poorest school districts. It limited annual increases for the wealthiest districts.

The chart shows the top five winners and losers in terms of the difference between dollars received per student in 1994 and 2001. Bloomfield Hills, an affluent district, had its budget cut by the state every year. The city sends more than $111 million a year in school taxes to the state — only to see two-thirds of it go to other districts. Bloomfield Hills and numerous other cities complain that rising costs force program cutbacks and threaten the quality of their educational offerings. Meanwhile, poorer school districts saw their allocation per pupil rise by up to 48%.

Governor John Engler, a prime mover behind Proposal A, has no sympathy for complaints from wealthy districts. "We need better managers in many districts," he told The Detroit News. "The education problems in Michigan are not due to lack of resources."

In his book Savage Inequalities: Children in America's Schools, Jonathan Kozol wrote: "One searches for some way to understand why a society as rich and, frequently, as generous as ours would leave [the children of East Saint Louis] in their penury and squalor for so long — and with so little public indignation. Is this just a strange mistake of history? Is it unusual? Is it an American anomaly?" As a practical matter, Kozol asks us to consider this: 90% of male jail prisoners in New York City are public school dropouts. Incarceration costs the city nearly $60,000 a year per person, far more than it would cost to provide a decent education.

There are well-meaning people on both sides of the "equitable funding" issue. Critics call laws like Michigan's "Robin Hood" laws, taking money from wealthy districts to give to poorer ones. Defenders say a child's education should not depend on geography. On a loftier level, the issue is discussed as a clash between local freedom and mass democracy.

Meanwhile, in the words of Stephen Smith, manager of the National Center for Education Finance at the National Conference of State Legislatures: "Adequacy has trumped equity as the biggest issue in education finance." The latest theory is that states must define what an adequate education means — then figure out how much money is needed to achieve the standard.

Sources: Jodi Upton et al. "Wealthy districts hit hardest." Detroit News. Online. Available: http://detnews.com. April 30, 2002. Charles V. Tines, "Bloomfield Hills: Standard-setting programs wither away." Detroit News. Online. Available: http://detnews.com. April 30, 2002. Michele Moser and Ross Rubenstein. "The Equality of Public School District Funding: A National Status Report." Public Administration Review. January-February 2002. Savage Inequalities. Online. Available: http://wwwunix.oit.umass.edu/~kastor/walking-steel-95/ws-savage.html. May 8, 2002. Phil Magers. "Cost of high standards studied." Washington Times. 6 April 2002. Online. Available: http://www.washtimes.com. May 8, 2002.