Report Illuminates “Stealth Inequities” in School Funding Systems


A new report released by the Center for American Progress examines school funding inequities and identifies several reasons for why high-poverty districts persistently fail to have equal access to state and local aid. Complicating the typical explanation for why these disparities exist, authors Bruce Baker and Sean Corcoran expose “stealth inequities,” which they define as “often-overlooked features of school funding systems that tend to exacerbate inequities in per-pupil spending rather than reduce them.”[1] The report focuses on six states (Illinois, Texas, New York, Pennsylvania, Missouri, and North Carolina) that have regressive school funding models, meaning the revenues for high-poverty districts are systematically lower than for low-poverty districts.

In his chapter titled “How State Aid Formulas Undermine Educational Equity in States,” Baker, a Rutgers University professor, shows how even states that initiated substantial, largely progressive changes to their school funding system in recent years often fail to distribute state funds on a per need basis. In Kansas, for example, a particular tax policy allows the 16 districts with the highest property values to raise education revenues beyond the normal limit. Proponents of this policy argue it as necessary to provide extra compensation for teachers at these schools because of the high price of real estate in the districts. But Baker stresses that it leaves poorer, higher-need districts at a disadvantage because they cannot afford to pay their teachers as high a salary. Another “stealth inequality” that exists in three of the states discussed is a state aid distribution based on average daily attendance rather than on enrollment numbers. The policy hurts high-poverty districts because they often have worse attendance records. Property tax-relief policies also tend to lead to more state funding for districts with the least need. Baker found that in New York, the tax relief program is so regressive that it essentially erases the benefits of federal aid aimed at correcting for inequities between the districts. These examples are just three of the many features of state funding systems, along with various types of “outside-the-formula aid,” that result in additional funding for districts with the least need.

While Baker focuses on stealth inequities at the state level, Corcoran, an associate professor at New York University, explores the inequities at the local level. In the second chapter of the report, he shows how while a number of local revenue sources — i.e. income, fees, revenue from intermediate sources — affect a district’s local aid, local property values typically have the largest impact on public education. Corcoran confirms the common understanding that a higher taxable property wealth translates into greater local revenues per student. However, he points to Ohio and Massachusetts as proof that it is possible for a state to have local revenues determined largely by property values and still have a progressive funding system if it offsets that variability with state aid policies. Corcoran offers a detailed explanation of how the particular tax policies and local funding frameworks hurt fiscal equity in each of the six states identified as having a regressive school funding model. For example, a restriction on the growth of local property taxes disproportionately hurts funding for poorer districts, and the report identifies New York’s recently adopted tax cap as “one of the biggest potential threats to school finance equity” in the state.

[1] The authors note that funding disparities are normally blamed solely on a system’s reliance on local property taxes, and thus, forcing the state to provide a larger share of the funds typically seems to be the only way to ensure fiscal equity.

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