Where Schools Really Get Their Money From, and Why It Needs to Change

Posted by Liz Dwyer

Last week we compared the United States' spending on defense to spending on education and discovered that—surprise!—the federal education budget is a tiny fraction of the military budget. A commenter on that post pointed out, however, that education funding primarily comes from the states, not the federal government. That's true. The national debate about education funding is often focused on federal money, but it only makes up a small slice of any school's budget.

It's actually in the Constitution. Our Founding Fathers didn't grant the federal government any authority over education, so the 10th Amendment—"The powers not delegated to the United States by the Constitution, no prohibited by it to the States, are reserved to the States respectively, or to the people"—has historically kicked responsibility for schools to states.

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In the latest data available from the Census, for the 2007 to 2008 school year, the federal government only contributes a little over 8 percent to the education pot. Federal funding just isn't a big factor right now. But the thing is, it should be.

The amount of money each state and district provides for education varies widely, which can lead to rampant inequalities. According to the Census data, New York spends an average of $17,173 per student, while Nevada only plunks down an average of $8,285. Sure, the cost of living in the Hudson River Valley is probably higher than Vegas—and more money doesn't always mean better educational outcomes, but that's a pretty large discrepancy. And as it turns out, New York has a 70.8 percent high school graduation rate, and Nevada has a dismal 51.3 percent grad rate.

There's also no common formula for deciding how states and local governments will fund education. Each state has a hodgepodge of property taxes, sales taxes, lottery funds, and other revenue generators, all calculated inconsistently. If a state depends primarily on property or sales tax, then when a recession hits, as is the case now, billions are slashed from education. And depending on the state, school districts in lower income areas often have less money to spend per student because of the way property taxes are calculated and redistributed. This means our public schools depend on the success of the state lottery, or the value of local real estate, to get money, even though those sources of money have nothing to do with the actual needs of the schools.

Because of this inequality, in 1965, President Lyndon B. Johnson enacted the Elementary and Secondary Education Act to supplement state support of schools. Among its provisions, the ESEA provides Title I funding, which is extra federal financial assistance to schools in low-income communities. It also helps pay for school libraries, textbooks, and training for teachers. The 2001 reauthorization of the ESEA became the No Child Left Behind Act. NCLB brought school accountability to the mainstream, and although federal education spending initially increased under it, NCLB has been criticized for not providing enough funding to enable schools to meet the standards it sets.

According to NCLB regulations, the Department of Education has the right to withhold money from a school or district if it doesn't meet annual standardized testing targets for reading and math. Cash-strapped schools in low-income areas can't always afford to purchase the extra instructional materials and supplies they need to help catch kids up, so schools fall into a vicious cycle where they don't meet targets, and are denied federal money, making it even harder to meet them the next year.

Because state budgets have been so severely affected by the economic downturn, in 2009 the federal government stepped in with the $814 billion American Recovery and Reinvestment Act. About $100 billion of that federal stimulus money was allocated for education and helped stem the tide of teacher layoffs and other cuts to school programs. Unfortunately, many states went ahead and slashed money from state education budgets and simply compensated with the federal stimulus funds. Now that the stimulus funds are running out, states are continuing to cut, and our schools are teetering on the cliff of a serious financial crisis.

Sit in your local under-resourced, low-income school's budget meetings and listen to principals and teachers fret over the lack of funds. Listen to them have to decide between spending on a math coach or a reading coach, or on keeping two classroom teachers so that class sizes don't have jump up to 40 to 1. Art, music, physical education? They're quickly becoming relics of a bygone age. Some schools are even slashing sports program. We need a fair and stable source of funding from the federal government so our kids don't pay the price when bankers sink our economy.