Financing Public Education

Chapter 8Financing Public

Education

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Criteria for Evaluating Taxes

• No Unintended Economic Distortions• Equitable• Easily Collected• Responsive to Changing Economic Conditions


Sources of School Funds

• Local– Property taxes, special taxes, and user fees– Exclusive product rights

• State– Taxes: income, sales, excise, severance– Lotteries

• Federal– U.S. Treasury


School Funding: Local Resources and Disparities

• Wealthy versus poor districts• Municipal overburden• Educational overburden• Urban cycle of financial strain


State Financing of Local Schools

Sales Tax – Usually compares favorably when• Food and medicines not taxed• Easy to administer and collect• Elastic: Revenue parallels the economy• In a recession tax revenues decline, hurting school fundingIncome Tax – Compares favorably• More equitable than other taxes• Easily collected through payroll• Highly elastic – rates can be changedOther taxes and Lotteries• Excise taxes, estate taxes, severance tax, and corporate income taxes• Lotteries – Initially most focused on school funding, now are minimal

contributors to school funding


Educational Support and the Graying of America

• Aging population – Median age risen steadily since 1900– Those over 65 will be 20% by 2020

• Older citizens have less contact with schools• Tend to be fiscally conservative, live on fixed

incomes• Vote in high proportions• More resistant to increased school taxes


State Methods of FinancingLocal School Districts

Flat Grant Model State gives all local districts a fixed amount per student.

Foundation Plan State guarantees a minimum expenditure per student to all districts.

Power-Equalizing Plan

State pays smaller percentage of local school expenditures as wealth of local district rises.

Weighted Student Plan

State aid is weighted according to special needs of students.


Two Types of Federal Grants

Categorical Grants

Funds designated for a specific group or purpose

Block Grants Funds to be used for general purposes, at the discretion of the recipients


School Finance Trends and Concerns

• Taxpayer Resistance• Accountability Movement• Funding Tied to Progress (No Child Left

Behind Act)• Tuition Tax Credits, Educational Vouchers,

Charter Schools and School Choice• Streamlining School Budgets• Infrastructure and Environmental Problems• Staffing Needs Change

Financing Public Education

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