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The Challenge of Directing Funds to Students Who Need Them Most

A new study conducted by the Urban Institute, a nonprofit organization that looks at issues facing America’s cities, recently looked at school funding and how some states are more progressive with targeting low-income students.

To better understand why some states better achieve the goal of targeting funding to districts that serve disadvantaged students, it’s important to look at how public schools are funded.

A combination of local, state, and federal dollars are used to fund public schools with the federal government only covering less than 10 percent of funds. State and local tax dollars as well as federal funds are distributed to school districts. The districts then build and maintain schools and hire staff to run those schools.

How much funding is progressive and goes to low-income students versus how much is regressive and goes to less needy students, largely depends on the demographic structure of the state’s districts and the interaction between funding streams from state and federal government.

The study examined the thirty-five states that currently have funding formulas aimed at targeting poor students. The researchers then measured whether disadvantaged students were more likely to be enrolled in districts with higher or lower per-student funding levels than non-disadvantaged students. States that were more progressive with their funding were directing more funds to those needier students.

While some states tended to have more regressive spending at a local level, that trend was balanced out by more progressive spending at the state level. Meaning at the local level, districts with an overwhelmingly non-poor student population tended to have more money to spend than those with a majority low-income student population. In some cases such as Connecticut, New Jersey, and Massachusetts, this was because the federal government required the state have more progressive funding systems put in place to correct funding at the local level.

Regarding the third and smallest source of funding for public schools, the study found that various federal funding streams are largely based on the income of students’ families. For example, “18 states that are regressive when looking only at state and local funding become progressive with the addition of federal dollars.”

Overall, the data from the study generally showed that when it came to local, state, and federal funding, more funds were generally allocated to financially disadvantaged students than non-disadvantaged students. Some states such as Alaska and Ohio were much more progressive in this approach than others, while others such as Nevada and Wyoming lagged behind.

To examine why some states seemed to be more progressive in their directing of funds to poorer students than others, the researchers looked at both New York and Florida. Both states are demographically similar in terms of a high financial diversity among students, but have very different school district makeups. Florida, for example, has incredibly large financially heterogeneous school districts compared to New York. A state formula that funds districts based on student income level just wouldn't work well for students who live in poor neighborhoods that are part of a larger more moderate school district.

Unlike Florida, New York’s school districts are much smaller and highly broken up by income level. It’s this economic segregation through school districts that allows the funds from the state to target low-income students, where local funds tend to be more regressive.

School funding has remained largely the same over the last two decades, with only a few exceptions. State and local funding both became more regressive in Missouri, likely because in 2006 the state adopted a formula that directs additional money for students living in poverty only to districts with higher than average low-income enrollment levels.

It’s how a state divides its school districts up, whether breaking them into small segments, or combining them into much larger blocks that often affects the ability to target funds to low-income students. States may have similar economic diversity, but go about using funds to reach their education goals in different ways.


Article by Joel Stice, Education World Contributor

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