Money, Schools, and Justice

By Stan Karp

Illustrator: Mark Fisher

For the past 30 years, battles over school funding have been clogging the nation’s courts. Ever since the U.S. Supreme Court declared in 1973 (San Antonio v. Rodriguez) that education was not a fundamental right protected by the U.S. Constitution, equity advocates have fought a state-by-state battle against the “savage inequalities” of school finance systems that provide sharply different levels of education to students from different class, race, and community backgrounds.

Typically, inequities have been traced to wide gaps in per-pupil spending and to finance systems that rely heavily on unequal property tax bases to fund schools. More recently, “adequacy” cases have focused on the gap between what school funding systems provide and what state and federal education standards (including the No Child Left Behind law) demand of schools. In many ways school funding systems simply mirror—and reproduce—the inequality we see all around us.

Although the details are complicated, the heart of the matter is simple: Our schools don’t get enough money, and the money they do get is not distributed fairly. Beneath the legal briefs, the legislative jargon, and the complex formulas that dominate debate over school finance, lie two central questions: Will we provide schools with the resources they need to make high-quality education possible, and will we provide those resources to all children, or only some children? The answers we give will go a long way toward determining whether our society’s future will be one of democratic promise or deepening division.

Since the early 1970s, more than 40 state high courts have issued decisions in school finance cases. About half have declared existing funding systems illegal or inadequate and mandated a variety of corrective measures.

But as New Jersey’s Education Law Center has pointed out, “Law books are filled with wonderful paper victories which have never been implemented.” While glaring disparities in school funding may persuade judges to order reform, it’s been difficult to prevent governors and state legislators from limiting the impact of court orders. Restrained by separation-of-powers concerns and a conservative political climate, most courts have given states wide latitude to proceed with half measures and evasive action.

In some states, tentative steps toward equity taken under court pressure have been thwarted by the rising tide of antitax populism. California is a prime example. The state’s 1972 Serrano decision was one of the first rulings that required a state to correct massive inequities among districts in educational services. Some efforts were made to equalize spending by revising aid formulas and transferring some property tax revenues from wealthier to poorer districts. But these efforts were derailed by Proposition 13, a 1978 ballot initiative that capped property taxes in one of the opening rounds in the “tax revolt” that came to shape local, state, and federal tax policy in the ’80s and ’90s (and which, despite promises of relief to hard-pressed taxpayers, has succeeded primarily in swelling government budget deficits, starving public services, and redirecting wealth upward). As a result, California was forced to assume a greater share of local school spending, which did lead to a degree of greater “equity” among districts. But there was also a dramatic decline in spending on schools in California relative to other states. In the ’60s, California was fifth in per-pupil spending; by the end of the ’90s it was 30th, well below the national average. Class size in California grew to among the highest in the nation. Because of Proposition 13 and its offspring, support for California schools tended toward “equalization” at a level that kept them in a state of perpetual budgetary crisis.

The property tax issue is both a root problem and, in some ways, a distraction from the core issues of adequacy and equity. Local property taxes still supply about 43 percent of all school funds. State support varies, but on average provides about 49 percent. The federal government’s share of education spending, despite the huge impact of federal policies like NCLB, is still only about 8 percent.

Since the distribution of property in the United States has never been more unequal, and since many communities have never been more segregated by race and class, it’s inevitable that schools heavily dependent on property taxes will be unequal. In fact, with more than 16,000 separate school districts, the reliance on property taxes functions as a sorting mechanism for class and race privilege, and allows pockets of “elite schooling” to exist within the public system. Any real chance of increasing and redistributing education resources requires fundamentally changing the connection between school spending and local property taxes.

In some ways, relying on local property taxes serves the agenda of the conservative forces that dominate state and local governments. When local communities must assume growing fiscal burdens for schools by more heavily taxing local residential and commercial property, it creates a strong budgetary pressure for austerity. When school budgets are presented like sacrificial lambs to hard-pressed local taxpayers, (who never get to vote on tax abatements for real estate developers or whether the Defense Department should build another aircraft carrier), the budget process is driven not by what schools and children need, but by how to keep the tax rate flat. When only a fraction of the local population has children in the schools, and an even smaller fraction usually votes on budget referendums, you have a system that works well to undercut quality education and keep communities divided. The reliance on property tax funding for schools, then, works at one level to protect privilege and at another as a vise to squeeze local budgets.

Nevertheless, there are growing efforts to find alternatives sparked by court orders, heavy local tax burdens, and the ongoing national debate about education reform. One set of fiscal reforms is geared to redistributing property tax revenues from richer districts to poorer ones. Another seeks to replace property taxes with other taxes—often sales taxes—and have the state assume a larger fraction of overall school spending. Still another set of proposals involves redefining state aid formulas so that fewer funds go to districts as “flat grants” and more through “foundation formulas,” which guarantee a base level of funding for each student and are calculated in ways that promote greater equalization.

The problem is that no particular financial mechanism, in itself, guarantees either equity or quality in education. It’s true that relying on some taxes, like property and sales taxes, tends to be regressive, while progressive income and corporate taxes are fairer ways to raise revenues. But choosing a particular funding mechanism does not assure that adequate funds will be available. A number of states have adopted new formulas promising better funding, only to see them cut once the higher costs became clear. If the underlying motivation is a desire to cut taxes or hold down educational spending, rather than to promote quality and equity, it may not matter what fiscal mechanism is chosen to do the job.

Another response has been to try to define what an “adequate” education means, and then peg funding formulas to the cost of providing it. Here again, debate persists over what level of educational services the state is obligated to provide for all.

This tension is reflected in New Jersey’s Abbott decisions, which are arguably the most progressive rulings for poor urban schools in the history of school finance cases. The case takes its name from an alphabetical list of families who sued the state on behalf of their children, and initially it covered familiar territory.  The New Jersey Supreme Court ruled that the state’s system of school funding, which relies heavily on unequal property tax bases in nearly 600 separate districts, denied children in urban areas equal access to the “thorough and efficient” education guaranteed by the state’s constitution. The Education Law Center documented gross inequality and pressing need in urban districts, and the court established unequivocally that it was the state’s obligation to redress this inequality.

Where Abbott really blazed new ground was in the standard it set for this equity mandate. Throughout long years of litigation, the court repeatedly pressed the state to define the essential elements of a “thorough and efficient” education. Repeatedly, successive state administrations avoided this request, fearing that a generous definition would obligate them to provide such resources to poor districts, while a low estimate would require explaining why the state’s most successful districts were spending much more (a gap that would call attention to the very inequality the court was seeking to address.)

The state tried changing the subject from “money” to “standards.” It adopted “core curriculum content standards” and argued that if all districts implemented these standards, all students would receive an equally adequate education. Essentially, the Court responded: nice try, but no sale. Standards may be helpful in defining educational expectations and outcomes, it argued, but they are not a substitute for the programs, staff, and resources needed to reach them. When the court looked closely at the funding formula passed by the state legislature to support the new standards, the numbers looked suspiciously like political calculations designed to keep state school aid at or near existing levels without redressing the record of inequality the court had before it.

Frustrated by the state’s evasions, the New Jersey high court ultimately devised its own formula. It took as its equity standard the level of spending in the state’s richest and most successful school districts. Arguing, plausibly, that these districts obviously knew what it took for kids to succeed educationally, the court ordered the state to raise per pupil spending in the poorest urban districts to the average level of the 130 richest. And citing deeper social problems and the cumulative effects of concentrated poverty, the court ordered “supplemental funding” in poor districts for programs like full-day pre-K, summer school and tutoring, above and beyond parity for regular educational programs.

Abbott remains, “the first decision in the history of school finance reform to establish an equality standard for the allocation of education resources to poor urban children.” Moreover, the court’s decision was phrased in striking language that made clear the implications of the social problems it was addressing.  “The fact is that a large part of our society is disintegrating, so large a part that it cannot help but affect the rest. Everyone’s future is at stake, and not just the poor’s,” it wrote.

This extraordinary decision opened up a new era of reform in New Jersey’s urban districts. While unending battles over implementation and budgetary issues continue, there has also been significant progress since Abbott funding started to flow in the late 1990s. Over 40,000 3- and 4-year-olds now attend high-quality, full-day pre-K and kindergarten programs. The math and language test score gap between urban and suburban 4th graders has been cut in half. New Jersey boasts the highest high school graduation rates in the country, including the highest rates for African American and Hispanic students, though significant gaps among groups and communities remain.

But while Abbott brought long overdue equity to the 31 poor urban districts that were parties to the case, it did not fix the state’s overall school finance system. More than 400 “middle districts” remain squeezed by property tax formulas and perpetual state budget crisis. Poor rural districts and surrounding “Abbott rim” districts have had little success gaining access to the same levels of funding.

In fact, New Jersey’s experience underscores the contradiction between equity goals and school funding systems based on local property taxes. The state is among the highest spenders on education and has the best funding levels for poor schools. But it ranks 41st out of 50 states in the total share of local school costs picked up at the state level: about 40 percent. Because the Abbott mandates directed a larger portion of this state aid to the poorest districts, suburban and rural districts were pitted in competition for an increasingly inadequate pool of state funds. State aid to non-Abbott districts has remained flat for five years, making them more dependent than ever on raising local property taxes, which are now the highest in the nation. Unless New Jersey adopts a new school funding formula that significantly increases state share and reduces reliance on local property taxes, sustaining both the Abbott commitments and the state’s status as a leader in educational achievement will be increasingly difficult.

Almost monthly, a prominent academic or government agency issues a report claiming that public education is vitally important to some aspect of our nation’s future from global competitiveness to national security to multicultural harmony. But the main prerequisite for improving this critical social institution is a funding system that provides excellent schooling for all kids through sustainable and fair tax policies. This means moving away from systems that rely on local property taxes and toward regional, state, and federal funding sources.

To really make good on promises of educational equity and excellence will take tens of billions of dollars over many years, the kind of sums that have been poured into the military for decades. In 2005-06, total K-12 education spending in the U.S. was about $500 billion. The most recently proposed military budget for FY 2008 is $622 billion. Public and private reports have documented a need for more than $300 billion in construction and renovation of K-12 facilities (costs that are generally not included in the per-pupil expenditures that are the focus of most equalization efforts). And putting aside for the moment the many dubious aspects of the No Child Left Behind act, studies indicate that to even approach NCLB’s fanciful goal of 100 percent proficiency for all students on state tests by 2014 would require an annual increase in school spending of about $130 billion above current levels, about ten times the current size of Title I, the largest federal education program.

Only a national effort to reform social spending and tax policies can generate such resources. That means public campaigns to put new state and federal tax policies behind the nation’s lofty educational rhetoric. It also means broader public efforts to reorder the nation’s social priorities. That, after all, is what excellence and equity in school funding is ultimately all about.

Stan Karp ( is a Rethinking Schools editor.