CPRE : Consortium for Policy Research in Education

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Policy Bulletins

Improving State School Finance Systems: New Realities Create Need to Re-Engineer School Finance Structures

School finance is at a crossroads. The traditional focus on fiscal disparities across school districts within a state might no longer be the most salient school finance issue in an era in which the primary education goal nationally and within every state is to teach students well enough to meet new rigorous performance standards.

First, the focus on spending differences across districts is only about money. Yes, extensive differences caused largely by widely varying property tax bases across districts have been unfair historically. But school finance programs designed to remedy this tax base problem have not been very efficient in reducing spending differences, nor in reducing the linkages between spending and wealth. Indeed, in many states today that have new school finance programs, there are still significant spending differences and those differences are still strongly tied to local wealth. Further, the potential for new school finance programs to raise spending in many low-wealth districts often has been passed over by those districts in favor of low school tax rates instead. In short, the traditional strategies for reducing spending differences across districts caused by variations in the local tax base have not worked very well. Further, such a policy focus, at best, addresses issues of fiscal fairness, but it does not address the more substantive issues of student performance and how to use resources more effectively to boost student achievement.

Given that the driving education goal across the country is to teach students to high standards, the new focus of school finance should be on this agenda. The goal should be first to determine a spending base that is "adequate" to fiscally support an education program that can teach the average student to those standards, and second, it should determine how to use those resources to produce results. This suggests a foundation type of school finance program.

Because some students require more services to reach those standards, the foundation base should be augmented by an extra amount of money for at least three major categories of studentsCthose from low-income backgrounds, the disabled, and those who need to learn English. Research shows that an extra $1,000 for each student from a low-income background is about the level needed for that category of student. Research also shows that it costs about an extra 130 percent to serve all disabled students. Additional research needs to be conducted to determine appropriate augmentations for non-English speaking students.

Publication Date

February 1999