Educational Finance

Required Text:

Brimley, V., Verstegen, D.A., and Garfield, R. (2012). Financing Education in a Climate of Change, 11th Ed. N.Y.: Pearson, Inc. ISBN: 9780137071364

Texbook can be accessed at: https://www.chegg.com/auth?action=login
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Equity in school finance refers to fairness in the expenditures per pupil and fairness in the treatment of taxpayers. In this context, equity and equality, although often used synonymously, do not mean the same. Fairness is more important in financing education than evenness or sameness, because students have wide differences in their abilities, needs, and educational desires. The school finance reforms emphasize equity of educational input; it is impossible to measure accurately equity of output. Even though real property taxes are usually paid at the same tax rate in a given district, they are not always equitable, because of different rates of assessment as com-pared to market values, different degrees of ownership of the property being taxed, and differences in the income or the wealth of taxpayers even though their property taxes may be relatively similar.

Income and wealth have some advantages over property assessments in formulas for determining the fiscal capacity of school districts. It is much easier to treat equals equally the horizontal component of equity than to treat unequals unequally the vertical component of equity. No one has deter-mined exactly how unequally those with unequal needs or abilities should be treated.

Since the cost of education varies with the abilities and the needs of students, the use of weighting factors adds some measure of fairness to finance formulas. The use of assessed valuation of property per pupil is more equitable than assessed valuation of property per capita for the operation of school finance programs. Wealth and income are gaining some support as bases for determining fiscal capacity.

The equity issue at the local school level has become a topic for researchers in the field of education finance. Critics are anticipating that it in some way may relate to accountability. The complexities in comparing one state to another is difficult because data of this nature are not required of local districts. It is important for administrators to monitor the budget figures. However, unless mandated, there appears to be limited interest in collecting and providing local-level finance information.

Taxes are classified into three general types: proportional (the same percentage of income spent for taxes for all levels of income), progressive (higher percent of income for taxes for higher levels of income), and regressive (lower percent of income for taxes for higher incomes). It is generally agreed that reasonable progressive taxes are the most equitable and regressive taxes the least equitable.

In the early history of the United States, many of the individual states were slow in accepting responsibility for financing their public schools. Consequently, full local district funding was the first of all school finance systems. Because of the extreme differences in the size and wealth of local districts, local financing proved to be a very unfair and discriminatory method of financing education. Early efforts of the states to aid local districts in financing education came principally in the form of flat grants. These, too, proved to be nonequalizing. Gradually, however, the states moved to equalizing grants and to the equalization principle in supporting local districts. Some

states and school districts continue to use obsolete and unfair educational finance practices in spite of the relationship between equal protection and equalization in school finance. Such practices are being challenged in state courts.

In this century, various patterns of financing education are emerging. Full state funding of public education has been advocated by some writers for several years. Such a plan raises some important questions about increased state control and the problem of financing districts that desire to maintain special higher- cost programs.

District power equalization involves the principle of state-local partnership, where each local district mill levy would produce the same number of dollars of revenue per mill per weighted student (state and local) in every district. Its main disadvantage is the fear that such a principle might open the doors of the state treasury. Property reassessment upward does not necessarily increase the total revenues.

Short Answer Questions

1. Discuss the problems and ramifications involved in improving school finance formulas in order to provide greater equity for taxpayers.

2. According to the literature, what are the apparent trends in the measurement of school district wealth? What are the problems involved in applying these measures to school finance formulas?

3. Using the following information about two school districts, solve the indicated problems.

District Assessed Valuation Weighted Pupil Unit

A $ 100,000,000 2,000
B $ 45,000,000 900

Foundation Program Board Leeway Voted Leeway

State Guarantee $ 1,800/ WPU $ 1,000/ WPU $ 400/ WPU
Required Levy 20 Mills $ 1.40/$ 100 AV $ 10/$ 1,000 AV

Need (in $) Local Effort State Allocation Total
a b c b + c
District A
Foundation Program $________ $________ $________ $________
Board Leeway $________ $________ $________ $________
Voted Leeway $________ $________ $________ $________
Total All Three Programs $________ $________ $________ $________
District B
Foundation Program $________ $________ $________ $________
Board Leeway $________ $________ $________ $________
Voted Leeway $________ $________ $________ $________
Total All Three Programs $________ $________ $________ $________

From the previous problem, calculate the following:

4. Ratio of state revenue to local revenue (Foundation program)

District A District B

_______:_______ _______:_______

5. Under the power equalization principle, how much money would the state provide for each of these districts using all three programs?

District A$_______ state money District B$_______ state money

6. Total WPU value from all sources:

District A$_______

District B$_______