School Funding

How Is K-12 education funded in the United States?

Funding for K-12 education in the United States is shared between the federal, state, and local governments, with state and local governments providing the largest portions. The federal government provides roughly 10% of all K-12 school funding (about $800 billion in 2021), while on average, local and state governments share the remaining 90% roughly equally.

‍

How do states fund K-12 schools?

The map below shows the variation in total spending across states for 2023: the state spending the most money per student was New York, which spent nearly $25,000 per student, and the state spending the least money per student was Utah, which spent just $8,000. The average spending per student across the country is $15,000 per student.

‍

All states contribute a portion of local education costs. Typically, these subsidies involve a flat amount per student plus more funding for students with additional needs, like English as a Second Language (ESL), low-income, and at-risk students. However, the size of the state subsidy varies considerably. For example, in California, over 60% of school funding comes from the state, while in Ohio, the percentage is around 40%. State funding comes from taxes on individual and business income, while local funding is usually based on property taxes (taxes on home and business property).

What are the pros and cons of using property taxes to fund education?

No system of school funding is perfect. When funding schools from state income taxes, the system is considered progressive, meaning wealthier individuals typically pay more as a percentage of their income than individuals earning less. A state funding system may also allow funds to be targeted towards poorer districts and those having a higher percentage of disadvantaged students. Relying on state funding has historically been politically unpopular, as taxpayers are funding schools in other communities that their children will not use. By contrast, property tax-based systems tend to be more regressive, meaning it is very likely wealthier individuals pay less as a percentage of their income than those earning less money, however, properties with higher values do generate greater tax revenue. Property taxes also offer a stable revenue source yearly, as property valuations may not change much, even in a recession. Property tax systems are also popular among people who oppose having their taxes pay for schools in other communities.

Funding schools using property taxes can disadvantage poorer communities, as they may not have the tax base to fund their schools adequately. One study by the Economic Policy Institute calculated the amount of per-student spending needed by different school districts to bring student test scores to the national average. Highest-poverty districts required the most funding, $18,231 per student, versus only $8,313 in the lowest-poverty districts. (The higher funding for highest-poverty districts is intended to remedy existing skills disparities.) Actual spending in the highest-poverty districts was only $13,096 per student, only about 70% of the required amount. In contrast, per-student funding in the lowest-poverty districts was $10,239, about 20% more than needed. Neither state income nor property tax funding addresses the fact that many taxpayers feel they disproportionately pay into the school system based on having fewer or no children.

Does spending on education matter?

Generally speaking, it does. As shown below in the figure that compares 2021 state-level spending with the percentage of 8th-graders who scored “proficient” or higher on the 2021 National Assessment of Educational Progress test, there is a clear relationship between spending per pupil and educational achievement.

‍

Students in low-income districts, in most cases, are the ones who typically require more funding to overcome socioeconomic barriers to student success. In other words, the current system of funding school districts means that students who need funding the most do not always receive adequate funding to improve test scores. In addition to overall funding, other variables can impact test scores and students achieving desired learning objectives. Some topics that have been the focus of public debate include allocating administrator, teacher, and faculty salaries, further investments in professional development and project-based / experiential learning, restructuring teacher tenure, and other aspects of home, community, and school life.

How is the federal government involved in K-12 education?

The federal government has a significant but limited role in K-12 funding, most notably through the Elementary and Secondary Education Act of 1965 (ESEA). ESEA established the Title I funding system for low-income school districts. As shown in the chart below using 2018 data, the average funding for Title I varies across states, ranging from just above $150 per student to nearly $500. For a school that qualifies for Title I funds, the average grant per student is about $1300.

‍

In the modern era, the Every Student Succeeds Act of 2015  vastly limited federal involvement in K-12 education and gave back wide discretion to the states. Today, the federal government’s role in education funding and regulation is focused more on subsidies to public higher education rather than K-12 education, although, as noted earlier, the various federal K-12 education programs provide about $80 billion a year to K-12 schools and school districts.

Federal funds also flow to local school districts for support for disabled students and for free and reduced-price lunch programs. The School Lunch Program provides free or reduced lunches for students according to their family’s income level. In 2022-2023, for example, students from a family of three are eligible for free lunch if their family income is less than $29,939. Approximately 19.6 million children received free or reduced-price lunches in the 2020-2021 school year.