Chapter 3
Financing Education Equitably
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Basic Concepts
Equity: distributing and expending available revenues with fairness
Equity not synonymous with equality
Equalization—an emotional issue
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Inequalities in Financing Education
•Equity issue revisited learning
course cases
research studies
equity does not always produce equal
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Equity: Objective of School Finance Reform
•traditionally-allocations of state money based on number of pupils to be
educated and district’s ability to finance a minimum (foundation
program)
•gradually financing formulas recognized the cost of educating different
populations of pupils
•court cases—focus on adequacy
•state finance reforms focused on: fairness for children and fairness for
taxpayers
•equity for children
concerns fairness in revenue and services provided—actual
expenditures per child
should be more concerned with quality of output
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inequities within districts (learning environments, support
services, facilities, book and supplies
vertical equity (unequal treatment of unequals)
equality does not always produce equal learning
•Weighted-pupil approach
additional funds allocated because of innate characteristics,
types of educational programs, etc.
 advantages: costs not same for all students, court
decisions, builds fairness into formulas, state successes
with approach, reduces categorical grants, and
simplifies state formula
excellent foundation structure
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Equity at the School Level
•Data linking students costs to results is scarce.
•Comparing states is difficult because of different funding patterns.
•Comparability need:
state and local fund expenditures for certified
and non-certified staff
district funds expended for books, library resources and
other instructional materials/supplies
•Factors influencing equity studies:
teacher length of service
class size
school boundaries
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maintenance costs
special program funds
auxiliary personnel
comparing schools
•Equity for taxpayers
states vary in their assessing practices and tax levying
levies based on rate, percent of market value, mills, dollars
per $100 assessed value (AV), or dollars per $1,000
assessed value
assessed value ranges from actual market value to a
percentage of market value
local taxes not equitable-property taxes levy doesn’t consider
degree or amount of ownership of land taxed
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•Unequal assessments
unequal rates of assessment of similar land parcels
reassessments during inflation and deflation not easy
•Classification of taxes
proportional—same percentage of each person’s taxable
income, regardless of income size
progressive—percentage of total taxable income taxed
increases as taxable income increases
regressive—higher incomes pay lower percentages of total
taxable income than do lower incomes
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Measures of School District Wealth
•assessed valuation per pupil
total assessed valuation of property divided by number of
students
property no longer a fair or accurate measure of wealth of
people or school districts
taxes and measures of wealth not related to income
•assessed valuation per capita
indicates the wealth of area in relation to raising funds
used particularly for non-education purposes
•statistical approaches to equalization
correlation studies determining relationship between per-pupil
wealth and per-pupil expenditure
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variables used to grade states on spending equity—state
equalization effort, wealth-neutrality score, the McLoone
index
limitations of existing data—availability of information, out-ofdate information, discrepancies within states,
complicated school budget formulas
•income tax
income not used as measure of fiscal capacity—school
districts don’t have access to local income taxes
no standard correlation between income and property tax
obligations
important to use income as a measure of wealth—relationship
between fiscal capacity and income apparent, income
an excellent variable for determining fiscal capacity and
all taxes paid out of income
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•wealth tax
based on net worth of an individual or household or all assets
minus liabilities
measure total ability to pay
disadvantages of using—difficult to determine total wealth,
privacy issues, cost, timing and actual process of
assessment
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Historical Influences on Equity
•Local district funding
first school financing plan
•Flat grants
funds per pupil, funds per teacher or percentage grants
provided for tax relief, not equalization
some states still use in combination with other equalizing state
allocations
•Equalizing grants
made in terms of tax-raising ability of local districts
reward for additional tax effort or reward by performance
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The Equalization Principle
•Strayer and Haig - introduced foundation program principle
Improving State Equalization Practices
•Formula
calculation of monetary need of each school district to obtain
state-guaranteed minimum program
determination of local school revenue that can be expected with
a state uniform tax rate
determination of state allocation based on difference of
monetary need and obtainable revenue
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•Complications of foundation program theory
some children are more expensive to educate
wide variations in assessment practices
costs of instruction vary
equal dollars don’t equal same amount or quality of goods
states operate many different kinds of school districts
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Foundation Program Variations
•with or without local option go above state guaranteed minimum
programs
•with or without state matching of local optional revenues
•combination with flat grants and/or categorical allocations
•differences in numbers of weighted-pupil units
•differences in local levies
•differences in amount of state funds provided
•numerous combinations of programs
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Impact of Average Daily Attendance on Equity
•Average Daily Attendance (ADA) versus Average Daily Membership
(ADM)
•How states count attendance influences financial equity
•Formulas based on ADA penalize larger urban districts
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Confusion in Current School Finance Practices
•Court cases have opened debate and reform
•Confusion has caused ineffective and obsolete financial practices
reliance almost completely on local property tax
not incorporating sound theories of equalization in program
many legislative bodies don’t see education as an investment
in people
different groups of people denied equity
fees and incidental charges discriminate against low-income
families
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