Public Education Funding in the U.S. Needs an Overhaul: How a Larger Federal Role Would Boost Equity and Shield Children from Disinvestment during Downturns

Education funding in the United States relies primarily on state and local resources, with just a tiny share of total revenues allotted by the federal government. Most analyses of the primary school finance metrics--equity, adequacy, effort, and sufficiency--raise serious questions about whether the existing system is living up to the ideal of providing a sound education equitably to all children at all times. Districts in high-poverty areas, which serve larger shares of students of color, get less funding per student than districts in low-poverty areas, which predominantly serve white students, highlighting the system's inequity. School districts in general--but especially those in high-poverty areas--are not spending enough to achieve national average test scores, which is an established benchmark for assessing adequacy. Efforts states make to invest in education vary significantly. And the system is ill-prepared to adapt to unexpected emergencies. These challenges are magnified during and after recessions. Following the Great Recession that began in December 2007, per-student education revenues plummeted and did not return to pre-recession levels for about eight years. The recovery in per-student revenues was even slower in high-poverty districts. This report combines new data on funding for states and for districts by school district poverty level, and over time, with evidence documenting the positive impacts of increasing investment in education to make a case for overhauling the school finance system. It calls for reforms that would ensure a larger role for the federal government to establish a robust, stable, and consistent school funding plan that channels sufficient additional resources to less affluent students in good times and bad. Furthermore, spending on public education should be retooled as an economic stabilizer, with increases automatically kicking in during recessions. Such a program would greatly mitigate cuts to public education as budgets are depleted, and also spur aggregate demand to give the economy a needed boost.