Why School Spending Is So Unequal

Some districts spend two to six times more on students than other districts -- even in the same state.
by | August 2018
(MCT/San Jose Mercury News/Gary Reyes)

The Hopatcong School District, serving a solidly middle-class borough of Sussex County, N.J., has a lot of money to work with. It spent approximately $40,000 per student in fiscal 2016 -- more than any other school district in the country with at least 1,000 students. A few other New Jersey districts of similar size were spending less than a third of that.

Such vast differences in education spending are common across districts, and come as debates over teacher pay and demands for more overall state support have garnered a lot of attention this year.

Looking at how spending varies across individual districts, Governing calculated per pupil current spending for all school districts in the nation with 100 students or more, using data from the Census Bureau’s 2016 Annual Survey of School System Finances. In most states, as in New Jersey, the top elementary-secondary school districts reported spending from two to six times more than those near the bottom.

One measure frequently used to assess education spending disparities is the coefficient of variation, calculated using districts’ financial numbers. When weighted for enrollment, per pupil spending discrepancies were largest in Alaska, Illinois and Vermont -- more than three times as much as in states with more uniformity across their districts.

Many factors explain such wide variations. One of the biggest is property taxes, which typically provide much of a school district’s budget. Wealthy enclaves with million-dollar homes tend to contribute tax revenues not available in poorer parts of a state. All states make an effort to offset local disparities by kicking in a portion of school funding, but just how far they go in equalizing the budgets varies considerably. The states that do it really well, says Lawrence Picus, a professor at the University of Southern California, also provide additional money for children with extra needs.

Districts in a state with the steepest per pupil costs are typically serving more students living in poverty or with additional needs. Research suggests that educating special needs students costs roughly twice as much as providing education to those without disabilities.

Geography also matters. In Alaska, several small districts in outlying areas recorded some of the highest expenses nationally. They serve many students living in poverty and must pay high costs for bus transportation, heating and flying in supplies.

States with a large roster of small districts also tend to show greater cost differences. On average, districts with 100 to 500 students reported the highest per pupil spending, about $3,000 per pupil more than those with over 10,000 students. The state with the most equalized district spending by our calculations was Florida, where entire counties make up school districts. Some others show little inequity in part because of relative uniformity across their local tax bases.

New York, meanwhile, spends more per student than any other state. Along with its high cost of living, it has a heavily unionized and costly school workforce. Michael Borges, executive director of the New York State Association of School Business Officials, says state requirements, such as special education funding obligations that exceed federal requirements, drive up expenses further. “There are a lot of state mandates that prevent us from reducing costs,” he says. “Even when we want to reduce them, our hands are tied.”

Absent high poverty, geographical issues or other special circumstances, unusually high spending in a district may signal inefficiency. A recent audit identified nearly $800,000 in potential annual savings for the Hopatcong district, recommending a restructuring of its facilities department and hiring of an internal auditor.

Research attempting to gauge the effects of spending on student performance has produced mixed results. Recent studies, though, suggest that increases in per pupil spending yield improved scores on standardized tests and higher wages after leaving school. In 40 cases where state courts have assessed a relationship between spending and student outcomes, 35 concluded a “substantial” correlation exists between funding and performance, according to the Center for Educational Equity at Columbia University.

Inequity could be intensifying in some places. In its annual report card, the Education Law Center determined that fewer states allocate higher poverty districts additional funding to mitigate local disparities than a decade ago.

Regional funding differences are a perennial issue in New Hampshire, which contributes relatively little from state sources, largely because there is no state income tax. A number of recent events have exacerbated the state’s funding inequities, says Nathan Greenberg of the New Hampshire School Administrators Association. He points to a sharp reduction in property values, a major source of school funding that was hit hard in the last recession. Lawmakers then eliminated the state’s contribution to teachers’ pensions in 2011, shifting the cost to localities. Taken together, equity isn’t getting any better, says Greenberg. “We’re back to where we were when the first [education funding] lawsuit was filed."


School Spending Disparities

One measure commonly used to examine school spending discrepancies is the coefficient of variation. States shown with higher coefficient values have larger differences in spending per student across their districts.

Districts’ current spending per pupil was calculated from data reported in the Census Bureau’s 2016 Annual Survey of School System Finances. Coefficients of variation were calculated for states, with district’s spending weighted for enrollment. Vocational or special education districts and those with fewer than 100 students were excluded. Hawaii and D.C. were also excluded as they consist of a single school district.

NOTE: A prior version of this story misrepresented school spending in West Virginia.