education in the united states there is no federal

When it Comes to Education, the Federal Government is in Charge of ... Um, What?

• Posted August 29, 2017
• By Brendan Pelsue

Judging by her Senate confirmation process, Secretary of Education Betsy DeVos is one of the most controversial members of President Donald Trump’s cabinet. She was the only nominee to receive two “no” votes from members of her own party, Senators Susan Collins of Maine and Lisa Murkowski of Alaska. On the eve of her confirmation vote, Democrats staged an all-night vigil in which they denounced her from the Senate floor. Following a 50–50 vote, Vice President Mike Pence was summoned in his capacity as president of the Senate to break the tie for DeVos — a first in the Senate’s 228-year history of giving “advice and consent” to presidential cabinet nominees.

Now that DeVos is several months into her tenure as the 11th secretary of education, both her supporters and detractors are paying close attention to the policies she is beginning to implement and how they will change the nation’s public schools. Even for veteran education watchers, however, this is difficult, not only because the Trump administration’s budget and policy proposals are more skeletal than those put forward by previous administrations, but because the Department of Education does not directly oversee the nation’s 100,000 public schools. States have some oversight, but individual municipalities, are, in most cases, the legal entities responsible for running schools and for providing the large majority of funding through local tax dollars.

Still, the federal government uses a complex system of funding mechanisms, policy directives, and the soft but considerable power of the presidential bully pulpit to shape what, how, and where students learn. Anyone hoping to understand the impact of DeVos’ tenure as secretary of education first needs to grasp some core basics: what the federal government controls, how it controls it, and how that balance does (and doesn’t) change from administration to administration.

This policy landscape is the subject of an Ed School course, A-129, The Federal Government and Schools, taught by Lecturer Laura Schifter , Ed.M.'07, Ed.D.'14,, a former senior adviser to Congressman George Miller (D-CA). Schifter has noticed that even for students who have worked in public schools, understanding the federal government’s current role in education can be complicated.

“Students frequently need a refresher on things like understanding the nature of the relationship between the federal government and the states, and what federalism is,” she says. With that in mind, the course begins with a civics review, especially the complicated politics of federalism, then moves on to a history lesson in federal education legislation since the Elementary and Secondary Education Act of 1965, and finally to an overview of the actual policy mechanisms through which the federal government enforces and implements the law. Throughout, students “read statutes, they read regulations, they read court decisions,” Schifter says — activities she believes are essential since there is no better way for educators to understand the law than to consult it themselves.

The civics and history lessons required to understand the federal government’s role in education are of course deeply intertwined and begin, as with so many things American, with the Constitution. That document makes no mention of education. It does state in the 10th Amendment that “the powers not delegated to the United States by the Constitution … are reserved to the States respectively.” This might seem to preclude any federal oversight of education, except that the 14th Amendment requires all states to provide “any person within its jurisdiction the equal protection of the laws.”

At least since the Supreme Court’s Brown v. Board of Education decision in 1954, this has been interpreted to give the federal government the power to intervene in cases of legally sanctioned discrimination, like the segregation of public schools across the country; to mandate equal access to education for students with disabilities; and, according to some arguments, to correct for persistently unequal access to resources across states and districts of different income levels. According to Associate Professor Martin West , the government’s historical and current role in education reflects the conflicts inherent in these two central tenets of the nation’s charter.

Before 1965, the 10th Amendment seemed to prevail over the 14th, and federal involvement in K–12 education was minimal. Beginning with Horace Mann in Massachusetts, in the 1830s, states implemented reforms aimed at establishing a free, nonsectarian education system, but most national legislation was aimed at higher education. For example, the 1862 Morrill Act used proceeds from the sale of public lands to establish “land-grant” colleges focused on agriculture and engineering. (Many public universities, like Michigan State and historically black colleges like Tuskegee University, are land-grant institutions.)

And then, in the late 1860s, the first federal Department of Education under President Andrew Johnson was established to track education statistics. It was quickly demoted to “Office” and was not part of the president’s cabinet. It wasn’t until the mid-1960s that the federal government took a more robust role in K–12 education.

The impetus for the change was twofold. The Supreme Court’s 1954 Brown v. Board of Education decision, which mandated the desegregation of public schools, gave the executive branch a legal precedent for enforcing equal access to education. At the same time, the launch of the Soviet satellite Sputnik I (and the technological brinksmanship of the Cold War more generally) created an anxiety that the nation’s schools were falling behind.

Those threads came together in the Elementary and Secondary Education Act (ESEA) of 1965, a bill designed in part by Francis Keppel , then the commissioner of education (the pre-cabinet-level equivalent of secretary of education) and a transformative dean at the Ed School. The bill was a key part of Lyndon Johnson’s War on Poverty and has set the basic terms of the federal government’s involvement in education ever since.

Rather than mandating direct federal oversight of schools — telling states what to do — ESEA offered states funding for education programs on a conditional basis. In other words, states could receive federal funding provided they met the requirements outlined in certain sections, or titles, of the act.

Every major education initiative since 1965 has been about recalibrating the balance first struck by esea. Until 1980, the program was reauthorized every three years, each time with more specific guidelines about how federal funds were to be used (Title I money has to add to rather than replace locally provided education funding, for example). In 1975, the Education for All Handicapped Children Act (now IDEA) ensured that students with disabilities are provided a free appropriate public education to meet their needs. This initial flurry of expansion culminated in 1979, under President Jimmy Carter, with the establishment of the federal Department of Education as a separate, cabinet-level government agency that would coordinate what West calls the “alphabet soup” of the federal government’s various initiatives and requirements.

The Reagan administration briefly rolled back many ESEA provisions, but following the release of the 1983 A Nation at Risk report, which pointed out persistent inequalities in the education system and made unfavorable comparisons between U.S. students and those in other nations, old requirements were restored and new ones added.

The 2001 No Child Left Behind Act (NCLB) marked a new level of federal oversight by requiring states to set more rigorous student evaluation standards and, through testing, demonstrate “adequate yearly progress” in how those standards were met. Flaws in the law quickly surfaced. Standards did not take into account the differences between student populations, and so, according to West, the Department of Education often ended up “evaluating schools as much on the students they serve as opposed to their effectiveness in serving them.”

When the Obama administration came to office, it faced a legislative logjam on education. NCLB expired in 2007, but there was no Congressional consensus about the terms of its reauthorization. The administration responded by issuing waivers to states that did not meet nclb standards, provided they adopted other policies the administration favored, like the Common Core standards. At the same time, the Race to the Top program offered competitive grants that awarded points to states based on their implementation of policies like performance-based evaluations. The two programs were seen by many conservatives as executive overreach, and when ESEA was reauthorized in 2015 as the Every Student Succeeds Act (ESSA), NCLB standardized testing requirements were kept, but the evaluation and accountability systems meant to respond to the results of those tests became the responsibility of individual states. When DeVos was testifying before the Senate in January 2017, the federal government still had a greater hand in public education than it did at any point before No Child Left Behind, but it had also recently experienced the greatest rollback in its oversight since an era of almost continual expansion that began in 1965.

Back in Schifter’s class, students grapple with simulated versions of the actual dilemma now facing the Trump administration: how to design and implement policy. For Schifter’s students, that means choosing between two final projects: a mock Congressional markup on an education-related bill or a mock grant proposal similar to Race to the Top. For Trump, it means navigating how education policy is shaped by all three branches of government.

Congress has the ability to write statute and distribute funds. If, for example, it releases funds as formula grants, which are distributed to all states on the same basis, it can ensure universal adoption of programs like Title I. Competitive grants like Race to the Top arguably make policy implementation more efficient: the executive branch can regulate, clarify, and be selective about its enforcement of the law. And judicial rulings can redefine what qualifies as implementation of policy, as the Supreme Court did in its 2017 Endrew F. v. Douglas County School Dist. RE-1 ruling, a unanimous decision that interpreted idea as requiring that a disabled student’s “educational program must be appropriately ambitious in light of his circumstances.”

It seems the Department of Education’s approach under DeVos is still taking shape. Some of its actions have been swift and decisive. In February, the Departments of Justice and Education jointly announced they were rescinding the Obama-era guidance protecting transgender students’ right to use a bathroom corresponding with their gender identity.

In other areas, however, the department’s positions have been vague. On Inauguration Day, the administration ordered a freeze on state evaluation and accountability plans for schools, which under essa must be federally approved. In a February 10 letter to chief state school officers, however, DeVos said states should proceed with their proposals. If the department is lenient in its evaluation of these plans, it would amount to a de facto rollback in federal oversight because the Department of Education would be choosing not to exercise its powers to the full extent permitted by law.

The administration’s proposed budget, released in May under the title “A New Foundation for American Greatness,” calls for $500 million dollars in new charter school funding — a 50 percent increase over current levels, but less than the $759 million authorized over the first two years of the George W. Bush administration. The budget also allots an additional $1 billion in “portable” Title I funding, meaning the money would follow students who opt to attend charter or magnet schools (currently it stays in their home districts). Under ESSA, however, much of what was once overseen by the Department of Education has now reverted to the states.

“Ironically, we will see an administration that will be reluctant to dictate specific policies,” says Professor Paul Reville , the Massachusetts Secretary of Education under former Governor Deval Patrick. This doesn’t mean, of course, that the Department of Education and the administration are unable to exert influence, but it appears they are planning to do so through cutbacks rather than new initiatives. Trump’s budget proposes a 13.5 percent cut in the Education Department’s 2018 budget, including a $2.3 billion cut that would eliminate Supporting Effective Instruction States Grants, which fund teacher training and development.

And cutbacks in other areas could also affect students, since not all federal funding for schools comes from the Department of Education. For example, money for the Healthy Hunger-Free Kids Act, whose school lunch nutritional guidelines were recently loosened by an executive order, comes through the Department of Agriculture. Public school employees like occupational and physical therapists bill much of their work through Medicaid, which also provides dental, vision, hearing, and mental health services. Programs like this are at risk in part because the administration’s proposed budget cuts Medicaid by $800 billion dollars.

Beyond the budget specifics, there is also the power of the presidential bully pulpit. Reville cites evidence that the administration’s rhetoric on charter schools and vouchers has already put conservative state governments “on the move, emboldened by the new federal stance on choice.”

The administration’s budget is only, however, a wish list. The actual power to determine federal expenditures rests in the House and the Senate, and even in years of less drastic proposals, legislators often pass a federal budget that looks quite different from the one suggested by the president. Trump’s budget has received pushback, and for some education-minded conservatives, the administration’s advocacy on their behalf is unwelcome. Frederick Hess , Ed.M.'90, director of education policy studies at the American Enterprise Institute, believes in school choice — but worries what will happen if Trump pushes for it.

“The last thing we want,” Hess says of school choice, “is for the least popular, most maladroit leader in memory to become the advocate for an otherwise popular idea.”

Not everyone agrees with Hess’ assessment of the president, of course, but his concerns do illustrate a basic idea about policymaking that Schifter has borrowed from political scientist John Kingdon and tries to pass on to her students. For any given idea to become a legal reality, the theory goes, policy proposals are only one part of a triangle. Politicians must also effectively prove the existence of the problem, and they must do so at a moment in history when the fix they are proposing is politically possible. For Lyndon Johnson in 1965, the problem was that the nation’s schools were not serving all students equally. The solution was for the federal government to distribute funds in a way that would correct the balance. The political moment was when both Cold War anxieties and newly robust understandings of the 14th Amendment made the changes possible. The result was a new relationship between the federal government and the states on education policy.

Although the Trump administration has outlined some first principles, both its ability to make its case to the American people and the possibilities of this unprecedented political moment remain to be seen.

Brendan Pelsue is a writer whose last piece in Ed. looked at gap year programs .

Illustrations by Simone Massoni

Ed. Magazine

The magazine of the Harvard Graduate School of Education

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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

Report • By Sylvia Allegretto , Emma García , and Elaine Weiss • July 12, 2022

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Summary 

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.

Following are key findings from the report:

Our current system for funding public schools shortchanges students, particularly low-income students. Education funding generally is inadequate and inequitable; It relies too heavily on state and local resources (particularly property tax revenues); the federal government plays a small and an insufficient role; funding levels vary widely across states; and high-poverty districts get less funding per student than low-poverty districts.

Those problems are magnified during and after recessions. Funding inadequacies and inequities tend to be aggravated when there is an economic downturn, which typically translates into problems that persist well after recovery is underway. After the 2007 onset of the Great Recession, for example, funding fell, and it took until 2015–2016, on average, to return to their pre-recession per-student revenue and spending levels. For high-poverty school districts, it took even longer—until 2016–2017—to rebound to their pre-recession revenue levels. And even after catching up with pre-recession levels, revenue levels in high-poverty districts lag behind the per-student funding in low-poverty districts. The general, long-standing funding inadequacies and inequities combined with the worsening of these problems during and in the aftermath of recessions have both short- and long-term repercussions that are costly for the students as well as for the country.

Increased federal spending on education after recessions helps mitigate funding shortfalls and inequities. Without increased federal education spending after recessions, school districts would suffer from an even greater decline in funding and even wider gaps between funding flowing to low-poverty and high-poverty districts.

Increased spending on education could help boost economic recovery. While Congress has enacted one-time education spending increases in difficult economic times, spending on public education should be considered one of the automatic stabilizers in our economic policy toolkit, designed to automatically increase and thus spur aggregate demand when private spending falls. Deployed this way, education spending becomes part of a set of large, broadly distributed programs that are countercyclical, i.e., designed to kick in when the economy overall is contracting and thus stave off or lessen the severity of a downturn. Along with other automatic stabilizers such as unemployment insurance, education spending thus would provide a stimulus to boost economic recovery.

We need an overhaul of the school finance system, with reforms ensuring a larger role for the federal government. In light of the concerns outlined in this report, policymakers must think differently both about school funding overall and about school funding during recessions. Public education is a public good, and as noted in this report, one that helps to stabilize the entire economy at critical points. Therefore, public spending on education should be treated as the public investment it is. While we leave it to policymakers to design specific reforms, we recommend an increased role for the federal government grounded in substantial, well targeted, consistent investment in the children who are our future, the professionals who help these children attain that future, and the environments in which they work. To establish a robust, stable, and consistent school funding plan that supports all children, investments need to be proportional to the size of the problems and to the societal and economic importance of the sector.

Introduction

The hope for the public education system in the United States is to provide a sound education equitably to all children regardless of where they live or into which families they are born. However, the COVID-19 pandemic exposed four interrelated, long-standing realities of U.S. public education funding that have long made that excellent, equitable education system impossible to achieve. First, inadequate levels of funding leave too many students unable to reach established performance benchmarks. Second, school funding is inequitable, with low-income students often and communities of color consistently lacking resources they need to meet their needs. Third, the level of funding reflects an overall underinvestment in education—that is, the U.S. is not spending as much as it could afford to spend in normal times. Fourth, given that educational investments are not sufficient across many districts even during normal times, schools are unable to make preparations to cope with emergencies or other unexpected circumstances. An added, less known feature is that economic downturns make all four of these problems worse. Downturns exacerbate funding inadequacies, inequities, underinvestment, and unpreparedness, causing cumulative harm to students, communities, and the public education system, and clawing back any prior progress. The severity of these problems varies widely across states and districts, as do the strength of states’ and localities’ economic and social protection systems, which may either compensate for or compound the problems.

The pandemic-led recession made these four major financial barriers to an excellent, equitable education system more visible, leading to serious questions about the U.S. education-funding model, which relies heavily on local and state revenues and draws only a small share of funding from the federal government. While public education is one of our greatest ideals and achievements—a free, quality education for every child regardless of means and background—the U.S. educational system is in need of significant improvements.

As the report will show, the core barriers to delivering universally excellent U.S. public education for all children—funding inadequacies and inequities that are exacerbated during tough economic times—were present in the system from the very start. They are the outcomes of a funding system that is shaped by many layers of policies and legal decisions at the local, state, and federal levels, creating widespread disparities in school finance realities across the thousands of districts across the country in all 50 states and the District of Columbia. This complex funding puzzle speaks to the need for a funding overhaul to attain meaningful and widely shared improvements.

In this report, we first provide an overview of the characteristics of the U.S. education funding system. We present data analyses on school finance indicators, such as equity, adequacy, and effort, that expose the shortcomings of funding policies and decisions across the country. We also discuss factors behind some of these shortcomings, such as the heavy reliance on local and state sources of funding.

Second, we illustrate that recessions exacerbate the funding challenges schools face. We parse a multitude of data to present trends in school finance indicators both during and after the Great Recession, demonstrating that the immediate effects of federally targeted funds helped schools navigate recession-induced budget cuts. We also look at the shortfalls and inequitable nature of those investments. We explore how increased federal investments—in good economic times and bad—could help address these long-standing problems. We argue that public education funding is not only an investment in our societal present and future, but also is a ready-made mechanism for countering economic downturns. Economic theory and evidence both demonstrate that large, broadly distributed programs providing public support serve as cushions during economic downturns: they spur overall spending and thus aggregate demand when private spending falls. As we note, there are strong arguments for placing public education spending within the broader category of effective fiscal responses to recessions that are countercyclical—designed to increase spending when spending in the economy overall is contracting and thus stave off or lessen the severity of a downturn. Increases in public education spending during downturns work as automatic stabilizers for schools and provide stimulus to boost economic recovery. We review existing research on the consequences of funding in general and of funding changes—evidence that supports a larger role for the federal government.

Third, we discuss the benefits of rethinking public education funding, along with the societal and economic advantages of a robust, stable, and consistent U.S. school funding plan, both generally and as a countercyclical policy. We show that federal investment that sustains school funding throughout recessions and recoveries would provide three major advantages: It would help boost educational instruction and standards, it would provide continued high-quality instruction for students and employment to the public education workforce, and it would stimulate economic recovery. Education funding, in particular, would blanket the country while also targeting areas with the most need, making the recovery more equitable.

We conclude the report with final thoughts and next steps.

This paper uses several terms to refer to investments in education and to define the U.S. school finance system. Below, we explain how these terms are used in the report:

Revenue indicates the dollar amounts that have been raised through various sources (at the local, state, and federal levels) to support elementary and secondary education. We distinguish between federal, state, and local revenue. Local revenue, in some of our charts, is further divided into local revenue from property taxes and from other sources.

Spending or expenditures indicates the dollar amount devoted to elementary and secondary education. Expenditures are typically divided by function and object (instruction, support services , and noninstructional education activities). We rely on data on current expenditures (instead of total expenditures; see footnotes 2 and 30).

Funding generically refers in this report to the educational investments or educational resources. Mostly, when we use funding we refer to revenue, i.e., to resources available or raised, but funding is also used to refer to the school finance system more broadly, and in that case it could be either referring to revenue or expenditures, depending on the context.

For more information on the list of components under each term, see the glossary in the  Documentation for the NCES Common Core of Data School District Finance Survey (F-33), School Year 2017–18 (Fiscal Year 2018) (NCES CCD 2020).

A funding primer

The American education system relies heavily on state and local resources to fund public schools. In the U.S. education has long been a local- and state-level responsibility, with states typically concerned with administration and standards, and local districts charged with raising the bulk of the funds to carry those duties and standards out.

The Education Law Center notes that “states, under their respective constitutions, have the legal obligation to support and maintain systems of free public schools for all resident children. This means that the state is the unit of government in the U.S. legally responsible for operating our nation’s public school systems, which includes providing the funding to support and maintain those systems” (Farrie and Sciarra 2021). Bradbury (2021) explains that state constitutions assign responsibility for “adequate” (“sound,” “basic”) and/or “equitable” public education to the state government. Most state governments delegate responsibility for managing and (partially) funding public pre-K–12 education to local governments, but courts mandate that states remain responsible.

States meet this responsibility by funding their schools “through a statewide method or formula enacted by the state legislature. These school funding formulas or school finance systems determine the amount of revenue school districts are permitted to raise from local property and other taxes and the amount of funding or aid the state is expected to contribute from state taxes. In annual or biannual state budgets, legislatures also determine the actual amount of funding districts will receive to operate their schools” (Farrie and Sciarra 2020).

A quick note on data sources

Some of our analyses rely on district-level data, i.e., the revenues and expenditures use the district as the unit of analysis. We rely on metrics of per-student revenue or per-student spending, i.e., taking into consideration the number of students in the districts. Other analyses use data either by state or for the country, which are typically readily available from the Digest of Education Statistics online. Sometimes the variables of interest are total revenue or expenditures, whereas on other occasions we rely on per-student values. All data sources are explained under each figure and table, and some are also briefly explained in the Methodology.

The federal government seeks to use its limited but targeted funding to promote student achievement, foster educational excellence, and ensure equal access. The major federal agency channeling funding to school districts (sometimes through the states) is the U.S. Department of Education. 1

Figure A shows the percentage distribution of total revenue for U.S. public elementary and secondary schools for the 2017–2018 school year, on average. As illustrated, revenues collected from state and local sources are roughly equal (46.8% and 45.3%, respectively). Two other factors also stand out. First, revenue from property taxes accounts for more than one-third of total revenue (36.6 %). Second, federal funding plays a minimal role, providing less than 8% of total revenue (7.8%). As discussed later in the report, this heavy reliance on local funding is a major driver in the funding challenges districts face.

More than 90% of school funding comes from state and local sources : Revenues for public elementary and secondary schools by source of funds, 2017–2018

The data below can be saved or copied directly into Excel.

The data underlying the figure.

Source: National Center for Education Statistics’ Digest of Education Statistics (NCES 2020a).

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Key metrics reveal the four major financial barriers to an excellent, equitable education system 

Fully comprehending how school funding works and how it contributes to systemic problems requires drawing on key metrics and characteristics that define the education investments or education funding. Understanding these metrics is the first step toward designing a comprehensive solution.

The adequacy metric tells us that funding is inadequate

Adequacy, one of the most widely used school finance indicators, measures whether the amount raised and spent per student is sufficient to achieve a certain level of output (typically a benchmark of student performance or an educational outcome).

We use the adequacy data provided by Baker, Di Carlo, and Weber (2020). These authors, who use the School Finance Indicators Database, compare current education spending by poverty quintile with spending levels required for students to achieve national average test scores—typically accepted as an educationally meaningful benchmark. The authors’ estimates account for factors that could affect the cost of providing education, including student characteristics, labor-market costs (differences in costs given the regional cost of living), and district characteristics (larger districts for example may enjoy economics of scale).

Figure B reveals that spending is not nearly enough, on average, to provide students with an adequate education. As this figure illustrates, relative to the wealthiest districts, the highest-poverty districts need more than twice as much spending per student to provide an adequate education. As the figure also shows, the gaps between what is spent on each student and what would be required for those students to achieve at the national level widen as the level of poverty increases. Medium- and high-poverty districts are spending, respectively, $700 and $3,078 per student less than what would be required. For the highest-poverty districts, that gap is $5,135, meaning districts there are spending about 30% less than what would be required to deliver an adequate level of education to their students. (Conversely, the two low-poverty quintiles are spending more than they need to reach that benchmark, another indication that funds are being poorly allocated.)

U.S. education spending is inadequate : Per-pupil spending compared with estimated spending required to achieve national average test scores, by poverty quintile of school district, 2017

Notes: District poverty is measured as the percentage of children (ages 5–17) living in the school district with family incomes below the federal poverty line, using data from the U.S. Census Bureau. The figure shows how much is spent in each of the five types of districts and how much they would need to spend for students to achieve national average test scores.

Source: Adapted from The Adequacy and Fairness of State School Finance Systems , Second Edition (Baker, Di Carlo, and Weber 2020).

The equity metric tells us that funding is inequitable 

An equitable funding system ensures that, all else being equal, schools serving students with greater needs—whether for extra academic, socioemotional, health, or other supports—receive more resources and spend more to meet those needs than schools with a lower concentration of disadvantaged students. Across districts, states, and the country as a whole, this means allocating relatively more funding to districts serving larger shares of high-poverty communities than to wealthier ones. While our funding system does allocate additional funds based on need (e.g., to students officially designated as eligible for “special education” services under the federal Individuals with Disabilities Education Act and to children from low-income families through the federal Title I program), in practice, more funding overall goes to lower-needs districts than to those with high levels of student needs.

Figure C compares districts’ per-student revenues and expenditures by poverty level, and shows gaps relative to low-poverty districts. The figure is based on data from what was, when this research was conducted, the most recent version of the Local Education Agency Finance Survey (known as the F-33) (NCES-LEAFS, various years). As shown in the figure, on average, per-student revenue and spending in school districts serving wealthier households exceed revenue and spending in all other districts. In low-poverty districts (i.e., districts with a poverty rate in the bottom fourth of the poverty distribution), per-student revenues averaged $19,280 in the 2017–2018 school year, and per-student expenditures averaged $15,910. In the high-poverty districts (i.e., in the top fourth of the poverty distribution), per-student revenues were just $16,570, and per-student expenditures were $14,030. High-poverty districts raise $2,710 less in per-student revenue than the lowest–poverty school districts, reflecting a 14.1% revenue gap—meaning high-poverty districts receive 14.1% less in revenue. Per-student spending in high-poverty districts is $1,880 less than in low-poverty districts, an 11.8% gap. 2 In other words, rather than funding districts to address student needs, we are channeling fewer resources—about 14% less, per student—into districts with greater needs based on their student population.

Districts serving poorer students have less to spend on education than those serving wealthier students

: total per-student revenues by district poverty level, and revenue gaps relative to low-poverty districts, 2017–2018, : total per-student expenditures by district poverty level, and spending gaps relative to low-poverty districts, 2017–2018.

Notes: Amounts are in 2019–2020 dollars and rounded to the closest $10 and adjusted for each state’s cost of living. Low-poverty districts are districts whose poverty rate (for children ages 5 through 17) is in the bottom fourth of the poverty distribution; high-poverty districts are districts whose poverty rate is in the top fourth of the poverty distribution.

Extended notes: Sample includes districts serving elementary schools only, secondary schools only, or both; districts with nonmissing and nonzero numbers of students; and districts with nonmissing charter information. Amounts are in 2019–2020 dollars using the consumer price index from the Bureau of Labor Statistics (BLS CPI 2021) and rounded to the closest $10. Amounts are adjusted for each state’s cost of living using the historical Regional Price Parities (RPPs) from the Bureau of Economic Analysis (BEA 2021). Low-poverty districts are districts whose poverty rate (for children ages 5 through 17) is in the bottom fourth of the poverty distribution; medium-low-poverty districts are districts whose poverty rate (for children ages 5 through 17) is in the second fourth of the poverty distribution; medium-high-poverty districts are districts whose poverty rate (for children ages 5 through 17) is in the third fourth of the poverty distribution; high-poverty districts are districts whose poverty rate is in the top fourth of the poverty distribution. Amounts are unweighted across districts.

Sources: Authors’ analysis of 2017–2018 Local Education Agency Finance Survey (F-33) microdata from the National Center for Education Statistics (NCES-LEAFS 2021) and Small Area Income and Poverty Estimates (SAIPE) data from the U.S. Census Bureau (Urban Institute 2021a).

Adequacy and equity are closely intertwined

In recent decades, researchers have explored challenges to both adequacy and equity in U.S. public education. For example, Baker and Corcoran (2012) analyzed the various policies that drive inequitable funding. Likewise, lawsuits that have challenged state funding systems have tended to focus on either the inadequacy or inequity of those schemes. 3

But in reality, especially given extensive variation across states and districts, the two are closely linked and interact with one another. At the state level, for example, apparently adequate levels of funding can mask disparities across districts that innately mean inadequate funding for many, or even most, districts within that state (Farrie and Schiarra 2021). 4

In addition, disparate levels of public investments in education are often made in a context that correlates positively with disparate levels of parents’ private investments in their children’s education and related support (Caucutt et al. 2020; Duncan and Murnane 2016; Kornrich 2016; Schneider, Hastings, and LaBriola 2018). Substantial research on income-based gaps in achievement demonstrates that large and growing wealth inequality plays a role. Parents at the top of the income or wealth ladders, who can and do pour extensive resources into their children’s human capital, constantly set a baseline of performance that can be hard for children and schools without such investment to attain (Reardon 2011; García and Weiss 2017). 5

The “effort” metric tells us that many states are underinvesting in education relative to their capacity

 “Effort” describes how generously each state funds its schools relative to its capacity to do so. Researchers measuring effort determine capacity to spend based on state gross domestic product (GDP), which can vary widely (just as wealthier neighborhoods can raise more revenues even with lower tax rates, states with higher GDP and thus greater revenue-raising capacity can attain higher revenue with a lower effort, i.e., generate more resources at a lower cost). The map ( Figure D ), reproduced from Farrie and Sciarra 2021, shows state funding effort from the 2017–2018 school year.

School funding ‘effort’ varies widely across states : Pre-K through 12th grade education revenues as a percentage of state GDP, 2017–2018

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Note: “Effort is measured as total state and local [education] revenue (including [revenue for] capital outlay and debt service, excluding all federal funds) divided by the state’s gross domestic product. GDP is the value of all goods and services produced by each state’s economy and is used here to represent the state’s economic capacity to raise funds for schools” (Farrie and Sciarra 2020).

Source: Adapted from Making the Grade 2020: How Fair is School Funding in Your State? (Farrie and Sciarra 2020).

As Farrie and Sciarra (2021) note, states fall naturally into four groups:

• High-effort, high-capacity: States such as Alaska, Connecticut, New York, and Wyoming are high- capacity states with high per-capita GDP, and they are also high-effort states: They use a larger-than-average share of their overall GDP to support pre-K–12 education, which generates high funding levels.
• High-effort, low-capacity : States such as Arkansas, South Carolina, and West Virginia have lower-than-average capacity, with low GDP per-capita, but they are high-effort states. Even with above- average efforts, they yield only average or below-average funding levels.
• Low-effort, high-capacity : States such as California, Delaware, and Washington are high-capacity states that exert low effort toward funding schools. If these states increased their effort even to the national average, they could significantly increase funding levels.
• Low-effort, low-capacity : States such as Arizona, Florida, and Idaho are low-capacity states that also make lower-than-average efforts to fund schools, generating very low funding levels.

Evidence shows that districts and schools lack the resources to cope with emergencies

As the COVID-19 pandemic has made clear, our subpar level of preparation to cope with emergencies or other unexpected needs reflects another aspect of underinvestment. As García and Weiss (2020) not about the COVID-19 pandemic, “Our public education system was not built, nor prepared, to cope with a situation like this—we lack the structures to sustain effective teaching and learning during the shutdown and to provide the safety net supports that many children receive in school.”

Whether due to lack of resources, planning, or other factors, districts, schools, and educators struggled to adapt to the pandemic’s requirements for teaching. Schools were unprepared not only to support learning but also to deliver the supports and services they were accustomed to providing, which go far beyond instruction (García and Weiss 2020). This lack of preparation was the result of both a lack of contingency planning as well as a failure to build up resources to be ready “to adequately address emergency needs and to compensate for the resources drained during the emergencies, as well as to afford the provision of flexible learning approaches to continue education” (García and Weiss 2021).

A lack of established contingency plans to ensure the provision of education in emergency and post-emergency situations, whether caused by pandemics, other natural disasters, or conflicts and wars (as examined by the education-in-emergencies research), prevents countries from being able to mitigate the negative consequences of these emergencies on children’s development and learning. The lack of contingency plans also leaves systems unprepared to help children handle the trauma and stress that come from the most serious events. This body of literature has also shown that access to education and services—and an equitable and compensatory allocation of them—helps reduce the damage that students experience during the crisis and beyond, since such emergencies carry long-term consequences (Anderson 2020; Özek 2020).

Public education’s over-reliance on local funding is a key factor behind the troubling funding metrics

The heavy reliance on local funding described above is at the core of the school finance problems. Extensive research has exposed the challenges associated with this unique American system for funding public schools. 6 The myriad factors that drive school funding—politics and political affiliation, state legislative and judicial decisions, property values, tax rates, and effort, among others—vary substantially from one community to another. Thus, it is not surprising that this system has contributed to institutionalizing inequities, especially in the absence of a strong federal effort to counter them.

It is well understood that the local sources of revenues on which school districts heavily rely are often distributed in a highly inequitable way. Revenues from property taxes, which make up a hefty share of local education revenues, innately favor wealthier communities, as these areas have a much larger capacity to raise funds based on higher property values despite their lower tax rates. 7 These higher property-tax revenues in wealthier areas lead to greater revenues for their districts’ schools, since property-tax revenues account for such a significant share of the total.

State and federal funding are insufficient to compensate for these locally driven inequities

State funding of public education is the largest budget line item for most states. 8 Along with federal funding, state funding is expected to make up for local funding disparities and gaps. 9 Federal funding, in particular through Title I of the Elementary and Secondary Education Act (ESEA), is specifically designed to compensate low-income schools and districts for their lack of sufficient revenues to meet their students’ needs. 10 Similarly, state funding is intended to offset some of the disparities caused by the dependence on local revenues. However, in reality, state and federal sources do not provide enough to less-wealthy school districts to make up for the gap in funding at the local level, as shown in Figure E .

As the figure   shows, the U.S. systematically funds schools in wealthier areas at higher levels than those with higher rates of poverty, even after accounting for funding meant to remedy these gaps. On average, local property-tax funding per student is $5,260 lower in the poorest districts than in the wealthiest districts.

Federal and state revenues fail to offset the funding disparities caused by relying on local property tax revenues : How much more or less school districts of different poverty levels receive in revenues than low-poverty school districts receive, all and by revenue source, 2017–2018

Notes: Amounts are in 2019–2020 dollars, rounded to the closest $10, and adjusted for each state's cost of living. Low-poverty districts are districts whose poverty rate for school-age children (children ages 5 through 17) is in the bottom fourth of the poverty distribution; high-poverty districts are districts whose poverty rate is in the top fourth of the poverty distribution.

Extended notes: Sample includes districts serving elementary schools only, secondary schools only, or both; districts with nonmissing and nonzero numbers of students; and districts with nonmissing charter information. Amounts are in 2019–2020 dollars using the consumer price index from the Bureau of Labor Statistics (BLS-CPI 2021) and rounded to the closest $10. Amounts are adjusted for each state’s cost-of living using the historical regional Price Parities (RPPs) from the Bureau of Economic Analysis (BEA 2021). Low-poverty districts are districts whose poverty rate for school-age children (children ages 5 through 17) is in the bottom fourth of the poverty distribution for that group; medium-low-poverty districts are districts whose school-age children’s poverty rate is in the second fourth (25th–50th percentile); medium-high-poverty districts are districts whose school-age children’s poverty rate is in the third fourth (50th–75th percentile); in high-poverty districts, the rate is in the top fourth. Amounts are unweighted across districts.

Sources: 2017–2018 Local Education Agency Finance Survey (F-33) microdata from the National Center for Education Statistics (NCES-LEAFS 2021) and Small Area Income and Poverty Estimates (SAIPE) data from the U.S. Census Bureau (Urban Institute 2021a).

While state revenues are a significant portion of funding, they only modestly counter the large locally based inequities. And while federal funding, by far the smallest source of revenue, is being deployed as intended (to reduce inequities), it inevitably falls short of compensating for a system grounded in highly inequitable local revenues as its principal source of funding. As such, although states provide their highest-poverty districts with $1,550 more per student than to their lowest-poverty districts, and federal sources provide their highest-poverty districts with $2,080 more per student than to their lowest-poverty districts, states and the federal government jointly compensate for only about half of the revenue gap for high-poverty districts (which receive a per-student average of $6,330 less in property tax and other local revenues). That large gap in local funding leaves the highest-poverty districts still $2,710 short per student relative to the lowest-poverty districts, reflecting the 14.1% revenue gap shown in Figure C. Even though high-poverty districts get more in federal and state dollars, they get so much less in property taxes that it still puts them in the negative category overall.

Disparities shortchange states’ (and districts’) ability to access and allocate the resources needed for effective education

Given the heavy reliance on highly varied local funding, it is no surprise that there is similarly significant variation across states with respect to almost every aspect of funding discussed here. Table 1 reports federal, state, and local funding for each state and for the District of Columbia, with local funding broken down into three categories.

Revenues for public elementary and secondary schools, by source of funds and by state : Share of each source in total revenue, 2017–2018 

Source: National Center for Education Statistics' Digest of Education Statistics (NCES 2020b). 

Nationally, in 2017–2018, local and state sources accounted for 45.3% and 46.8% of total revenue, respectively; just 7.8% comes from the federal government. However, these averages mask substantial variation in the shares of revenue apportioned by each source across states. Local revenue, for example, ranges from just 3.7% of total public-school revenue in Vermont and 18.2% in New Mexico, on the lower end, to a high of 63.4% in New Hampshire. The same is true with respect to state revenue. The state that contributes the smallest share to its education budget is New Hampshire at 31.3%, with Vermont contributing the largest share (89.9%). There is also quite a bit of variation in the share represented by federal funds—from just 4.1% in New Jersey to 15.9% in Alaska. (The cited values are highlighted in the table. We omit the District of Columbia and Hawaii from these rankings because of the unusual composition of their funding streams, but we provide their values in the table.)

As shown earlier in the discussion of the map in Figure E, there are also large disparities in funding effort—how generously each state funds its schools relative to its capacity to do so, based on state GDP. High-effort, high-capacity s tates such as Alaska, Connecticut, New York, and Wyoming use a larger-than-average share of their overall GDP to support pre-K–12 education and they generate high funding levels.

As a result of funding and effort variability across states, the levels of inequity and inadequacy across states also vary substantially (Baker, Di Carlo, and Weber 2020; Farrie and Sciarra 2021). Notably, funding variability translates into significant disparities in overall per-student revenue and per-student spending levels, as shown in Figures F and G . In Wyoming, for example, where effort is relatively high (4.36%; see Figure E) and there is a higher-than-average contribution of state funds to total revenue and a lower-than-average contribution of local funds to total revenue (56.8% and 36.8%, respectively, versus 46.8% and 45.3% averages across the U.S.), per-student revenue is among the highest of any state, nearly $21,000. In contrast, Arizona and North Carolina—which are among the lowest in effort in the country (2.23% and 2.28%, respectively), but where state funds account for 47.1% and 62.1% of the state’s total public education revenues, respectively, and local funds account for 40.4% and only 27.0%, respectively—collect about half of what Wyoming collects per student. (Data accounts for differences in states’ cost of living; see the appendix for more details on our methodology.)

Public education revenues vary widely across states : Per-student revenues for public elementary and secondary schools, by state, 2017–2018

Note: Amounts are in 2019–2020 dollars using the consumer price index from the Bureau of Labor Statistics (BLS-CPI 2021) and rounded to the closest $10. Amounts are adjusted for each state’s cost-of living using the historical regional Price Parities (RPPs) from the Bureau of Economic Analysis (BEA 2021).

Source: National Center for Education Statistics’ Digest of Education Statistics (NCES 2020b).

Public education expenditures vary widely across states : Per-student expenditures for public elementary and secondary schools, by state, 2017–2018

Note: Amounts are in 2019–2020 dollars using the consumer price index from the Bureau of Labor Statistics (BLS-CPI 2021) and rounded to the closest $10. Amounts are adjusted for each state’s cost-of living using the historical Regional Price Parities (RPPs) from the Bureau of Economic Analysis (BEA 2021).

Source: National Center for Education Statistics’ Digest of Education Statistics (NCES 2020c).

These substantial disparities in all the school finance indicators, and in per-pupil spending and revenue across states, are mirrored in capacity and investment patterns across districts and, within them, individual schools.

As such, these systemic and persistent inequities play a decisive role in shaping children’s real school experiences. As Raikes and Darling-Hammond (2019) note, “As a country, we inadvertently instituted a school finance system similar to red-lining in its negative impact. Grow up in a rich neighborhood with a large property tax base? You get well-funded public schools. Grow up in a poor neighborhood? The opposite is true. The highest-spending districts in the United States spend nearly 10 times as much as the lowest-spending, with large differentials both across and within states (Raikes and Darling-Hammond 2019). In most states, children who live in low-income neighborhoods attend the most under-resourced schools” (see also Turner et al. 2016 for the underlying data). 11

These gaps in spending capacity touch every aspect of school functioning, including the capacity of teachers and staff to deliver effective instruction, and pose a huge barrier to the excellent school experience that each student should receive. In Pennsylvania, for example, where districts tend to rely heavily on local revenues to finance schools, per-pupil spending ranges dramatically. Indeed, in 2015, the U.S. Department of Education flagged the state as having the biggest school-spending gap of any state in the country (Behrman 2019). One illustrative example is in Allegheny County, on the western side of the state, where the suburban Wilkinsburg school district outside of Pittsburgh spent over $27,000 per student in the 2017–2018 school year, while the more rural South Allegheny school district spent just over $15,000, roughly 45% less.

With salaries being the largest line item in school budgets, these disparities substantially affect schools’ ability to hire the educators and other school personnel needed to provide effective instruction, the school leaders to guide instructional staff, and the staff needed to support administrative needs and to offer other services and extracurricular activities. As a result, these resources vary tremendously not only among states, but within them from one district, and even school, to another. 12 Overwhelming research exposes large disparities in access to counselors, librarians, and nurses, and in access to up-to-date technology and facilities. Facilities are literally crumbling in lower-resourced states and districts, painting a clear picture of the dire straits many schools face. (See, for example, Filardo, Vincent, and Sullivan 2019 regarding added consequences for low-income students and their teachers in schools that are too cold, full of dust or lead paint, and have broken windows or crumbling ceilings.)

Baker, Farrie, and Sciarra (2016) note that “increasing investments in schools is associated with greater access to resources as measured by staffing ratios, class sizes, and the competitiveness of teacher wages.” The findings presented here are backed by the extensive body of literature on the positive relationship between substantive and sustained state school finance reforms and improved student outcomes. Together, they make a strong case that state and federal policymakers can help boost outcomes and close achievement gaps by improving state finance systems to ensure equitable funding and improved access to resources for children from low-income families.

Economic downturns exacerbate the problems with our school finance system and, over time, cause cumulative damage to students and to the system

Recessions lead to depleted state and local budgets and, in turn, to cuts in education funding. Trends since the Great Recession demonstrate that it can take a long time to restore education budgets and that our practice of balancing budgets on the backs of schoolchildren is an unwise and, ultimately, costly one in terms of educational and societal outcomes. As we show in Figure H , reductions in revenue for public education often outlast the official length of the recession, lasting much longer than the point when state and local budgets have returned to pre-recession trajectories in other areas of spending. In addition, a poor allocation of resources across high- and low-poverty districts disproportionately harms students in the highest-poverty districts relative to their peers in better-off districts, compounding the existing challenges described above and impeding their recovery.

It took the United States nearly a decade to restore the national per-student revenue to its pre-recession (2007–2008) school-year levels. Figure H shows national trends in revenue per student, by source (federal, state, and local), from the onset of the Great Recession through 2017–2018. 13

Education revenues fell sharply after 2008 (and did not return to pre-recession levels for about eight years) : Change in per-student revenue relative to 2007–2008, by source (inflation adjusted)

Note: The chart shows change in revenue per student for public elementary and secondary schools compared with 2007–2008. Amounts are in 2019–2020 dollars and rounded to the closest $10 using the consumer price index from the Bureau of Labor Statistics (BLS-CPI 2021). The Local line is all local sources, including property tax revenues.

Per-student state revenue fell precipitously between 2007–2008 and 2012–2013—it was down nearly $900 at the low point. While revenue from property taxes did not decrease, on average, other local revenues fell by $160 by 2011–20121, only recovering to 2007–2008 levels in 2014–2015. Federal funding for schools, together with the additional recovery funds targeted to education through the 2009 American Recovery and Reinvestment Act (ARRA), provided an initial and critical counterbalance to these reductions; in 2009–2010 and 2010–2011, districts were receiving slightly over $600 more per student from the federal government than they were before the recession.

The peak in federal revenue is also visible in Figure I , which depicts the distribution of funding by sources by year . Total federal funds accounted for 12.7% of total revenue in 2009–2010, compared with just 8.2% in 2007–2008, an increase of over 50%. (Note that this increase was made larger by the reduced total amounts of revenues, i.e., it constituted a greater share of a smaller whole).

Importance of federal funding for education increased in the aftermath of the Great Recession : Share of total education revenue by source, 2007–2008 to 2017–2018

Source: National Center for Education Statistics' Digest of Education Statistics (NCES 2020a).

While these federal investments provided a critical boost by temporarily upholding education funding, our analyses suggest an opportunity to shorten the slow recovery to pre-recession levels was lost. Just as they effectively operated during the recession, it is likely that larger and more sustained federal investments would have better assisted the students, schools, and communities that suffered major setbacks due to the Great Recession. We come back to this idea in sections below.

In keeping with the discussion on broad funding disparities by state, the road to recovery from the Great Recession also varies across states and districts, with some still lagging from the Great Recession as they struggled with the COVID-19 crisis.

Research demonstrates that well after the end of the Great Recession, a significant number of states were still funding their public schools at lower levels than before the recession. As late as 2016, for example, per-student funding in 24 states—including half of the states with over a million enrolled students—was still below pre-recession levels (Leachman and Figueroa 2019). For some of these states, the failure to return to prior funding levels was driven by the lack of recovery of the per-student state revenue (for example, Alabama, Alaska, Arizona, Florida, Mississippi, Montana, New Mexico, and Oklahoma). In some of the “deepest-cutting states — including Arizona, North Carolina, and Oklahoma,” note Leachman and Figueroa, the state governments made significant cuts to income tax rates, “making it much more difficult for their school funding to recover from cuts they imposed after the last recession hit.” In other states, lack of local revenue was the culprit (as in Hawaii, Indiana, Kansas, and Vermont, for example). Finally, in some of these states, this shortfall fell on top of a rapidly growing student population (i.e., even had their total revenues recovered to pre-recession levels, they would still fall far behind on a per-student basis). Exploring the various drivers of these trends and their variation across states is beyond the scope of this report but would undoubtedly be fruitful. 14

Putting aside state trends and underlying causes, a focus on school districts reveals a strong correlation between poverty rates and education funding recovery. The following figures show the trends over time in total per-student revenue and spending by school district poverty levels. As we see, high-poverty districts and their students experienced both the biggest shortfalls and the most sluggish recoveries.

Figure J shows that, as discussed above, districts with relatively small shares of low-income students (low-poverty districts) never saw revenues per student fall below pre–Great Recession levels, adjusted for inflation and state cost of living. By contrast, the one-fourth of districts with the largest share of students from poor families (high-poverty districts) stayed below their pre–Great Recession level of per-student revenues long after recovery was in full swing, through 2015–2016. In keeping with that spectrum, the medium-high poverty districts did recover to their pre-recession per-student revenue levels, but not until 2014–2015.

The drop in education revenues after 2007–2008 was greater in high-poverty districts : Change in total per-student revenue compared with 2007–2008, by district poverty level (adjusted for inflation and state cost of living)

Sources: 2007–2008 to 2017–2018 Local Education Agency Finance Survey (F-33) microdata from the National Center for Education Statistics (NCES-LEAFS 2021) and Small Area Income and Poverty Estimates (SAIPE) data from the U.S. Census Bureau (Urban Institute 2021a).

Figure K tells a similar story regarding trends in per-student expenditure across school districts. As such, it took until 2017–2018, a decade after the Great Recession had first hit, for high-poverty school districts to surpass their pre-recession levels, though they still lagged far behind their wealthier counterpart districts. Moreover, though not shown in this graph, for high-poverty districts, getting back to pre-recession status means catching up to revenue and spending levels that were lower than in the wealthier districts to begin with. (Figure C earlier in the report illustrates the gaps between high- and low-poverty districts in 2017–2018.)

The drop in education expenditures after 2007–2008 was greater in high-poverty districts : Change in total per-student expenditures compared with 2007–2008, by district poverty (adjusted for inflation and state cost-of living)

Notes:  Amounts are in 2019–2020 dollars, rounded to the closest $10, and adjusted for each state's cost of living. Low-poverty districts are districts whose poverty rates (for children ages 5 through 17) are in the bottom fourth of the poverty distribution; high-poverty districts are districts whose poverty rates are in the top fourth of the poverty distribution.

Balancing budgets on the backs of children during a recession has serious consequences

Inadequate, inequitable funding relegates poor children to attend under-resourced schools even in good economic times, and to suffer disproportionately during and in the aftermath of economic downturns. We have for far too long been balancing recession-depleted budgets on the backs of schoolchildren, in particular low-income children and children of color. This not only hurts these children immediately, but severely limits their prospects as adults. As such, this practice has broader implications for the future of the country, both economically and regarding the strength of our societal fabric, given that the students of today are the workers and the citizens of tomorrow.

Indeed, these negative patterns are just the first indications of a cascade of consequences that result from funding cuts. This section describes those consequences and their flip side, which is more frequently the focus of education researchers—the positive effects of increased investment. First, we review the literature demonstrating the impacts of various levels of funding on student outcomes. Next, we point to analyses that have shown some other associated school problems (education employment, class size, and student performance, among others) that were contemporaneous with the declines in spending and revenue. Thought it is difficult to quantify the exact and independent impact of the funding cuts on these factors, the strong correlations suggest that they are related.

Substantial evidence points to the positive effects of higher spending on both short- and long- term student outcomes, as well as on schools overall and on adult outcomes (Jackson and Mackevicius 2021; Jackson, Johnson, and Persico 2016; Gibbons, McNally, and Viarengo 2018; Hyman 2017; Lafortune, Rothstein, and Schanzenbach 2018; Jackson 2018; Jackson, Wigger, and Xiong 2020; Baker 2018). This body of research also provides evidence that the impact of school spending differs by students’ family income (Lafortune, Rothstein, and Schanzenbach 2018; Jackson, Johnson, and Persico 2016). And, though less has been studied in this specific area, the evidence also shows that a misallocation of resources and/or a decrease in spending has a negative influence on student outcomes, as well as on some teacher outcomes (Jackson, Wigger, and Xiong 2020; Greaves and Sibieta 2019). 15

A recent summary of the literature provides compelling evidence of the effects of school spending on test scores and educational attainment. Based on 31 studies that provide reliable causal estimates, Jackson and Mackevicius (2021) find that, on average, a $1,000 increase in per-pupil public school spending for four years increases test scores by 0.044 percentage points, high school graduation by 2.1 percentage points, and college-going by 3.9 percentage points. Interestingly, the authors explain that “when benchmarked against other interventions, test score impacts are much smaller than those on educational attainment—suggesting that test-score impacts understate the value of school spending.” Consistent with a cumulative effect, the educational attainment impacts are larger after more years of exposure to the spending increase, and average impacts are similar across a wide range of baseline spending levels, indicating little evidence of diminishing marginal returns at current spending levels.

Other research suggests that the effect of spending is greater on disadvantaged students. Bradbury (2021) investigates “how specific state and local funding sources and allocation methods (redistributive extent, formula types) relate to students’ test scores and, especially, to test-score gaps across races and between students who are not economically disadvantaged and those who are.” Her findings suggest that statewide per-student school aid has no relationship with test-score gaps in school districts, but that the progressivity of the state’s school-aid distribution is associated with smaller test-score gaps in high-poverty districts. 16

Other studies further affirm the implications of equity-specific funding decisions. Jackson, Johnson, and Persico’s (2016) study assesses the impacts on a range of student and adult outcomes of a series of court-mandated school finance reforms that took place in the 1970s and 1980s. Linking information on the reforms to administrative data about the children who attended the schools, the authors found that the increase in school funding was associated with slight increases in years of educational attainment, and with higher adult wages and reduced odds of adult poverty, as well as with improvements to schools themselves—increased teacher salaries, reduced student-to-teacher ratios, higher school quality, and even longer school years (Jackson, Johnson, and Persico 2016). Specifically, a 10% increase in per-pupil spending each year for all 12 years of public schooling leads to 0.27 more completed years of education, 7.25% higher wages, and a 3.67 percentage-point reduction in the annual incidence of adult poverty. As with the other studies, the benefits from increased funding are much greater for children from low-income families: 0.44 years of educational attainment and wages that are 9.5% higher.

In another study drawing on data from post-1990 school finance reforms that increased public-school funding in some states, Lafortune, Rothstein, and Schanzenbach (2018) estimate the impact of both absolute and relative spending on achievement in low-income school districts, as measured by National Assessment of Educational Progress (NAEP) data. 17 They find that the reforms increase the achievement of students in these districts, phasing in gradually over the years following the increase in spending/adequacy. While the measures employed to estimate the impact tend to be technical, the authors emphasize that this “implied effect of school resources on educational achievement is large.” 18 Similar adequacy-related reforms that resulted from court mandates, rather than state legislative decisions, prompted significant increases in graduation rates (Candelaria and Shores 2019).

Conversely, research shows that both the reallocation of resources and/or a decrease in spending have a negative influence on both teacher and student outcomes. Jackson, Wigger, and Xiong (2020) find that the cuts to per-pupil spending that occurred during the Great Recession reduced test scores and college enrollment, particularly for children in poor neighborhoods. Shores and Steinberg (2017) reaffirm these findings, noting that the Great Recession negatively affected math and English language arts (ELA) achievement of all students in grades 3–8, but that this “recessionary effect” was concentrated among school districts serving both more economically disadvantaged students and students of color. Greaves and Sibieta (2019) find that changes that required districts to pay teachers following higher salary scales, but that provided no additional funding to implement the requirements, did lead to increased pay for teachers as intended, but at the expense of cuts to other noninstructional spending of about 4%, with no net effects on student attainment. That is, reallocating resources across functions, without increasing the overall levels, did not improve outcomes.

Other studies explore disappointing trends across multiple education parameters during the decade preceding the COVID-19 pandemic, including teacher employment, class size, aggregate student performance, and performance gaps by socioeconomic status and/or racial/ethnic background. Several analyses show that recession-led school funding cuts were contemporaneous with significant reductions of teacher employment. The number of teachers in the United States public-school system reached its highest point in 2008, and then dropped significantly between 2008 and 2010 because of the recession (Gould 2017; Gould 2019; Berry and Shields 2017). Evans, Schwab, and Wagner (2019) estimated a decrease in total employment in public schools of 294,700 from the start of the recession until January 2013. Gould (2019) estimated that, in the fall of 2019, there were still 60,000 fewer public education jobs than there had been before the recession began in 2007 and that, if the number of teachers had kept up proportionately with growing student enrollment over that period, the shortfall in public education jobs would be greater than 300,000.

Related to these challenges, in the aftermath of the Great Recession through the 2015–2016 school year, schools’ struggles to staff themselves increased sharply. García and Weiss (2019) showed that the share of schools that were trying to fill a vacancy but could not do so tripled from the 2011–2012 to the 2015–2016 school year (increasing from 3.1% to 9.4% of schools in that situation), and the share of schools that reported finding it very difficult to fill a vacancy nearly doubled (from 19.7% to 36.2%). 19

Although class size, and the closely related metric of student-to-teacher ratios, have declined over the long term, they are higher, on average, in 2020 than they were in 2005 (the closest data point prior to the Great Recession) in 29 out of the 50 states plus the District of Columbia (NCES 2020d; Hussar and Bailey 2020). (See Mishel and Rothstein 2003 and Schanzenbach 2020 for a recent review of the influence of class size on achievement.)

Understanding overall trends in student performance over this period helps to put the impacts of trends in these other metrics in context. We have cited research that links school finance trends and educational outcomes in the aftermath of the Great Recession, but it is worth describing what the trends in student performance looked like across the country. It should not be surprising that scores from the National Assessment of Educational Progress (NAEP), the most reliable indicator over time of how much students are learning, show stagnant performance in math and reading for both fourth- and eighth-graders between 2009 and 2019 (NAGB 2019). As Sandy Kress, who served as President George W. Bush’s education advisor, commented, “The nation has gone nowhere in the last ten years. It’s truly been a lost decade [and] [t]he only group to experience more than marginal gains in recent years has been students in the top 10th percentile” (Chingos et al. 2019).

Gains (both absolute and relative) vary by students’ background, with multiple trends visible. Carnoy and García’s 2017 research on achievement gaps between racial/ethnic groups shows that Black–white and Hispanic–white student achievement gaps have continued to narrow over the last two decades, and also that Asian students were widening the gap ahead of white students in both math and reading achievement. At the same time, Hispanic and Asian students who are English language learners (ELLs) are falling further behind white students in mathematics and reading achievement, and gaps between higher- and lower-income students persist, with some changes that vary by subject and grade. During the decade of stagnation, however, in keeping with trends in per-pupil investments over this period, these trends widened existing inequities. As National Center for Education Statistics (NCES) Associate Commissioner Peggy Carr soberly notes, “Compared to a decade ago, we see that lower-achieving students made score declines in all of the assessments, while higher-performing students made score gains” (Danilova 2018).

Finally, we have also seen marked changes in the student body composition that have implications for these trends going forward. The proportion of low-income students in U.S. schools has increased rapidly in recent decades, as has the share of students of color (NCES 2020e; Carnoy and García 2017). A student’s race/ethnicity and socioeconomic status also affects the student’s odds of ending up in a high-poverty school or a school with a high share of students of color. For example, Black and Hispanic students who are not poor are much more likely than white or Asian students who are low income to be enrolled in high-poverty schools (Carnoy and García 2017).

All of these changes point to the need for increased resources across the board, and especially in schools serving the highest-needs students. As we revisit education funding in the aftermath of the pandemic-induced recession, the new structure must make greater investments to ensure the equitable provision of education and associated supports not only in stable times but also in the context of substantial disruptions and crises (García and Weiss 2021). As the analysis above makes clear, neither equity not adequacy—and, thus, excellence in public education—will ever be possible as long as local revenues play such a central role, and as long as states are the primary vehicle to address those disparities. While we leave it to policymakers to design the specifics of this public-good investment, we emphasize that the benchmarks we should reach to determine that those investments are stable, sufficient, and equitable should reflect meaningful, consistent advances for the highest-poverty schools and schools serving students of color. In other words, when the impacts of recessions no longer fall on the backs of our most vulnerable children, we will know that we are moving in the right direction.

Public education funding could also be deployed quickly to boost the economy and serve as an automatic stabilizer

The practice of cutting school funding during recessions is not only bad for students and teachers but also hurts the economy overall. The education sector has the potential to help stabilize the economy during downturns, but historically, our policy responses have failed to provide the necessary investment, as discussed in this report.

Up to this point, we have shown the characteristics, dynamics, and consequences of the existing education funding system. We have emphasized that fixing the system’s problems and achieving an excellent, equitable, robust, and stable public education system requires more funding —not just a reshuffling of existing funding. We have presented evidence indicating the need for a significantly larger contribution to the system from the federal government on a permanent basis. We have also demonstrated that targeting additional funds to schools during the Great Recession—via ARRA funds in particular— helped offset the large cuts schools experienced due to state and local shortfalls. As stated by Evans, Schwab, and Wagner (2019), “[…] the federal government’s efforts to shield education from some of the worst effects of the recession achieved their major goal.” Based on the observed trends, we considered whether even more sustained federal investments would have better assisted the students, schools, and communities that suffered major setbacks due to the Great Recession.

There is another reason for both larger investments and a more robust federal role when state and local budgets experience shortfalls due to economic downturns: School funding can be part of the countercyclical public-spending programs that help the economy recover. While policymakers and economists have long recognized the need for, and the effectiveness of, such automatic stabilizers (programs that pump public spending into the economy just when overall spending is declining), they have not traditionally placed public education spending in this category—yet it belongs there. 20 Federal funding directed toward schools during and in the aftermath of economic downturns can further boost the economy, thereby jump-starting economic recoveries.

Stable, sufficient, and equitable education funding would give schools and districts the resources and flexibility to adapt to challenges that they need but have not had during the COVID-19 pandemic. Moreover, automatic stabilization of public education protects students and school systems against depleted school budgets during recessions and volatile business cycles (Evans, Schwab, and Wagner 2019; Allegretto, García, and Weiss 2021). In addition to averting the harms to students and teachers described above, countercyclical investments would keep the public education workforce employed. The teachers, nurses, counselors, librarians, bus drivers, cafeteria workers, and others who work in public schools made up 53.2% of all state and local public-sector workers in 2019—accounting for nearly 7.0% of total U.S. employment. 21 School staff are also family and community members whose spending ripples through their local economies (known as the multiplier effect). Cuts to education revenues and employment thus also affect local communities more broadly, and retrenchment of spending acts as a type of reverse multiplier, resulting in a vicious downward cycle.

Federally provided countercyclical fiscal spending on public education set up to kick in based on defined triggers—akin to an expansion of unemployment benefits that kicks in when certain unemployment targets are reached—would have significant “bang-for-your-buck” multiplier effects. Such automatic spending constitutes smart investment that upholds public education while giving the overall economy a significant boost. Analyzing then President-elect Biden’s American Rescue Plan, which included public education spending, Zandi and Yaros (2021) reported a 1.34 fiscal multiplier for state and local government spending (the American Rescue Plan Act of 2021 was signed into law in March 2021).

Because the federal government already provides substantial support to state and local governments in such times, bolstering and further targeting that support in a defined and concerted manner would entail a relatively light lift. Despite some challenges, several programs of this nature have been shown to meet their goals in their given policy areas. For example, the federal unemployment insurance (UI) and food stamps (SNAP) 22 programs are often cited as having demonstrably positive outcomes when the federal government increases their funding. Both have been heavily criticized for their structural flaws and lack of sufficient resource (Bivens et al. 2021). However, through prior recessions and the pandemic, data illustrate that UI and SNAP nonetheless prevented millions of people from falling into, or deeper into, poverty, as well as averted hunger and evictions. The CARES Act’s first allotment of the Economic Impact Payments and expanded UI benefits during the COVID-19 pandemic kept 13.2 million people out of poverty (Zipperer 2020). 23 The Bureau of Economic Analysis broke out the effects of selected pandemic response programs on personal income, illustrating just how heavily Americans leaned on these benefits through the pandemic. In June 2020, UI payments accounted for 15.6% of all wages and salaries in the U.S (BEA 2020). By contrast, just prior to the pandemic UI benefits were negligible in comparison—just 0.27% of wages and salaries overall in February 2020.

We propose that policymakers create a program for funding education during downturns that is of adequate magnitude and provides immediate, sufficiently large, and sustained relief as needed.

In order to provide an immediate response, the system must have the capacity to adapt to emergencies; a key way to ensure that is to specify ahead of time the automatic triggers that prompt launching the contingency plans. 24 To clarify, we are not suggesting that public education spending be treated exactly like food stamps or unemployment insurance benefits—i.e., that states amass reserves for a “rainy day” or that reserves be built up during nonrecessionary periods. Rather, we are pointing to the economic benefits of an education system that is robustly, stably, and consistently funded throughout economic ups and downs, ensuring that it also has the resources to withstand the downturns and the flexibility to adapt. And we are recommending that Congress establish a program that kicks in when needed, rather than waiting until a crisis and coming together to pass a large, responsive bill, which requires political negotiation and can thus take a lot of time.

Sufficiently large investments imply that the spending numbers are adequate to the size of the problem. As we have seen during the COVID-19 pandemic, the various public programs—even with all their flaws—have been critical to preventing a much worse disaster than the one we have experienced. 25

Finally, regarding sustained assistance, it was clear that relief and recovery spending fell far short in response to the Great Recession and was cut off too soon; it took 6.2 years to recoup the jobs lost and nearly eight years for the unemployment rate to get back to its pre-recession rate of 5%. And unemployment rates for Black and Hispanic workers took much longer to return to pre-recession levels (Allegretto 2016). In education, as shown before, it was not until the 2014–2015 school year that districts’ per-student revenue, on average, recovered to 2007–2008 levels nationally—and recovery took even longer for high-poverty districts.

In sum, while the purpose of this study is not to offer guidance on how to best design a public education automatic-stabilization program, we do argue that such a program would help public education during downturns, and provide a boost to the overall economy. At later stages, proof-of-concept designs such as Medicaid and transportation grants, and some of the existing large-scale public programs already mentioned, could be a useful place to continue the discussion. Identifying best practices—in program design, financing, and implementation in the United States and elsewhere—would help to conceive a strategy.

Conclusions and next steps

For too long in this country, we have normalized the practice of underinvesting in education while expecting that schools would still function well (or at least moderately well). We have also accepted the disproportionate burden that economic recessions place on public schools and students. These norms are very costly—to individuals and to society—and they shortchange our country’s potential.

As the data and research show, this approach is backward. If we are to have a chance of providing all students in the United States with an excellent education we must  build a strong foundation—one with sufficient, adequate, and equitable funding of public schools in practice, not just in theory. Ensuring broad adequacy and equity will require increased federal investment (to more fully complement a system that relies heavily on nonfederal sources). Moreover, federal provisions that provide for automatic boosts to education spending during downturns is critical. Our education system can and should include a countercyclical designed to help stabilize the economy when it is contracting—benefiting schools and communities.

Were we to truly acknowledge the benefits, it would be hard to argue politically against making these investments a reality. Here again the data are edifying: Extensive research indicates that a stable and consistent funding system with a much higher level of investment would generate large economic and social returns. 26

An increased federal investment to ensure sufficient, adequate, and equitable funding of public schools has an additional benefit: It could serve as another tool in our toolbox for faster, broader, and more equitable recoveries from recessions. Boosting school funding during downturns could boost the wider economy—and disproportionately benefit the low-income communities that tend to be hit hardest in hard economic times.

This proposal requires jettisoning the tendency to pit public policy areas against one another for resources, and to glamorize the purportedly efficient notion of “doing more with less.” The latter, often used to justify education budget cuts, actually entails a misguided denial of the need for resources and of the inevitable damage that ensues when those resources fall short—or fail to exist at all.

We are not arguing that increased access to federal resources alone will address all the issues outlined above. Simply throwing money at the goal of providing an excellent education equitably to all children won’t achieve it; we need to make the right investments. 27

In addition, it is also important to distinguish funding from decision-making. While the federal government is best positioned to ensure broadly adequate and equitable education funding nationwide, it is not necessarily well suited to make decisions about policy, practice, and implementation. Evidence should guide how decision-making is allocated across the federal, state, and local levels. 28

Advancing this proposal also requires that we dislodge the conversation from where it has been stuck for at least the past half-century—namely on whether the resources exist. They do. What we need to ask now is how to make those resources available, and how to deploy them to ensure that all students have the opportunities to learn, develop, and achieve their full potential—and that these opportunities are available during both ordinary and recessionary times.

About the authors

Sylvia Allegretto is a research associate with the Economic Policy Institute. She worked for 15 years at the Institute for Research on Labor and Employment at the University of California, Berkeley, where she co-founded the Center on Wage and Employment Dynamics (CWED). She received her Ph.D. in economics from the University of Colorado, Boulder.

Emma García is an economist specializing in the economics of education and education policy. She developed this study while she was at the Economic Policy Institute (2013-2021). She is now a senior researcher at the Learning Policy Institute. García received her Ph.D. in economics and education from Columbia University’s Teachers College.

Elaine Weiss is the Policy Director at the National Academy of Social Insurance, and former National Coordinator of the Broader, Bolder Approach to Education at the Economic Policy Institute (2011-2018). She received her B.A. in Political Science from the University of Maryland, J.D. from Harvard Law School, and Ph.D. in public policy from the George Washington University.

Acknowledgments

The authors are grateful to EPI Publications Director Lora Engdahl for having edited this report and for her help shepherding it to its release. The authors benefited from Ajay Srikanth’s guidance on school finance data sources at the beginning of the project. The authors appreciate EPI’s support of this project, EPI Research Assistant Daniel Perez for his assistance with the tables and figures, EPI Editor Krista Faries for her usual thoughtful insights, and EPI’s communications staff for their assistance with the production and dissemination of this study.

Appendix: Notes on the data sources and the analyses

We construct our own district-level longitudinal data set using information from three different sources:

• the National Center for Education Statistics’s School District Finance Survey (F-33, Local Education Agency Finance Survey microdata from NCES 2007–2008 to 2017–2018 (NCES-LEAFS 2021)
• the United States’ Census Bureau’s Small Area Income and Poverty Estimates (SAIPE) Program (for districts 2007–2018, from the Urban Institute’s Education Data Portal (Urban Institute 2021a) 29
• Stanford Education Data Archive (SEDA) Version 4.0 covariates file (Reardon et al. 2021).

The School District Finance Survey (F-33) is the source for revenues and expenditures for public elementary and secondary school districts in the country. The F-33 is a component of the Common Core of Data (CCD) and consists of local education agencies (LEA)-level finance data submitted annually to the U.S. Census Bureau by state education agencies (SEAs) in the 50 states and the District of Columbia. The entire universe of LEAs in each school year and in each state plus D.C. are included. The F-33 report includes the following types of school district finance data: revenue, current expenditure, and capital outlay expenditure totals; revenues by source; current expenditures by function and object; and revenues and current expenditures per pupil.

We use the annual data from 12 school years from 2006–2007 until 2017–2018 (the most recent available data at the time of development of this research was the data for 2017-2018, last accessed in March 2021 (NCES-LEAFS 2021) , see https://nces.ed.gov/ccd/files.asp#Fiscal:1,LevelId:5,Page:1 for updates).

We use the following variables from NCES CCD 2020:

• Total Revenue (TOTALREV)
• Total Federal Revenue (TFEDREV)
• Total State Revenue (TSTREV)
• Local Rev – Property Taxes (T06)
• Fall Membership (V33 and MEMBERSCH if V33 is missing)
• Total Current Expenditures for Elementary/Secondary Education (TCURELSC) 30

We calculate revenues (total and by source) and current expenditures in per-student terms.

For findings expressed “in constant 2019 – 2020 dollars,” all spending and revenue data are expressed in dollars corresponding with the 2019–2020 school year (average July–June as explained by NCES 2019), using the consumer price index from the Bureau of Labor Statistics (BLS-CPI 2021).

For findings involving states’ cost-of-living-adjusted (RPPs), we account for differences in the cost-of-living across states by using the Bureau of Economic Analysis’s (BEA’s) Regional Price Parities (BEA 2021). 31

For analyzing metrics and outcomes by school poverty level, we link the school finance information with the poverty information.

Our preferred poverty data source is the United States Census Bureau’s Small Area Income and Poverty Estimates (SAIPE) Program for districts for school years spanning 2007–2018, which we collect from the Urban Institute’s Education Data Portal (Urban Institute 2021a). Census SAIPE district poverty data are available for the period 2007–2008 through 2017–2018 (U.S. Census Bureau 2021). The variable of interest is the poverty rate for children ages 5–17 in the district (ratio between poor children and total children in that age group). They are originally available as yearly data. To proxy for the school year (July–June) data, for a given school year, we take the average between the fall year-1 and the spring year.

We also use two other poverty data sources, which are linked to the F-33 data in sequential steps, for the following two purposes: (a) to offer sensitivity analyses of the results using alternative sources of data; and (b) to use the maximum number of observations possible, in cases in which some information is missing in one source but available in others.

Our second-preferred poverty data are SEDA’s shares of free and reduced price lunch eligible students in grades 3–8 in the districts (Reardon et al. 2021). This information is available in the covariates’ file, and it is available starting in school year 2008–2009 (which is least preferred because it is after the beginning of the Great Recession). 32

As an additional source checked in our sensitivity analyses, we use the county-level information from the Census, available (by year) at: https://www.census.gov/programs-surveys/saipe/data/datasets.html (U.S. Census Bureau 2021). The information is equivalent to the district-level information, but at the county level. For this study, we use the data in the same manner (turning the year estimates into school-year equivalent estimates, etc.).

We perform the analyses using the different sources independently, plus one more in which we combine the three sources, when one is missing but the other is not (i.e., we define a poverty-all variable that “combines” sources: If Census’s SAIPE’s district poverty data are missing, SEDA’s district poverty data are used; for districts missing on both, Census’s SAIPE’s county poverty data are used).

In each case, we calculate the poverty quartiles each year by dividing the poverty variable(s) into four quartiles. 33 Low-poverty districts are districts with a poverty rate for children ages 5–17 in the first quartile of the poverty distribution. Medium-low-poverty districts are districts with a poverty rate for children ages 5–17 in the second quartile of the poverty distribution. Medium-high-poverty districts are districts with a poverty rate for children ages 5–17 in the third quartile of the poverty distribution. High-poverty districts are districts with a poverty rate for children ages 5–17 in the fourth (top) quartile of the poverty distribution.

A note about analytic samples and weights: As the school finance variables of interest are in per-student terms, districts with nonmissing and nonzero numbers of students are kept in our sample. In our preferred sample, we also restrict the analyses to observations from districts serving elementary schools only, secondary schools only, or both, 34 and to districts with charter information nonmissing. Results using the full number of observations (unrestricted sample) are available upon request.

A note about the final sensitivity analysis: Following the nature of F33 and the weights available in the surveys, our unit of analysis is the district, and we present unweighted averages across districts. Sensitivity analyses are also available using the student population in the district to compute weighted averages across the districts, upon request.

A note about methods: The analyses presented in this report are descriptive in nature. We are interested in providing a description of the trends in revenues and expenditures over time, by state, and by district poverty level. We produce updated estimates for the main school finance indicators and we look at trends in the main variables (per-student revenue and spending) during recessions to see the potential of a solid response from the system to respond, counter, and recover from economic recessions.

We conducted multiple sensitivity analyses in our attempt to verify that the data that we provide are not sensitive to data sources or data procedures, as well as to understand possible ways to further expand this research. Each data source offers significant advantages, but there is no source that can be used for all the purposes intended. Additionally, the evidence improves if we use multiple sources. We are confident the main findings hold and are not driven by extraneous factors. We do not use regression analyses in this version of the report.

1. In addition to the Department of Education, the Department of Health and Human Services, which funds the Head Start program for young children, and the Department of Agriculture, which funds the School Lunch (meals) Program are also part of the agencies that support programs or functions in education.

2. We use current expenditures instead of total expenditures when comparing education spending between states or across districts, as suggested by the agency that provides the data, the National Center for Education Statistics (NCES). This approach recognizes that current expenditures exclude expenditures for capital outlay, “which tend to have dramatic increases and decreases from year to year.” Also, “the current expenditures commonly reported are for public elementary and secondary education only. Many school districts also support community services, adult education, private education, and other programs, which are included in total expenditures. These programs and the extent to which they are funded by school districts vary greatly both across and within states and school districts.” See NCES 2008.

3. See the New Yorkers for Students’ Educational Rights backgrounder (NYSER n.d.) on Campaign for Fiscal Equity, Inc. (CFE) v. State of New York , 8 N.Y.3d 14 (2006) and Srikanth et al. 2020. Michael A. Rebell, one of the most prominent school funding litigators in the country, was co-counsel for the plaintiffs in CFE v. New Yor k , a school funding “adequacy” lawsuit that claimed that the State of New York violated the constitutional rights of New York City students by failing to adequately fund the city’s public schools (NYSER n.d.). See also Sciarra and Dingerson 2021.

4. Since 2010, the Education Law Center (ELC), housed at Rutgers University, produces report cards that ask Is School Funding Fair? (using the data collected annually, some of which we use in our analyses below). To paraphrase their response, “Generally, no.” As the authors emphasize, “The hallmark of a fair school funding system is that it delivers more funding to educate students in high-poverty districts [since] states providing equal or less funding to high-poverty districts are shortchanging the students most in need and at risk of academic failure” (Farrie and Schiarra 2021).

5. Moreover, these wealth-based disparities are mirrored in and compounded by race/ethnicity-based gaps. The Education Trust uses data to report on disparities by both income/poverty level and race/ethnicity. As the Education Trust’s report on funding gaps in 2018 reveals, “School districts serving the largest populations of Black, Latino, or American Indian students receive roughly $1,800, or 13 percent, less per student in state and local funding than those serving the fewest students of color. This may seem like an insignificant amount, but it adds up. For a school district with 5,000 students, a gap of $1,800 per student means a shortage of $9 million per year ” (Morgan and Amerikaner 2018, emphasis added).

6. Our peer Western nations view public schools as more of a national responsibility and provide resources accordingly. For example, Germany has a heavily state-based school system, France has a hybrid local–federal system in which the central government pays teachers’ salaries, and Finland’s national government takes virtually full responsibility for public education.

7. As a large study by Berry (2021) reveals, higher-income areas are taxed, on average, at just half the rate of their lower-income counterparts. Not only does this lead to structurally inequitable funding for schools, it exacts a harder toll on the residents who are least able to afford it—who pay double the taxes of their wealthier peers on much lower incomes. And, as Srikanth (2021) notes, “The study reveals structural racism at work.”

8. Funding for K–12 (21.5%) and higher education (9.4%) combined make up the largest segment of most state budgets. Spending on K–12 education alone is barely second in public budgets to public welfare spending (22.4%) (Urban Institute 2021b).

9. Bradbury (2021) explains that “the largest portion of state aid to local school districts is typically provided on a per-student basis through a ‘foundation,’ ‘power-equalizing,’ ‘flat grant,’ or ‘tiered’ program.…In addition, some states include cost adjustments in their formulas. Key attributes on which states base such cost adjustments are student poverty, English language facility, and special education or disability status.”

10. As part of his War on Poverty, which recognized the impacts of poverty on children’s well-being and the nation’s future, President Lyndon Johnson advanced the Elementary and Secondary Education Act (ESEA) in 1965. This flagship federal legislation, which has since been reauthorized multiple times and whose current iteration is the Every Student Succeeds Act, is designed principally to channel resources to schools serving low-income students. However, Title I, the largest section of ESEA, was never enough to make up for the inequities created by the local–state funding system (see Gamson, McDermott, and Reed 2015).

11. This pattern isn’t at all “inadvertent,” but is a built-in feature that is part of a pattern of systemic racism and related classism that merits attention in itself. See, for example Sosina and Weathers 2019.

12. For example, in 2018–2019, average teacher salaries ranged from less than $46,000 in Mississippi to roughly $86,000 in New York (NEA 2020). However, within New York (according to 2017 data), they ranged from as low as $55,976 in the low-income Finger Lakes region in the northern part of the state to nearly twice as high, $110,000, in the wealthiest Long Island districts (Malatras and Simons 2019).

13. We note that the Great Recession started as the 2007–2008 school year was underway, so we are using the term “pre-recession level” flexibly and assuming school budgets do not immediately respond to the economic recession.

14. See Leachman, Masterson, and Figueroa 2017; Leachman and Figueroa 2019; Baker 2018; and Allegretto 2020 for some more examples.

15. Note that we are not distinguishing here between the source of increased or decreased funding but focusing on total revenues and expenditures. Roy (2011) examined a redistributive school finance reform initiated by the state legislature in Michigan in the mid-’90s, called Proposal A. This reform, which eliminated local discretion over school spending by increasing state aid to the lowest-spending districts and limiting it in the highest-spending districts, reduced spending disparities between districts, and increased student performance (state test scores) in the lowest-spending districts, though it also had a negative effect on student performance in the highest-spending districts. For an analysis of state school finance reforms affecting Kansas (“block grant funding” that froze district revenue regardless of enrollment and reduced funding in districts where enrollment increased), see Rauscher 2020. See Biasi 2019 for an examination of the effect of equalizing revenues across public school districts on students’ intergenerational mobility; Biasi finds that equalization has a large effect on mobility of low-income students, with no significant changes for high-income students.

16. Note that these analyses are based on cross-sectional data.

17. This post-1990 period, often referred to as the “adequacy era,” represented a time in which state-court decisions in multiple states resulted in increased public-school funding, offering an opportunity for researchers to study the overall impacts of these substantial increases and to compare them to student outcomes in states that did not experience them.

18. Their preferred estimates, based on the gradient of student achievement with respect to district income, indicate that a school funding reform raises achievement in a district with log average income one point below the state mean, relative to a district at the mean, by 0.1 standard deviations after 10 years.

19. High-poverty schools found it more difficult to fill vacancies than did low-poverty schools and schools overall, and high-poverty schools experienced higher turnover and attrition rates than did low-poverty schools (García and Weiss 2019).

20. Note that in this report, our main goal is to document the need and concept for such a program, not to discuss how best to design a public education automatic-stabilization program. These considerations, including specifically raising federal supports to education, have been discussed before (Boushey, Nunn, and Shambaugh 2019; Partelow, Yin and Sargrad 2020; Ogletree et al. 2017; Sahm 2019; Schott Foundation 2022; U.S. Department of Education 2013; Washington Center for Equitable Growth 2021; etc.).

21. Author Sylvia Allegretto’s analysis based on Bureau of Labor Statistics Current Employment Statistics data for 2019 (BLS-CES 2021). Education is one of the largest single components of government spending, amassing 7.3% of GDP across federal, state, and local expenditures (OECD 2013).

22. SNAP is the abbreviation for the Supplemental Nutrition Assistance Program, also known as “food stamps.”

23. Data Household Pulse Survey (HHPS) from the U.S. Census Bureau found that 29.3% of respondents with children were food insecure in the week of April 23–July 21, 2020 (Schanzenbach and Tomeh 2020). Bauer (2020) estimates that there were almost 14 million children living in a household characterized by child food insecurity during the week of June 19–23, 2020, “5.6 times as many as in all of 2018 (2.5 million) and 2.7 times as many as during [the] peak of the Great Recession in 2008 (5.1 million).” Typically, these programs disproportionately benefit low-income communities, which are often hit the hardest, thus preventing even more damage and the exacerbation of the large existing inequities.

24. The term “contingency plans” comes from the education-in-emergencies field and is mostly applicable to international contexts, but it has also been used in the U.S. to give broader responses to crises such as Hurricane Katrina (The White House 2006). See García and Weiss 2020, 2021 for more details. The term “automatic trigger” is used to indicate what activates benefits or programs. See Mitchell and Husak 2021 and Boushey, Nunn, and Shambaugh 2019.

25. For flaws around one of those programs—unemployment insurance—see Bivens et al. 2021. Bitler, Hoynes, and Schanzenbach 2020 provide evidence for three reasons why the policy response left needs unmet: “(1) timing—relief came with a substantial delay (due to overwhelmed UI systems/need to implement new programs); (2) magnitude—payments outside UI are modest; and (3) coverage gaps—access is lower for some groups and other groups are statutorily excluded.”

26. See section summarizing the literature on the impacts of spending on education above.

27. We have discussed this point extensively in our other research on early childhood education, socio-emotional learning, and integrated student support, among others. See García 2015; García and Weiss 2017; García and Weiss 2016; Weiss and Reville 2019, among others, for guidance on smart education investments. See also Bryk et al. 2010 for a discussion on the role of context and how even after receiving funding, schools did not improve, and offering suggestions for school reform efforts.

28. California, which revamped the state’s education funding and accountability systems in the wake of the 2015 passage of the Every Student Succeeds Act, offers a valuable model. See Furger, Hernández, and Darling-Hammond 2019 and Johnson and Tanner 2018.

29. For counties 2007–2019, see U.S. Census Bureau 2021.

30. As explained earlier in the report, we use current expenditures instead of total expenditures when comparing education spending between states or across districts, as suggested by the agency that provides the data, the National Center for Education Statistics (NCES). This approach recognizes that current expenditures exclude expenditures for capital outlay, “which tend to have dramatic increases and decreases from year to year.” Also, “the current expenditures commonly reported are for public elementary and secondary education only. Many school districts also support community services, adult education, private education, and other programs, which are included in total expenditures. These programs and the extent to which they are funded by school districts vary greatly both across and within states and school districts.” See NCES 2008.

31. For 2018: https://www.bea.gov/news/2020/real-personal-income-state-and-metropolitan-area-2018 , and For Time Series: https://apps.bea.gov/regional/histdata/releases/0920rpi/SARPP.zip

32. Note that we obtain the minority concentration from this source. Not used in this report.

33. Variables with the poverty quartiles are called POV_CDIST (our preferred Census SAIPE district) and povall (the one combining all sources).

34. Excluded are districts of vocational or special education system; nonoperating school system that exists for administrative purposes only and does not operate its own schools; LEAs that closed shortly before the start of the fiscal year or are scheduled to open in a future fiscal year but still reported revenue or expenditure information for the current fiscal year; and education service agency (ESA) (variable labeled schlev).

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A primer on elementary and secondary education in the United States

Editor’s Note: This report is an excerpt, with minor edits, from Addressing Inequities in the US K-12 Education System , which first appeared in Rebuilding the Pandemic Economy , published by the Aspen Economic Strategy Group in 2021.

This report reviews the basics of the American elementary and secondary education system: Who does what and how do we pay for it? While there are some commonalities across the country, the answers to both questions, it turns out, vary considerably across states. 1

Who does what?

Schools are the institution most visibly and directly responsible for educating students. But many other actors and institutions affect what goes on in schools. Three separate levels of government—local school districts, state governments, and the federal government—are involved in the provision of public education. In addition, non-governmental actors, including teachers’ unions, parent groups, and philanthropists play important roles.

Most 5- to 17-year-old children – about 88%– attend public schools. 2 (Expanding universal schooling to include up to two years of preschool is an active area of discussion which could have far-reaching implications, but we focus on grades K-12 here.) About 9% attend private schools; about a quarter of private school students are in non-sectarian schools, and the remaining three-quarters are about evenly split between Catholic and other religious schools. The remaining 3% of students are homeschooled.

Magnet schools are operated by local school districts but enroll students from across the district; magnet schools often have special curricula—for example, a focus on science or arts—and were sometimes designed specifically to encourage racial integration. Charter schools are publicly funded and operate subject to state regulations; private school regulations and homeschooling requirements are governed by state law and vary across states. Nationally, 6.8% of public school students are enrolled in charter schools; the remainder attend “traditional public schools,” where students are mostly assigned to schools based on their home address and the boundaries school districts draw. Washington, D.C. and Arizona have the highest rates of charter enrollment, with 43 and 19% of their public school students attending charter schools. Several states have little or no charter school enrollment. Prior to the COVID-19 pandemic, nearly all public schooling took place in person, with about 0.6% of students enrolled in virtual schools.

Local School Districts

Over 13,000 local education agencies (LEAs), also known as school districts, are responsible for running traditional public schools. The size and structure of local school districts, as well as the powers they have and how they operate, depend on the state. Some states have hundreds of districts, and others have dozens. District size is mostly historically determined rather than a reflection of current policy choices. But while districts can rarely “choose” to get smaller or larger, district size implicates  important   trade-offs . Having many school districts operating in a metropolitan area can enhance incentives for school and district administrators to run schools consistent with the preferences of residents, who can vote out leaders or vote with their feet by leaving the district. On the other hand, fragmentation can lead to more segregation by race and income and less equity in funding, though state laws governing how local districts raise revenue may address the funding issues. Larger districts can benefit from economies of scale as the fixed costs of operating a district are spread over more students and they are better able to operate special programs, but large districts can also be difficult to manage. And even though large districts have the potential to pool resources between more- and less-affluent areas, equity challenges persist as staffing patterns lead to different levels of spending at schools within the same district.

School boards can be elected or appointed, and they generally are responsible for hiring the chief school district administrator, the superintendent. In large districts, superintendent turnover is often cited as a barrier to sustained progress on long term plans, though the causation may run in the other direction: Making progress is difficult, and frustration with reform efforts leads to frequent superintendent departures. School districts take in revenue from local, state, and federal sources, and allocate resources—primarily staff—to schools. The bureaucrats in district “central offices” oversee administrative functions including human resources, curriculum and instruction, and compliance with state and federal requirements. The extent to which districts devolve authority over instructional and organizational decisions to the school level varies both across and within states.

State Governments

The U.S. Constitution reserves power over education for the states. States have delegated authority to finance and run schools to local school districts but remain in charge when it comes to elementary and secondary education. State constitutions contain their own—again, varying—language about the right to education, which has given rise to litigation over the level and distribution of school funding in nearly all states over the past half century. States play a major role in school finance, both by sending aid to local school districts and by determining how local districts are allowed to tax and spend, as discussed further below.

State legislatures and state education agencies also influence education through mechanisms outside the school finance system. For example, states may set requirements for teacher certification and high school graduation, regulate or administer retirement systems, determine the ages of compulsory schooling, decide how charter schools will (or will not) be established and regulated, set home-schooling requirements, establish curricular standards or approve specific instructional materials, choose standardized tests and proficiency standards, set systems for school accountability (subject to federal law), and create (or not) education tax credits or vouchers to direct public funds to private schools. Whether and how states approach these issues—and which functions they delegate to local school districts—varies considerably.

Federal Government

The authority of the federal government to direct schools to take specific actions is weak. Federal laws protect access to education for specific groups of students, including students with disabilities and English language learners. Title IX prohibits sex discrimination in education, and the Civil Rights Act prohibits discrimination on the basis of race. The U.S. Department of Education issues  regulations and guidance  on K-12 laws and oversees grant distribution and compliance. It also collects and shares data and funds research. The Bureau of Indian Education is housed in the Department of the Interior, not the Department of Education.

The federal government influences elementary and secondary education primarily by providing funding—and through the rules surrounding the use of those funds and the conditions that must be met to receive federal funding. Federal aid is typically allocated according to formulas targeting particular populations. The largest formula-aid federal programs are Title I of the Elementary and Secondary Education Act (ESEA), which provides districts funds to support educational opportunity, and the Individuals with Disabilities Education Act (IDEA), for special education. Both allocate funding in part based on child poverty rates. State and school district fiscal personnel ensure that districts comply with rules governing how federal funds can be spent and therefore have direct influence on school environments. Since 1965, in addition to specifying how federal funds can be spent, Congress has required states and districts to adopt other policies as a condition of Title I receipt. The policies have changed over time, but most notably include requiring school districts to desegregate, requiring states to adopt test-based accountability systems, and requiring the use of “evidence-based” approaches. 

IDEA establishes protections for students with disabilities in addition to providing funding. The law guarantees their right to a free and appropriate public education in the least restrictive setting and sets out requirements for the use of Individualized Educational Programs. Because of these guarantees, IDEA allows students and families to pursue litigation. Federal law prohibits conditioning funding on the use of any specific curriculum. The Obama Administration’s Race to the Top program was also designed to promote specific policy changes—many related to teacher policy—but through a competitive model under which only select states or districts “won” the funds. For the major formula funds, like Title I and IDEA, the assumption (nearly always true) is that states and districts will adopt the policies required to receive federal aid and all will receive funds; in some cases, those policy changes may have  more impact than the money  itself. The federal government also allocated significant funding to support schools during the Great Recession and during the COVID-19 pandemic through specially created fiscal stabilization or relief funds; federal funding for schools during the COVID crisis was significantly larger than during the Great Recession.

The federal tax code, while perhaps more visible in its influence on higher education, also serves as a K-12 policy lever. The controversial state and local tax deduction, now limited to $10,000, reduces federal tax collections and subsidizes progressive taxation for state and local spending, including for education. As of 2018, 529 plans, which historically allowed tax-preferred savings only for higher education expenses, can also be used for private K-12 expenses.

Non-Governmental Actors

Notable non-governmental actors in elementary and secondary education include teachers’ unions and schools of education, along with parents, philanthropists, vendors, and other advocates.The nation’s three million public school teachers are a powerful political force, affecting more than just teachers’ compensation. For example, provisions of collective bargaining agreements meant to improve teachers working conditions also limit administrator flexibility.  Teachers unions  are also important political actors; they play an active role in federal, state, and school board elections and advocate for (or, more often, against) a range of policies affecting education.  Union strength varies considerably across U.S. states.

Both states and institutions of higher education play important roles in determining who teaches and the preparation they receive. Policies related to teacher certification and preparation requirements, ranging from whether teachers are tested on academic content to which teachers are eligible to supervise student teachers, vary considerably across states. 3 Meanwhile,  reviews of teacher training programs  reveal many programs do not do a good job incorporating consensus views of research-based best practices in key areas. To date, schools of education have not been the focus of much policy discussion, but they would be critical partners in any changes to how teachers are trained.

Parents play an important role, through a wide range of channels, in determining what happens in schools. Parents choose schools for their children, either implicitly when they choose where to live or explicitly by enrolling in a charter school, private school, participating in a school district choice program, or homeschooling, though these choices are constrained by income, information, and other factors. They may also raise money through Parent Teacher Associations (PTAs) or other foundations—and determine how it is spent. And they advocate for (or against) specific policies, curriculum, or other aspects of schooling through parent organizations, school boards, or other levels of government. Parents often also advocate for their children to receive certain teachers, placements, evaluation, or services; this is particularly true for parents of students with disabilities, who often must make sure their children receive legally required services and accommodations. Though state and federal policymakers sometimes  mandate parent engagement , these mechanisms do not necessarily provide meaningful pathways for parental input and are often dominated by  white and higher-SES parents .      

Philanthropy also has an important influence on education policy, locally and nationally. Not only do funders support individual schools in traditional ways, but they are also increasingly active in influencing federal and state laws. Part of these philanthropic efforts happen through advocacy groups, including civil rights groups, religious groups, and the hard-to-define “education reform” movement. Finally, the many vendors of curriculum, assessment, and “edtech” products and services bring their own lobbying power.

Paying for school

Research on school finance might be better termed school district finance because districts are the jurisdictions generating and receiving revenue, and districts, not schools, are almost always responsible for spending decisions. School districts typically use staffing models to send resources to schools, specifying how many staff positions (full-time equivalents), rather than dollars, each school gets. 

Inflation-adjusted, per-pupil revenue to school districts has increased steadily over time and averaged about $15,500 in 2018-19 (total expenditure, which includes both ongoing and capital expenditure, is similar but we focus on revenue because we are interested in the sources of revenue). Per-pupil revenue growth tends to stall or reverse in recessions and has only recently recovered to levels seen prior to the Great Recession (Figure 1). On average, school districts generated about 46% of their revenue locally, with about 80% of that from property taxes; about 47% of revenue came from state governments and about 8% from the federal government. The share of revenue raised locally has declined from about 56% in the early 1960s to 46% today, while the state and federal shares have grown. Local revenue comes from taxes levied by local school districts, but local school districts often do not have complete control over the taxes they levy themselves, and they almost never determine exactly how much they spend because that depends on how much they receive in state and federal aid. State governments may require school districts to levy certain taxes, limit how much local districts are allowed to tax or spend, or they may implicitly or explicitly redistribute some portion of local tax revenue to other districts.

Both the level of spending and distribution of revenue by source vary substantially across states (Figure 2), with New York, the highest-spending state, spending almost $30,000 per pupil, while Idaho, Utah, and Oklahoma each spent under $10,000 per pupil. (Some, but far from all, of this difference is related to higher labor costs in New York.) Similarly, the local share of revenue varies from less than 5% in Hawaii and Vermont to about 60% in New Hampshire and Nebraska. On average, high-poverty states spend less, but there is also considerable variation in spending among states with similar child poverty rates.

Discussions of school funding equity—and considerable legal action—focus on inequality of funding across school districts  within the same state . While people often assume districts serving disadvantaged students spend less per pupil than wealthier districts within a state, per-pupil spending and the child poverty rate are nearly always uncorrelated or  positively  correlated, with higher-poverty districts spending more on average. Typically, disadvantaged districts receive more state and federal funding, offsetting differences in funding from local sources. Meanwhile, considerable inequality exists between states, and poorer states spend less on average. Figure 3 illustrates an example of this dynamic, showing the relationship between district-level per-pupil spending and the child poverty rate in North Carolina (a relatively low-spending state with county- and city-based districts) and Illinois (a higher-spending state with many smaller districts). In North Carolina, higher poverty districts spend more on average; Illinois is one of only a few states in which this relationship is reversed. But this does not mean poor kids get fewer resources in Illinois than in North Carolina. Indeed, nearly  all  districts in Illinois spend more than most districts in North Carolina, regardless of poverty rate.

Figure 4 gives a flavor of the wide variation in per-pupil school spending. Nationally, the district at the 10th percentile had per-pupil current expenditure of $8,800, compared to $18,600 at the 90th percentile (for these calculations we focus on current expenditure, which is less volatile year-to-year, rather than revenue). Figure 4 shows that this variation is notably  not  systematically related to key demographics. For example, on average, poor students attend school in districts that spent $13,023 compared to $13,007 for non-poor students. The average Black student attends school in a district that spent $13,485 per student, compared to $12,918 for Hispanic students and $12,736 for White students. 4  School districts in high-wage areas need to spend more to hire the same staff, but adjusting spending to account for differences in prevailing wages of college graduates (the second set of bars) does not change the picture much.

Does this mean the allocation of spending is fair? Not really. First, to make progress reducing the disparities in outcomes discussed above, schools serving more disadvantaged students will need to spend  more  on average. Second, these data are measured at the school district level, lumping all schools together. This potentially masks inequality across (as well as within) schools in the same district.

The federal government now requires states to report some spending at the school level; states have only recently released these data. One study using these new data finds that within districts, schools attended by students of color and economically-disadvantaged students tend to have more staff per pupil and to spend more per pupil. These schools also have more novice teachers. How could within-district spending differences systematically correlate with student characteristics, when property taxes and other revenues for the entire district feed into the central budget? Most of what school districts buy is staff, and compensation is largely based on credentials and experience. So schools with less-experienced teachers spend less per pupil than those with more experienced ones, even if they have identical teacher-to-student ratios. Research suggests schools enrolling more economically disadvantaged students, or more students of color, on average have worse working conditions for teachers and experience more teacher turnover. Together, this means that school districts using the same staffing rules for each school—or even allocating more staff to schools serving more economically disadvantaged students—would have different patterns in spending per pupil than staff per pupil.

[1] : For state-specific information, consult state agency websites (e.g., Maryland State Department of Education) for more details. You can find data for all 50 states at the U.S. Department of Education’s National Center for Education Statistics , and information on state-specific policies at the Education Commission of the States .

[2] : The numbers in this section are based on the most recent data available in the Digest of Education Statistics, all of which were collected prior to the COVID-19 pandemic.

[3] : See the not-for-profit National Council on Teacher Quality for standards and reviews of teacher preparation programs, and descriptions of state teacher preparation policies.

[4] : These statistics may be particularly surprising to people given the widely publicized findings of the EdBuild organization that, “ Nonwhite school districts get $23 billion less than white school districts. ” The EdBuild analysis estimates gaps between districts where at least 75% of students are non-White versus at least 75% of students are White. These two types of districts account for 53% of enrollment nationally. The $23 billion refers to state and local revenue (excluding federal revenue), whereas we focus on current expenditure (though patterns for total expenditure or total revenue are similar).

Disclosures: The Brookings Institution is financed through the support of a diverse array of foundations, corporations, governments, individuals, as well as an endowment. A list of donors can be found in our annual reports published online  here . The findings, interpretations, and conclusions in this report are solely those of its author(s) and are not influenced by any donation .

About the Authors

Sarah reber, joseph a. pechman senior fellow – economic studies, nora gordon, professor – mccourt school of public policy, georgetown university.

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How are public schools funded?

Public school funding comes primarily from local and state governments, while the federal government provides about 8% of local school funding.

Updated on Fri, July 21, 2023 by the USAFacts Team

Public schools in the US serve about 49.5 million students from pre-K to 12th grade. But how does it all get funded?

It's primarily a combination of funding from local and state governments, along with a smaller percentage from the federal government. Here's a breakdown.

Where does school funding come from?

In the 2019-2020 school year , 47.5% of funding came from state governments, 44.9% came from local governments, and the federal government provided about 7.6% of school funding.

Federal funding for schools

Most federal funding for public schools comes from the Child Nutrition Act, Title I, and the Individuals with Disabilities Education Act (IDEA), followed by other programs, according to 2018-19 school year data .

Title I grants

Title I provides funds to school districts with large numbers of low-income students. According to data from 2015-2016 school year, nearly 56,000 schools received money from Title I grants, serving more than 26 million students. About $14.6 billion went toward funds for Title I grants during the 2019-2020 school year, according to the National Center for Education Statistics.

Individuals with Disabilities Education Act

The Individuals with Disabilities Education Act (IDEA) provides funding to help children with disabilities receive quality special education and related services that are designed to meet their unique needs, according to the Education Department. In 2020–21, 7.5 million students received special education services under the Individuals with Disabilities Education Act (IDEA) . Some $14.3 billion in federal funding went toward IDEA in 2022.

Child Nutrition Act

During the 2020 fiscal year, $23.6 billion in federal funds were allocated for child nutrition programs , providing free or reduced lunches to eligible students.

Other federal funding

Federal funds also went towards Head Start programs (supporting children from birth to age 5 in low-income families), magnet schools, gifted and talented programs, Impact Aid (assistance to districts with children residing in areas including Indian lands, military bases, and low-rent housing properties), vocational programs and Indian Education programs.

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State funding for schools

Some states allocate more money for public K-12 schools than others. In five states, two-thirds or more of K-12 public school funding comes from state revenue.

State revenues are raised from a variety of sources , primarily personal and corporate income and retail sales taxes, as well as taxes on tobacco products, alcoholic beverages, and lotteries—depending on the state.

Each state uses a different funding formula to determine how money for K-12 education is raised and how much each school district receives in a given school year. Funding formulas calculate whether school expenditures come from state governments versus local governments, such as counties, cities, or school districts themselves.

In at least 35 states, the state government sets a base level of funding per student that all school districts receive, according to a Congressional Research Service report that summarized various approaches of categorizing states' education funding models.

Local funding for schools

Local school revenue comes from cities, counties, or the school districts themselves. About 81% of local funding for schools comes from property taxes.

Other revenue comes from parents via parent-teacher associations and other groups. Schools also receive some private revenue from tuition, transportation fees, food services, district activities, textbook revenue, and summer school revenue.

Property taxes are a major source of school funding

According to the Department of Education's National Center for Education Statistics, property taxes contribute 30% or more of total public school funding in 29 states .

• More than 60% of total public school funding came from property taxes in New Hampshire—the highest of any state.
• On the low end, Vermont had such little funding from property taxes that it rounded to zero. And Hawaii's one school district did not receive any funding from property taxes.

How are charter schools funded?

Public charter schools are funded by state and local governments and may also receive federal funding through Department of Education Charter School Program grants . Charter schools are independently run under an agreement (charter) with the state, district, or another entity. School choice programs offered in some states give parents the option to enroll their kids in charter schools, magnet schools, or opt for home-schooling.

How has school funding changed over time?

Over the past decade, funding provided by local and state governments has increased steadily while federal funding dropped by $30.2 billion. This has resulted in a lower share of school funding from the federal government, dropping from 12.5% in the 2010-11 school year to 7.6% in the 2019-20 school year.

Although federal funding for public schools plays a minor role, it supports programs like Title I, IDEA, and the Child Nutrition Act. As federal contributions have decreased over the past decade, the responsibility for supporting education increasingly falls on local and state entities, highlighting the role of local property taxes and state revenues in funding public education.

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22 Pros and Cons of Federal Involvement in Education

If you grew up in the 1970s, 80s, or 90s, then the concept of standardized tests is something familiar. This annual tradition in some states was useful in the determination of information retention for the core materials taught that year. It was a week or more of a different routine. Some kids thrived in this environment, but there were others who just fought to survive.

Schools are still requiring students today to take annual assessments. It is the state’s role in the United States to determine what the assessments should cover, so there is no clear answer from an American perspective on what to expect from the time spent in school.

One of the ways that this issue could be resolved with clear expectations is to bring more federal involvement into the education process. By creating a system of national expectations that each state government must follow, there could be more consistency in the American educational system. There is also the issue that having more government involvement won’t guarantee new results.

This guide will take you through the essential advantages and disadvantages that may arise if there is more federal involvement in education from an American perspective.

List of the Pros of Federal Involvement in Education

1. Federal involvement would eliminate the inconsistencies in the system. If the states in the U.S. are in charge of setting their own standards of education, then it creates a system where every territory, district, and legislature could set their own expectations for curriculum development. There is no way to create an accurate picture of how the educational system in the country performs at the national level because there are 50+ different ways to measure results. Creating a single standard would help teachers, administrators, parents, and students have a clear idea of where they stand compared to others throughout the country.

2. It would help to hold school districts across the country accountable for their actions. Having a national set of standards would make it easier to hold underperforming school districts accountable for their actions. Although most teachers and administrators want to see their students succeed, the implementation of IEPs and other plans that encourage individual learning are not always followed. Getting the federal government involved in the educational systems across the country would make it easier to create one set of expectations to which everyone could be held.

3. Students could move between schools with less difficulty. Under the current American system, moving from one state to another creates a unique set of challenges for some students. If the standards are exceptionally different, then the difference in a child’s education could move them a full grade up or down in extreme circumstances. Families don’t know what to expect because there the standards are not the same. Having the federal government involved in the educational system beyond Common Core expectations allows for more consistency with the student experience.

4. It guarantees that the American system follows international benchmarks. Under a system of state implementation, American public schools are only held to the standards that the local legislature sets for them. If the federal government becomes involved, then all U.S. schools can begin to follow the international benchmarks that are helping other countries find more success. Although this advantage may not provide a guarantee of results, it is a change that could help the next generation of students be more competitive in a global environment.

Like it or not, the world is becoming a smaller place and international work will likely become more common in the coming years.

5. There could be opportunities for cost-sharing with federal guidelines in place. When Common Core standards were adopted across the United States, it became possible for school districts to begin sharing costs for common tasks. Scoring, grading, and curriculum creation all followed the same standards, which means a centralized expense structure was formed. Without federal involvement in the educational system, there are 50 different cost standards to consider. That structure reduces the opportunity to purchase supplies with the leverage of scalability. By working together, schools could save money, help taxpayers with costs, and potentially improve the quality of the learning environment all at the same time.

6. Federal involvement would create standards for each subject. With the institution of Common Core standards, federal involvement in education helped to provide more consistency in mathematics, reading, social students, and other essential subjects. Moving toward full integration on a national level would allow other subjects to receive the same treatment. Proponents believe that this process could lead to higher developmental levels in problem solving, critical thinking, and the creative arts. This advantage could even include technical skills that students could use in lieu of going to a traditional college or university setting one day.

7. It could lead to better individualized educational approaches. If the federal government would get involved with the American educational system, then critics fear that the approaches they use would be generalized instead of individualized. The current American system already encourages grading on a curve in the higher grades of the K-12 system. By creating a single set of standards that could go through a simplified grading process since the curriculum would be similar, there would be less time needed to grade each student. That means we would have more information to use outside of the standardized testing methods currently used to spot problem areas in some subjects.

8. Students would have a better idea of what to expect with federal involvement. When everyone is on the same page in the American educational system, then there is more understanding of the information being passed from teacher to student. There would be more time with federal involvement to convey why some forms of learning follow specific processes. It would require a transition period over a few years that could be challenging for some families, but it would help future generations find better learning and application opportunities within the school systems across the country.

9. Federal involvement creates a professional network for teachers and administrators. When there are national standards in place for an educational system, then teachers and administrators have more opportunities to form professional networks. It creates more chances for collaboration, professional development, and ongoing educational opportunities because everyone is already on the same page. When each state uses a unique system that applies to local districts only, then this advantage can only apply within a specific set of boundaries. When there is federal involvement in the educational system, then this benefit can apply to everyone involved in the K-12 system.

10. It creates more empirical-based learning methods. When today’s parents were students, it was not unusual for teachers to expect the correct answer and nothing more. If you had the wits to look at the back of your book where an answer key was located, then you could get by without really learning anything. Thanks to the federal involvement in the American educational system, Common Core mandates that kids show their work when providing an answer. If there are errors in the steps, then teachers can intervene immediately to ensure students understand the “why” of what is being learned instead of relying on the final outcome.

Proponents suggest that this benefit also makes it possible for students to defend their work because they understand the steps required to achieve a specific answer.

List of the Cons of Federal Involvement in Education

1. It would add another level of bureaucracy to the education system. If the federal government gets involved in the education system, then it would create another level of bureaucracy that could bog down the entire process. The states would need to collect data about the testing and methods used to then send the information off to the federal government. Then the feds would need to determine what that info meant, relate their findings back to the states, and this process would then need to develop solutions that would help students.

Local governments are usually better equipped to identify and solve problems at individual public school districts. Sending the data to the national government may not allow for individualization that could help produce better student results in the future.

2. There is no guarantee that the results would be better. The American educational system struggles against the rest of the developed world for a variety of reasons. One small solution is not going to fix every issue. The public schools in the United States need teachers who are paid according to their responsibilities. They need access to resources instead of tax breaks. There must be manageable classroom sizes and an understanding of the curriculum at all levels of all schools. Far too often, the schools in economically disadvantaged areas fail to thrive because they lack access to these resources.

3. It could reduce the quality of education for some students. When Common Core standards were introduced in the United States, Indiana, California, and the District of Columbia all had higher expectations for their students. Almost a dozen other states had results that were comparable to what was introduced. That means the $3.5 billion in spending that each state government competes to earn from the federal government could create a problem where great standards are reduced in an effort to receive funding. Critics of federal involvement would say that we should strive to achieve the highest quality standard instead of encouraging lower-level results.

4. There is still too much emphasis placed on testing. The only practical way to test information retention in a practical way is to offer standardized tests to students. Some students do not perform well on these tests because of the way that they learn. Federal intervention has helped to create some flexibility in this system by allowing those with identified learning or developmental disabilities to have accommodations, but it doesn’t fix the entire problem.

Some students have a high emotional IQ that doesn’t accurately reflect their intelligence on the current standardized tests. Creative approaches to learning don’t always translate into multiple choice answers.

5. It won’t eliminate the habit of teaching to the test. Federal involvement in education can help to reduce the trend of judging teachers by the results their students generate on standardized tests, but it won’t eliminate it entirely. By trying to “manipulate” the data to suggest that students are well-versed in the subject material covered by the exam, there are learning deficits that occur in other areas. Instead of being taught a practical education, today’s K-12 environment would still be directed toward the teaching of test-taking skills that meet the desired high standards.

6. Federal involvement could reduce help for students with special needs. As the federal government worked to revamp the K-12 educational system in 2015, it set aside about $250 million for preschool development. There are additional opportunities for special needs students as well. When we look at what Common Core provides to schools today in the United States, critics suggest that students with learning disabilities are treated the same as a child who might be in a district’s gifted and talented program.

Up to 60% of the students in some under-performing school districts in the United States have an identified learning issue. That means holding all schools to the same standards will create funding issues for the districts that must create more IEPs and implement other forms of teaching that fall outside of the “standardized” method.

7. It could encourage more educators to retire. Teachers in the United States have gone through three different variations of educational standards if they have more than 20 years of teaching experience. Forcing them to go to another system because of federal involvement is an issue that critics say could encourage more educators to retire. Many communities are already short on teachers and other school staff. This disadvantage could be especially devastating in the states that might see a reduction in their standards as they meet the national requirement.

The best way to avoid this potential issue is to allow states that have standards that already exceed the federal minimum to keep them. Doing that would also reduce the benefits of going to one system, so the trade-off would need to be examined carefully.

8. The federal government could create vague standards to follow. As states transitioned to the Common Core standards, the vagueness of some requirements created uncertainty in the educational system. Since the federal government was involved in that process, critics suggest that a similar outcome could occur if the feds were given the freedom to do what they wanted with the system.

There is also the problem of politics when looking at this disadvantage. Each election cycle would create the risk of changes to the standards as one party seeks to counter the impact that the other would have had in the previous session. In the polarized climate between Republicans and Democrats, it could create a system of compromise where the risk of sliding even further backward when compared to the rest of the world.

9. New standards create additional costs in other industries. When the United States updates its educational standards, then there are associated changes that must occur in the textbooks and curriculum to meet those expectations. These costs are usually not factored into the figures that get released to the public. Since taxpayers would subsidize this expense with federal involvement in education, the cost of getting a high-quality K-12 education may continue to rise. Then there are the printing, distribution, and similar expenses to consider as well.

10. It places the entire emphasis on the test results. The standardized testing that occurs with a national education system place all of the emphasis on the results of the test instead of the body of work that the student produces. Kids in the K-12 system could have perfect results during their coursework, flunk the test, and the results would place them into a low-performance category. Since some tests are electronically administered, an equipment malfunction could produce artificial results that might stick with a student throughout the remainder of their school career.

There are some appeals processes in place that can reduce the impact of this disadvantage. Proponents of federal involvement suggest that new laws could help kids avoid this issue altogether. Unless the standardized results include other work, there will always be a high-stakes approach to each test.

11. The levels of federal involvement are not showing improvements. When the United States adopted the Common Core standards, most of the infrastructure was in place in less than a year. Additional legislation in 2015 helped to support the system so that it could be effectively implemented using the initial educational act standards from the 1960s with some essential upgrades. What we are finding in the years since the implementation of this process is that the results are not improving the quality of a child’s education.

From 2008-2017, Common Core standards have led to modest declines in the reading scores of fourth graders and the mathematics results from eighth graders. There are studies from 2013 that show some test scores did show some modest improvements. In either case, the results that occurred were far less than the far-reaching gains that were expected.

12. It would require additional teacher training that may not occur. Critics of federal intervention would also point to how Common Core was rolled out to the states that voluntarily accepted the standards. In Massachusetts, educators said that their training on the new material was “low quality.” New York City public schools didn’t even receive the textbooks that were aligned to the new standards in time to start teaching them to their students. Many districts were instituting high-stakes teacher evaluations based on standardized testing at the same time, which further reduced the impact of the effort.

Verdict of the Pros and Cons of Federal Involvement in Education

Although there are clear disagreements as to whether or not the federal government should become involved in the educational systems in the United States, no one seems to disagree with the idea of providing benchmarks for students to achieve, The idea of holding schools accountable to them is something that proponents and critics support on some level.

Where there is disagreement with the pros and cons of federal involvement is how those standards get created and who should be responsible for the accountability.

There are still many unknowns from an American perspective about how a change to the educational system could benefit students. Risks are present with any form of change because the results could be inferior after the implementation of new standards. At the same time, the status quo doesn’t seem to be working, which means something needs to be done.

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Biden Administration Releases Revised Title IX Rules

The new regulations extended legal protections to L.G.B.T.Q. students and rolled back several policies set under the Trump administration.

By Zach Montague and Erica L. Green

Reporting from Washington

The Biden administration issued new rules on Friday cementing protections for L.G.B.T.Q. students under federal law and reversing a number of Trump-era policies that dictated how schools should respond to cases of alleged sexual misconduct in K-12 schools and college campuses.

The new rules, which take effect on Aug. 1, effectively broadened the scope of Title IX, the 1972 law prohibiting sex discrimination in educational programs that receive federal funding. They extend the law’s reach to prohibit discrimination and harassment based on sexual orientation and gender identity, and widen the range of sexual harassment complaints that schools will be responsible for investigating.

“These regulations make it crystal clear that everyone can access schools that are safe, welcoming and that respect their rights,” Miguel A. Cardona, the education secretary, said in a call with reporters.

The rules deliver on a key campaign promise for Mr. Biden, who declared he would put a “quick end” to the Trump-era Title IX rules and faced mounting pressure from Democrats and civil rights leaders to do so.

The release of the updated rules, after two delays, came as Mr. Biden is in the thick of his re-election bid and is trying to galvanize key electoral constituencies.

Through the new regulations, the administration moved to include students in its interpretation of Bostock v. Clayton County, the landmark 2020 Supreme Court case in which the court ruled that the Civil Rights Act of 1964 protects gay and transgender workers from workplace discrimination. The Trump administration held that transgender students were not protected under federal laws, including after the Bostock ruling .

In a statement, Betsy DeVos, who served as Mr. Trump’s education secretary, criticized what she called a “radical rewrite” of the law, asserting that it was an “endeavor born entirely of progressive politics, not sound policy.”

Ms. DeVos said the inclusion of transgender students in the law gutted decades of protections and opportunities for women. She added that the Biden administration also “seeks to U-turn to the bad old days where sexual misconduct was sent to campus kangaroo courts, not resolved in a way that actually sought justice.”

While the regulations released on Friday contained considerably stronger protections for L.G.B.T.Q. students, the administration steered clear of the lightning-rod issue of whether transgender students should be able to play on school sports teams corresponding to their gender identity.

The administration stressed that while, writ large, exclusion based on gender identity violated Title IX, the new regulations did not extend to single-sex living facilities or sports teams. The Education Department is pursuing a second rule dealing with sex-related eligibility for male and female sports teams. The rule-making process has drawn more than 150,000 comments.

Under the revisions announced on Friday, instances where transgender students are subjected to a “hostile environment” through bullying or harassment, or face unequal treatment and exclusion in programs or facilities based on their gender identity, could trigger an investigation by the department’s Office for Civil Rights.

Instances where students are repeatedly referred to by a name or pronoun other than one they have chosen could also be considered harassment on a case-by-case basis.

“This is a bold and important statement that transgender and nonbinary students belong, in their schools and in their communities,” said Olivia Hunt, the policy director for the National Center for Transgender Equality.

The regulations appeared certain to draw to legal challenges from conservative groups.

May Mailman, the director of the Independent Women’s Law Center, said in a statement that the group planned to sue the administration. She said it was clear that the statute barring discrimination on the basis of “sex” means “binary and biological.”

“The unlawful omnibus regulation reimagines Title IX to permit the invasion of women’s spaces and the reduction of women’s rights in the name of elevating protections for ‘gender identity,’ which is contrary to the text and purpose of Title IX,” she said.

The existing rules, which took effect under Mr. Trump in 2020, were the first time that sexual assault provisions were codified under Title IX. They bolstered due process rights of accused students, relieved schools of some legal liabilities and laid out rigid parameters for how schools should conduct impartial investigations.

They were a sharp departure from the Obama administration’s interpretation of the law, which came in the form of unenforceable guidance documents directing schools to ramp up investigations into sexual assault complaints under the threat of losing federal funding. Scores of students who had been accused of sexual assault went on to win court cases against their colleges for violating their due process rights under the guidelines.

The Biden administration’s rules struck a balance between the Obama and Trump administration’s goals. Taken together, the regulation largely provides more flexibility for how schools conduct investigations, which advocates and schools have long lobbied for.

Catherine E. Lhamon, the head of the department’s Office for Civil Rights who also held the job under President Barack Obama, called the new rules the “most comprehensive coverage under Title IX since the regulations were first promulgated in 1975.”

They replaced a narrower definition of sex-based harassment adopted under the Trump administration with one that would include a wider range of conduct. And they reversed a requirement that schools investigate only incidents alleged to have occurred on their campuses or in their programs.

Still, some key provisions in the Trump-era rules were preserved, including one allowing informal resolutions and another prohibiting penalties against students until after an investigation.

Among the most anticipated changes was the undoing of a provision that required in-person, or so-called live hearings, in which students accused of sexual misconduct, or their lawyers, could confront and question accusers in a courtroom-like setting.

The new rules allow in-person hearings, but do not mandate them. They also require a process through which a decision maker could assess a party or witness’s credibility, including posing questions from the opposing party.

“The new regulations put an end to unfair and traumatic grievance procedures that favor harassers,” Kel O’Hara, a senior attorney at Equal Rights Advocates. “No longer will student survivors be subjected to processes that prioritize the interests of their perpetrators over their own well being and safety.”

The new rules also allow room for schools to use a “preponderance of evidence” standard, a lower burden of proof than the DeVos-era rules encouraged, through which administrators need only to determine whether it was more likely than not that sexual misconduct had occurred.

The renewed push for that standard drew criticism from legal groups who said the rule stripped away hard-won protections against flawed findings.

“When you are dealing with accusations of really one of the most heinous crimes that a person can commit — sexual assault — it’s not enough to say, ‘50 percent and a feather,’ before you brand someone guilty of this repulsive crime,” said Will Creeley, the legal director of the Foundation for Individual Rights and Expression.

The changes concluded a three-year process in which the department received 240,000 public comments. The rules also strengthen protections for pregnant students, requiring accommodations such as a bigger desk or ensuring access to elevators and prohibiting exclusion from activities based on additional needs.

Title IX was designed to end discrimination based on sex in educational programs or activities at all institutions receiving federal financial assistance, beginning with sports programs and other spaces previously dominated by male students.

The effects of the original law have been pronounced. Far beyond the impact on school programs like sports teams, many educators credit Title IX with setting the stage for academic parity today. Female college students routinely outnumber male students on campus and have become more likely than men of the same age to graduate with a four-year degree.

But since its inception, Title IX has also become a powerful vehicle through which past administrations have sought to steer schools to respond to the dynamic and diverse nature of schools and universities.

While civil rights groups were disappointed that some ambiguity remains for the L.G.B.T.Q. students and their families, the new rules were widely praised for taking a stand at a time when education debates are reminiscent to the backlash after the Supreme Court ordered schools to integrate.

More than 20 states have passed laws that broadly prohibit anyone assigned male at birth from playing on girls’ and women’s sports teams or participating in scholastic athletic programs, while 10 states have laws barring transgender people from using bathrooms based on their gender identity.

“Some adults are showing up and saying, ‘I’m going to make school harder for children,” said Liz King, senior program director of the education equity program at the Leadership Conference on Civil and Human Rights. “It’s an incredibly important rule, at an incredibly important moment.”

Schools will have to cram over the summer to implement the rules, which will require a retraining staff and overhauling procedures they implemented only four years ago.

Ted Mitchell, the president of the American Council on Education, which represents more than 1,700 colleges and universities, said in a statement that while the group welcomed the changes in the new rule, the timeline “disregards the difficulties inherent in making these changes on our nation’s campuses in such a short period of time.”

“After years of constant churn in Title IX guidance and regulations,” Mr. Mitchell said, “we hope for the sake of students and institutions that there will be more stability and consistency in the requirements going forward.”

Zach Montague is based in Washington. He covers breaking news and developments around the district. More about Zach Montague

Erica L. Green is a White House correspondent, covering President Biden and his administration. More about Erica L. Green

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Who pays, and doesn’t pay, federal income taxes in the U.S.?

It may be true, as Benjamin Franklin wrote toward the end of his life, that “ in this world, nothing is certain except death and taxes .” But while we’re all in the 100% death bracket, the federal income tax’s impact on Americans is considerably more variable – depending on one’s income level, source of income, marital status, age, residence, homeownership, parenthood and many other factors.

The American tax system manages to combine ubiquity, complexity and opacity. With the 2023 tax season nearing its end, Pew Research Center analyzed IRS data to shed light on a poorly understood topic.

The IRS, by the nature of its mission, collects copious data on Americans’ financial lives. It makes much of that data available through its Statistics of Income program. We concentrated most of our research on the individual income tax – the federal government’s single largest revenue source, and what most people tend to associate with “paying my taxes.” (That said, for millions of middle- and lower-income Americans, the payroll taxes that fund Social Security and Medicare take a bigger bite out of their gross income than income taxes do. Nor did we attempt to quantify the relative incidence of state and local taxes, such as sales tax and property tax.)

The IRS data we used was derived from a stratified probability sample of all individual income tax returns filed in a given year. IRS researchers then weighted the sample data for each stratum, or subpopulation, to reflect the total number of returns in it. (The strata were defined not only by income, but also by such factors as the presence or absence of special forms or schedules.)

In most cases the IRS breaks down its estimates into 18 groups by adjusted gross income , or AGI, plus a 19th group with no AGI. For much of our analysis, we combined the IRS’s AGI categories into eight larger groups, which made some underlying trends easier to see. Along with the IRS data, we relied on the Office of Management and Budget for historical data on the share of federal receipts from various sources.

All told, the federal government expects to collect about $2.33 trillion in individual income taxes this year, accounting for nearly half (48.5%) of its total receipts, according to the Office of Management and Budget . The IRS expects more than 168 million individual tax returns to be filed this year; if previous years’ patterns continue, about two-thirds of those returns will show some taxable income.

Taken as a whole, the federal income tax is progressive, meaning that those with higher incomes pay at higher rates. But the system’s progressivity tends to break down at the very uppermost income levels.

In 2020, the most recent year for which the IRS has detailed data, all groups of taxpayers with $1 million or more in adjusted gross income (AGI) had average effective tax rates of more than 25%.

Average effective tax rates, defined here as total income tax as a percentage of AGI, were highest among taxpayers with AGIs between $2 million and $10 million (nearly 28%). The average effective tax rate for taxpayers with AGIs of $10 million or more was actually a bit lower (25.5%), mainly because they tend to get more of their income from dividends and long-term capital gains, which are taxed at lower rates than wages, salaries and other so-called “ordinary income.”

At the other end of the income scale, tens of millions of Americans owed little or no federal income tax, especially after factoring in the effects of refundable tax credits, such as the child and earned-income credits.

In 2020, the IRS received nearly 5.3 million individual tax returns that showed no AGI and hence no taxable income. (About 4,600 of those people ended up paying tax anyway, mainly due to the alternative minimum tax .) Another 60.3 million returns showed AGIs of less than $30,000. The average effective tax rate for those taxpayers was 1.5%, even before refundable tax credits were applied.

Millions of Americans actually get money from the IRS, largely due to refundable tax credits. (This is distinct from the refunds eagerly awaited by legions of taxpayers, which typically result from more tax being withheld from people’s paychecks than they end up owing.)

Credits are used to offset taxes owed – not only income tax but certain other taxes, too, such as the self-employment tax or the penalty tax on early withdrawals from qualified retirement plans. But if the value of refundable tax credits exceeds total taxes owed, the excess can be paid out to the taxpayer. This primarily benefits people with lower incomes.

After refundable credits were figured in, taxpayers with AGIs below $30,000 (including those with no AGI or with negative AGI) collectively got back more than $78.6 billion from the IRS in 2020. For taxpayers with AGIs between $1 and $15,000, their average effective tax rate fell to ‑14.8%, from ‑10.3% in 2019, largely due to coronavirus pandemic-related federal relief efforts, some of which were structured as tax credits.

Since 2000, there has been a downward trend in average effective tax rates for all but the richest taxpayers – those with AGIs of $10 million or more. But the three major tax law overhauls during this period have affected different classes of taxpayers quite differently:

• The Bush tax cuts of 2001 and 2003 benefited the highest-income taxpayers the most. Those with AGIs of $5 million or more saw their average effective tax rate drop from 27.2% in 2002 to 23.2% in 2003. Taxpayers with AGIs between $500,000 and $5 million saw their average effective rates fall from 28.8% to 25.5%. Other taxpayers with lower incomes experienced much smaller rate cuts.
• In 2013, by contrast, two provisions aimed squarely at higher-income taxpayers kicked in. A new net investment income tax and Medicare surtax , enacted to help pay for the Affordable Care Act (“Obamacare”), helped raise the average effective tax rate on the highest-earning taxpayers (those with AGIs of $5 million or more) from 20.7% in 2012 to 27% the following year. Those with AGIs ranging from $500,000 to under $5 million also saw their average effective tax rate increase, from 24.2% to 27.5%, while other groups experienced little to no change.
• The Trump tax cuts of 2017 , which altered provisions throughout the tax code, had their biggest impact on upper-middle-income taxpayers: those with AGIs of at least $200,000 but less than $500,000. Although average effective tax rates fell for all income groups, they fell the most for that upper-middle group, from 19.2% in 2017 to 16.6% in 2018.

Besides average effective tax rates, another way to look at the relative burden on different groups of taxpayers is by examining how much of the total bill they foot.

The IRS collected $1.66 trillion in individual income taxes in 2020 (excluding the $78.6 billion in negative tax liabilities referred to earlier). Close to 54% of that sum came from taxpayers with AGIs between $100,000 and $1 million – a group that accounted for just under a fifth of all returns filed (31.3 million), and about 30% of all taxable returns (31 million).

At the very top of the income ladder, only 0.02% of all returns filed in 2020 showed AGIs of $10 million or more, but those taxpayers collectively paid $210.2 billion in taxes after refundable tax credits, or 12.6% of total individual income tax collections.

Corporate tax brings in smaller share of federal revenues

Although the focus this time of year is on individual income taxes, corporate income taxes are also a significant source of federal revenue. This year, the Office of Management and Budget projects that the government will collect $546 billion in corporate taxes, or 11.4% of estimated total receipts. That’s less than half the corporate-tax share of total revenues that prevailed in the 1950s.

Several big corporations, including Amazon, Nike and FedEx, have come under fire in recent years for paying little to no income tax . But comparing corporate and individual income taxes is tricky. For one thing, corporations can report income and taxes differently to the IRS than they do publicly to investors. They can also spread losses in a given year across several years’ worth of taxes – meaning, in effect, that taxes due on this year’s profits can be offset by a previous year’s losses .

Also, some types of business income generally aren’t taxed through the corporate income tax at all. Sole proprietorships, partnerships and entities called “S corporations” pass their income (or loss) through to their owner or owners, who include it in their individual taxes. In 2020, 9 million taxpayers reported income or losses from partnerships and S corporations, and 27.7 million reported income or losses as sole proprietors or self-employed professionals.

The rules governing what constitutes business or individual income, and how it should be taxed, are only part of what makes the U.S. tax code as complex as it is. One rough measure of that complexity: The printed version of the 2021 edition of the Internal Revenue Code runs a total of 4,074 pages, excluding front matter. More than half of those pages (2,448) are devoted to the income tax alone.

The tax code’s complexity is one of the biggest things Americans dislike about it. In a recent Pew Research Center survey , 53% of U.S. adults said the system’s complexity bothered them a lot. Larger shares, however, said they were bothered a lot by the feeling that some corporations and wealthy people don’t pay their fair share of taxes (61% and 60%, respectively). By contrast, 38% said they were bothered a lot by the amount they personally paid.

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Drew DeSilver is a senior writer at Pew Research Center

7 facts about Americans and taxes

Americans’ top policy priority for 2024: strengthening the economy, congress has long struggled to pass spending bills on time, what the data says about food stamps in the u.s., inflation, health costs, partisan cooperation among the nation’s top problems, most popular.

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In a long-anticipated move that dramatically alters the employment landscape, the Federal Trade Commission (“FTC”) issued its final Non-Compete Clause Rule (“final rule”) effectively banning employee non-compete agreements throughout the United States. After receiving over 26,000 public comments, the FTC determined that the use of non-compete agreements with workers constitutes an “unfair method of competition” in violation of Section 5 of the FTC Act.

The final rule is sweepingly broad and imposes a prospective ban on new non-competes for all workers, while retroactively invalidating all existing non-competes except for those with senior executives. Under the final rule, “senior executives,” whose existing non-compete agreements remain enforceable, are defined as workers in policy-making positions earning more than $151,164 annually. The final rule requires employers to provide notice to affected employees, other than senior executives, that their existing non-compete agreements will not be enforced by the effective date of the rule.

The FTC’s ban targets non-compete clauses that are “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from” seeking or accepting different work in the United States or operating a business in the United States. Other types of non-compete agreements, such as those entered into in connection with the sale of a business, are excluded. The prohibition applies to both contractual terms and workplace policies, whether written or oral, and it preempts conflicting state laws.

The final rule will become effective 120 days after it is published in the Federal Register.

Legal Challenges Underway and More Expected

As anticipated , the final rule is facing legal challenges out of the gate. Earlier today, less than 24 hours after the FTC announced the final rule, the U.S. Chamber of Commerce filed a lawsuit challenging the non-compete ban, arguing that the FTC does not have authority under the FTC Act to make rules regulating unfair methods of competition, and that under the U.S. Supreme Court’s “major questions doctrine,” the final rule must be vacated because the FTC acted without clear Congressional authorization. Given the Supreme Court’s increasingly skeptical view of administrative rulemaking of late, these arguments may find favor should they reach the Supreme Court. The Chamber also challenges the final rule on other grounds, including that it is an unconstitutional delegation of legislative power, that it impermissibly applies retroactively to existing non-compete agreements, and that it is arbitrary and capricious, as the FTC issued the final rule based on limited and flawed studies without sufficient consideration of the concerns and alternatives raised during the public comment period. We expect that other interested parties will raise similar challenges and that status of the final rule will remain in flux while legal battles unfold.

Proactive Steps for Employers

Although there may be strong bases to challenge the final rule and its ultimate fate is unknown, the recent trend at both the federal and state levels has decidedly been to narrow and restrict the use of employment-based non-compete agreements. Employers should use this opportunity to think about their protectible business interests and take stock of the alternative tools available, including, for example, by implementing or updating non-disclosure and non-solicitation agreements, ensuring systems are in place to safeguard and restrict access to trade secrets and other confidential business information, investing in training and culture to promote retention and reinforce employee duties and implementing robust exit interviews and transition planning.

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