Local K-12 funding is creating inequities. Who covers the gaps?

Black and Hispanic students receive 4% less funding than students of all other races and ethnicities.
By: | May 2, 2022
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The way local, state, and federal education funding streams run together—and sometimes compensate for each other’s shortfalls—can mystify even the most astute district leader. And though funding has increased in most parts of the country, there are still stark socioeconomic, racial and geographic disparities, according to an analysis by The Urban Institute, a nonprofit research organization focused on equity and upward mobility.

State and federal funding sources, for instance, often have to close gaps when it comes to “funding progressivity,” or how much more is spent educating students from low-income families compared to their more affluent peers. Funding progressivity has remained flat for decades even as, on the local level, property taxes often generate more revenue for schools that serve higher-income families, according to the Urban Institute.

“In general, local funding … inequitably allocates funds, whereas states, which have their own funding formulas, typically attempt to correct these inequities,” the report says. “Federal funding, which accounts for less than 10% of all funding, is also designed to create equity.”

Nationwide, 1% more funding is allocated to students experiencing poverty than to students who are not in poverty, the analysis found. Still, the funding progressivity mix varies by state. While many states follow the national trend in providing slightly more funding to disadvantaged students, some states spend a lot more—most notably, Alaska, Montana, North Dakota, South Dakota and Wyoming. And in some states—such as Connecticut, Illinois and Pennsylvania—the balance of local, state and federal funding tilts toward wealthier students.

The most glaring inequities occur around race and ethnicity. Nationally, Black and Hispanic students receive 4% less funding than students of all other races and ethnicities, the analysis found.”As a result of school segregation and other discriminatory practices, many students of color do not have educational opportunities equal to those of white students,” the report says.


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A few states stand out as places where Black and Hispanic students receive slightly more funding than other students. This list includes Arkansas, California, Louisiana, Minnesota, Mississippi and South Carolina. On the other side of the ledger, the balance has tumbled in states such as Connecticut, Massachusetts and New Hampshire, where funding was long in favor of disadvantaged students but now lags behind.

Geography also causes wide variations in funding. The country, overall, provides 3% more funding to rural and small schools with the bulk of those funds coming from the state. Those districts face higher transportation and technology costs, and often have to increase salaries to attract educators to work in more remote communities, the analysis says.

To dig deeper into state-by-state funding levels, visit The Urban Institute’s interactive analysis.