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Introduction to School Finance Main source for the content Odden and Picus, School Finance, 4 th edition.

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Presentation on theme: "Introduction to School Finance Main source for the content Odden and Picus, School Finance, 4 th edition."— Presentation transcript:

1 Introduction to School Finance Main source for the content Odden and Picus, School Finance, 4 th edition.

2 Education is big business – it accounts for the largest portion of most state and local governmental budgets. In 1940 there were 117,108 school districts in the US – by 1950 there were 33,000 less; by 1960 another 43,000 had consolidated. In 1970 there were 17,995 school districts and in 2015 there are approximately 14,000. The number of districts in each state varies greatly – over 1000 in Texas, Nebraska has 477, NC has 115, and Hawaii has 1.

3 Did all this consolidation lead to more “efficiency” and “equity” ? Similarly, the number of schools have declined – around 260,000 in 1930 to around 100,000 today. (The number of private schools have increased from about 12,000 in 1930 to 38,000 in 2002.) Total public schools expenditures in 1990 – around $208 billion – in 2003 – around $440 billion. (in 2004 – Exxon Mobil had total sales of $340 billion – the #1 Fortune 500 company)

4 Ed. Revenues as a percent of GDP and Personal Income – 1929 – 2%; and 2.5%; 1970 – 3.9 %, and 4.8%; 2004 – 3.8%, and 4.5% Per pupil expenditures and percentages of federal, state, and local $ (in real 2004-05 dollars) – 1920 - $401 -.3%, 16.5%, and 83.2%; 1980 - $5,157 – 9.8%, 46.8% and 43.4%; 2003 - $8,468 – 8.5%, 48.7% and 42.8%. What does NC look like on these percentages ? Why do you think these per-pupil increases occurred ?

5 Lots of variation between states in percent federal, state, and local support (2005 NCES) NC – 9.6%, 63.7%, and 24.2% (In 2011-12 this looked like 14%, 58%, and 24%) Va - 6.6%, 39.6%, and 51.8% (4.3 NJ low fed) SC – 9.8%, 48.1%, and 38.4% Nev – 7.0%, 30.2%, and 59.1% high local, low state NM – 15.0%, 72.1%, and 11.1% (15.7 SD high fed) Haw – 8.2%, 90.1%, and 0.8% (low local, high state) US – 8.5%, 48.7%, and 40.5% What causes the variation in federal dollars ?

6 What are some advantages to a high percentage of state funding ? Advantages to a high percentage of local funding ? For the first 100 years of public schools (mostly the 19 th century) local boards controlled public schools – in the early 20 th century control begin shifting to the state and then mid-60s some control shifted to the federal level. Most states finance public schools through local property taxes which have created wide disparities in ability to pay for education.

7 Local funding for schools in NC is determined by County Commissioners – the amount of local tax collected for all county services is calculated by multiplying the tax rate established by the Commissioners times the total value of the property in the county. (if the tax rate is.50 per $100 valuation – what is the tax paid on a $200,000 house ?) Is the value of property equally distributed across counties in NC ? What kinds of inequities result ?

8 In NC the average adjusted property wealth (apw) available per child is $770, 875. If the counties are placed into quartiles the apw looks like this: (Public School Forum 2013 finance study) $1,494, 504 / $727, 128 / $504, 179 / $393, 699 If counties in each quartile chose to levy a tax rate of $1.00 per $100 of property valuation, how much money would be generated for each child ? Is this fair ? What are some ways that this could be addressed at the state level ?

9 Several states (NY, Illinois, Missouri, and Wisconsin) have had similar patterns where the tax rates in the less wealthy districts have been lower than the tax rates in the wealthier districts thus creating an even larger financial disparity. A comparison of the first decile of districts to the tenth decile of districts in NY – does not include NYC: Assessed value per pupil - $37,957 to $115,535 Gross income per tax return - $12.2K to $21.6K Property tax rate (millage) – 13.01 to 23.84 Property tax revenue per pupil - $485 to $2,583 State aid per pupil - $1,229 to $706 Total state and local - $1,759 to $3,443

10 Most states adopted one of three school finance systems: (1) a guaranteed tax base (GTB) or district power-equalizing program – essentially meaning that the tax effort in the poorest district would produce the same revenue per pupil as the wealthiest district – up to a certain amount; (2) a minimum foundation program funded by the state – a formula that would provide an expenditure per student at a level that would provide at least a minimum quality-education program. Most states require a certain level of effort from the local district; or (3) some combination of the GTB and foundation program.

11 From Odden and Piscus p. 25, “ Some argue that the continued existence of spending disparities and their relationship to local property wealth, whatever the cause, remain a problem. But if the “old” problem was the unequal ability to raise revenues to support public schools, and that problem is resolved by a high-level GTB or other kind of school finance reform program, others say that any remaining spending differences are a matter of local taxpayer choice and reflect neither an inherent inequity nor a school-funding problem.

12 “Yet another group may argue that since education is a state function, then spending differences per se (as a proxy for education quality) are a problem regardless of whether they are caused by the unequal distribution of the property tax base or local taxpayer choice. Still others focus on the spending of the bottom half of districts by arguing that it should be higher.” What’s missing in all of these arguments ?

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14 School financing litigation in many states has begun to stress adequacy issues over equity issues. The goals which were created by state standards-based education reform, were reinforced with NCLB 2001 –p.25 Odden The challenge is to determine an “adequate” level of spending. “Analysts are convinced that, on balance, there are substantial revenues in the American public school system and that the core problem is to determine how best to use those resources- particularly how to use the resources differently to support strategies that dramatically boost student performance. “ (Odden and Piscus – p. 26)

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