SCHOOL FINANCE OVERVIEW
The expenditure of public funds for K-12 education has a long tradition in the United States. While the United States Constitution does not make any federal provisions for public education, every state's constitution guarantees some level of free public schooling for its citizens. Each state governs its own public education system and decides how to pay for it.
The amount of money spent on schools is certainly a factor in the quality of the education students receive. Of even greater importance is the way funds are spent. To understand school finance, then, it is important to know how much money is available, how it is spent, and who controls those decisions.
Where the money comes from: Historically, local property taxes have been the major source of funding for public schools. Typically, the property tax rate was set by the local school board, other local officials, or directly by citizens. This local control led to dramatic differences in school funding, usually depending on the relative property wealth of the surrounding community. During the 1970s and 1980s, the courts in many states ruled that these wealth-related differences in school support needed to be eradicated. They called on state governments to come up with new ways to fund public schools more equitably.
As a result, school finance systems today look dramatically different from state to state. The general trend has been toward a larger portion of state funding and control, but the proportions and funding structures vary. Illinois and New Jersey, as well as many other states, depend somewhat on state funds but still rely most heavily on local property taxes. A few states, most notably California and Michigan, have state-controlled school finance systems. Hawaii is unique in that it has one statewide school district. Unlike most states, California and Michigan are funded primarily through State, rather than local, sources of revenue.
Although its contribution has been increasing, the federal government provides less than 10% of funding for public education nationwide. Nearly all of it is earmarked to support specific programs or to help certain categories of students, primarily those who are poor or require special education.
How the money is used: Decisions about expenditures: What the money is used for and who decides how to spend it is the other half of the picture. The federal government, state governments, school districts, and schools all have some decision-making role, again with substantial variation from place to place. Policy makers and educators must balance the need for equity and standardization against the need to tailor services and instruction to unique local circumstances.
The largest expense in every school system is salaries and benefits, particularly to pay for teachers. Instructional materials, utility costs, and building maintenance are among the other types of expenditures.
Special Education funding: Special Education remains a large portion of the education budget. Federal and state Special Education laws require that all students with disabilities receive a free and appropriate public education in the least restrictive environment. About 11% of California's public school students qualify for Special Education services. The funding comes from both state and federal government programs and from local school districts. School districts receive funds based, for the most part, on their total student enrollment.
The construction and upkeep of school facilities: School districts throughout California are in need of funds to expand, maintain, and modernize their facilities. The California Department of Education (CDE) estimates that more than 7,000 new classrooms will be needed each year through 2008. As of April 2004, more than $16.5 billion worth of new construction and modernization projects have been approved and are awaiting funding, according to the Office of Public School Construction.
In recent years, the facilities problem has received substantial attention from state leaders and California citizens. In November 2000, voters made it easier for school districts to pass local general obligation bonds. The passage of Proposition 39 lowered the required threshold for local voter approval from two-thirds to a 55% super majority (but only if specific accountability provisions were included).
Since 1998, school districts have been allowed to establish School Facility Improvement Districts (SFIDs) in which property taxes for a portion of the district are raised to service debt incurred from the sale of general obligation bonds. A law passed in July 2001 (SB1129, O'Connell) changed the voter approval minimum for SFIDs from two-thirds to 55% (and required Proposition 39's accountability provisions).
In March 2004, California voters passed Proposition 55, a $12.3 billion bond measure for the construction and modernization of public elementary, secondary, and higher education facilities. The amount includes $10 billion for K-12 school repair and construction and $2.3 billion for higher education. Proposition 55 is the second of a two-part bond measure, Proposition 47, which passed in November 2002. Proposition 47 provided $13.05 billion ($11.4 billion for K-12 and $1.65 billion for higher education).
Funding levels are a continuing issue in California. In California the question of funding adequacy consistently underlies other discussions about educational improvement. From the 1970s to the late 1990s, per-pupil expenditures in California lost ground compared to the national average.
The issue of how much money schools need has also been a subject before the courts in California. In 2000, the ACLU filed a court case (Williams et al vs. State of California et al) charging that the state has not met its obligation to provide all students with "basic educational necessities." The suit was settled in a tentative $1 billion agreement announced by Governor Schwarzenegger and the ACLU. This suit could eventually have a substantial impact on how schools are funded in California and on how (and by whom) expenditure decisions are made.
From 1996 to 2001, California steadily increased its spending on schools. From 2001 until 2003, spending remained relatively steady. However, spending on schools is projected to decrease for 2003-04. These figures, however, distort the level of growth. They do not reflect a series of deferrals from one year to the next that have been part of the budget balancing act over the last three years, most notably the postponement of the final state payment to K-12 schools from June to July. When those deferrals are taken into account, spending actually decreased slightly. For 2002-03 the expenditures per pupil was $6,788 compared to an estimated $6,752 per pupil for 2003-04.
--Courtesy of EdSource
