School Funding – Part I – The Controversy Around School Funding

Want to start a heated debate among educators and parents? Simple. Bring up school funding, kick back, and wait.  School funding has been a hot topic for decades, and it continues to become even more controversial each year.   Virtually everyone agrees the current school funding model is very flawed.

The general consensus is that more affluent school districts, that have a population of students with lower needs, typically get significantly more funding than disadvantaged school districts that have a population of students with higher needs.  Basically, the kids who have resources at home also have resources at school, while the kids who don’t have resources at home don’t have resources at school.

It’s a huge problem because having better resources available, such as high-quality curricula, experienced teachers, and the appropriate accommodations, has a direct correlation to academic success, graduation rates, opportunities for higher education and careers.

Here’s how school funding currently works. School districts get their funding in the following ways:

  • Roughly 8-10% comes from the federal government
  • Roughly 47-48% comes from the state government
  • Roughly 44-45% comes from the local government

The grants coming from the federal government tend to fill in the gaps left behind by the other funding sources. For example, most of its funding is allocated to providing resources for low-income students, English Language Learners, and students with disabilities.

On the state level, funds are collected through income taxes, sales taxes, and other fees.

And on the local level, funds are collected through property taxes.

The US Constitution places responsibility for public education on the states. That’s why the majority of school funding comes from state and local governments. The problem lies in how states allocate the available funding.

In all but five states, school funding is controlled by a statewide formula. All states determine their own formula which is why there’s so much inconsistency with school funding across the country.

The most used statewide funding model is the foundation grant. This means the state:

  • Determines the minimum amount each student should receive
  • Calculates each school district’s ability to pay this minimum amount per student
  • The state pays the difference

Another statewide formula is the guaranteed tax base. In this formula, the state:


The guaranteed tax base approach promises districts a consistent amount of money for their tax effort. Rather than ensuring a minimum overall funding level, the state instead commits to providing a minimum amount for each percentage of property tax regardless of how much district tax revenue is actually raised by that tax.

Lastly, some states have chosen a centralized school finance model.  This includes the state:

  • Assigning a standard property tax rate for all school districts

No matter which formula a state uses, all budgets are due in January and must be passed by June 30th according to the law.