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Clearinghouse on Educational Policy and Management
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| College of Education · University of Oregon |
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Trends and Issues: School Finance
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Compiled by Margaret Hadderman, research analyst. Updated June 28, 2001 During the past several years, policy-makers and practitioners have concentrated their energies on resolving equity/adequacy issues, reforming school tax structures, improving schools' efficiency and cost-effectiveness, developing school-based accountability and reporting systems, and exploring alternative cost-cutting and fundraising strategies. National Expenditure and Enrollment FiguresThe United States is a big-time spender on education. Total expenditures for public elementary and secondary education alone are approaching $336 billion for 2000-01 (National Center for Education Statistics 2000). In fiscal year 1996, the nation spent over $500 billion for elementary, secondary, and higher education combined. Estimated public-education revenues for 2000-01 are about $354 billion (National Center for Education Statistics 2000). State, local, and private expenditures accounted for over 90 percent of spending, with the federal government contributing about 10 percent to support students of all ages (U.S. Department of Education 1997). Total per-pupil expenditures have risen from $5,529 in 1994-95 (National Center for Education Statistics 1999) to an estimated $6,585 in the 1999-2000 academic year (National Center for Education Statistics 2000). Per-pupil expenditures are expected to increase to $9,204 in 2009-2010 (NCES Projections Web Site 2000). The Organisation for Economic Cooperation and Development's comparison of 1994-95 spending in 29 countries pegged the average per-pupil cost for all educational levels in the U.S. at $7,790—the highest of any of the nations studied (Viadero 1998). Education has become the largest single spending category in all the states (National Conference of State Legislatures 1996). Public-school enrollment rose from 42.8 million students in fall 1992 to 45.9 million in fall 1997, a 3.1 million (or 6.5 percent) increase (National Center for Education Statistics 1998). This means that real per-pupil spending was stagnant over that five-year period, having increased only .14 percent yearly (Johnston 1998). In fall 1999, public-school enrollment had reached 46.8 million. By fall 2000, public and private elementary/secondary enrollment was expected to reach a record 53 million students, up from 50.5 million in fall 1995 (National Center for Education Statistics Projections Web Site 2000). The NCES predicts "further small enrollment increases between 2000 and 2005, followed by small enrollment declines between 2005 and 2010." Elementary enrollment has risen faster than secondary enrollment, and faster than the number of schools. State Education Spending and Taxation TrendsState finances remained "remarkably healthy in FY 2000," with aggregate state balances reaching $40.4 billion, according to one National Conference of State Legislatures executive summary (January 2001). By late February 2001, the outlook seemed less rosy, due to disappointing December revenue collections. Only thirty-one states reported that revenues were on target; thirty-one reported that spending was exceeding budgeted levels. Although most states were not planning budget cuts, eleven were instituting cuts, including Alabama, Delaware, Mississippi, Nevada, North Carolina, Virginia, and West Virginia. Another eight states, including Arkansas and Louisiana, reported that budget cuts were possible; ten were planning to raise taxes. Generally, the South was experiencing less revenue growth than other regions, especially western states. Increasing health and education costs "may dampen the budget outlook for 2002," despite the presence of "rainy day" reserves in many state coffers (NCSL February 2001). Prior to the recession that officially began in spring 2001, most states were able to both increase spending and reduce taxes. Every state except Hawaii finished FY 1997 with budget surpluses (Liebschutz, December 1997). The strong U.S. economy allowed state legislatures to increase total state education spending from $135.2 billion in 1996-97 to $145 billion in 1997-98, a 7.2 percent increase (Liebschutz, October 1997). These figures exceed by more than $2 billion what the governors proposed in their budgets. Changes reflected court-mandated finance and tax-system changes in several states and rising enrollments, especially in the Southwest and the Far West. In 1997, 34 states cut taxes; 22 cut personal income taxes, 9 cut business taxes, 10 cut their sales taxes (mostly on food or utilities), and 9 reduced property-tax rates (Liebshutz, December 1997). A robust national economy also may have influenced states' expenditures and allocations for education. According to Crampton (2000), "the 1999 legislative session closed with 563 [education] bills signed into law," ranging from "zero in Kentucky and Minnesota to 38 in California." Crampton observes that the number of new laws in 1999 "eclipsed earlier years and extended an overall trend of increasing levels of legislative activity since 1994," when only 127 education bills were passed. Trends in School FundingThe proportion of federal funding for public schooling stabilized during the mid-nineties, varying between 6.9 percent in 1992-93 and 6.6 percent in 1995-96. During that same period, state contributions have edged slightly upward from 45 percent to 47.5 percent, whereas funding from local and intermediate sources has dropped slightly from 47 percent to 46 percent. This trend is likely to continue, as equalization efforts shift more financial responsibility for schools to the state level (Protheroe 1997). Special Education. Schools are spending an increasing proportion of their instructional budgets on special education, although estimates differ. An Economic Policy Institute study of nine representative districts' spending patterns found that between 1991 and 1996 special-education expenditures grew from 17.8 to 19 percent of all school funding (Johnston 1998). In the 1997 National Survey of School District Budgets, the Educational Research Service reported that districts claimed to have spent 9.74 percent of their operating budgets for special-education instruction (Protheroe). A more recent survey of 50 states pegs total national spending for special education at $49.2 billion for 1998-99; the federal share would have comprised 7.7 percent of total expenditures, compared to 38.8 percent for states and 53.9 percent for local districts (Parrish 2000). In an upcoming National Special Education Expenditure Project (SEEP) sponsored by the U.S. Department of Education, "a nationally representative sample including all states and 250 school districts will provide comprehensive and comparable data on special-education expenditures" for educators, legislators, and other stakeholders (Parrish). Educational Technology. Spending for K-12 educational technology nearly doubled from the early to mid-1990s, increasing from $2.1 billion in 1991-92 to an estimated $4.1 billion in 1996-97 (Hayes 1997). In 1998, U.S. schools spent well over $500 million for educational software alone (D'Amico 2001). A Merrill Lynch Report put K-12 expenditures for instructional technology (mostly for Internet services) at nearly $7 billion during 2000 (Angulo 2001). During the 1999 legislative session, 17 states passed 26 educational technology funding measures" (Crampton 2000). Crampton notes that over the past several years, "the range of the legislation has expanded from the purchase of computer hardware and peripherals to include" professional development for educators, as computer and Internet access improved. However, teacher training is only one hidden "total cost of ownership" that districts often neglect to factor into technology budgets (Bolton 2001). D'Amico estimates that it could cost America's schools $45,000 per school and $80 per student to update, maintain, and manage sophisticated systems with reasonable student access. Facilities. For several decades, districts spent a steadily decreasing proportion of their budgets on maintaining and repairing increasingly outmoded, deteriorating buildings. Maintenance allocations had fallen from 14 percent in 1920 to 9.6 percent in 1960, to 6.7 percent in 1982, and to 3 percent in 1992 (Honeyman 1998). This trend may be changing. According to Faith Crampton (1998), "Between the 1996 and 1997 legislative sessions, capital outlay funding bills for elementary and secondary education nearly doubled from 41 to 70, approximately two-thirds of the states passing legislation." In the 1999 session, 93 bills were passed in 35 states (Crampton 2000). Aging buildings, deferred-maintenance backlogs, increasing enrollments, and litigation in some states (California, New Mexico, Arizona, Colorado, and New Jersey) are pressuring legislatures to pass facilities-renovation and construction funding measures. According to expert Joe Agron, districts across the nation are currently spending "near-record amounts on building construction and improvement" (Richard 1999). Districts completed building projects worth over $17.1 billion in 1998 and $16 billion in 1999. However, the National Education Association pegs school building needs at $332 billion—nearly three times the suggested $112 billion in a 1995 GAO report (Richard). For further information, visit the National Clearinghouse for Educational Facilities website at http://www.edfacilities.org/. Teacher SalariesTeacher salaries, comprising over 60 percent of most school budgets, did not keep pace with inflation during the 1990s. From 1981-82 to 1989-90, teacher salaries had increased nearly 21 percent, from $30,811 to $37,163 (in 1994-95 constant dollars). However, teachers made only $36,973 in 1992-93, $36,828 in 1995-96, and $40,965 in 1998-99. Their salaries actually declined (in inflation-adjusted dollars) 1 percent between 1989-90 and 1995-96, and only recently are they regaining their 1990 levels (National Center for Education Statistics 1998).
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