School Finance:

State Efforts to Reduce Funding Gaps Between Poor and Wealthy Districts

HEHS-97-31: Published: Feb 5, 1997. Publicly Released: Mar 7, 1997.

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Pursuant to a congressional request, GAO reviewed funding gaps between poor and wealthy school districts, focusing on the: (1) size of the gap in total (state and local combined) funding between poor and wealthy school districts for each state; (2) key factors that affect the size of states' funding gaps; (3) effect of states' school finance policies on the funding gap; and (4) implications of this information for state policies.

GAO found that: (1) although most states pursued strategies to supplement the local funding of poor school districts, wealthier districts in 37 states had more total (state and local combined) funding than poor districts in the 1991-92 school year; (2) this disparity existed even after adjusting for differences in geographic and student need-related education costs; (3) on average, wealthy districts had about 24 percent more total funding per weighted pupil than poor districts; (4) three factors affected the funding gap between a state's poor and wealthy districts; (5) first, the extent to which a state targeted funding to poor districts affected the funding gap; (6) although targeting efforts typically reduced funding gaps, they did not eliminate them; (7) second, a state's share of total funding can reduce the funding gap, even when the targeting effort is low; (8) finally, the local tax effort to raise education funding affected the funding gap; (9) at the local level, the greater the tax effort that poor districts were willing to make compared with wealthy districts, the smaller the gap in funding between these two types of districts; (10) poor districts in 35 states made a greater tax effort than wealthy districts; (11) because all three of these factors can affect the funding gap, analyzing the effects of state school finance policies required excluding the effects of the local tax effort; (12) to do this, GAO estimated the foundation level each state's school finance policies implicitly supported, which estimates the minimum total funding per pupil that districts could finance if they were to make the same local tax effort; (13) GAO's resulting analysis showed wide variations in the implicit foundation level that state school finance policies supported in school year 1991-92; (14) the implicit foundation levels of almost all states were less than their state average funding levels; (15) in 14 states, the implicit foundation level was less than half the state average funding level; (16) although the relative tax effort of poor and wealthy districts greatly affects the funding gaps between these districts, higher implicit foundation levels can help reduce the gaps; (17) therefore, states can further reduce the funding gaps by increasing their targeting effort to poor districts, increasing the state share of total funding, or increasing both; and (18) officials in a number of states reported making such changes between school years 1991-92 and 1995-96, although 25 states reported making little or no changes in their targeting of poor districts or state share.

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