Introduction

Education Law Center’s Making the Grade is an annual overview of the condition of school finance in the states. The current report presents a picture of school funding in the 2021-2022 school year, the most recent data available. The main findings are:

• Funding levels vary greatly across the country with the five highest funded states spending over $5,000 per pupil more than the national average ($16,645), and the five lowest funded states spending over $4,000 per pupil less. Average funding levels in the highest funded states are about twice as high as the lowest funded states, and this disparity (between $13,000 to $14,000) has persisted over the last decade.
• More than half of states had at least a modestly progressive distribution of state and local funding, with 28 of the 48 evaluated states providing at least 5% additional funding to high-poverty districts. That is twice as many states as a decade ago.
• States are making vastly different levels of effort to fund education; effort is measured as state and local revenue for PK-12 education as a percentage of state GDP. In the highest effort state (Vermont), education revenue is 5.5% of GDP while in the lowest effort state (Arizona) it is just 2.05%. Schools in many of the highest effort states benefit from a double advantage – high effort on top of high fiscal capacity. Schools in many of the lowest effort states suffer from a double disadvantage – low effort on top of low capacity. Because education spending has not kept pace with economic growth, the average effort level of states was the lowest it has been in a decade.

State Policies Hinder Progress While Schools Face Post-Pandemic Challenges

Of course, these findings must be placed within the unique context of a not quite post-Covid reality. Despite overwhelming challenges posed by the pandemic, many states pursued economic policies that depressed revenues, such as income tax cuts on wealthy individuals and corporations and/or education policies that compete with public schools for scarce resources, i.e., universal voucher programs.

In the 2021-2022 school year, schools were still confronting the consequences of school closures and disruptions from the global pandemic. Students were struggling, both in academic and social-emotional terms. Thirty-six percent of schools reported that more than half of their students were behind grade level at the start of the school year, and the majority believed Covid played a major role.¹ More than two-thirds of public schools reported an increase in the number of students seeking mental health services.² In 2021-2022, nearly half of public schools reported teaching vacancies, which were more prevalent in predominantly non-white and high-poverty schools. As a result, a majority of schools reported using both teachers and non-teaching staff for tasks outside their intended duties and a quarter reported increased class sizes.³ Schools had extra resources to address these challenges, thanks to three federal Covid relief packages that provided direct support to school districts, but most of those funds were allocated in subsequent school years (see box on Page 5).

Tax Cuts

Despite the overwhelming challenges facing schools, in many states a surprisingly healthy fiscal outlook was met with tax cuts, rather than efforts to capitalize on economic growth by maintaining or increasing support for public education. As documented by the Center on Budget and Policy Priorities (CBPP) in a 2023 report, “State policymakers nationwide have embarked on a tax-cutting spree over the past three years, using the cover of temporary budget surpluses stemming from robust federal aid in response to COVID-19 and the economic recovery that followed.” ⁴

CBPP identified 26 states that cut income taxes between 2021 and 2023. These tax cuts, which were mostly permanent and targeted towards wealthy households and corporations, will cost an estimated $124 billion by 2028, equivalent to a 3.6% reduction in general revenue. Seventeen of these 26 states ranked in the bottom half on our funding level measure, meaning most of these states are likely in need of greater investment in public education, not less.

Universal Voucher Programs

Starting in 2022, states also embarked on the harmful trend of enacting universal voucher programs with no income or other eligibility requirements. Already, nearly one in every four states has universal or near universal vouchers. These programs – through which nearly every child is eligible to receive public dollars to attend a private school or be homeschooled – have enormous fiscal consequences. Researchers estimate that universal vouchers increase the total public costs of education by between 11% and 33%. If universal vouchers were expanded to all states, the cost would be somewhere between $66 and $203 billion per year.⁵ These are public dollars that should instead be invested in under-resourced public schools.

States Must Prioritize Public Education

While there is evidence of progress, there is little doubt that more needs to be done to improve school funding in states across the country. More states are adopting funding systems where high-poverty districts receive more funding than their low-poverty neighbors, but in many states these funding boosts are modest and may not fully account for the additional needs generated by student poverty. Moreover, the disparities in average funding levels among states remain vast, creating enormous gaps in educational opportunity by region. States are confronting the fiscal cliff created by expiring federal Covid relief funds, and the future of more traditional federal funding (IDEA, Title I, etc.) is uncertain. The need to prioritize investment in public education is obvious, yet too often states are making short-sighted decisions that reduce available revenue and prevent students from reaching their full potential. State policymakers must continue to address the inequity and inadequacy of school funding in many states across the nation.

What Is Fair School Funding?

We define fair school funding as the funding needed in each state to provide qualified teachers, support staff, programs, services, and other resources essential for all students to have a meaningful opportunity to achieve a state’s academic standards and graduate from high school prepared for citizenship, postsecondary education, and the workforce. A fair funding system is the basic foundational building block for high-performing, effective, PK-12 public school systems. Fair funding has two basic components: a sufficient level of funding for all students and increased funding for high-poverty districts to address the additional cost of educating students in those districts. These two components are dependent on a third factor: the effort made by state lawmakers to raise sufficient revenue to support their public schools so they can meet state-established curriculum content and performance objectives.

Why the States?

Unlike other countries, the United States has no national education system. Instead, states, under their respective constitutions, have the obligation to support and maintain a system of free public schools for all resident children. The states, and not local school districts or the U.S. Congress, are the unit of government legally responsible for operating the nation’s public schools and providing the funding necessary to support and maintain those schools.

All states fund their schools through a statewide method or formula enacted by the state legislature. These school funding formulas, or school finance systems, determine the amount of revenue school districts are permitted to raise from local property and other taxes and the amount of funding or aid the state is expected to contribute from state taxes. In annual or biannual state budgets, legislatures also determine the actual amount of funding districts will receive to operate their schools – amounts which do not always align with the state’s funding formula.

Why Does Fair School Funding Matter?

A fair, equitable, and adequate school funding formula is the basic building block of a well-resourced and academically successful school system for all students. A strong funding foundation is even more critical for low-income students, students of color, English learners, students with disabilities, and students facing homelessness, trauma, and other challenges. These students, and the schools that serve them, need additional staff, programs, and supports to put them on the same footing as their peers. Research on the needs of vulnerable student populations for extra academic and academically-related programs and services is compelling, as is growing evidence that increased investments in these students improves academic achievement and other outcomes.¹¹

The Fairness Measures

Funding Level

A state’s funding level is measured as the combined state and local revenue for PK-12 education divided by student enrollment and adjusted to account for regional variation in labor market costs.

A state’s funding level grade is determined by ranking its position relative to other states; the grade does not measure whether a state meets any particular threshold of funding adequacy based on the actual cost of education resources necessary to achieve state or national academic standards.¹⁵

Our analysis highlights the significant disparities in per-pupil funding across states, with many states spending thousands of dollars per pupil more than the national average, and other states spending thousands of dollars per pupil less (Figure 1a). Even after adjusting for regional cost differences, the highest funded states are largely in the Northeast while the lowest funded states mostly span across the South and Southwest (Figure 1b).

Funding Level Trends

Funding gaps among states have remained relatively consistent over time. Figure 1c shows the funding gaps between the average funding levels of the top and bottom five states each year, adjusted for inflation. After widening somewhat in the post-2008 Recession period, the gap between the most and least funded states has remained between $13,000 and $14,000 per pupil since 2012. States with the highest funding levels are spending about twice as much per pupil as the lowest funded states.

Figure 1d shows the per-pupil funding level changes between 2021 and 2022 in both nominal (non-inflation-adjusted) and inflation-adjusted terms. Nominally, all but ten states increased per-pupil funding levels. Among those that did not, D.C. and Massachusetts reported actual declines in total state and local revenue between 2021 and 2022, while in Montana and Ohio, small revenue increases were offset by enrollment growth.

Figure 1e highlights those states where changes in per-pupil funding were significant enough to shift the state’s relative rank in comparison to other states. States that moved three or more positions up in ranking are indicated with a blue line, and states that moved three or more positions down in ranking are indicated with a yellow line. The states with both the highest and lowest funding levels remain relatively static, and most of the movement occurs among states in the middle. The states that lost the most ground relative to other states were Montana (-5), Hawaii (-4), West Virginia (-4), and Alaska (-4). The states that most improved their position relative to other states were Louisiana (+7), Oregon (+6), Colorado (+5), California (+5), New Mexico (+4), and Delaware (+4).

Funding Distribution

The hallmark of a fair and equitable school finance system is that it delivers more funding to educate students in high-poverty districts. This means states providing equal or less funding to high-poverty districts are shortchanging the students most in need of additional resources for academic success.

Figure 2a depicts funding distribution in each state by comparing the average per-pupil funding allocated to high-poverty districts to that allocated to low-poverty districts (the funding distribution ratio). States are defined as “progressive” if high-poverty districts receive at least 5% additional funding relative to low-poverty districts. States that do the opposite, where high-poverty districts receive at least 5% less funding than low-poverty districts, are “regressive.”¹⁷ States with similar funding levels in high- and low-poverty districts have “flat” distribution systems. While we do not propose a specific target for how much progressivity is enough, we maintain that flat or regressive distribution patterns do not adequately support low-income students. However, it is important to remember that our grades are assigned on a relative basis, meaning that states are compared with each other and their rankings do not necessarily align with these categorizations. For example, the average funding ratio in 2022 is 108%, so states around this average receive a C.

In 2022, 28 states had at least a modestly progressive funding distribution, providing high-poverty districts with at least 5% more funding than low-poverty districts. Nine states had a flat distribution, and 11 states were regressive where high-poverty districts received at least 5% less funding than low-poverty districts. There is a broad continuum, with the most progressive state, Utah, providing, on average, 60% more per-pupil funding to high-poverty districts, while the most regressive state, Oregon, provides 23% less funding to high-poverty districts.

A Decade of Steady Progress

Figure 2b shows the nation making significant progress towards more equitably distributed funding. The number of states with progressive funding systems more than doubled in the last decade from 13 states in 2012 to 28 in 2022.

Figure 2c presents the change in each state’s funding distribution ratio between 2012 and 2022, highlighting whether the state experienced a positive or negative change. A distribution ratio, comparing funding between high- and low-poverty districts, above 105% indicates progressive funding, and a ratio below 95% indicates regressive funding.

The positive trend of more states becoming progressive is largely due to incremental gains shifting formerly flat states to progressive. Fourteen states designated as flat in 2012 improved to a progressive distribution in 2022, with Wyoming, New Mexico, California, and Colorado making the largest gains. Notably, three formerly regressive states have made significant progress over this period: Maryland’s distribution ratio shifted from 92% to 137%; New York shifted from 90% to 118%, and Virginia shifted from 90% to 107%.¹⁸ For example, in 2012, a high-poverty district in New York typically received $18,603 per pupil, about 10% less funding than a low-poverty district ($20,605). But by 2022, a high-poverty district typically received about $31,829, 18% more than a low-poverty district ($27,003).

Fairness Profiles

The fairness of a state’s school funding system is contingent on both adequate funding levels and a progressive distribution of funds. Some seemingly well-resourced states, such as Connecticut and Pennsylvania, do a poor job of targeting those funds where they are most needed, leaving large disparities in average funding levels of the highest and lowest poverty districts. Likewise, some states with a progressive distribution, such as Colorado and South Dakota, have low overall funding levels that leave even their highest poverty districts with funding that just barely reaches the national average (Figure 2d).

Funding Effort

Figure 3a ranks states on effort measured as PK-12 revenue as a percentage of the state’s economic activity, or gross domestic product (GDP).¹⁹ It is important to evaluate a state’s effort index in the broader context of overall economic wealth. Consider New Hampshire and Kentucky: Both states receive a C for average effort, but one state is relatively wealthy with a high per-capita GDP (New Hampshire: $64,439), while the other has a relatively low per-capita GDP (Kentucky: $48,225). Though these states are making a similar effort to fund schools, New Hampshire can generate much higher per-pupil funding levels than Kentucky ($20,745 and $14,493, respectively). Figure 3a juxtaposes a state’s effort compared to the national average with its per-capita GDP and per-pupil funding levels to contextualize how the effort index interacts with the state’s relative wealth to produce high or low funding levels.

It is also important to recognize that the effort index reflects both state and local funding as a percentage of GDP at the state level. It does not mean the level of effort is distributed equitably across districts within the state. In fact, many of the highest effort states receive an A on funding level and an F on funding distribution (Connecticut, Illinois, Maine, and Pennsylvania). In these states, the high funding levels, driven by local property taxes, are disproportionately concentrated in the state’s lowest poverty districts, while the highest poverty districts operate with less.

In 2022, vast disparities in the effort states make towards funding education persist. In Vermont, the highest effort state, state and local education revenue represents over 5% of GDP, well above the national average of 3%. In Arizona, the lowest effort state, education revenue represents only 2% of GDP.

Schools in many of the states with high effort, such as New Jersey, Connecticut, New York, Illinois, and Wyoming, benefit from a double advantage. These states make a high effort and have higher economic capacity, resulting in higher funding levels. Schools in some of the states with low effort, such as Oklahoma, Idaho, Florida, North Carolina, and Arizona, suffer from a double disadvantage. These states make a low effort and have less fiscal capacity, resulting in lower funding levels.

Even with Strong Economic Growth, Effort Continues to Fall

Putting It All Together

Making the Grade is meant to provide an overview of school funding fairness in the states through the examination of three interrelated factors (Table 1). We urge readers to consider each state’s rankings on the three measures collectively and not in isolation. In some cases, a state’s stellar performance in one area is completely undermined by its poor performance in another. Figures 4a – 4e provide a few classifications to explain general patterns in school funding across the country. The groupings below are not exhaustive, since some states do not fit into any of the categories provided.

Conclusion

The findings of this edition of Making the Grade leave room for both hope and concern. On the positive side, states are making slow and steady progress towards more progressive funding systems that recognize that economically disadvantaged students need more resources to boost success. More than half of all states now provide at least modestly more funding to their highest poverty school districts. Between 2012 and 2022, the number of progressive states doubled.

Recent rigorous analyses of school funding reform make clear that these investments pay off. For example, as a result of California’s Local Control Funding Formula, more low-income students have access to a higher-quality and better-trained workforce, smaller class sizes, and improved facilities. These interventions significantly reduce opportunity gaps and have resulted in improved academic achievement, increased graduation rates, fewer suspensions and expulsions, and students who are more prepared for college.²⁵ These results echo previous findings on the positive, short- and long-term impacts of school finance reforms.²⁶

Nonetheless, there is still more work to do. The vast disparities in school funding levels across the nation reinforce that where you live determines the type of educational resources you have access to. For poorly funded and regressive states, these resource disparities cross both district and state lines. Reducing these disparities, both within and between states, is crucial for ensuring that every student has access to the resources and opportunities they need to succeed in school and in life.

While public education nearly always suffers when the economy weakens, it often fails to benefit when the economy is strong. Evidence of this is clear in our findings on the effort states are making to fund their schools. The average effort among states is the lowest it has been in a decade and states are forgoing billions of dollars in potential education revenue by enacting tax cuts for the wealthy and corporations. The disparities in effort across the country make clear that some states prioritize education less than others, often in the face of obvious need.

The responsibility for adequately and equitably funding public schools now, as ever, lies with the states. But state policymakers continue to make decisions that prioritize advantages for the already advantaged rather than enacting policies that would benefit the most disadvantaged. Advocates must continue the fight for adequate and equitable school finance systems and push policymakers to confront the unacceptable disparities in funding and resources that deprive students of their full potential.

Endnotes

1. Institute of Education Sciences. (n.d.). School Pulse Panel, Learning Recovery Dashboard. ↩︎
2. Institute of Education Sciences. (n.d.). Mental Health and Well-Being of Students and Staff During the Pandemic. ↩︎
3. Institute of Education Sciences. (n.d.). School Staffing Shortages: Results from the January School Pulse Panel. ↩︎
4. Tharpe, W. (2023). States’ Recent Tax-Cut Spree Creates Big Risks for Families and Communities. Center on Budget and Policy Priorities. ↩︎
5. Shand, R. & H.M. Levin. (2021). Estimating a Price Tag for School Vouchers. National Education Policy Center. ↩︎
6. Afterschool Alliance. (n.d.) Timeline of the Elementary and Secondary School Emergency Relief Funds (ESSER). ↩︎
7. U.S. Census Bureau. Annual Survey of School System Finances, 2020–2022. ↩︎
8. U.S. Government Accountability Office. (2024). K-12 Education: School Districts Reported Spending Initial COVID Relief Funds on Meeting Students’ Needs and Continuing School Operations. ↩︎
9. Education Resource Strategies. (2023). Here’s Why Some States Are Facing a Steeper ESSER Funding Cliff in 2024. ↩︎
10. LeFebvre, J. (2024). States Should Bolster, Not Undermine, Education Gains Made with ESSER Funds. Center on Budget and Policy Priorities. ↩︎
11. McKillip, M. & Luhm, T. (2020). Investing Additional Resources in Schools Serving Low-Income Students. Education Law Center. ↩︎
12. This measure does not include figures for Hawaii and the District of Columbia which operate as single district systems. Vermont is also excluded because of reporting inconsistencies. See the Technical Appendix for more information. ↩︎
13. Federal revenue varies by state and typically ranges between 4% and 14% of total revenue. U.S. Department of Education, National Center for Education Statistics, Common Core of Data (CCD), “National Public Education Financial Survey (State Fiscal)”, 2019-20 (FY 2020) v.2a ↩︎
14. Poverty is measured using the Census definition due to reporting inconsistencies for the National School Lunch Program, the more commonly used metric of school poverty. Census poverty is a more severe measure than either free lunch (130% of Census poverty) or reduced lunch (185%) eligibility. We define high-poverty districts as having a 30% Census poverty rate among school-aged children and low-poverty districts having a 5% poverty rate. For more detail, see the Technical Appendix. ↩︎
15. The United States has no established “opportunity to learn” standards that define the resources needed to ensure students have the opportunity to achieve common outcomes. It is, therefore, not feasible to determine the cost of those resources and funding levels across states. ↩︎
16. Using the State and Local Government Price Deflator, an index that measures inflation specifically for state and local government revenues and expenditures, we calculate inflation for the 2021–22 school year (July 2021 to June 2022) at 7.98%. This rate is more than double recent rates, which ranged between 1.26% and 4.44% in the previous five years. ↩︎
17. Categorizations are assigned using unrounded funding distribution ratios. The ratios presented in the chart are rounded. ↩︎
18. Nevada improved its funding ratio over the last decade but nearly all the change took place in the last year. The state was significantly and persistently regressive between 2012 and 2021 with a distribution ratio that ranged between 51% to 74% over that period. Then, in 2022, it suddenly shifted to a flat distribution of 102%. More recent data will reveal whether this trend is consistent or an anomaly. ↩︎
19. Gross domestic product (GDP) is the value of all goods and services produced by each state’s economy. In this report it serves as a measure of each state’s capacity to raise revenue to fund schools. ↩︎
20. Walker, T. (2024). ‘No Accountability’: Vouchers Wreak Havoc on States. NEA Today. ↩︎
21. Public Funds Public Schools. Bill Tracker, accessed November 14, 2024 ↩︎
22. Abrams. S.E. & Koutsavlis, S.J. (2023). The Fiscal Consequences of Private School Vouchers. Public Funds Public Schools. ↩︎
23. Public Funds Public Schools. (n.d.). The True Cost of Private School Voucher Programs; Public Funds Public Schools. (n.d.). The Myth of Cost Savings from Private School Vouchers. ↩︎
24. Public Funds Public Schools. (n.d.). Research Shows Private School Vouchers Don’t Work for Students and Harm Public Schools. ↩︎
25. Johnson, R. (2023). School funding effectiveness: Evidence from California’s local control funding formula. Learning Policy Institute. ↩︎
26. McKillip, M. & Luhm, T. (2020). Investing Additional Resources in Schools Serving Low-Income Students. Education Law Center. ↩︎