Many education decisions—from how many students will be in each class to how long bus routes will be—are driven by one significant factor: money. This section of Story Starters offers materials that explore the myriad decisions that affect how money for K-12 schooling is raised and spent, and how those decisions shape the way the nation’s public schools are run.
K-12 education is an expensive line item in all states’ budgets. In every state, education is one of the top two spending categories—rivaled only by Medicaid, the state-federal health care program for low-income people. In 2011, K-12 education made up 20 percent of state budgets, while Medicaid made up nearly 24 percent, according to the National Association of State Budget Officers. Such a large line item means that in tough budget times, when governors and legislatures must find a lot of money to cut to patch budget holes, K-12 education often cannot be spared.
Schools have taken a financial hit in many states since the severe economic recession that began in 2008. According to an October 2011 report by the Center on Budget and Policy Priorities, 30 states were spending less on K-12 education than they were before the recession started. And in 17 states, those cuts have been deep—at least 10 percent below pre-recession levels.
K-12 remains a mostly state responsibility, with state and local revenues contributing nearly 90 percent of the $600 billion spent to run schools nationwide in 2008-09, the latest year for which such data are available. The federal government provided just 9.5 percent of K-12 funding in the 2008-09 school year, according to the U.S. Census Bureau’s May 2011 public school finances report. The two biggest programs the federal government pays for are Title I for disadvantaged students and special education.
However, during the severe economic downturn that began in 2008, the American Recovery and Reinvestment Act passed by Congress in 2009 provided a temporary, one-time infusion of nearly $100 billion of federal money into local schools—boosting the federal contribution to 10 percent as states cut back in tough times. By early 2012, that funding had mostly been spent.
To drive tax dollars to districts, states use widely different and complicated funding formulas based largely on enrollment—and per-pupil spending amounts vary drastically by state. New York spends more than $18,000 per student, while Utah spends less than $7,000, according to U.S. Census Bureau data. These funding formulas have sparked numerous lawsuits over the years—in 45 states, in fact. Those cases typically challenge whether states are spending enough money on K-12 education, and whether they are equitably spreading that money around to districts within the state.
One of the biggest drivers of school spending is class size, because, on average, 78 percent of a school district’s budget is dedicated to paying the salaries and benefits of teachers, administrators and support personnel directly tied to instruction. The rest of a district’s budget pays for things such as transportation and facilities maintenance staff, supplies, and professional development, according to Census Bureau data.
Consider that in 1955, the average student-teacher ratio nationwide was 27-to-1, according to the National Center on Education Statistics. In 2008, that nationwide ratio had declined to 15-to-1—a figure that was predicted to stay there for the next several years, according to federal estimates. Whether reducing class size actually improves academic achievement is an entirely different issue that is hotly debated.
Given that personnel costs are such a significant part of a district’s budget, school districts are often forced to lay off teachers when faced with significant budget shortfalls. Because of the way teacher contracts are structured, the teachers laid off are often the last ones to have been hired, regardless of how effective they might have been. That practice of “last-in first-out” has been shown to have a disproportionate effect in schools that serve mostly poor and minority students, because the newest teachers are often concentrated in those schools, according to a May 2010 report by the Center on Reinventing Public Education at the University of Washington.
When teachers are laid off, their dismissal contributes to another school-related financial problem: underfunded pensions. Fewer teachers and other public employees paying into state retirement systems mean that unfunded liabilities grow. In 2008, the promises made by state pension plans across the country were, collectively, 84 percent funded. A year later, that figure dropped to 78 percent, according to an April 2011 report by the Pew Center on the States. As more baby boomers retire, states will be faced with even greater budget challenges in dealing with those unfunded liabilities. Some experts predict those problems could spill over and affecting general K-12 funding.
Although most money for schools is spent on costs related to instruction, the cost of building and renovating school facilities accounts for about 11 percent of school spending nationwide, according to the Census Bureau data. Collectively, the nation’s schools spent $54 billion on construction in 2008-09 and carried $400 billion in debt attributed mostly to capital projects. Most states and districts have separate funding streams to pay for capital projects, usually paid for through local property tax dollars.
Transportation is another relatively small portion of a district’s overall budget, but it hasn’t escaped scrutiny during tough budget times. In 2007-08, the latest year for which these data are available from the National Center on Education Statistics, schools collectively spent $21.5 billion on busing, or about 4 percent of their overall spending. That amounted to about $438 per child. When the cost of fuel rises, school districts tend to eye busing to cut costs. Districts across the country, from Jefferson County in Colorado to Westford Public Schools in Massachusetts, have started charging transportation fees—which have sparked outrage in some corners from parents. In some states, including Indiana, lawmakers have debated banning such busing fees.
Saving money on transportation is one of the drivers behind districts switching to four-day school weeks, especially in sprawling rural districts with few students but high transportation costs. All states have laws setting a minimum number of days, or in some cases hours, in each school-year calendar, ranging from a low of 160 days in Colorado to a high of 186 days in Kansas. Most require 180 days. But during the difficult budget times that began in 2008, school districts across the country began experimenting with changing their school calendars to save money. An analysis by the Education Commission of the States found that by mid-2011, at least 120 districts in 17 states were moving to a four-day school week to save money on transportation, utilities and custodial staff. In exchange for three-day weekends, students spend more hours in class each day. But the savings have been minimal, with actual savings ranging from less than 0.5 percent of district budgets to 2.5 percent. Teachers, whose salaries and benefits make up the bulk of district budgets, still worked the same number of hours, only in a compressed time frame, the analysis found. The relevant studies can be found here.
Even as the economy slowly regains momentum, many analysts expect states to continue to experience lean budget times. And that means school districts will keep having to make tough financial decisions even as they face demands to improve student achievement. — Michele McNeil, June 2012
Highlighted journalism and reports for this topic
Even though 34 states and the District of Columbia have No Child Left Behind Act waivers in hand, many of them are still negotiating with the U.S. Department of Education over their teacher-evaluation systems—a crucial component if they want to keep their newfound flexibility. (Education Week)Read More »
Arizona’s generous open-enrollment policy also poses challenges. Because children are free to go to school wherever they like, there is nothing that Tucson can do to keep its white students from leaving. (The New York Times)Read More »
California embarked on an ambitious experiment in 1996 to improve its public schools by putting its youngest students in smaller classes. Nearly 17 years later, the goal of maintaining classrooms of no more than 20 pupils in the earliest grades has been all but discarded-- a casualty of unproven results, dismal economic times and the sometimes-fleeting nature of education reform.
To save money on teacher salaries amid drastic cutbacks in state funding, many school districts throughout the state have enlarged their first-, second- and third-grade classes to an average of 30 children... (AP)
For New York City, that means that it will not receive $250 million in aid, money that city officials said would result in midyear cuts and could affect school funding for school staff, technology and after school and arts programs.
The absence of an evaluation means that the city will also not be able to claim up to another $200 million in state and federal grant money. (Gotham Schools)Read More »
WBEZ plotted annual school closings and schools "turned around" since the 2001-02 school year when CPS began shuttering schools as a reform strategy.
This sortable chart and map shows where schools have been closed or turned around (where the staff is completely replaced but students remain), what’s become of the old buildings and how well the new schools in those buildings are performing. The chart includes updated performance data from the 2011-12 school year.Read More »
More than 200 school districts across California are taking a second look at the high price of the debt they've taken on using risky financial arrangements. Collectively, the districts have borrowed billions in loans that defer payments for years — leaving many districts owing far more than they borrowed.
In 2010, officials at the West Contra Costa School District, just east of San Francisco, were in a bind. The district needed $2.5 million to help secure a federally subsidized $25 million loan to build a badly needed elementary school. (NPR)Read More »
Demographers and local officials say the reasons for this marked decline in student numbers are myriad: smaller families, graying communities, less new housing development, families moving out of the area. But its effects touch all aspects of schools, from the number of employees to hire to how many cartons of milk to order or buses to deploy, even whether to build new schools or close old ones. (Daily Press)Read More »
KARNES CITY, Texas—The school district in this ranching community has long been among the poorest in the state—and it remains so, local officials say, even though an oil boom has sent property values surging eightfold in the past two years.
But that jump in value has changed the town's designation to "property wealthy" from "property poor," under Texas' school-funding formula. That means the town can't keep most of this year's projected property tax of $20 million—up from $6.5 million last year—and must instead share the bounty with other districts. (The Wall Street Journal)Read More »
Officials hope this will bring the district to its right size, claiming it now has only 400,000 students for 600,000 seats.
It’s going to be a tough sell. Though districts turn to closing schools to deal with smaller enrollments, crumbling infrastructure or poor performance, they are often met with fierce opposition, especially in minority neighborhoods. (Atlantic Cities)Read More »
Reform supporters come from both parties, and tend to push for charter schools and grading teachers in accordance with their students' standardized test scores. In some states, like Connecticut, South Dakota and Idaho, voters dealt the movement a significant blow, pushing back controversial measures that would have ended an elected school board, abolished teacher tenure and instituted merit pay. On the other side of the issue, a major charter school initiative in Georgia made it through, and the results for another similar measure in Washington were inconclusive as of Tuesday night, though it led in the polls as of Wednesday morning. (The Huffington Post)Read More »
Based on the expenditures in the mid-range districts, an average cost per student is developed. Local school districts statewide are supposed to receive that average cost per student multiplied by their average daily attendance.
Because of an unprecedented drop in state revenue collections in 2009-2010, the Adequate Education Program has been underfunded a total of about $980 million since the 2007-08 school year. The 2007-08 school year was the high water mark for education funding. Since then, education funding was reduced every year until the most recent 2012 session where it was increased about $20 million. (Northeast Mississippi News Daily Journal)Read More »
Today the district is split into three large school zones and children are bused widely within them. But since only 13 percent of Boston public school students are white, and only 22 percent are middle class or affluent, politicians have begun to speak openly about the supposed futility of busing as a school desegregation tool. In his January 2012 State of the City address, Mayor Thomas Menino vowed to end widespread busing, speaking romantically about the neighborhood school model. "Pick any street. A dozen children probably attend a dozen different schools," he said. "Parents might not know each other; children might not play together. They can’t carpool, or study for the same tests." (Atlantic Cities)Read More »
Some of the education-related ballot items, like those in Arizona and California, are part of the perennial effort to obtain more financial support for schools and seek to help K-12 school systems recover in part from the Great Recession and subsequent economic stagnation.Read More »
But other proposals—such as ones in Idaho and South Dakota—represent resistance from teachers' unions and other groups to changes they view as antagonistic to public education, such as reduced collective bargaining rights or a bigger emphasis on standardized testing. (Ed Week)
In Washington, evaluations based in part on standardized tests have been used since 2009 to rate teacher performance, putting the city at the forefront of major school systems that are working to reform their personnel practices. All told, nearly 400 teachers have lost their jobs since the new evaluations were put into place. (AP via Philly.com)Read More »
Chicago public school teachers returned to their classrooms on Wednesday but thorny questions remained over how Mayor Rahm Emanuel and the cash-strapped school system will pay for the tentative contract that ended a strike of more than a week. (Reuters)Read More »
The attendance push has been particularly strong in California, New York, Texas and other states where schools funding is based on how many children are in their seats each day, rather than enrollment. Several California districts have made a back-to-school ritual of reminding parents that schools lose money whenever kids are out.Read More »
Some have asked families with children who missed school for avoidable reasons such as family trips to reimburse schools the $30-$50 a day the absence cost in lost funding, or at least consider having a child with the sniffles or a stomach ache show up for the first part of the day so he or she can be counted before going home sick. (Associated Press)
Eight years after California settled a landmark lawsuit promising hundreds of millions of dollars to repair shoddy school facilities, more than 700 schools still are waiting for their share of funds as students take classes on dilapidated campuses with health and safety hazards.
California has funded less than half of the $800 million required by the Emergency Repair Program, which grew out of a class-action lawsuit against the state that former Gov. Arnold Schwarzenegger agreed to settle. (California Watch)Read More »
Los Angeles school officials are fighting a court order, which took effect Wednesday, that would set aside more classroom seats for charter schools — even if that means traditional schools will lose space for parent centers, computer labs, academic intervention and other services. (Los Angeles Times)Read More »
Cutting school budgets is in vogue these days, but Pittsburgh is trying to save money this fall by approaching cost-cutting from a different angle. (Pittsburgh Post-Gazette)Read More »
EWA 2012 National Reporting Contest winner. Crumbling school buildings can impede academic achievement, but what happens when the public votes down bond measures to upgrade the infrastructure? This series of articles looks at the impasse between school boards and the voters, and cost-saving tricks to fine tune the walls of public instruction. (The Journal News)Read More »
EWA 2012 National Reporting Contest winner. Of the many problems turnaround schools face, the intersection of finances and performance goals is often at the heart of what make or break them. Many of these schools face a dilemma: They need students to keep their budgets and staff intact, but find it tough to improve academics with too many low-achievers. (Catalyst Chicago)Read More »
Newsweek and the Center for Public Integrity “crunched the numbers on graduation rates and test scores in 10 major urban districts—from New York City to Oakland—which got windfalls from…four top philanthropists. The results, though mixed, are dispiriting proof that money alone can’t repair the desperate state of urban education.” (Newsweek)Read More »
When tis report was published, “millions of public school students across the nation [were] seeing their class sizes swell because of budget cuts and teacher layoffs, undermining a decades-long push by parents, administrators and policy makers to shrink class sizes.” (The New York Times)Read More »
Reporters from 36 news outlets in 27 states spent nearly three months examining the impact of the historic influx of cash from the American Recovery and Reinvestment Act. They found that the stimulus package’s long-term impact on public education is far from certain. Indeed, many of the resulting policy changes are already endangered by political squabbles and the massive budget shortfalls still facing recession-battered state and local governments. (Hechinger Report and Education Writers Association)Read More »
EWA 2010 National Reporting Contest winner. This investigative report found that a top-notch public school in Lower Manhattan has been charging students and their families $1,000 to attend. (New York 1 News)Read More »
EWA 2010 National Reporting Contest winner. This series details a 16-month investigation by the paper. The report “has turned up no-bid contracts, questionable property deals and supposedly self-supporting ventures that failed, lost money or drew formal complaints and lawsuits.” (Statesman Journal)Read More »
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Reports & Data
Notable research on this topic
Large-scale public school closures have become a fact of life in many American cities, and that trend is not likely to stop now. In a previous study, The Pew Charitable Trusts looked at a wide range of issues involved in the shuttering of buildings, including the impact on students. For this report, we focused on what happens to the buildings themselves, studying the experiences of Philadelphia and 11 other cities that have decommissioned large numbers of schools in recent years. (The Pew Charitable Trusts)Read More »
The following facts help illustrate the state of educational attainment in the United States and the growing importance of education in determining people's well-being. On many dimensions—lifetime earnings, incarceration rates, and life expectancy, to name a few—Americans who do not graduate from high school or college are increasingly falling behind those with a college degree. This paper explores both the condition of education in the United States and the economic evidence on several promising K-12 interventions that could improve the lives of Americans. (Brookings Institution)Read More »
"Even as the availability of data on K-12 education programs has exploded over the past decade, the American education system suffers from an acute lack of some of the most basic information about publicly funded programs for young children. Although, for example, pre-K often comprises significant investments by state and federal governments, in many localities it is difficult to determine how many children receive publicly funded pre-K services or to make fair comparisons between local programs." (New America Foundation)Read More »
This series of three special reports examines implementation of the federal School Improvement Grant (SIG) program. The first special report, Schools with Federal Improvement Grants Face Challenges in Replacing Principals and Teachers, looks at how states, districts, and schools are addressing challenges related to SIG staffing requirements. The second special report, Increased Learning Time Under Stimulus-Funded School Improvement Grants: High Hopes, Varied Implementation, highlights key findings about state, district, and school experiences related to the requirement to increase student learning time in SIG-funded schools. Findings in these first two special reports draw on survey data from 46 responding states and case study research in Idaho, Maryland, and Michigan, published in earlier CEP studies. The third special report, Changing the School Climate is the First Step to Reform in Many Schools with Federal Improvement Grants, examines the positive changes in school climate experienced by six case study schools that received the federal grants in Idaho, Maryland, and Michigan.Read More »
The federal government’s website for tracking how stimulus funds were spent is a good resource for examining how the economic crisis affected schools.Read More »
This database “compiles state-level information on K-12 education from sources such as the U.S. Department of Education, Market Data Retrieval, and education policy organizations like the Education Commission of the States and the National Center for Educational Accountability.” A valuable resource for producing a variety of charts and graphs. (Education Week)Read More »
This website offers revenue and expenditure data for all school districts in the United States. (National Center for Education Statistics)Read More »
This report, published in 2012, concludes that “In short, money matters, resources that cost money matter, and more equitable distribution of school funding can improve outcomes. Policymakers would be well-advised to rely on high-quality research to guide the critical choices they make regarding school finance. (Albert Shanker Institute)Read More »
This 2010 report looks at how states distribute funding to school and districts during the start of the 2008 financial crisis. (Editorial Projects in Education Research Center)Read More »
Published in 2008, this five-year examination of K-12 school finance in the United States offers an in-depth examination of key issues. The group's conclusion is simply put: “The bottom line is that education finance needs to be redesigned to support student performance.” (Center on Reinventing Public Education, University of Washington)Read More »
This paper offers and economic analysis of the research regarding how class size affects student achievement. (The Economic Journal)Read More »
Five Questions To Ask
- With personnel costs claiming the lion’s share of district budgets, is your district considering innovative models of staffing to save money in this area? Or are cuts and layoffs the only steps taken or considered?
- How is your district directing facilities funding to particular schools, and how has funding changed over the past decade?
- Are there incentives built into your state’s or district’s pension or retirement system that encourage teachers to retire at certain times? How are districts preparing for the retirement of baby boomer teachers? Are teachers allowed to return after they retire and teach, and collect both a regular and retirement check?
- How have class sizes been affected by budget decisions, especially during the economic downturn? And are the results of any class size changes the same across all schools, or are some schools, grades or subjects hit harder?
- Now that most of the economic-stimulus funding has been spent by districts and states, is there anything to show for the money in terms of improvements to programs or student achievement? And how are districts and states dealing with this so-called “funding cliff”?
The Association of School Business Officials International is a professional association representing more than 5,000 professionals nationwide who work in various aspects of school business management.
The Center on Budget and Policy Priorities is a nonprofit organization that studies the impact of financial policy decisions at the state and federal levels.
The Consortium for Policy Research on Education, University Wisconsin-Madison is a collaboration of seven of the country’s top research institutions. It studies education reform, finance and policy.
The Education Commission of the States is a nonprofit, nonpartisan commission that has worked since 1965 to enable states to exchange information, idea and experiences affecting education policy.
The National Association of State Budget Officers is a professional organization representing professionals who work as the chief financial advisors to the nation’s governors.
Suggest a Change
If you'd like to suggest an addition or change to this section, send an email to EWA Project Director Kenneth Terrell.