Five minute primer: School funding
Teachers participate in an education budget cut rally and protest at Pershing Square on May 13, 2011 in Los Angeles, California.
April 17th, 2012
06:46 AM ET

Five minute primer: School funding

by Donna Krache, CNN

(CNN) Buses, salaries, building maintenance…the costs add up. It should come as no surprise that a free public education is hardly free. An estimated $1.15 trillion will be spent in public elementary and secondary schools this academic year to educate almost 50 million students throughout the U.S. Where does the money come from?  Here are some major sources of funding for public school districts and some challenges to that funding.

The federal government

In the U.S., education is primarily a state and local responsibility.  It varies, but about 10.8% of a state’s education budget is being funded by the federal government this year, according to the U.S. Department of Education. That department contributes to states via federal program grants like the American Recovery and Reinvestment Act (the “stimulus” of 2009), and Title I, which provides financial assistance to schools with a high percentage of students from low-income families.  There are also competitive grants, such as those available under the Obama administration’s Race to the Top program, that revolve around adoption of standards and assessments, teacher evaluation, and turning around low-achieving schools.  The amount of money awarded to states varies based on the states’ willingness to adopt and implement the federal requirements.  Other departments, including the Department of Agriculture, which administers the federal school lunch program, contribute education funding to states as well.

While some state administrators welcome federal help for elementary and secondary schools, critics cite the Department of Education’s requirements as their “strings attached” and view this as an intrusion of the federal government into state control over education.

State and local governments

Although the percentage of federal education funding to states is increasing, the largest percentage of funding for a school district – about 48% - typically comes from its state government, according to the National Center for Education Statistics (NCES).  The remainder not covered by federal and state governments is financed by local governments.

In general, state and local governments rely heavily on property taxes to finance education. In nine states, property taxes account for almost half the revenue needed to fund education.  The National Association of Home Builders estimates that the average homeowner pays property taxes of 1.04% of the value of their home, or $1,917 per year.

The problem, even in good economic times, is that home values are typically lowest in the communities whose schools need the property tax revenues the most. So states try to minimize the differences among school districts by devising formulas that calculate and distribute state funding more equitably.   In “Is School Funding Fair? A National Report Card”, experts argue that in spite of these calculations, many states “do not fairly allocate education funding to address the needs of their most disadvantaged students, and the schools serving high numbers of those students.”

Many states have other sources of revenue that help support school districts, including state income taxes, sales taxes, license fees and other targeted taxes.  In Texas, for example, taxes on gasoline, natural gas, electricity and oil production help to fund schools.  In some states, like Georgia, county voters can and have authorized local sales taxes to fund school projects.  Nevada’s gaming industry generates almost half of its general state revenue.  And lotteries have helped to fund education in 42 states, though some critics argue that most of the proceeds from lottery ticket sales never make it back to the classroom.

The crunch

The housing market collapse in recent years has led to decreases in property tax collection in many localities, both as the number of foreclosures skyrocketed and as inhabited properties lost value.

Likewise, other products and services that fund education have taken a hit during the Great Recession and cost schools precious dollars.  Tourism, incomes and sales have all suffered, resulting in lower revenues to state and local governments that rely on the money.   In spite of claims that the overall economy is improving, there is little rejoicing in school districts.

The ripple effects of the poor economy have been catastrophic for some: Virginia Beach, Virginia, recently told all of its 245 first year teachers that there will not be jobs for them in the fall.  School weeks have been cut to four days in some districts in South Dakota, Wyoming and Colorado. The state of California has issued nearly 20,000 pink slips to teachers resulting from billions of dollars in budget cuts over the past four years. And as class sizes grow due to shrinking staffs, extracurriculars are being cut in some districts, meaning that sports and the arts are among the latest casualties of the lack of education funding.

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    April 19, 2012 at 7:08 pm |
  5. wgersen

    I worked as a school superintendent for 29 years... and ONE of the biggest myths– bought into by most commenters– is that there is lots of administrative "fat". To those readers who believe this, I ask you to compare the span-of-control (i.e. the number of employees supervised by a manager) in public education to ANY private sector job. The HS Principals I've overseen typically are responsible for over 100 employees: teachers, ed assistants, custodians, and bus drivers. When ANYTHING goes wrong in ANY of those arenas, the Principal is the person accountable. Find me a CEO in any bank with that kind of responsibility....

    April 18, 2012 at 6:01 pm |
    • Susan

      AMEN!!! You forgot to mention the 12+ hour work days and having to work in my office all day on Sundays just to keep my head above water as an elementary school principal who supervises a staff of 75 and 500 students.

      April 19, 2012 at 9:38 am |
  6. teacher

    J, The vast majority of teacher work far beyond a 7 hour day. Many teachers have to sponsor extra activities which requires after school work. Many teachers don't free time during the day to do grading or creating resources because they are helping students during their plan period. So teacher work extra hours at night grading at home. In addition to that we work at school on weekends for extracurricular activities. So the idea that teachers get long vacations and clock in and out for 7 hour days and collect large sums of money is not true. As a teacher with a bachelors, unless I get a masters, I will never top out around $80,000 dollars. Even after 20 years of service in a district.

    April 18, 2012 at 2:50 pm |
    • John

      Just to be clear, I am not a teacher. My job requires that I work 12+ hours / day, shifts and frequently work weeknds and holidays. I missed Easter dinner with my family again this year. I have a very difficult time getting all of my vacation time each year. While I would love to have weekends, holidays and summers off every year, I am unwilling to trade my current salary for that. All I ask is that teachers quit complaining that they don't earn the same salary as I do. Step back and see what benefits your teaching job provides you as compared to what others need to do in order to earn the higher salary.

      April 19, 2012 at 7:51 am |
      • Adam

        Spoken like a truly ignorant person. It's funny how people are always quick to hop on the "teacher's need to stop complaining" bandwagon – people who wouldn't last one day in most public schools. The teaching profession is one of the most underpaid and underappreciated job in American society – considering we are the ones training and educating the future generations. Most teachers work during those 3-months of vacation either planning for the next year or taking a side job to put their children through college. Plus, in Pennsylvania teachers are required to gain master's credits every 5 years – no choice – most teachers foot the bill for continuing education with no hope of actually getting fairly compensated for higher education. So please John, don't be an idiot.

        April 23, 2012 at 11:19 am |
  7. TonyKMN

    $1.15 trillion / 50 million kids = $23k per kid per year.

    That's $299,000 to educate a single child K-12.

    That's $5.98 million for a class of 20 K-12.

    April 18, 2012 at 1:08 pm |
    • keivn

      At $23K per child you have $460K for a 20 child class room. If the teacher is paid $100K in salary + benefits where is the other $360K? You can't tell me that is for the building which is often many decades old. Clearly much of the school funding is not used very well when most classes are near 30 children meaning $100K salary + $590K of other costs that are not well defined. In the private sector if it cost $350-600K in other costs to keep an employee working, there would be no business left. Even with one supervisor for every ten teachers $20K per class, plus $50K per class going to buses, plus $30K per class going to building, plus $50K per class going to materials ($150K total per class), where is the other $200-350K per class annually? In a 500 student school with 20 children per class this is $5M in other overhead.

      April 19, 2012 at 11:34 am |
  8. Name*tbyrd

    To all of you who vote down school levies, you get what you pay for. If you want steak but only pay for hamburger well that's what you get hamburgers.

    April 18, 2012 at 10:36 am |
    • sammy

      Sometimes you pay for steak and still only get hamburger!

      April 18, 2012 at 4:59 pm |
  9. krehator

    What about all the lottery money that was marked for schools?

    Strange. We throw more money at the problem and it still gets worse.

    April 18, 2012 at 7:28 am |
    • Teacher

      It is true that the money received from the lottery is given to schools. What isn't known is that the states cut school funding from other sources to balance it out. The schools end up with the same amount. Upset? Me too!

      April 18, 2012 at 9:11 am |
    • sammy

      That's because you can't make a silk purse out of a sow's ear. For those of you who think I'm talking about students and those of you who think I'm talking about're right!

      April 18, 2012 at 5:02 pm |
  10. mugzee

    Keep em' dumb and stupid that's the republican way

    April 18, 2012 at 4:11 am |
  11. mich

    I own property in Texas and half of my property tax bill are school taxes. My house is located in Spring, TX and I know for a fact that many school districts waste a lot of money by having too many administrative positions, such as directors that do nothing. Education is a business but the schools districts do not watch their books like a business. Instead of cutting the Administrative staff they cut teachers and cause the class sizes to increase. Also, the states do not make education a priority, instead they disproportionately cut the budgets for education while requiring teachers to meet more stringent levels of proficiency.

    April 18, 2012 at 4:00 am |
    • Teach

      I'm a teacher in Madison, WI. I agree with you. I have a business degree and then went into teaching – they have no clue how to manage. Especially the middle managers, the principals. There needs to be a house cleaning done in management. Stop blaming teachers all the time. Parents need to step-up also. Where is their responsibility? This needs to be a REAL community effort.

      April 18, 2012 at 7:22 am |
  12. stefon bernard

    I understand what they'er saying about the grants that they have for the low income family's but in some areas its not working. I live in Newark NJ and there are a lot of schools closing down. To my believe I think America spends they'er money on point less things sometimes and that case us low family's to feel the pain.

    April 17, 2012 at 11:33 pm |
  13. chizzlinsam

    parents need to start paying $1000 per child per year...cant pay? work it off or dont have kids!!

    April 17, 2012 at 10:05 pm |
    • mugzee

      We already pay. It's called TAXES!!!

      April 18, 2012 at 4:13 am |
  14. Teacher

    I agree that there are issues to be concerned with in the education system. I do not work in a state that allows teachers to form a union. That said, I receive only what the school can give. Due to the poor economy our school wasn't able to give standard raises to us for three years. Did we grumble? No. We didn't like it, but were glad to have our jobs. I do not know of any teachers who are overpaid. I know the job we do, the standards we have to meet, and the difficulty of teaching children. I cannot stand hearing/reading about people, who do not work in the education system, who want to blame the teachers on the quality of our education system. Spend a day in my shoes before you tell me how horrible I am as a teacher. While I do not agree with teacher who go on strike, I do understand their frustrations. The education system is public. If you don't like something about it, go vote. We follow the standards set by politicians, who by the way, you voted into office. I'm proud of being a teacher. It offers rewards that no other job could compare. Student success is my reward. My goal is for them to become more successful than me. I know this is the same with other teachers. My point is that, before you grumble, think about what the causes of problems are and not just simply go after the easy targets (teachers).

    April 17, 2012 at 9:51 pm |
  15. Olaf

    Our education – is full of s...t!. Europe, and even 3rd world country does much better. If no more efforts about this – we will
    be 3rd world country one day, Period!!!

    April 17, 2012 at 9:39 pm |
  16. the truther

    Want to have better school funding? Become atheist

    April 17, 2012 at 8:35 pm |
  17. Jerry Von Korff

    Many state governments make absolutely no effort to connect the amount of funding to local school districts to the estimated cost of the educational programs that they mandate. Starting in about 1990, most states transitioned from a "seat-based" educational system, in which the state required local districts to provide a certain amount of seat time to students. Under the seat based system, local districts were not mandated to deliver all students to any given level of proficiency. If students started out behind, they ended up behind, because the state simply required the school to provide a desk and time in chair.

    But new state laws transitioned to "proficiency based" public education, in which local districts are required to deliver all students, regardless of their readiness, and regardless of disability or pre-K preparation, to arrive at state set proficiency levels. This resulted in a fundamentally different mission for public education. Its the difference between going to a car dealer and saying, I want all the car I can by for $15,000, or saying, I want a sports car with high performance and handling. When you specify the outcome, the price changes. But very few states changed their funding system. Instead, they pretended that schools could do a fundamentally different job for the same inflation adjusted price. During this time period, as well, the federal government imposed a new special education requirement that likewise mandated states and local districts to radically improve education for the disabled. But states and federal payments for this newly mandated service are billions of dollars less than the cost of the services, and so these costs are subtracted out of the funding for regular education. Critics of public education add the cost of special education to general education, and compare that cost to the pre-special education program costs, and claim that there has been this huge increase, but actually, special education costs subtract from available regular education revenues, and reduce the money available per student for regular education.

    You can blame this all on unions, if you like, and certainly unions share some of the blame. But what is happening in America is that the percentage of students who are coming to school unprepared for learning, or who speak no English, is rising dramatically, and our expectations for the performance of these children is rising dramatically, but everybody wants to do it for the same inflation adjusted price.

    April 17, 2012 at 5:16 pm |
  18. kiss

    This report left out the billions in revenue schools recieve from the sale of cigarettes and lottery. Get rid of the unions for starters. also, when did people go into teaching to get rich. It's not about the kids anymore. get rid of tenure.

    April 17, 2012 at 3:08 pm |
    • ASH

      You obviously do not understand what exactly the "billions of cigarette and lottery money" actually means when the state takes away other funding and then replaces some of that with those dollars. If the state had left the schools alone and then allowed them to make use of cigarette and lottery money we would have been okay. They took it out of one hand before they put it in the other making those funds delivered without impact. P.S. I am not a teacher I am a lowly classified staff member and all of us are trying to make this work with much less and we are failing.

      April 17, 2012 at 5:46 pm |
    • drdiane50

      If you think teachers go into teaching to get rich, you obviously never learned elementary school math. I do NOT consider an average salary in my state, for a veteran teacher, of $40,00, to be "getting rich." Teachers must have at least a bachelor's degree, which they pay for, and then they often continue their education past that minimum level, also at their own expense. I have no clue how you could think, assuming you really CAN think, that anyone goes into teaching as a career to get rich. And don't even blame the unions; without teachers' unions, pay scales for teachers would be FAR lower.

      April 18, 2012 at 5:53 pm |
  19. LJB

    I think that all the cuts that are being made from Education should be cut from The Prisons. The inmates live better than we do. They have cable television, air conditioning, no bills, eat everyday free and they even have rights to go to the doctor. What kind of world are we living in. This world main goal is to education our children and to take sure that they graduation. Now you want to cut the education funding. Maybe we need to get someone in office that is for education and that will stand by what they say instead of lying to the world.

    April 17, 2012 at 1:31 pm |
    • Steve

      Sorry to tell you, most prisons today are privately owned and contracted to the state. There is money in having as many citizens in prison as they can fit...why do you think a vast number of our prisons are in excess capacity upwards of 200-300%?

      There are a few people that have a vested interest in throwing as many people in jail as possible. Every inmate earns them $36000/year on average. The few making tens of millions off incarcerating people.

      April 17, 2012 at 1:57 pm |
    • J


      April 18, 2012 at 2:00 pm |
  20. KWS

    If we took that 10.8% the fed sends to state schools and had that redistributed to state coffers automatically, and completely dismantled the federal morass we employ to handle all that money, how much MORE money would there be for the kids? (Of course, it would never get to the kids because all the "don't touch education" campaigns we see across teh country really mean "don't touch my massive pension and benefits, and keep giving me above-average raises, or else".)

    April 17, 2012 at 1:18 pm |
    • Concerned Parent

      KWS, I think I understand what you are trying to say, but the reality is if you dismantle "federal morass" as you have called it, there wouldn't be ANY federal money to help our states implement an educational system! And I really don't understand your claim of "massive pension and benifits" at all!??? I don't know of a single teacher in our state who is overpaid nor a single one who has "massive benefits and pensions"! They ALL work for MUCH LESS pay than any and all private schools or companies! You could get a MUCH BETTER salary at a McDonalds! YOU have obviously NEVER taught anything, have you?

      April 17, 2012 at 2:33 pm |
      • WhatNow

        Concerned Parent...Thank you. Some of us live in states that don't have unions or big pensions. If we got rid of the "federal morass", our state would probably use that income for other purposes and let the public schools continue to suffer.

        April 17, 2012 at 3:32 pm |
      • joey shabadoo

        i understand and echo your sentiments, but please know that private school teachers usually make far less money than public school teachers.

        April 17, 2012 at 3:42 pm |
    • mhthomas33

      Oh PLEASE!! Above average wages and raises??? For who? Certainly not the teachers. Most teachers top out in salary where other people with college degrees START.
      If you want to know the real problem with education, look at the parents of school children.

      April 18, 2012 at 6:55 am |
      • J


        I think it must vary by area. Where I live, an elementary teacher "tops out" at $80,000/year, which is well above the average income in my (rural) area. And that's working seven hours a day with a three-month summer vacation, a week's vacation in the winter, and a week's vacation in the spring.

        April 18, 2012 at 2:08 pm |
      • Jason

        J – You didn't even notice that you are comparing "topped out" salaries with "average salary?" I know LANDSCAPERS with no college degrees pulling in more than 80k.

        April 19, 2012 at 10:31 am |