School Finance

DEFINITION

School finance is how education systems raise, allocate, budget, and manage the money that funds schools — not just how much money they receive, but the rules and formulas that govern it.

BENEFITS

• Teacher capacity — competitive salaries, smaller class sizes, and instructional support that help recruit and retain qualified staff.Link

• Facilities and materials — safe, well-maintained buildings, current learning resources, supplies, and transportation. nces.ed

• Student services — special education, tutoring, counseling, and supports for English learners and students from low-income families through programs like Title I and IDEA. files.eric.ed

• Better student outcomes — a synthesis of 31 credible causal studies found increased spending raises test scores, high-school graduation, and college-going on average. nber

• Stronger long-term results — gains in educational attainment and adult earnings, with the largest benefits for children from low-income families. nber

SCHOOL FINANCE PRIORITIES

To have the most impact on student achievement, school finance should prioritize:

1. Time for teacher collaboration and professional development

2. Instructional supplies

3. Instructional methodology (evidence-based) that solves student achievement and fosters social-emotional development

4. Too much money is spent on structural solutions like class size, length of school year, and creating new school structures. Greenwald (1996)

5. Effect-size data on popular ways to spend money in schools (note the following do not change student achievement much)

• 0.15 increase in per pupil funding

• 0.22 teacher conference attendance

• 0.18 teacher experience

• 0.16 teacher salary

• 0.04 class size

CHALLENGES

• Reliance on local property taxes — communities with lower property wealth have less capacity to raise local school revenue, so equitable state funding becomes critical. Link

• State-to-state variation — large differences in funding across states mean students’ access to educational resources depends partly on where they live. brookings

• Special education underfunding — federal IDEA funding remains below its authorized “full funding” benchmark, leaving states and districts responsible for financing legally required services. files.eric.ed

• Aging facilities — GAO’s 2020 national survey found about half of districts need to update or replace multiple building systems, such as HVAC. gao

• Recession vulnerability — economic downturns destabilize school budgets; research on Great Recession-era cuts found lower test scores and college-going and widening achievement gaps

• Within-district inequity — differences in the distribution of experienced, higher-paid teachers can produce unequal staffing expenditures across schools in the same district. brookings

• Enrollment decline and choice expansion — these trends can create budget pressures and instability for many public school systems. brookings

WHAT NOT TO DO

• Don’t create ongoing commitments with one-time money — temporary funds (like federal relief dollars) shouldn’t fund recurring expenses unless there’s a sustainable funding or phase-out plan.

• Don’t assume across-the-board class-size reduction is the best investment — large-scale, untargeted reductions require hiring many inexperienced teachers and can divert money from higher-return uses. brookings

• Don’t budget only for the coming year — use multiyear forecasts that account for enrollment trends, expiring funds, and salary commitments. edweek

• Don’t let finance and instruction operate in silos — align spending decisions with instructional priorities rather than treating them as separate conversations. edweek

• Don’t treat emergency reserves as a fix for recurring deficits — experts recommend keeping one to three months of annual spending in reserve for genuine emergencies. edweek

• Don’t leave outdated funding formulas in place — formulas based on stale student counts, needs, or costs misdirect resources. edweek

• Don’t cut indiscriminately — assess how cuts affect student services and engagement, especially for students who need additional support to stay connected to school. Edwin