School Finance

Disparities in per pupil funding for elementary and secondary education within each state have long been a concern of parents, teachers, state officials, and federal officials. Since the early 1970s, these disparities have prompted poor districts in more than 40 states to challenge the constitutionality of their states' school finance systems. Under Title I's Education Finance Incentive Program, states with high levels of "fiscal effort" for education--that is, high state spending relative to the state's ability to pay--and equity in per pupil spending would receive additional funds. In June 1994, GAO cited weaknesses in the proposed measures of effort and equity used in the Title I program. (See improved. This report (1) examines the measures now included in Title I's Education Finance Incentive Program to reflect state fiscal effort for education and equity in per pupil spending, (2) proposes several options for improving these measures, (3) describes the characteristics of states with higher levels of effort and equity under both the current definitions and the options GAO developed, and (4) suggests alternative ways the options GAO developed could be used in allocating funds under the Education Finance and Incentive Program.

GAO found that: (1) the Education Finance Incentive Program's definition of effort does not include a comprehensive measure of states' funding capacity, penalizes states with a high proportion of school-age children, and provides no incentive for low-effort states to increase their effort in funding elementary and secondary education; (2) the title I definition of equity excludes a comprehensive measure of the differences in students' needs among school districts and the differences in purchasing power among districts; (3) adjustments to the effort factor should include using states' total taxable resources in establishing the states' education funding capacity and eliminating the bias against low-effort states; (4) adjustments to the equity factor should include rewarding states for increasing their level of equity in education spending and considering more fully the differences in educating higher-needs students; and (5) the allocation of title I funds should be based on the number of children in poverty rather than on the states' total number of school-age children.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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