School Finance

State and federal governments provided $146 billion for public elementary and secondary schools in school year 1994-95. GAO found that in more than 90 percent of the states, school finance systems targeted more state funds to poor school districts, regardless of whether the system intended for that to happen. The extent of targeting varied widely, and federal money was more targeted than state funds. Targeting reduced, but did not eliminate, the gap between high- and low-poverty school districts. Although targeting helped close the funding gap, the percentage of total funding from state and federal sources was more important in reducing the gaps. Gaps were smaller in states whose combined state and federal share of total funding was relatively high.

GAO noted that: (1) school finance systems in over 90 percent of the states had the effect targeting more state funds to districts with large numbers of poor students in school year 1991-92, regardless of whether the system explicitly intended to do so; (2) the extent of the targeting varied widely, however; (3) New Hampshire targeted poor students the most, providing an additional $6.69 per poor student for every $1 provided to each student; school finance systems in four states (Montana, Nevada, New Mexico, and New York) had the effect of targeting no additional funding per poor student; (4) the national average was $.62 in additional state funding; (5) federal funding was more targeted than state funding, providing an average of $4.73 in additional federal funding per poor student nationwide for every $1 provided for each student; (6) because federal funds were more targeted than state funds, the combination of federal and state funding increased the average additional funding per poor student from $.62 to $1.10 nationwide for every $1 provided for each student; (7) reported changes in federal education programs and state school finance systems since school year 1991-92 would probably result in federal funds being more targeted than state funds; (8) state and federal funding reduced but did not eliminate the local funding gap between high- and low-poverty districts in many states; (9) high-poverty districts had less local funding per weighted pupil in 37 of the 47 states GAO analyzed; (10) when GAO added state and federal funds to local funds for GAO's analysis, only 21 states still had such funding gaps, and these gaps were smaller in each state; (11) nevertheless, about 64 percent of the nation's poor students live in these 21 states; (12) nationwide, total funding levels in low-poverty districts were about 15 percent more than those in high-poverty districts; (13) although targeting helped close the funding gap, the percentage of total funding from state and federal sources was more important in reducing the gap; and (14) gaps were smaller in states whose combined state and federal share of total funding was relatively high.