University of Arkansas Office for Education Policy

District Funding Equity

In The View from the OEP on January 29, 2020 at 2:04 pm

Over the past few months we’ve written several posts about school spending. Most recently, we showed that there appears to be essentially no relationship between spending and test score growth. Of course the aim of education is broader than just test score growth, but increasing knowledge and skills in core subjects, as demonstrated on tests, is certainly an important outcome. However, given the broader purpose of education and people’s general desire for fairness, funding equity has also been a longstanding education policy issue.

For Arkansas, funding equity has had particular importance since the Lake View school district filed its original court case in 1992 alleging that the state’s funding system was inequitable and inadequate. The Lake View case eventually made its way to the Arkansas Supreme Court and has since had a profound impact on the state’s approach to school funding. This post looks at school funding equity post-Lake View to see where things stand today.

We used the Arkansas Department of Education’s Annual Statistical Reports to analyze property wealth and school district revenue between 2004 and 2018. All of the dollar amounts presented below are per pupil, meaning we divide property wealth and district revenue figures by the number of students the district serves. Using per pupil figures provides an apples-to-apples comparison for districts of varying sizes.

A key concern in the Lake View case was that affluent districts had significantly more property wealth than poor districts, and could, therefore, generate significantly more funding with the same tax effort. Lake View argued that state and federal dollars were not sufficient to make up for local funding deficits in poorer communities around the state. Below we look at (1) how property wealth and revenue have changed over time, (2) the relationship between revenue per pupil and property wealth, and (3) the relationship between local funding share and property wealth.

Both property values and school district revenue have increased significantly. Between 2004 and 2018, the median assessed property value per pupil for Arkansas school districts increased from $49,803 to $93,301, an 87 percent increase over 14 years. The median is the value where half of districts have higher values and half have lower values. Over the same period, median revenue per pupil increased from $7,191 to $12,112 (a 68 percent increase), and the locally generated share of total district revenue increased from 24 percent to 32 percent. Property values and funding per pupil have both grown at healthy rates, and on average, a greater share of school districts revenue is coming from local property taxes. Next we investigate the relationship between property wealth and revenue.

School district revenue has a weak, positive relationship with property wealth, but overall appears to be relatively equitable. Figure 1 below shows the relationship between property wealth and school district revenue for 2005 (blue dots), 2008 (orange dots), and 2018 (grey dots). Each dot in the figure represents a school district. The data show a weak, positive relationship between revenue and property wealth that has not changed much over time – the dots get slightly higher as property wealth increases from left to right and the different colored dots are similarly distributed. It does not appear from this graph that there are large, systematic inequities built into Arkansas’ school district funding system – the dots are somewhat evenly scattered with only a slight upward tilt from left to right.

Figure 1: The relationship between Arkansas school district revenue per pupil and property wealth between 2005 and 2018

State and Federal funding is being used to equalize school district funding between wealthy and poor communities. Figure 2 shows the relationship between the locally generated share of school district revenue and property wealth. There is a strong positive relationship between locally generated share and property wealth, meaning that wealthier school districts’ taxpayers contribute a greater percentage of school district revenue than do taxpayers in less well-off districts. In other words, state and federal dollars are being heavily allocated toward poorer communities, allowing those school districts to be funded with less reliance on local property wealth.

Figure 2: The relationship between the locally generated share of school district revenue and property wealth between 2005 and 2018

Since Lake View, Arkansas has made many changes to its school funding formula in an effort to improve both adequacy and equity. Our analysis shows that even as property values have grown significantly and a greater share of overall district revenue is coming from local property taxes, Arkansas current funding formula appears to be relatively equitable. There is only a weak, positive relationship between property wealth and revenue, but there is a strong positive relationship between local revenue share and property wealth –  state and federal dollars are being used to mitigate wealth differences across districts. While we still might want to do more to support our poorer communities, it is good news that the equity concerns raised in Lake View seem less apparent today.

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