Finance Reforms to Combat Racial Inequities Often Made Them Worse, Study Finds
The study of fiscal policies in 48 states going back to 1990 left its lead author feeling 鈥渟urprised and depressed.鈥
Over the past decade, more than a dozen states have overhauled their K-12 finance systems to make them fairer for low-income families, students with disabilities and those learning English. Given that a disproportionate number of those students are Black and Hispanic, many see changing the way states fund schools as a tenet of racial justice 鈥 a chance to chip away at generations of systemic racism that鈥檚 kept students of color from accessing a quality education.
But suggests that in an attempt to right these inequities, those reforms often got it wrong.
State school finance policies designed to close funding gaps between high- and low-income districts did not reduce racial and ethnic funding inequities and in some cases increased them, according to a study published Wednesday by the American Educational Research Association.
鈥淚 was quite surprised. And depressed, frankly,鈥 said Emily Rauscher, lead co-author and professor at Brown University. 鈥淢y guess going into the study was that these income based school finance reforms that worked to reduce inequality of funding by income would also at least slightly help reduce racial inequality of funding.鈥
The U.S. is unique in that school district budgets are tethered to property taxes, meaning schools in wealthier communities automatically start with a larger pot of local funding. Since school desegregation efforts slowed after the 1980s, civil-rights minded policymakers have tried fixing this discrepancy between low-income districts that serve lots of students of color and rich districts that serve lots of white students by directing more money to districts with more low-income kids.
All these kids who are under-resourced in school are going to enter adulthood without adequate skills and training. It鈥檚 an ongoing battle.
Emily Rauscher, Brown University
State funds are typically distributed through a formula, or set of formulas, that send money to districts. From there, districts send it to schools. Each state uses different criteria in their formulas, but most try to target at least a portion of their funds to school districts that enroll lots of students with greater needs and those that struggle to raise funds from property taxes. Sometimes, courts make them do it.
According to the , the number of states with co-called “progressive” funding systems 鈥 where high-poverty districts receive more per-student funding than low-poverty districts 鈥 more than doubled, from 13 states in 2012 to 28 in 2022. States such as New Mexico, Wyoming, California, and Colorado saw some of the largest gains in funding equity during this period. As it stands, more than half of the 48 states studied have at least a modestly progressive distribution of state and local funding, providing at least 5% additional funding to high-poverty districts. That is twice as many states as a decade ago.
But Rauscher and co-author Jeremy Fiel, a professor at Rice University, found that while these reforms narrowed funding gaps by income, they did not lessen 鈥 and sometimes widened 鈥 disparities by race and ethnicity.
Using data from the U.S. Census Bureau and the National Center for Education Statistics, the researchers examined the effects of school finance reforms across the U.S. from 1990 to 2022. They found that such policies reduced school spending gaps between the highest- and lowest-income districts by over $1,300 per pupil on average. However, the reforms also increased the spending advantage of districts with low percentages of Black and Hispanic students鈥攂y $900 and $1,000 per pupil, respectively.
Reforms were more effective at reducing racial disparities in states where those inequities were already relatively modest. In contrast, reforms were less effective, or even regressive, in states with high levels of racial and economic segregation between school districts. In these more segregated states, reforms not only exacerbated racial and ethnic disparities but also failed to narrow economic gaps.
While the study did not pinpoint the exact reason for this, researchers posited that it may be driven by demographic and political processes related to implementation. Additionally, many funding reforms boosted spending broadly rather than targeting it, leading to minimal effects. Many court-ordered solutions, by contrast, stipulate that states must target racial and ethnic inequality.
Notably, the funding reforms worked best at directing money to historically marginalized students in districts that were less segregated, likely a reflection of separate policies aimed at supporting students of color, low-income students and their families, Rauscher said. Moreover, the study showed that the biggest inequities exist between states 鈥 not within them.
Rauscher offered that it鈥檚 likely not random that states funding their education systems the least are also the ones with the highest concentration of students of color. And that’s exactly why, she said, the federal government needs to step up to fix it.
When you compare the funding levels of a low-income school district in Mississippi that has a lot of Black and Hispanic students to a tawny suburb of Boston in Massachusetts where all the kids are white, you're going to pick up a huge gap.
Rebecca Sibilia, EdFund
For many school funding experts, this realization is not surprising. After all, while most states distribute funding relatively evenly by the racial and ethnic composition of districts, wealthier states still spend significantly more per pupil than poorer ones. And since these states tend to have higher shares of white students and lower shares of Black and Hispanic students, national disparities are bound to persist.
鈥淭he concentration of non-white students is in the lowest-funded states, and the concentration of white students is in the highest-funded states,鈥 says Rebecca Sibilia, executive director of EdFund, a nonprofit that funds school finance research. 鈥淪o when you compare the funding levels of a low-income school district in Mississippi that has a lot of Black and Hispanic students to a tawny suburb of Boston in Massachusetts where all the kids are white, you’re going to pick up a huge gap. It just distorts the amount of money when you’re comparing across the entire U.S.鈥
It鈥檚 worth noting, Sibilia says, that recent state funding reforms, like those in Tennessee, Colorado, Mississippi and Alabama, are poised to make a real difference. Tennessee鈥檚 model, adopted three years ago, directs more funding to students who need it most, including those living in high concentrations of poverty. It also accounts for students in small and sparsely populated districts, which formulas sometimes shortchange. Meanwhile, Alabama鈥檚 model 鈥 the newest in the country 鈥 includes additional funds for students with special needs, such as those with disabilities or who are English language learners.
鈥淭here’s no way that you’re going to change interstate funding differences, because people are so focused on schools in their communities, and because half of the money is coming from local property taxes,鈥 she says. 鈥淭he federal government can鈥檛 touch those dollars, so you have to focus within the state. And when you look at the effect of the intrastate reforms, you tend to see that they鈥檙e working.鈥
The new research comes against the backdrop of the Trump administration鈥檚 efforts to dismantle the Education Department, eliminate policies aimed at increasing equity for students of color and significantly curb federal spending, including on long-standing programs like Title I and IDEA, which are the federal government鈥檚 two biggest levers for bolstering state education funding.
There's no way that you're going to suddenly get the federal government stepping in on overall spending differences between states.
Eric Hanushek, Stanford University
In other words, it鈥檚 a political environment not likely to prioritize issues of racial inequity.
鈥淵ou’re never going to have a funding formula that says we’re going to add x hundreds of dollars per Black student in each state, because that’s just not a viable policy,鈥 says Eric Hanushek, an economist and senior fellow at Stanford University鈥檚 Hoover Institution. 鈥淲e’ve had these differences all along, and there’s no way that you’re going to suddenly get the federal government stepping in on overall spending differences between states.鈥
Rauscher says that given the political environment, she鈥檚 concerned that her research may be used in bad faith by policymakers who have no interest in closing racial gaps in education.
Her message to them: 鈥淵ou are mortgaging the future of the country, because all these kids who are under-resourced in school are going to enter adulthood without adequate skills and training. It鈥檚 an ongoing battle. We鈥檝e been here before.鈥
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