School Funding: Do Poor Kids Get Their Fair Share?

Posted by Urban Institute on June 12, 2017

Research suggests increased spending on education can improve student outcomes, especially among low-income students. This means that targeted increases in funding could help narrow the achievement gap between poor and nonpoor students. But given the complexities of our school finance system, can policymakers actually direct funds to the students who need them most?

Public schools are funded through a combination of local, state, and federal dollars. In the 1920s, local governments provided more than 80 percent of school funding; today, state and local governments provide an equal share of school funding, with the federal government covering less than 10 percent.

Money for public schools does not flow directly to the schools, however. Local and state dollars, as well as some federal funds, are distributed to districts, which then hire staff, build and maintain schools, and buy supplies.

State funding is the primary mechanism for targeting districts that serve disadvantaged students. The federal government similarly attempts to channel funding toward students from low-income families. But whether funding is progressive, with the most money going to low-income students, or regressive, with more money going to nonpoor students, depends on the interaction of multiple funding streams, policies, and the demographic structure of the state and its districts.

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