Why school funding formulas are about politics, not just capacity
State party control and local partisanship matter in how much money a school district gets
As states look to deal with the financial fallout from the pandemic, cuts to public education are becoming all too common. But how are these cuts going to play out? Will districts with the most needs be spared the harshest cuts?
Funding formulas were designed to distribute based on need
It is likely that state leaders will apply cuts by changes in the funding formula. Funding formulas are used by state governments to equalize school funding within a state through various ways of transferring money to local districts. Much of the focus on funding formulas has been on the economic components of them and whether they achieve equalization.
These funding formulas use local school district information, like capacity of the local district to collect property taxes, to make decisions about how states allocate funding to individual districts. School districts that need more financial help from the state should receive more funding per child.
These funding formulas are often touted as a way to fairly distribute funds. But the creation of these formulas is often a political process that lacks transparency and can be quite complex: taxpayers know little about which factors are included in the formula and how the formulas weigh each of these factors.
A new study at the journal State Politics and Policy Quarterly highlights partisanship as one important factor of school funding allocations, regardless of local economic conditions. In this study, I explore whether state legislatures can use funding formulas to target funding to their core supporters. That is, if Democrats are in control at the state level, do school districts whose citizens vote at higher rates for Democrats receive more money compared to school districts that do not vote for Democrats and vice versa for Republicans?
Funding for public education provides an opportunity for strategic state elected officials to distribute benefits to like voters. Spending on K-12 public education is often the largest expenditure of a state, giving politicians an incentive to want to direct funds in ways that benefit themselves electorally.
To understand the partisan influences in state funding to school districts, I collected precinct level voting information and aggregated it up to school districts to understand the partisan voting patterns within each school district for elections from 2000 to 2010.
By combining this data with financial and demographic information of each school district, I was able to leverage changes in partisanship over time at the state level to test how it influences the distribution of funds in subsequent years.
Funding Formulas are not just about taxes
If there was no partisan influence in funding formulas, then we would expect that the percent voting for a Democratic candidate would be unrelated to the amount a district receives. However, I find that parties that are in control at the state level are able to influence the geographic distribution of education funds to core voters.
As an example, a one percentage point increase in voting for the Democratic candidates in an election when Democrats have control at the state level is associated with a $9.59 per student increase in the funding from the state formula.
If Republicans have control at the state level, then a one percentage point increase in voting for the Democratic candidates is associated with a $2.53 decrease in state transfers.
Figure 1: A marginal Change in Local School District Two-Party Vote effect on State transfers
Differences between the two parties are even more evident when looking at the interaction between state party control and percent of students receiving free lunch. When Democrats are in control at the state level or it is divided control, more money is transferred to these districts with higher need.
This is not the case when Republicans are in control at the state level. An increase in percent of students receiving free or reduced lunch is associated with no additional money from the state to that district.
The Future of School Budgets
While state funding formulas are often touted as a way to distribute money fairly, they are often not transparent and are difficult to understand. This lack of transparency might make it easier for politicians to create formulas that would favor their constituents most likely to support them and not based on need.
COVID-19 is going to have disastrous implications for school district budgets. Cuts to budgets are likely to come from multiple fronts with drops in revenue from both state and local taxes.
Furthermore, drops in enrollment are seeming more likely as parents decide to home-school or create “pandemic pods”. And so, because funding formulas are in part determined by enrollment numbers, districts with large drops will take an additional hit to their budget.
But it unlikely that these cuts will be applied uniformly. For example, Maryland Governor Larry Hogan (R), along with the Public Works Committee, recently announced a cut of $12.4 million in disparity grants to poorer school districts as part of their cost-savings plan. These targeted cuts are in areas unlikely to support the Republican Governor in an election. As lawmakers scramble to deal with these issues, we should recognize that mathematical formulas are not free from partisan politics.