For decades, the financing of public schools was seen as a local issue, and districts' spending decisions were based almost solely on the amount of money they had available. Beginning in the 1950s, however, states gradually became more active participants in school funding. Greater state involvement meant detailed state funding formulas, which began to direct funds to districts with greater financial needs or difficult-to-serve student populations such as special education students and students with limited English proficiency.
The next major transformation of school finance began in the early 1970s with the rise of litigation challenging the wide variations in per-student funding that existed in most states. The Serrano v. Priest case in California was the first in a wave of lawsuits filed on behalf of individuals in low-wealth districts who argued that their schools were unable to provide as good an education to students as wealthier districts could.
More recently, the focus of funding arguments has moved from equity in the distribution of funds to the adequacy of the funding provided. The concept of school finance adequacy is that if states have established performance measures (for example, test scores, graduation rates and/or dropout rates), there should be sufficient funding available to allow all schools to meet those measures. In the case of several states (Ohio, New Hampshire and Wyoming) where the low-wealth school districts won their legal challenges, it has meant a switch from local property taxes to a statewide tax structure. Other states (Maryland and Oregon, for example) have tried to move to an adequacy-based funding formula without the pressure of being sued. In addition, lawsuits and political pressure have begun to force many states to fund the construction of school facilities, which traditionally has been seen as a local obligation.
The increasing shift to a more state-controlled school funding system has put further pressure on ever-shrinking state budgets. As a result, states have been forced to search for alternative funding sources such as lotteries, increases in "sin taxes" or the use of tobacco settlement funds.
States also are beginning to explore new approaches and strategies, including more closely tying spending to results, increased use of vouchers, the creation of "virtual" schools and improved tracking of per-student spending. There is also growing interest in creating more integrated funding systems, focused on the entire continuum of public education, from preschool through postsecondary.
This Issue Site features research summaries, selected readings, state policy trends and links to other sources of information on the general topic of school finance, as well as on funding formulas, litigation, taxes, equity, adequacy and other subtopics highlighted above.