School Funding

Historical Issues

• Prior to 1800s, schools were private, local entities

• In the mid-1800s, several states rewrote their constitutions to create statewide public education systems and established government responsibility for funding schools

New Jersey Constitution

“The Legislature shall provide for the maintenance and support of a thorough and efficient system of free public schools for the instruction of all children in the State between the ages of five and eighteen years.” (amendment in 1875)

Sources of School Funding Today

In the United States as a whole (varies by state, see p. 14 in the Education Trust report)

• Almost 50% comes from States (taxes on income, corporations, sales, lottery & tobacco money) (42% in New Jersey)

• Over 40% from Local districts (property taxes) (53% in New Jersey)

• About 9% from the Federal level (mainly through special programs, like Title I) (4% in New Jersey)

Does our system of funding promote meritocracy or social

reproduction?1) Sources of funding

2) Expenditure

Progressive and Regressive Taxation

• Regressive taxation maintains social inequality by taxing at an equal rate (“flat rate” no matter what the value, or higher tax for less value)

• Progressive taxation attempts to level the playing field by taxing less value at a lower rate than richer people (graduated rate, rising with the value)

Property Taxes

• Property taxes tend to be regressive socially, in that an owner of a house in a poorer community will pay more in taxes than an owner of a house of equal value in a richer community

• Some districts have high property values (houses worth $300k-$1m); others have low property values ($30k-$100k), affecting the ability to raise money from property taxes.

A hypothetical example

• Two districts: 1) average home value = $100,000; 2) average home value = $1m

• Average # of school-going children per household = 1.2

• Cost of educating child necessary to raise from local property taxes = $7500

• Average property tax rate = 4%• How much funding does one raise from each

house?

Poor Towns Pay Higher Property Taxes(100% = average of all southern NJ districts)

Town Household Income as % of metro income

Tax rate as % of metro rate

Camden 45% 141%

Penns Grove 50% 110%

Atlantic City 63% 138%

Collingswood 82% 101%

Gloucester City 69% 117%

Bridgeton 82% 121%

Why is property worth less in one district than another?

• Desirability of living there• Presence of jail, waste treatment facility, and

low-income housing in neighborhoods• Redlining by mortgage and insurance

industries making the cost of insuring a home prohibitive (if there is a fire, house is not repaired)

• Poor city services, including schooling (a cycle hard to break out of)

Wealthier Towns Pay Lower TaxesTown Household

Income as % of metro income

Tax rate as % of metro rate

Moorestown 150% 84%

Mount Laurel 121% 86%

Harrison 147% 82%

Cherry Hill 132% 104%

Haddonfield 165% 106%

Property Taxes

As a result of a poorer tax base, poorer districts have to tax their existing houses at a higher property tax rate than rich districts in order to raise revenue for education.

Property Taxes

• If you had a $200k house in Camden, you would pay more in property taxes than you would if the same house was in Cherry Hill.

• But, there are more $200k+ houses in Cherry Hill than in Camden, so ultimately Cherry Hill’s revenue from property taxes is higher than Camden’s.

• Another implication: districts want only valuable real estate (high-priced housing)

Why does a school district or town prefer high-priced housing to low-priced housing in a development?

A Hypothetical CaseA town has a vacant acre of land, on which they can

build (i.e., give a permit to a developer to build):• one $1m house• 30 townhouses each worth $200,000The town can assume that each household will on

average have 1.2 school-age kidsThe tax rate is 4% on each $100,000Educating each child will cost $7500 from local funds

A Hypothetical Case

• From the $1m mansion, one (1.2) child would enter the school system: cost: $7,500; revenue: $40k

• From the 30 townhouses (worth a total of $6m), 36 kids would enter the school system (requiring a new classroom and new teacher); cost: $270k; revenue: $240k

• Now imagine that the one acre is really ten acres (36 children becomes 360 children, equivalent to another elementary school)

Scarcity of Affordable Housingin New Jersey

• Wealthier districts that can afford to do so resist having low-priced housing built within their boundaries

• As a result, there is a shortage of affordable housing in NJ

• Affordable housing that has been built has not been in areas experiencing job growth (i.e., in Camden, rather than Cherry Hill).

Mount Laurel Decision (1985)• New Jersey communities have a constitutional

obligation to provide housing for all income levels• However, until five years ago, towns and developers

have been able to skirt their obligations• Under state guidelines, builders are allowed to pay a

fee to the town rather than build affordable units• The town can then build the affordable units, either

inside or outside its boundaries

McGreevey’s Plan, 2004

• For every ten units of housing built and every thirty jobs created in a community, one unit would have to be affordable (affordable to those earning 50% of average income or less)

• Communities could meet 50% of their affordable-housing obligations by building homes for senior citizens

• They could meet the other 50% through regional contribution agreements, in which towns pay other towns to build affordable units

Where are we now?

• State Supreme Court in March 2015 said that the Christie administration has not been enforcing Mount Laurel. It would determine which municipalities were meeting their constitutional responsibilities and allow developers and fair housing groups to file suit against those who were not. If towns do not meet their obligations, the courts will decide what is to be built and where.

Implications of Property Taxes on School Funding

• Because local revenue for education is dependent on property taxes, different districts have great differences in the amount of revenue available to them

What does Funding Affect?

A majority of states actually exacerbate gaps between locally raised revenue by sending a disproportionate amount of state money to the districts with the

fewest poor children (Education Trust, 2006, p. 5).

How does New Jersey compare to the nation

in terms of spending differences between districts?

Why is this so?

Federal Level

• Nothing in the US Constitution requires the federal government to provide education for its citizens.

• The Supreme Court overturned a ruling by a Texas district court that found inequalities of education finance unconstitutional in 1973.

• This means that the pursuit of equality in educational finance is pursued at the state level.

Robinson v. Cahill (1970)

• Cities of Jersey City, Paterson, Plainfield, and East Orange joined Kenneth Robinson, a Jersey City student and his parents, in a challenge to the constitutionality of the State school funding system.

• They charged that large wealth-based variations in per-pupil expenditures across New Jersey school districts deprived students in low-wealth communities like theirs to a “thorough and efficient” education.

Superior Court ruling

• “Clearly, a large number of New Jersey children are not getting an adequate education. This is caused by insufficient funds in many districts despite high taxes.”

• Closets serving as libraries• People teaching for over 20 years with only

“emergency” teaching certificates• Science books dating back 30 years, before

people went to the moon

But….• Despite initial attempts to fix

this, the legislature did not continue to provide education funding. Disparity in spending and achievement between richest and poorest districts continued to grow.

• In 1981, Marilyn Morheuser of the Rutgers Education Law Center filed a class action lawsuit on behalf of the 28 poorest school districts in the state.

Nine years and four million dollars later, the State Supreme Court ruled on the case (Abbott v. Burke) and maintained that the system was unconstitutional.

NJ Supreme Court, 1988

• Found that urban schools were underfunded• Decided that there was a connection between

school achievement and money• Examined disparities in foreign language, art

and music, science, and technology (p.12)

State Supreme Court

• In 1998, ruled that NJ must pay to build or renovate schools in the poorest, largely urban districts (the Abbott districts).

• Average age of school buildings in these districts is 62 years old.

The Big Picture of Last 30 Years• There was significant reluctance

on the part of the state to pay for education and to pay for educational parity. They were basically forced to do so by the State Supreme Court.

• There continues to be considerable reluctance on the part of the state (latest budget), despite drops in the achievement gap, higher graduation rates for African-American and Latino students, and high-quality preschool in the Abbott districts.

The National Picture

• Lawsuits brought in 45 states about equalization of educational finance in 1970s and 1980s

• In 27 states, the plaintiffs have won• In less than half of the states in which the

plaintiffs won have the states taken action in compliance with court orders.

Some Other Approaches to Reduce Reliance on Local Property Taxes

• Michigan in 1993 decided that they would move from a property-tax based system to one supported by state sales tax.

• Pennsylvania talked in 2005 about abolishing local property taxes and replacing it with a state property tax but this did not pass.

Not Just about Differences between Districts, but also…

• Differences between states (Education Trust 2006, p. 3 (Table 1))

• Differences within districts (Education Trust 2010, Kozol 2005)

Are schools the way to reduce economic inequality?

There are lots of different ways to reduce educational disparities between schools, including promoting neighborhoods of mixed class and racial background. Instead, the state has tried to compensate for existing inequalities generated by segregated residence by race and class.