Does the Federal Government Fund Public Schools?

Does the Federal Government Fund Public Schools?

While my great-grandfather may have dropped out of school in the 6th grade, today it’s expected that the vast majority of children in the United States will attend school from grades K-12.  In addition, most parents will elect to choose public school districts to educate their children.  What’s better than free education, right?  Well as you probably know, nothing in life is ever free.  We pay for these public services with taxes.  But does it come from the federal government or from somewhere else?  I decided to find out!

The federal government actually contributes very little money to the funding of public education across the country.  In 2019, the federal government had a budget totaling around $1.3 trillion dollars, however only around 4% of their budget was allocated to funding education.  On average, the federal government’s funding for schools typically only accounts for about 8% of a school district’s annual expenses.  The other 92% of funding must come from other sources, primarily at the state and local level.

With such little funding from the federal government, schools must find other sources of revenue to provide the necessary educational experience for their local communities.

Where do public schools get the rest of their funding?

Where do Public Schools get their Funding?

According to the U.S. Department of Education, the responsibility for providing education is left to each individual state.  A Supreme Court case in 1973 (San Antonio Independent School District v. Rodriguez) determined the Constitution does not lay out any fundamental right to education and therefore it is outside the jurisdiction of the federal government to provide and must be left to the states.

In order for states to fund public education, they need to utilize their state budget to provide that funding.  All states provide funding in some capacity at the state level.  In most states, school funding is the single largest line item in their budget.  Nearly half the states in the U.S. contribute over 50% of their annual state budget towards funding schools (in case you were wondering, Hawaii was the highest at 89% of their state budget!).

The rest of the funding comes from the local county, usually in the form of property taxes.  Of course this can cause some equality issues.  A rich, suburban neighborhood with fancy houses would pay more in property taxes compared to an urban area with tenement housing.  Which location do you think would have a nicer school and provide the better education?

In order to offset that locality imbalance, states often provide targeted funding to schools most in need.  This is typically determined by the percentage of students who qualify for free or reduced cost lunches, which is determined by the federally defined poverty guidelines.  Schools with a high free/reduced percent will get access to grants and additional funding to help provide an equal education across the state.

While there have been some federally defined mandates in the past, such as No Child Left Behind, these mandates must be funded by the federal government.  However because ultimately the responsibility to manage education is left to the state, a state can decide to not to comply with a federal mandate and thereby reject federal funding.  This is a very rare occurrence as most states can’t afford to offset the funding loss.

What are some other programs that qualify for additional funding?

Each school district has its own unique challenges to solve and those challenges often require money.  The government has multiple programs that try to address certain specific issues.  For example, a community with a heavy proportion of immigrants may need additional funding to promote teaching English to children whose family’s primary language is not English.  This is often referred to as “English as a Second Language” or “English Language Acquisition” funding.

Another challenge is how to support schools in low income areas.  This is done via a program called Title I.  It is additional funding for schools who may need additional resources (typically in the form of staff) to provide for remedial education for students who may need the extra help.  Unfortunately despite attempts to create an equal educational experience across the state, it is common for poor, urban areas to lack the resources to counter the unique challenges students in these communities face.

Another example of a program that qualifies for additional funding is the Reading First initiative.  This focuses on providing states with additional funding to support teachers in increasing literacy with high quality reading instruction for students in grades K-3.

Lastly, there are a few other grants available to assist students with specific needs.  There are grants available to help students with disabilities.  Grants are also available that help provide teachers with additional training so that they’re better able to accommodate the specific needs of their students in their classroom.

How do schools get more funding?

How do Schools get more Funding

Over the past 3 decades, the amount of money spent on public education has vastly increased beyond what’s expected with inflation and enrollment numbers.  Between 2000 and 2016, education spending grew 27% even though the number of students only went up by 8%.  This increased spending has to get its funding from somewhere.

In some areas it is common for schools to propose to their community something called a referendum.  A referendum basically outlines why the school needs more money and attempts to get this money by raising property taxes in their locality.  Because property taxes are set by the county and not the school district, any referendum needs to be put to a vote at the next election cycle.  If passed, a referendum usually lasts for 5-7 years and needs to be renewed for continued funding.

Schools can also apply for grants.  As mentioned before, there are special grants available to help fund in areas where English is not commonly spoken at home, to improve reading literacy in the community, or to provide technology to better facilitate at home learning.  These vary across states and localities.

Additional federal funding can also sometimes be used.  For instance, schools qualify for E-rate funding.  E-rate funding is used to fund technology improvement or pay for services like internet and telephone service.  With E-rate funding, the federal government will cover a portion of a district’s expenses based upon their funding needs.

There may also be times where the government passes a special bill to increase funding for schools.  For example during the COVID pandemic in 2020, the federal government provided a huge $225 billion for education as part of the CARES act.  This was to help schools adapt to virtual learning, purchase PPE, and fund additional safety practices as it relates to preventing the spread of COVID-19.

Lastly, some schools can make some extra money by renting out their facilities during the summer or off-hours, offering summer school for non-residents, holding sporting events, or organizing local fundraising events for specific funding needs.

Can public schools go into debt?

I don’t know of a single school district that is flush with cash.  School districts run a tight budget and use every penny to do their best for their students.  However what happens if a big purchase needs made, like a renovation to a school building?  Or even a bigger project like an entirely new school building for an expanding community!

These large capital projects are typically financed by issuing public bonds.  These bonds are issued over a 20 to 30 year period at current market interest rates.  In this way, schools are able to basically crowdsource funding from wealthy donors and institutions rather than going to a bank and asking for a loan (and of course paying a higher interest rate because banks need to make a profit!).

What happens if a school can’t meet its funding requirements?

All public schools are required to run a balanced budget.  If possible, schools try to set some money aside in a “rainy day” fund to prepare for unexpected circumstances, such as a drop in student enrollment or a decrease in funding.  Just like you probably have a savings account, schools also try to keep a little bit of money set aside.

However if a school district is unable to meet their budget, this can lead to higher class sizes, reducing teacher pay, or even a complete takeover of the school budget by the state’s board of accounting.  This is why it is so important that schools take advantage of every funding opportunity at their disposal and have a backup plan in case something unexpected occurs.

Final Thoughts

School funding is a complex topic and no two school districts are alike.  Just as each state is different across the country, so too are the individual counties within each state.  Because of this, I think it’s rightly fair to leave education funding to the states.  While federal funding does contribute to the budget, it is really just a tiny slice of the pie when it comes to the whole budget.

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  5. US Department of Education
  6. National Center for Education Statistics

Written by Beau Mueller

Beau is a teacher, entrepreneur and the founder of The Moneywise Teacher! He started this website to help educators make and save more money.

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