How Funding in Education Impacts Public and Private Schools
As the late South African freedom fighter and president Nelson Mandela once said, “No country can really develop unless its citizens are educated.” A nation’s education system is critical to its overall economic development and success, as well as social harmony and political stability.
K-12 schooling forms the vital foundation of a person’s education, and post-secondary studies at a college or university allow a person to gain specialized knowledge. Most students in the United States attend public education institutions.
How and to what extent these places are funded directly affects the quality of education, educational outcomes, facilities, extracurricular activities, and other programs. Private schools, colleges, and universities are also somewhat reliant on funding outside of fees.
This article will explore education funding sources, how funds are spent, the ways school funding and spending have changed, and the challenges created by the current funding structures.
What Is Funding in Education and Why Is It Important?
Funding in education refers to the money schools and higher education institutions receive to provide education to learners. Funding sources are varied and often differ depending on whether an educational institution is private or public.
Public K-12 schools (and some colleges and universities) receive funding from the three tiers of government: local, state and federal. Funding from local governments pertains to the county or municipality in which the institution is located, and state and federal funding are self-explanatory.
Together, local and state funding accounts for over 90% of public K-12 education funding, according to the Peter G. Peterson Foundation. These two types of funding are based on formulas, with state calculations dictating how funds are spent across school districts. These formulas vary by state, which can explain many of the inequalities seen in school resources across the nation.
State funds largely account for local funding differences that occur due to lowered capacity to raise local funds, which is particularly helpful in states that have high concentrations of students from low-income families. Local government funds come largely from property taxes, whereas state funds are generated by sales and income tax. Local funds account for 40% of a school’s funding.
Federal money is taken from a variety of tax sources and is allocated in the form of specific grants. For instance, the federal Title 1 program was authorized under the Elementary and Secondary Education Act (ESEA) of 1965 to assist low-income students. Another example is the Individuals with Disabilities Education Act (IDEA) of 1975 that aims to help disabled learners.
Federal government also contributes further funding during economic downturns, such as the one experienced during the COVID-19 pandemic. Like local and state funding, these funds are distributed according to specific formulas. Interestingly, state governments can choose to refuse federal funding if they don’t wish to support the programs to which those funds are allocated, as Public School Review explains.
Private institutions are also partly funded by governments, although to a much lesser extent. Nevertheless, all schools, colleges, and universities require funding to perform vital functions such as:
- Paying salaries: This goes beyond just teachers and teaching assistants to include janitors and cleaning staff, administrative officials, and sometimes board members.
- Maintaining school facilities: Classrooms, science labs, drama theaters, sports fields, and offices all need to be serviced regularly. Lighting, plumbing, and public announcement systems also need upkeep.
- Providing educational supplies and services: Although many students have to buy their own textbooks, stationery, and other educational products, government funding is designed to contribute to procuring these materials. Funding is also necessary to source additional resources like specialized coaches and tutors.
- Feeding learners: Many schools provide lunch to their students. Funding goes toward purchasing food and paying the cooking staff who prepare meals.
- Funding research: Government funding contributes in no small part to research programs at both public and private colleges and universities.
According to the National Center for Education Statistics, 56% of public K-12 school expenditures went toward paying educator salaries in 2020 (the latest aggregate data available at the time of writing). A further 26% was spent on employee benefits for school staff members. The remainder of school budgets was allocated toward purchased services such as food and janitorial services (11%), supplies like textbooks (7%), tuition (1%), and “other” (1%).
How Has Funding in Education Changed Over Time?
The most significant historical change in funding is shown by the shifts that have occurred in the K-12 public school government funding ratio. In the past, local funds contributed far more to a school district’s funding, up to around 80%. Now, local funding is at just half that, leaving state funding to do most of the heavy lifting.
Today, state funds make up about 50% of funding, leaving federal funding to account for roughly 10% of funds. All in all, the government spends more on funding education than it has since the 1990s. Specifically, funding has risen steadily since 2012, per the National Center for Education Statistics. Again, the majority of this increase has come from local and state sources.
By contrast, federal spending has declined over the same period. It’s argued that this decline is, in part, due to the American Recovery and Reinvestment Act of 2009 that followed the great Wall Street Crash of 2008 that ushered in a devastating recession. This coincides with lowered federal aid in other sectors as the economy struggled to recover from the economic downturn.
The increase in state and local funding can actually be attributed to federal funding cuts over the past 15 years, with federal discretionary spending at its lowest level since 1989, according to Center on Budget and Policy Priorities.
What Funding Challenges Does the Education Sector Face?
This fall in federal funding coupled with soaring local and state funding in some regions has led to some school districts being underserved while others have a funding surplus. Consequently, progressivity (how much money is spent on low-income students) has stayed mostly unchanged, despite the state government’s attempts to create equity through funding.
As The Century Foundation explains, overall, public schools are underfunded by about $150 billion annually. As one might expect, this disproportionately affects public schools when compared to private schools, as the former don’t have the same access to non-government funds (namely private donors and school fees) as private institutions.
This lack of access is of particular significance because public schools serve so many more students than private ones. 49.2 million learners were enrolled in public schools in fall 2019 compared to just 4.7 million private school students during the same period, according to the National Center for Education Statistics.
Per the Economic Policy Institute, underfunding becomes particularly noticeable when we examine racial and economic class differences. In general, less publicly-available funds are spent on low-income students and learners belonging to racial minorities (although these two groups often overlap) which can contribute to the cycle of poverty.
This disparity isn’t intentional, but it’s a major problem. What contributes to this phenomenon? The most salient factor is how local funds are sourced. As previously mentioned, local funding is derived from local property taxes. These are higher in more affluent areas where property is more expensive, leading to more well-funded schools.
By contrast, properties in more impoverished regions generate less tax, resulting in less well-equipped and resourced schools. Another facet is how state governments choose to spend funds. Earlier, we noted that states can elect not to use federal funds for programs designed to cater to disadvantaged learners.
The results of such refusal are most noticeable in cities and counties that have disproportionately high numbers of learners of color and poor students. Even if states do accept federal funding, state funds are often at the mercy of the economy and can fluctuate along with economic conditions.
These problems aren’t unique to public K-12 schools—public colleges and universities are also affected by funding issues. These institutions receive approximately $600 billion from state and federal governments, with each level contributing to 40% of a public university’s funding and local funding contributing 13%, according to IBIS World.
That means less than 10% of public higher education institutions’ funds come from non-government sources, according to Ibis World. Consequently, public post-secondary colleges are as susceptible to funding issues as their public K-12 counterparts.
How Education Vendors Can Weather Funding Storms
It’s clear that how well-resourced public education institutions are directly depends on government funding. It can be difficult for educators to navigate the myriad issues created by underfunding or economic volatility. Some find that they need additional products or services to help them teach effectively.
Fortunately, educational material and service providers are there to fill the gaps. Independent providers contribute greatly to the American education system by helping to offset many of the differences created by public funding structures. And, these businesses need appropriate data to serve their customers.
Agile Education Marketing provides the best in marketing data products and services to enable education organizations to maximize their marketing efforts. Contact us to discuss how we can best help you!