Funding for U.S. Public Education

In 2007–08, the United States spent $477 billion on elementary and secondary education. This amounts to about $9,683 per pupil. The amount spent per pupil varies widely from state to state and from district to district within states. Each state has established formulas for distributing funds to local districts to supplement locally derived funds. The criteria for these formulas are unique to each state.

Generally, schools are funded through a combination of income taxes, corporate taxes, sales taxes, and local property taxes. The Federal Government contributes about nine percent of school funding according to the most recent figures.

Sources of Funding

Overall, states provide most of the funding for schools, but the proportion of school revenue from states varies widely from state to state. Hawaii, which has a single school district, provides the greatest share (90 percent), while Nebraska provides the smallest (32 percent). The Federal share of school funding also varies, depending on the number of low-income students in a state and other factors. The Federal share ranges from 4.4 percent (New Jersey) to 17 percent (Louisiana). Under the Federal Title I program, the largest source of Federal aid to districts, Federal funds must supplement, not supplant, local and state funds.

Schools or school districts may also receive funding through private grant awards or philanthropic donations to supplement funds received through government sources. Schools sometimes use these funds to help with school equipment, facilities, and activity programs for students. Private individuals, local businesses, and corporations may also donate funds. Some districts have developed policies on private donations to help cover the widening gap between funding and expenditures and have established nonprofit organizations to administer the funds, called local education funds. Most charter schools are able to leverage private funds because the laws under which they were created provide them more autonomy.

Sources of Federal Funding

There are a number of large Federal funding streams that support learning, including Title I and Impact Aid, as well as Perkins, described below, and the Individuals With Disabilities Act, discussed in more detail in Module 9: Supporting Students With Special Needs. There have also been recent investments targeted at innovative improvement efforts that are not directly tied to specific legislation.

Title I

Title I is one of the key components of ESEA and its goal is to improve the academic achievement of disadvantaged students. The basic function of Title I is to distribute Federal funds through SEAs to school districts with a high percentage of students from low-income families and hold schools accountable for improving academic results. The program is administered through the Office of Elementary and Secondary Education at the U.S. Department of Education. Funding reaches more than 17 million children nationwide, roughly 60 percent from the elementary grades (kindergarten through grade 5), 21 percent in the middle grades, and 16 percent in high school. Roughly 500,000 children are served prior to kindergarten entry. Title I funds help students who are behind academically, or at risk of falling behind, by providing supplemental services such as hiring additional teachers, tutoring, parental involvement activities, professional development, purchase of materials and supplies, preschool programs, and hiring teacher assistants, among others.

The Carl D. Perkins Vocational and Technical Education Act (Perkins)

This 1984 act supports research, evaluation, information dissemination, technical assistance to states, and other activities aimed at improving the quality and effectiveness of career and technical education (CTE). Federal funding levers provide direction and funding to states and local communities as well. These levers are focused on rewarding states, schools, and partnering groups for innovative reform efforts.

The American Recovery and Reinvestment Act (ARRA)

This 2009 act provides funds to schools and school districts through competitive grants. The jump in the Federal contribution for education funding mentioned earlier is largely a result of ARRA investments. The 21 ARRA programs include several that relate specifically to education, including Race to the Top (RttT). RttT is a competitive grant program that awarded $4.35 billion to states—$4 billion for statewide education reform grants and $350 million to improve student assessments.

The Investing in Innovation Fund (I3)

The fund provided $650 million in competitive grant funding to 49 school districts and partnering nonprofit organizations with a record of using innovative approaches to improve student achievement or growth, close achievement gaps, decrease dropout rates, increase high school graduation rates, or increase college enrollment and completion rates.

Impact Aid

Impact Aid, a program administered through the Office of Elementary and Secondary Education at the U.S. Department of Education, is a Federal formula grant program designed to relieve the financial burden of school districts in educating significant numbers of federally connected students—those who reside on military bases, low-rent housing properties, Indian lands or other Federal properties, and/or those with parents in the uniformed services or employed on eligible Federal properties.

Additionally, the Department of Defense administers three Department of Education Impact Aid programs, which are much smaller than the Department of Education Impact Aid Program:

  • Impact Aid Supplement offers Federal aid to school districts where military-connected children make up at least 20 percent of the enrollment.  
  • Impact Aid for Children With Severe Disabilities aims to support schools serving two or more military-connected children with severe disabilities that meet certain special education cost criteria.  
  • Impact Aid for Large Scale Rebasing (though not always funded by Congress) provides financial assistance to districts that are heavily impacted by the increase or reduction in military-dependent students when funds are appropriated.
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