Guest Contributor
Public education is often touted as the “great equalizer,” but an examination of how we fund K-12 schools uncovers a history of stark disparities in how resources are generated and distributed. These educational disparities are yet another glaring example of the consequences of wealth inequality in the United States. Significant wealth disparities exist across local communities, and chief among these disparities are extreme differences in real estate values. Affluent communities have a much easier time raising revenue from the property tax because their tax base is vastly larger than in poor communities and voters in these affluent communities can easily fund programs and services that are not within the reach of poor communities. There are cases where the property tax rate in a poor community needs to be more than ten times the rate of that in an affluent community in order to generate the same amount of revenue. Thus, use of the property tax to fund schools further perpetuates inequality in access to opportunity.
Sources of school funding
In the United States, nearly all the revenue for public schools is generated by taxes imposed by various levels of government, with state and local entities contributing the largest shares. On average, the composition of school funding looks like this:
While state and local revenues seem fairly equivalent on average, there is wide variation across states in the proportions coming from each source. For example, in Texas, 32% of school funding comes from state sources, but in Washington state, that figure is 69%. In 18 states, more than half of all school revenue comes from local sources, almost exclusively raised by the tax on real property.
The property tax and inequality
In addition to the inherent inequity that comes with relying on the property tax as a source of revenue, the property tax itself is replete with regressive policies that govern its design and implementation, such as providing property tax breaks to corporations and developers. Even more problematic is that some of the inequitable policies are deeply rooted in racist practices such as housing segregation, racial covenants in property deeds, and redlining, further exacerbating the inequities associated with the property tax[1]. The combination of these factors results in placing an unfair burden on communities with low property wealth, many of which are comprised of people who are low-income, immigrants, and/or people of color or from indigenous backgrounds.
Given these systemic problems, the property tax is widely perceived to be a highly regressive means of providing revenue for schools. There have been numerous successful legal challenges to states’ school funding systems that were highly dependent on property taxes, one of the most notable being the 1971 decision in California, Serrano v Priest. In this State Supreme Court decision, the court declared that the system in place for funding schools in California was unconstitutional because of its reliance on local property taxes as the main source of funding. The court recognized education as a fundamental right that cannot be conditioned on wealth and said, “We have determined that this funding scheme invidiously discriminates against the poor because it makes the quality of a child's education a function of the wealth of his parents and neighbors”.[2]
Successful legal challenges in a number of states resulted in a significant reduction in the reliance on property taxes and a notable shift towards state sources of funds, usually through a combination of income and sales taxes[3]. In fiscal year 2019, there were a dozen states whose revenue from state sources exceeded 60%. Other changes to mitigate the inequitable effects of the property tax have been implemented, including exemptions for low-income households, senior citizens, and those with disabilities. Some states have provided additional dollars to districts with lower than average property values to help reduce funding inequities. Despite these changes, it is still the case that the majority of districts with low property values do not have access to the level of resources, programs, materials and facilities that are readily available in high wealth districts.
Resistance to change
Given these negative and discriminatory effects, why isn’t more being done to further reduce or eliminate reliance on the property tax? One of the most persistent reasons is a resistance on the part of local school districts to give up “the power of the purse”. They argue that their ability to levy taxes on property gives them more control over how that money is used which allows them to respond to the unique preferences of their local community and better serve the particular needs of students and families in their district. While this local control is an important value, it should not trump finding a funding solution that confronts the inequity of reliance on the property tax. Economically disadvantaged communities need the same access to resources and local decision-making capacity that affluent communities can accomplish with ease.
The second reason is that the revenue lost from the elimination of the property tax would need to be replaced with some other form of revenue, and that is fraught with political resistance. Some new type of tax or fee, or a notable increase in existing taxes would need to occur, most likely at the state level. Even when this shift may represent a more equitable or efficient way to fund services, and even when it does not represent an increase in overall tax burden, resistance will happen. State and local elected officials would need to take risks and champion the cause, further increasing political resistance to change.
The third form of resistance stems from a lack of desire or will to support “other people’s children,”[4] and segregation by race and class further complicate the nature of the debate. In addition to property wealth differences, the nation’s school districts are also separated by differences in race and socioeconomic class, and by size. These three factors—property wealth, race/class, and size—are intertwined. For example, 10 of the 12 million students enrolled in predominantly nonwhite districts reside in states where the funding policies are biased in favor of predominantly white districts. Predominantly nonwhite school districts receive $23 billion less than districts serving predominantly white students, despite serving the same number of students.[5] This is in part due to the fact that smaller districts are predominantly white and large districts serve large proportions of students of color. Predominantly white districts enroll approximately 1,500 students on average, while predominantly nonwhite districts serve more than 10,000 students on average. Small districts can amplify their political power at the state level and lobby for resource distribution strategies that serve their needs.
In his 2012 work on education and inequality, author Jonathon Kozol chronicles the widening gulf between schools for the rich and poor and questions whether education can ever realize its potential to be the great equar of opportunity for all without undergoing fundamental changes. [6] Some examples of changes that would increase equity in education funding are provided below.
Ways to reduce inequity
One obvious and most radical solution to the problems with the property tax would be to eliminate it completely as a source for funding schools. Full state funding of public schools has been promoted for decades, and two states (Hawaii and Vermont) are funding schools with 88% and 91% (respectively) coming from state sources. Of course, making this switch is much easier said than done. However, there are numerous means by which the inequities associated with the property tax can be mitigated, three of which are discussed next.
One strategy is for the state to “power equalize” the revenue gained by a set property tax rate. To illustrate, let’s say that wealthy District A levies a one percent property tax and receives $2,000 per pupil in increased funding while District B also levies a one percent property tax and receives only $500 per pupil in additional revenue. In this case, the state would provide the additional $1,500 per pupil in state aid to District B, in addition to whatever state aid is provided to both District A and B. Different varieties of this type of funding mechanism are in place in several states, at least to some extent. However, this strategy is dependent on a district’s ability to successfully convince voters to pass a property tax in the first place. Furthermore, in several cases there are super-majority requirements for passing school taxes.
Another solution is to shift the burden of the property tax away from residential property and towards commercial real estate. At the very least, property tax exemptions and abatements for corporations could be eliminated. Some research suggests that these exemptions are not necessary for stimulating economic growth in communities as the taxes to be paid represent a very small share of corporate revenue, and many businesses would locate to a particular community without incentives. One study concluded that these exemptions cost school districts at least $2.37 billion in fiscal year 2019, representing an increase of $273 million from two years prior (a 13% increase)[7].
Yet another strategy would be to alter how school construction and remodeling are funded. For the most part, the cost of building or renovating school facilities falls on the local district, with some minor assistance from state or federal sources in some situations. State or federal sources could provide substantial and reliable direct funding for school facilities that is proportionate to the local community’s property wealth and ability to pay.
I believe that the most effective policy response needs to be multi-faceted. First and foremost, asking corporations to pay their fair share of funding for local services they benefit from is long overdue. Additionally, power-equalizing from the state has the benefit of providing poor communities with increased local decision-making authority, and could be combined with caps on local property taxes in affluent communities. And finally, the federal government could do much more to improve the condition of school facilities in poor districts.
As a society we are not “putting our money where our mouth is” when we fail to provide the same quality of educational funding and services in the poorest communities that is readily available in the wealthiest communities. This essay only scratches the surface of the complexities of school funding equity. There are a host of other root causes and reasons why inequity in K-12 education persists. That said, efforts to eliminate the inequities of the property tax as a source of school funding would positively contribute to a path towards greater equity, especially for those children and families who are furthest from educational justice.
Marge, A very clear discussion of a very complicated issue! Thanks-- and Welcome! John Denvir
From subscriber, Cecily: "I guess that’s why the Texas Robin Hood Law exists."