Commentary | Wages, Incomes, and Wealth

Lessons—Closing the Gap in State School Spending



Closing the Gap in State School Spending

By Richard Rothstein

For nearly 30 years, state courts have ordered more equitable spending between school districts. Yet this within-state focus has meant that an even greater inequality has been ignored: the difference in education expenditure between rich and poor states. New Jersey, for example, spends two and a half times as much per pupil as Mississippi. In general, even after within-state spending has been equalized, poor districts in rich states spend much more than rich districts in poor states.

It has been difficult to address this problem because education is largely a state and local concern, with federal dollars accounting for only about 7 percent of school spending. Proposals to increase that role have become enmeshed in partisan arguments. Democrats typically want to increase spending for specific purposes like smaller classes, while Republicans resist the loss of local control that comes with federal dollars.

Here is a proposal that should satisfy both parties: Use federal money to subsidize states lacking the means to support adequate schools. This could add up to a new federal civil rights mission—giving poor states (many with large minority populations) the possibility of having good school systems like rich states.

It would mean an increase in federal education spending that liberals want. But to address conservative concerns about meddling from Washington, the money should come with no strings attached. Poor states with subsidies should not be asked to follow federal rules any more than rich states that would not be dependent on federal money.

To make the plan work requires an adjustment for price differences between states. For example, New Jersey spent $9,700 per pupil in 1996 (the most recent year for which comparative data is available), while Mississippi spent only $3,700. But living costs are lower in Mississippi. It costs less to hire a good teacher there than in New Jersey.

A precise calculation of such disparities is impossible because the dollar’s relative purchasing power in different places cannot easily be measured. But we can make estimates with formulas used by business groups to calculate cost-of-living allowances for executives moving from place to place. Such estimates show that the real spending gap is smaller, but still quite large: In “New Jersey dollars,” Mississippi spent $4,900 per student in 1996, not $3,700.

Because it costs more to educate poor children, subsidies should also be adjusted for a state’s poverty. Let’s assume that a poor child’s education needs 50 percent more money. We can then recalculate per-pupil spending, counting each poor child as “one and a half children.” On this basis, New Jersey (where 14 percent of the children were poor) spent $9,200, compared with only $3,300 in Mississippi (where 26 percent were poor).

Such gaps do not primarily result from the value a state places on education. Mississippi has less capacity to finance schools, no matter how much it wants to do so. In 1996, total personal-income-per-child in New Jersey was $247,000; in Mississippi it was only $62,000 (again, in “New Jersey dollars”). But some other states may spend little, though they can afford to do more. So Congress should also adjust for a state’s capacity to provide for its own needs. States with high income-per-child should not receive grants, even if their per-pupil spending is low.

If the plan aims to bring poor states’ spending up to the level of the average state, it could cost $20 billion a year. Federal spending for pre-college education is now about $20 billion, so if no existing programs were replaced, this could double federal school spending.

“Small-government conservatives” may resist this plan because it would increase the education budgets of the federal government and of poor states. But government should be no more limited in poor states than in rich ones.

“Big-spending liberals” may resist because they prefer to tell states how to spend federal dollars. But subsidized states should not be subject to more federal control than states where, because of low poverty or high wealth, federal aid is not needed.

A well-designed program would distribute grants to states like Mississippi and New Mexico but probably not Florida because, despite having many poor children, its retired residents give it relatively high personal income per child.

On the other hand, California probably should receive a grant because, despite relatively high wealth, it has even higher relative numbers of children, many of whom are poor.

Bringing spending in poor states up to an adequate level should be a federal role on which everyone can agree. This will not solve all the problems in our nation’s schools, but it addresses one too long ignored.

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