How the Federal Government Can Improve School Financing Systems

Executive Summary

Decades of interventions into school finance systems around the country have had some success in reducing inequity and increasing adequacy in the nation’s schools. However, more still needs to be done to ensure equal educational opportunity for all. The central premise of this working paper is that the federal government has an important role to play in this effort. In particular, federal education funding should be targeted to best promote equity and adequacy on a nationwide level. Moreover, especially in light of heightened federal expectations for state and local school systems, as called for by No Child Left Behind, it is appropriate for the federal government to take on a greater share of education financing. Accordingly, after reviewing the structure and recent history of American school financing, this working paper presents five recommendations for the federal government to improve school financing systems. The first three recommendations call for reconfiguring Title I to ensure that federal funding to support poor children is directed most sensibly state by state, district by district, and school by school. The fourth recommendation calls for increasing federal funding for special education programs so that the federal government provides 40 percent of the additional cost of educating children with disabilities, as has been the federal goal for decades. The final recommendation calls for an interstate federal foundation program to reduce disparities between states, as similar programs at the state level have reduced disparities between districts.


Equality of educational opportunity is a widely held value in America, yet its existence in practice is all too lacking. Even after decades of intervention at the federal and state levels, the poverty of students and communities is still connected to lower educational achievement. Because educational achievement is strongly associated with success in later life, unequal educational opportunities play a significant role in the continuation of poverty from generation to generation. The issue of equal educational opportunity was part of the impetus for No Child Left Behind (NCLB), the 2001 reauthorization of the federal Elementary and Secondary Education Act. Discussion of the issue should feature both in NCLB’s upcoming reauthorization and in the 2008 presidential election campaign.