Education Finance Overview The National Center for Education Statistics reports that total expenditures for K-12 and higher education in the United States reached 7.5 percent of the nation's gross domestic product in 2004-05. (Click here for more information from NCES.) Federal, state and local governments spent a combined total of $488.5 billion on K-12 education for the same year. Forty-seven percent of those revenues originated from state sources, 43.9 percent from local sources, and 9.1 percent from federal sources. ( Download PDF Version ) During the 2003-04 school year, close to 34.8 percent of those sources came from local property tax revenues, compared to 36 percent in the 1989-90 school year. ( Download PDF Version) The State Role in Education Finance In 1973, the U.S. Supreme Court ruled that "[e]ducation...is not among the rights afforded explicit protection under our Federal Constitution," but that "[n]o other state function is so uniformly recognized as an essential element of our society's well-being." San Antonio Ind. Sch. Dist. v. Rodriguez, 411 U.S. 1, 35 and at 89 (1973), emphasis added. Rodriguez effectively removed the constitutional burden for providing public education away from the federal government and placed it squarely on the states. Since Rodriguez, state high courts in all but seven states have ruled with varying outcomes on whether their state systems were "equitably" or "adequately" providing public education as required by their respective state constitutional provisions. State legislative responses to these rulings have varied, but perhaps the long-term aggregate result is that collectively states now contribute the largest portion of funding for public education in the United States, surpassing total local government contributions for the first time in 1979. In 1956, for example, states contributed 39.5 percent of total K-12 revenues while local governments contributed 55.9 percent, and the rest, 4.6 percent, came from federal government contributions. ( Download PDF Version) By 2005, states contributed close to 3 percent more to total public education revenues than did local governments. (At the height of the "adequacy"-based litigation movement in the late 1990s, states were contributing close to 7 percent more than local governments.) Aside from ensuring public education is "equitably" and "adequatly" funded, states also bear the burden of ensuring the statewide education finance system is founded on sound governance principles. A sound state school finance system: 1. Provides equity for both students and taxpayers. 2. Is efficient, making the best possible use of resources. 3. Provides adequate resources to local school districts so that they may achieve state and local educational goals and standards. 4. Incorporates fiscal accountability through generally accepted budgeting, accounting, and auditing procedures. 5. Promotes predictability and stability of education revenues and expenditures over time. Visit the following links for more general information on education finance:
Property Taxes and School Funding The property tax is a large (although shrinking) source of funding for public education. For more information on the link between the property tax and school funding, click here.
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