School Finance Equity

• Federal law includes a measure and definition of school finance equity. As per the Education Finance Incentive Grant program, the federal government uses a school finance equity measure in distributing nearly $3 billion in Title I Part A funding each year. [1]
  
  The Title I equity factor is calculated by using a weighted coefficient of variation in district per-pupil expenditures. The Title I program’s weighted coefficient of variation is basically a measure of how much per-pupil expenditures vary in districts across a state in comparison to the average per-pupil expenditure in that state. In other words, it is the average difference in per pupil spending from the overall state average per pupil expenditure level. The lower the coefficient of variation is in a state, the more equitably education funding is distributed across districts. For more detailed information see Federal Standard for School Finance Equity.

• School finance equity is regional in nature. In addition to the impact of state funding formulas, within state, inter-district finance equity varies according to the size and number of school districts in a state. Southern and Western states tend to have a smaller number of large school districts. This translates into more equitable funding structures, as funding is aggregated in larger pools and distributed in a more uniform fashion. In the Northeast and the Midwest, states generally have large numbers of small school districts. This magnifies the influence of local property taxes and increases funding disparities between districts. [2]
  
  In both the South and the West, states have an average of 200 districts, with approximately 5,650 students per district in the South and 4,350 students per district in the West. The Northeast averages 330 districts per state, and the Midwest averages almost 430, with significantly fewer students per district (2,670 and 2,055 respectively). Florida and Illinois have roughly the same number of students, yet Illinois has 814 more districts than Florida and almost 40,000 fewer students in each district.
  
  The South is the most equitable region, with finance inequity between districts averaging 10.5%, or $769. In the Northeast, average inter-district inequities are much starker than in any other region—14.9%, or $1,618. Of states that rank in the top half of the country in school finance equity, only one is in the Northeast and only four are in the Midwest. The other 20 most equitable states are located in the South or West.

• School finance equity is roughly correlated with statewide per-pupil expenditure. States that spend more on education tend to have more inequitable funding structures. While certainly not always true, in general the states with the highest per-pupil expenditure have greater inter-district finance inequity. This could be because a state’s average spending level can be heavily influenced by spending in a top tier of very wealthy districts. This group of wealthy districts both pulls up the average per-pupil expenditure and increases the average per-pupil dollar difference from the mean per-pupil expenditure, which translates into more inequity.
  

  On average, the 10 states that rank best in school finance equity spend $7,914 per pupil, while the 10 most inequitable states spend $9,210 per pupil. New York, Vermont, and Massachusetts—all in the top five in per-pupil expenditure—rank 43rd, 44th, and 47th in inter-district finance equity respectively. Florida and North Carolina are both among the top 10 most equitable states, but also among the bottom 10 states in spending.
  
  However, there are examples of states that have high fiscal effort and equitable funding structures. For example, Delaware ranks sixth in per-pupil expenditure, spending more than $10,000 per-pupil, and in school finance equity, with average inter-district inequities of only 8.5% or $866. On the other side of the spectrum, Idaho spends very little on education, ranking 49th in spending, and also has large average funding inequities between districts of 16.9% or $1,016, ranking 41st in equity.

• Inter-district finance equity measures do not take account of intra-district (within district) inequities. Equity data presented here are inter-district in nature, but it is important to note that inequities reach a more micro, frequently hidden, level. Districts often do not distribute their funding equitably among individual schools within districts. These intra-district inequities are largely driven by the uneven distribution of teachers and teacher salaries. For more on this issue, see School Finance Comparability.

[1] For each state, there are three numbers used here relating to the federal equity factor
1. The average school finance inequity among districts in percentage terms.
This number represents the average difference in per-pupil expenditure from the average state per-pupil expenditure expressed as a percentage.
2. The average school finance inequity among districts in per-pupil dollars.
This number is the average per-pupil dollar difference from the mean per-pupil expenditure. It is basically the number described above in (1) multiplied by the per-pupil dollars for a particular state.
3. The school finance equity rank of 50 states.
This number represents how a particular state ranks in comparison to other states on the equitable distribution of funding across districts. The state ranked first has the least amount of variance in funding across districts (i.e. is the most equitable) while the state ranked 50th has the most variance in funding distribution (i.e. is the least equitable).
[2] Based on Census Bureau-designated regions. Northeast: Connecticut, Maine, Massachusetts, New Jersey, New Hampshire, New York, Pennsylvania, Rhode Island, Vermont. Midwest: Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, North Dakota, Ohio, South Dakota, Wisconsin. South: Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia. West: Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, New Mexico, Nevada, Oregon, Utah, Washington, Wyoming