Striking Teachers Won, but Are School-Funding Gains Sustainable and Equitable?

Without higher taxes, and redistribution of funding to poorer districts, #RedforEd victories in Arizona, North Carolina, Oklahoma, and West Virginia may be short-lived.
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Arizona teachers march toward the State Capitol in Phoenix, Arizona, on April 26th, 2018.

A #RedforEd teachers strike in Arizona.

In 2018, public school teachers won notable victories in some unexpected places. Teachers in West Virginia launched the #RedforEd movement, winning a 5 percent pay raise last February after a strike that stretched almost two weeks long. Public school teachers in Arizona, Oklahoma, North Carolina, and Kentucky followed suit in striking—winning various concessions from Republican-dominated legislatures and governors: a 9 percent state school-funding increase in Arizona; 19 percent in Oklahoma, and 3 percent in North Carolina, according to a report released last week by the Center on Budget and Policy Priorities. (In Kentucky, where teachers were protesting proposed changes to pensions, funding was essentially flat.)

The CBPP report, however, also notes that these victories may be short-lived. Not only is funding in all five #RedforEd states well below pre-Recession levels, but in increasing financial support, legislators in many of these states relied on funding sources that are both unsustainable and inequitable.

In Arizona, for example, the education bill—which increased funding for teacher salaries by $273 million and included an additional $100 million of flexible funding—did not actually include new revenue sources, with the exception of a small increase in the new car-registration fee, which will disproportionately harm low-income residents. It instead relies on Medicaid spending cuts and rosy economic growth projections. Similarly, legislators in North Carolina did not include new revenue sources in their education-funding bill and are facing a projected budget shortfall this year as deep income-tax cuts take effect. In Oklahoma, legislators relied on increasing cigarette and gas taxes, two types of taxes that can be unsustainable over time: People may smoke less, or purchase more fuel-efficient cars, in the face of them.

Michael Leachman, senior director of state fiscal research at CBPP and a co-author of the report, says that sustainable revenue sources are those that grow alongside school costs over time.

"You want to use revenues that will grow with school costs over time," Leachman says. "The best major funding source is income taxes. ... Income taxes are also typically graduated so they’re based on ability to pay."

In recent years, some states have come around to this reality. In Kansas, for example, where districts and conservative legislators have been locked in a long-running court case over school funding, lawmakers in 2017 approved a rollback of the state's infamous income-tax cuts. (The vote came after the Kansas Supreme Court ruled that the state's schools were under-funded and ordered the legislature to come up with more money for public schools.) Minnesota, in 2013, meanwhile, raised taxes on high-income residents to fund full-day kindergarten and a variety of additional preschool and higher-education scholarships.

But while increasing income taxes is a sustainable way to increase the amount of state revenue available for school funding, it's also not the only piece of the puzzle. As Pacific Standard has covered before, most school districts receive funding from local, state, and federal sources. Public schools receive 45 percent of their funding from local sources, 46 percent from the state, and 9 percent from the feds. The problem with this funding mix is that it disadvantages districts with few sources of local wealth.

In theory, state and federal funding should make up for these disparities by directing more money to poorer districts. In practice, however, this rarely happens, and yawning funding disparities currently exist between rich and poor districts (and even between racially concentrated, low-income minority districts and comparable white districts). According to the most recent school funding national report card from the National Law Center, the majority of states have either flat or regressive funding systems, in which high-poverty districts receive either the same amount of state funding or less state funding than low-poverty districts. Only 11 states provide high-poverty districts with at least 5 percent more funding than low-poverty districts. (These stats are particularly egregious in light of the fact that education experts agree it costs more money, on a per-student basis, to educate low-income students.)

Simply raising income taxes won't be enough. Historically, school-funding advocates have argued for states to both increase overall spending on education—funded, perhaps, by higher income taxes on the wealthy—and to direct more of that money to high-poverty districts to make up for lower local revenues. But, Rebecca Sibilia, the founder and chief executive officer of EdBuild, a non-profit organization that researches school-funding issues, says that, while she'd like to see more states increase taxes on high earners, those revenues are vulnerable to what she calls "crowd-out."

"This is the conundrum that I think that everyone in the school-funding community is facing right now," Sibilia says. "Larger taxing jurisdictions are going to create more equity—in that respect, we would advocate for 100 percent of education funding to come from state funding. The problem is that all of the increasing burdens that these states are going to continue to face is going to cause crowd-out. We're seeing education money that states collect get sloughed off to cover increasing Medicaid costs, pension debt, that kind of thing."

Sibilia argues that, in light of these challenges, local property taxes can and should also play a role in achieving truly sustainable education-funding streams. Specifically, Sibilia suggests that states need to do two things: require districts to raise a certain amount of money locally—proportional to the district’s wealth—in order to be eligible to receive state education funding, and impose a ceiling on the amount of locally raised revenue that can go to that district's schools.

"States need to say: If you’re going to get help from the state, you have to raise money that's proportionate to the wealth that you're sitting on," Sibilia says. "And the ceiling is where you get your equity provision: if you raise more than X amount, some of it has to be reclaimed by the state."

Imposing both a floor and a ceiling would relieve some of the pressure on state funding, while also ensuring equity. At present, only 22 states have a "floor"—a minimum contribution districts must make in order to receive state funding—and only 19 states have a "ceiling." To establish sustainable and equitable school-funding streams, lawmakers will have to change that, but they'll also have to tackle another bogeyman: the anti-tax laws passed in recent decades.

"Almost every state over the last 20 years decided they were going to put the most ridiculous constraints on increasing taxes," she says. "One of the things we need to do is we need to start scaling back some of these ridiculous prohibitions that were put in place. We need to set the bar higher for what we should be investing in in education."