School Finance

Detroit Public Schools recently made national headlines for the heartbreaking conditions of its school facilities and a widespread teacher “sick-out.” For Detroit, these are sadly just the latest hurdles to overcome: The public school system has been in dire financial straits for many years, while national testing data indicate that the district’s students are among the lowest-achieving in the nation.

A report from the Lincoln Institute, a nonprofit that focuses on land use and tax policy, provides a fascinating angle on the Detroit situation. It highlights the massive problems that the Motor City encounters when trying to finance public services, including education, through its local property tax system. Consider just a few bleak statistics reported in this paper: 1) The property tax delinquency rate was a staggering 54 percent in 2014; 2) roughly eighty thousand housing units are vacant—23 percent of Detroit’s housing stock; 3) and 36 percent and 22 percent of commercial and industrial property, respectively, sat vacant.

The report also highlights ways that property tax policies exacerbate the school system’s revenue woes. First, property tax abatements—tax breaks aimed at spurring re-investment—have reduced or exempted the tax liabilities of more than ten thousand properties. Whether the benefit of these reductions outweighs...

Detroit Public Schools recently made national headlines for the heartbreaking conditions of its school facilities and a widespread teacher “sick-out.” For Detroit, these are sadly just the latest hurdles to overcome: The public school system has been in dire financial straits for many years, while national testing data indicates that the district’s students are among the lowest-achieving in the nation.

A report from the Lincoln Institute, a nonprofit that focuses on land use and tax policy, provides a fascinating angle on the Detroit situation. It highlights the massive problems that the Motor City encounters when trying to finance public services, including education, through its local property tax system. Consider just a few bleak statistics reported in this paper: 1) The property tax delinquency rate was a staggering 54 percent in 2014; 2) roughly eighty thousand housing units are vacant—23 percent of Detroit’s housing stock; 3) and 36 percent and 22 percent of commercial and industrial property, respectively, sat vacant.

The report also highlights ways that property tax policies exacerbate the school system’s revenue woes. First, property tax abatements—tax breaks aimed at spurring re-investment—have reduced or exempted the tax liabilities of more than ten thousand properties. Whether the benefit...

  • Career and technical education is one of the best weapons in the reformer’s arsenal. It’s a proven gateway to post-secondary credentials and skilled jobs, which can’t be taken for granted when so many of our high school graduates find themselves unprepared for college and career. The Gadfly was apoplectic when Arizona Governor Doug Ducey green-lit $30 million in cuts to the state’s CTE programs last year, reducing their funding by nearly 50 percent. These classes obviously benefit the ninety thousand students they serve annually, but they’re also a boon to the local and regional economies, which profit immensely from a domestic source of coveted technicians and tradesmen. It’s great news for all, therefore, that veto-proof majorities in both houses of Arizona’s state legislature are ready to pass legislation repealing the cuts. If ever there was a case of government electing to be pennywise and pound-foolish, it was this.
  • Republicans and teachers’ unions have always been like peas in a pod. We’re not sure where the love affair started, but it was probably when they spent all those decades impugning and seeking to destroy one another. Okay, kidding aside, we’re all aware of the historic tensions existing between unionized teachers and the
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Nothing in life is truly free—but don’t tell that to dogmatic liberals and their pandering politicians, who would turn the first two years of college into a new universal entitlement. This idea has the same fatal flaws as universal preschool: a needless windfall for affluent voters and state institutions that does very little to help the needy.

Start with the expense. Today, millions of families save their own pennies and dollars to pay for kids’ college. While they would surely love to slough this burden onto taxpayers, doing so would probably shift billions of dollars every year from programs that help talented poor kids access higher education and improve our schools. In a time of scarce resources, why is this a priority?

Nor would it help disadvantaged students. Most “free college” proposals focus on community colleges, turning them into “grades thirteen and fourteen” of a new public education system. Yet these schools have the worst track record with poor kids, especially those with exceptional academic promise. (They’re also already “free” to poor students today, thanks to federal Pell grants.) We know from a ton of research that these students do best at more challenging state schools and private colleges.

Yes, it...

Leslie Kan

This week, teachers’ unions continued their battle over mandatory “agency fees” in the Supreme Court case Friedrichs v. California. Union dues cover the costs of lobbying and collective bargaining and are crucial to advocating for employee benefits, including teacher pensions. Add these fees on top of a teacher’s mandatory state pension contributions, though, and it becomes apparent that teachers are spending a substantial chunk of their paychecks on pensions—without receiving much in return.

Take for example, a California teacher’s paycheck. California teachers are required to pay a mandatory state pension contribution of 8.15 percent, soon to rise to either 9.205 or 10.25 percent in the next few years depending on a teacher’s hire date. Alongside pension contributions, teachers contribute a portion of their salary toward union dues. About a third (the amount varies depending on the school district) goes toward political and legislative advocacy. (In 2013, the California Teachers’ Association spent a year of political and legislative action preventing harsher cuts from a recent pension reform law.) The remaining two-thirds of dues, or the mandatory agency fee, covers the cost of collective bargaining. Collective bargaining indirectly impacts pension benefits through negotiations like late-career salary raises that can spike pension benefits for certain teachers. California’s mandatory agency fees make...

According to the Annie E. Casey Foundation, 594,000 children live in poverty throughout the state of Ohio. Assuming a family of four, these Buckeye youngsters come from households with an annual income of less than $25,000—truly disadvantaged families. It’s no secret that children such as these are behind the proverbial eight-ball in life; as recent research demonstrates, it’s a longshot that kids who grow up poor will climb into the upper-middle class as adults—and Ohio’s low-income children face some of the longest odds nationally.

It has long been recognized that the best antidote to this vicious cycle of intergenerational poverty is an extraordinary education. Still, even today, tens of thousands of low-income Buckeye students are way off track in school—in an academic Siberia—and almost certainly not on the path to adult success. In fact, according to early results from last year’s PARCC tests, roughly 15 percent of students from poor urban areas are meeting career- and college-ready benchmarks, while the percentages reach 50 and 60 percent in the suburbs.

What can we do? One possible avenue for advancement is to create public finance policies that devote more dollars to the education of low-income students. In technical...

A new AEI report argues that private schools have a problem: They need more space. As more states use vouchers, tuition tax credits, and education savings accounts to help families access private education, schools will need to scale up and create new seats for incoming students. And the best way to do this, writes author Michael McShane, is to explore new funding mechanisms that will give the schools the necessary resources to handle growing enrollments.

One solution is for private schools to seek bond financing to help offset expansion costs. Public school districts already tap these financial instruments for capital projects because they expose investors to very little risk and the district itself pays less in interest than if it were to get a loan for the same amount from the bank (such financing for educational organizations is often tax-exempt). In 2012, the Colorado Educational and Cultural Facilities Authority (CECFA) gave $9 million to the Catholic Educational Capital Corporation, which then offered it to Iona Prep, an all-boys high school in New York, to help purchase real estate that would allow it to open an elementary school. CECFA is not a state agency, but it is able to provide bond...

Editor's note: This post is the final entry of a three-part series on Race to the Top's legacy and the federal role in education. You can read the first two entries here and here.

In two recent posts about Race to the Top (RTTT), I expressed skepticism about a sunny assessment of the program’s influence and critiqued the mindset behind federal efforts to remake complex education systems.

But my M.O. is not to disparage all federal K–12 activity. From Brownthe National Defense Education Act, and Title I to the charter school grant program, NCLB’s disaggregated data, and the D.C. Opportunity Scholarship Program, Uncle Sam has done some serious good for our schools. So I believe that there should be a federal K–12 agenda (for instance), and I hope both parties’ presidential candidates start articulating one.

What I’m interested in is fashioning some rules of the road. The agnosticism/nihilism of insisting on no federal activity ever would’ve amounted to a “Road Closed” sign to high-return investments like NAEP and seed funding for charters. The progressive hubris of believing that the feds can solve everything, on the other hand, is the on-ramp to P.J. O’Rourke’s bon mot about government-induced pileups. I think the...

When is a test not a test? Sure, there’s an easy answer—“When it doesn’t send opt-out parents running for their torches and pitchforks”—but that’s not what we’re looking for. Give up? It’s when the test is a “locally driven performance assessment.” An article in Education Week explains the rise of these specially designed student tasks in eight New Hampshire school districts, which have been granted authority by the Education Department to employ them as alternatives to standardized tests. The districts will work with the state and one another to develop Performance Assessment of Competency Education (PACE), a series of individual and group queries that allow students to exhibit mastery over a subject without filling in bubbles. The challenges (which include the design of a forty-five-thousand-cubic-foot water tower to show proficiency in geometry) sound stimulating, and the Granite State’s record in competency-based education is extensive. It’s not hard to see why such an option would be attractive to state and local officials, especially when testing has become roughly as popular there as a leaf-peeping tax. What remains to be seen is whether this approach to assessment captures the same vital data as traditional measures.

Of course, some folks...

School finance systems are complicated, often controversial, and subject to a certain amount of speculation. Are public schools “overfunded” or “underfunded”? Are they wasting precious taxpayer dollars or putting them to effective use? From which sources are they receiving their funds, and what strings might be attached? Are our public institutions on solid financial footing, or are they in dire straits?

These are fundamental questions that parents and taxpayers have every right to ask and to which they’re owed clear answers. One crucial disclosure is a district’s statement of revenues and expenditures—akin to a business’s income and expense statement. This report describes how a district raised revenue and how it spent those funds during the past fiscal year.

But you may be surprised to learn that the state revenues received and transferred to charters are also included in a district’s financial statement. You wouldn’t know it by simply looking at the statement: Consider, for example, the statement of revenues and expenditures for Cincinnati City Schools in the figure below.

You’ll notice that the presentation doesn’t clearly display the $57 million received to educate Cincinnati...

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