Financial Support of Schools

HISTORY
Jason L. Walton

CAPITAL OUTLAY IN LOCAL SCHOOL SYSTEMS
John G. Augenblick
Anne K. Barkis
Justin R. Silverstein

STATE SUPPORT
Lawrence O. Picus

HISTORY

School finance history is characterized by varying degrees of local, state, and federal support. Throughout history, local support of schools has suffered from glaringly inequitable tax structures resulting in wide variations in funding. State intercession has reduced local control but increased equalization in funding through regulations based on conditions associated with state aid. Federal financial activity evolved rapidly in the latter half of the twentieth century with contributions reaching their highest levels in the 1970s and again in the late 1990s. Federallevel rhetoric about support of education reemerged at the beginning of the twenty-first century, but the levels of funding and programmatic efforts were fractured along political divisions. These trends may be viewed within a historical perspective that encompasses five periods, beginning in 1607.

The Colonial Period

The colonial period began with the establishment of the permanent settlement at Jamestown and ended with the conclusion of the Revolutionary War in 1783. During this period, support and control of schooling were exclusively a local matter. Local support, grounded in either the church or the home, grew from limited support of European investors. Monies that were earmarked for education were often redirected to other community needs, such as the building of hospitals. Schooling in the southern colonies was based on apprenticeships or the use of pauper schools. Wealthier areas in the Northeast supported community-financed grammar schools. The wide disparity in a revenue base for schooling mirrored similar disparities in quality of teaching, buildings, and curricula.

Once agreement had been reached to build and finance a school, local communities identified revenue sources that included subscriptions (specified amounts paid by townspeople), rents, donations, bequests, land grants from the British Crown, and other efforts made from the resources of the town. Puritan-Calvinist New England supported taxation to support an education system of common schools for all students, Latin schools for upper grades, and a college for ministerial preparation. A different system evolved in the mid-Atlantic colonies because these colonies did not have a church majority. Parochial schools dominated, despite their inevitable decline because of a lack of state regulation. State interference was resented and opposed. The state had no role or obligation to support such schools. The dominant trend emerging from the colonial period was that public education should not be limited to poor children or require tuition.

The National Period

The national period began with the close of the Revolutionary War and extended through the end of the Civil War. Publicly supported and controlled education was implemented slowly. Financing of schools suffered because of needs associated with national security, the economy, and a significantly rapid increase in population. Local schools became less accessible due to westward expansion. Greater dispersion of the general population resulted in town decentralization and the establishment of the school district. Creating districts extended the concept of local control but resulted in poorer financing and reduced quality. Despite such limitations, the idea of the common school prospered between 1830 and 1865. The idea of tax-supported schools for all children also prospered. The driving mechanism for the common school movement was an expanding national economy based on manufacturing, trade, and industry.

Tax support during this period took a tremendous step forward. The designation in the western territories of sixteenth section township revenue increased support to common schools. (Revenue from the sixteenth section of each township was earmarked for the support of the township's common school.) Revenue obtained from two other sections within each township was also set aside to endow a university. States from the original colonies that did not have township revenue looked to other methods of tax support including literary funds (New York, Maryland, and New Jersey); liquor-license fees (Connecticut); and state lotteries (New York). Bank taxes were also used between 1825 and 1860. States that did not use direct taxation looked to the property tax, but widespread use of this form of taxation was hard-won. Critics of pauper schools argued that the segregation of the poor into special schools did not represent the American ideal of an egalitarian democracy. Free schools also came under attack, because many were not actually free. In many cases, these schools were supported by rate bills that required a family to pay a tuition based on the number of children attending the school.

One of the main outcomes of the national period was an increase in state supervision with accompanying state requirements. Both outcomes were based on conditional state aid, a tactic also followed by the federal government. Government aid through land endowments to church schools was effectively ended. An outcome of the increase of sectarian control (loss of church dominance) over education was a decrease in the quality of local education and school attendance. This condition continued until state supervision over local outcomes began to increase.

The Post–Civil War Period

The post–Civil War period began with the Reconstruction era and continued until 1905. The Civil War slowed educational expansion in the North, and completely stalled it in the South. Not until 1900 did southern educational standards come to meet the standards of 1860. In the South, education was in such a dilapidated state that the average value of a school building in 1900 was about $100. The South was the last region to establish tax support because of slow improvement in the southern economy and it took the South a much longer time to generate a sufficient revenue stream to meet the needs of a public education system. The North, on the other hand, benefited from rapid urbanization, a vigorous economy, and an increased demand for skilled workers. Taxation reflected earlier trends, with nontax revenues used when possible and the property tax serving as the foundation for securing local support. State funding, when available, was characterized by a wide disparity in levels of aid to wealthy and poor areas.

The Early Reform Period

Beginning in 1905, the early reform period witnessed increases in the general population, the number of students attending school, average daily attendance (ADA), the number of teachers, and programs for handicapped children. Greater revenue was available for maintenance, operations, capital outlay, and transportation. Competition for tax dollars increased due to the growing number of lobbyists for special interest groups. Taxes, while more acceptable, were no more popular, and tax dollars were not automatically available for school support. Of great concern during this time was the idea of finding a fair and equitable means of distributing school funds and of maintaining local control.

This was also the era that witnessed the birth of school finance theory. The evolution of school finance theory can be traced through the work of a handful of scholars. As early as 1905, Ellwood Cubberly argued that the states should be responsible for ensuring that local communities establish and maintain local schools, for requiring employment of qualified teachers for a minimum annual period of time, and for setting requirements for educational outcomes. In 1922 Harlen Updegraff promoted the idea of rewards for local effort, incentive grants, equalization aid, and a variable level foundation program of state assistance based on local tax effort. George Sturgis followed in 1923 with proposed penalties for noncompliance with minimum state standards. Sturgis used a minimum, uniform tax levied for each school district and a level of state aid based on the difference between revenue acquired by a wealthy and a poor district. In 1924 Paul Mort defined a satisfactory minimum program and developed a measure of financial need based on a weighted pupil-typical teacher method that used such factors as ADA, educational level, and size of district. Henry Morrison argued that earlier efforts had failed and proposed a full state support model based on the fact that under law education is a state responsibility. The practical foundation for establishing state support through various aid formulations was created through the work of such theorists.

The Modern Reform Period

The modern reform period began in 1965 when President Lyndon B. Johnson signed the Elementary and Secondary Education Act (ESEA) as part of his War on Poverty. Although this period is known for a diversity of finance-related reforms such as improved property assessment and inclusion of income in district wealth determination, ESEA was the signal event in the evolution of federal financial activity. ESEA enacted a wide range of programs such as Title I, which pushed states to do more to serve their most needy students. Separately, Head Start services were provided for underprivileged preschoolers. Many laws followed ESEA targeting special needs groups including the Bilingual Education Act, the Native American Education Act, and the Education for All Handicapped Children Act (later renamed the Individuals with Disabilities Education Act). Federal aid reached a twentieth-century zenith under the Carter administration (adjusting for inflation), dropped slightly during the Reagan administrations, and resurged again during the two Clinton administrations. Education funding remains a key political issue in the twenty-first century for both Republicans and Democrats, despite their parties' very different views on the funding priorities.