Efforts to improve equality of school funding are like a carnival shell game. Focusing too closely on one shell can distract from a sleight of hand with another. While state school funding reforms work to reduce inequality of school resources by income, sociologists know that inequality of school funding is not the result of income disparities alone. Any effort to understand—or reform—school finance must also grapple with longstanding inequality of educational opportunity by race.
Historical Background
Much of America’s history of racial educational inequality stems from state policy and district boundaries. In the past, some states explicitly engineered unequally funded, racially segregated districts. Even as states accommodated desegregation and recognized the egalitarian educational mandates in their constitutions, their commitment to the “sanctity of school district boundaries” constrained policies to allow White and upper-class people to evade specific reforms.
For example, advantaged families have used district boundaries to practice social closure and monopolize opportunities through “White flight’ or district secession. Amid rising income inequality and economic segregation, it has been affluent White families who have monopolized access to the most affluent school districts. Unequal funding across districts heightens the incentives and the consequences of these practices.
Attempts at Reform
Two large-scale efforts to address these disparities have been race-based school desegregation policies and race-neutral school finance reforms. As desegregation policy erodes, viable state-level finance reforms become increasingly important. For example, since the 1970s, state-provided funds allocated to districts in lower-income communities and with lower property values resulted in improved socioeconomic equity across school districts. These economically progressive state finance reforms were successful in increasing the equality of school funding across households by income. High-poverty districts now receive more funding than before, and funding levels are much more equal between high- and low-poverty districts. Successful progressive policy reforms are difficult to achieve, and this is a relatively rare success story in terms of funding by income.
Researchers, therefore, expected to find that the reforms would also improve racial equity in school funding. Our recent research, however, showed that this is not the case. In fact, in some cases, the same reforms that improved equality by income made funding less equal by race and ethnicity.
Reforms Improved Equality by Income, Not by Race
So, which school finance reforms most effectively reduced inequality in school funding by race and ethnicity? The 2018 study “School Finance Reform and the Distribution of Student Achievement found that across the nation, school finance reforms passed during 1990–2012 increased equality of spending by district income. More recently, a database of school finance reforms in 40 states from 1990–2017 was constructed, as well as state outcomes through 2022. This longer timeframe has allowed us to see changes at least five years after each reform and whether reforms have delayed or gradual effects.
Our research identified the most economically progressive reforms, including court mandates, legislative changes, and voter-approved reforms. By focusing on the most economically progressive reforms, we created an “upper bound” or conservative test of whether the strongest income-based reforms could improve racial equality. They hypothesized that if any reform could improve racial equality, the most economically progressive reforms should.
Progressive Finance Reforms Increased Equality by Income
The finance reforms achieved their goal, reducing school funding gaps between low- and high-income districts. After the reforms, funding increased by more than $500 per pupil in low-income districts, compared with high-income districts, on average. When including more recent reforms through 2017, funding increased by more than $1,300 per pupil in low-income as compared to high-income districts. In short, whether we look only at the early reforms or include more recent reforms, we find that the economically progressive school finance reforms made school funding more equal by income. Over the entire period, 1990–2017, reforms eliminated or even slightly reversed the funding gap identified in 1990, which was based on household incomes. The improvements in funding equality are impressive when many reforms are nominally progressive.
The picture changed when we examined funding gaps by race and ethnicity instead of income. The same finance reforms that improved equality by income either widened or did not change funding gaps between districts with the lowest and highest shares of Black or Hispanic students.
Economically progressive finance reforms increased the funding advantage of districts with low shares of Black and Hispanic students. Specifically, funding increased by $740 more per pupil in districts with low compared to high shares of Black students. The funding advantage of low-Hispanic districts increased even more, by $1,100 per pupil, compared to high-Hispanic districts.
The surprising takeaway is that even well-intentioned and effective reforms to improve economic equality can fail to improve, and may even exacerbate, racial inequality.
Why Such Limited Progress by Race and Ethnicity?
In Designed to Fail: Why Racial Equity in School Funding Is So Hard to Achieve (University of Chicago Press 2024), sociologist Roseann Liu documents how colorblind policies and political efforts to maintain advantages (e.g., through “hold harmless” policies) perpetuate inequality of funding based on race, despite progressive reform efforts. Well-resourced districts can also increase local taxes to offset declines in state funding. In short, the sanctity of school district boundaries still provides advantaged people opportunities to monopolize educational resources. Unless legislators actively focus on reducing racial inequality, these forces will limit any progress toward racial equity.
In addition to these political efforts, the disparities in the distribution of funding based on race explains part of the limited progress. Racial funding disparities exist both between and within states. State school finance reforms change the allocation of funding within states, meaning they cannot address between-state disparities, which account for much of the remaining gaps in school spending.
Furthermore, school finance reforms can only mitigate racial funding inequality to the extent that race and class overlap. If poverty and race are not strongly correlated in districts, then policies based only on income will not improve racial inequality and could even make it worse.
Where Did the Reforms Improve Racial Equality?
The findings are strongest in states that started out with less racial funding inequality and where race and income segregation don’t overlap much. In those states, the finance reforms did not worsen racial inequality and, in some cases, improved funding equality by race. States that had already demonstrated a commitment to funding equality by race seemed to retain that commitment as they improved equality by income. These reforms, however, did not reduce racial funding disparities in states with high race-by-income segregation, where there was the greatest need to improve and the most room to do so. This suggests that these states’ finance reform processes continued to protect the interests of districts with more White students, either due to the constraints of prior policies or the power dynamics of contemporary politics.
Key Takeaways
- Income-based reforms are important, but not sufficient, if policymakers have a dual goal of improving racial and income equality. States have reduced inequality of school funding by income. But in their efforts to do so, state lawmakers should also pay attention to racial funding disparities.
- States could allocate funds to help integrate racially isolated or marginalized districts. Desegregation efforts, including affordable housing and housing vouchers, could help address racial funding inequality from another direction.
- Federal policy is required to make substantial progress toward racial funding equality because states with lower school funding tend to have higher shares of Black students.
Sociological research shows the inability of state income-based reforms to address racial disparities in education. The two problems are not interchangeable, and policymakers who wish to address both need to attend to inequality by both race and income.
Editor’s Note: This policy brief was produced as part of ASA’s Policy Outreach Program Fellowship.