How Efforts to Fund Schools More Equitably Actually Worsened Racial Inequality

When states overhauled their school funding models to promote equity, they helped narrow the financial gap between high- and low-income districts, but those efforts did not narrow racial and ethnic gaps, a new study finds.

In some cases, differences in funding between largely white and more diverse districts widened. The inequality was most pronounced between states, rather than within them, researchers found, largely because wealthier, less diverse states typically fund their schools at higher levels.

“There’s been a lot of work showing that those reforms did successfully increase equality by student income,” said Emily Rauscher, a sociology professor at Brown University and a co-author of the study, published Sept. 10 in the journal Educational Evaluation and Policy Analysis. “I was expecting that these same reforms would also reduce inequality by race and ethnicity. To my surprise, they did not.”

Because funding for schools is largely generated by property taxes, districts with larger populations of students from low-income households, which often have lower property values, tend to have less local funding per student than districts with wealthier student populations.

States have sought to remedy those disparities by adopting school funding reforms that provide additional money to districts with lower local tax revenue and weighting per-pupil funding to provide additional aid based on characteristics like student disability, poverty, or English-learner status.

Researchers weighed the effects of finance reforms adopted by 40 states between 1990 and 2022. Those changes resulted from court orders in cases challenging the constitutionality of school funding models, legal settlements, ballot issues, and laws passed by state legislatures. The analysis used data from the U.S. Census Bureau and the National Center for Education Statistics to compare districts in the top quintile for child poverty and enrollment of Black and Hispanic students with those in the lowest quintile.

What they found: Across states, the funding-model changes reduced spending gaps between the highest- and lowest-income districts by an average of $1,300 per pupil—sending a bigger share of resources to lower-income districts.

But contrary to researchers’ initial assumptions, the funding gap between districts with the lowest and highest percentages of Black students widened by $900 per pupil following the reforms. Districts with the lowest enrollment of Hispanic students gained an additional $1,000 per-pupil spending advantage over those with the highest enrollment.

Within states, changes to school funding models were most effective at remedying racial and ethnic disparities when those gaps were already relatively narrow, Rauscher said. States with higher enrollments of Black and Hispanic students and more racial and ethnic segregation between districts often had lower per-pupil funding than their less diverse counterparts, researchers found, and changes to their funding models did not help narrow the nationwide disparities.

“What these states’ school finance reforms are doing is really admirable,” Rauscher said. “I think it’s great that state legislators are tackling this issue. What’s going on here is the variation in funding between states.”

Changing those persistent gaps at the national level would require more than state and local efforts, researchers concluded, including a more coordinated effort by the U.S. Department of Education to help level spending among states.

Rauscher discussed the study in this video produced by the American Educational Research Association.