Understanding the First, Second, and Third Order Effects on Disparities in K-12 Funding and Outcomes (April – July 2023 P&R Journal)

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Excerpted from Poverty & Race, Volume 32, No.2 (April – July 2023)

Bruce D. Baker, Matthew Di Carlo, and Preston Green

In the spring of 2022, our team released a report that explained the connection between decades of housing discrimination in the United States and deficits in school funding and student outcomes (Baker, Di Carlo, & Green, 2022). That report included deep historical dives and empirical analyses of seven major metropolitan areas (Baltimore, MD; Oakland/Bay Area, CA; Birmingham, AL; Hartford, CT; Kansas City, KS; San Antonio, TX; Twin Cities, MN). In that report, we showed that:

• Across all seven metro areas, 90 percent of majority-Black/Latino districts spend below estimated adequate levels, compared with 12 percent of majority-white districts.
• These spending patterns matter for student outcomes: 85 percent of majority-Black/Latino districts are both inadequately funded and score below the U.S. average on math and reading tests, compared with six percent of majority-white districts.
• Out of the roughly 200 districts throughout all seven metro areas with funding above adequate levels and testing outcomes above the U.S. average, precisely one serves a majority-Black/Latino student population.
• The trends in these seven metro areas are part of a national pattern. For instance, of the over 1,300 majority-Black/Latino public school districts located in U.S. metropolitan areas, roughly 82 percent receive inadequate funding, compared with about 22 percent of majority-white districts. Among the roughly 3,200 metropolitan districts in which funding is adequate and scores are above the U.S. average, only 80 (two percent) are majority Black/Latino.

These findings were astounding, even to us—a team of researchers with decades of experience studying education disparities. Yet, they occurred neither recently nor accidentally. They are, rather, the result of decades of ongoing institutional housing discrimination.

First and second order effects

We identify first, second, and third order effects to connect these disparities in K-12 funding and outcomes to racial housing discrimination. First order effects include the persistent, measurable differences in the values of residential properties owned in Black, Latino, and white neighborhoods, as well as their respective incomes. For instance:

• In Baltimore City, Black household income was 70 percent of white household income and housing values 60 percent, while property taxes were 0.15 percent higher.
• In the San Francisco Bay area, Black incomes were only 66 percent of white income and housing values 62 percent, with property taxes 0.09 percent higher.
• The above-mentioned “first order” effects of racial segregation—wealth disparities by race and ethnicity—play out predictably in “second order” effects on school funding. That is, less taxable wealth, combined with the reliance on that wealth to fund K-12 education (e.g., via property taxation), means less property tax revenue for schools in Black and Latino communities. This creates pressure on these communities to tax themselves disproportionately to improve local schools.

We show, for example, that:

• In five of the seven metropolitan areas studied, the average Black and Latino student’s district receives local property tax revenue that is lower than that of the average white student.
• In the Bay Area, Hartford, Kansas City, and San Antonio, state aid is insufficient to close the local gaps completely, and in some cases (e.g., the Black/white gap in Baltimore and the Latino/white gap in Hartford), the differences in total state and local revenues remain substantial; and
• As a result, in all seven metro areas, the average Black resident pays a higher effective property tax rate than the average white resident, with Latino residents in most cases falling in between.

Once again, we also find these racial/ethnic disparities in home value and effective property taxes nationally. Third order effects on equal educational opportunity and adequacy Far more substantial are the effects of persistent housing discrimination on the costs of providing adequate education and equal opportunity, measured in terms of achieving common educational outcomes. Prior research has shown that racially isolated, majority-Black districts face substantially higher per-pupil costs to achieve the same academic outcomes as their majority-white, more affluent neighbors. Majority-Black districts have higher costs than districts with similar rates of child poverty but are not racially isolated (Baker, 2011).

In some metro areas, state aid might bring total revenues in majority-Black/Latino districts to levels close to those of majority-white districts, but this does not account for the fact that the per-pupil costs of achieving any common outcome goal are higher in the former districts. For making comparisons of equal opportunity and adequacy, we use our National Education Cost Model (Baker, Weber, & Srikanth, 2021). That model provides predictions of the per-pupil cost for every district in the country to reach national average outcomes in reading and math.

After showing that majority-Black/Latino districts are extremely likely to receive less adequate funding than their mostly white counterparts in the same metro area, we calculated what adequate funding levels look like with versus without considering district racial composition. That is, what are the additional costs created by racial isolation – notably Black student enrollment – in these districts?

Table 1 below shows the increased costs created by racial isolation in Baltimore City and in three Kansas City area districts. For example, if we ignore racial composition, the predicted per-pupil costs to achieve national average outcomes in reading and math in Baltimore City are just over $24,000. But, if we consider the share of enrollment that is Black, those costs rise to $32,214. Similar differentials in cost estimates exist in Kansas City area districts, and other majority-Black districts around the country. Baker (2011) explores causal explanations for these higher costs.

The implication of these findings is that to provide equal educational opportunity to all children, especially those in racially isolated, majority-Black school districts, we must target additional resources to those districts at least in part based on their racial composition (Green, Baker & Oluwole, 2008). This “reparatory aid” must be part of a comprehensive package for achieving equal educational opportunity for those in communities subjected to over a century of systemic racist housing policies.

Race was the cause

We illustrate extensively, through historical documentation, how race was the basis – often framed as economic necessity – for creating, exacerbating, and perpetuating racial residential segregation. At no point since the early 20th century has there been a significant gap, pause, or reversal in discriminatory housing policy. Rather, there has been a constant evolution in the discriminatory strategies and practices used to create and reinforce racial/ethnic segregation, for example:

• Municipal ordinances in the 1910s, which dictated where families of color were permitted to live and were declared impermissible by the Supreme Court in 1917.
• Racially restrictive covenants in property deeds, governed by private local homeowners associations, from the 1920s through the late 1960s, despite the Court declaring those restrictions unenforceable in 1948.
• Federally backed home lending policies that effectively codified racially differentiated home values into lending risk metrics (so-called “redlining”), effectively excluding Black homebuyers from the post-WWII homeownership boom.
• “Blockbusting” of middle-class white neighborhoods, tipping them to majority-Black via short sales, while promoting white flight to new suburban safe spaces (1950s to present).
• Continued racial steering of Black and Latino people to Black and Latino neighborhoods, respectively, coupled with discriminatory mortgage lending, identified in blind audit studies that we report as recently as 2016;
• Secessions of majority-white neighborhoods from otherwise racially mixed school districts, secessions which occurred throughout the 20th century, but picked up after the Brown v. Board of Education decision and continue today.

While many people seem to believe that racial housing discrimination is largely a thing of the past, the reality is that discriminatory efforts to create and reinforce racially segregated neighborhoods have only changed in form. Moreover, the legacy of even the oldest strategies is still evident in school funding disparities today. We show, for example, that in our seven metro areas, the districts that were heavily “redlined” during the late 1930s are virtually certain to serve larger shares of students of color, and to be more inadequately funded than their non-redlined counterparts in the same metro area. Contemporary housing discrimination, while less “explicitly” racial than that of the past, has been very effective in maintaining the racial and ethnic separation built throughout the 20th century.

Remedies must be race-conscious

In related work, we offered a “Reparations Framework” related to school funding, an approach focused primarily on mitigating the accumulation of further damages imposed on racially isolated communities. We recommended that framework include:

1. Directly mitigating the effects of racial differences in housing values by a) targeting additional state aid to offset the racial differences and b) providing rebates to Black homeowners for excess property taxes paid.
2. Auditing state school finance formulas to identify aid programs that reinforce systemic discrimination; and
3. Providing explicit aid in state formulas to close racial achievement gaps that result from racial isolation and the elevated costs of mitigating those gaps.

These steps alone, however, are not enough and are not fully reparatory. While even these steps seem a bit of a pipe dream in public policy, future considerations must be even more comprehensive and more aggressive in their undoing of our long history of racially discriminatory housing policies and their effects on public schooling and equal educational opportunity. The causes of present-day disparities are indisputably based on race. So too must be the solutions.

References

Baker, B. D. (2011). Exploring the Sensitivity of Education Costs to Racial Composition of Schools and Race-Neutral Alternative Measures: A Cost Function Application to Missouri. Peabody Journal of Education, 86 (1), 58-83.

Baker, B. D., Di Carlo, M., & Green III, P. C. (2022). Segregation and School Funding: How Housing Discrimination Reproduces Unequal Opportunity. Albert Shanker Institute.

Baker, B. D., Weber, M., & Srikanth, A. (2021). Informing Federal School Finance Policy with Empirical Evidence. Journal of Education Finance, 47 (1), 1-25.

Green III, P. C., Baker, B. D., & Oluwole, J. O. (2008). Achieving Racial Equal Educational Opportunity through School Finance Litigation. Stanford Journal for Civil Rights and Civil Liberties, 4, 283.

Green III, P. C., Baker, B. D., & Oluwole, J. O. (2020). School Finance, Race, and Reparations. Washington and Lee Journal of Civil Rights and Social Justice, 27, 483.

Bruce Baker (educpolicy@gmail.com) is Professor and Chair of the Department of Teaching and Learning in the School of Education and Human Development at the University of Miami. Matthew Di Carlo (mdicarlo@ashankerinst.org) is Senior Research Fellow at the Albert Shanker Institute. Preston Green (preston.green@uconn.edu) is Professor of Educational Leadership and Law at the University of Connecticut and the John and Maria Neag Professor of Urban Education at the Neag School.