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Excerpted from Poverty & Race, Volume 32, No.2 (April – July 2023)
Funding disparities between school districts are driven by racial and economic segregation, and yet progressive state legislatures have generally bypassed desegregation in favor of compensatory funding for districts with greater student need and lower property wealth. Could these same progressive funding systems sometimes be inadvertently supporting segregation, or penalizing districts that attempt to deconcentrate poverty? If so, how can these unintended consequences be ameliorated, and what would a pro-integration state school funding system look like?
We previously explored these questions in the context of federal Title I funding in a 2019 policy brief for the National Coalition on School Diversity, “Title I Funding and School Integration: The Current Funding Formula’s Disincentives to Deconcentrate Poverty and Potential Ways Forward.” In that brief, we point out that the funding formula in Title I can financially penalize high-poverty districts that participate in interdistrict transfer programs by losing per-pupil funds and can remove funding flexibility for individual schools that drop below a 40 percent poverty rate. This issue even made it into the 2020 presidential campaign platforms of Elizabeth Warren and Bernie Sanders (who pledged to “end funding penalties for schools that attempt to desegregate”).
Since state education funding constitutes a much larger portion of school budgets than federal Title I funds, the potential impact of state funding incentives and penalties could also be more significant. But how serious is this concern? In our preliminary review of educational funding systems in states with relatively progressive funding statutes (Maryland, Massachusetts, North Carolina, Minnesota, New Jersey, New York, Delaware, and Wisconsin), we found two possible areas of concern. First, similar to Title I, since supplemental funding is often based on the count of low-income students attending schools in the district, an exodus of low-income students to participate in interdistrict integration programs could have a significant financial impact on the sending (high-need) district, with no compensatory funding following more affluent children coming into the same district through magnet schools or neighborhood change.
Second, within districts, there may be unintended consequences of state funding systems that give enhanced funding based on high poverty concentration in specific schools. Of course, compensatory funding should increase as school-based poverty increases, but potentially “rewarding” districts for maintaining concentrated poverty in specific schools (rather than deconcentrating poverty across a district) raises education policy concerns. Funding systems that have a specific funding cut-off “cliff” for supplemental funding may inadvertently create disincentives to intradistrict integration and poverty deconcentration for both district and individual school leaders. One example of this can be found in Minnesota, where districts receive increasingly generous per-pupil payments as individual schools increase in poverty concentration (Strom, 2022). Maryland’s “concentration of poverty grants” operate in much the same way, with additional funds allocated to schools with a minimum of 65 percent school poverty (Md. Code Ann., Educ. §5–223).
It also matters how the district distributes compensatory funds calculated on school-based poverty rates. In Minnesota, for example, only 50 percent of the additional funds awarded for high-poverty schools are earmarked for spending at those schools. Does this encourage districts to maintain poverty concentration at the schools generating these funds? (We hope not!) In Maryland, by contrast, extra funds allocated by the state for schools with greater than 65 percent poverty concentration are required to be allocated directly to those schools. In both scenarios, poverty deconcentration can result in a loss of revenue.
Avoiding integration penalties and affirmatively promoting school diversity
Interdistrict school integration programs – and even traditional open enrollment systems – face potential financial disincentives for both the sending and receiving districts. Ideally, the receiving (low-need) school district should have an incentive for welcoming new low-income students into their system, and the sending (high-need) school district should not bear too heavy a financial penalty for participating. Connecticut has tried to achieve this balance in the Open Choice (city to suburban) school integration program, which gives increasing per-pupil payments to receiving towns based on their percentage of city enrollment, and also permits the sending and receiving districts to split the state Education Cost Sharing allocation for each participating student (decreasing the aggregate resident student count by one half of a student for the sending district and increasing the aggregate resident student count by one half of a student for the receiving district for each Open Choice student). Similarly, in Wisconsin’s former Chapter 220 integration program (now phasing out), the receiving suburban district received state educational aid equal to the average net cost per pupil for each pupil accepted, and the sending district (Milwaukee) continued to count each outgoing pupil as 3/4th of a pupil for funding purposes.
Avoiding financial incentives for maintaining high poverty rates in individual schools within a district can be achieved by avoiding bright-line thresholds for enhanced funding, and by holding schools harmless for reducing poverty concentration over time. Maryland’s concentration of poverty grants includes a specific threshold for enhanced funding (65 percent poverty) but ameliorates that policy somewhat by decreasing the poverty concentration threshold by five percent in each of the next seven years, allowing these schools to continue to benefit from a compensatory poverty concentration “bonus” even as they reduce poverty concentration over time.
Beyond eliminating potential adverse financial incentives, what kinds of positive state funding incentives might actively encourage diverse districts to promote racial and economic integration between schools? One state approach could be modeled on the proposed federal Strength in Diversity Act, offering generous planning grants to local districts to plan for integration, followed by substantial implementation grants to move forward with school diversity plans. Other incentive structures could be directly built into state funding systems so that funding could be provided annually to relatively diverse districts for progress in reducing racial and economic segregation across schools.
The existence of funding structures that encourage and perpetuate segregation are well known to advocates of fair housing, but not generally acknowledged by advocates for educational equity. Further research along the lines sketched out above would be helpful to include in the next generation of school finance reform.
Black, D. W. (2010). The Congressional Failure to Enforce Equal Protection Through the Elementary and Secondary Education Act. B.U. Law Review, 90, 313.
Knudsen, B. & Tegeler, P. (2021). Which Districts Might Benefit from the Strength in Diversity Act: A Look into the Most Diverse, But Segregated, Large School Districts in the United States. National Coalition on School Diversity.
Strom, T. (2022). Minnesota School Finance: A Guide for Legislators. Minnesota House Research Department.
Tegeler, P. & Hilton, M. (2018). Disrupting the Reciprocal Relationship Between Housing and School Segregation. A Shared Future: Fostering Communities of Inclusion in an Era of Inequality. Joint Center for Housing Studies of Harvard University.
Tegeler, P., & Milwit, L. (2019). Title I Funding and School Integration: The Current Funding Formula’s Disincentives to Deconcentrate Poverty and Potential Ways Forward, Policy Brief No. 9. National Coalition on School Diversity.
Wilson, E. (2021). Monopolizing Whiteness. Harvard Law Review, 134, 2382.
Philip Tegeler (firstname.lastname@example.org) is Executive Director of the Poverty & Race Research Action Council. The author is grateful for excellent background research assistance provided by Proskauer Associates Noah Travis, Gregory Dewire, Chi-Yu Huang, and Alexandra Stanley.