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The Index of Education Effort

There are many ways to rank education spending--by student, by technology purchases, by state and fe

One of the biggest battlegrounds in K-12 education in this country has been, and always will be, how it is funded.

Arguments and lawsuits dot the country; at any one time a handful of lawsuits are threatening to topple a particular state's funding formula. Indeed, the main criticism of No Child Left Behind hasn't been its loss of local control or its reliance on standardized tests, but how it is--and many say, isn't--being funded.

So why do you need another report about school spending?

Two simple reasons: The Index of Education Effort is different, and by using it properly, districts nationwide can effect real change--narrowing the funding inequities in their specific state or with the town right next door.

The concept behind the report is simple.

By looking at each school district's median income and factoring how much local tax money that district spends on education, the report calculates an effort number. The real benefit to this report isn't to find your own district's effort number, but to compare that number with similar districts in your state, or with the group of districts in your immediate area. The results may surprise you.

Quantifying Local Taxes

The Index of Education Effort report was produced jointly by District Administration and AEL, a West Virginia-based nonprofit corporation that provides services to educators, education publishers and policymakers. Thomas Husted, of American University and CNA Education, helped compile the statistics used in this report.

Before diving into the report's specifics, let's consider the landscape of this country's education funding. In academic year 2000-2001, nearly $401 billion was collected from all levels of government to fund public primary and secondary education in the United States. State, local and intermediate governments accounted for about 92.7 percent of these total government education funds, with local and intermediate sources providing about 43 percent of total funds.

When considering local funding in the past, most people look at the demographics and the economic landscape of each town or city. School districts with similar demographic characteristics are expected to vary in their education spending efforts based on their ability to finance these expenditures using property taxes. Indeed, unequal local education spending is, in part, a direct consequence of the inequities in property wealth across local districts. However, even under conditions of equal taxable wealth and income, it is likely that local governments will vary in the levels of education spending due to differences in the willingness of local citizens to tax themselves or to devote resources to education as opposed to other government services. Local government financial support is also affected by the state's financial responsibility for education. State government support varies across the country and depends, in part, on legislative or court-mandated efforts to reduce education inequities resulting from the traditional reliance on local property taxes. States that have worked to decrease the inequities in education funding have generally done it by shifting a higher proportion of fiscal responsibility from local governments to the state government, usually through the use of a more broad-based tax such as a state income tax. Local effort to raise revenues--that is, the willingness of citizens to tax themselves--is expected to be lower in those states where the local government has a relatively small responsibility for government education revenues and citizens instead are exerting effort to pay income or other state-mandated taxes.

This report conducts an analysis within each state of the effort that local communities expend to fund education relative to their wealth or fiscal capacity. It combines financial data from every K-12 school district in the country--10,574 unified (primary and secondary) school districts. The report has information on the socioeconomic characteristics of these districts collected from the census. It considers two straightforward measures of local effort. It defines the school district's local support as the amount of per-pupil education revenue collected from local sources (usually property taxes). Finally, it compares that support with a measure of the local community's fiscal capacity--median income--and derives an effort index score.

These measures are the payoff of this report. For instance, as a superintendent you've always suspected that although your district's per-pupil spending matches other similar districts in your state, that your municipality actually spends less on education that these other districts. This report--through a series of state specific charts--allows you to see if your hunch is correct.

And that information is really just the beginning. To make this point, let's consider this specific example from Blount County School District in Alabama. Blount County is an urban school district with 7,373 students. The median income of its residents is $35,838 and its total per-pupil expenditures are $5,958, the lowest per-pupil expenditure in the state. As a whole, four districts in Alabama spend more than $10,000 for every student, three spend less than $6,000 per student, and the average per-student expenditure statewide is $6,503, the sixth-lowest figure in the country.

Blount County spends $1,295 in local tax money on education; statewide, municipalities in Alabama fund 23.8 percent of the district's total budget. Dividing the county's median income of $35,838 into the county's $1,295 local contribution gives Blount County an effort score of 3.61. This means that for every dollar in median income in this district, 3.61 percent of that money is plowed back into the education budget. That's the fourth lowest effort number in a state that has 128 districts, and far below the state's average effort figure of 5.8 percent.

The real benefit of all this computing is the ability to stack Blount County's contributions against the rest of the state. Appropriate comparisons can be made across districts in the same state with similar characteristics. There are many other city districts with enrollments and income levels similar to Blount County, whose local contribution to education were much higher. For example, Decatur City School District had local per student revenues of $3,572 to bring total per-student revenues up to $8,034. This contribution was from a community that earned just under $37,000, which amounted to only about $1,000 a year difference in median income from Blount County. Decatur City's effort index was 9.66, more than two-and-a-half times higher than Blount County's effort index.

A closer look at the differences between Decatur and Blount County show that Decatur's local contribution to its education budget is 44.5 percent, only six districts in the state apply a higher percentage of local revenue to education spending.

This information raises compelling questions about the funding of these two districts, and indeed the funding throughout the state of Alabama.

As the charts on page 73 show, Blount County gets more state money per student than Decatur City Schools. Does this lead Blount to lower its local contribution to education, or is Decatur's stronger local effort a reflection of that community's belief in education's importance? Has the gap between these two districts widened or narrowed over the years?

Sources of Education Revenue

Property tax is, by far, the largest single source of local education revenue. Nationwide, the average state gets 77.25 percent of its local education funding from property taxes, with the median state percentage at 87 percent, according to the National Center of Education Statistics figures for the 1998-99 school year. School districts in 11 states use property taxes exclusively to raise local revenue for education.

The structure of property taxes in most localities is straightforward--tax liability is determined by multiplying the (usually) locally determined tax rate by the state- or local-assessed value of the property tax base. Local support for education, as measured by the per-pupil local revenue, is shown in the chart on page 67. The average amount is about $3,000, but there are large differences in this measure across the states, from $40 in Hawaii to $6,116 in New Jersey.

Overall, state government funding represents the largest source of education revenue. Nearly two-thirds of the state funding support for primary and secondary education comes from taxes on income, sales, and, in a few states, property.

The federal government provides the smallest percentage of total revenue for education. Federal and state financial involvement in local education is primarily through intergovernmental aid to school districts. Basic support aid covers part of the school district's operating funds and is generally redistributive based on need. The typical method for defining need is by approximating the number and socioeconomic characteristics of the students and the demands placed on the school district's education system.

State and local governments dominate the financing of education across the states, but there is also considerable diversity in the shares of local, state and federal financial involvement in each state's education funding. For example, the local percentage ranges from 0.5 percent in Hawaii to 62.2 percent in Nevada. As described above, a larger state percentage could reflect the citizens' desire--or a court mandate--to improve the equity of education spending.

Local Support and the Effort Index

Real estate wealth and household income are the largest determinants of local education support. Indeed, a recent document from the U.S. Department of Education finds a strong positive relationship between local per-pupil revenues and two separate measures of school district wealth--median value of owner-occupied housing and median household income. Moreover, using a similar concept as the one employed in this report, the Department of Education has developed "indicators of public effort" at the national level (i.e., public revenue per student and public revenue for education as a percentage of total personal income). This report takes a deeper look at public effort, particularly the local level.

Real estate wealth is obviously an appropriate factor in determining the ability of local governments to fund education. However, there are some difficulties with using house values as a gauge of fiscal effort for comparative purposes. Since there are nearly 75,000 local tax jurisdictions in the U.S., there are large variations in the categories of property covered under the tax system, the method of property tax assessment, and the type and size of any allowable exemptions to different taxpayers. These differences in property assessment practices and tax base definitions make simple comparisons of tax rates across school districts, within and across states, particularly problematic. Another difficulty is that a simple measure of house property wealth might not reflect the revenue potential because it does not take into account variations in the amount of commercial, utility, railroad, and agricultural property across the local tax jurisdictions. Evaluation of these non-residential properties for tax purposes poses additional problems and can create inequities that would not be revealed with simple comparisons of median house values. For these reasons, in deriving the effort index statistic this report compares the local portion of a school district's education revenue (what the report calls local support) to a more general measure of the local government's ability to finance these expenditures, the area's median household income. In summary, the effort index is a school district's local support as a percentage of district median household income.

Comparing Districts

The primary purpose in collecting these statistics is to make comparisons among comparable districts with regard to their fiscal efforts in supporting education. However, care must be taken when such comparisons are made. Education spending is determined by political and legal arrangements. In many states, property tax rates are determined through elections. In other states, school districts may not have any control over their own budgets. Some school districts are fiscally dependent on a higher (county or state) level of government's taxing authority and, in those cases, education competes with other budgetary demands on government resources. Summary measures of effort tend to obscure such local circumstances, which makes across-state comparisons especially problematic.

Going In-Depth State by State

As mentioned earlier, this report includes the ability to look deep within each state to gauge where the money comes from and how one district's funding compares to another district in the same state. Another key feature is the ability to group districts in each state into five funding levels. Each separate state effort index chart (Texas is shown to the right as an example) is keyed to the circumstances of that particular state; that is, the levels of effort labels (lowest to highest) have been assigned based on a rank ordering of the effort index scores within the state, and division into quintiles, such that:

HIGHEST 81st to 100th percentile

HIGH 61st to 80th percentile

MEDIUM 41st to 60th percentile

LOW 21st to 40th percentile

LOWEST 1st to 20th percentile

Sticking with the Texas example, let's see what a look at this chart shows specifically. Of the 973 districts counted in the state effort report, it's clear that a high percentage of districts cluster around per-pupil support of between $1,000 to $5,000, with median income for these districts ranging from $20,000 to $40,000. In these cases, the differences between being ranked as a district that gives a high effort to the lowest effort can be relatively minor. For instance, 49 districts are ranked as giving a high effort if the districts spend about $2,500 in local taxes per student with a median income of $25,000. If a district dips down to spending about $2,000 per student with local funds and the median income remains the same, which is the case for 43 Texas districts, these districts effort are judged medium. If a district slips down to spending about $1,500 in local taxes per student, and the median income remains $25,000, the effort is ranked as low. This applies to 14 districts in the state.

But there are districts that stand out. Of the 194 Texas districts that are ranked as giving the highest effort, 34 of them spend more than $15,000 in local revenues per student. Most of these high-spending districts, 12, have a median income of $35,000. But let's examine two of the districts that span this range. Marathon Independent School District 902 is a rural district with just 76 students. Obviously the low number of students can lead to a greater variation in spending, but Marathon has a median income of $24,375 and yet it spends $16,303 in local revenue per student. This nets the district an effort rating of 66.88, and it shows that local revenue pays for nearly 78 percent of the total per-pupil spending of $20,921.

In Eanes Independent School District 909, the effort is still high, but the figures are vastly different. Eanes, an urban district with 7,260 students, has a median income of $97,248. So although it spends $14,554 in local revenue per child, its effort rating is much lower, 14.97. Eanes' local contribution is more than 94 percent of what the district spends per pupil, which is $15,459.One other district that stands alone in the Lone Star state is Sabine Pass Independent School District 913. This rural district of 149 students spends more than $50,000 in local revenue for each of its students. This is almost 97 percent of the district's total per-student expenditures. Sabine's effort rating is an almost unbelievable 141.81.

Related Information

A Closer Look At:

New Hampshire

Locals seem to get what they pay for in this small Northeast state. Of the 15 districts that spend a total of more than $10,000 per student, only one of them fails to be ranked high for local funding. The urban Exeter Region Cooperative School District does use local funds for more than half of its per-pupil spending of $10,149, but because of a median income of nearly $58,000, its effort level is 9.40, making it average in this state.

By comparison, a district of similar size, the urban Portsmouth City School District, spends $6,306 in local taxes on education although its median income is $45,344, almost $13,000 less than Exeter. Portsmouth's effort level of 13.91 ranks it 10th in the state.

A closer look at the numbers for these two districts show that while Portsmouth gets more federal aid ($1.5 million) than Exeter ($850,000), the tables are turned when it comes to state funding. Exeter leads in this area, bringing home $12.8 million for its 2,900 students, while Portsmouth nets $11.3 million for its 2,679 students. So it appears the reason Portsmouth spends $913 more per student is directly attributable to its local contribution, which is $864 above Exeter's local effort.

As a state, New Hampshire spends $8,223 per student, placing it 25th in the country. But the state averages $3,607 in local spending for each student, a fi gure that ranks New Hampshire 21st nationwide. Its effort index of 7.29 lands it 29th in the country.


Rural rules in Michigan. Of the 105 top-ranked effort districts, all but 36 of the districts are rural. (Seventeen districts are classifi ed as urban; 19 are suburban.) Of the bottom 106 districts, the highest number-38-are rural, but 36 are suburban and 31 are urban.

Michigan has one of the highest per-pupil expenditures in the country at nearly $9,000 per student, but just a little more than a quarter of that money comes from local funds. The state pays for nearly two-thirds of all local district expenses; that's the eighth-highest percentage in the country. But this doesn't mean that the effort difference between the highest districts and the lowest districts is less than it would be in most other states.

Let's consider two rural districts to prove the point. Mayville Community District 10 and Harbor Springs Public School are both rural districts with about 1,100 students. Mayville spends $7,674 per student, but it kicks in just $601 of local tax revenues for each student. Mayville's effort rating is 1.43 and it is ranked as the lowest district effort in the state. In the highest designation sits Harbor Springs. Its per-student expenditures are $12,332, $4,600 more than Mayville. Much of this is due to its local investment in education. Harbor Springs socks more than $10,500 into education for each of its students, earning it an effort index of 23.83, the eighth-highest in the state.


California is a big state that spends an average amount on education, but not much of that money comes from local revenue. California, with nearly 1,000 school districts and more than 6.1 million students, spends $8,306 per child, ranking it 24th in the country. But its local per-pupil expenditure of $2,517 ranks its 36th overall.

As you might expect, the Golden State has a bevy of large districts. Out of the 987 California districts ranked in the effort index, 111 of them have more than 10,000 students. Only fi ve of these districts-Santa Clara UnifiedSchool District, Santa Rosa City Schools, San Francisco Unified School District and San Diego City Unifi ed School District-are among the 72 districts given the highest effort ranking. Conversely, of the bottom-ranked 71 districts, 38 of them are districts with more than 10,000 students.

To see how two large districts that are both rated high can differ, let's look at Santa Clara and Santa Rosa. Both districts are classifi ed as suburban; Santa Clara spends $11,539 for each of its 13,555 students. Santa Rosa spends $8,303 per child and it serves 17,645 students. Locally, both districts buck a statewide trend. While the average district in California uses local taxes to pay for 30 percent of its school budget, Santa Clara's local contribution is 68 percent of its education budget and Santa Rosa uses local taxes for 55 percent of its education spending.


It's unusual when one of a state's largest cities has the highest effort index, but that's what has happened in Georgia. Atlanta, the state's fi fth-largest district with almost 57,000 students, contributes $10,136 in local taxes per student. That's good enough for an effort rating of 29.42, which not only leads the state, but is far ahead of second place Clark County School District's effort rating of 18.31.

Atlanta's total education revenue is $848 million. Of that, $211 million comes from the state and $63.5 million from the federal government. That leaves a whopping $573.5 million that comes from local taxes. In fact, Atlanta's local contribution to education of $10,136 is higher than the total spent on per-pupil education for all but nine of state's districts counted in the effort index.

Atlanta's big effort comes out of an average median income for its residents of $34,449. Looking at another district with a similar median income, the numbers are much different. Baldwin County School District, a rural district with a median income of $35,421, contributes just $1,870 in local revenue to education. Its per-pupil spending is $8,223, and its effort rating of 5.28 puts it in the bottom fi fth in the state. That means that out of roughly the same median income, Atlanta puts more than five times the amount of local money into education than Baldwin County does.

South Dakota

As you would expect from a state as sparsely populated as South Dakota, there are a fair number of small districts. In fact, of the 168 districts ranked in the effort index, nine of them have fewer than 100 students, while just four districts have 3,000 students or more. Slightly more than half of all of South Dakota's education funding comes from local tax revenues, the 10th highest percentage in the country. But the state ranks low in money spent per pupil. South Dakota's per-pupil rate of $6,883 is the 10th lowest in the country. Statewide, municipalities give $3,501 to education, giving the state an effort index of 9.92.

The median income per school district community tells a real story in this state. Of the 14 districts in the effort index that have median incomes of $40,000 or more, 12 of them are rated as giving the lowest effort in the state. But of these 12 districts, four of them give more local money to education than the state average.

For instance, Brandon Valley School District 49-2 spends $3,592 from local revenue on education. But because the urban district of 2,595 students has a median income of $58,000, its effort level is 6.21, one of the lowest rankings in the state. Burke School District 26-2 spends $3,556 in local taxes on education, but because its median income is just $22,179, its effort rating is 16.03, making it one of the highest in the state.