The Case for Stronger School Funding Reform

Stronger School Funding Reform: A Necessity for Equity

Executive Summary

U.S. public education is at a crossroads. Despite decades of reform efforts, funding systems for K-12 schools remain deeply unequal, underfunded in many districts, and poorly aligned with students’ needs. Research consistently shows that more equitable and adequate funding improves student achievement, graduation rates, and long-term social and economic outcomes. Stronger school funding reform is no longer optional — it’s necessary.

This report argues that stronger reform should aim to:

Ensure adequacy: all students receive sufficient resources to meet high standards.
Advance equity: funding should be progressive (more for students with greater needs) and neutralize disparities based on district wealth, race, or zip code.
Promote stability and predictability: schools must be able to plan, hire, and maintain quality over time, not only fluctuate with political winds.
Boost accountability and transparency: families and communities must see how funds are allocated and used, with outcomes tied to inputs.

I’ll walk through the empirical case, current challenges and failures, promising models, and policy recommendations.

Why School Funding Matters: What the Evidence Tells Us

A. The link between funding and student outcomes

Multiple studies affirm that increased school funding — when targeted properly — leads to measurable, meaningful outcomes, especially for historically underserved students.

Learning Policy Institute summarizes many studies: more money per pupil leads to better academic achievement, higher graduation rates, and higher earnings later in life.
For example, LaForte, Rothstein, & Schanzenbach (2018) find that post-1990 school finance reforms (the so-called “adequacy era”) produced sharp, immediate, and sustained increases in spending in low-income districts, which translated into improvements in student achievement.
Another recent study (Stanford & Harvard; Learning Policy Institute) shows that federal pandemic relief funds directed at low-income districts helped narrow learning losses in both math and reading.

Thus, the evidence is strong that money does matter, so long as it’s spent equitably and efficiently.

B. The current state of inequity in funding

Despite this, U.S. school funding systems remain deeply inequitable in several dimensions.

Between‐state disparities: Some states spend more than twice what others do per pupil (when adjusting for regional cost differences) yet often have similar student performance gaps.
Within‐state and district disparities: Even within a single state, school districts in lower-wealth or higher poverty areas often receive less funding or are unable to generate sufficient local revenue, resulting in fewer resources per student.
Regressive funding mechanisms: In many states, local property taxes are a major funding source. Wealthier districts can raise more, while poorer districts have far less property wealth. State funding formulas sometimes try to correct this, but many fail to fully compensate. In nearly half of states, students from low-income households still receive less state + local funding than non-poor peers.
Race and ethnicity gaps: Some finance reforms have improved equity by income, but have not reduced — and in certain cases widened — funding disparities by race and ethnicity.

C. Underfunding: The adequacy gap

It’s not just about fairness; many districts do not have enough funding to provide the basic quality of education.

A report by the Economic Policy Institute (EPI) shows that in 2019, high-poverty districts were underfunded by approximately $4,000 per student compared to what’s needed for a quality education, while low-poverty districts were overfunded by about $5,700.
The American Bar Association / Century Foundation finds that the nation underinvests by roughly $150 billion per year relative to what would be required to close funding gaps and ensure all students have what they need.

Underfunding shows up in teacher shortages, large class sizes, deteriorating facilities, insufficient instructional materials, limited access to early childhood and special education services, and constrained extracurricular and enrichment opportunities. All of these weaken student outcomes, especially for children facing multiple adverse conditions.

Challenges & Failures in Past Reforms

Understanding where previous reforms fell short is crucial for designing stronger new ones.

A. Incomplete or inconsistent implementation

Many states have passed reforms, but implementation has often lagged.

Funding formulas may promise progressive weighting for poverty, English language learners, etc., but the state may fail to fully fund those weights in their budgets.
Political refusal to raise taxes or reallocate existing ones may result in under-funded “promise” formulas.

B. Failure to address racial disparities

As noted, some reforms improved equity by income but did little to close racial or ethnic funding gaps.

This matters because poverty and race are correlated, but not perfectly so; even at similar poverty levels, students of color often attend schools that are under-resourced in other dimensions (e.g. teacher experience, facilities, enrichment programs).

C. Overreliance on local revenue and property taxes

Using local property taxes means that school funding becomes closely tied to local wealth. Rich districts can raise more; poorer ones can’t. While state equalization formulas try to correct for this, in many cases they do so only partially. The reliance on unequal local funding remains a major driver of disparities.

D. Political resistance and volatility

Reform efforts (e.g., court mandates) often face political pushback: from taxpayers in wealthier districts, from state legislators reluctant to shift funding, or from governors and legislatures opposed to tax increases.
Also, budget volatility: recessions, competing budget priorities, austerity measures tend to hit education budgets hard, especially for poorer districts.

E. Lack of transparency

In many cases, the way funding is allocated or how much it costs to educate a student with particular needs is opaque. Families, educators, and even policymakers may not have access to clear, comparable data. This inhibits both accountability and smart decision-making.

Successful Models & Case Studies

Here are some instances where funding reform has shown promise.

1. Maryland’s

Blueprint for Maryland’s Future

Enacted in 2020, the Blueprint is a 10-year plan aimed at increasing state education funding (≈ $3.8 billion annually by 2032) for multiple purposes: universal preschool, special education, teacher compensation, concentrated poverty grants, and more.
It explicitly targets districts with high poverty, increasing weights/funds for students with higher needs.
Early indications show progress in budgeting and implementation, though some delays are acknowledged. This model is a useful reference for how to build a long-term, stable funding path.

2. Vermont’s Acts 60, 68, and 130

Vermont responded to a state Supreme Court ruling (Brigham vs. State) finding its funding system unconstitutional because district funding differed by property wealth. The statutes established to equalize educational spending involved pooling property tax yields and determining “equalized yield” to attempt to standardize funding across districts.
Evaluations show that Vermont’s system has in many ways met its goals of reducing funding disparities and improving student performance in historically underfunded districts. However, there remain debates over tax burdens in property‐wealthy towns.

3. State finance reforms in the adequacy era

As in LaForte et al. (2018), states that revised their finance systems in the 1990s and early 2000s toward definitions of “adequate funding” (i.e. what’s required for all students to meet state standards) saw both increased funding in poorer districts and improvements in student achievement.
K-12 school finance reforms (SFRs) in various states have demonstrated capacity to reduce funding gaps between richer and poorer districts; where designs explicitly weight for poverty, special education, English learners, and cost differences (e.g. geography, regional cost of living), results are better.

What Stronger Reform Should Look Like: Key Principles

Drawing from evidence and best practice, reform should rest on several principles.

1. Adequacy

Define and quantify what “basic sufficient resources” look like: what it takes (staff, facilities, supports, services) to ensure all kids can meet state standards, not just minimums. Basic adequacy must include:

early childhood education
special education
support for English learners
mental health and social services
technology, infrastructure, and safe facilities

2. Equity / Progressivity

Funding formulas should allocate more per pupil in high-poverty or high-need districts, and less in very low-need districts, to balance out disparities.
Adjust for cost differences (higher cost of living, rural geography, etc.).
Ensure race and demographics are considered, not just income; direct attention to historically underfunded groups.

3. Predictability & Stability

Multi-year commitments: avoid large variation year to year to allow districts to plan, hire, maintain infrastructure.
Protect education budgets during economic downturns; establish reserve funds or formula triggers.

4. Transparency & Accountability

Clearly published per-pupil spending, per-district and per school.
Data that tracks how funds are spent (teacher quality, class sizes, programs).
Outcome tracking: test scores, graduation, but also non-academic outcomes (attendance, special services).

5. Flexibility with Guardrails

Allow districts some discretion to use funds in ways tailored to local needs.
But require that certain minimums (e.g. staffing levels, teacher qualifications) are met.

Barriers to Reform & How to Overcome Them

Political resistance and perceptions of fairness

Wealthier districts often resist redistributive formulas, seeing it as penalizing success.
A key is crafting reforms that emphasize shared benefit: when all students are lifted, the state as a whole gains in economic health and civic stability.

Fiscal constraints

Raising revenue is difficult, especially in tax-averse states.
However, many studies argue that current underinvestment has long-term costs: remedial spending, unemployment, social services, etc. So reform can be framed as both investment and cost avoidance.

Legal obstacles

Many reforms have come via court rulings (state supreme courts) that find education funding systems violate state constitutions. These rulings are powerful but can be slow and fragmented.

Implementation capacity

Even when formula revisions are passed, states sometimes under-fund them, delay implementation, or provide vague guidance, leaving districts with uncertainties.

Data limitations

Not all states collect or publish data at the school-level on spending and outcomes. Without good data, it’s hard to measure progress, hold stakeholders accountable, or fine-tune.

Policy Recommendations

Based on research and examples, here are policy proposals for what stronger funding reform might require at state and federal levels.

A. State-level reforms

Redesign state funding formulas
- Include “weights” for poverty, English learners, special education, geographic cost differences (rurality, commuting), teacher cost differentials.
- Move away from flat grants and entitlements that assume all students cost the same.
Guarantee full funding of formulas
- When the legislature passes a formula, ensure that budgets fully fund each part (e.g. the weights) rather than under-allocating.
- Include regular audits to ensure what’s promised is delivered.
Implement adequacy studies
- Use empirical research to define what it costs to provide a high-quality education in the state’s context, including target outcomes.
- Base formula revisions and budget requests on those studies.
Stabilization mechanisms
- Reserve funds or rainy day funds specifically for education, protecting it in recessions.
- Multi-year commitments, e.g., legislated phase-in periods for new funding formulas so that districts can plan.
Transparency measures
- State dashboards showing per-district and per-school spending broken out by categories: teacher compensation, instructional materials, support services, facilities, etc.
- Data on student outcomes aligned with spending, disaggregated by race, income, English-learner status, etc.

B. Federal policy levers

While states carry most responsibility, the federal government has tools that can help:

Increase Title I and other targeted funding
- Ensure federal funding that goes to disadvantaged students is sufficient and predictable.
Incentivize equity through grants and matching funds
- Conditional grants that reward states which adopt progressive funding formulas or guarantee adequacy.
- Matching funding for infrastructure, technology, and special program expansion (e.g., early childhood, mental health).
Enforce civil rights-based obligations
- Use federal statutes (e.g., Equal Educational Opportunities Act, Title VI) to address funding disparities that perpetuate racial or ethnic segregation or unequal outcomes.
Provide research and technical assistance
- Fund and disseminate high-quality adequacy studies, cost modeling, data best practices.
- Support low-wealth states/districts in building capacity to collect and use data, retool formulas.

Potential Economic and Social Return on Investment

Reforming school funding isn’t just morally right; it makes economic sense.

Students from low-income families with adequate school funding are more likely to graduate, go to college, less likely to need remedial education, less likely to be involved in the criminal justice system. Over their lives, they contribute more in taxes, civic participation, and innovation.
The cost of inaction is high: wage stagnation, inequality, underemployment, health disparities, generational poverty.
Some studies estimate that the intergenerational returns of investing in high-quality early and primary education are very large — both in increased earnings and in reduced social costs. The exact figures depend on estimates, but many models suggest long-term multiplier effects.

Embedded Video Resource

Here’s a helpful YouTube video that explores school funding inequities and reform strategies:

(This video provides historical context, data visualizations of inequities, and expert interviews about reform options.)

Another video worth watching:

Case Study: What Could Reform Mean Locally (Granite State / New Hampshire)

To make all of this more concrete for New Hampshire / the Granite State region, some considerations:

New Hampshire has many small and rural districts. Geographic cost and transportation are major cost drivers. A funding formula that better accounts for rurality and low enrollment might improve equity.
Property wealth is uneven across towns; local tax bases vary greatly. Reform that pools or equalizes more of property tax yields, or that shifts more responsibility to state revenue with progressive taxation could help.
Teacher retention and pay are critical issues. Rural and lower-wealth districts struggle more to recruit and keep qualified teachers. Higher base pay, bonuses for hard-to-staff areas, and adequate support should be built into formulas.
Early childhood / preschool access is uneven; expanding universal pre-K or state support for early learning programs would be a high-impact investment.

Arguments & Counterarguments

No reform is without opposition or trade-offs. Below are some common objections and responses.

Objection	Response
“It’s too expensive; we can’t afford to raise taxes or redirect money.”	True, there are upfront costs. But incremental reform (phased-in, targeted) and evidence of long-term return can make this feasible. Also, many states already underinvest; reallocation and better targeting may get a lot of mileage without dramatic tax increases.
“Wealthy districts will lose; that’s unfair.”	Redistribution is often framed as “taking from success,” but the case is that public education is a public good: all benefit from stronger public education system. Also, reform can include transition periods and compensation to reduce shocks.
“More money doesn’t guarantee better outcomes.”	Absolutely — money alone is not sufficient. It must be paired with good policies: high-quality teachers, curriculum, accountability, community engagement, and efficient use of resources. But research shows that without enough money, these other reforms often have limited impact.
“State government overreach / loss of local control.”	Local control is valuable, but local control coupled with massive disparities (especially based on property tax wealth) undermines equal opportunity. Reforms can preserve local decision-making while ensuring minimum standards and fair allocation.

What Stronger Reform Could Look Like in Practice

To illustrate: here is a model of what a strong funding reform package might include.

Establishing a state adequacy commission to define cost per student for various student profiles (poverty, English learner, special needs, rural, etc.), infrastructure, technology.
Creating a progressive K-12 funding formula that includes multiple “weights”: e.g., +X% for high poverty, +Y% for English learners, +Z% for rurality, +W% for special education, adjusted for regional cost differences.
Ensuring full implementation via multi-year state budget commitments; no “phantom weights” that are underfunded.
Introducing education budget reserve or rainy day fund that protects schooling after economic shocks.
Enhancing federal funding targeting to particularly disadvantaged districts — via expansion of Title I, grants for early childhood, etc.
Expanding state and federal transparency: portals where per-pupil spending by district and school is published; dashboards showing outcomes and resource allocations.
Providing teacher support and compensation enhancements, especially to underserved and rural districts (e.g. stipends, housing incentives, loan forgiveness).

Measuring Success: Indicators to Watch

Reforms must be measured. Key metrics include:

Per-student spending levels, by district and school: overall and broken down by categories (instructional vs non-instructional; staff compensation; support services).
Gap metrics: difference in per-pupil funding between high-poverty vs low-poverty districts; race/ethnicity gaps; rural vs urban.
Outcome metrics: test scores (math/reading), graduation rates, dropout rates, college enrollment, but also non-academic outcomes (attendance, behavior, social and emotional health).
Teacher metrics: teacher quality, turnover rates, number of teachers with advanced credentials, teacher salaries.
Infrastructure and resources: facilities condition, technology access, class size.

Data should be disaggregated (race, income, language status, special ed, geographic region) and published publicly regularly.

Conclusion

Stronger school funding reform is both a moral imperative and a sound investment. Inequalities in educational opportunity damage individuals, communities, and the broader society. There is ample empirical evidence that more equitable, adequate, stable, and transparent funding systems can narrow achievement gaps, improve outcomes, and yield long-term social and economic returns.

States and the federal government must take decisive action: reform funding formulas, commit resources, protect budgets, and hold systems accountable. The cost of delay is steep — but the dividends of reform are high and lasting.

References

Making the Grade 2024: Education Funding Disparities Persist as Some States Prioritize Tax Cuts and Privatization. Education Law Center.
Rauscher, Fiel (2025). State School Finance Reforms Increased Racial and Ethnic Funding Inequities
How Money Matters: Education Funding and Student Outcomes. Learning Policy Institute.
School Finance Reform and the Distribution of Student Achievement, LaForte, Rothstein & Schanzenbach (2018).
U.S. investment in public education is at risk. EPI.
Inequitable and Inadequate School Funding. American Bar Association / Century Foundation.
An Analysis of School Funding Equity Across the U.S. and Within Each State (The Education Trust).
State School Finance Reforms. What Works for Health / County Health Rankings.
Effect of federal relief funding during pandemic: NAEP, etc. Learning Policy Institute.
Vermont’s Act 60, 68, 130: Equalizing educational resources across districts.
Maryland’s Blueprint for Maryland’s Future.