At Monday night's Brown & Black Democratic Presidential Forum in Iowa, Bernie Sanders came out in favor of a massive change in the way the US funds schools:
"One of the things that I have always believed is that, in terms of education, we have to break our dependency on the property tax, because what happens is the wealthiest suburbs can in fact have great schools but poor, inner-city schools cannot. So I think we need equality in terms of how we fund education, and to make sure the federal government plays an active role to make sure that those schools we need it the most get the funds that they deserve."
Bernie's right: The property tax system of funding schools is inherently regressive, granting fewer resources to poorer towns with lower property values and more to rich towns with high property values. Federalizing funding of public schools — or at least moving further in that direction — would be a huge boon for both economic and racial equality. It would make our tax system much more progressive and protect schools from cuts during recessions. And done right, it can improve school quality while maintaining a degree of local autonomy.
Rich districts spend more per student than poor districts
Nationwide, state and local governments spend 15 percent less per pupil on poor school districts, which get $9,270 per student, than on rich districts, which get $10,721. This isn't true in every state. Twenty-three states, including major ones like California and Florida, provide more spending to poor districts. That's as it should be. Quality education in high-poverty areas costs more money than quality education in affluent areas, not least because of greater numbers of special education students and students for whom English isn't a first language.
But in 23 other states, poorer districts are shafted, and in three states funding is essentially equal, which isn't good enough. In Pennsylvania, the worst offender, the poorest districts get a whopping 33.5 percent less per pupil.
And this really harms poor kids. A study last year by Northwestern's C. Kirabo Jackson and Claudia Persico and Berkeley's Rucker Johnson examined court-ordered increases in education funding and found that a 10 percent per-pupil boost for poor children led to 9.5 percent higher wages and a 6.8 percentage point reduction in poverty as adults. The natural corollary to that is that lower school spending means less pay and more poverty as adults. And while efforts to equalize funding that "level down" funding in rich districts can have bad effects, there's plenty of research suggesting that good funding equalization plans can improve academic performance for disadvantaged students.
In theory this problem could be solved at a state or local level; all that research relies on past state efforts to equalize funding, after all. But the bias toward the rich introduced by the property tax system makes state and local reform difficult. State funding has to actively work to counteract this bias, and that redistribution causes resentment from affluent towns whose residents vote more and donate more to local politicians than do residents in poor communities.
What's more, states don't have the luxury of running continuous deficits the way the federal government does. They can't print their own money, and all but Vermont have some kind of balanced budget requirement. So getting enough state funding to give poor districts a leg up is a tall order.
Federal funding would solve almost all those problems. Sure, redistribution is still polarizing at the federal level. But federalizing it depersonalizes it. Currently, state governments have to convince rich suburbs to subsidize their neighboring, poorer cities' school districts, which can breed a raw, tribal resentment. At a federal level, though, the Philadelphia suburbs wouldn't just be subsidizing Philly — they'd be subsidizing poor areas all over, and other rich areas would be subsidizing Philly, too.
The federal government can run deficits. That's a big deal.
The big reason that states shouldn't, in general, be trusted with social programs of consequence is that they can't run deficits. They have to pay for every dime they spend right then, and that in practice tends to necessitate program cuts during economic downturns, when tax revenues fall as people spend less, property values tank, and incomes plummet. At least 30 states cut per-pupil education spending after the Great Recession; Oklahoma led the pack with a whopping 23.6 percent cut, with Alabama and Arizona following closely. Overall per-pupil spending across the US fell as well, breaking a trend of more than a decade.
By contrast, it's customary for the federal government to run larger deficits during downturns. Stimulus packages, like the large one President Obama signed and the smaller one President Bush signed the year before, are normal and often, as in the case of Obama's, include education funding support for states. That helps stanch the bleeding caused by state-level cuts, but was hardly a full replacement.
If all spending were federal, there'd be no similar pressure to cut. The government could simply run a deficit and keep funding education as usual.
Federal education funding could be more progressive
State and local taxes, which fund the majority of K-12 education spending in the US, are quite regressive. According to the left-leaning Citizens for Tax Justice's annual "Who Pays Taxes in America" report, the poorest 20 percent of Americans pay an average of 12.1 percent of their incomes in state and local taxes — more than they pay in federal taxes. The top 1 percent, by contrast, pays only 8.3 percent of their income in state and local taxes. The property taxes and, to a lesser extent, sales taxes that fund education just aren't that effective at targeting higher earners.
But federal taxes are, on average, progressive, with the bottom 20 percent paying 7.1 percent on average, and the top 1 percent paying 24.3 percent. They're even more progressive when you exclude payroll taxes earmarked for Social Security and Medicare. Without those in the picture, the main revenue sources are the personal and corporate income taxes, which are quite progressive.
Of course, federalizing education spending would entail raising federal spending on the order of $500 billion a year. That probably requires a new revenue source, which could conceivably be a regressive tax like a VAT or a new payroll levy. But it's also possible to raise a big chunk of that revenue by, for example, raising the top income tax rate to 50 percent. And even a regressive source could be made less regressive than the current regime of state and local taxes.