|Percent of revenue|
|provided by state*||37.7||36.4||54.1||52.9|
|State Aid Systems:||Number of States|
|Percent equalizing grant||5||3||0||0|
|Full state funding||0||0||0||2|
|Fiscal capacity measure:|
|Property wealth only||2||7||9||6|
|Property wealth and|
|other tax bases||7||5||6||5|
|Other cost adjustment**||2||3||5||8|
|* Unweighted average of state percentages. The average for West does not include Hawaii.|
|** Other cost adjustments are typically for small or sparse districts or those with high cost of living.|
|SOURCE: S. Gold, D. Smith, S. Lawton, and A Hyary, Public School Finance Programs of the United States and Canada, 1990-91, vol. Albany, NY: The A. Rockefeller Institute of Government, and U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics, 1993, Table 158.|
imposed ceilings on the amount of aid that any particular school district can receive. At the extremes of state aid distribution are several states which either use full state funding of basic education or some form of flat grant.
While most U.S. states tend to rely on some form of foundation grant to distribute operating aid; there remains important variation between these foundation systems. Differences exist in the foundation level set, the measures of expenditures and pupils used, and adjustments for costs and fiscal capacity. Almost all states include estimates of the property wealth of a school district as a measure of fiscal capacity. Some states have broadened their tax capacity estimates to include measures of income and retail sales. To adjust for differences in the needs of particular students, all but seven states include some form of "weighted pupil" measure in the aid formula. Pupils who are handicapped, have limited English proficiency, or have other special needs are given a heavier weight than other students in the distribution of aid. It is much less common for states to take into account other factors affecting expenditure needs, such as higher costs of living, low population density, or declining enrollment. Eighteen states include some form of cost adjustment but it is usually in the form of some simple adjustment factor rather than the use of a more comprehensive cost of education index.
Besides funding for basic operating expenditures of a school district, state governments often provide support for a number of separate categories, such as special education, transportation, capital acquisition, education for disadvantaged students, and vocational education. These grant programs are called categorical aid because the funds are to be used for specific functions. Most of these state categorical grants are tied directly to areas of federal aid. Frequently, such programs are accompanied by an administrative apparatus to assure that funds are being targeted to the right students and spent for appropriate programs.
State distribution of categorical aid usually does not take into account local fiscal capacity. Special education aid or transportation aid are commonly distributed as a flat dollar grant per student in a district classified with special needs or requiring bus transportation. A number of states either subsidize capital construction or debt service or help school districts obtain favorable financing. Other types of categorical aid often provided by states include funding for disadvantaged students, commonly called compensatory education (29 states), gifted and talented programs (41 states), bilingual education (28 states), and pre-kindergarten education (24 states).
WILLIAM D. DUNCOMBE
Berne, Robert and Leanna Stiefel, 1984. The Measurement of Equity in School Finance. Baltimore: Johns Hopkins University Press.
Cohn, Elchanan and Terry Geske, 1990. The Economics of Education. 3d ed. New York: Pergamon Press.