payers who own their own homes. Few benefits accrue to large cities populated disproportionately by low-income renters.

Thus, the direct federal role has historically been very small and targeted to specific groups. Recently the federal government has tried to play a larger role through the adoption of funding mechanisms designed to influence how states and districts might go about improving the overall quality of education. A major question, addressed in Chapter 8, is whether it is time to expand the federal role—especially on the financing side.


Policy makers can alter school finance systems in four generic ways as they attempt to drive the education system toward greater achievement and more efficiency. Which of these broad generic strategies are preferred depends on policy goals, judgments about the efficacy of various strategies to achieve those goals, and an understanding of the unintended side effects of various strategies.

During the final third of the twentieth century, education finance reformers emphasized a strategy of reducing funding inequities and (more recently) inadequacies among school districts. This reform strategy was consistent with their dominant objective at the time, which was to reduce the large fiscal disparities resulting from the tradition of local funding of education. Since significant disparities and inadequacies remain, this strategy will continue to be of interest, although its focus may need to change given the new interest in enhancing student achievement.

The generic strategy of reducing inequities and inadequacies in school finance also applies to the goal of raising revenues fairly. On the revenue side of the finance system, this strategy might be pursued via policies aimed at altering the level of government (e.g., local, state, or federal) at which revenues are raised or altering the types of tax (e.g., property, income, or sales tax) or other revenue sources that are used. However, any policy changes designed to enhance fairness in revenue raising will also need to be evaluated as well in terms of their effects on the efficiency with which revenues are raised and education is provided.

Meeting the new challenge of aligning school finance with the goals of enhancing achievement for all students and reducing the nexus between family background and student achievement will undoubtedly require increased attention in the years ahead to additional strategies for reforming school finance. One possible strategy is investing more resources in developing capacity. This refers not only to the capacity of the formal education system to provide services but also to the capacity of students to learn. Investing in capacity-building will facilitate the achievement of the goals only if the investment will generate greater future returns in the form of student achievement than will spending the money in other ways. As is the case with any investment policy, the resources to be

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