The Politics of School Finance in the 1990s
Melissa C. Carr and Susan H. Fuhrman
Education is one of the most important investments that a state can make in the future of its individual citizens and of the society as a whole. Educational opportunities and resources, however, are unevenly distributed among rich and poor sectors in our society.1 In the United States, a country based on the principles of equality, thousands of American children may be deprived of future opportunities because they do not receive an equal or even adequate education. Other chapters in this volume have documented the efforts in many states to reduce educational disparities, especially disparities in the amount spent per student or disparities resulting from differences in school district wealth.
Solving the problems of school finance, however, is difficult and has often required action in the courts. In addition, the politics of school finance are inherently contentious. A state's existing school finance system is a product of the legislative process and therefore reflects the state's balance of political power. Changing that system requires a shift of power relationships, and the external stimulus from the courts is often only one of many factors that determine the success of school finance reform efforts within individual states.
This chapter explores how state politics have affected the implementation of reforms that result from court orders or concerns about possible legal challenges in the area of school finance. It examines questions such as: How have state legislatures and executive branches responded to anticipated legal action and to court mandates to reform school finance systems? What coalitions formed to support or resist various approaches to equity? Do governors and state legislatures
have the capacity, resources, and political will to implement the types of reforms embedded in school finance litigation?
This chapter will explore the trends in the politics of school finance from the 1970s to the present and will look specifically at four states where the courts have ordered reforms of school finance systems. Analysts of school finance litigation have argued that favorable trends in recent court decisions give cause for optimism about improved school finance equity (Thro, 1989, 1990). Political and economic analysts, on the other hand, have argued that significant challenges to school finance reform remain in many states (Reed, 1997). Using a general analysis of the issues and the evidence from these four states, we will argue that although judicial decisions in favor of finance equity are more common and more comprehensive, the political climate can impede efforts to take action based on these decisions. The political incentives for governors and legislators are such that comprehensive changes in school finance programs are not likely to come easily within a state, at least for the foreseeable future.
The analysis of school finance politics in this chapter addresses the following questions: (1) Why is school finance reform so contentious in the United States? What incentives encourage politicians to either support or oppose greater equity in school finance? (2) How were the politics of school finance in the 1970s and 1980s influenced by the trends in the courts, in state politics, and in the economy? (3) How did the political, economic, and social contexts in the 1990s differ from those of the 1970s and 1980s? (4) Are the politics of school finance in four states (Kentucky, Alabama, New Jersey,2 and Texas) examples of the trends in the 1990s? (5) What are some of the lessons learned in school finance politics? What are some of the crucial elements for successful reform?
The Politics Of School Finance: Issues And Incentives
School finance is an inherently controversial issue in the United States because it affects two basic issues that concern most American voters: the resources available for their children's education and their state and local taxes. Education is often seen as the great equalizer, the key to success, and the most important responsibility for state and local politicians. Although most people support the idea of giving all children equal educational opportunities, problems arise when attempts are made to define equality (see Berne and Stiefel, Chapter 1 in this volume). There is no consensus about the quality of education to which every child is entitled, the extent to which each citizen should pay for that education, or the level or forms of disparities that are acceptable within a school district, state, or the nation.
The long-standing tradition of using local property taxes to finance education has been the cause of many inequities in education and makes state reform of school finance systems controversial. Variations in property values, local tax rates, and costs of competing municipal services have led to large disparities in per-pupil spending and in educational opportunity. Americans are used to the idea that they can directly determine how much to tax themselves to fund their local schools. Moreover, with locally determined and locally raised taxes, almost all questions related to education—whether in the realm of finance, curriculum, facilities, or personnel—have historically been decided and managed at the local level. Thus, there are strong coalitions with vested interests in maintaining local control of education funds and services. School finance reform, however, is legislated at the state level and reduce the number of financial and, to some extent, programmatic decisions made at the local level. Many voters are opposed to relinquishing this local control over their taxes and education policies.
Moreover, for many people, it has become part of the American tradition to aspire to earn more money, live in a larger house in a better community, and send one's children to a better school than one's parents were able to do. People often feel that they are entitled to the good public schools in their community as a reward for their hard work. This feeling of entitlement makes people reluctant to transfer the fruits of their labor out of their own communities. If, instead of paying for the education of their own children, taxpayers see their money going to students in other towns or other counties, they may feel that neither these students nor the students' parents have earned their benefits. Similarly, since education is considered the key to success, parents are often determined to secure the best possible education for their children. For some people, the desire for their own children to succeed extends into trying to maintain all possible advantages for them, even if it means unequal and unfair treatment of other children in some other district.
In order to overcome the inequities created by the dependence on the local property tax to finance education, states must do one or more of the following: redistribute state and local funds, increase state revenues, or cap education expenditures in wealthy districts. Because many American voters are protective of the local resources available for their children's education, school finance equalization has typically been a process of leveling-up. No proposal to equalize education funding throughout a state by decreasing expenditures down to the lowest level has ever been considered politically feasible or desirable.3 Therefore, school finance equalization requires more money and frequently involves increased state taxes.
State officials, however, often have few incentives to raise taxes. Tax increases are always unpopular even if the program which the increased revenues support is popular. Additionally, the taxes most frequently available to states for use in supporting school finance equalization are the income tax and the sales tax. Both are hard to increase because they affect politically powerful constituencies and the state's ability to compete with other states for economic development purposes.
In many states, demographics further complicate the school finance issue. Elderly people are often reluctant, or simply unable, to pay higher local property taxes in support of local schools. Similarly, taxpayers with no children, with grown children, or with children who attend private schools often protest paying high taxes in support of education, a state service from which they perceive little or no personal benefit. If these people are reluctant to support their local schools, they are often even less willing to pay higher taxes in support of schools outside their community. Furthermore, some would prefer to see the increased revenues applied to other programs from which they personally receive greater benefit, such as Medicaid, law enforcement, or public transportation.
To the extent that towns and school districts are segregated along racial, ethnic, religious or socioeconomic lines, corresponding prejudices often enter the politics of school finance. People in wealthy, predominantly white suburbs may oppose school finance equalization because they perceive themselves as the main losers and urban minorities as the main beneficiaries of such policies. Perceptions that equalization aid would be wasted—either by bloated administration or on children who are difficult to teach—help fuel the opposition to school finance reform.
Considering the inherently controversial nature of school finance, what incentives exist for political actors to get involved in school finance reform and work toward school finance equalization? Education is always one of the most salient issues in state politics and educational expenditures often make up the largest share of most state budgets. Therefore, making a mark on education can make or break political careers. Traditionally, one of the best ways for governors and legislators to play a role in such a state issue is through the purse. In times of fiscal surplus, governors and legislatures often face powerful incentives to get involved in school finance reform since education aid is one of the easier methods of distributing resources to all geographic constituencies. This fact provides an incentive to get involved in school finance; it does not, however, automatically translate into an incentive to equalize educational opportunity.
Legislative Branch Incentives
Constitutional requirements vary among the states, but most state constitutions require the legislature to establish a free system of public schools that fits some quality standard such as ''thorough and efficient."4 Addressing this constitutional obligation through school finance is conceptually simpler than attempting to address it through nonmonetary criteria. Therefore, constitutional obligations sometimes provide legislatures with incentives to equalize school finance, especially when there is a court mandate for reform, a threat of litigation, or the likelihood that a court will rule that the state's educational system is constitutionally inequitable or inadequate.
Incentives for legislatures to change school finance systems exist when the risks of not acting are greater than the risks of acting. For instance, when there has been outside pressure from the court or from the community to reduce disparities in funding, some legislatures have found it in their best interest to act. These periods of legislative activity in the sphere of school finance have usually coincided with strong state economies that have decreased the necessity for, or softened the blow of, new taxes (Fuhrman, 1994b:31).
More often than not, however, legislators have been reluctant to promote school finance reform for fear of being associated with the introduction of new taxes. Legislators represent individual districts, are accountable only to those districts, and are very conscious of their district's tolerance level for taxes. Fearful of overstepping that tolerance level, legislators are often reluctant to vote for a policy that would require a tax increase even if that policy would bring benefits to some of the members of their district.
In school finance politics, representatives from poor districts are the most likely advocates of school finance equalization while representatives from other districts are protective of their portions of state aid and conscious of their voters' tolerance for new taxes. Representatives from the wealthiest districts often express their constituents' concerns: that they be allowed to spend as much as they want on education for their children and that their local money stay in their local schools rather than being put into a state pool to be redistributed to poorer districts. To the extent that poorer districts tend to be urban, their representatives have other battles to fight in the state legislature in order to secure state aid to other municipal programs. In such a scenario, representatives from suburban districts may be able to reserve more political capital for use in education debates than their colleagues from urban districts. Moreover, representatives from poor districts tend to be outnumbered by representatives from middle and wealthy districts combined. Since the 1960s, structural and legal change in state legislatures, combined with urban flight and the growth of the suburbs, have dramatically reduced the power of cities and rural areas in relation to that of the suburbs in most state legislatures (Weir, 1995).
Executive Branch Incentives
Governors are accountable to the whole state and therefore are not limited to representing local interests. This mandate makes governors more likely than members of the legislature to lead efforts for comprehensive school finance policies in the best interest of children and youth throughout the state.
Governors do, however, balance the interests of the majority with those of the minority. The fact that school finance reform is often perceived to assist children in only a few districts—albeit often the largest and most populated—at the expense of children or taxpayers in the rest of the state sometimes limits the Governor's willingness to act on this issue. Governors have a limited amount of time in office, a limited number of staff, and limited amounts of political capital. They must therefore choose cautiously the issues that they will focus on and must be careful not to use too many of these scarce resources on unpopular or contentious initiatives. As a result, gubernatorial leadership on school finance reform is unlikely without at least one of the following catalysts: outside pressure from the courts, widespread support among the population, or the existence of a fiscal surplus. An existing school finance system is, after all, the result of the legislative process and thus represents an intricate web of political compromises that reflect the state's political balance of power. Upsetting that balance is often too risky for political leaders.
Judicial Branch Incentives
Because legislatures and governors have few incentives to solve the inequities and inadequacies in school finance systems, people have often turned to the courts to break the political logjam. It is the court's duty to interpret the constitution and decide whether or not the legislated school finance system meets constitutional requirements. The court's overriding concern in school finance cases is what the state should be required, by law, to provide for students throughout the state. Some courts simply answer that question and leave the legislative and executive branches to design a solution that meets the court's standards; others have gone further by prescribing a remedy.
The court is more insulated from the political process than the legislature or the governor and is therefore most likely to advocate for the underrepresented groups in the population. It is important, however, to remember that the courts are not completely isolated from the political process. Many judges are appointed and approved by political leaders while others are elected by the population. Moreover, in deciding a school finance case, the court must always consider its willingness to enforce the decision (in some cases this has required an injunction to close the schools). Since courts really have very limited enforcement power, they run the risk of having their authority undermined if they mandate (in their
decision or their prescribed remedy) a politically impossible solution that the legislature and/or governor decides not to enact or enforce.
Interest Group Incentives
The types and positions of interest groups that participate in school finance debates vary significantly over time and across states. Historically, education interest groups and state departments of education have played the key roles in determining education policy. Over the past three decades, however, their influence has decreased dramatically due to their increased fragmentation. The interest groups that have actively opposed school finance reform over the past three decades are the anti-tax groups that typically oppose school spending. On the other side of the debate, groups advocating for the poor, particularly the urban poor, have most actively argued in favor of leveling up policies and have brought many of the legal challenges to the state's system of financing education. All these interest groups play a significant role in determining the incentives facing government and legislators as they respond to court mandates for school finance reform.
Teachers unions, which in many states are traditionally politically powerful entities, have been noticeably quiet in most school finance reform debates, except to argue for increased overall spending. Frequently unions, as well as other statewide educational interest groups, have been paralyzed on the school finance issue because their members have been so divided, depending on where they live and the perceived effects of any particular policy on their district.
Competing concerns within the education community have also limited the influence of educational interest groups. Teachers, administrators, and school board associations view school finance reform proposals from different perspectives. Special education advocates, bilingual program advocates, gifted and talented program advocates, and advocates for "regular" education often compete with each other for pieces of the pie rather than forming coalitions to lobby to increase the overall amount of revenue available. Although all of these groups consistently agree that there should be more resources spent on education, they are divided by their disagreement over how these resources should be allocated.
The Politics Of School Finance In The 1970s And 1980s
The 1970s: A Decade of School Finance Reform
The 1970s was a decade of great activity in school finance reform in all branches of state governments. During this decade, school finance litigation reached the highest court in 16 states. School finance reform emerged as an election issue in gubernatorial and legislative elections. Governors Askew of Florida, Milliken of Michigan, and Anderson of Minnesota chose to make school
finance one of their top issues (Fuhrman, 1994a:57). Twenty-eight state legislatures reformed their school finance systems.5 As a result of these reforms, the state share of education spending increased from 38 percent in 1972 (Evans et al., 1997) to 45 percent by 1979 and the state aid to elementary and secondary education doubled (Fuhrman, 1982:53). The sheer prevalence of school finance reform during this period represents more than twice the expected rate of diffusion of policy ideas from state to state (Brown and Elmore, 1982:107). 6
The intense interest in school finance reform during the 1970s was a reflection of four emerging trends: the birth of school finance litigation, the activism of a national reform movement, changes in gubernatorial and legislative institutions, and the existence of fiscal surpluses. These factors combined to create an environment in which legislators and governors faced strong political incentives to act on the school finance issue.
Prior to the 1970s, legislative and executive participation in education policy making had been minimal (generally confined to fiscal matters) as efforts had been made to insulate education from politics. Educators, educational interest groups, and state departments of education had played united, active roles in education issues. They determined policies and simply presented them to political leaders for their approval.
In the 1970s, with school finance as the major issue in education, the role of state legislators and governors in education policy increased dramatically and began to overshadow that of the previously dominant education coalition. This trend was due in part to reforms within the legislative and executive branches, reforms that created larger professional staffs, enhanced gubernatorial veto powers, and increased budgetary control for the governors. With large professional staffs, legislators and governors could commission their own research on education issues. At the same time, conflicts between teachers and school board associations, the emergence of collective bargaining for teachers, and geographic splits between urban/rural and property-rich/property-poor districts began to fragment the once united education coalition.
During the 1970s, governors and legislatures created commissions and committees to assess equity and propose solutions. They also designed proposals to respond to anticipated or actual court mandates for school finance reform. Some even proposed tax increases and new revenue sources to increase the amount of education funding that came from the states. As a consequence of their leadership roles in school finance reforms, state legislatures and governors emerged from this decade as full-fledged education policymakers.
One of the legacies of the 1960s was an increased public awareness of social inequities and injustices. In the 1970s, this public awareness, along with the realization that desegregation efforts were not effectively providing each American child with an equal educational opportunity, helped spark a wave of successful school finance litigation, beginning with the watershed Serrano v. Priest case in California in 1971. In the early 1970s, people took note of the fact that
education spending at the 95th percentile was 2.72 times higher than education spending at the 5th percentile and challenged these inequities in the state and federal courts.7 The results of the first wave of cases were mixed, but they definitely succeeded in getting the issue of school finance reform on the agenda in state politics.
Although school finance litigation occurred in only 12 of the 28 states that legislated school finance reform during the 1970s, it is important not to underestimate the role that litigation had in prompting legislative and executive action in all states. The cases put the issue of school finance reform on the political agenda, dramatized the taxing and spending inequities among districts, and demonstrated to every state that its own school finance system might also be susceptible to challenge. In states where there was a school finance case, reform probably would not have occurred without litigation. In other states, the threat of school finance litigation prompted legislatures and governors to take action. Many governors and legislators therefore found school finance reform in their best interest—whether out of personal ideological conviction, in response to a court mandate, as a preemptive measure to avoid litigation, or for a combination of these reasons.
Litigation resulting in a court mandate for reform of the state school finance system did not, however, guarantee reform of school finance. Legislatures were sometimes reluctant to act, in part because of confusion over what reforms were necessary to comply with the court order. Many of the court decisions in the 1970s were narrow in scope, did not establish a clear definition of a constitutional school finance system, and did not include instructions for the legislature concerning appropriate remedies. For example, the California Supreme Court and many of the other state courts employed the principle of fiscal neutrality and declared that students should not have diminished access to resources for their education simply because they live in property-poor districts. The courts did not specify, however, whether legislatures needed to assure that the same amount of money was spent on educating each child in the state or whether they needed to equalize across districts the amount of revenue raised at any given tax rate.
The activism of the courts was encouraged and complemented by the activities of a national network of school finance reformers that emerged in the 1970s. Scholars, lawyers, government officials, citizen education groups, minority research and advocacy organizations, and national organizations such as the National Conference of State Legislators and the Education Commission of the States combined to provide research, technical assistance, and other support to the movement. The network, nurtured by the Ford Foundation's program in Education Finance and Management, helped plaintiffs make their cases about the state's constitutional responsibility to provide education for all children such that the amount of resources available to children and their schools is not dependent on where children live. Members of the network, which extended beyond the traditionally active educational interest groups, researched all aspects of school
finance reform—from the technical questions regarding the best formulas to the political and economic dimensions of the issue—and then shared the results with policymakers and the public.
Not all governors and legislators, however, were eager to get involved and make the changes in school finance systems that were necessary to respond to court mandates to increase equity. The contentiousness of the issue and lack of leadership made compliance with the court mandates very slow in many states. For example, the New Jersey Supreme Court and legislature engaged in a 3-year struggle which involved seven rounds of court decisions before an equalization plan that was acceptable to the courts was finally established. After the initial Robinson v. Cahill decision in 1973, the New Jersey legislature defied the court order. It did not even begin to legislate a response until the court prohibited the state treasurer from disbursing state aid to education in any manner that did not comply with Robinson. When the legislature did pass a new formula, it stalled on enacting the taxes to pay for it. Only after the court closed the schools did the New Jersey legislature implement its first state income tax and fund a school finance plan which was found to be in compliance with Robinson. Similarly, in California, Serrano v. Priest went to the state's highest court level three times and only in the third round, 15 years after the initial decision, was the legislated school finance system upheld as constitutional.
Although court activism, the national reform network, and shifts in political roles in education policy making all provided increased incentives for gubernatorial and legislative action on school finance reform, the most crucial factor was the existence of fiscal surpluses. Pressure from the courts, the public, and their own institutions may not have been enough to force so many legislatures to act had there not been money with which to reform school finance systems. The pattern of school finance reform in the 1970s mirrors that of the economy. The high points of reform activity at the beginning and end of the decade also coincided with the years of fiscal surplus. Similarly, the middle years of the decade were a time of relative inactivity in school finance reform and a dip in the economic fortunes of the states. Reform during this period was a process of leveling-up in most states. Only three states, Montana, Utah, and Wyoming chose the politically more difficult route of equalizing school finance by redistributing funds from rich to poor districts (Odden et al., 1983:7). In the rest of the states where reform was enacted, districts with low-property wealth became eligible for increased state aid. As a result, the states added a total of over $27 billion to their share of education expenditures during the 1970s (Fuhrman, 1982:57).
It is important to note that the reforms of the 1970s were not designed, even on their surface, to fully equalize per-pupil expenditures, much less educational opportunities.8 During the 1970s, the debate surrounding school finance reform in many states was focused on reducing property tax rates as well as equalizing education expenditures. In fact, a 1978 study found that school finance reform
was accompanied by significant property tax relief in 11 of the 19 states studied. In eight of those states, tax relief appeared to have come at the expense of the educational program since those states' per-pupil expenditures declined relative to the national average (Brown and Elmore, 1982:112). Especially after Rodriguez, the 1973 federal court case which upheld Texas's highly inequitable school finance system as constitutional under the federal Constitution, and after the economic downturn in the mid 1970s, reforms became much more diverse in their objectives and, overall, less concerned with pure school finance equity arguments (Brown and Elmore, 1982:112-113). 9
In the 1970s, the courts and many legislatures used the standard of fiscal neutrality. New school finance formulas did not require equalized tax rates but were designed so that districts would receive equal revenue for equal tax rates. Such formulas could only equalize revenues to the extent that districts chose to tax themselves at the same rate. In many instances, however, property-poor districts taxed themselves at relatively low rates and therefore had significantly lower amounts of revenue available for educational expenditures. Although the new formulas shrunk spending gaps and increased the proportion of the state's contribution to education expenditures, they did not equalize per-pupil expenditures (Fuhrman, 1982:57). At the time, however, these changes were enough to satisfy the courts and subdue the public pressure for equity from educational and social interest groups.
The 1980s: Excellence Replaces Equity as the Top Concern
During the 8 years from January 1981 to December 1988, only 8 school finance cases were decided in the states' highest courts as opposed to the previous 8-year period when 16 cases had reached the highest courts in their states. Moreover, during this same 8-year time period only 1 of the cases was decided in favor of the plaintiffs as compared to 7 out of 16 between 1973 and 1980. Faced with less pressure from the courts, legislators and governors were able to turn to issues other than school finance. Events at the beginning of the decade did much to set the tenor for the remaining years. The recession of 1981-82 and the 1983 publication of the report A Nation At Risk (National Commission on Excellence in Education, 1983), combined to relegate school finance to the back burner for most of the decade.
By the early 1980s, most states were experiencing fiscal difficulties. The aggregated national balance of state budgets in 1983, for example, was $2.3 billion in comparison to 5 years before, in 1978, when it had been $21.2 billion (Council of State Governments, 1980:275). States like California and Massachusetts had enacted tax and expenditure caps which limited the amount of money available for education equalization aid. Other states, such as Michigan and Oregon, were experiencing severe economic downturns. Most states had dangerously low amounts of economic reserves and experienced decreases in federal
funding of education during the first years of the Reagan administration. During these years, the main concern was simply maintaining the overall level of resources for education rather than finding ways to increase resources in order to improve equity.
The 1983 report from the National Commission on Excellence in Education, A Nation At Risk, called attention to a perceived crisis in the quality of education in the United States. Governors and legislators responded by shifting their attention from school finance equity to issues of education standards, graduation requirements, teacher certification, and compensation. For some, the equalization efforts of the 1970s had "dealt with" school finance and it was no longer an issue. The courts, the public, and the plaintiffs were either satisfied with or resigned to these initial successes. Therefore, governors and legislators faced less pressure from the courts and the public to equalize school funding, and excellence replaced equity as the focus.
During the excellence reform efforts of the 1980s, governors and legislators expanded the leadership role that they had established for themselves in the 1970s. The sheer volume of legislative activity in education reform issues in the 1980s was unprecedented. By 1985, almost every state had enacted some sort of reform package. For example, over 40 new state testing programs were established and over 1,000 pieces of legislation concerning teacher certification and compensation alone were introduced in state legislatures (Fuhrman, 1994b:31). The diffusion of these policy actions across states was significantly faster than the diffusion rates of school finance reform (McDonnell and Fuhrman, 1985:48).
To some extent the increased legislative and gubernatorial interest in substantive issues of education was an inevitable result of the increased proportion of resources they were providing to education. Since the state share of education funding had increased significantly, it was only natural that governors and legislators, who appropriated these resources, would want to increase accountability and their involvement in the management of these funds. However, the aura of crisis and pressure from the public, especially the business elites, significantly spurred action.
After the recession in 1981-82, the 1980s was generally a decade when state economies were fairly healthy and resources were available to education. Between 1982-83 and 1986-87, state funding for education rose 21.3 percent in real terms (Fuhrman, 1994b:31). This increase, however, financed the general education reforms of concern to the states during this decade rather than equalization efforts. In fact, many of the equity gains that had been made in the 1970s eroded in the 1980s.10
As a result, the reforms of the 1970s were not designed to achieve equal educational opportunity, or even equal per-pupil expenditures. The reforms did not account for the fact that poorer districts might choose to tax themselves at a lower rate or for other urban factors that complicate the picture. Urban districts have greater expenditures on public health, transportation, housing, welfare, crime
prevention, prisons, and services for the elderly than suburban or rural districts do. These large urban programs create more intense competition for scarce resources and political pressures so that education sometimes can lose out. Although municipal overburden can lead to greater disparities in per-pupil expenditures in urban versus suburban or rural districts, the significance of this type of influence remains in doubt.
Similarly, although the costs of education in urban districts are assumed to be higher than suburban or rural districts, since the cities tend to have more students living in poverty, students requiring at-risk programs, students with limited English proficiency, and students with disabilities, the appropriate weights to compensate for these differences remain uncertain.
By 1979-80, 23 states provided funds to local districts for support services for children at risk and for children with limited English language skills. All 50 states had passed special education programs in keeping with new federal law. However, during the recession of the early 1980s, when there was not enough revenue generated to pay for everything, many of these supplementary programs were the first to be repealed. In addition to reducing the equalizing effects of the 1970s reforms, this circumstance intensified competition among educational interest groups based on which supplementary program (i.e., special education, bilingual education, or programs for impoverished youth) they supported.
Although the reforms in the 1970s had increased the state share of education expenditures to 45 percent in 1979, more than half of school financing remained dependent on local property tax revenues (Fuhrman, 1994a:61). School financing formulas that maintain a local property tax component and do not cap wealthy districts' expenditures, redistribute their local revenues, or set the equalization standard at the highest level of funding in the state are open to growing inequities in per-pupil spending over time.
Circumstances in the 1980s hastened the erosion of school finance equity. The recession of 1981-82 forced some states to cut back on state funding and increase the portion of education expenditures funded through locally raised revenues. Other states, such as New Hampshire, were particularly hard hit by the decrease in federal aid to education and increased local contributions to compensate for these losses. In addition, the real estate boom of the 1980s increased the wide disparities among districts' property values, disparities that were exacerbated as the price of suburban property rose at a greater rate than in the cities.
These factors combined in some states to produce even greater inequities in per-pupil expenditures in the 1990s. In New Jersey, for example, differences in per-pupil expenditures were greater in 1989-90 than they had been before equalization legislation was passed in 1975 (Corcoran and Scovronick, 1995:5). Similarly, in the state of Washington, the share of resources available to school districts with the highest percentage of students living in poverty had declined 4.9 percent between the state supreme court's 1978 ruling and 1991 (Rebell, 1994-95:693). These renewed disparities help explain why plaintiffs have since returned
to the courts in six of the eight states which had adopted remedies prior to 1989 to improve equity in their school finance system. This is not to say that the reforms and the litigation of the 1970s did not help. The reforms did help—the disparities in per-pupil expenditures grew at an even greater rate in states that had not passed reform. A recent study using data from over 16,000 school districts over the 1972-92 period found that, on average, court-ordered reform reduced within state inequities in per-pupil expenditures by 16 to 38 percent (depending on the measure of inequity used) while legislated reform without successful litigation did not, on average, reduce inequities by a statistically significant amount (Evans et al., 1997:11, 28). But the efforts of the 1970s did not solve the problem.
School Finance In The 1990s—A Different Context
School finance has reemerged as a major issue in the courts, the statehouses, and the legislatures in this country. The judicial, economic, and political contexts surrounding school finance in the 1990s are, however, somewhat different than those of the previous decades.
The Judicial Context of School Finance in the 1990s
Of the 21 cases considered by the states' highest courts since 1989, 13 have been decided in favor of the plaintiffs.11 This is a much better success rate than the 1 success in 8 cases or 7 successes in 16 cases during two previous 8-year cycles. School finance cases have expanded from a narrow focus on issues of fiscal neutrality and tax equity in the 1970s to broader considerations of the entire education system and the many variables that affect a child's education in the 1990s. The most dramatic example of the increased scope of courts' decisions is the 1989 Kentucky Supreme Court's decision in Rose v. Council by which Kentucky's entire education system was declared unconstitutional.
The Kentucky case exemplifies another trend in the court decisions since 1989: courts are more willing to define the remedies and make concrete requirements for a constitutional remedy than they were in the 1970s. These court-mandated requirements for change often address finance, curriculum, inputs, and student outcomes. In part because plaintiffs rely more on state constitutions' education clauses than on pure equal protection arguments, courts have found it necessary to define their standards more clearly and to explain what qualifies as a "thorough and efficient" education. In Kentucky, as well as in Alabama and Massachusetts, the court listed curricular goals of education and specified student capabilities that should result from a constitutional public school system. Some courts have recommended that state leaders must consider other areas including spending disparities, revenue sources, specific finance and education issues, and deadlines for legislative action.
While in the 1970s and 1980s courts had used the standards of equal revenue for equal tax effort or equal per-pupil expenditures to evaluate the constitutionality of school finance systems, in the 1990s courts have tended to use the standard of equal educational opportunity. Under this standard, claims of inequity and remedies for those inequities are defined in terms of relative availability of educational programs and curricular opportunities. There is also increasing recognition of the fact that achieving equal results may require unequal expenditures. When equity is defined as providing each child with an equal educational opportunity regardless of that child's place of residence, socioeconomic status, race, nationality, native language, or disability, ensuring equity actually requires differences in per-pupil expenditures.
These trends in the courts have encouraged many legal scholars to expect major breakthroughs in school finance reform and important strides toward equity. Although the courts are sending encouraging signals, other political and economic considerations mitigate and in many cases overshadow their effects.
The Fiscal Context of School Finance in the 1990s
Without fiscal slack, enacting school finance reform is difficult and often requires new taxes to create revenue sources for leveling-up policies or the redistribution of revenues from other state programs or districts to education. But increasing taxes has been virtually impossible in the anti-tax climate of the 1990s. Meanwhile, fiscal constraints, an aging population, and growing social problems have intensified competition with other programs for state funds. Some states have adopted what has often been the least politically attractive option of capping education expenditures in the wealthy districts and/or redistributing some of the tax revenues from these districts to the poorer districts.
The incentives for governors and legislators to take leadership roles in increasing equity decrease dramatically in a fiscal environment where reform is possible only through raising taxes or leveling-down. Legislative and gubernatorial leadership on school finance issues has always been dependent on the availability of resources. In the late 1970s, early 1980s, and early 1990s, when there was little fiscal slack, legislators and governors did not maintain the high-profile leadership roles in school finance that they demonstrated during periods of relative fiscal plenty (Fuhrman, 1994b:33). Most states have not had large fiscal surpluses in the 1990s until the last few years (National Association of State Budgetary Officers, 1991, 1993, 1995, 1997).
The Political Context of School Finance in the 1990s
Other political issues made reform particularly difficult and hindered movements toward compliance with court mandates to equalize school finance in the early 1990s. The increased scope and specificity of the courts' mandates for
educational reform, which addressed a wider range of educational issues, created a larger, more difficult task for the legislature. Furthermore, in the early 1970s all the successful school finance reforms were passed as part of complex packages that often included multiple issues. Since school finance reform often does not have enough widespread support on its own, packaging it within a broader bill that has something for everyone makes it easier to pass (Fuhrman, 1978:164). But, with courts mandating comprehensive education reforms, the resulting remedies require a great deal of compromise and are difficult to package with other legislation.
The new equal educational opportunity standard used in school finance litigation has also made the politics more contentious in the 1990s. Much of the public support for school finance reform in the 1970s stemmed from dissatisfaction with the local property tax; school finance reform provided tax relief and was therefore politically feasible. In the 1970s, school finance reform often required increases in state taxes, but the existence of fiscal surpluses reduced the amounts that had to come from these tax increases, and reform could be equated with tax relief in the public's minds. That equation no longer exists because any greater state role in equalizing school finance is likely to rely on greater taxation.
The new nature of the court-mandated remedies also calls for increased state monitoring of education spending, state curriculum requirements for minimum standards of education, and minimum and maximum levels of local funding. These reforms, which often accompany equalization efforts, decrease (or at least are perceived to decrease) the amount of local autonomy in education decisions and in setting local tax rates. They are opposed by groups with vested interests in, or ideological commitment to, maintaining local control. Moreover, they directly conflict with increasing voter support for decentralization and deregulation in all aspects of public life (Massell et al., 1997).
Although increasing state taxes and introducing new taxes have never been politically popular moves, the public has had varying degrees of tolerance for tax increases over the years. Currently, an extreme anti-tax mood characterizes the public and their elected officials. An indication of the strength of this anti-tax sentiment is the fact that on the national level, as of October 1996, nearly one-half of all U.S. representatives and 35 U.S. senators had signed a pledge to vote against any tax increases (Rubin, 1996:3058). The 1994 sweeping Republican victory in Congress was largely based on an anti-tax, anti-government platform. Similar results were also observed in the state legislative and executive branches; many newly elected officials fashioned successful campaigns against incumbents by using anti-tax and anti-government themes. In fact, increasing state taxes in the 1990s has proven to be political suicide for many. New Jersey former-Governor James Florio and many of his Democratic colleagues in the legislature learned that lesson the hard way when, in response to Abbott v. Burke , they passed reform legislation which included a tax increase. Florio's 1993 defeat by Governor Christine Whitman and numerous Democratic losses in the state legislature
during that year were a result of resultant public opposition (Corcoran and Scovronick, 1995).
In addition, general lack of trust in state and local government's use of education funds permeates the politics of school finance today. Many taxpayers have watched their state taxes increase to pay for better education while simultaneously hearing media reports of the decline of the American education system. Increases in education spending have coincided with increases in violence, guns, and drugs in schools. Similarly, Eric Hanushek's studies (1986, 1991, 1996) in which he detected no correlation between the amount of resources invested in education and student achievement received increased attention in the late 1980s and early 1990s. Hanushek and others have pointed to the fact that as per-pupil education expenditures have steadily risen over the past 30 years, average SAT scores have steadily declined (Picus, 1997:35). Of course many factors account for test score stagnation, and recent analyses of educational spending, such as those by Hedges et al. (1994), have questioned Hanushek's econometric techniques and the resulting claim that money does not matter in education. Ferguson and Ladd (1996) used a different econometric model and found a positive correlation between additional resources and student outcomes. Others have used different measures of student outcomes (such as dropout rates and postgraduation wages) and found a positive relationship between spending and increased outcomes (Murray, 1995; Card and Krueger, 1992).
Studies are now underway to identify which types of investments are most likely to improve student outcomes. For example, Krueger (1997) and Monk (1994) conducted studies which demonstrate the importance of teacher education, small class size, and teacher knowledge, respectively, on student outcomes. Despite these other studies, Hanushek's observation of upward trends in spending and downward trends in test scores is enough to raise many questions in the minds of voters about the effectiveness and necessity of increased resources for education.
Few voters have any real understanding of how their education tax dollars are being spent. They often do not appreciate the increased costs of education in the 1990s with higher enrollments, more regulations, and special programs. Each of these trends, especially the increasing enrollments in special education, has significant effects on the distribution of resources and educational opportunity within a state that are generally not sufficiently explained to the public.
Less political will exists to reform school finance systems than there was in the 1970s, especially in states that have had extensive school finance litigation and have enacted multiple remedies. Many people feel that the state has made enough of an effort to equalize school funding and that a lack of results is more a reflection of mismanagement of resources or proof that money does not matter in education than a reflection of incomplete or ineffective state policies. They claim that it makes no sense to invest more money in poorer districts until the local mismanagement problems are solved. In a number of states, these sentiments are
complicated by racial prejudices as the poorer districts tend to be cities with high percentages of minorities. Further, antipathy toward unions and tenure among some political factions increases skepticism toward spending more on education.
A symptom of increasing anti-government sentiment and disillusionment with the public schools is the recent tendency to look for solutions outside the public sector. School choice, voucher programs, private management of schools, contracting for services, and charter schools have emerged as new ways to improve education, particularly for students in poorer districts. Such solutions are proposed as cost-effective and efficient ways to improve the quality of education for everyone and are presented as alternatives to pouring more taxpayers' money into schools that do not work. There is no consensus among politicians, education advocacy groups, parents or educators regarding the merits, risks, and viability of these options but the national debate about market-based reforms does call attention to education improvement methods that are not dependent on greater equity among school districts.
Interest Group Politics
Now that school finance reform is increasingly viewed as a zero-sum game where the pie from which all groups must draw is not expected to expand, education groups are even more divided on geographic, programmatic, and philosophical lines than they were in the 1970s. Education interest groups from wealthier districts are threatened by reforms that involve redistribution from particular education services, such as bilingual education or special education programs. The increasing number of students classified as learning disabled has also increased the financial resources, required by federal law, necessary to serve them. Competition between state funding for special programs and for general education aid has divided the education community and, in many states, further strengthened the geographic urban/suburban divide since cities tend to have more students who require additional education services. Education interest groups and educators have not reached a consensus about what constitutes equal or adequate educational opportunity. While a united front from education interest groups might provide legislators and governors with additional incentives to act on school finance reform, the lack of consensus among these groups adds to the public's skepticism that reform is possible or desirable.
Demographic trends are eroding voter and taxpayer support for the equalization of school finance. Poterba (1997) observed that an increase in the fraction of elderly residents in a state was associated with a significant reduction in per-child expenditures, especially when the elderly population and school age population were of different races. Finally, the study found that differences in the size of the
school-age population do not result in corresponding differences in education spending. Thus, states with larger school-age populations have smaller per-pupil expenditures. This last finding does not bode well for states with increasing enrollments.
Currently, less than 30 percent of adults in the United States have children attending public schools (Crampton and Whitney, 1996:10). The aging of the population has increased the numbers of people who need Medicaid and other programs and strengthened voter interest in these expensive services. In addition, increasing costs of prisons and other crime protection services compete with education for funds. Trends in state budgeting indicate that expenditures on Medicaid and corrections are currently growing at a faster rate than expenditures on education (Crampton and Whitney, 1996).
Changing racial demographics have also contributed to the increased amount of contention surrounding school finance equalization. Many American cities, especially in the Northeast, have experienced substantial white flight in the past 30 years. Black and Latino children are often concentrated in the poorer districts most in need of equalization aid while resources and political influence in the legislature are largely concentrated in the predominantly white suburbs. In many states, while the middle aged and elderly populations are still predominantly white, a rapidly increasing proportion of the students attending public schools are black and Latino. Racial prejudices, such as the idea that all minority school or city officials are corrupt or the idea, reinforced through publications like The Bell Curve (Herrnstein and Murray, 1994), that suggest that minority children are less educable than their white peers, strengthen some voters' fears that equalization money will be wasted (Firestone, 1997a, 1997b).
Although elementary and secondary school enrollments decreased in the 1970s, enrollments increased in the 1990s, and even larger increases are expected in the near future. The National Center for Education Statistics estimates that in the next decade 6,000 new schools will be needed to accommodate 3 million more children (Crampton and Whitney, 1996:10). Districts need to spend more money just to maintain per-pupil expenditures during periods of increasing enrollments. To the extent that these enrollment increases are concentrated in the poorer districts, they exacerbate disparities in funding and polarize the politics of school finance.
Thus, in the 1990s, the economic and political contexts imply a changed road for school finance reformers. The national trends discussed above provide helpful background, but, since school finance reform is a state-level issue, it is necessary to look at the political, economic, and judicial contexts in each state. In order to understand how these factors affect school finance debates in individual states and to get a sense of what to expect in the future, we now turn to a closer analysis of the politics of school finance in four states.
The Politics Of School Finance In Kentucky, Alabama, New Jersey, And Texas
We chose to study four states that are well known for their school finance histories: Kentucky, where major reform occurred; Alabama, where the lack of political leadership has stymied any response to the court's mandate for reform; Texas, where a solution has brought peace, at least for the time being; and New Jersey, where the school finance reform debate is still raging 25 years after the state's first school finance litigation. The following discussions of each state are based on a review of the literature that focuses on these states and on interviews conducted with academicians, policymakers, and activists who had been involved in reform efforts.
Despite the politically contentious nature of school finance in the 1990s, major school finance reform is possible. Kentucky is often cited as the example of school finance reform that accomplished equalization and comprehensive reform at the same time.
Political incentives for school finance reform in Kentucky included a strong mandate for comprehensive change from the state supreme court, widespread public support, a great need to spark economic development, and relatively low costs. Kentucky had consolidated its school districts in the 1930s and 1950s to county-based districts, reducing the fragmentation and attachment to local control that comes with more numerous, smaller districts. Kentucky has an unusually racially homogeneous population, and minorities tend to be concentrated in the wealthier cities. Thus, equalizing reforms were not perceived as primarily benefiting racial minorities and racial politics did not play a role in the debate. Finally, low investments in education and the need for economic development made it easier for school finance reform advocates to prove the necessity of increased expenditures on education.
The Kentucky Supreme Court decision in Rose v. Council for Better Education was key to creating the incentives for legislators and governors to enact reform. Sixty-six school districts (or one third of the state's total) sued the state in Rose v. Council, demonstrating widespread support for the idea that something needed to be done. In 1989, the Kentucky Supreme Court was the first ever to declare an entire state education system unconstitutional. Relying on the provision in the Kentucky Constitution that requires ''an efficient system of common schools throughout the State," the court determined that each child in the state had a fundamental right to education (Dove, 1991:94) and that this right was violated by the unequal and inadequate nature of the education system. The court declared every piece of legislation related to public schools in Kentucky invalid and charged the legislature with designing a new constitutional education system
within a year. The court defined a constitutional system of schools in terms programs available to students and student achievement results as opposed to per-pupil expenditures. It listed seven goals for education and specified nine minimal standards that the legislature's remedy would have to meet in order to be in compliance.
Within a year, the legislature had passed the Kentucky Education Reform Act (KERA), which had three main components—finance, curriculum, and governance—and a corresponding sales tax increase to fund the bill. KERA created a three-tier system allowing local districts some flexibility in tax rates, capped the wealthiest districts, and leveled-up. There was a hold-harmless provision in the bill which guaranteed that no district could lose money through KERA; everyone won, but the poorer districts won significantly more than the wealthier ones. In order to finance KERA, the state poured an additional $500 million into Kentucky's education system (Reed, 1997:99). KERA remains the law today, having survived for 7 years and three changes in governmental leadership. It has not only survived, it has had impressive results. Kentucky has moved from near the bottom of national rankings in all educational indicators to the middle. In the first 4 years following the passage of KERA, Kentucky's school finance inequities, as measured by the amount of variation in per-pupil expenditures, were cut almost in half (Reed, 1997:99).
Considering the contentious nature of school finance politics, the Kentucky example appears somewhat miraculous. How was such comprehensive reform possible? Who took the lead on KERA, and what factors created the incentives for the legislature to pass it?
Kentucky's educational history had been fairly dismal. For years it had ranked near the bottom of all national education rankings of per-pupil expenditures, measures of equity, and measures of student achievement. During World War II, Kentucky was the number-one state where people were rejected for the draft because of illiteracy. Since then many leaders felt that Kentucky was not getting its fair share of the Southern industrial boom because the state did not have a well-educated workforce.13 In 1990, Kentucky was still suffering from a lack of economic development and a failing educational system. Predominantly a rural state with coal mining, timber, and agriculture as its main industries, Kentucky's businesses had been satisfied with the level of education of the work force and had typically opposed higher taxes to improve education. But if Kentucky wanted to diversify its economic base and improve the standard of living, that would have to change.
In 1984, Governor Martha Collins was the first governor in Kentucky to talk almost exclusively about education. She argued that improved education would be the key to the future economic development of Kentucky and its survival in the global economy. Governor Collins helped attract a Toyota plant to the state, an event that was critical because it created the need for a more educated workforce.14
Governor Wallace G. Wilkinson, the governor at the time of Rose, had campaigned on the issue of education reform. Coming from Appalachia with only a high school diploma himself, he was painfully aware of the inadequacies of the education system. He greatly underestimated the cost of reform in his campaign, however, and took a great risk when he backed KERA even though it cost $430 million more than the reform he had promised in his election-winning campaign.15 Former-Governor Bert Combs, the lawyer for the plaintiffs, also emerged as a powerful political leader in the state at this time.
The grassroots leadership provided by Kentucky's Prichard Committee for Academic Excellence was as important as the political leadership. Founded in 1981, the Prichard Committee consisted of business leaders and other prominent individuals who promoted the idea that education reform was necessary in order to bring economic development to Kentucky. During the 1980s, the Prichard Committee conducted an extensive public education effort, including televised townhall meetings throughout the state that helped create both strong public support for reform and tolerance of tax increases—two components that were necessary in passing KERA.
Consequently, when the Kentucky Supreme Court issued its decision in 1989, legislators were ready and willing to act on the court mandate because they knew that school improvement was an issue that resonated with the people of the state. Legislative leaders appointed a task force on school reform, brought in outside experts and national consultants to help author the bill, and then with the governor's support presented KERA to the legislature. The fact that KERA was a quickly developed, expert-driven reform plan in response to a strong court mandate and that it had strong support from the governor and key legislative leaders made its passage in the legislature possible.
Timing was also key in Kentucky, and some have argued that KERA would not have passed just 2 years later. Although anti-tax sentiment existed in Kentucky at the time, it was overshadowed by the consensus throughout the state that reform was necessary. A few years later, however, especially after the rise of conservative opposition to standards-based reforms, this might not have been the case. Now the school finance portion of KERA is the least contentious part of the bill because it has been the easiest to implement. Most of the hurdles with respect to KERA implementation are in the governance, curriculum, and assessment aspects of the legislation. These components of the reform are difficult to implement because they represent a set of challenges to traditional practices. However, the state continues to make progress on outcome measures and to serve as a model for standards-based reform.
Many parallels can be drawn between Kentucky and Alabama's contexts for school finance reform in the 1990s. At the beginning of the decade, these two
states were similar in terms of per capita GDPs, poverty rates, and population sizes. Both states were near the bottom in every national ranking of educational indicators. Each state had an active citizen's organization leading a public campaign connecting the problems in the state with the quality of education and building consensus on the need for educational reform to foster economic development. Both states had school finance equity court cases that developed into equity and adequacy cases. In 1993, the Montgomery County Circuit Court declared the state's entire education system unconstitutional in Harper v. Hunt. The Alabama court decision was very similar to the Rose decision in its verdict, rationale, wording, and remedy requirements. Many of the same school finance experts who had authored KERA also helped write Alabama's comprehensive education reform bill "Alabama First." But, Alabama First was never enacted, and today Alabama's school system is still near the bottom of all national education rankings. Unlike its neighbor to the north, Alabama has not significantly changed its education system or its level of financing during this decade.
What happened in Alabama to make the results of a remarkably similar set of circumstances turn out so dramatically different? Timing played a tremendous role in determining the fate of school finance reform in Alabama. Anti-tax and anti-government sentiments were much stronger in 1993 then they had been in 1990, and by 1993-94 Alabama's political leadership had run into trouble.
School finance reform is inextricably tied to the volatile politics of taxes Alabama during the 1990s. Alabama has not had the luxury of a fiscal surplus; in fact, a few times education has been pro-rationed when there has been a budget shortfall. Moreover, Alabama is significantly behind the southeastern average in school funding.17 Thus, in Alabama, even more so than in other places, reform cannot be accomplished without additional tax revenue, and the rise of anti-tax sentiment throughout the country had a great impact on the remedy phase of the Alabama court case. The Christian Coalition, Eagle Forum, and conservative Republicans had significant political power and popularity in Alabama, whereas similar groups had less power in Kentucky 4 years earlier in 1990 during the Rose decision. These groups mobilized against education reform in Alabama, viewed the Alabama First bill as social engineering, and did not want to see their taxes rise in order to finance the bill.
When the Montgomery County Circuit Court ruled in Harper v. Hunt that the entire Alabama education system was unconstitutional, Governor Guy Hunt did not appeal the case to the highest court in the state both because it appeared to be a losing battle and because he ran out of time. Hunt, a Republican governor, was the only remaining defendant of the five originally named in the suit. The rest had switched over to the side of the plaintiffs. When the court ruling came out, Hunt was facing charges of improper use of public funds and could not afford any more negative publicity. He was found guilty and removed from office shortly after the court decision.
Lieutenant Governor Jim Fulsom Jr., a Democrat, replaced Hunt in office for
the remainder of the term. Fulsom supported education reform and worked closely with A+, the Alabama leadership organization that advocated education reform around the state. Governor Fulsom presented Alabama First, along with the corresponding billion dollar tax revenue increase, to the legislature during the session preceding the gubernatorial elections. However, when the general public learned of the high price tag of reform, the consensus that A+ had built around the need for educational reform disintegrated. The Alabama Education Association, led by gubernatorial candidate Paul Hubbart, opposed the Alabama First bill because of its accountability provisions. Hubbart, who was running against Governor Fulsom in the Democratic primary and was vying with Fulsom for the title of "the education candidate," could not allow a Fulsom-backed reform plan to pass. He argued that Alabama could not afford, and did not need, a billion dollars worth of reform. The bill was passed in the Senate but not in the House and was thus postponed until the next legislative session.
The crucial turning point for school finance reform in Alabama was the 1994 election of Governor Fob James. James, a political underdog, ran on a "No New Taxes" campaign platform and rode the national Republican anti-government, anti-tax tide to beat Fulsom, who was hurt by charges of ethical violations. Although he only won the election by a small margin, James has since consolidated his political power in the state. Governor James has taken a strong stand against increased taxes and school reform and fully supports the political philosophy of the Christian Coalition. He has withdrawn from the National Governors' Association and does not support the federal Goals 2000 plan because he considers it to be social engineering. James has characterized the Alabama education system as inefficient and wasteful and has opposed increases in education spending. Governor James has also characterized the Hunt decision as judicial intervention, has defied the court order, and has attempted, so far unsuccessfully, to have it overturned. The fact that Harper v. Hunt did not make it to the Supreme Court in 1993 has helped James argue that the decision has no authority behind it.
The timing of the elections and political developments in Alabama eliminated the gubernatorial support of comprehensive reform in Alabama, but the effects of these events were compounded by the absence of legislative support for reform. Alabama First had no legislative participation, and former Governor Fulsom was the only political leader with strong stakes in Alabama First. At the same time, the politically powerful Alabama Farmers Association (ALFA) and the Christian Coalition opposed property tax increases and outcome-based education components of Alabama First and presented their own reform bill, Score 2000, which was backed by Republicans in the legislature.
Although A+, which was modeled after the Prichard Committee in Kentucky, had been very active in building consensus around reform, it had only been in existence for a few years. In contrast, ALFA and coalitions with vested interests in maintaining Alabama's property taxes as the lowest in the nation have a long history in the state. Alabama's constitution, written in 1901, favors large
property owners and out-of-state businesses and requires a popular vote to raise property taxes. School finance reform in Alabama is further complicated by the fact that a constitutional amendment to the tax system is required to enact many proposed changes to the system.
Race and class considerations also made school finance reform more politically contentious in Alabama than in Kentucky. Racial minorities in Alabama make up a greater proportion of the population and are concentrated in the poorest sections of the state. Therefore, aid that is targeted to the poorest districts is perceived by many to disproportionately assist minorities who have significantly less political power.
Most people in Alabama are discontent with the education system in the state, but they have not been willing to raise revenues in order to improve it. Although incentives exist for the judicial branch to mandate comprehensive reform, as demonstrated by Harper v. Hunt , the court decision is an insufficient incentive for the legislative and executive branches to enact reform. The tax, racial, distributive, and ideological implications of comprehensive school reform, along with the perception that Alabama's education problems are rooted in mismanagement rather than lack of funds, have eroded public support.
School finance litigation and legislative responses are dominant themes in Texas state politics during the 1990s. In 1989, the Taxes Supreme Court found the Texas school finance system unconstitutional. The nature of this decision, however, was very different than the decisions in Kentucky and Alabama. In Edgewood v. Kirby, the court found that Texas's school finance system violated the state constitution's requirement of an "efficient system of schools" (Fulton, 1997; Fulton and Long, 1993:17). The court ruled that the legislature must devise a new funding system that provided districts with equal access to similar revenues per pupil at similar levels of tax efforts. In addition, the court established that in order to achieve compliance with the Edgewood decision, legislators could consolidate school districts and/or tax bases.
After 5 years and four rounds of Texas Supreme Court decisions, a legislated remedy was upheld as constitutional by a 5-4 decision in 1995. This remedy does help to reduce inequities in school finance in Texas. In fact, some predict that by 1999, when the new system is fully implemented, the portion of state revenues excepted from equalization will have decreased from the 1989 level of nearly 21 percent of all state and local revenues to less than 2 percent (U.S. General Accounting Office, 1995). Alterations to the original legislation, however, make it unclear whether or not the present system would be upheld as constitutional if it were challenged again by either the original plaintiffs or the wealthier districts. Moreover, it is uncertain whether equalizing effects will occur and be sustained over time.
Texas has enacted school finance reform in the past, but in the 1990s the politics have become more contentious because it involves redistributing existing resources—not raising new money.19 The long battle between the court and the legislature, and the threat of the courts closing down the schools, demonstrate the political difficulty of the issue. Without the Edgewood v. Kirby ruling and the Texas Supreme Court's continued pressure on the legislature to devise a new constitutional system, reform never would have happened.20 In fact, the reform legislation of 1993 resulted from frustration with the litigation and the manner in which it obstructed progress on other educational issues. Patience and energy levels wore thin on all sides, and compromises were made in the interest of passing something.
The biggest obstacle to a politically feasible solution that complied with the court order was the fiscal impossibility of leveling-up. The large disparities in property wealth in Texas required an increase in state revenues of an amount close to four times the entire state budget to bring the bottom districts up to the top levels of spending (U.S. General Accounting Office, 1995:31). Responding to the strong anti-tax sentiment in the state and a 10-year record of putting more money into the system in order to help equalize funding, legislators opposed further increases in state taxes in their efforts to comply with the court ruling. Texas's economy has been improving in the 1990s, but business tax exemptions and the absence of a state income tax have reduced the rate by which these improvements transfer to state revenues. Competition for state revenues has been fierce; between 1990 and 1995 Medicaid expenditures increased by 117 percent and criminal justice expenditures by 135 percent (U.S. General Accounting Office, 1995:31). Meanwhile, fiscal surpluses were used to finance a 34 percent increase in total expenditures in education from 1990 to 1994, but much of this increase was used to compensate for the simultaneous 8.6 percent increase in enrollments that necessitated increased expenditures and new facilities in some areas (U.S. General Accounting Office, 1995:31).
Having ruled out state tax increases, and lacking fiscal flexibility to equalize through available revenues, the legislature looked to remedies that would redistribute local wealth. Redistribution is always difficult, but it is more so in a state like Texas with strong racial, class, and urban/rural divides. The initial remedy passed by the state legislature in response to Edgewood was ruled unconstitutional because it did not go far enough in guaranteeing equal revenues for equal tax effort. In this ruling the court suggested either consolidating school districts or district tax bases but the public opposed loss of local control over education issues.
The next remedy bill, signed into law in April 1991, consolidated school districts for the purposes of taxation only and provided a mechanism to cap per-pupil property wealth and to redistribute local property tax revenues. This remedy required a constitutional amendment, approved at the polls, allowing the property tax recapture. Although poll data prior to the vote showed significant
support for the amendment, it was defeated 63 percent to 27 percent (Reed, 1997:110). Although the debate in the newspapers focused on taxes and education, a recent study suggested that the opposition to the school finance equalization bill was, in many ways, more about racial cleavages over educational opportunities (Reed, 1997:114). The study reported that the racial and economic composition of districts was a better predictor of support or opposition to school finance reform than district wealth. Districts with high percentages of blacks and Latinos were most likely to vote in favor of the amendment, probably because they viewed themselves as the prime beneficiaries of the equity-enhancing reforms. Predominantly white districts, on the other hand, were most likely to oppose the proposal even when their income levels were such that they either would benefit or not suffer significant loss.
After the constitutional amendment and accompanying reform proposal were rejected by the voters, Texas legislators proposed a new remedy to end the long struggle with the courts. This 1993 remedy legislation was finally approved by the court in 1995. It has, for the most part, remained in place and has helped to reduce inequities in Texas school finance. The remedy capped the amount of taxable wealth in a district, limited local property tax rates, and provided districts with taxable wealth above the cap five options for redistributing that wealth to poorer districts. The remedy also included a hold harmless provision that allowed all districts to maintain their 1992-93 revenue levels at least until 1996. The fact that the reform included choices for how the wealthier districts redistribute their wealth and that it did not involve a constitutional amendment changing the state's tax structure made it less threatening to the wealthier districts and therefore easier to pass.
Inequities in Texas still exist, and the remedy may not be the best solution. In May 1998, a group of 126 poor school districts in Texas filed a petition to reopen litigation because of the lack of state compliance with the 1993 finance-reform law (Johnston, 1998). On the other side, a backlash with strong support from the wealthiest districts has been challenging the redistributive nature of the remedy and, in the most recent legislative session, caused some minor concessions. The longevity of this reform thus remains in question.
School finance remains an important issue in Texas state politics, and politicians are wary of disrupting the delicate balance established by the 1993 reform. In the most recent legislative session, Governor Bush and the legislators imposed an unwritten requirement that new policies must not affect the amount of revenue available for education because they did not want to reopen the school finance debate and open the door to further litigation.21 The 1993 remedy has resulted in significant increases in local property taxes and has sparked a new movement for property tax relief. In 1992-93, state taxes covered 40 percent of education expenditures while local taxes covered 49.6 percent (National Center for Education Statistics, 1995). In 1994, Governor Bush was elected on a platform that the state should assume its fair share of school funding, over 50 percent. Once
elected he made local property tax relief one of his main goals and appointed a committee to explore the situation and alternative solutions. A few proposals for property tax reform were debated in the 1997 legislative session, but the school finance revenue neutrality requirement made extensive reform impossible.
In the 1970s, after the 1973 Robinson v. Cahill decision, the legislature and the New Jersey Supreme Court engaged in a 3-year struggle, seven rounds of litigation, and a court injunction that closed the schools before a legislated remedy was finally passed, financed, and approved as constitutional. By the 1980s, however, the disparities in per-pupil spending in the cities versus the suburbs were increasing again. New Jersey school finance advocates filed a new suit on behalf of the children in 29 of the state's poorest districts.
The 1990 Abbott v. Burke decision in favor of the plaintiffs sparked another round of attempts to equalize New Jersey's school finance system. The court specified that the remedy must ensure that the educational opportunities for the students in the 29 special needs districts equal those of the students in the wealthiest districts in the state. In a later round of the case the court clarified that equal educational opportunity for the students in the special needs districts would require access to all educational and extracurricular activities that were available in the wealthiest districts and funds for supplemental programs to address the special educational needs of urban districts. The decision created an entitlement to equal educational opportunity only for the 30 poorest districts.23 The court did not hear evidence on, and therefore issued no decision about, the system's constitutionality vis-à-vis the students in the more than 450 school districts remaining. This made it difficult to build a political coalition in support of the decision. On the other hand, the court's use of the standard of equal educational opportunity and recognition of educational overburden in the urban districts boded well for significant equity-enhancing reforms.
New Jersey provides an extremely challenging environment for school finance reform. In 1990, at the time of the Abbott decision, the disparities in regular educational spending per student between the richest and the poorest septiles had grown to $2,008 (Firestone, 1997a:5). New Jersey already spent more per pupil on education than any other state in the nation. Thus, while Kentucky and Alabama could point to their low national rankings in per-pupil expenditures as justification for the necessity of increased spending, New Jersey needed other ways to justify increased expenditures.
New Jersey has the second highest per capita income in the nation and yet has four of the country's poorest cities along with a few others that would qualify as the poorest cities in most states. Its predominantly white suburbs have some of the most valuable property in the nation, booming economies, and excellent schools. The cities, on the other hand, are predominantly black and Latino and
have little property wealth, stagnant or declining economies, and abysmal education conditions. They also have less than one-quarter of the seats in the state legislature. Blacks and Latinos constitute close to 25 percent of the public school population, yet New Jersey has one of the most segregated school systems in the country.
In contrast with the national trend toward school district consolidation, New Jersey has actually created more school districts and now has over 600. Each has a vested interest in maintaining local control of its own resources and education policies. Although the lack of district consolidation is inefficient, regionalization of school districts is a political taboo because of its racial, class, and ideological implications.
The Abbott decision of 1990 was well timed politically. A Democrat, Governor James Florio, a former representative from Camden and an urban schools advocate, had recently been elected and had a Democratic majority in both houses of the state legislature. A general public consensus supported efforts to increase equity and improve the quality of education in the state's poorest districts. In a 1990 poll, out of those who were aware of the Abbott verdict, 54 percent agreed with the court and only 38 percent disagreed (Reed, 1997:104).
In response to the Abbott decision, a committee of legislators and technical experts authored the Quality Education Act (QEA), a new school finance formula that established a high foundation level of spending for everyone, provided supplemental programs for students in the poorest districts, and slowly phased out state aid to the wealthiest districts. The QEA provided over $1 billion of state aid to education, most of it targeted to the 30 poorest urban districts that educated one-quarter of the state's public school students. Governor Florio backed the QEA and a $2.8 billion tax package that was designed to fund the QEA, address the projected budget deficit, and provide local property tax relief (Corcoran and Scovronick, 1996:6). Within a month, the QEA and the tax package were passed and signed into law. They were never enacted, however, because the legislature rebelled against the Governor's leadership 4 months before the law was to take effect. They passed a revised package called QEAII, which substantially decreased the tax burden and reduced the level of education aid by $360 million (Corcoran and Scovronick, 1996:13).
Widespread public opposition to the QEA proposals, the tax increases, and the prospect of increased spending in urban districts eventually succeeded in derailing these reforms. After the first QEA and the $2.8 billion tax increase were passed, an anti-tax uprising, led by a grass-roots organization called Hands Across New Jersey, caused the governor's approval ratings to drop 19 points (Firestone, 1997a:4). The QEA was criticized for being punitive—punishing the wealthier districts by taking away their state aid. Moreover, it was, and still is, often argued that more money would only be wasted in the poor districts. Perceptions of the urban districts as corrupt, inefficient, and hopeless have been strengthened by the rhetoric supporting choice vouchers and charter schools. These
perceptions are further complicated by racial politics; what may lie behind some of the arguments that urban districts are inefficient is the belief that minority children cannot be educated and minority adults cannot run school districts well. Strong opposition also came from a somewhat unlikely source, the New Jersey Education Association (NJEA), which opposed the QEA proposals over pension issues.
In 1991, almost every nonurban legislator who had voted for the QEA and the accompanying tax bill was defeated, and the Republicans gained a majority in the state legislature. Similarly, in 1993, Governor Whitman, running on an anti-tax platform and a promise to reduce income taxes by 30 percent over 3 years, defeated Governor Florio. The Republican legislature and governor have repealed most of the tax increases and much of the QEA spending. In another round of Abbott in 1997, the court ordered Governor Whitman and the legislature to provide an additional $130-248 million to the poorest districts (Goodnough, 1997:1). This decision was affirmed in May 1998 when the New Jersey Supreme Court approved a plan for funding and systemic education reform provided by the State Commissioner of Education (Abbott v. Burke, N.J. Sup. Ct., May 1998; see Minorini and Sugarman, Chapter 6 in this volume).
Even the combination of a strong court decision, an activist court, and strong gubernatorial and legislative leadership were not enough to pass and sustain reform in New Jersey. Some important lessons can be drawn from the attempts to legislate school finance reform made by Governor Florio and the proponents of equal educational opportunity. First, if the bill had included provisions for accountability, educational standards, and programmatic initiatives, it might have inspired more confidence that the money would be well spent and might have had more support. Second, the QEA was passed too quickly without input from the necessary interest groups. Third, there might have been more support for the reforms if the governor and the legislators had taken more time to build a coalition, to educate the public about the problems, and to explain the reforms to the public. For example, although the middle districts would have benefited substantially from the bill and would only have paid a small portion of the taxes, these aspects were not highlighted in the debate (Corcoran and Scovronick, 1995).
Critical Elements For Reform
The preceding discussion of four states suggests that the political, economic, and judicial contexts of the 1990s pose a number of challenges for school finance reformers.
Anti-tax and anti-government sentiment has emerged, especially in the 1990s, as a major issue in three of the four cases that we have discussed. The anti-tax message is a simple, clear message that appeals to a widespread audience with offers of concrete benefits. On the other hand, school finance reform is extremely complex; its benefits are more nebulous and are often concentrated in certain
areas and populations. In Alabama and New Jersey, the current governors have made repeated promises to reduce taxes and have adopted the issue as a central political priority.
With higher taxes ruled out, revenue to equalize school finance across districts disappears. Economic downturns have similar effects. The current and anticipated fiscal health of each state definitely plays a role in determining the timing, the nature, and the extent of school finance reform. School finance reform is virtually impossible without some sort of fiscal flexibility in the state's budget, whether in the form of fiscal surpluses; public tolerance to raise taxes, as was the case in Kentucky; or the possibility of transferring funds from one district to another, as Texas did.
In Alabama, New Jersey, and Texas, the politics of race have significantly affected reform. In each of these states, respondents pointed to the main role that race plays in education policy, claiming that ''We have an unresolved race and class problem in New Jersey that affects everything we do"24 and "In Alabama, everything comes back to race; there is no public policy in the state that does not come back to race."25 In each of these three states, the benefits of school finance reform were perceived to accrue mostly, or even exclusively, to racial minorities. The white majority opposed tax increases and redistribution of resources to benefit minorities in part because negative assumptions were made about student ability to learn and about adult competence to lead school systems. In Kentucky, on the other hand, where racial minorities are a smaller percentage of the population and are concentrated in the wealthier districts, racial politics were not salient. It was therefore much easier to organize a community of interest among the white majority and create support for increasing taxes to fund education throughout the state.
These factors pose challenges to school finance reformers. In the states we examined, successful litigation, strong political leadership, and extensive public education efforts proved to be necessary, but not automatically sufficient, conditions for overcoming these obstacles.
In each of the four states we examined above, litigation played a key role in placing and keeping the issue of school finance reform on the state agenda. Without findings in favor of the plaintiffs and orders from the court to reform their systems, none of these states would have undergone school finance reform. A court decision in favor of the plaintiffs can act as a catalyst for reform but it is not sufficient to bring about improvements in a state's school finance system. The nature and scope of school finance litigation, the extent to which the court is willing to define the remedy, and the standards that it uses to evaluate equity all affect the types of incentives created for policymakers and the level of consensus for reform. Court decisions like Kentucky's, which declare the school finance system unconstitutional, define the standard of evaluation as equal educational opportunity, prescribe requirements for reform (including deadlines), and link improvements in finance systems to improvements in both inputs such as teachers
and outputs such as student outcomes, appear to inspire legislators to pass significant equity-enhancing reform.
Kentucky's court case opened a window of opportunity for extensive reform. As the comparison of events in Kentucky and Alabama so clearly illustrates however, successful comprehensive litigation is not enough to guarantee reform. An activist court and successful litigation are helpful, but political leadership from the governor and key legislators is essential in passing school finance reform to reduce inter-district inequities. In Alabama, where turnover and corruption severely limited consistent political leadership during the period following legislation, school finance reform efforts had very little chance of succeeding. Now, with the Governor actively opposing school finance reform and challenging the court's authority, there is no hope for success in the near term. As the other states demonstrate, the lack of opposition from the governor and others in positions of leadership is not enough; strong activist political leadership and positive incentives are needed to enact equity-enhancing school finance reform. The benefits of school finance reform need to be clearly articulated to political leaders and the broader public, as does evidence linking equalization of school finance systems with increased quality of educational experiences and improved student outcomes.
In Kentucky these incentives existed and were clearly articulated by the Prichard Commission, the court, legislative leaders, and the Governor. Here the focus was on economic development. A clear argument linking school finance reform and greater investment in education to the future economic health of the state was developed and publicized for many years leading up to the litigation and reform. In other states where there has not been such decisive, repeated articulation of the benefits of school finance reform, it has been hard to identify what politicians and the broader public have to gain from taking on equity issues.
Because the arguments in favor of school finance reform are complex and usually contentious, while those opposing reform are fairly simple and often have more widespread appeal, extensive and prolonged efforts to educate the public and create a community of interest for reform are essential. These efforts are necessary both in building consensus around the need for reform and in garnering support for specific reform bills. In devising a new school finance initiative, governors and legislators must often confront interest groups defending their economic advantages and "a mass public opposition that is, in significant ways, racially based" (Reed, 1997:104). School finance reform is a politically risky initiative for politicians to support unless they can clearly identify and articulate universal benefits, explain where the new money will go, show how it will improve students' experiences and outcomes, and demonstrate how these improvements benefit the wider society. The Kentucky legislators had major advantages by responding to an adequacy argument that framed both the problem and the remedy in terms of substantive education change and not just money.
Such a focus is not sufficient (witness Alabama), but in today's climate it appears at least necessary.
School finance is an increasingly partisan issue in most states as the parties take more sharply defined positions on the issue. A united and broad community of interest can help bridge partisan gaps, especially when remedies that benefit diverse interests can be formulated and presented in ways that attract popular support within the general population. Active coalitions within the educational community can help articulate the need to invest in children and the future and provide arguments that would help push reforms through the political process.
Such coalitions can also examine and illustrate the status of school finance by measuring how the allocation of opportunities and resources changes over time and specifying whether the problem of inequalities exists at a national or state level or is focused only within certain kinds of districts or schools. When courts, legislatures, educators, and the public at large agree on the types of disparities in educational resources that are unacceptable, such agreement helps overcome impediments to reform that are shaped by confusion, uncertainty, and inconsistent or contradictory evidence.
In states where school finance and comprehensive education reform can be billed as a necessary step toward economic development, the politically influential business community can sometimes be united behind reform initiatives and play a very important role in the debate. When the business community and a united education community support reform, as they did in Kentucky, they provide politicians with the incentives that they need to support reform.
As the politics of school finance reform have become more contentious, the issues themselves are also changing. As Allan Odden (1998) has argued, the nature of the school finance equity problem in some states is different now than it was in the past. In the 1970s, for example, inequities resulted from high tax rates in districts with low property wealth and low amounts of per-pupil spending while low tax rates in districts with higher property wealth resulted in high amounts of per-pupil spending. In the 1990s, after an initial round of reforms that attempted to equalize potential revenues, many states are faced with a situation where low-wealth districts have low tax rates and low spending while high-wealth districts have higher tax rates and higher spending. Moreover, in many states, as spending levels have increased in property-poor districts, wealthier districts have increased their local tax rates and maintained spending inequities. Politically, this situation presents a less compelling argument for state intervention because low-wealth districts could improve their situation themselves if they were willing to raise their tax rates.
The shift in school finance reform from tax equity to equalizing educational opportunity creates complex challenges and intricate politics. Many states are attempting to resolve these challenges through the creation of foundation levels and the use of weights to reflect the higher costs associated with serving large numbers of pupils from low-income families, special education, and other special
groups, as well as addressing variations in district characteristics such as regional cost differences, size, or enrollment change.
In the current political atmosphere, especially with the public demanding more accountability from its government, it is increasingly difficult politically to sell school finance reform on the equity principle alone. In many cases it has become necessary, though not sufficient, to have an adequacy argument and to explain what the increased or redistributed money will buy. In addition, compelling evidence about the types and levels of investments that are most likely to improve student outcomes can generate public support for school finance reform.
percent. Thus, the volume of school finance activity in the 1970s is more than twice the expected rate of innovation.
California eventually achieved substantial equality of per-pupil spending and of educational opportunity through school finance reform in response to Serrano combined with state and local tax capping laws such as Proposition 13 and the Gann Amendment. Equality of spending came at a high price, however, as California's total spending on education declined and the state's education system dropped from one of the best in the nation to one of the worst.
The record in the Rodriguez case demonstrated that Edgewood, a poor district in San Antonio, taxed itself at a 24 percent higher rate than neighboring Alamo Heights but still only had a per-pupil expenditure that was 60 percent of Alamo Heights' per-pupil expenditures. In 1967-68 dollars, Edgewood was spending $356/pupil and had a tax rate of $1.05 per $100 of assessed property while Alamo Heights spent $594 per pupil and had a tax rate of only $0.85 per $100 assessed property.
As Table 3-2 in Evans, Murray, and Schwab (Chapter 3) in this volume demonstrates with nationally aggregated data, the 95th percentile was spending 2.22 times more than the 5th percentile in 1982 and by 1987 the 95th percentile was spending 2.53 times more than the 5th percentile. Similarly, the other measures of inequality listed in that table all show an increase in inequality from 1982 to 1987.
Two of these rulings (Alabama's Harper v. Hunt and Missouri's Committee for Educational Equality v. State) were decided at the circuit court level in 1993 but were not appealed, and legislative action began in response to the lower court's ruling. In Alabama, the lower court's decision was later upheld by the Alabama Supreme Court in 1996.
Much of the information in this section comes from telephone interviews conducted with the following people in May and June 1997: Jacob Adams from Vanderbilt University and Timothy Collins from the University of Kentucky's Appalachian Center.
Telephone interview, Timothy Collins, Appalachian Center, University of Kentucky, June 1997.
Telephone interview, Timothy Collins, Appalachian Center, University of Kentucky, June 1997.
Figure cited in telephone interview, Timothy Collins, Appalachian Center, University of Kentucky, June 1997.
Much of the information in this section comes from telephone interviews conducted with the following people in May and June 1997: Wayne Flynt from Auburn University, Kathy Gassenheimer from A+, and Ira Harvey from University of Alabama, Birmingham.
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