School Finance Prerequisites: On the provision of public education

The next several posts will include what I consider to be prerequisite material for understanding state school finance systems and public education systems more broadly.

Education as a Taxpayer Financed (Quasi) Public Good

Let’s step back for a moment and consider broadly the provision of public goods and services through a system of taxpayer support. In the United States, for elementary and secondary education in particular, that system combines federal (about 10%), state and local (varied by state) tax dollars to pay for the provision of public education systems.


Public education systems are largely state governed. Local tax dollars are generally raised from property taxes on residential, commercial and industrial properties within geographic spaces defined in state law as local public school districts. In some states, these “districts” are contiguous with other municipal (city/town) boundaries, while in others they are not. Generally, the rules for and parameters determining local taxation are governed by states.  State dollars typically come from state general funds fueled by income and sales taxes and are allocated to local districts through various aid formulas, governed by state legislatures. Similarly, federal aid is allocated to states by various formulas governed by Congress, from revenue derived primarily from federal income taxes.

Governments (at all levels), established by the people for the people, collect and redistribute tax dollars to provide for the mix of public goods and services desired. Investment in public schooling is investment in “human capital,” and the collective returns to that investment are greater than the sum of the returns reaped by each individual who furthers her education.[i] We invest public resources into the education of the public, for the benefit of the public.

The dollars provided via taxation support both a) infrastructure and b) annual operations for public goods & services. This includes schools, roads, public safety (police/fire), national security, public utilities, parks, etc. Investment in public infrastructure meant to serve not only immediate users, but users for generations to come. Support of annual operations is also not exclusively to the benefit of those using the service or good today or this year. Contributors of tax dollars include those directly and indirectly benefiting (both parents of school-aged children, property owners without school aged children). Indirect benefits accrued from investment in system of public schooling include capitalization in housing values (e.g. “better” schools increase property values).

The necessity to revisit the basic connections between taxation and the provision of public goods[ii] comes about partly in response to a frequent argument of school choice (voucher and charter) advocates that the public tax dollars belong (or at least should belong) to the child, not the institutions (schools). Institutions – especially government institutions – are faceless bureaucracies, thus “bad” whereas children are obviously “good.” That is, even if those institutions are established to serve the children. While this claim makes a compelling soundbite, it falsely assumes an oversimplified linear tax collection to spending distribution path and individualistic benefit basis for public goods and services. That taxpayer-parents (presumed one and the same?) pool their money such that the money can be distributed not based on any collective preferences but instead according to each individual’s preferences for their own child, and with no other contributor to the pool having influence over individual choices. That is, individual parent preferences for the use of public dollars always supersede societal preferences. This ideology runs contrary to the basic concept of public goods and services.

The “money belongs to the child” claim also falsely assumes that the only expenses associated with each individual’s education choice are the current annual expenses of “educating” that individual. Further, that the expenses associated with educating (equitably) the first, second and third child are the same as the ninety-ninth child choosing any one institution.  That is, it ignores entirely marginal costs and economies of scale, foundational elements of origins of public institutions. We collect tax dollars and provide public goods and services because it allows us to do so at an efficient scale of operations.

Rather, the tax dollars collected belong to (are governed or controlled by) the democratically governed community (local, state, national/Federal) that established the policies for collecting those tax dollars, which are to be distributed according to the demands – preferred goods and services – of that community within the constraints of the law.  Public spending matters not only to those using it here and now. Those dollars don’t just belong to parents of children presently attending the schools. The assets acquired with public funding, often with long-term debt (15 to 20 years), surely do not belong exclusively to parents of currently enrolled children.  This is not to suggest that this is the perfect or even best possible system, but rather that it is the system we have in place – one that provides for democratic control and taxpayer financing of public schooling – governed and regulated by the appropriate local, state and federal authorities and laws.[iii]

[i] Sweetland, S. R. (1996). Human capital theory: Foundations of a field of inquiry. Review of educational research, 66(3), 341-359.

[ii] Education, or public schooling (public school systems) in particular is not typically considered a “public good” as the provision of public schooling does not comply with the definition of a “pure public good” which can be equally accessed by all, without reduction in benefits to any.  The intent here (in the above tweet-storm) was to shed some light on the importance of understanding the role/position of these publicly financed education systems in society and that there’s more to these systems than the year to year provision of “schooling” to those who happen to be school aged in a specific community at a specific point in time.

[iii] Another recent policy proposal which ignores these realities is the “parent trigger,” a policy which allows the parents of children presently attending a particular public school to petition (by simple majority) to have that school taken over by a private management company, including potential transfer of capital assets to the private manager.[iii] Clearly, 51% of parents of currently enrolled students should not be granted such authority over an institution financed by a much larger taxpaying public.


Published by schoolfinance101

Bruce Baker is an Professor in the Graduate School of Education at Rutgers, The State University of New Jersey. From 1997 to 2008 he was a professor at the University of Kansas in Lawrence, KS. He is lead author with Preston Green (Penn State University) and Craig Richards (Teachers College, Columbia University) of Financing Education Systems, a graduate level textbook on school finance policy published by Merrill/Prentice-Hall. Professor Baker has written a multitude of peer reviewed research articles on state school finance policy, teacher labor markets, school leadership labor markets and higher education finance and policy. His recent work has focused on measuring cost variations associated with schooling contexts and student population characteristics, including ways to better design state school finance policies and local district allocation formulas (including Weighted Student Funding) for better meeting the needs of students. Baker, along with Preston Green of Penn State University are co-authors of the chapter on Conceptions of Equity in the recently released Handbook of Research Education Finance and Policy, and co-authors of the chapter on the Politics of Education Finance in the Handbook of Education Politics and Policy and co-authors of the chapter on School Finance in the Handbook of Education Policy of the American Educational Research Association. Professor Baker has also consulted for state legislatures, boards of education and other organizations on education policy and school finance issues and has testified in state school finance litigation in Kansas, Missouri and Arizona. He is a member of the Think Tank Review Panel, a group of academic researchers who conduct technical reviews of publicly released think tank reports on education policy issues.

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