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Reason Foundation

Under Stimulus Rich School Districts Get Richer

Lisa Snell
March 23, 2009, 5:37pm

The New York Times reports on how the federal stimulus package is pouring cash into school districts, whether they need the money or not. Complex funding formulas do not target the funding to school districts that actually need the money to backfill their budgets or ensure equal funding for similar students.

Surprise, Surprise, the $95 billion in education money is not necessarily going to schools with the greatest need. In fact, some schools with greater needs will receive less funding. At the very least one would expect that similar students might receive similar amounts of funding. But then you would not be playing in the random world of school finance in the United States. Perhaps not as troubling as big AIG bonuses, but still you would expect some comparability in per-pupil funding amounts from the federal stimulus. The New York Times reports that the federal stimulus package is NOT targeting school districts that actually need the money:

Utah, where a $1.3 billion budget deficit has threatened deep school cuts, will get about $655 million in education stimulus money, or about $1,250 per student, according to the federal Department of Education. Wyoming, which has no deficit and has not cut school budgets in many years, will get about $1,684 per student.

North Dakota, which also has no budget problems, will receive $1,734 per student. California, which recently closed a $42 billion budget gap through July 2010 partly through deep spending cuts, will get $1,336 per student...Democrats in Congress decided to use the formulas to save time, knowing that devising new ones tailored to current conditions could require months of negotiations.


Congress shouldn't just give the money away. If they were going to give schools billions in new resources, they blew a one-time opportunity to revamp school funding and at least make it more equitable and transparent.

The complex federal formulas mean that the same student with similar characteristics is not worth the same from one state to another. This is compounded by the fact that the money eventually flows to school districts and not students. School districts do not allocate the money based on per-pupil characteristics in a transparent manner. Districts fund programs and staff positions rather than students. Therefore, even within a school district, similar students at neighboring schools draw down vastly different amounts of per-pupil funding including federal dollars based on the characteristics of the employees rather than the students. Schools with more senior staff get more money and the school is only charged for average district staffing levels.

Congress missed a chance to rethink school funding transparency and intentionally decided to continue with inequitable formulas in the name of expediency.

Congress could have required this money to be driven-down to the school level on a per-pupil basis--forcing districts to consider within district disparities.

However, for too many districts this will be a government windfall that matches the pattern of the various bailouts and stimulus thinking in other sectors. Spend now and think about it later.


Lisa Snell is Director of Education


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