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Fee-For-Service Redux

October 24, 2014

Yesterday I wrote a post describing the latest funding scheme advocated by the business community and taxpayers groups whereby schools are starved of funds and private foundations and/or school fundraisers are expected to fill the void. The post was prompted by a NYTimes article by Mokoto Rich describing how this gambit is effectively adding to the disparity between affluent schools and schools serving children in poverty and effectively diminishing the support for increases in broad based taxes needed to increase the base funding for public education.

For readers who might have concluded that this was a problem only in the Northeast because it was reported in the NYTimes, today’s Google feed offered evidence that the same phenomenon is occurring in the heartland by providing a more detailed analysis of the study completed by the University of Indiana-Bloomington that was the basis of Rich’s article. According to the study, private funds for schools have increased but the schools serving lower income students have benefited least and… the increase in “voluntary funds” has not offset the aggregate loss in taxes:

Nonprofit organizations dedicated to helping support public schools have grown dramatically over the past two decades. And they are raising a lot more money than a few years ago.

But the growth hasn’t come close to offsetting the reduction in tax revenues for schools that came with the recent recession, according to a study by Indiana University researchers. And the support is uneven, with students in high-poverty schools less likely to benefit from voluntary fundraising.

This whole gambit of shifting the burden to “end-users” has consequences that match my personal experience as a superintendent during the time frame the study covers:

The researchers analyzed trends and relationships in data from thousands of U.S. nonprofit school-supporting organizations that filed annual IRS reports between 1995 and 2010. Findings included:

  • The number of such organizations, including local school foundations, booster clubs and parent-teacher organizations, grew from 3,475 in 1995 to 11,453 in 2010.
  • The money they raised, adjusted for inflation, grew from $197 million to $880 million, or nearly 350 percent.
  • The share of school districts with at least one such nonprofit organization increased from 12 percent in 1995 to 29 percent in 2010.
  • Large school districts are more likely to be served by at least one fundraising organization; but the money raised, per pupil, declines as district enrollment gets larger.

School districts with greater capacity — as measured by property tax revenues per pupil, the share of individuals with a bachelor’s degree or more, median household income, and relatively low unemployment rates — have higher probabilities of being served by at least one school-supporting nonprofit and receive more money, per pupil, from the nonprofits.

While school-supporting nonprofits have exploded in number and revenue, the researchers conclude the money they raise isn’t enough to tip the balance in how schools are funded. Among school districts that got help from one or more nonprofit organization, average voluntary per-pupil funding in 2010 was $28; that compares to approximately $10,600 per student that public schools spent. Meanwhile, state tax receipts — a key source of support for schools in many states — have declined by 12 percent since the start of the Great Recession in 2008.

I believe the researchers were charitable in assigning the decline in state revenues to “the Great Recession”. The decline in revenues has also been helped by an increase in corporate tax breaks and reductions in state income taxes that were sold to the public as a means of stimulating economic growth. The privatization movement has only made matters worse for students in high poverty schools. The fact that these tax cuts and privatization movements happened in States under the leadership of Republicans who want to “starve the beast” and neoliberals who want to “run government like a business” is no coincidence. The sad reality is that once broad based taxes are reduced and privatization is introduced, the funding States ultimately provide to “students in high poverty schools” is unlikely to return unless some politician is courageous enough to insist that better schools will require higher taxes. In the meantime the mainstream media like TIME magazine will run cover stories blaming teachers for the failings of underfunded schools…. and the death spiral will continue.
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