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Federal Share in K-12 Spending Remains Low, But Varies Widely

Last week, President Obama signed the latest iteration of the decades-old Elementary and Secondary Education Act (ESEA) into law, officially replacing the No Child Left Behind Act (NCLB) with the bipartisan compromise known as the Every Student Succeeds Act (ESSA). Like any true compromise, reactions have been mixed on both sides of the aisle, but for all the heated debates the new law has generated, the federal financial role in K-12 education remains extremely limited. But even within this narrow federal role, the formulas that policymakers have devised to allocate the funds still result in considerable variation among states.

On average, states receive  $1,315 per student from the federal government, which translates to just over 10 percent of all spending. These totals vary from state to state, with the District of Columbia receiving the most in per-student funding, at $2,735. Alaska is a close second, receiving $2,692 per student. Despite their above-average allocations, these states have relatively high education costs, meaning federal funding doesn’t represent an outsized share of their budgets. (D.C. spends over $27,000 per student, the highest of any state, while K-12 spending in Alaska comes in just under $19,000 per student. These high spending levels put the federal contribution at 10 and 14 percent, respectively.) At the bottom of the list, Utah receives just $752 dollars per student, out of a total of $7,532, putting the state in line with the national average of 10 percent federal funding despite the extremely small federal contribution.

In percentage terms, states with lower overall poverty levels tend to receive a lower share of their funding from federal sources, thanks to the way the formulas are designed. New Jersey and Connecticut tie for the lowest federal share, receiving just 5 percent of funding from federal sources. On the opposite end of the spectrum, Mississippi receives nearly 18 percent. The largest single source of federal funding comes in the form of Title I of ESEA, and is intended to provide additional funding to support education for disadvantaged students. This seems to indicate that the dollars are indeed well-targeted. In addition, many of these low-poverty states spend higher amounts on K-12 education. For example, Massachusetts comes in eighth in terms of overall spending, yet receives just 7 percent of that revenue from federal sources, a lower rate than all but three other states. On the other hand, Arizona and North Carolina both receive a relatively generous federal contribution, but have held overall spending quite low. Because of this, Arizona ranks fifth in the share of federal funding, with North Carolina coming in sixth.  

The other major federal component comes in the form of special education funding, provided under the Individuals with Disabilities in Education Act (IDEA). Both the IDEA formula, and the Title I program are governed by complex rules, including hold harmless provisions that prevent them from losing money from one year to the next, and small-state minimums that guarantee states with small populations a minimum aggregate amount, which translates to higher per-student allocations. These factors profoundly affect the way federal funding is distributed. For example, South Dakota ranks seventh in federal funding per student, despite a per pupil spending rate of under $10,000 per student. Because of it’s small size, South Dakota receives a disproportionate share of funding from the federal government, putting the state third in the share of funding from federal sources. Other small states, such as Wyoming and Rhode Island, receive similar per pupil allocations from federal sources, but spend much more overall.  

Interestingly, the new legislation will likely have an impact on how some of these dollars are distributed. Changes to Title II of ESEA, which grants funding for teacher education and professional development, included a change to the formula that prioritizes poverty over population. While the $2.3 billion spent on Title II makes up a very small sliver of the overall federal contribution, they're likely to benefit Southern states at the expense of rust-belt states over time.

In the aggregate these dollars add up: overall, the federal government contributed $61 billion to states in 2012, creating valid reasons to desire that those dollars be spent both effectively and equitably, and to hold states accountable for serving vulnerable populations. With ESSA’s increased state flexibility, this federal bump will remain a valuable tool for bolstering cash-strapped districts and overworked state budgets, but the way these dollars are distributed means that some states get a much larger allocation than others.

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