Education funding across school districts varies widely. Some school districts have very high per-pupil expenditures, while other districts in the same state may spend a significant amount less per student. While there are a variety of ways of measuring school funding equity, the federal government developed a standardized measure—known as the "equity factor"—to determine how evenly (or unevenly) funding is distributed across school districts in a state. The equity factor is defined in federal law under Title I Part A of the No Child Left Behind Act.
The U.S. Department of Education calculates the equity factor for each of the 50 states, DC, and Puerto Rico by comparing per-pupil expenditure for each school district with the average per-pupil expenditure for the state, weighted according to district population size and poverty level. Specifically, the equity factor is calculated by using a "weighted coefficient of variation" in district per-pupil expenditures. The weighted coefficient of variation is essentially the average per-child deviation in education spending from the state mean – expressed in percentage terms. For example a state with an equity factor of 0.1 has an average variation in per pupil spending of 10 percent from the state mean per pupil spending. The lower the coefficient of variation is in a state, the more equitably education funding is distributed across districts.
The District of Columbia, Hawaii, and Puerto Rico have only one school district (and therefore no disparity in funding across districts) so they are assigned an equity factor of 0.0, indicating the maximum level of equity. In 2009, the five states with the most equitable funding across school districts within a state are: Hawaii (which only has one district), West Virginia, Washington, Florida, and Iowa. States with an equity factor of 0.2 and above are considered the least equitable. The five states with the least equitable funding across school districts in the state in 2009 were: Louisiana, Illinois, Virginia, Montana, and Massachusetts.
Certain safe-harbor standards exist for states with large numbers of federally-impacted students (as defined by the federal Impact Aid program). These states, Alaska, Kansas, and New Mexico, cannot be assigned an equity factor of above 0.1 regardless of their actual distribution of spending. A detailed graph ranking each state based on the equity factor is available here.
EFIG Funding Formula
EFIG Funding is computed as follows: (# Poor Children ) * ( Per-Pupil Expenditure ) * (Effort) * [1.3 - Equity Factor]
An Example: Pennsylvania
Pennsylvania had an equity factor of 0.168, or 16.8 percent, in 2012, meaning state per-pupil expenditures by school district vary, on average, by 16.8 percent from the state average. In contrast, Iowa had an equity factor of 0.083 or 8.3 percent. That means that district spending, on average, only varies by 8.3 percent in Iowa.
Multiplying Pennsylvania's equity factor of 0.168 by the average per-pupil expenditure in the state, which was $14,849 in 2010, shows that the average Pennsylvania school district spends $2,495 above or below the mean state per pupil expenditure. For an average size district of 4,300 students, that is a difference of more than $10.7 million dollars from the state mean.