2). State Funds Target Poor Students in Most States

Regardless of whether a state’s school finance system explicitly targeted poor students, the effect was to target more state funds to poor students in 43 of the 47 states in our analysis. Federal Funds Were More Targeted Than State Funds in Most States

Federal funding was more targeted to poor students than state funding in 45 of the 47 states. On average, for every $1 of federal funding districts received for each student, they received an additional $4.73 in federal funding per poor student. In 37 states, high-poverty districts had less local funding per weighted pupil than low-poverty districts. A substantial number of poor students lived in these 21 states, however. Although targeting poor students helped reduce the total funding gap, the percentage of total education funding provided by state and federal governments was more important in reducing the gap. 3). State and Federal Funding Reduced or Eliminated Funding Gaps in Most States

Combined state and federal funding had the effect of eliminating the funding gap in 16 of the 37 states where the local funding per weighted pupil was less in high- than low-poverty districts. Changes in State and Federal Targeting Since School Year 1991-92

We contacted state school finance officials in the 47 states to determine whether school finance systems had changed in ways that would affect the funding patterns of school year 1991-92. Scope and Methodology Overview

The objectives of this study were to determine (1) the extent to which state and federal funding is targeted to poor students and (2) the effect of state and federal funding on the amount of funds available to high-poverty compared with low-poverty districts. V): the combined additional state and federal funding targeted to districts on the basis of the district’s number of poor students, the extent to which state funding is targeted to low tax base districts, combined state and federal funding as a percentage of total funding, the tax effort of low-poverty compared with high-poverty districts in a state, and the tax base of low-poverty compared with high-poverty districts in a state (as measured by income per pupil). At the high end, for every $1 of state aid provided for each student, New Hampshire provided an extra $6.69 per poor student; at the low end, four states (Montana, Nevada, New Mexico, and New York) provided no additional funding on the basis of the number of poor students. Louisiana’s targeting efforts and state share of total funding reduced the local funding gap between the lowest and highest poverty groups from about 15 percent to about 11 percent. Nevada’s state funding had the effect of providing districts with no additional funding per poor student for every $1 provided to each student.
Why GAO Did This Study

Pursuant to a congressional request, GAO reviewed state and federal efforts to target poor students and the funding gaps between districts with high and low proportions of poor students, focusing on: (1) the extent to which state and federal funding is targeted to districts on the basis of the number of poor students; and (2) the effect of state and federal funding on the amount of funds available to high-poverty compared with low-poverty districts.

What GAO Found

GAO noted that: (1) school finance systems in over 90 percent of the states had the effect targeting more state funds to districts with large numbers of poor students in school year 1991-92, regardless of whether the system explicitly intended to do so; (2) the extent of the targeting varied widely, however; (3) New Hampshire targeted poor students the most, providing an additional $6.69 per poor student for every $1 provided to each student; school finance systems in four states (Montana, Nevada, New Mexico, and New York) had the effect of targeting no additional funding per poor student; (4) the national average was $.62 in additional state funding; (5) federal funding was more targeted than state funding, providing an average of $4.73 in additional federal funding per poor student nationwide for every $1 provided for each student; (6) because federal funds were more targeted than state funds, the combination of federal and state funding increased the average additional funding per poor student from $.62 to $1.10 nationwide for every $1 provided for each student; (7) reported changes in federal education programs and state school finance systems since school year 1991-92 would probably result in federal funds being more targeted than state funds; (8) state and federal funding reduced but did not eliminate the local funding gap between high- and low-poverty districts in many states; (9) high-poverty districts had less local funding per weighted pupil in 37 of the 47 states GAO analyzed; (10) when GAO added state and federal funds to local funds for GAO's analysis, only 21 states still had such funding gaps, and these gaps were smaller in each state; (11) nevertheless, about 64 percent of the nation's poor students live in these 21 states; (12) nationwide, total funding levels in low-poverty districts were about 15 percent more than those in high-poverty districts; (13) although targeting helped close the funding gap, the percentage of total funding from state and federal sources was more important in reducing the gap; and (14) gaps were smaller in states whose combined state and federal share of total funding was relatively high.