Where Do Schools Get All That Money?

From eduwonkette:
Guest blogger Sean Corcoran on: Private Donations to Public Schools
Sean Corcoran is an economist who teaches at the Steinhardt School of Culture, Education, and Human Development at NYU.

One of my all-time favorite bumper stickers is the now-classic:

To my knowledge, the Air Force has yet to experiment with bake sales. But—according to three papers presented at last month’s National Tax Association meeting in Philadelphia—private contributions through local education foundations have become a significant source of operating funds for many of the country’s public schools.

Education foundations are not your grandmother’s PTA. School foundations organize as 501(c)(3) corporations, and in some cases mount sophisticated fund-raising campaigns, soliciting contributions from local businesses, parents, and philanthropies. Foundations fund more than occasional trips to the zoo, paying to supplement instructional programs, offer scholarships, and provide extra pay to recruit and retain teachers.

School foundations have grown over time. According to a 2005 report by Eric Brunner and Jennifer Imazeki, contributions to California school foundations rose from $123 million in 1992 to $238 million in 2001. If these contributions were divided up evenly statewide, they would amount to only $40 per child. Of course—as Brunner and Imazeki point out—these contributions are far from evenly distributed. Donations are strongly related to family income, and in some cases they are quite high, at more than $250 to $500 per student. (You can read about the $3.3 million education foundation in Santa Monica-Malibu Unified School District here).

What explains the growth in private foundations? Two papers presented at the NTA meeting offer some hints. Julie Golebiewski of Syracuse University linked foundation giving in California to the restrictiveness of tax limitations in that state (the famous Proposition 13). In a nutshell, she finds that school districts that would have spent more on schools in the absence of the limitation were much more likely to raise funds through private foundations. Similarly, Tom Downes of Tufts found that private contributions in Vermont were highest in wealthy districts who—under their 1997 finance reform—would have been penalized for taxing themselves at higher rates.

Why do these education foundations matter? I find them interesting for several reasons. First, they stand in sharp contrast to the usual claim that school spending is out of control, and that teachers are adequately paid. If this were true, how can we account for the growth in voluntary contributions to public schools (some of which is channeled to teacher compensation)?

Second, foundations have the potential to undo school finance formulas designed to equalize educational opportunities. The evidence on school foundations suggests that communities with a high demand for school quality (or relative school quality) will find a way to meet this demand, regardless of the rules put before them. Thus, a policy based on promoting equity will not necessarily result in greater equity.

Finally, school foundations are likely to grow in importance as public education continues to decentralize control to individual schools. Charter schools and schools funded through a “weighted student” formula may come to rely on private giving whenever public funds are insufficient to meet the unique demands of their constituencies. As a result, school policies designed to level the playing field may end up tipping the balance in favor of schools most able to mobilize private resources. (For a terrific example from New York City, see this chapter by one of my colleagues Amy Schwartz).

Whether or not local school foundations will play a major role in the future of school funding remains to be seen. Eduwonkette readers, what do you think? Do private contributions play a role in your school district? Should they?

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