School Finance, Equivalent Educational Expenditure, and the Income Distribution: Equal Dollars or Equal Chances for Success?

Abstract

This article breaks new ground in the debate on school finance and equality of per pupil school expenditures. We are able to merge school district data with the individual and family data of the Panel Study of Income Dynamics (PSID). This allows us to examine both student and school district characteristics and to assess several measures of equality of expenditure across the income distribution of parents and by funding sources. Unlike studies that use district-level data, our study finds a surprising degree of equality in the actual amounts expended per child in low- versus high-income families. But after adjusting expenditures for student body composition to reach equivalent education expenditures, we find a greater inequality in per pupil spending across the income distribution. In addition, there are substantial racial inequalities in expenditures across the income spectrum. In closing we discuss policy implications for school finance and increased equality of educational opportunity.