Pennsylvania education funding: a major dilemma

Introduction: Judge Renée Cohn Jubelirer sided with the plaintiffs in a landmark trial that challenged the current school funding model, ruling that the General Assembly has not fulfilled its legal mandate and has deprived students in school districts with low property values and incomes of the same resources and opportunities as children in wealthier ones.

-From Pennsylvania Capital-Star, Feb. 8, 2023.

This Policy Brief addresses the decision and proposes possible remedial actions.


Background and overview

The Commonwealth Court ruling is potentially far reaching in its impact on how public schools in Pennsylvania are funded by the state’s taxpayers. The court declared there is inequity in funding that gives children in poorer districts less access to quality education and is therefore unconstitutional. If upheld by the Supreme Court, it will force the Legislature to act.

The problem of large differences in total funding per student is the direct result of the two-source revenue policy—namely, local funding, essentially based on property taxes, and state funding. The state allocation ostensibly uses a methodology predicated on an “aid ratio index” for each district. The aid ratio is calculated by combining the market value per average daily membership (ADM) aid ratio and the personal income per ADM aid ratio. There is a further funding complication created by the so-called “hold harmless” provision that prevents reductions in funding for districts that have lost enrollment.

In principle, the higher the value of the aid index for a school district the more state aid per student it should receive. The method of calculating the aid ratio essentially inverts the district’s ability to generate revenue based on its market value of property per ADM and total personal income per ADM. The values are normalized over the 500 school districts and the combined property value and income aid ratio is forced to fall in a range of 0.1500 to 1.00.   The three highest district readings were posted for Reading in Berks County (0.8967), Duquesne in Allegheny County (0.8924) and York City in York County (0.8649).  All data in this Brief are taken from Pennsylvania Department of Education’s “Annual Financial Reports 2020-2021,” the latest available.

Statewide, the 2020-2021 total revenue from local, state and federal per ADM sources (excluding the other revenue category that includes revenue from the sale of bonds; proceeds from extended term financing; interfund transfers; receipts from other local education agencies; sale of or compensation for loss of fixed assets and refunds of prior years’ expenditures) totaled $31.796 billion statewide.  With a state total of 1,690,400 ADM, the statewide average revenue per ADM was $18,810. Rounded to the nearest dollar, average local revenue per ADM was $10,627 (56.5 percent of total), state revenue was $7,200 per ADM (38.3 percent of total) and federal revenue was $983 per ADM (5.2 percent of total).  For the state as a whole, excluding the federal funding, the state share is 40 percent and the local share is 60 percent of funding.

School district funding examples

Combined state, local and federal spending per ADM ranged from $13,058 in the Shamokin District (Northumberland County) to $34,710 in the New Hope-Solebury District (Bucks County) with Forest Area District (Forest County) at $33,516 per ADM close behind.  Note that Shamokin’s local revenue was only $3,368 per ADM while New Hope-Solebury local funds were $29,092 per ADM.  Rounded to two decimal points, Shamokin’s aid ratio was 0.79 and New Hope-Solebury’s was 0.15.  Shamokin received $8,736 per ADM from the state while New Hope–Solebury received $5,180.

While the Shamokin and New Hope-Solesbury districts seem to support the notion that the aid ratio is allocating according to the purported intent of the corrective mechanism, it actually does not.  For example, Line Mountain District in Northumberland County, with a significantly lower aid ratio than Shamokin at 0.65, received $10,349 per ADM from the state.  Even worse, West Middlesex District in Mercer County, with an aid ratio of 0.64, receive $12,381 in state funds per ADM. And perhaps most egregiously, the Pittsburgh Public School District, with a quite low aid ratio of 0.27, received $11,513 in state funds per ADM and another $2,498 per ADM in federal funds and had total revenue of $27,716 per ADM.

Some technical analysis

Countless other examples of the failure of the aid ratio to match actual state funding could be presented but statistical analyses provide an overall picture. For all districts, the covariance between the aid ratio and per ADM state funding is 0.64. And the R-squared from a regression analysis is 0.41.  R-squared is simply the fraction of the variation in the state funding accounted for by the aid ratio.

In other words, the Education Department’s use of the aid ratio falls far short of achieving more equitable funding. Equitable meaning closing the gap significantly between very high spending districts (far above the state average per ADM) and the very low spending districts.  Much of the failure is likely due to falling enrollment in some districts.

Root causes of the funding disparities

As noted in the beginning paragraph, the problems with school funding in Pennsylvania derive largely from the long-standing policy of using both local and state funds for education—and some federal funding.  Wealthier districts can raise far more money locally per student than poor districts can.  Of course, this can be offset to some degree by the number of students in a district.  A relatively poor district with only 300 or so students can most likely afford to spend more per student than a poor district with 3,000 students. That is somewhat adjusted for in the aid ratio but, as noted above, the aid ratio as put into practice leaves a lot to be desired in promoting equitable funding. Consider, for example, the Forest Area District (mentioned above as having the state’s second-highest total revenue per ADM) has only 420 ADM. As a result, it is able to raise $18,220 locally and even with a relatively low aid ratio of 0.31 received $13,729 in state funding per ADM along with another $1,617 in federal funds per student.

Nonetheless, the situation becomes startlingly out of proportion when a rich district raises $29,000 per student locally and still receives state funding when the average total state, local and federal spending per student is $18,810. In the current system of local funding and state funding it might not be feasible to eliminate income and wealth inequality impacts on school funding across school districts.  On the other hand, the state should not be further exacerbating per student funding differences by allocating state revenue to districts that locally raise $11,000 per year more than the state average of total revenue per ADM.

Is there a solution?

Can the two funding tax sources ever produce a fairer system of funds per student in which the revenue per ADM falls in narrow range for all districts?  There are several possible ways, none easy or readily implementable for political reasons. First of all, the minimum per student spending level that should create adequate educational and learning opportunities will need to be determined. That will not be easy.  Note that in Pennsylvania, out of 500 districts and 99 charter schools, seven of the top 12 ranked school districts as measured by achievement test scores are in Allegheny County and have average revenue per ADM of $20,733. South Fayette, the state’s fourth-ranked district had revenue of $18,051—under the state average total.

Meanwhile, the Pittsburgh Public School District ranked 454th with revenue of $27,716 per ADM.  The Cheltenham District in Montgomery County had revenue of $28,790 per ADM and ranked 304th. Even worse, the Farrell District in Mercer County, despite having revenue per ADM of $28,908, ranked 519th.   On the other hand, the Loyalsock District in Lycoming County, with revenue of $15,795 per student, ranked 78th or in the top 15 percent of districts.

In short, while there may be a relationship that shows broadly that revenue levels correlate with academic achievement, it is weak and there are plenty of counter examples showing poor academic performance in high revenue per student districts and good or above average performance in lower revenue districts.

Obviously, there are factors that influence learning and academic achievement besides the dollars spent per student.  And spending more in an effort to improve performance in schools that are already abject failures despite huge expenditure per student is doomed to be ineffective.  Thus, simply focusing on dollars per student will not produce desired outcomes. Determining the causes of poor performance and addressing those are far more likely to pay education dividends.

Outlines of possible equitable funding plans

If the Legislature wants to focus on reducing the wide disparities in per student funding across school districts it must address a principal cause, i.e., the vast differences in population, property values and incomes among the school districts. Without question, wealthier districts can raise relatively very large amounts of funds at fairly low tax rates compared to poor districts. In short, the wide disparities in funding can only be reduced by addressing this inescapable fact. The current system of using an aid ratio was shown above to be hopelessly inadequate.

Consider three possible options to get closer to equal funding:

One, by law, eliminate property taxes and other local funding sources and have all funding come from the state.

Two, place an enforceable dollar per student limit on local funds that can be raised for each district—perhaps the most recent statewide average of local funding—with future adjustments determined by inflation.

In either scenario the state would then provide each district funds adequate to equalize total per student funding across all districts at close to the most recent all district average total funding per student with some possible inflation adjustment each following year.

Without doubt these proposals will meet with tremendous opposition from wealthy districts.  The teachers and employees whose salary and benefits—as specified in union contracts—are far greater than those in middle class or poor districts would face tremendous cuts in compensation.  And, of course, the contracts currently in effect are unlikely to be renegotiated. This problem might be overcome over time by a phase-in of the new funding policy.  But it would take many years and be derailed before completed.

A third option is to allow districts with the enormous ability to fund education the option of creating an essentially private district-wide school system that would receive no state funding. The districts would operate in a relationship to the state, similar to charter schools.

Indeed, the state should encourage the formation of charter schools and go further and provide vouchers that parents can use to find alternative education away from poorly performing public schools.

Clearly, all these proposed options will face a storm of resistance. That is the inevitable result of years of ignoring the problems or trying to solve them by half-measures that proved inadequate and difficult to implement.

Education Funding Commission is a Distraction from Real Issues: Part I-Equity

What is the most pressing problem with public education in Pennsylvania?  According to the teachers’ unions, the Governor, the education establishment, and their allies in the Legislature, it is inadequate and unfair funding of schools.  The same argument that has been made for decades.  And recently arrived is yet another commission report offering more schemes to solve the purported funding issues.


This comes against the backdrop of National Association of Educational Progress (NAEP) 2013 statistics that show Pennsylvania’s overall academic achievement record through 8th grade stacks up well nationally—beating the national averages handily and certainly far from the disaster some portray it to be in order to justify large increases in funding. The record is somewhat better for white students (ranked 7th highest among the 50 states in 8th grade reading and math) than black students (ranked 14th in 8th grade math and 15th in fourth grade reading).  Unfortunately, the NAEP reports 12th grade results for only a handful of states so it is not possible to do a similar comparison of Pennsylvania with other states for high school seniors. This could be an area of concern given the tendency in many districts for achievement scores to drop in the higher grades relative to those in elementary schools.


But returning to the original question posed above, the correct answer to “what is the most pressing problem with public education,” is simple. To wit, it is the ongoing miserable failure of many school districts to educate children to anything approaching an acceptable level of competence despite expenditures per student far above the state average. And we know this because there are school districts in Pennsylvania that spend at or below the state average per pupil ($15,019) and yet have high schools that rank among the top schools in the state on academic achievement (Peters, Hampton, and Pine-Richland are prime examples). Thus, spending levels alone cannot be the answer.


And what else do we know to be true?  Top ranked academic performance districts compared to very poor performing districts with well above average per student outlays  receive a relative pittance in state funding compared to the amounts received by those poorly performing districts. Data to illustrate this truth are shown below.


The question then arises: what educational metric, other than achievement test scores, is most different between high schools with excellent performance in the low spending districts and high schools with abject performance failure in high spending districts?   The answer: absenteeism, especially in high schools. Not teacher qualifications, not the absence of free breakfasts or free lunches, not the absence of remedial programs, not the lack of access to resources, not lack of special programs. Absenteeism is a huge difference. There might be other corollary measures but absenteeism is a place to start because it serves as a proxy for a lack of interest in, and commitment to, becoming educated.


Part II of this Brief, to be released shortly, will provide an empirical demonstration of the correlation of high absenteeism and extremely poor academic achievement.


Back to the questions of funding adequacy and fairness.  Consider the following data. The ten lowest  ranked school systems based on academic achievement in the 2013-2014 school year include in order, Duquesne, Wilkinsburg, Sto-Rox, Chester-Upland, Steelton Highspire, Aliquippa, Clairton, Greater Johnstown, Farrell, and Reading.


Using PA Department of Education data we find that in the 2013-2014 these ten failing districts had average (non-weighted) revenue per student of $16,684 of which $10,562 came from state funding, $4,545 was raised locally and $1,186 came from Federal sources. Other sources such as debt issues and private gifts make up the small remaining amount of funding. Bear in mind that average total spending per student in Pennsylvania was $15,019.


Within this group of poorest performing districts, Duquesne led with $25,603 in total revenue per student; $20,310 came from the state and $1,534 from Federal sources. And yet Duquesne, despite this enormous revenue, was the lowest ranked district academically. Chester-Upland, Farrell, and Clairton each received more than $10,000 per pupil from the state. None of the ten received less than $7,000 per student from the state with six of the remaining districts getting $8,000 to $9,400.


By contrast, the top ten ranked districts (Unionville–Chadds Ford, South Fayette, Rose Tree, Lower Merion, Radnor, Tredyffrin East Town, Garnet Valley, Lower Moreland, Mars, and Mt. Lebanon) had average revenue of $17,767 per student—excluding Lower Merion where local funding is so high that it distorts the total revenue of the group. Interestingly, the nine districts received an average of only $2,935 per student from the state, raised $14,603 from local taxpayers, and got $169 from Federal sources and $62 from other.  Lower Merion raised $24,019 per student from local taxpayers and stands as the premier example of funding inequity for those who push the inequitable school funding issue. They might want to ask the teachers in Lower Merion if they would like to see that $24,000 number cut sharply and along with it teacher compensation.


In short, the weakest performing districts received 3.6 times ($10,562/$2,935) more per student funding from state aid than the highest ranked districts.  Meanwhile, the lowest ranked districts received nine times more in Federal money per student than the top ranked districts.  Someone needs to explain how districts like Wilkinsburg, with its $23,437 per pupil revenue, can have the second worst academic performance in the state—and more generally why so many districts with huge amounts of revenue, with much of it from the state, are unable to deliver something approximating even a bare minimum level of academic proficiency. The key question we ought to be asking is: how likely is it that even more state dollars will turn the situation around in the high spending districts in the bottom tier of performers in light of the countless programs that have been tried and found to be ineffective over the decades?  Maybe something new and dramatic such as vouchers would be a better plan. But that is unlikely as long as funding can be kept in the forefront of needed policy changes by education lobbyists as being the critical issue.


Here is another problem for the funding reformers to deal with. The ability of well-off districts such as Lower Merion and others to raise easily vast amounts of money for education creates a distortion in the school funding picture compared to the funding levels in most districts. Does the Legislature plan to tell these rich districts that they will not be permitted to raise so much money for education? Unless that happens the argument that Pennsylvania is not providing enough state funding will never go away.


What we know from the facts as opposed to rhetoric is that the state’s taxpayers are spending enormous sums of money on failing schools that are not getting better, while very good schools are raising the lion’s share of their funds locally.


Tinkering with the funding formula will not solve what ails Pennsylvania education.

Teachers’ Union Head Claims State Shortchanging Education

To no one’s surprise the head of the state’s largest teachers’ union is again complaining about the unwillingness of the state to replace the Federal stimulus spending that ended in 2011. Moreover, the union head is unhappy that a large fraction of the $1.25 billion increase in funding since Governor Corbett took office is going to pensions and social security. 



The union president is also upset that state law limits the ability of school districts to raise property taxes. And he wants one of the most important pro-business policies adopted by the Legislature-the phasing out of the Capital Stock and Franchise Tax-curtailed to produce more tax revenue. Presumably the union wants most of any such increase to be allocated to education.


This preposterous and one sided view came from the Pennsylvania State Education Association’s (PSEA) recently released Sounding the Alarm 2 report.


As we, along with other analysts, argued back in 2009 when the Federal government was pouring enormous amounts of “stimulus” money into the states to keep public employees on the payroll, it would have been prudent for school districts not to treat the funding as permanent and to take steps to begin reining in expenses against the time when the “stimulus” would end. So, in effect, the impact of the recession on public spending was muted and postponed. But it is happening now. Making the impact of the delayed recession effects worse, the state employees’ and the state teachers’ pensions are seriously underfunded and are necessitating large amounts of tax dollars to be allocated to meet those obligations.


The argument that school districts cannot raise taxes is misleading. Districts are limited by state law as to how much they can raise taxes in a given year. However, districts can apply to the Department of Education for an exemption if they need more money for pensions, special education, or construction.  Most exemptions are granted.  Districts can also put any tax increases before the voters in a referendum.  The real limiting factor is not state law; it is the willingness and ability of taxpayers to absorb an even greater burden along with their ability to force school boards to heed their wishes. In a weak economy and with already heavy property tax burdens, it is very difficult to ask taxpayers to accept higher tax levies. As we saw in the Plum School District, the school board opted not to raise taxes and instead announced the layoffs of 23 personnel.  Why? Because of the need to ante up a million dollars for pensions and the unwillingness of the teacher union to agree to a wage freeze for the coming year.


There are three parts of this problem. The right of teachers to strike that leads to overly generously contract terms, the very rich pension formula for retirees, and the law that prevents layoffs for economic reasons, forcing the elimination of entire programs.


If the head of the teachers’ union insists on resisting reforms in all three of these areas by bringing to bear the powerful political influence of the teachers’ union, then the future will bring more of the same-demands for higher taxes, layoffs and a worsening education environment. 


Indeed, it is time for taxpayers to ask a question. What concessions are teachers willing to make to help the state and school districts get through the period of subdued growth? Pennsylvania teachers are on average very well compensated compared to the nation and receive exceptional benefits.  But there is no gainsaying the fact that the right to strike and state law regarding layoffs create an imbalance of bargaining power in favor of the unions.  Pennsylvania needs to take a look at Wisconsin’s reforms. Education quality need not be sacrificed in order to rein in costs while eliminating work rules that preclude good management. 


And the unions need to explain how it is that with enormous levels of per pupil spending districts including Pittsburgh, Wilkinsburg, and Harrisburg cannot achieve acceptable levels of academic proficiency. The time for excuses is over. If teachers have good reasons for the failure of many public schools that spend loads of money, they should come forward with those solutions. And asking for more money is not an answer. Taxpayers have the right to expect responsibility and accountability.  Public employees who are not willing to be part of a solution will remain part of the problem.  Taxpayers have done their part.