Fall 2018 Journal: Federalism in School Finance

By Justin Lam

Edited by Randall Tran and Chenchen Zhang

School funding is inextricably intertwined with systems of racial and socioeconomic segregation — and is also a venue to call out those inequities. While the 1954 case Brown v. Board of Education and 1965 legislation Elementary and Secondary Education Act (ESEA) are often seen as federal remedies that should have reduced gaps between and within districts, funding and resource inequities persist in communities throughout the U.S. Policymakers and advocates should understand the powers and limits of federal courts, state courts, Congress, and state legislatures. While federal courts have not established a right to education, state constitutions have. ESEA now has its greatest legislative impact in outlining the kinds of accountability states should seek in disbursing their own dollars, while state legislatures have a pivotal role in determining what those distributions may look like. This paper surveys the limits in litigation and legislation, and offers four takeaways for policymakers and advocates.


A considerable amount of educational inequities stems from the resource and distribution gaps between districts and schools, a reality that naturally prompts questions about the respective roles of states and the federal government in addressing those disparities through spending.  Originally passed as part of the Great Society reforms of the 1960s, the Elementary and Secondary Education Act of 1965 (ESEA) and subsequent pieces of federal legislation have sought to improve educational opportunities for disadvantaged populations and to reinforce the provisions of Title VI of the Civil Rights Act of 1964. Looking at the role that federal accountability plays in school finance, federal legislation can be seen less as a financial equalizer and more as a communicator of expectations. Simultaneously, state legislatures serve as the most direct avenue to increase fiscal and resource equity between high-income and low-income districts. To understand federalism’s ability to address resource and equity gaps, it is helpful to consider the power and limits of federal courts, state courts, Congress, and state legislatures.


While Brown v. Board of Education (1954) helped open the door to federal involvement in education, San Antonio v. Rodriguez (1972) severely limited the role of federal courts in pursuing equitable school funding in two ways. First, the case revealed the difficulty of constructing a poverty-based class; second, it generated the distinction between quality and adequate education standards.

Class action lawsuits require the establishment of a class of individuals that share common defining characteristics and claims. In Brown, the plaintiffs were a class comprised of students unified by experiences of race-based segregation.¹ However, Rodriguez demonstrated the difficulty of constructing a particular class defined via poverty rather than racial lines. In his opinion, Justice Powell described the plaintiffs in Rodriguez as neither contiguously defined by an income level nor concentrated in those school districts in Texas (i.e., there might be socioeconomically disadvantaged kids in wealthy districts who would then fall outside the definition). 

In Rodriguez, Justice Powell notes that the plaintiffs were not children failing to receive an education, but rather children receiving a poorer-quality education than children in districts with more highly assessed property values.² Powell further notes that the Equal Protection Clause “does not require absolute equality or precisely equal advantages” and that the provision of 12 years of education with teachers, books, transportation, and operating funds fulfilled the definition of an adequate education as specified by “A Minimum Foundation Program of Education.” The court chose not to apply the strict scrutiny standard,³ which is normally reserved for cases involving a compelling governmental interest and requires policies narrowly tailored to that aim (as in the case of policies like affirmative action that use race-based criteria). As a result, it declined to frame education funding as a deprivation of the prerequisites needed for First Amendment freedoms and utilization of the right to vote.  Instead, the court framed the case as a concern regarding one state’s taxation and revenue distribution system, on which it deferred judgment, stating that it did not have the wisdom superior to that of legislative authority. 

Rodriguez highlighted the limitations of using federal courts to address inter-district disparities, given the absence of an explicit education mention in the Equal Protection Clause and the difficulties in both constructing a class and proving that a dearth of quality or resources constitutes a deprivation. Later, in Papasan v. Allain (1986), the Court noted that Rodriguez did not preclude the future definition of some kind of minimum education as a constitutionally protected right.⁴ But neither did it establish one, confirming the legal authority for education as coming from the states. Even if it had, it is not guaranteed that a school finance system would receive the kind of rigorous review of strict scrutiny that might be advantageous in advocating for reformed local or state financing schemes. 


Unlike the federal constitution, which contains no constitutional right to education, many state constitutions include language mandating education systems and often provide the primary legal basis for state litigation. 

Unlike in Rodriguez, the California Supreme Court was able to define a suspect class in Serrano v. Priest (1977), leveraging a ban on individuals being granted privileges or immunities not granted to all citizens (Section 21 of the California Constitution) and finding, therefore, that a class of individuals was denied access to the “fundamental interest of education”.⁵  Using the state’s constitution to construct an equal protection standard narrower than the federal Equal Protection Clause, the Court was able to frame school funding disparities as the deprivation of a right.

While a rights-based approach depends on explicit state constitutional language, some state courts have favored such an approach. Notably, the Connecticut Supreme Court established in Horton v. Meskill (Conn. 1977) that while higher-income towns and lower-income towns exercised the same constitutional duties to provide students an education, students in the latter experienced a discrimination that was “relative rather than absolute”.⁶ 

While state litigation benefits from a constitutional foundation absent in federal litigation, using it as a sole or foundational strategy to address school finance issues would suffer from three shortfalls. First, it is not necessary to approach equal protection in its absolute sense but rather consider what would be best for advancing interests of equity. Still, courts can demur depending on their interpretations of education clauses. For example, citing a balancing of state human and fiscal resources and the right of local governments to provide additional funding, the North Carolina Supreme Court held in Leandro v. State (1997) that the General Assembly was only responsible for a “sound basic education being provided in every school district” and not for “substantially equal funding.”⁷  

Second, such a strategy would run into the limits many courts have placed on themselves that cite separation of powers, leaving ultimate discretion on most finance issues to legislatures. Urging the Kentucky Supreme Court to define “an efficient system of common schools throughout the state” led to a fivefold definition of efficient that included provisions for uniform resources throughout the state, an evenly distributed taxation system, and adequate education. In Rose v. Council for Better Education (1989), the court balanced its definition with a prescription to the General Assembly to reestablish a system of schools that provided adequate funding and a uniform tax rate.⁸ While the criteria set forth by the Court may have been unusually prescriptive, the Assembly still retained sole responsibility for creating and executing such a system. Similarly, when plaintiffs tried to surface in Committee for Educational Rights v. Edgar (1996) that the word “State” meant that the judiciary and executive bore equal responsibility in ensuring an adequate education, the Illinois Supreme Court noted that such language did not remove expertise and democratic deficits inherent to the courts.⁹ 

Third, litigation is costly and time-intensive. One of the most notable school finance cases, Abbott v. Burke,10 has resulted in decades of rulings and appeals following the 1970s Robinson v. Cahill case.11 The core concept of the Abbott series is to ensure that schools in New Jersey’s poorest communities receive the thorough and efficient system of education guaranteed by the state constitution. The New Jersey State Supreme Court ruled in 2009 that the state was meeting its funding obligations, then ruled in 2011 that the governor and legislature were obligated to fund an additional $477 million to lower income districts in the state. Meanwhile, New Jersey Governor Chris Christie has attempted on multiple occasions to have the case overturned by the state supreme court.   

State litigation offers the constitutional basis for equal protection claims lacking in federal law. However, given that the courts cannot or will not prescribe specific policies to address equity, federal or state legislation is necessary to provide a complete recourse.


When considering tools to address funding inequities, it is less helpful to look to federal legislation as a direct equalizer and more helpful to see federal legislation as an agenda-setter for expectations, especially given its political limitations. 


When states — or the districts within them — do not provide equitable finance levels, they can fall on federal dollars to cover the gaps.12 However, by providing base funding to all states regardless of need, size, or poverty; placing weight on district size; and basing funding on what states already spend on education, ESEA funding can exacerbate inequities between states and districts instead of solving them. The U.S. Government Accountability Office has identified that the “supplement not supplant” provision, an ESEA provision13 added in the 1970s that requires that federal dollars not be used to replace funds already being spent on schools, is nearly impossible to enforce. More importantly, the 2015 reauthorization of ESEA, the Every Student Succeeds Act (ESSA), eliminated the requirement that Title I schools (schools and school districts with a high percentage of students from low-income families) be “substantially comparable” to other schools in the district. Though federal funds can make up nearly 10 percent of funding in the neediest districts, the amount falls short of the 40 percent supplement the federal government estimates these districts need.14 Funds go to 90 percent of districts instead of only the neediest ones. In short, the amounts and ways that ESEA dollars are conferred are not enough to equalize spending among districts, and may even broaden gaps.15 

Finally, federal legislation like ESSA can often result in aspirational or vague steps due to the diluting effect of shaping goals through the political process. ESSA’s Gang of Six agreement, struck between three Democrat and three Republican senators, calls for state education agencies to work toward a 50 percent reduction in opportunity gaps across all subgroups. Yet such gaps are to be addressed on state timetables, resulting in a wide variance across draft implementation plans already when it comes to what results will be achieved when. Indeed, while some of this vagueness is necessary for reaching consensus, it can also result in enforcement and follow-through being left to the discretion of the administration in power.


While ESEA has had mixed funding impacts, it has more recently functioned as a vehicle for and communicator of national goals for education policy. Despite its many faults, the largest contribution of No Child Left Behind Act (NCLB), the 2001 reauthorization of ESEA, was to establish a framework of accountability that held schools responsible for both absolute and relative student performance, in which a constitutionally inadequate education would result from schools failing to close achievement gaps between poorly performing subgroups and highly performing ones.16 

The Obama administration continued this thread by using both the 2010 Race to the Top grant program and waivers from the No Child Left Behind Act to spur policy shifts within states. The latter spurred changes by leading 45 states to request a waiver or flexibility or risk the loss of federal funding for failing to meet accountability requirements. In the waiver process, states had to show they would adopt higher standards, stronger data systems, teacher recruitment and retention programs and school turnaround initiatives. Neither Race to the Top nor waivers explicitly compelled states to change their school finance systems, but both programs inspired policy and funding shifts that were designed to address equity gaps in education. Similarly, ESSA continues this trend by setting forth additional expectations for states to support early childhood education, high-quality teacher distribution, and alternatives to suspension and expulsion. 

ESSA does not require states to move away from local tax-funded school finance models, or any other kind of comprehensive reform. However, it includes implicit and explicit expectations toward funding levels that can remedy inequities. Local education authorities preparing Comprehensive Support and Improvement or Targeted Support and Improvement plans must identify resource inequities, though those may be addressed through plan implementation and do not necessarily need to be addressed with money. Indeed, ESEA and its subsequent rewrites have, in recent years, provided a modest amount of funding while shifting or refining policy goals for states. 

The bipartisan Commission on Equity and Excellence notes that the Constitution does not preclude a federal role in incentivizing school finance reform.17 Future legislation could amend ESEA Title I to more intentionally fund schools with high concentrations of low-income students or direct states to implement school finance systems that prioritize student needs. Rather than being constitutional questions, these are questions of political will among Congress and the executive. For this reason, among others, state legislation offers more direct avenues to change school finance inequities.


The democratic accountability, statutory flexibility, and deference from courts afforded to state legislatures mean that they have the greatest discretion to affect issues at the root of funding inequities such as adjusting funding amounts, directing local educational authorities to implement school efficiencies or consolidations, and more. Solutions to funding inequities can be understood through two broad lenses.


Predictably, not all legislatures are predisposed toward making funding remedies on their own, especially if doing so means upending the interests of local property owners, managing competing priorities, or prioritizing in the face of budget deficits. While litigation has limited power in its ability to offer prescriptive solutions, it can compel action, especially if the remedies prescribed span several areas. 

Connecticut Superior Court Judge Thomas Moukawsher’s recent ruling in CCJEF v. Rell (2016) was more expansive than the remedies in either case above, calling for specific development by the legislature and review by the court of improvements to the education aid formula, educator recruitment, pay and evaluation, and special education.18 Such a decision is more prescriptive than what could be offered via federal litigation and perhaps provides more urgency than what could be achieved in the absence of a judicial directive. However, the contested nature of litigation makes even court decisions far from a surefire path to change. The state appealed to the Connecticut Supreme Court, which ruled that funding inequities were not unconstitutional. While the legislature promised funding increases for lower-income districts starting at $82 million and continuing over the next ten years, the package fell far short of the comprehensive reforms called for in Moukawsher’s ruling.

However, in some scenarios, courts will stipulate their own remedies. For example, the court in Campbell County School District v. Wyoming (2008)19 directed the legislature to determine the cost of an equal education and fund districts at that cost. Finding the legislature’s response unsatisfactory, the court mandated its own list of solutions, resulting in the legislature implementing a system that narrows local discretion over education spending more than any other system in the US.20 Essentially, legislatures bear the ultimate responsibility for enacting statewide funding systems. Even if they did not, judges are not pedagogical experts or policymakers, and prescriptive solutions may be only as strong as the arguments and amicus briefs that enter a court. Whether of their own volition or through court order, statutory outcomes may be the most useful lever for policymakers to affect when considering the disparities between districts.


A solution that would withstand a court challenge and have the largest chances of investment from different stakeholders would be one that directly results from legislation, and, ideally, maximizes the amount of state-level contributions in order to mitigate the disparities inherent in property tax systems. Many states still have a plurality of education funding come from local revenues. However, by 2013, statewide funding represented more than 60 percent of total education funding on average; in New Mexico, 70 percent of such funding came from statewide sources; and in Vermont, more than 85 percent of funding came from statewide sources. California’s Local Control Funding Formula (LCFF) offers an example of this. Proposed by Gov. Jerry Brown in 2012 and passed by the state legislature in 2013, LCFF attempted to simplify dozens of categorical grants that were not effectively tied to the highest-need student populations. Under this formula, all districts receive a base level of funding, followed by additional funding depending on the district’s population of English learners and low-income students and the concentration of those students in the district.21 In turn, each district submits a Local Control Accountability Plan (LCAPs), detailing how dollars will be spent at the local level. 

By going directly to the legislative level, advocates may have the best chance of securing redistributive policies that counter the uneven effects of local financing. A logical extension would be to make funding completely distributed at the state level as some have proposed, which is likely politically infeasible given local property taxes. However, Wyoming’s approach of increasing the amount of local revenues returned to the state — in order to be distributed to needier districts — offers an example of entrusting revenue redistribution to the state level.   


In sum, the roles of federal and state authority have four takeaways for policymakers and advocates seeking to address funding inequities.

School funding is inextricably intertwined with systems of racial and socioeconomic segregation — and is also a venue to call out those inequities. The legal challenge of establishing a class of traditionally underserved subgroups should not be interpreted as the absence of such groups. Rather, policies and implementation plans to address school funding should explicitly identify racial gaps — as Mississippi’s ESSA implementation plan does in calling out historic white-black gaps, while also considering solutions tailored to the needs and histories of those communities. When policies fail to  do so, advocates and policymakers should work to revise the design — especially when stakeholder input is required by law, as ESSA does.

Legislatures are still the most legally desirable place to target advocacy and partnerships, largely because legislation has the ability to prescribe what funding levels can or should be, and courts have traditionally deferred to legislative action.

Policymakers and advocates looking for federal solutions to school finance equities should pay attention to ESEA as it is implemented, and toward any future reauthorizations. ESSA contains provisions requiring states to hold all schools accountable and to direct additional supports and resources to the lowest performing five percent of schools. As states begin to implement their ESSA plans, policymakers and advocates should be keen to the degree to which state plans honor these requirements, and the degree to which these plans communicate next steps clearly for all stakeholders. As future reauthorizations of ESEA occur, more should be done to maintain, but also rectify, the technical challenges of Title I funding so that it truly prioritizes the highest-need schools and communities.

School funding litigation is useful for urging change, but not for specifying the details of change. Litigation can serve as a valuable — albeit costly and time-intensive — venue for calling attention to resource and equity gaps in order to compel action. However, litigation is not effective in prescribing what resulting actions may include. School funding is already complex, which is why it is best changed when advocates elevate the priorities of parents, students, and communities and translate those priorities through the details of funding. As claimed by Justice Powell in Rodriguez, courts are not equipped to do that work of elevating compelling priorities. As such, litigation can result in initiating a change, but should be seen as a starting point and not a goal. 


As opposed to the explicit desegregation remedies obtained in Brown, the nature of our federal system provides implicit remedies. While federal courts have stopped short of prescribing a right to education, this right in state constitutions provides the needed authority to pursue and enforce changes. Legislatively, ESEA, NCLB and now ESSA offer some funding to mitigate the differences between districts, but have their greatest impact in outlining the kinds of accountability states should seek in disbursing their own dollars. This leaves state legislatures to determine what those distributions may look like, whether by choice or by court order.

A significant portion of school finance discretion rests with states when it comes to spending those dollars equitably, transparently, and effectively — and up to policymakers and advocates to engage with decision-makers to ensure that occurs. By focusing on the primacy of state statutes as well as the expectation-setting that occurs via federal legislation, policymakers and advocates alike can maximize the impact of the federal conversation on school funding, while ensuring that progress continues on inequities at the inter-district level. 

1. Brown v. Board of Education of Topeka, 347 U.S. 483 (1954).
2. San Antonio Indep. Sch. Dist. v. Rodriguez, 411 U.S. 1 (1973). 
3. Editor’s note: Strict scrutiny is a form of judicial review that courts use to determine the constitutionality of certain laws.  To pass strict scrutiny, the legislature must have passed the law to further a “compelling governmental interest,” and must have narrowly tailored the law to achieve that interest. Suspect classifications have come to include race, national origin, religion, alienage, and poverty. For more information, please refer to the Legal Information Institute by Cornell Law School, https://www.law.cornell.edu/wex/strict_scrutiny. 
4. Papasan v. Allain, 478 U.S. 265 (1986). 
5. Serrano v. Priest, 775 P.2d 929 (Cal. 1977). 
6. Horton v. Meskill, 376 A.2d 359 (Conn. 1977). 
7. Leandro v. State, 488 S.E.2d 249 (N.C. 1997). 
8. Rose v. Council for Better Education, 790 S.W.2d 186 (Ky. 1989). 
9. Rights v. Edgar, 672 N.E.2d 1178 (Ill. 1996). 
10. Abbott v. Burke 100 N.J. 269, 495 A.2d 376, (N.J. 1985); Abbott v. Burke, 119 N.J. 287, 575 A.2d 359 (N.J. 1990); Abbott v. Burke, 136 N.J. 444, 643 A.2d 575 (N.J. 1994); Abbott v. Burke, 149 N.J. 145, 693 A.2d 417 (N.J. 1997); Abbott v. Burke, 153 N.J. 480, 710 A.2d 450 (N.J. 1998); Abbott v. Burke, 163 N.J. 95, 748 A.2d 82 (N.J. 2000). 
11. Robinson v. Cahill, 69 N.J. 449, 355 A.2d 129 (N.J. 1976). 
12. Ross Weiner and Eli Pristoop, “How State Shortchange the Districts that Need the Most Help,” in Education Law: Equality, Fairness, and Reform, ed. Derek W. Black et al. (Wolters Kluwer, 2016). 274. 
13. Editor’s note: It refers to the Section 3115(g) of Title III of the ESEA, see the US Department of Education, https://www2.ed.gov/programs/sfgp/supplefinalattach2.pdf. 
14. Supra, note 11, 274.
15. Goodwin Liu, “Improving Title I Funding Equity across State, Districts, and Schools,” Iowa Law Review 93 (2008): 1014.
16. James S. Liebman, Charles F. Sabel, “The Federal No Child Left Behind Act and the Post-Desegregation Civil Rights Agenda,” North Carolina Law Review 81 (2003): 1703-1748.
17. The Equity and Excellence Commission, “For Each and Every Child — A Strategy for Education Equity and Excellence,” February 2013, U.S. Department of Education, https://www2.ed.gov/about/bdscomm/list/eec/equity-excellence-commission-report.pdf.
18. Conn. Coal. for Justice in Educ. Funding, Inc. v. Rell, 2008 Conn. Super. WL 492273c (2016).
19. Campbell County School District v. Wyoming (Wyo.2008).
20. Zahava Stadler et al., “Making Change: Favorable Conditions For Education Finance Reform,” EdBuild, https://edbuild.org/content/making-change. 
21. See Court of Appeal decision in Robles-Wong v. State of California and Campaign for Quality Education v. State of California 246 Cal.App.4th 896 (2016).