School finance: a critical primer, pt. 2
Here's Part 2 of "School Finance: A Critical Primer."
Federal grants
Bruce Klunder was a priest in Cleveland. His faith called him to participate in the Civil Rights Movement there in the early 1960s. One important struggle in the city was the fight against school segregation, for which he became a martyr.
When the Cleveland City School District decided to build new schools which would have reinforced the pattern of segregated neighborhood enrollment, Klunder took the lead in attempting to stop construction. On 7 April 1964, he and four other protesters gathered at the construction site for Stephen E. Howe Elementary School on Lakeview Road. He lay down behind a bulldozer while four other pickets blocked its forward path. The operator, seeking to avoid the protesters in front of him, unknowingly backed over Klunder, instantly killing him.
Note that Klunder’s death took place ten years after the landmark Brown v. Board of Education decision in the United States Supreme Court. The bitter struggle against the separate but equal doctrine continued for decades after that decision, with activists like Klunder pushing for changes to the school system. The same year Klunder was killed, Lyndon B. Johnson’s Great Society legislation, including the Elementary and Secondary Education Act, was passed into law. It represented a victory for activists like Klunder as its first section devoted federal funding to districts and schools whose children lived in poverty, no matter their race.
Yet federal spending, largely from Title 1 programs, is only 8% of the national average, a pitifully small number. Furthermore, this 8% is distributed according to a byzantine set of four formulas, the result of sixty years of partisan disagreement over how to operationalize the goal of funding poor districts. Compromise has led to complexity. The basic formula put in place in the original ESEA legislation, uses a state’s average per pupil expenditure and the number of poor children in the state, with the government paying 40 cents for every dollar the state spends to educate poor kids. The concentration formula factors the number of poor kids above a certain rate of poverty into the basic grant, while the targeted formula weights certain aspects of the concentration grant differently according to geographic distributions of poverty. The education finance incentive formula (EFIG) uses relative state effort to incentivize states to spend more. The Biden Administration even proposed a fifth formula, which, while details have not been released, is most likely going to reup the Obama Administration’s 2015 attempt to add a formula similar to the EFIG formula but without the effort factor, using the same expenditure factor for all states as opposed to a state level expenditure factor to determine equity.
The complexity of these formulas is only matched by their effetteness in the larger context of school finance. While the Biden Administration proposes appropriating $20 billion for the new formula, it will only likely increase the overall percentage of federal funding to around 10% nationally. The majority will still be shouldered by states and local governments, who also have to contend with a privatized debt financing system for capital expenditures like school building projects.
The federal government’s absence, combined with uneven state effort and racial-capitalist realities of property value inequity at the local level (depicted in Figure 1), creates a special sort of evil void in school finance. What do districts with low property values in low-medium state effort areas do to provide their students with the education they need? The answer is that they don’t provide that education. For every other fiscal emergency that arises, they take out big loans from Wall Street that literally enrich fatcats off the backs of poor students, teachers, administrators, and taxpayers across the country. The evil void is just that, a financial black hole that rips into the spacetime of our social contract (depicted in Figure 2). And because it’s so complicated and multi-layered, it continues to suck the life energy out of our communities.
Bonded debt
In Philadelphia, schools were closing due to the pandemic. It was 2019 and the pandemic was sickness caused by lingering, untreated asbestos in the district’s old and poorly maintained buildings. In one publicized case, a veteran teacher was diagnosed with mesothelioma. In another, several elementary schools serving predominantly Black and Brown families had to be closed down. The schools are toxic because their financing is toxic.
Organizers in the city had been fighting for years to get more money and accountability in school facilities. In 2020, a local socialist group called the Local Action/Local Initiative Committee (LILAC) and a national research center the Action Center for Race and the Economy (ACRE) partnered to try something new: they demanded the Federal Reserve’s Municipal Liquidity Facility (MLF) should offer no-cost, no-interest loans to the School District of Philadelphia to finance its school building infrastructure. On March 13th, they held an online event where participants sent emails to the Philadelphia Federal Reserve Bank to demand its leaders advocate for changes to the facility’s terms on its loans and its eligibility requirements, using the hashtag #CancelWallStreet.
School building infrastructure is a capital expenditure rather than an operating cost. Big, multi-year projects are not accounted for in school districts’ year-to-year budgeting process. In the United States there is no federal policy on school building infrastructure financing, and many states do not have generous reimbursement programs. Districts are forced to go to the municipal bond market to finance their buildings, subject to the forces of credit ratings agencies, wealthy lenders’ choices, private banks’ fees, consultant fees, and fluctuating interest rates. Indeed, by many measures, this Wall Street-based system of credit allocation is not working: the Reportcard for American’s Infrastructure gives the country a D+ on its school buildings, noting that 53% of schools report needs for updates to their buildings, including HVAC systems (so essential to preventing spread of the coronavirus). At the same time, there was a 31% decrease in state capital funding for school districts between 2008-2017.
For this reason, the Federal Reserve’s Municipal Liquidity Facility was a revelation. Never before had the Fed offered loans to local governments. There was a possibility of a sensible, practical, and more just mechanism for financing school buildings in the absence of significant fiscal spending. Yet conservatives and market fundamentalists prevented the facility from engaging in this kind of direct lending, pushing for the facility to act as a backstop to municipal credit markets. Rather than canceling Wall Street they wanted it to flourish, which it did. Then in December 2020, it was Pennsylvania Senator Pat Toomey who demanded the MLF close. While the reconciliation process includes significant funds for school buildings, no systematic intervention exists to remedy this issue.
What the Cancel Wall Street campaign demonstrated was that it is both feasible and desirable to have public credit for public schools. In lieu of a truly grant-based system for financing school facilities and yearly budget gaps, and while we’re fighting on all the fronts described above, we can and should demand government apparatuses that provide no-cost, long-term loans for our schools. The MLF was just a taste of what we can do.
Olde deluders
In 1647, in the Massachusetts Bay Colony, Puritan settler colonists passed a law called the Olde Deluder Satan Act. They stipulated that:
It being one chief project of that old deluder, Satan, to keep men from the knowledge of the Scriptures, as in former times keeping them in an unknown tongue, so in these later times by perswading from the use of tongues, that so at least the true sense and meaning of the Originall might be clowded by false glosses of Saint-seeming deceivers; and that Learning may not be buried in the graves of our fore-fathers in Church and Commonwealth, the Lord assisting our indeavors: it is therefore ordered by this Court and Authoritie therof; That every Township in this Jurisdiction, after the Lord hath increased them to the number of fifty Housholders, shall then forthwith appoint one within their town to teach all such children as shall resort to him to write and read…
The law is well-known for being one of the first calls for public education in the colonies. The system these settlers built became standard in other colonial governments and then state governments after the American revolution. Most readings of this text focus on the mention of delusion by Satan, certainly a headline feature. Few however focus on the financing mechanism the settlers included in the law. The wages of their teachers, the law said,
shall be paid either by the Parents or Masters of such children, or by the Inhabitants in general, by way of supply, as the major part of those that order the prudentials of the Town shall appoint. Provided that those which send their children be not oppressed by paying much more then they can have them taught for in other towns...And if any town neglect the performance hereof above one year then everie such town shall pay five pounds per annum to the next such School, till they shall perform this Order.
The Puritans envisioned every town inhabitant, including those without children, chipping in for education. They felt so strongly about establishing an institution to prevent Satanic delusion that they were willing to use the repressive force of their government to collect a tax from towns that fell out of compliance, threatening to send the funds to the closest school to support their work.
For the movements fighting to change it, the school finance system that emerged in the United States, ironically, has itself become immoral and deluded. The black hole I mentioned before—the byzantine layers of negligence committed at local, state, and federal levels that drives poor school districts to predatory Wall Street debt—is a demonic delusion. Part of this delusion is a kind of structural ignorance of this apparatus’s basic features, spanning three streams of tax grants and a privatized system of lending, which social and political movements have been trying to change for generations. If we can get our minds around how this system works by studying the movements who have taken it on in the past, we have a better shot at protecting our schools and their communities from the demons of the existing financial system.