Public School Funding

Boys doing classwork at their desksThe United States spends almost a trillion dollars on all aspects of education each year. This amount is slightly above defense spending.1 School districts in the United States spend roughly $530 billion annually.2 In 2009, nearly $450 billion was spent on elementary and secondary education: $57 billion covered capital outlay, $14.3 billion funded interest payments on debt, and $7.4 billion was allocated to other programs such as adult education.3 Public education financing in the United States varies from one State to the next and even from one school district to the next within the same State.

Generally, schools are funded using some combination of income taxes, corporate taxes, sales taxes, local property taxes, and finally the Federal Government.4 It is the local portion of the funding—often captured in local property taxes—that has created a firestorm across the country between school districts within higher property-value areas and districts where property taxes cannot bridge the gap between what is available and what is needed to cover the cost of a child’s education.

Funds for public education are distributed to school districts in a few ways: on a per-pupil basis, to cover the expense of an individual child’s education, and categorically, to cover the expense of a particular program or facility.5 Besides the Federal allocation based on the number of pupils, schools receive Federal funds in the ways listed below.

Per-pupil funding – These funds are allocated based on the number of students enrolled, by a particular date (usually late fall) in each school. It is a formula grant, for which States do not have to compete, beyond timely submission of enrollment data. The most recent analysis found that schools spent on average $10,362 for each student.6 Yet there is great variance across States, with Alaska spending the most per student ($21,468) and Idaho ($8,045) spending the least.

Title I funding
– These funds, which are sometimes received by schools for additional staff or programs, are available for schools whose population meets the poverty guidelines to qualify for Title I funds. (See ESEA section for more information.)

Private grants and donations – Schools or school districts may also receive funding through philanthropic grant awards to supplement funds received through government sources. Schools sometimes use these funds to help with school equipment, facilities, and activity programs for students. Private individuals, local businesses, and corporations may also donate funds. Some districts have even developed policies surrounding private donations to help cover the widening gap between funding and expenditures. Most charter schools are able to leverage private funds because the laws under which they were created provide them more autonomy.

Impact Aid – This fund, among the largest programs under the Office of Elementary and Secondary Education, is a federal formula grant program designed to relieve the financial burden placed on resources of local educational agencies (LEAs) in educating significant numbers of federally connected students – those who reside on military bases, low-rent housing properties, Indian lands or other federal properties, and/or have parents in the uniformed services or employed on eligible federal properties.

Many local school districts across the United States include within their boundaries parcels of land that are owned by the Federal Government. These school districts face special challenges: They must provide a quality education to the children and meet the requirements of the ESEA while sometimes operating with less local revenue than is available to other school districts because the Federal property is exempt from local property taxes.

Since 1950, Congress has provided financial assistance to these local school districts through the Impact Aid Program. Impact Aid was designed to assist local school districts that have lost property tax revenue due to the presence of tax-exempt Federal property or that have experienced increased expenditures due to the enrollment of federally connected children, including military children. The Impact Aid law provides assistance to local school districts with concentrations of children residing on Indian lands, military bases, low-rent housing properties, or other Federal properties and, to a lesser extent, concentrations of children who have parents in the uniformed services or employed on eligible Federal properties who do not live on Federal property.

Most Impact Aid funds, except for the additional payments for children with disabilities and construction payments, are considered general aid to the recipient school districts. These districts may use the funds in whatever manner they choose in accordance with their local and State requirements. Most recipients use these funds for current expenditures, but recipients may use the funds for other purposes such as capital expenditures. Some Impact Aid funds must be used for specific purposes.

School districts use Impact Aid for a wide variety of expenses, including the salaries of teachers and teacher aides; purchasing textbooks, computers, and other equipment; after-school programs and remedial tutoring; advanced placement classes; and special enrichment programs. Payments for children with disabilities must be used for the extra costs of educating these children.7



2National Center for Education Statistics, Fast Facts, accessed November 19, 2009 online at:

3National Center for Education Statistics, Fast Facts, accessed November 19, 2009 online at:

4Education Week, School Finance accessed on November 19, 2009, online at:

5Education Week, School Finance accessed on November 19, 2009, online at:

6U.S. Department of Education, National Center for Education Statistics, IES, Revenues and Expenditures for Public Elementary and Secondary School Districts: School Year 2006–07. Accessed on November 20, 2009 online at: