how states maroon districts in financial distress

This report tells the story of how struggling school districts around the country have been left stranded—financially insecure, with nowhere to turn in a system that leaves them at the mercy of their neighbors. These districts include Midland, Pennsylvania, which had to send its students across state lines to an Ohio school after failing to join with another Pennsylvania district, and Poughkeepsie, New York, whose wealthier neighbor, Spackenkill, defied state recommendations to merge into one, unified district. Other examples span the nation, from Whitmore Lake, Michigan to Wallace, Idaho to Cottonwood, Arizona. In all of these—and in many other instances—districts facing economic distress have sought what most would see as a last resort: to give up on the districts as they are and join their neighbors to form larger, better-resourced school systems. But in nearly all cases, states set these efforts up for failure. Across the country, thirty-nine states allow mergers to proceed only when local districts wish to consolidate, and the incentives in the system dictate that distressed districts will almost always be turned away. And at that point, those districts are left with nowhere else to turn.

When school funding is drawn from local taxes, the result is a system of haves and have-nots, divided by district borders.

Financially troubled districts pursue these mergers because the way American states fund public schools relies heavily on local tax receipts, and district borders define both school systems and property tax jurisdictions. As a result, those borders do a great deal to determine who has access to a well-funded education. In this way, local funding encourages a system of districts that are small and unequal: Wealthy districts are motivated to stay small, keeping revenues in and needy students out. Meanwhile, districts experiencing economic problems, like population declines or loss of local industry, will see their tax bases diminish and will struggle to find sufficient resources within their borders. This self-reinforcing dynamic produces underfunded classrooms and instability for kids, as well as a school system that can’t do the work of powering economic recovery and a better future.

States are failing to take responsibility for stranded students. Only nine states have provisions in law allowing them to merge two school districts, even in the direst of circumstances.

It makes sense, then, that districts facing local economic challenges would seek to join together with a better-off neighbor to broaden the local tax base and break the cycle of economic troubles. But some districts have been trying unsuccessfully to consolidate for upwards of three decades as their neighbors have repeatedly refused to merge. These failures have created long-term insecurity and left students in limbo.

How District Borders Divide Students from Resources

Though funding schools out of property taxes is an approach with a long history, it became a truly entrenched problem over the second half of the twentieth century. That story began in the 1940s, when the state of Texas encouraged wide-scale consolidation of school districts, but left it up to local school boards to decide how and whether to pair up. For years, the students in Edgewood, a poor and largely Mexican-American school district near San Antonio, watched as their wealthier neighbors merged, leaving them behind in more ways than one. By the mid-1950s, Edgewood’s entire property tax base was worth only $2,000 per student, while nearby San Antonio and Alamo Heights both had over $10,000 per student in property value. Edgewood made multiple attempts to join with nearby districts but was repeatedly turned away. Left stranded in a significantly under-resourced school district, the 22,000 students of Edgewood became the plaintiffs in a lawsuit that would eventually become the landmark United States Supreme Court case San Antonio v. Rodriguez (1972).

With the approval of the U.S. Supreme Court, nearly all states perpetuate inequality by using local dollars to support schools.

The lawsuit argued that Texas’s system of partially financing public education through local property taxes deprived the children in low-wealth Edgewood of their right to an equal education. But the Court’s ruling did not bring good news for Edgewood or the millions of children in property-poor districts around the country. The justices agreed that these students were disadvantaged by the system—but found that federal courts have no power to enforce fairness in state school funding systems.

Today, all U.S. public school students live in the world San Antonio has wrought. With the Supreme Court’s approval, states have continued to fund schools substantially out of local property taxes, tying school budgets to local home values. Within the environment created by that policy, affluent families can afford homes in better-off school districts, moving across borders to access well-funded schools and leaving behind school districts that are increasingly concentrated with poor students. In the most egregious cases, funding schools in this way incentivizes wealthy neighborhoods to pull away from the larger community and form their own school districts, drawing new borders that allow them to retain their tax receipts within their hyperlocal communities. And these funding systems also give us school districts that wither on the vine, trapped in borders that outline an unsustainable school system and cannot be changed.

How Students Become Stranded

This kind of school system decline can often begin with local economic troubles. When an area experiences the kind of problems that lead property values to fall—population loss, for instance, or a key employer leaving town—the schools (which are heavily dependent on property tax revenue) will likely suffer too. This sets off a vicious cycle, as difficulties in the school system drive more families to leave the district, accelerating the economic downturn. When the financial burden placed by the school finance system on the struggling community becomes too great, local districts may decide they can no longer go it alone and attempt to merge with a neighboring system so as to share both costs and local resources.

But the same school funding approach that leads such districts to seek a merger also makes it unlikely that any better-off school districts will agree to accept them. From the vantage point of a financially healthy district, such a step could only mean either higher taxes or fewer resources per students when the same tax dollars must stretch further. And while the state could always step in and require districts to consolidate, stretching a lifeline across the border, few states—just nine—have the legal structure in place to do so. Instead, merger decisions are almost always left to the discretion of local boards or voters, making it all but certain that insolvent districts will be left to fend for themselves. This leaves students in limbo, trying to learn in districts that can’t break the cycle of decline.

Case Studies

Policies regarding school funding and district consolidation vary from state to state. But when states employ the most common combination—any form of locally rooted funding, and rules that generally allow districts to choose whether to accept or refuse a merger—some students will always be left stranded in underfunded school systems, no matter what other policies are in place. Click the buttons below to read the stories of districts failed by such state policies in Pennsylvania and New York.

The National Picture

State policies can ensure no student is left stranded by ending the reliance on local property taxes to fund public schools and stepping in when districts need them to.

When students are left stranded in struggling districts that are unable to find a consolidation partner, they are victims of school funding policies that are rooted in local property taxes. These policies are a choice: States could choose alternative funding schemes (and, in fact, a few have), eliminating the problems that follow from tying school budgets to local wealth. But as the vast majority of states have chosen this system, with all its attendant inequalities, it is up to those states to deal with the consequences.

If states choose school funding schemes that tie school budgets to local wealth, then they are responsible to deal with the consequences.

Almost no state is taking that responsibility, however. The statistics are clear. Only nine states have provisions in law allowing them to require a merger, even in the direst of circumstances. Meanwhile, thirty-nine states leave merger decisions entirely to the discretion of local school districts. These states span the country, from Alabama to Oregon. Of these, seventeen states not only have voluntary-only consolidation policies; they also offer no incentives at all to encourage mergers. Click the table below to see a full accounting of states with voluntary, mandatory, and incentive-supported consolidation policies.

Today, state funding policies are setting districts up to fail. When economic misfortune comes, as it has come for so many communities over the last decade, our locally rooted funding system sends them into a vicious cycle: Falling tax receipts harm schools, spurring families to leave the community and sending home values and local fortunes into further decline. The same funding policies mean that no better-off district is likely to accept a merger with a struggling school system, and state consolidation policies mean they are almost never asked to. Until states take true responsibility, both for the funding systems they use and the inequities those systems create on the ground, there will be students left stranded.