Chapter 2
History of School Finance
Our founding fathers profoundly
believed that their new democracy’s
health depended on its people’s virtues
as right, honorable, ethical individuals
as well as knowledgeable citizens.
Founding Fathers Believed
Public Education Essential
Rousseau noted in 1758
that “public education…is
one of the fundamental
rules of popular or
legitimate government”.
Jean Jacques Rousseau, A Discourse of Political
Economy, 1758, translation and introduction by
G.D.H. Cole in The Social Contract and Discourses,
London: J.M. Dent & Sons, 1973), p. 149.
An educated
general populace
required for its
republic’s survival
The first American school finance laws
date back to the Massachusetts Act of
1642, which required parents and
masters to attend to the educational
duties of the colony’s sons and
“The General Court (the colonial
legislature) empowered ‘certain chosen
men’ of each town to ascertain, from
time to time, if the parents and masters
were attending to their educational
duties; if the children were being trained
in learning and labor and other
employments…profitable to the
Commonwealth .”
Early U.S. Value in Education
“The child is to be educated, not to
advance his personal interest, but
because the state will suffer if he is not
“Profitable to the state”
“Profitable” meant that sons
and male servants learned to
read and understand
religious principles while they
received training in “learning
and labor”. Women stayed
home and learned household
tasks and embroidery– an
obvious Title IX violation
“Ye Olde Deluder Satan” Laws
Within five years
of the first school
finance law,
however, it failed;
The law presumed
that those who
could read &
understand the
Bible couldn’t be
tempted to follow
Satan’s wiles.
Different Sized Settlements Had
Varying Requirements for Providing
Public Schooling
• For 50 or more households -
Appoint a reading and writing teacher
Pay what deemed appropriate
• For settlements of 100 or more
households –
Community taxed property owners to
provide a grammar school
Towns not meeting this educational
requirement faced a financial penalty.
Who Paid for Schools?
• Founding fathers
believed that the
wealthy should pay for
education’s public and
religious functions.
• Local government
taxed property
because people in
those days considered
land to be a valid
measure of wealth.
The Law of 1647 Represented
a Distinct Step Forward
• Not only did the law order towns to establish a
school system – elementary for all towns &
children, and secondary for youths in the larger
towns – but
• For the first time among English-speaking
people, there was an assertion of the right of
the State to require communities to
establish and maintain schools. Failure to do
so resulted in penalty.
The Laws of 1642 & 1647
Represent the
foundations upon
which our American
state public-school
systems have been
They also
established the
State’s right to tax
for the provision of
Massachusetts’ Precedent
Establishing property taxes as the basis
for funding public schools quickly
caught on in other New England
colonies. It remains a tradition to this
Compromise to Appease State’s
Rights Advocates & Federalists
Since the first 10 Amendments do not
mention “education”, it became a state
Who is Responsible
for Public Schools?
• This compromise,
however, has farreaching legal and
financial effects
• State’s rights
continues to be a
national issue with
keen influence on
educational policy
and practices.
Taxing Property Evolved Somewhat
Differently in Various Regions
The middle and
southern colonies,
for example,
subsidized very
basic public schools
(small facilities,
limited curriculum,
few students
Mostly churches &
parents financed
further education.
Education = Prosperity
States must invest as heavily in
education as their capacity allows if they
want future economic prosperity for all
its citizens.
Regional Evolution of Schools
& School Financing
1. Good school
2. Mixed conditions
3. Pauper &
parochial schools
4. “No action” group
Schools’ Evolution Differed in
Various Geographic Regions
• New England
became the first
area that required
children learn how
to read
• Although religious in
inspiration and scope
(students would be able to
interpret the Bible for
themselves and save their
immortal souls), knowing how
to read and comprehend also
allowed individuals to think for
themselves and act without
offense or injury to others
Good School Conditions
• Citizens generally
valued education
and saw its value for
the “entire”*
• Provided public
financial support to
educate large
number of students
* White Male
• Maine
• Vermont
• New Hampshire
• Massachusetts
• Connecticut
• New York
• Ohio
Mixed Conditions Schools
People held conflicting
ideas about what
education should be and
what it should provide for
Showed wide variance in
their willingness to fund
local schools and in
resulting education
• Indiana
• Illinois
Pauper & Parochial School
• Believed that high-quality
schooling was for the elite
• Privileged sent their
children to churchsponsored (parochial)
• Community leaders
believed that the poor
(paupers) deserved a
minimal level of education
• Pennsylvania
• New Jersey
• Delaware
• Maryland
• Virginia
• Georgia
• South Carolina
• Louisiana
“No Action” Group
Philosophically, these
colonists believed that
“government” should play
little role in citizens’ or
community affairs.
Individuals held
responsibility for their own
actions and well-being,
including providing for their
children’s education.
• These regions took little
or no actions
establishing public
education in their early
• Rhode Island, Kentucky,
Tennessee, North
Carolina, Mississippi,
and Alabama.
Not All States Fit
These Categories
• A number of states reflect an amalgam
of people and ideas, not fitting one
distinct pattern.
The BEST Schooling Model
• The Good School Conditions
model offered its eligible children
the best learning
Federal History of
School Funding
• Even though the
Constitution made
education a state
responsibility, the
federal government
did not abandon
involvement with
public schools or
leave their
financing solely to
the states
• On the contrary,
the federal
heavily promoted
and financed
education from
before the
Constitution was
Federal Financial Involvement
in Education
In 1778 Congress
eagerly sought ways
to generate revenue
for the new country
and to pay its war
debts. One method
involved selling
claim to western
Ordinance of 1785
 New Congressional townships in the western
territories should be six miles square (or
thirty-six square miles)
 The six miles square would be surveyed and
divided into thirty-six lots, each of one square
 Towns could set aside the proceeds from lot
number 16 to finance their public schools
Early School Financing
Northwest Ordinance
of 1787:
Authorized land
grants to establish
Magnificent rhetoric
but little guidance
about how to carry
it out
Ordinance of 1787:
approximately five
million acres to
land speculators
The Ordinance Included:
“Religion, morality, and
knowledge being necessary
to good government and the
happiness of mankind,
schools and the means of
education shall be forever
New States Required to
Provide Education
The Northwest Ordinance also
established the requisite conditions
for territories to become states and
included a provision that each state
have an education provision within
its basic laws.
Clarifying the “Sixteenth
Section’s” Township Intent
• Required monies
• Federal & state
from this section’s
sales be spent for
public schools
• Started with Ohio
roles clarified
4th “Wave” of Federal Policy
• States would receive “a 5%” portion of
the sale of public lands & states agreed
that federal lands within states would be
exempt from state taxes
• These revenues added to monies
available to establish public schools
Andrew Jackson’s Presidency
• There was a move to
decentralize the federal
• In 1836, the Surplus
Revenue Deposit Act gave
$28 million of federal
funds to the states
• Much of this windfall was
spent for public schools
Another Major Federal
Financing of U.S. Education
• In 1802, Congress enacted legislation establishing
the U.S. Military Academy
In 1845, established the Naval Academy
In 1876, founded the Coast Guard Academy
In 1936, founded The Merchant Marine Academy
In 1954, started the U. S. Air Force Academy
1862, Congress Established
the Morrill Act
 Authorized the states to use public land
grants to establish and maintain
agricultural and mechanical colleges
 Assured the country’s economic security by
producing knowledgeable managers and
planners for the nation’s growth
 In 1890, Congress passed the second Morrill
Act providing funds to support instruction in
the colleges that the first Morrill Act
U.S. Department of Education
• Established in 1867
• This brought the
function of education
to a leadership
position in the federal
• Later, the
Department was
“downgraded” to the
Office of Education.
It continued as part
of the Department of
Health, Education,
and Welfare until
reestablished as a
Department in 1980
The 1917 Smith-Hughes Act
 During World War I,
the government
faced large numbers
of returning soldiers
who needed
specific workplace
 This Act gave states
grants to support
vocational education
States Administer
Federal Monies
• The national government directed the
state’s role in administering this
program according to federal standards
and funds – a model followed in future
federal education grants.
1918, Congress Passed the
Vocational Rehabilitation Act
Providing funds
to rehabilitate
World War I
1919, Congressional Act to Provide for
Further Educational Facilities
Authorized the federal government to
sell surplus machine tools to schools
for 15 percent of their original purchase
price – enabling schools
to have the equipment
needed to give students
“real world” training.
1920, Smith-Bankhead Act
Authorized grants for the states to
provide vocational rehabilitation
1935, Agricultural
Adjustment Act
Congress and the
Executive Branch
sought the quickfix to save the
crashing economy
and relieve
citizens’ economic
Set up the School
Lunch Act –
providing food to
schools so it could
feed its students
(because their
families might
1941, Amendment to the
Lanham Act of 1940
Providing federal aid
for the construction,
maintenance, and
operation of schools
located in federally
impacted areas…
(where U.S. military
families lived and
worked on
land and facilities
and paid no state or
local property
1943, Vocational
Rehabilitation Act
• Public Law 78-16
• Provided assistance to disabled
veterans returning home from WW II
1944, The G.I. Bill
 Servicemen’s
Readjustment Act
 Provided education
benefits to military
returnees as they
reentered civilian life
By providing
an attractive
education alternative
to employment, the GI
Bill delayed many of
the returning veterans
from flooding the
labor market and
stalling economic
G.I. Bill
 Offered a living stipend while veterans
attended school, effectively
transitioning the potential labor glut into
a student cohort earning their living
while learning new work knowledge
and skills
 Enabled an educational investment in
our country’s infrastructure by
enhancing the workforce’s job skills
G.I. Bill, cont.
Effectively supplied a massive
education infusion to citizens,
raising the education bar, and
expanding learning horizons,
career, and lifestyle opportunities
for these returnees and for future
Federal Property and
Administrative Services Act
Initially, schools and
colleges felt a bit
overwhelmed with
the newfound
demand for their
services, placing a
drain on resources.
The Act allowed the
national government
to donate surplus
federal property to
After WWII
America believed
herself to be the
most powerful
nation in military
and economic
Following Sputnik in 1957,
however, the nation faced a
wrenching reality check.
National Defense
Education Act
The NDEA provided
economic assistance
to states and
individual school
systems to “beef up”
science and math
instruction, foreign
languages, and other
crucial subjects.
NDEA Also Supplied States
with Resources Including
Statistical reporting
Guidance & counseling
Vocational & technical programs
Higher education student loans &
• Foreign language study & training
• New teaching media
Education of Mentally
Retarded Children Act
Train teachers to
work successfully
with disabled
Prior to this time, only a
few states distributed
funds to localities to
supplement educational
programs for
handicapped students.
Most families with
disabled children had to
find their own help.
1975 Education for All
Handicapped Children Act
 Public Law 101-46
 Intended the federal
government to pay
40% of the funding
necessary for special
education services
 States & localities to
pay the rest
 Today, the federal
government pays
17% of special
education costs
instead of the 40%
promised in national
1965 Elementary and
Secondary Education Act
Categorical Aid Programs: Title I
Provided supplemental school program grants for
children of low-income families
Intended to help economically disadvantaged
students succeed (catch up with middle class and
affluent peers) in the regular school program
Provided additional educations resources to improve
their basic and advanced skills to achieve gradelevel proficiency
Included extra or school-wide activities encouraging
heavy parent involvement
Government Distributes
These Funds in 2 Ways
Basic Grants
Flow through the State
Education Agency
(SEA) to localities
based on a formula
involving the school
district’s number of
eligible students and
the average state perpupil expenditure.
Concentration Grants
Available only to
restricted populations
and represent a
smaller percentage of
the overall funding.
Particularly useful to
school systems with
high percentages of
Title I
• Title I provided supplemental school program
grants for children of low-income families
• This program intended to help economically
disadvantaged students succeed in the
regular school program by improving basic
and advanced skills and achieving gradelevel proficiency
• The program could include supplemental or
school-wide activities encouraging heavy
parent involvement
Title I, cont.
• Most Title I funds are basic grants which
flow through the State Education
Agency (SEA) to localities based on a
formula involving the school district’s
number of eligible students and the
average state per-pupil expenditure
• Concentration grants represent a
smaller percentage of the overall
funding within this Title
Title I, cont.
• Concentration grants are designed for
localities with a high number of eligible
students – more than 6,500 students or
more than 15% of all students eligible
for Title I funding
• This is particularly useful to school
systems with high percentages of
disadvantaged students
Title I, cont.
 Annual amount of
Congressional funds
allocated for Title I varies
from year to year,
depending on political
allocation decisions
 Requires that school
divisions will not receive
less than 85% of its
previous year’s funding
 Title I money had
less buying power
in the 1990’s
although expected
to support learning
interventions for
more children
Title II
 Grant monies for school
library resources, textbooks
& other instructional materials,
including audio-visual equipment
 Called the Dwight D.
Eisenhower Mathematics
& Science Education Act
Title II
 Provides presidential awards
for outstanding teaching
Funds for magnet schools
Monies for talented and gifted programs
Funds for women’s educational equity
Grants for drug abuse prevention,
dropout prevention,
bilingual education, &
other programs.
Other Categorical Grants
Title III
Provided funds for
supplementary education
centers and services to
public and private schools
Other Categorical Grants,
Title IV
Allocated funds for
regional educational
research and
training laboratories
Other Categorical Grants,
Title V
Provided funds for
strengthening state
departments of education
(otherwise known as State
Education Agencies –
Funding Public Broadcasting
• In 1967, Congress
passed the Public
Broadcasting Act
• The Corporation for
Public Broadcasting
(CPB) was created and
assumed a major role in
routing federal monies to
noncommercial radio and
television stations
Funding Public Broadcasting
• The CPB began program • Many of today’s new
production groups and
started Educational
Television (ETV) networks
• The CPB was responsible
for awarding construction
grants for educational
radio and television
teachers were raised
on programming given
its start by the CPB.
Those programs
include Sesame
Street, The Electric
Company, and others.
Educating Disabled Students
• In 1968, the Handicapped Children’s
Early Education Assistance Act, Public
Law 90-576, was passed. This act
provided for the authorization of
preschool and early education programs
for handicapped children
Educating Disabled Students,
• Seven years later, in 1975, Public Law
94-142, the Education for All
Handicapped Children Act provided that
all handicapped children have a free,
appropriate public education
Social Changes &
School Funding
• In 1970, many federal legislative changes came
into being that had their beginning in social
changes of the times
• The National Commission on School Finance
was established under the Elementary and
Secondary Education Assistance Programs,
Extension, Public Law 91-230
Social Changes &
School Funding, cont.
• Office of Education Appropriation Act, Public
Law 91-380, provided emergency school
assistance to desegregating local school
districts and schools
• The Drug Abuse Education Act of 1970,
Public Law 91-527, provided funding for the
development, demonstration, and evaluation
of materials dealing with the many problems
of drug abuse
Selected Other
Federal Funding
• In 1986, the Handicapped Children’s
Protection Act, Public Law 99-372, was
• This allowed parents of handicapped
students to collect the attorney fees in
cases brought under the Education of
the Handicapped Act
Selected Other
Federal Funding, cont.
• In 1993 the NAEP Assessment Authorization,
Public Law 103-33, authorized the use of the
National Assessment of Educational Progress,
the Nation’s Report Card
• To be used for the purpose of making state-bystate comparisons of student performance.
Country-by-country comparisons had already
been made public
Selected Other
Federal Funding, cont.
• In 1996, Congress felt pressure from states
and localities regarding legislation that required
states and localities to take certain actions that
required money without the financial provisions
in the acts to cover costs
• To that end, the Contract With America:
Unfunded Mandates, Public Law 104-4, was
passed in an attempt to curb the practice of
imposing unfounded federal mandates on
states and localities
Federal Funding Today
• Today, the federal
government funds
$50 billion dollars
for education
purposes at the
elementary and
secondary levels
Federal Funding Today, cont.
• The federal government
has invested more than
$1 trillion in elementary
& secondary education
from 1969 to 2001 – an
average of more than
$27.7 billion per year.

Chapter 2- History of School Finance