Competing Forces Complicate State Education Funding
This is one in a series of five articles examining key debates that will unfold in the nation’s statehouses in the year ahead. Debates about how to approach public school funding are reaching a boiling point nationwide. Although the pressures have been building for years, the $190 billion in Elementary and Secondary School Emergency Relief (ESSER) Program funding from the federal government and the wave of state tax revenue have masked... Now in 2025, most of the federal aid tied to the COVID-19 pandemic has expired and many school districts are dealing with budget deficits. And—following a slowdown in tax revenue—states are tightening their belts. Meanwhile, enrollment rates, part of the calculation of district funding, are stagnant and still below pre-pandemic levels, even as demand for additional education spending grows and interest in alternatives such as school voucher programs...
These competing forces are expected to start coming to a head in this year’s legislative sessions, and policymakers are revisiting their states’ school funding formulas and considering other courses of action. Declining enrollment, rising staffing and administrative costs, and increasing numbers of students with additional educational needs are increasing pressure on traditional state funding formulas. Many school districts’ biggest budget concerns this year have centered on the federal government: The Trump administration has moved aggressively—generally without warning or congressional approval—to withhold formula dollars, terminate in-progress grants, and change funding... But in a number of states, political debates and administrative turmoil are piling distinct and varied challenges on school districts at the start of a new school year. Lawmakers in Michigan, North Carolina, and Pennsylvania blew past their deadlines for finalizing their respective state budgets, jeopardizing tens of millions of dollars for public schools. Courts have recently issued rulings that education funding systems in Arizona, New Hampshire, and Wyoming violate state constitutions—setting up what will likely be yearslong battles over ensuring all students have equal access to schooling.
Independent of those fights, state-level school funding debates are already raging widely, over private school choice investments in Arizona and Texas; property tax reforms in Indiana, Ohio, and Wyoming; and outdated funding formulas in... In the architecture of American public education, federal dollars have long served as both scaffolding and safety net. They may not be the foundation, state and local funds hold that weight, but they have kept the structure from cracking where inequities run deep. Now, with mounting political momentum to restrict or reduce federal education funding, states find themselves at a familiar crossroads, this time without a guide rail. Federal contributions to K-12 public education typically make up 7% to 10% of district budgets, National Center for Education Statistics data shows. That support flows through targeted programs: Title I for low-income students, IDEA for students with disabilities, and funds for English language learners.
For districts serving students with the greatest needs, these federal streams are vital tributaries that keep the entire system flowing. In March 2025, Congress passed a continuing resolution to fund the federal government through September, maintaining baseline education support for now, EdWeek reported. But other developments signal a more austere future. Proposed legislation introduced in the House, H.R. 369—calls for the elimination of the U.S. Department of Education altogether.
Meanwhile, a coalition of 16 states and the District of Columbia is suing the federal government after it abruptly froze access to remaining COVID-19 education relief funds, the Associated Press reported. Plaintiffs argue the action violates federal law and threatens already underserved school communities. If the federal tide recedes, states must reckon with the shoreline it reveals. Public education funding across the U.S. is a patchwork deeply uneven, stitched together by local property taxes that tether a child’s academic opportunity to the affluence of their ZIP code. In nearly half of U.S.
states, students from low-income families receive fewer dollars in combined local and state funding than their wealthier peers, according to analysis by the Urban Institute. The consequences are not theoretical. In February 2023, a Pennsylvania court ruled that the state’s education finance system violated constitutional rights, failing to provide students in poor districts with equal access to a quality education. Kentucky is now facing a similar lawsuit brought by students who claim state lawmakers have neglected to update the school funding formula for more than three decades. This decade could go down as one of the most consequential in the history of U.S. public education.
Between COVID-19 school closures, historic declines in public school enrollment, and the rise in school choice policies, the decisions made by state lawmakers in the coming years will help shape generations to come. Policymakers must have the best data possible to inform their public education decisions. The following analysis from Reason Foundation’s K-12 Education Spending Spotlight brings together the latest figures from the U.S. Census Bureau and National Center for Education Statistics and highlights five key insights from our tool and their implications for state policymakers and other stakeholders. These critical insights include examining and ranking every state’s total K-12 and per student public school funding, the public school enrollment levels in every state and how states continue to hire more non-teaching staff... Nationwide, public school funding increased by 35.8% between 2002 and 2023, rising from $14,969 per student to $20,322 per student after adjusting for inflation, Reason Foundation’s K-12 Education Spending Spotlight finds.
In total, U.S. public schools received $946.5 billion in funding in 2023, with New York topping all states at $36,976 per student, followed by New Jersey at $30,267 per student. The United States has no single national education system. Instead, 50 distinct state systems operate with different priorities, funding mechanisms, and success measures. This arrangement stems from the U.S. Constitution, which grants states primary authority over public education.
The Education Commission of the States was formed in 1965 to help states navigate their responsibilities and serve as a strategic consortium for policymakers. Its creation responded to growing federal influence, strengthening state capacity to lead on education policy. For years, the No Child Left Behind Act imposed prescriptive federal mandates requiring states to meet nationally defined accountability standards. The Every Student Succeeds Act (ESSA) in 2015 marked a shift, returning substantial authority to states. ESSA dismantled many rigid requirements and let state leaders design their own systems for measuring school performance, identifying struggling schools, and setting educational goals. This renewed state control amplified existing differences.
States now diverge on nearly every major policy aspect. They use vastly different funding models, creating wide resource disparities. They’ve built unique accountability systems reflecting specific values, measuring everything from college readiness to chronic absenteeism. States take widely varied approaches to academic standards, school choice, teacher workforce policies, and what is taught in the classroom. School finance methods determine resources available to students and reflect fundamental decisions about equity and local control. Investment in a child’s education varies dramatically by zip code.
Recent moves on both sides of the aisle show that lawmakers may not be in favor of the Trump administration’s agenda to reduce federal spending on public education. On July 31st, the bipartisan Senate Appropriations Committee voted 26-3 in favor of a bill that rejects most of Trump’s recommended $4.5 billion cuts to K-12 education and, in fact, increases funding to Title... Yet, with the budget not due to go into effect until October 1st (and the full Senate and House still needing to weigh in) there’s ample opportunity for federal cuts to go back on... And while the overall amount of money may not seem like a lot compared to total education funding, reductions, impoundments, and rescissions in federal education funding disproportionately impact some states, some schools, and some... Receive ERS’ latest research, analyses, district stories, and interactive tools. As we look ahead to two more months of discussion and debate, we analyzed three significant factors that affect how keenly each state experiences disruptions or reductions in federal funding:
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This is one in a series of five articles examining key debates that will unfold in the nation’s statehouses in the year ahead. Debates about how to approach public school funding are reaching a boiling point nationwide. Although the pressures have been building for years, the $190 billion in Elementary and Secondary School Emergency Relief (ESSER) Program funding from the federal government and th...
These Competing Forces Are Expected To Start Coming To A
These competing forces are expected to start coming to a head in this year’s legislative sessions, and policymakers are revisiting their states’ school funding formulas and considering other courses of action. Declining enrollment, rising staffing and administrative costs, and increasing numbers of students with additional educational needs are increasing pressure on traditional state funding form...
Independent Of Those Fights, State-level School Funding Debates Are Already
Independent of those fights, state-level school funding debates are already raging widely, over private school choice investments in Arizona and Texas; property tax reforms in Indiana, Ohio, and Wyoming; and outdated funding formulas in... In the architecture of American public education, federal dollars have long served as both scaffolding and safety net. They may not be the foundation, state and...
For Districts Serving Students With The Greatest Needs, These Federal
For districts serving students with the greatest needs, these federal streams are vital tributaries that keep the entire system flowing. In March 2025, Congress passed a continuing resolution to fund the federal government through September, maintaining baseline education support for now, EdWeek reported. But other developments signal a more austere future. Proposed legislation introduced in the H...
Meanwhile, A Coalition Of 16 States And The District Of
Meanwhile, a coalition of 16 states and the District of Columbia is suing the federal government after it abruptly froze access to remaining COVID-19 education relief funds, the Associated Press reported. Plaintiffs argue the action violates federal law and threatens already underserved school communities. If the federal tide recedes, states must reckon with the shoreline it reveals. Public educat...