Social and Cultural Foundations of American Education/Administration/Financing

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How are schools financed?

"Money doesn't grow on trees". That was the saying that most parents used when their child would ask them for money. If money did grow on trees, economic and educational resources would not be as scarce as they are now. Schools struggle everyday to find funds for their students. It becomes more difficult as technology and population begin to expand. One event that sparked the need for better resources and technology in schools was the launch of Sputnik. It established that the expectations that school improvement was tied to national political and economic goals(Everhart70). This goes back to the United States wanting to be the powerhouse over all the other countries. This placed stress on schools for their students to improve in technology and all around education. In order for this to occur, there was a higher demand for educational resources. The resources usually either come from the state or federal government. There are various ways schools can receive financial. The various strategies are spelled out throughout this section.

State Funding[edit]

The states provide some funding for public schools. They provide funding for the infrastructure and for academic resources. Most of a school's funding actually is generated from the state. There are various funding mechanisms that schools can use in order to gain more money for resources.


One funding mechanism is grants. The good thing about grants is that the money does not have to be repaid to the donor. The type of grants given differs from state to state. The categories consist of flat grants, equalizing grants, categorical grants, and full state funding(Sielke 654). While most might think that a huge percentage of their funds are allocated through grants, this is not the case.

Voter Approved Bond Issues[edit]

The vast majority of states rely on voter approved bond issues to fund some, if not all, of their infrastructure needs(Sielke 654). A lot of schools are in dire need of infrastructure funding. Some schools are dirty and unsafe for students. Students should not be forced to learn in an unhealthy environment. Who wants to wake up every morning knowing that they have to stay and learn in a run down school for at least six hours? Most would prefer not to suffer through that. Thus people would assume that the voter approved bond issues are a reliable source to receive funding aid from. However, there are a few problems with this financial source. The problem with these bond issues is that they are tied to property wealth. So basically, the rich just keep getting richer. The amount of property wealth limits the size of the bond issue and places a heavier burden on taxpayers in low wealth districts(Sielke 654.) The schools that are in low-income areas are the schools that need the most funds. Unfortunately, if they were to use this source, they would not receive nearly as much funds as another school may receive.

Federal Funding[edit]

The federal government also plays a role in school funding. Probably not a large of a role as the state, but it is beneficial. The federal government also offers grants to the schools. Federal competitive grants account for $100 Billion of the $400 Billion distributed in assistance programs annually(Gosmire 161). There is money out there for schools. They may have to search a little harder for the funds. Obviously, the federal government is not a large contributor. There is an extra $300 billion dollars that can be allocated to some schools. A person can never stress enough the importance for applying for grants.

Federal Impact Aid[edit]

The legislature for Federal Impact Aid was passed in 1950. It was originally intended for the sole purpose of providing financial relief to local school districts that were burdened by activities of the federal government (Zimmer,Buddin,Gill 939). This burden could contain a multitude of things. One main problem is the increase in population at a certain school. When there are more people, more resources are needed to accommodate them. Currently, the federal impact aid program provides $900 million per year in subsidies to approximately 1,400 local school districts which enroll 12 million eligible children (Zimmer et al.) If the government were to allocate the maximum funds the schools could receive, the monetary amount will be a lot higher. The government seems to always find a way to deprive funds from people who need it the most. They can spend billions of dollars on wars, but what about the youth. They are the key to the future. We want competent leaders in the future. The government should be more willing to give up the maximum amount of money. To determine how much money each school is allowed, the government has a funding formula. This formula creates the basic support payment that is partially distributed to the schools. The first part of the formula is the weighted adjustments for the federally-connected students. The federally-connected students are the students eligible for aid. Listed below are the federally-connected students and their weighted adjustments.

Children of military parents living on base=1.0

Children living on Native American Reservations=1.25

Children of federal civilian employees living on federal property=1.0

Children of military parents living off base=0.1

Children living in low-rent housing=0.1

Children of federal civilian employees not living on federal property=.05

To determine the basic support payment, they multiple the total number of students in each category by the weighted adjustment. For example, if there are 2000 students in a school who have military parents living on base, you would multiply 2000 times 1. Thus the school will receive $2000 for those students. They would do this for each category. The Federal Impact aid is good; however, it is still not enough money for the burden the school is taking. Just think about it, the most the government will give for one child is $1.25. Books cost a lot more than $1.25. They can come up with more funds from somewhere. But who can complain about getting free aid.


There are different sources where schools can receive funds from. The situation is still hard for schools. Most funding is not total funding. They could possibly give out more money, but for some odd reason they do not allocate the maximum amount of funds. The state provides the majority of the funds for the schools. Some of those funds come from grants and voter approved bonds. The federal government also has a small contribution to the national school system. They provide a few grants and federal impact aid. Unfortunately, we still need more money for school. Don't we wish money grew on trees.

Multiple Choice Questions[edit]

Click to reveal the answer.

What event created a need for increased technology in schools?
A. World War II
B. Launch of Sputnik
C. The Great Depression
D. The Cold War

B. Launch of Sputnik

Principal Rogers is searching for funds for the infrastructure of his school. From which source will he rely on the most for the money?
A. Voter approved bond issues
B. Flat grants
C. Equalizing grants
D. Federal impact aid

A. Voter approved bond issues

Which type of grant is not given through the state government?
A. Equalizing grants
B. Categorical grants
C. Stabilizing grants
D. Full state funding grants

C. Stabilizing grants

What is the major disadvantage of voter approved bond issues?
A. The funding is extremely difficult to find
B. It only benefits the wealthy
C. The percentage of approval is low
D. All of the above

B. It only benefits the wealthy

How much money do federal grants account for annually?
A. $120 Billion
B. $50 Billion
C. $75 Billion
D. $100 Billion

D. $100 Billion

The original intention for the Federal Impact Aid passed in 1950?
A. To build new schools.
B. Providing financial relief to local school districts that were burdened by activities of the federal government.
C. Provide funds to colleges and universities across the country.
D. To implement after school programs.

B. Providing financial relief to local school districts that were burdened by activities of the federal government.

Schools that need the most funds are:
A. Schools who are implementing technology in the curriculum.
B. Schools with the highest test scores.
C. Low income areas.
D. Schools who want to improve there technology.

C. Low income areas.

Most schools are funded by:
A. State funds
B. Federal funds
C. Private donations
D. Lotteries

A. State funds

Essay Question[edit]

Click to reveal a sample response.

What are the advantages and disadvantages of the various sources of school funding?

There are a few advantages and disadvantages to the funding that some schools receive. One of the funding sources are grants. Grants are allocated through the federal and state government. One advantage of the grant is that it is easily accessible. There is a multitude of grant money ready to be given out. People just have to search for it. In addition, the money does not have to be paid back. However, the disadvantage of the grant is that there is no way the government will give out all of the money that they set aside for grants. They hardly give away 10% of the total grant funds. The next source is voter approved bond issues. The good part about this resource is that it provides the school with infrastructure funds. Some schools are in dire need of being repaired and this source of funding is extremely helpful. It is unfortunate to say that it only benefits the wealthy land. If a school is based near a poor neighbor, it has a less likelihood of receiving those funds. In all reality, those are the schools that probably needs those funds the most. The last source mentioned was the federal impact aid. The advantage of this funding is that the government pays the schools for the increase in the student body. The increase in the student body causes for an increase in the resources for those students. When looking at the equations on how they distribute the money, the results are lopsided. In essence, the schools are receiving, at maximum, $1.25 per student. This is not even enough to buy that student the books they need for all of their classes. In conclusion, there are benefits and drawbacks to most sources of funding.


  • Everhart, Robert B. "Why are Schools Always Begging for Money." Phi Delta Kappan. Vol 88 no 1. 2006. pg 70-75.
  • Gosmire, Doreen. "The Art (Not Science)of Grants Management." Journal of Women in Educational Leadership. Vol 4 No 3. 2006. pg 159-163.
  • Sielke, Catherine C. "Funding School Infrastructure Needs Across the States." Journal of Education Finance. Vol 27 No 2. 2001. pg 653-662.
  • Zimmer, Ron, Richard Buddin, Brian Gill. "Distributional Effects and Distorted Incentives: Funding Policy Under the Federal Impact Aid Program" Journal of Educational Finance. vol27no.4, 2002. pg 939-963.