Pennsylvania Ruling Can Help Redefine School Funding Formula
A court ruling is requiring Pennsylvania to reevaluate how it distributes revenue among school districts to create a more equitable system—and it should view this as an opportunity for economic development and growth, say Jennifer W. Karpchuk and Olivia Y. Klein of Chamberlain, Hrdlicka, White, Williams & Aughtry, PC.
The Feb. 7 court ruling declaring Pennsylvania’s public education funding system unconstitutional capped a decade-long legal battle in which school districts, parents, and others successfully argued that the severe underfunding of public schools violated the Equal Protection Clause of the 14th Amendment, as well as Pennsylvania’s education clause.
Pennsylvania Commonwealth Court Judge Renee Cohn Jubelirer analyzed the public school funding system, which pulls from federal, state, and local revenue sources but largely depends on local property taxes. She found the system insufficient, noting strong and direct correlations between funding disparities and achievement gaps among school districts.
“All witnesses agree that every child can learn,” she wrote in a 786-page opinion. “It is now the obligation of the Legislature, Executive Branch, and educators to make the constitutional promise a reality in this Commonwealth.”
The office of Gov. Josh Shapiro, who while attorney general had filed an amicus brief in support of the plaintiffs, is reviewing the decision and has until March 9 to appeal.
Pennsylvania isn’t the first state to face lawsuits over public school funding. Courts in North Carolina and Washington have ordered overhauls to state education funding systems due to inequalities.
While North Carolina is struggling to revamp its public education, Washington has made substantial progress. In 2012, the Washington Supreme Court ordered the state to fully fund its public schools, as required by its constitution. When, by 2014, the state failed to establish a plan, the court fined the state $100,000 per day until the system was fixed. Finally, in 2018, the state was found in compliance with its constitution.
If Cohn Jubelirer’s decision stands, Pennsylvania’s legislature must grapple with how to address these funding issues. Since Pennsylvania relies heavily on local property taxes to fund its public schools, there is a direct relationship between property values and the revenue school districts can generate.
Approximately 38% of school funding comes from the state, while 43% comes from local property taxes—ranking Pennsylvania 45th nationally of states with the most inequitable school funding formula, according to the National Center for Education Statistics. The Education Law Center labeled Pennsylvania one of the worst states at distributing this revenue across high-poverty and low-poverty districts.
Compounding the issue, local revenue is simply insufficient in underfunded districts. The former superintendent of William Penn School District—which was the lead plaintiff in the funding case—testified that the district wasn’t able to raise taxes enough to address its needs. Even if increasing local tax rates could be effective, increasing the financial burden on struggling school districts and taxpayers wouldn’t create a viable solution.
Potential Options for Pennsylvania
The ruling calls not just for a redistribution of state aid but also an increase in overall funding. The Pennsylvania legislature will need to determine how to raise or allocate funds to fill the roughly $4.5 billion needed to properly fund schools. To put that into perspective, the entire state budget for 2022–23 is $45.2 billion. To fill the education deficit, the legislature would have to increase revenue by roughly 10%.
Pennsylvania’s revenue comes from multiple sources, including taxes, fees, and fines. The three main tax revenue sources are sales tax, personal income tax, and corporate net income tax, or CNIT. To increase revenue, the legislature could raise rates in any of these areas, but that’s generally a politically disfavored approach. In lieu of raising rates, the legislature also could increase to whom or to what a tax applies. For instance, it could increase the types of items it subjects to the sales tax, thereby increasing the sales tax base.
Another option to increase revenue is to implement new taxes, a strategy Massachusetts used to address school funding issues when voters approved a “millionaire’s tax” ballot measure. The Fair Share Amendment creates a surcharge on income over $1 million, which is expected to raise over $2 billion a year to be used solely for education and transportation.
While an increase in state tax rates or additional taxes are possibilities, Pennsylvania also must reevaluate how it distributes revenue across high-poverty and low-poverty school districts to create a more equitable system—and it should view this as an opportunity for economic development and growth. Last year, the legislature passed a bill lowering the CNIT, aiming to make Pennsylvania more competitive in attracting businesses. If the strategy works, as the CNIT rate decreases, businesses will move to Pennsylvania, generating more revenue for the commonwealth through taxes.
The same philosophy can be used for investing in people. There is an obvious, documented correlation between education and a robust economy. A larger skilled workforce equates to a more prosperous local economy, which equates to more revenue for the state.
However, educating that skilled workforce begins in elementary school. A child who leaves elementary school unable to read or reading far below grade-level—as is not uncommon in underfunded school districts—will be disadvantaged in their career and likely won’t obtain a skilled job and meaningfully contribute to their local economy. Instead, investing in that child gives them the chance to enter the skilled workforce and to better the economy and themselves.
Improving education in the US could increase US GDP by $32 trillion, and bringing all students to the average of the highest-achieving states could boost GDP by $76 trillion over the next several decades. As with the analysis that went in to cutting the CNIT last year, the Pennsylvania legislature should think of funding education similarly—the economic growth and development afforded by improvements in education could far outweigh the cost.