ERIC Identifier: ED335205
Publication Date: 1991-08-00
Author: Verstegen, Deborah
Source: ERIC Clearinghouse on Rural Education and Small Schools
Funding Rural, Small Schools: Strategies at the Statehouse.
Early efforts to achieve greater efficiency in schooling focused on
educating the largest number of students at the lowest possible cost. Research
about schools, following industrial models, stressed the phenomenon of
"economies of scale." If industry could boom as a result of such economies,
why could not education benefit in similar ways? Subsequently, aggressive
state policy initiatives sought to capture similar benefits for education
through consolidating schools and districts.
Today, by contrast, more attention is being given to what education
dollars produce in terms of morale, student achievement, curriculum, and
positive attitudes towards learning. This change in outlook is driven by
a growing body of research that focuses on the outcomes that dollars buy
(e.g., Fox, 1981; Goodlad, 1984; Hawkins, 1985; Monk, 1990; Plecki, 1991;
Turner, Camilli, Kroc, & Hoover, 1986). In particular, recent studies
suggest that small schools and districts may be a more efficient investment
than large schools, because the learning value per unit of expenditure
seems to be higher there (Plecki, 1991; Walberg & Fowler, 1987).
The new findings represent a dilemma for lawmakers, educators, and communities.
This issue especially concerns rural areas, since schools and districts
there tend to be smaller than their urban or suburban counterparts. This
Digest examines state strategies for meeting the unique financing needs
of rural, small schools and districts. To what extent do states actually
provide additional support for rural and small schools? On what basis is
this support distributed?
RURAL AND SMALL SCHOOL DISTRICTS' FINANCE NEEDS
Financing rural education is an issue of broad interest. Fifty-one percent
of all schools in the United States are located in small towns or rural
areas; nearly 40 percent of students nationwide attend either small-town
or rural schools. Twenty-three states have 50 percent or more of their
students in these categories. Thirty-seven states have more than one third
of their students attending schools in these localities (Johnson, 1989).
One of the driving goals of state educational systems is to operate
efficient and effective schools. But if the cost of providing an educational
program is higher for rural, small schools and districts, then--all else
being equal--they will be less able than other schools and districts to
provide an adequate program. Without additional state assistance rural,
small districts have two choices. They must either (1) spend more out of
local resources to provide a basic educational program or (2) be satisfied
with more limited educational offerings (Monk, 1982). Because many of these
districts are poor, however, the first option is not available to them.
For them, fiscal freewill is a cruel illusion.
STATE STRATEGIES FOR FINANCING RURAL SCHOOLS AND DISTRICTS
Thirty states currently include a factor in their school finance formula
to compensate for additional costs necessary to mount an educational program
in rural, small schools or districts:
* Ten states distribute funding based on school or district size.
* Six states provide aid for sparsely populated or isolated districts.
* Nine states award aid based on a combination of size and isolation
of the school or district.
* Two states use size, sparsity, and tax effort for allocation purposes.
* Three states provide funding based on other characteristics, such
as cooperative arrangements (Verstegen, 1990).
Size. Among these ten states, the majority base funding on school district
enrollments. Generally, eligibility for additional assistance is based
on specific numerical thresholds set for schools, school districts, or
both. Districts or schools with enrollments below these thresholds are
eligible for assistance beyond basic state funding guarantees. Currently,
thresholds for elementary school size tend to be about two to three times
smaller than the required number of students for additional aid purposes
in high schools. The median threshold reported in 1989-90 was 138 students
for elementary schools and 428 for secondary schools. For school districts,
the median was 1,500.
Six states provide extra funding to districts based on small school
size. Louisiana provides aid to all schools with fewer than 438 students.
Montana, Nevada, New Mexico, and North Dakota provide differential support
levels based on separate population thresholds for elementary, junior high,
and high schools. For example, in Montana, small schools receive help based
on a sliding scale of support, until a threshold of 300 students in elementary
schools and 600 students in high schools is reached. When schools reach
these thresholds, supplemental aid stops. New Mexico schools with fewer
than 200 elementary or secondary students get supplementary assistance.
In North Dakota, high schools with 550 or fewer pupils, and with small
or one-teacher elementary schools generate additional funds. Among the
other three states who fund on the basis of small school size, Ohio gives
additional support to three small Lake Erie Island schools. In Virginia,
additional aid goes to small schools, based on guarantees of minimum class
Four states--Kansas, Oklahoma, Colorado, and New Mexico--provide aid
based on an overall school district enrollment. For example, in Oklahoma,
funding is awarded to school districts with fewer than 500 students. Colorado
supplements funds for districts with enrollments of fewer than 150 funded
students. New Mexico allots additional aid to small schools in districts
with 4,000 or fewer students in average daily membership (ADM).
Population sparsity and isolation. Of these six states, two--North Carolina
and Idaho--provide assistance to isolated school populations. Four states--Florida,
Georgia, Nebraska, and West Virginia--provide funding to isolated school
districts. Most states determine isolation based on the distance to the
next school or district, the time required to reach the next school by
bus (to account for barriers of terrain), or the sparsity of population
per square mile.
Nebraska, for example, uses the number of persons per square mile to
help determine equalization funding. The percentage of 10%, 20%, 30%, or
40% is added to the total basic need calculation for districts that have
4, 3, 2, or 1 person per square mile. West Virginia has a new provision
in its finance formula to provide additional aid to districts based on
the sparsity of the population and bus miles driven.
Small size and isolation, combined. Nine states provide additional revenue
based on a combination of small size thresholds and isolation factors.
Five provide aid based on school district size and isolation, whereas four
base added funds on schools judged to be small and "necessary."
Small and isolated districts receive additional support in Alaska, Arizona,
Maine, Minnesota, and Texas. In Minnesota, for example, isolated districts
with small student populations receive additional state aid (20 or more
miles away from the next nearest school and with fewer than 140 students
in elementary schools [K-6] or fewer than 400 in secondary schools [7-12]).
Texas uses a two-tiered criterion of size combined with an isolation factor.
Districts over 300 square miles--and with average daily attendance (ADA)
below 1,600--get supplements, as do districts with ADA under 130.
Small, isolated schools drive additional revenue to districts in California,
Oregon, Utah, and Washington. In California districts with fewer than 2,501
ADA and which contain "necessary" small schools receive supplements. Washington
provides assistance for "remote and necessary small schools" and for elementary
schools with fewer than 300 students, depending on grade level and required
pupil-staff ratios. Necessary existent small schools in Oregon below 165
ADM for elementary, 389 ADM for junior high, and 722 ADM for high schools
get supplements if they are 10 miles from the next nearest elementary school.
Size, sparsity, and tax effort. Arkansas and Pennsylvania provide additional
aid to small schools or districts based on three factors: size, isolation,
and tax effort. As a condition of receiving additional assistance in both
of these states, school districts must be providing a tax effort at least
equal to the statewide average.
Cooperative arrangements and other provisions. Only one state reported
additional assistance to school districts based on cooperative arrangements.
Iowa reported providing state aid for 0.5 percent of the time a pupil is
instructed by a teacher employed by another school district or jointly
employed. If a substantial number of pupils share more than one class or
teacher, the weighting is reduced to 0.1 percent.
Two states reported "other" significant provisions for rural, small
schools. Missouri provides assistance based on the average student count
in the previous three years. South Dakota reports a larger "mill deduction"
for some rural districts. Several states report factors such as this under
"declining enrollment," but such provisions are not specific to rural,
small schools or districts. They provide additional aid when enrollments
fall. Finally, transportation allotments and other factors can also provide
limited additional revenue to rural areas that are small, isolated, or
The debate about financing rural schools and districts will, no doubt,
continue. Five critical questions will figure in the debate. First, what
actual levels of support are needed to adjust for additional costs in rural,
small schools and districts? Second, is educational equity threatened if
states fail to provide sufficient additional funds to rural areas? Third,
how should state agencies measure local ability to pay? Fourth, what conceptions
and measures can specify the level of "rural overburden" that affects local
tax systems? Finally, what options are available to enhance curriculum
in small, rural schools and districts?
Compensating rural, small schools for high operating costs does require
extra funding. But if small schools seem to offer environments more conducive
to learning than those in large schools, then the investment makes sense.
Moreover, the total cost in state finance formulas is insignificant when
compared to the high cost of neglecting the needs of the 40 percent of
the nation's children who attend schools in rural areas.
Fox, W. (1981). Reviewing economies of size in education. Journal of
Educational Finance, 6(3), 273-296.
Goodlad, J. (1984). A place called school. NY: McGraw-Hill.
Hawkins, R. (1985). A strategy for revitalizing public education. In
J. Bunzel (Ed.), Challenge to American schools (pp. 29-46). New York: Oxford
Johnson, F. (1989, March). Assigning type of locale codes to the 1987-88
public school universe. Paper presented at the annual meeting of the American
Educational Research Association, San Francisco, CA. (ERIC Document Reproduction
Service No. ED 312 113)
Monk, D. (1982). Educational cost differentials and rural schools: A
broadened view. Administrators Notebook. 30(4), 1-4.
Monk, D. (1990). Educational costs and small rural schools. Journal
of Education Finance. 16(2), 213-225.
Plecki, M. (1991, April). The relationship between elementary school
size and student achievement. Paper presented at the annual meeting of
the American Educational Research Association, Chicago, IL.
Turner, R., Camilli, G., Kroc, R., & Hoover, J. (1986). Policy strategies,
teacher salary incentive and student achievement: An explanatory model.
Educational Researcher, 15(3), 5-11.
Verstegen, D. (1990). School finance at a glance. Denver, CO: Education
Commission of the States. (see ERIC Document Reproduction Service No. ED
305 733 for 1988 edition)
Walberg, H., & Fowler, W. (1987). Expenditure and size efficiencies
of public school districts. Educational Researcher, 16(7), 5-13.