Chapter 4: Covid-19 and School Finance: Adjusting to Downturns and Accommodating the Costs of Online Education

We consider how the COVID-19 pandemic has brought into focus the fact that economic downturns, such as from the pandemic, unveil the profound reality that school financing systems are likely to be far from uniform. First, we explore how variation in spending inequality through the cycle is related to elements of state finance systems. Do states where inequality grows less during downturns have common elements in their finance systems? Second, we discuss the nature of existing adjustments for cost disparities and note that those adjustments may do little to compensate for differential computer and broadband access. Do districts in which families have less access spend more and receive more aid? What is the link between other determinants of cost disparities and computer and broadband access? Using data from the Rutgers Graduate School of Education/Albert Shanker Institute: School Finance Indicators Database, we find that finance systems with recapture are associated with positive deviations in equity in current expenditures; and, in states with foundation programs and power equalization, most measures of equity improve during downturns. These latter results suggest that systems that combine a first tier of foundation aid with a second tier of power equalization aid may perform particularly well in downturns. We also offer suggestive evidence that, during downturns, equity declines in systems with heavy use of flat grants and categorical aid. Using data from the American Community Survey and the Common Core of Data, we document a negative relationship between current expenditures per pupil and broadband access, suggesting that, by accounting for economic disadvantage and sparsity, existing aid formulas implicitly compensate for the higher costs of differential access. We argue those implicit adjustments are probably insufficient; this conclusion is buttressed by our finding that capital expenditures per pupil are lower in districts with less broadband access and computer ownership.