Four takeaways from the U.S. Census Bureau’s latest school finance data

As public schools grapple with historic challenges—enrollment losses, learning recovery, fiscal cliffs, and others—it’s critical to examine the funding trends that will shape the future of K-12 budgets. With federal data from the 2022 school year now available, policymakers can better grasp how the COVID-19 pandemic affected public school budgets and what might lie ahead. Here are four key takeaways from the U.S. Census Bureau’s latest school finance data.

Public education funding is up by 34% per student in the last two decades.

Public education funding hit record levels in 2022, continuing its upward trajectory. Between 2002 and 2022, inflation-adjusted K-12 revenue increased by 34.2%, going from $14,088 per student to $18,911 per student. All states saw positive growth, including ten states with 50% or more increases. In 2022, the top spending states were New York ($35,902), New Jersey ($29,019), Connecticut ($28,363), Vermont ($27,338), and Pennsylvania ($24,917). Table 1 shows the inflation-adjusted revenue figures for all states.

Table 1: Inflation-Adjusted Revenue Per Student Growth (2002-2022)

Federal dollars have driven K-12 funding growth since the start of COVID-19.

Policy decisions during the COVID-19 pandemic had major school finance implications, so it’s important to consider funding trends since 2020. Nationwide, inflation-adjusted education funding grew by 7.4% per student between 2020 and 2022—about $1,300 per student. During this time, Louisiana (17.9%), California (17.2%), and Kentucky (16.5%) had the highest growth, with only Alaska, Delaware, and Kansas seeing declines, as shown in Figure 1.

But nearly all the $1,300 per student funding increase since the pandemic’s start—$1,245 per student—was due to a temporary spike in federal dollars. Congress sent $190 billion in K-12 relief aid to states through three separate packages, and all states saw substantial gains in federal funding that ranged from $457 per student (Kansas) to $1,650 per student (Kentucky). In total, federal funding growth exceeded $1,000 per student in 42 states. Table 2 includes federal funding growth data across states.

Figure 1: Inflation-Adjusted Funding Growth Per Student Since the Start of the COVID-19 Pandemic (2020-2022)

Inflation has erased gains in state and local education funding since 2020.

Federal funding has driven recent K-12 finance trends. But with federal relief aid expiring later this year, it’s critical to examine what’s happened with non-federal dollars since the pandemic’s start. Table 2 compares growth in federal and non-federal revenue (non-federal dollars include funding from state and local sources). Rampant inflation has eaten into gains in non-federal funding, which comprises the bulk of dollars for public schools across the country.

Between 2020 and 2022, nominal non-federal funding grew by $1,485 per student but only $55 per student after adjusting for inflation. Overall, 20 states saw real increases in non-federal dollars, with five states exceeding $1,000 per student growth (California, New Jersey, Louisiana, New York, and Missouri) and four states exceeding $1,000 per student decline (Texas, Hawaii, Alaska, and Delaware).

For context, between 2018 and 2020, non-federal revenue went up nominally by $1,204 per student, resulting in a $769 increase in real terms. During this time, 43 states increased their inflation-adjusted non-federal funding per student. Had inflation stayed at its pre-pandemic level, non-federal funding would’ve gone up by roughly $938 per student between 2020 and 2022 rather than the $55 per student observed.

Table 2: Inflation-adjusted Funding Growth Per Student by Source (2020-2022)

Eight states have increased K-12 appropriations since 2020 despite substantial enrollment declines.

State funding formulas tie dollars to enrollment, so school districts lose funding when student counts fall. But this doesn’t necessarily mean that state K-12 appropriations will also decline. Between 2020 and 2022, eight states increased inflation-adjusted education appropriations despite substantial enrollment losses. Notably, California increased total state funding by 6.6% despite losing 5.2% of its students. Put another way, California’s public schools got an additional $3.8 billion even though they served 292,800 fewer students.

The interplay between enrollment, state funding formulas, and state appropriations will be important in the coming years as federal projections show enrollment will continue to fall until at least 2030. It’s generally true that public schools lose funding when enrollment drops, but increases in state funding could offset these losses—especially in states that have generous hold harmless that protect against funding losses.

Figure 2:  States with K-12 Enrollment Declines and Inflation-adjusted State Funding Increases (2020-2022)

Conclusion

The U.S. Census Bureau’s latest school finance data illustrate an odd fiscal reality for public schools: despite record funding levels, many will have tight or shrinking budgets in the years ahead as they deal with challenges from things such as inflation, enrollment losses, and the expiration of federal COVID-19 relief aid. State and local policymakers must monitor these trends closely.

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