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The education community often focuses on the distribution end of school finance without much focus on the revenue side. However, without knowledge about revenues in general and taxes in particular, it is difficult for policymakers to have a complete understanding of a school-funding system.

Sales, income and property taxes constitute the major source of revenue for funding K-12 education. Other sources of revenue include cigarette taxes, tobacco settlement funds and state lotteries. These smaller revenue streams become even more important during economic downturns.

State policymakers have tried for decades to determine the right mix of income, sales and property taxes — both local and state — to fund education. In some states, efforts to arrive at the correct balance have been made more difficult by court rulings. For example, lawmakers in New Hampshire, Ohio and Wyoming have struggled with court orders that require them to move away from the stable revenue of local property taxes — which creates inequities among school districts — to less stable statewide income or sales taxes.

The recent downturn in the economy has complicated efforts to fund K-12 education. Because many states must rely on income and sales taxes to fill state coffers, revenues have significantly decreased across the country. For the time being at least, budget cuts are the order of the day and K-12 education is not exempt.

 

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