State school finance reforms increased racial and ethnic funding inequities, new study finds

(Press-News.org) Washington, September 10, 2025—State school finance reforms designed to close funding gaps between high- and low-income districts did not reduce racial and ethnic funding inequities and in some cases increased them, according to new research. As school desegregation efforts slowed in the decades following the 1980s, these findings highlight the limitations of income-based approaches in addressing racial funding disparities in education.

The study, by Emily Rauscher of Brown University and Jeremy E. Fiel of Rice University, appears in Educational Evaluation and Policy Analysis, a peer-reviewed journal of the American Educational Research Association.

Video: Study co-author Emily Rauscher discusses findings and implications of the study

Over time, many states—through legislation or court orders—have restructured school finance systems to reduce reliance on local property taxes and direct more resources to economically disadvantaged districts. Rauscher and Fiel found that while these reforms have narrowed funding gaps by income, they did not lessen—and sometimes widened—disparities by race and ethnicity.

Using data from the U.S. Census Bureau and the National Center for Education Statistics, the researchers examined the effects of school finance reforms across the United States from 1990 to 2022. They found that state finance reforms reduced school spending gaps between the highest- and lowest-income districts by over $1,300 per pupil on average. However, the reforms also increased the spending advantage of districts with low percentages of Black and Hispanic students—by $900 and $1,000 per pupil, respectively.

“The growth in racial and ethnic funding inequity, in light of decades of school finance reforms, is surprising and needs to be addressed,” said co-author Emily Rauscher, professor of sociology at Brown University. “Persistent gaps in educational opportunity and outcomes for students of color, combined with the failure of state reforms, point to the need for new investments at the federal level.”

Reforms were more effective at reducing racial disparities in states where those disparities were already relatively modest. In contrast, reforms were less effective, or even regressive, in states with high levels of racial and economic segregation between school districts. In these more segregated states, reforms not only exacerbated racial and ethnic disparities but also failed to narrow economic gaps.

Where district-level segregation was lower, reforms tended to be more economically progressive, directing more funding to historically marginalized districts. However, the study notes that much of the racial inequality in school funding exists between, not within, states. While most states distribute funding relatively evenly by the racial and ethnic composition of districts, wealthier states still spend significantly more per pupil than poorer ones. These states tend to have higher shares of white students and lower shares of Black and Hispanic students—contributing to persistent national disparities.

Rauscher notes that this raises a critical question: If school funding remains unequal even as states distribute funds more equally, how can we ensure equal educational funding and opportunity for all children? One key solution could be the federal government, which could incentivize states to spend adequately on education and invest in states that struggle to achieve adequate funding levels.

“Slow progress from reforms targeting district economic inequality suggests state-level, class-based approaches are insufficient to address racial disparities in school resources,” said Rauscher. “Federal reforms that explicitly target racial and ethnic inequity are needed to reduce these gaps.”

Study citation: Rauscher, E., & Fiel, J. E. (2025). Slow progress: School finance reforms and racial disparities in funding. Educational Evaluation and Policy Analysis. Prepublished September 10, 2025. https://doi.org/10.3102/01623737251362855

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