How schools are funded
Public schools draw on three streams: a relatively small share from the federal government (often tied to specific programs), and the bulk from state and local sources. Local funding leans heavily on property taxes, which is the main reason school funding varies so much between communities.
Where the money comes from
- Federal (~8–10% typically) — targeted programs like Title I and IDEA
- State — usually the largest source, via funding formulas
- Local — mainly property taxes, plus bonds for buildings
The exact mix varies widely by state, and the balance is itself a major policy debate.
The budget process
Each year districts build a budget — projecting revenue, setting priorities and allocating funds — which the school board must approve, usually in public meetings. By far the largest expense is people: teacher and staff salaries and benefits typically make up 80% or more of an operating budget.
Why funding is unequal
Because local property wealth differs enormously, so does school funding — and states use complex formulas to try to close the gap, with mixed success. Funding equity (fairness) and adequacy (enough for all students to succeed) are among the most contested and litigated issues in education.
Operating vs capital funds
Districts keep two kinds of budgets: the operating budget (salaries, supplies, day-to-day costs) and capital funds for buildings and major projects, usually raised through voter-approved bonds. This is why a district can build a new school while claiming it can't afford more teachers — the money comes from different, legally separate pots.
Related resources
See state funding by state, the Financial Literacy toolkit, and School Data & Accountability.
Frequently asked questions
- Where do schools get their money? A small share from the federal government and the bulk from state and local sources. Local funding relies heavily on property taxes.
- What is a school's biggest expense? People. Salaries and benefits for teachers and staff typically make up 80% or more of an operating budget.
- Why is school funding unequal? Because local funding depends on property wealth, which varies widely. States use funding formulas to try to reduce the gaps, with mixed success.
- Why can a district build a school but not hire teachers? Capital funds (for buildings, from bonds) are legally separate from the operating budget (for salaries). Money can't always move between them.
- What is the difference between funding equity and adequacy? Equity means fairness in how funds are distributed; adequacy means providing enough for all students to succeed. Both are heavily debated and litigated.