Study: Voluntary Donations To Schools Are Widening Funding Gap

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October 28, 2014 — State Impact Indiana — A report released this week from education researchers at Indiana University’s School of Public and Environmental Affairs shows voluntary donations to school districts is widening the funding gap between rich and poor districts.

The study, written by SPEA associate professors Ashlyn Aiko Nelson and Beth Gazley, looked only at non-profit groups like Parent Teachers Associations, Booster Clubs and local foundations. They excluded large foundations that donate to schools around the country, because they wanted to track local money donated to local schools.

Nelson says they wanted to look at these types of donations because of the widening gap between wealthy and low-income districts. Currently in Indiana, money raised from income and sales taxes are pooled by the state and allocated to districts on a per-pupil basis using a school funding formula. The state does this as a way to keep funding for all schools equal, but donations through non-profit organizations provides a different way to create inequality.

“What that leads to is a system where in high-income districts a lot of families are saying ‘well we’d be willing to have more spending being done but we can’t control that locally because it’s based on a state formula’,” Nelson said. “So what are the alternative revenue raising mechanisms we have available to us to increase the level of spending to the desired level? One of the mechanisms is to pass a general fund or construction referendum. Another mechanism is to create one of these school supporting non-profit organizations that can be used to funnel money into the schools.”

Nelson says this trend will only widen the gap between rich and poor districts. Nelson says in some places, like California, there is a push to pool donated money in a similar way to the public money. But, she says eliminating the option for non-profit donations probably won’t solve the problem.

“If you tell parents that their voluntary contributions aren’t going to stay in their local schools, it creates a huge disincentive to engage in voluntary contributions,” Nelson said. “Of course with wealthy parents they have an exit option, which is to send their kids to a private school.”

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