Shifting education funding to the state probably wouldn’t lead to higher spending
The movement to shift public school funding from local governments to the state is driven by a core belief that the shift will bring more funding. But that assumption is almost certainly wrong.
The National Education Association’s latest annual report on public school data drew media coverage this week for its finding that New Hampshire’s state contribution to K-12 public school funding ranked the lowest nationwide.
The implication, pushed by the union’s own advocacy, is that New Hampshire’s system of primarily locally funded education shortchanges students. (Less hyped was the report’s finding that states on average contribute the largest share but still less than half—47.6%—of K-12 public school funding.)
Always downplayed in the coverage of this issue is that New Hampshire’s total combined (state, local. And federal) spending is higher than all but a handful of other states.
The NEA report pegged New Hampshire’s K-12 public school spending from all sources at $22,252 in the 2023-24 school year. That ranked sixth nationwide and was $5,262 (31%) higher than the national average of $16,990.
When New Hampshire contributes such a small share relative to other states, how do we spend 31% more per pupil than the national average? If larger state contributions led to higher spending, New Hampshire should be at the bottom in per-pupil expenditures, not near the top.
Counting all K-12 public school expenditures, including capital and interest, New Hampshire students received on average $26,320 each this year. Counting just operating expenses, it’s $21,545. That’s on par with the average private school tuition in the state, which is $21,935, according to Private School Review.
Many believe that these already high public school expenditures would increase substantially if the state picked up a larger share of the tab. But that ignores the reasons why New Hampshire’s public education spending is so high.
The Josiah Bartlett Center for Public Policy has tracked public education spending in New Hampshire for decades. We’ve found that regardless of enrollment, local spending on K-12 district schools steadily increases year after year even after adjusting for inflation.
State spending, which is tied to enrollment and fluctuating state revenues, does not.
From 2001-2019, total state taxpayer funding to district public schools increased in nominal dollars from about $878 million in 2001 to approximately $1 billion in 2019. However, much of that increase was consumed by inflation. When adjusted for inflation, total state appropriations to district public schools shrank from an inflation-adjusted $1.2 billion in 2001 to $1 billion in 2019—a decline of 17 percent.
Most of that decline (83.9%) was caused by falling student enrollments. State spending is tied to enrollment, so a decline in enrollment means a decline in state funding. The remaining 16.1 percent was due to actual increases in state appropriations coming close to, but not quite keeping up with, inflation.
By contrast, total local appropriations, adjusted for inflation, doubled, going from $1.09 billion in 2001 to $2.19 billion in 2019. That’s a 101% increase in spending as the number of students served fell by 14%.
Supporters of higher state spending claim that local governments spend more because the state spends so little. If that were the case, we’d expect to see local spending rise and fall with enrollment. That would indicate that voters adjust their spending based on need.
Instead, even when enrollment falls significantly, local voters typically approve large increases in public school budgets. Local K-12 public education funding appears driven primarily by voters’ desire to spend money on their own children and their own communities.
For decades, local voters in New Hampshire have demonstrated a pattern of approving larger increases in school budgets than town budgets, even when school populations have shrunk and town populations have grown.
This dynamic is not evident at the state level.
The state budget, including the Education Trust Fund, is heavily affected by economic conditions. When those conditions are bad, legislators tighten spending. Local budgets, by contrast, come from property taxes, which are much more stable and reliable.
Shifting public education funding entirely to the state would divorce it from the two factors that drive most of its increases: the stability of property tax revenues and parents’ desire to invest in their own children.
The same is true, though to a lesser extent, if a larger portion of education funding is shifted to the state.
At the national level, K-12 public education spending also has trended up even as enrollment has fallen, as the NEA’s own data show. The teachers union’s report finds that enrollment fell by 2.5% and average daily attendance fell by 4.2% from the fall of 2015 to the fall of 2024 but, adjusted for inflation, current expenditures per student rose by 9.4% and current expenditures per student in average daily attendance rose by 11.4%.
As enrollment fell, the number of instructional staff increased by 5.4%.
Our research found that New Hampshire’s increase in per-pupil spending in the first two decades of this century grew much faster than the national average. That’s likely because local voters here control a larger portion of public education spending.
Some hope that shifting all public school spending to the state will cause legislators to adopt an income tax. But Granite Staters don’t want an income tax. The more likely outcome is that lawmakers would cobble together funding from other sources and impose the sort of fiscal discipline on K-12 spending that local voters have chosen to avoid.
