After discussing basic principles of school finance, and comparing selected education-related variables in southeastern states, this paper examines how schools districts are financed in Kentucky. Emphasis is given to issues of funding adequacy, efficiency and equity, and the lawsuit culminating in the 1990 Educational Reform Act. Changes in the formulae by which state school funds are distribu­ted are discussed in detail. Estimated per pupil school revenue data for the 1989-90 and 1990-91 years are analyzed to determine how funding inequality changed. In the aggregate, per pupil revenues across county school districts (i) have risen without exception; (ii) have become less variable as measured by a reduced standard deviation and; (iii) become less dependent on locally raised taxes. Nevertheless, funding differences among and within metro and non-metro areas remain, as demonstrated by a variety of mea­sures, including coefficients of variation, relative mean deviation, Gini coefficients and Theil indices. Most importantly, perhaps, increases in funds have been directed primarily towards Eastern Ken­tucky, where nearly two-thirds of all pupils live under "economically deprived" conditions. The reason for this result is obvious when the new funding formula is examined.


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