How Public Education Is Funded and Where the Money Goes

School finance shapes almost every part of public education. It affects class sizes, staffing, and the programs your community offers. Yet most people know very little about how schools get their money. Federal relief funds have now lapsed, and many state budgets are tight. Local choices also affect how schools run each day. So understanding school funding helps families make sense of changes in their own districts.

Even experts find US school finance data hard to read. The main reason is simple. Local, state, and federal funding all interact in complex ways. This guide explains how public education is funded and where the money goes. Therefore, you can judge whether your state and district fund schools fairly.

How Public Education Is Funded

Most money for public schools comes from governments. Experts call this money revenue. Revenue shows where school funds come from. Expenditures, however, track what schools buy. These purchases include salaries, benefits, supplies, outside services, and other items.

State and local authorities govern public education in the United States. Because of this, they supply most of the money. In 2022-23, about 87 percent of school funding came from state and local governments. The federal government provided the remaining 13 percent (figure 1).

That federal share is likely a peak. Normally, it sits closer to 8 or 9 percent. Federal funding rose after 2020 because of COVID relief funds. Those funds have now lapsed. The balance between state and local money also varies widely by state. A key driver is how much each state relies on local property taxes.

[Insert Figure 1: Percentage distribution of revenues for public elementary and secondary schools, by source of funds: 2022-23]

NOTE: District of Columbia and Hawaii function as single school districts.
SOURCE: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics, 2025, Table 235.20.

Local Funding for Public Schools

Local funds made up 42 percent of public education revenue in 2022-23. Most of this money came from property taxes. Counties, cities, and other local authorities collect these taxes. As a result, about 33 percent of all public school funding comes from local property taxes.

Other local taxes added another 7 percent. Private payments added only about 1 percent. These payments cover things like school lunches, transportation, and instructional materials.

Reliance on local money differs sharply from state to state. Hawaii gets just 1 percent from local sources, and Vermont gets 3 percent. However, Nebraska relies on local sources for 59 percent. New Hampshire tops the list at 63 percent. Hawaii largely works as a single district, so most of its funding counts as state money.

The District of Columbia reported 88 percent of its revenue as local. That is because DC is not a state system. Its government appropriations count as local sources.

State Funding for Public Schools

Most state money for public education comes through state government appropriations. States typically use a foundation grant model to set each district’s share. This model is a mathematical formula. It looks at how much a district raises locally. Then, the state adds enough money to reach a basic foundation level.

Wealthier districts can usually raise extra funds on top of that level. States can also add weights to the foundation amount. Weights give districts more money for students who cost more to educate. For example, children with disabilities often qualify their district for extra funding. Supplements may also cover students in poverty and English language learners. Some states add other groups they define.

Courts have often heard challenges to state funding systems. These cases usually focus on adequacy and equity. Tension also exists between wealthy and less wealthy districts. Wealthy districts want to keep more of the money they raise locally. But less wealthy districts depend more on state funding. You can explore this issue further in our equality in education articles.

States with high state funding usually have low local funding. Hawaii (88 percent) and Vermont (86 percent) led the nation in state funding in 2022-23. Nebraska and Missouri (29 percent each) and New Hampshire (28 percent) had the lowest shares.

Federal Funding for Public Schools

The federal government does not fund general education directly. There are a few exceptions. These include Bureau of Indian Education schools and schools on military bases. Instead, most federal public education money targets specific student groups or programs.

In 2022-23, the largest federal amounts went to three areas. School meals received $22.7 billion. Title I grants for economically disadvantaged students received $16.8 billion. Special education for students with disabilities received $13.2 billion.

The federal share of school revenue also varied by state in 2023-24. It was 8 percent in New Jersey, Massachusetts, and Connecticut. However, it reached 20 percent or more in several states. These include Arkansas (20%), South Dakota (21%), Louisiana (22%), Alaska (22%), and Mississippi (23%).

Most large federal programs use formula grants. These grants rely on math based on student counts and other factors. For instance, special education and school lunch funds depend on how many students take part. Title I, however, uses a very complex formula. It estimates the number of children in poverty and other disadvantaged children in each district. Then, it adds other financial variables.

Where the Public Education Money Goes

Experts often compare public education spending on a per student basis. But they can count students in several ways. Common measures include average daily attendance, average daily membership, and fall enrollment. Attendance and membership measures track how students move in and out during the year. Average daily attendance also accounts for absences.

These measures help states and districts plan instruction more precisely. However, definitions differ from state to state. So they make national comparisons harder. For this reason, national studies often use fall enrollment instead. It is easy to calculate and more comparable across states. This article uses fall enrollment too.

Current Expenditures vs Total Expenditures

Spending comparisons can take many forms. Analysts often use current expenditures per student for general comparisons. These cover the routine costs of running a district. Salaries and benefits for instructional staff form the largest single category. Office supplies, guidance, libraries, transportation, and food services also count.

Total expenditures go one step further. They include current expenditures plus new school construction and interest on school debt. Analysts use total spending to study the full economic impact of schools. Some studies narrow in on specific costs. Examples include instruction, student services, transportation, administration, or maintenance. This article focuses on current expenditure per student in fall enrollment.

How Much Public Schools Spend per Student

Public schools spent an average of $16,560 per student in 2022-23. Spending varied widely across states (figure 2). Utah spent $10,265 per student, and Idaho spent $10,345. At the high end, Vermont spent $26,469 and New York spent $29,588. The District of Columbia spent $31,037 per student. That figure ranks among the highest for urban districts.

Most public education dollars go to teaching. Instruction took 59 percent of current expenditures. This covers salaries and benefits for teachers and teacher aides. Here is the full breakdown of per pupil expenditures by category.

Spending Category	Share of Current Expenditures
Instruction (teacher and aide salaries and benefits)	59%
Operations and maintenance of facilities	10%
School and district administration	8%
Student support services (guidance, health, attendance, speech pathology)	7%
Instructional staff support	5%
Student transportation	4%
Other support services	4%
Food services	4%

[Insert Figure 2: Current expenditures per pupil in fall enrollment in public elementary and secondary schools: 2022-23]

SOURCE: U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics, 2025, Table 236.75.

Making Sense of School Spending Numbers

In public education, per student figures help compare places of different sizes. You get the average by dividing total spending by total enrollment. However, actual spending on each student varies a lot. Some students receive special services, such as disability services or career and technical education.

Teacher experience also matters. Teachers with more years or advanced degrees usually earn higher salaries. So schools with these teachers may show higher costs.

Cost of living is another key factor. When comparing states or years, you should adjust for it. Yet most same-year state comparisons skip this step. General studies also rarely consider how student needs differ by state.

Why District Comparisons Need More Context

District comparisons are even trickier than state comparisons. That is because the unit of analysis is smaller. Student needs and location can shift conclusions a great deal. The limits of average spending show most clearly in small districts. They also show in rural versus urban comparisons.

In a small district, a few teachers or students can change the average sharply. Also, over 6,000 US districts have only one school. In most cases, that school is a charter school. Many charter schools run as independent districts. Still, they may share costs with other districts.

Some states also share special schools for students with disabilities. Others share vocational or technical centers. These specialized districts have their own cost structures.

Researchers have shown growing interest in school-level spending data. But national efforts have produced limited results so far. Systematic data on school staffing and shared services is still missing. In general, smaller units need more context to interpret the data. Districts, however, hold detailed information on their own schools. Therefore, they can allocate resources across schools with care.

Just like school ratings, a single spending number never tells the whole story.

Economies of Scale and Cost of Living

Two more factors affect district comparisons. First, consider cost of living in urban and rural areas. Second, consider economies of scale. Sometimes these factors cancel each other out. Large urban districts gain from economies of scale. Meanwhile, rural districts often enjoy a lower cost of living.

Pupil/teacher ratios show economies of scale clearly. In fall 2022, cities averaged 15.8 students per teacher. Suburban areas averaged 15.7. Remote rural areas averaged only 12.2. Larger schools can fill classrooms closer to allowed limits. Small districts have fewer teachers and students, so they have less flexibility.

Economies of scale also affect districts with falling enrollment. Many school costs do not shrink when enrollment drops. A school that loses students must still maintain the whole building. Leaders can make some small cuts. But the basic choice stays the same: keep the school open or close it.

Homeowners and renters know that living costs vary across communities. Older data on geographic cost adjustments shows how much this matters. In 2018-19, large cities spent $14,156 per student without adjustments. Remote rural areas spent $13,716. After adjusting for location, the picture flipped. Rural schools in remote areas spent $16,713 per student, while large cities spent $13,595.

These adjusted figures match the lower pupil/teacher ratios in rural areas. This does not mean rural ratios are too low. Instead, it shows how location and population density shape rural vs urban school spending.

Why Understanding Public Education Finance Matters

Agora helps the public understand how education systems work. School finance directly affects opportunity, equity, and daily student life. So clear data helps communities read what they see in their schools. It also helps them understand the tough choices districts face.

This article covers the basics of common school finance comparisons. It also explains the limits of those comparisons, especially the need for context. Good education policy for individual schools needs much more information. That includes school policies, missions, staffing, and shared activities with other schools.

Structural and geographic factors affect many comparisons across states and regions. Yet analysts rarely adjust for them. These adjustments are complex and sometimes controversial. Where possible, comparisons should use a single data source. Surveys can differ in coverage and definitions. When you use multiple sources, check that jurisdictions match across data sets. Boundaries and coverage can vary.

School options keep growing through charter schools and other models. Therefore, knowing how public education is funded matters more than ever. It helps ensure every student gets fair opportunity in public education. To see how the US built its system for tracking schools, read Counting What We Never Promised: US Education at 250.

Need help making sense of education finance data? Our data analytics and reporting teams can help. Subscribe to get new public education insights in your inbox.

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