School Finance: Trends in U.S. Education Spending (Letter Report,
09/15/95, GAO/HEHS-95-235).

Pursuant to a congressional request, GAO examined the current status and
trends in public education spending, focusing on: (1) the current
expenditure levels for education and how they have changed over time;
(2) the roles local, state, and federal governments play in financing
education in the United States, and how these roles have changed over
time; and (3) how the states differ in their capacity to provide
resources for education and their relative tax effort.

GAO found that: (1) since 1980, total real expenditures in public
elementary and secondary schools have increased, while the average
national per pupil expenditure increased then stabilized after 1989; (2)
total public expenditures for elementary and secondary education
increased by 40 percent to $254.4 billion from the 1979-1980 school year
to the 1992-1993 school year; (3) the number of poor children attending
elementary and secondary schools has increased, and the cost of
educating these and other at-risk children is higher than educating
those not at risk; (4) the average per pupil expenditure for elementary
and secondary students has leveled off after years of increase; (5) the
average per pupil expenditure in school year 1992-1993 was $5,296; (6)
the portion of state budgets designated for elementary and secondary
education decreased between fiscal years 1987 and 1994; (7) states'
ability to raise revenues for education grew more slowly than their
willingness to raise revenues for overall spending; and (8) state and
local governments feel more pressure to increase education spending in
less wealthy school districts.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  HEHS-95-235
     TITLE:  School Finance: Trends in U.S. Education Spending
      DATE:  09/15/95
   SUBJECT:  Educational programs
             Disadvantaged persons
             Children
             Elementary education
             Aid for education
             Secondary education
             Public schools
             State/local relations
             State budgets
             Intergovernmental fiscal relations
IDENTIFIER:  Medicaid Program
             
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Cover
================================================================ COVER


Report to Congressional Requesters

September 1995

SCHOOL FINANCE - TRENDS IN U.S. 
EDUCATION SPENDING

GAO/HEHS-95-235

U.S.  Education Spending

(104794)


Abbreviations
=============================================================== ABBREV

  ACIR - Advisory Commission on Intergovernmental Relations
  ESEA - Elementary and Secondary Education Act
  GSP - gross state product
  LEP - limited English proficiency
  NCES - National Center for Education Statistics
  PCPI - per capita personal income
  TTR - total taxable resources

Letter
=============================================================== LETTER


B-259607

September 15, 1995

The Honorable Jeff Bingaman
The Honorable Christopher Dodd
The Honorable Paul Simon
United States Senate

Education spending is an important part of the U.S.  economy and
traditionally has been the largest state expenditure.  In school year
1993-94, expenditures in all elementary and secondary schools totaled
an estimated 4.5 percent of the gross domestic product, or $285
billion.\1 Yet education, like many other budgetary items, faces
tight fiscal constraints at federal, state, and local levels, while
pressures for public funds are increasing. 

As we reported last year,\2 our nation's school-age population became
increasingly poor, racially and ethnically diverse, and at risk of
school failure during the 1980s.\3 Schools have been addressing some
needs of at-risk children through a variety of compensatory education
and education reform efforts.  Demands on funds authorized by the
Elementary and Secondary Education Act (ESEA)--the federal
government's primary funding source for addressing those needs--have
increased due to higher numbers of at-risk children.\4 However, while
states and localities face hard budget choices, the federal
government may also be reducing future spending. 

Successfully educating at-risk populations depends, in part, upon
adequate and equitable funding.\5 For this reason, you asked us to
examine the current status and trends in public education spending. 
Specifically, you asked us to answer the following questions: 

  What are the current expenditure levels for education and how have
     they changed over time? 

  What roles do local, state, and federal governments play in
     financing education in the United States, and how have these
     roles changed over time? 

  How do states differ in their capacity to provide resources for
     education and their relative tax effort? 

To answer these questions, we examined national and state trends in
education spending and revenues using data from the Department of
Education's National Center for Education Statistics (NCES) and other
sources.  In addition, we developed measures of states' ability and
willingness to raise revenues for education and examined trends using
data from the Department of the Treasury.  (See app.  I for details.)

Several aspects of our analysis should be noted.  First, all trend
analyses comparing finance data for several years are in constant
dollars.  In addition, when reporting state trend data, we provided
information on the 50 states; we did not include the District of
Columbia.  Second, data in this report represent varying time spans
because we used the most recent actual and estimated NCES data. 
However, where possible, trend data in the report start in the 1960s
to show long-term trends since ESEA's passage, which marked the
beginning of a major federal role in education.  Third, although we
present some answers to the third research question you asked us to
address, a separate report will discuss how individual states
approach education funding, including the legal, budgetary, and
legislative barriers they face. 

We conducted our work between October 1994 and September 1995 in
accordance with generally accepted government auditing standards. 


--------------------
\1 Includes public and private elementary and secondary schools. 

\2 School-Age Children:  Poverty and Diversity Challenge Schools
Nationwide (GAO/HEHS-94-132, Apr.  29, 1994). 

\3 School-age children are children aged 5 to 17 living in families. 
Families are defined as households in which one or more people are
related.  We chose this population because it is the same population
used in the Elementary and Secondary Education Act's (ESEA) Title 1
allocation formula. 

\4 We also reported on the poor condition of many of America's school
facilities.  For more information, see School Facilities:  Condition
of America's Schools (GAO/HEHS-95-61, Feb.  1, 1995) and School
Facilities:  America's Schools Not Designed or Equipped for the 21st
Century (GAO/HEHS-95-95, Apr.  4, 1995). 

\5 Proponents of greater financial support for education would argue
that the need for resources has increased in recent years due to (1)
an increased number of at-risk children; (2) local, state, and
federal support for higher academic standards related to education
reform; and (3) a need for adequate facilities with greater
technological capability to support education reform.  Opponents of
greater financial support for education would argue that increases in
educational productivity have not followed previous increases in
funding for education.  However, both sides agree that looking at how
funds are spent, as well as the overall level of education spending,
is important. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

Since 1980, total real expenditures (that is, expenditures in
constant dollars) in public elementary and secondary schools have
increased, while the average national per pupil expenditure increased
then stabilized after 1989.  From the 1979-80 school year to the
1992-93 school year, total public expenditures for elementary and
secondary education increased by 40 percent to $254.4 billion.  In
addition, since 1990, public school enrollments began to increase
after a decade of decline in the 1980s, when public school enrollment
decreased to a low of 39.2 million children in the school year
1984-85.  This upward trend is expected to continue, with public
school enrollment increasing by 11 percent between school years
1993-94 and 2000-01 to about 48.3 million. 

Moreover, the number of poor children is also increasing at a high
rate.  The cost of educating these and other at-risk children is
generally higher than the cost of educating children not at risk. 
However, since 1989, after years of increase the average per pupil
expenditure\6 for elementary and secondary education has leveled off. 
In school year 1992-93, the current average per pupil expenditure was
$5,296. 

Such leveling off is due, in part, to a leveling off in the states'
share of education funding.  Beginning in the 1970s, the overall
trend was for states to assume a greater and greater share of
education funding until their share peaked at 49.7 percent in school
year 1986-87.  By school year 1989-90, it had decreased to 47.3
percent.  By school year 1992-93, state and local shares of total
education spending were roughly equal, estimated at 45.6 percent
($113 billion) and 47.4 percent ($118 billion), respectively. 

In looking at trends in competition for state revenues, we found that
education's share of state budgets decreased between fiscal years
1987 and 1994, while Medicaid, which provides medical care for the
poor, and corrections, which builds and operates prisons, increased
their shares.  The portion of state budgets designated for elementary
and secondary education decreased by about 11 percent, while
Medicaid's share increased sharply by 90 percent and corrections' by
10 percent. 

In addition, while states' ability to raise revenues for education
grew more quickly from 1982 to 1992 than overall ability to raise
revenues, states' willingness to raise revenues for education grew
more slowly than willingness to raise revenues for overall spending. 
The ability of states to raise taxes and revenues on the basis of
taxable resources (fiscal capacity) and each state's willingness to
tax those resources (fiscal effort) vary widely.  States also differ
in ability and willingness to raise revenues for education and for
overall government services. 

State and local governments feel pressure from different sources,
including growing numbers of students--especially at-risk
students--those who want to improve America's schools through
education reform, and state court challenges to school funding to
increase education spending in less wealthy school districts. 
Education is losing its dominance of state budgets as it competes
with other public services, such as Medicaid and corrections, for
public funds. 


--------------------
\6 This is the current average per pupil expenditure--that is, total
expenditure, excluding capital outlay and interest on debt. 


   BACKGROUND
------------------------------------------------------------ Letter :2

America's elementary and secondary schools are funded primarily by
state and local revenue sources.  State revenues derive primarily
from general sales, personal income, and corporate taxes.  Localities
raise revenues primarily through property taxes and, to a lesser
extent, local sales and income taxes.  Federal aid to education has
historically been provided to supplement state and local funds for
students with the greatest needs. 

State school finance programs are meant to meet the educational needs
of children, while considering budget priorities in each state. 
Finance programs vary in complexity as well as in the amount spent
per pupil.  Some of this variation in per pupil expenditures is
accounted for by differences in the cost of educational services, the
property wealth of the state, the amount the state is willing to
spend for education, or the funding formula used by the state.  In
some states, this variation has led to lawsuits challenging funding
formulas. 


   TOTAL EXPENDITURES HAVE
   INCREASED SINCE 1979-80
------------------------------------------------------------ Letter :3

From 1979-80 to 1992-93, total real expenditures for public
elementary and secondary education increased by 40 percent to $254.4
billion.  Total expenditures have generally increased since the
1960s, except for a slight decline between 1977 and 1980.  Between
1989-90 and 1992-93, expenditures increased by 6 percent, similar to
the rate of increase in public school enrollment during this time. 
This increase in total expenditures contrasts with the levels in the
1970s, when the totals remained somewhat level until increasing to
approximately $189 billion in 1977-78 (see fig.  1). 

   Figure 1:  Both Total
   Expenditures and Public School
   Enrollment Levels Increased
   During the 1990s (in Constant
   1993 Dollars)

   (See figure in printed
   edition.)

Source:  NCES. 


      PUBLIC SCHOOL ENROLLMENT HAS
      GROWN SINCE 1990 AND IS
      EXPECTED TO GROW MORE IN THE
      FUTURE
---------------------------------------------------------- Letter :3.1

Since 1990, enrollment has begun growing after generally leveling off
in the 1980s.  In 1980-81, public school enrollment was 40.9 million;
it declined to a low of 39.2 million in 1984-85.  Thereafter, public
school enrollment began growing slowly and in 1989-90 reached 40.5
million.  From 1989-90 to 1992-93, public school enrollment increased
by 6 percent, to 42.8 million.  By the school year 2000-01, this
enrollment is projected to increase to 48.3 million (see fig.  1).\7

In addition, the number of at-risk children in all categories has
increased since 1980.  Between 1980 and 1990, the number of poor
school-age children increased by about 6 percent to 7.6 million,
while the overall school-age population declined.\8 The numbers of
other types of at-risk students, such as those with limited English
proficiency (LEP), immigrants, and students needing special
education, have all increased at similar or higher rates (see app. 
II, table II.2).  We also examined data on all children under age 18,
school age and nonschool age, because they provide a more
comprehensive measure of the number of children expected to enroll in
school currently and in the future.  From 1980 to 1993, the number of
poor children under age 18 in families increased by 35 percent, from
11.1 million to 15 million (see app.  II, fig.  II.4). 

The growth in these at-risk populations has increased the demand for
specialized classroom services.  Regular classroom services
increasingly include special education for the physically and
mentally challenged, compensatory education for the economically
disadvantaged, and language services for LEP students.  In addition,
many schools will have to address the needs of other at-risk
students, such as children who change schools frequently\9 and are,
therefore, more likely to be low achievers and have other
difficulties such as health and nutrition problems. 

Because of the additional services associated with educating poor and
other at-risk students, many schools face elevated cost requirements
and must find ways to stretch current funding levels to pay for these
services.  This is more difficult in areas with high concentrations
of poverty because such areas are frequently limited in their ability
to raise revenues.  This limitation is partially offset, in many
states, by federal and state categorical education programs. 


--------------------
\7 Projections of Education Statistics to 2005, NCES, U.S. 
Department of Education (NCES-95-169)(Washington, D.C.:  Jan.  1995). 

\8 School-Age Children:  Poverty and Diversity Challenge Schools
Nationwide. 

\9 Elementary School Children:  Many Change Schools Frequently,
Harming Their Education (GAO/HEHS-94-45, Feb.  4, 1994). 


      PER PUPIL EXPENDITURES HAVE
      RECENTLY LEVELED OFF
---------------------------------------------------------- Letter :3.2

After decades of increase (with one plateau in the late 1970s), per
pupil expenditures for elementary and secondary education leveled off
beginning in 1989-90, increasing less than 1 percent, on average,
each year until 1992-93 (see app.  III, fig.  III.1).  This leveling
off of per pupil expenditures is due, in part, to the increased
number of children who enrolled in our nation's schools since 1990
and the effects of the 1990-91 recession.  Before the 1990s,
education spending--measured as current per pupil expenditures--rose
steadily.  Data going back to the 1960s show a rapid increase in
expenditures--up 69 percent for the decade, with a slower rate of
increase in the 1970s--35 percent--and a similar increase in the
1980s--33 percent.\10

For the nation, the average total per pupil expenditure for 1992-93,
using fall enrollment as a measure, was $5,296, although per pupil
expenditures vary throughout the United States.  In 1992-93, per
pupil expenditures for the states ranged from $3,700 to $10,100 (see
app.  III, table III.2).  From 1981-82 to 1992-93, on average, most
states' per pupil expenditure increased between 25 and 50 percent
(see app.  III, fig.  III.2). 

Per pupil expenditures may vary substantially within a state.  For
example, in Texas, some school districts spent more than twice as
much on total operating expenditures per pupil than others.  While
districts at the low end, the 5th percentile, spent $3,650 per pupil,
high-spending districts, at the 95th percentile, spent $7,928 per
pupil in 1993-94.  These differences may exist, in part, however,
because of geographic cost-of-living differences and differences in
pupil needs. 


--------------------
\10 Declining enrollments in the 1970s and 1980s may have contributed
to increases in per pupil expenditures. 


   STATE SHARE FOR EDUCATION
   SPENDING LEVELED OFF
------------------------------------------------------------ Letter :4

The previously increasing state share of education spending leveled
off beginning in 1989-90 (see fig.  2).  Since the early 1970s, the
states had provided an increasingly larger share of education
spending.  In 1969-70, the state share was 39.9 percent, and it
increased by 17 percent to 46.8 percent in 1979-80.  In 1986-87, the
state share had peaked at 49.7 percent.  By 1990, the state share had
decreased to 47.3 percent.  In 1992-93, the state and local shares
were roughly equal, with localities contributing a slightly larger
share (47.4 percent or $118 billion) than states (45.6 percent or
$113 billion).  Some states' shares declined further. 

   Figure 2:  Local, State, and
   Federal Shares of Education
   Spending

   (See figure in printed
   edition.)

Source:  NCES. 

Although localities had historically been the major contributors for
education revenues, states began playing a larger role in funding
education in the 1970s and 1980s.  During this time, states sought to
reduce the fiscal disparities among districts and became more
involved in education reform efforts. 

Localities' share decreased by 17 percent from 52.1 percent in
1969-70 to 43.4 percent in 1979-80.  During the 1980s, the
localities' share leveled off.  It rose slightly from 1988-89 to
1992-93--from 46 to 47.4 percent. 

During the 1970s, the federal share also began to rise, largely as a
result of the increased number of programs for at-risk children.  In
1969-70, the federal share was 8 percent, increasing to 9.8 percent
in 1979-80.  Thereafter, during the 1980s, the federal share
decreased and reached a low of 6.1 percent in 1989-90.  In 1992-93,
the federal share increased to 6.9 percent or $17 billion. 

State, local, and federal shares for education spending vary by
state.  In 1991-92, state contributions ranged from a high of 73.8
percent in New Mexico to a low of 8.5 percent in New Hampshire, where
citizens regard education as a local responsibility.\11 Most states
contribute between 30 and 70 percent.  Local contributions range from
14 to 88 percent, and the federal contributions per state range from
3 to 17 percent (see app.  IV, table IV.2). 


--------------------
\11 Hawaii contributes 90.3 percent, but the state differs from the
others because it is the school district, funding and operating all
public schools. 


      ELEMENTARY AND SECONDARY
      EDUCATION'S SHARE OF STATE
      BUDGETS DECREASED
---------------------------------------------------------- Letter :4.1

Between fiscal years 1987 and 1994, the relative share of elementary
and secondary education spending in state budgets\12 decreased by 11
percent.  In fiscal year 1987, education accounted for 22.8 percent
of total state spending but decreased to 20.3 percent by fiscal year
1994 (see app.  V, fig.  V.1).  This decrease in the percent of
states' budgets spent for education occurred, in part, because of
increased spending for Medicaid\13 and corrections (see fig.  3). 
State shares for education and other government services declined
because of relatively weak economic growth as well as the budget
effects of state and federal mandates.\14

   Figure 3:  Education's Share of
   State Budgets Decreased, While
   Corrections' and Medicaid's
   Shares Increased, Fiscal Years
   1987-1994

   (See figure in printed
   edition.)

Source:  National Association of State Budget Officers. 

State education needs compete for funds with other state services,
and relative budget shares have shifted since fiscal year 1987. 
Between fiscal years 1987 and 1994, Medicaid's share of states'
budgets increased sharply by 90 percent, from 10.2 to 19.4 percent. 
In addition, corrections' share increased by 10 percent, from 3 to
3.3 percent.  Meanwhile, elementary and secondary education's and
higher education's shares decreased by 11 percent and 15 percent,
respectively.  In fiscal year 1990, Medicaid surpassed higher
education as the second largest state program; in fiscal year 1994,
Medicaid was nearly equal to elementary's and secondary's share of
20.3 percent (see fig.  V.1).  Medicaid spending, which provides
medical care for the poor and is mandated by the federal government
and administered by states, has been absorbing the bulk of additional
revenue generated in many states.  Twenty-four states experienced
double-digit growth in total Medicaid spending between fiscal years
1993 and 1994.  Increased corrections spending is due, in part, to
court orders imposed on states requiring the relief of overcrowded
prisons or improved prison conditions as well as to an increased
number of prisoners. 


--------------------
\12 State budgets include general and other state, federal, and bond
funds.  Trends were generally similar when considering changes in
shares of the general fund alone. 

\13 The federal government provides a large portion of the funds for
Medicaid. 

\14 State and Local Finances:  Some Jurisdictions Confronted by
Short- and Long-Term Problems (GAO/HEHS-94-1, Oct.  6, 1993). 


   STATES' ABILITY AND WILLINGNESS
   TO RAISE REVENUES VARY WIDELY
------------------------------------------------------------ Letter :5

We developed a measure of a state's ability\15 to raise taxes and
revenue based on taxable resources, accounting for differences among
states in purchasing power and population (see app.  I).  In 1992,
states with high ability to raise revenue were usually resource rich,
had populations with high incomes and high property values, or had
large tourist industries.  The seven states that have very high
ability to raise revenue overall--that is, 115 percent or more of the
U.S.  average--are Alaska, Connecticut, Delaware, Hawaii,
Massachusetts, New Jersey, and New York.  Those with very low ability
to raise revenue overall--that is, below 85 percent of the U.S. 
average--are Alabama, Arizona, Arkansas, Idaho, Kentucky,
Mississippi, Montana, New Mexico, Oklahoma, South Carolina, Utah, and
West Virginia.  (See app.  VI and figs.  VI.1 and VI.2.)

We also examined each state's ability to raise revenue for
kindergarten to twelfth grade education using a cost-adjusted measure
of total taxable resources per child enrolled in public schools.  Six
of the seven states with very high ability to raise revenue overall
also had very high ability to raise revenue for education (115
percent or more of the U.S.  average):  Connecticut, Delaware,
Hawaii, Massachusetts, New Jersey, and New York.  Eight states had
very low ability to raise revenue for education (less than 85 percent
of the U.S.  average):  Arizona, Arkansas, Idaho, Mississippi,
Montana, New Mexico, Utah, and West Virginia.  (See app.  VI, fig. 
VI.2 and table VI.1.) These 8 states are among the 12 with very low
ability to raise revenue overall. 

States, however, vary in their willingness to raise revenue, which we
measured as actual state revenue relative to the state's ability to
raise revenue.  Some states tax heavily because their citizens have a
strong preference for public services; other states tax lightly,
reflecting a preference for a smaller public sector.\16 States with
very high willingness to raise revenue for education include Alaska,
Maine, Michigan, Montana, New Jersey, Oregon, Vermont, West Virginia,
Wisconsin, and Wyoming.  States with very low willingness to raise
revenue, according to our measure, for education include Alabama,
Delaware, Hawaii, Nevada, and Tennessee.  (See app.  VI, figs.  VI.3
and VI.4.)


--------------------
\15 Our measures of states' ability and willingness to raise revenues
account for the revenues available to, or raised by, localities as
well as states. 

\16 RTS 1991:  State Revenue Capacity and Effort, Advisory Commission
on Intergovernmental Relations (Washington, D.C.:  Sept.  1993). 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

Recent trends in U.S.  education finance reveal the leveling off of
per pupil spending for education combined with increasing enrollment
in public elementary and secondary schools.  Meanwhile, the schools
face an increasing number of at-risk children whose education costs
may be generally greater than average.  Moreover, education's share
of state budgets has declined, and federal education funding faces
tight fiscal constraints.  If these trends continue, America may be
less able to adequately provide educational services for many of our
school-age children or make necessary improvements in the educational
system. 


   AGENCY COMMENTS
------------------------------------------------------------ Letter :7

Officials from the Department of Education's National Center for
Education Statistics and education finance experts reviewed a draft
of this report and provided us with technical comments, which we
incorporated as appropriate. 


---------------------------------------------------------- Letter :7.1

We are sending copies of this report to appropriate House and Senate
committees and other interested parties.  Please call Eleanor L. 
Johnson on (202) 512-7209 if you or your staff have any questions. 
Major contributors to this report are listed in appendix VII. 

Linda G.  Morra
Director, Education and
 Employment Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I


   EDUCATION SPENDING TRENDS
--------------------------------------------------------- Appendix I:1

To determine the national and state trends in education spending, we
analyzed fiscal data from the Department of Education's National
Center for Education Statistics (NCES).  In addition, we reviewed
data from the National Association of State Budget Officers and other
published works by education finance experts.  We used the most
recent actual and estimated NCES data; therefore, the time spans of
the data in our figures and tables vary. 

When reporting state trend data, we provided information on all 50
states; we did not include the District of Columbia.  When reporting
finance data for a number of years, we provided data in constant
dollars for greater comparability.  In cases when NCES data were not
in constant dollars, we used the price index developed by the
Department of Commerce's Bureau of Economic Analysis for state and
local government purchases of goods and services to make adjustments. 
When comparing per pupil expenditure data at the state and national
level, we used fall enrollments as the pupil measure.  When we
compared federal, state, and local shares of education revenues, we
combined the local share with intermediate and private funds. 
Intermediate and private funds included a relatively small amount
from nongovernmental sources, such as gifts and tuition from patrons. 


   MEASURES OF ABILITY AND
   WILLINGNESS TO RAISE REVENUE
--------------------------------------------------------- Appendix I:2

We have developed two measures of ability to raise revenue.  One,
which we call ability to raise revenue overall, measures the ability
of states to finance public services, accounting for the costs of the
services as well as a rudimentary measure of need for services--total
population.  The Advisory Commission on Intergovernmental Relations
(ACIR) defines ability to raise revenue similarly, "as the
hypothetical ability of a state and its local governments to raise
revenue to provide public services in the state relative to the need
for those services."\17 We have also developed a measure of ability
to raise revenue that estimates a state's ability to finance
educational services, which we call ability to raise revenue for
education.  This measure accounts for the number of school-age
children and the costs of providing educational services in the state
as measured by average teacher salaries. 

Both measures of ability to raise revenue that we have developed use
total taxable resources (TTR) as a component that assesses a state's
ability to finance services.  TTR, defined and compiled by the
Department of the Treasury, is the average of per capita personal
income (PCPI) produced in a state and per capita gross state product
(GSP).  As noted in an earlier report, "GSP measures all income
produced within a state, whether received by residents, nonresidents,
or retained by business corporations."\18 TTR is a more comprehensive
indicator of taxable resources than PCPI alone, in part, because it
also considers income produced in a state but received by
nonresidents.\19 The Congress has included TTR in the allocation
formula for the Alcohol, Drug Abuse, and Mental Health Block Grant. 

We have also developed two measures of willingness to raise revenue: 
an overall measure and one for education.  Willingness to raise
revenue overall can be determined by comparing a state's actual
revenue with its capacity to raise revenue.  Willingness to raise
revenue for education is determined similarly but focuses on spending
for kindergarten to twelfth grade public education alone rather than
all public services.  For each of our "willingness measures," as well
as our two "ability measures," we have developed an index by
comparing the state figure to that of the whole nation.  The
following describes each of these indexes. 


--------------------
\17 RTS 1991:  State Revenue Capacity and Effort, ACIR (Washington,
D.C.:  Sept.  1993), p.  5. 

\18 State and Local Finances:  Some Jurisdictions Confronted by
Short- and Long-Term Problems (GAO/HRD-94-1, Oct.  6, 1993), p.  102. 

\19 Mike Springer, Estimating Total Taxable Resources, memorandum,
Department of the Treasury (Washington, D.C.:  July 22, 1991). 


      ABILITY TO RAISE REVENUE
      OVERALL
------------------------------------------------------- Appendix I:2.1

Our index of ability to raise revenue overall has two components. 
The first component is TTR per capita for a state divided by TTR per
capita for the nation.  This provides an index of nominal ability to
raise revenue.  Our second component, a cost index or purchasing
power adjustment, provides a common measurement for states with
greatly varying costs.  This cost index is based on the work of
Department of the Treasury analysts.  Robert Rafuse developed a state
level labor-input-cost index for 1986 based on the mean annual
earnings of males 45 to 54 years old who worked 40 or more weeks per
year, accounting for seven different levels of education.\20 This
work was later replicated by Kiran Duwadi for 1990.\21 Dividing the
first component, an index of nominal ability to raise revenue by the
cost index results in a cost-adjusted measure of ability to raise
revenue overall.\22


--------------------
\20 See Robert W.  Rafuse, Jr., Representative Expenditures: 
Addressing the Neglected Dimension of Fiscal Capacity, ACIR
(Washington, D.C.:  Dec.  1990).  On the basis of information
provided by Rafuse on the percent of males aged 45 to 54 in each of
seven education groups, we developed a similar set of cost estimates
for 1979. 

\21 Robert W.  Rafuse, Jr., "Memorandum for Participants in
Brainstorming Session On Estimation of Representative Expenditures,"
Department of the Treasury (Washington, D.C.:  Nov.  9, 1992). 

\22 In Representative Expenditures:  Addressing the Neglected
Dimension of Fiscal Capacity, Robert Rafuse calculates that 50
percent of all direct expenditures relate to employee compensation
costs.  Since the costs of employee compensation vary by state (for
example, they are higher in New York State than in Mississippi), we
cost adjusted 50 percent of expenditures.  Other expenditures, such
as for equipment, are less likely to vary by state because national
markets exist for such items. 


      ABILITY TO RAISE REVENUE FOR
      EDUCATION
------------------------------------------------------- Appendix I:2.2

Our index for ability to raise revenue for education parallels that
for ability to raise revenue overall.  Again, the index has two
components.  The first is TTR per school-age child in the state
divided by that for the nation.  The second component is a cost index
based on average teacher salaries for each state, adjusted for
average levels of teacher experience for each state.  Using a
methodology developed by F.  Howard Nelson along with information on
teacher experience from the Department of Education's 1990-91 Schools
and Staffing Survey, we found that teacher salaries increase about
2.33 percent, on average for the nation, for each year of teacher
experience. 

We then adjusted average teacher salaries for each state, a measure
of the costs of providing educational services in each state, to
account for differences among states in average levels of teacher
experience.  For example, we found that the average teacher salary in
Oklahoma for 1991-92 was $26,514 and that the average number of years
of teaching experience was 12.9, about 2.2 years below the national
average of 15.1 years.  If Oklahoma were to be able to attract
teachers with comparable years of experience as the nation as a
whole, it would cost the state, we estimate, an additional $618 for
each year of teaching experience or about $1,359 for 2.2 years. 
Therefore, we estimate that the experience-adjusted average teacher
salary for Oklahoma would be about $27,873, still well below the
average for the nation, $34,213.  Consequently, while our measure of
the cost of educational services in Oklahoma is still low, it does
account for Oklahoma's costs being somewhat higher were it to have
levels of teaching experience comparable to the U.S.  average. 

To illustrate how the index of ability to raise revenue for education
was developed, consider again the example of Oklahoma.  Oklahoma has
a relatively low TTR per school-age child, about 73 percent of the
U.S.  average, or $104,693 per child compared with $143,178 per child
for the United States.  This stems from two factors:  (1) relatively
low TTR and (2) relatively high proportions of school-age children. 
While Oklahoma's nominal ability to raise revenue for education is
low, its cost of providing educational services, that is, adjusted
average teacher salaries, is also low, at about 81 percent of the
U.S.  average.  When we applied a cost adjustment to reflect the
purchasing power in each state, we calculated an index of .86, which
reflects Oklahoma's ability to raise revenue for education--less than
the average for the nation as a whole of 1.00.\23


--------------------
\23 States face different levels of purchasing power for teacher
compensation, that is, it costs more to attract teachers to work in
some states than others.  Personnel-related costs make up 84.8
percent of current expenditures and 75.5 percent of total
expenditures.  To account for cost differences in personnel-related
costs, we cost adjusted 75.5 percent of our measure of ability to
raise revenue.  See Stephen M.  Barro, Cost-of-Education
Differentials Across the States, Department of Education, NCES,
Working Paper No.  94-05 (Washington, D.C.:  July 1994), pp.  29-30. 


      WILLINGNESS TO RAISE REVENUE
      OVERALL
------------------------------------------------------- Appendix I:2.3

Our index of willingness to raise revenue overall is based on a
state's total state and local revenue divided by the state's TTR. 
This number is divided by total state and local revenue in the nation
(or all states), divided by the nation's TTR, to provide an index. 
For example, if the index is 1.10, then we know that the state's
willingness to raise revenue overall is 10 percent greater than that
for the whole nation.  Conversely, if the state's index of
willingness to raise revenue is .90, then the state's willingness to
raise revenue overall is only 90 percent of that for the whole
nation. 


      WILLINGNESS TO RAISE REVENUE
      FOR EDUCATION
------------------------------------------------------- Appendix I:2.4

Similarly, our index of willingness to raise revenue for education is
based on actual state and local revenue for kindergarten to twelfth
grade public education divided by the state's TTR.  As an example,
the index of willingness to raise revenue for education for Wyoming
was 1.31 for 1991-92, substantially over the 1.00 index for the
nation.  Adjusting the two measures of willingness to raise revenue
for differences in purchasing power by state is not necessary because
such measures would be in both the numerator and denominator and
therefore would cancel each other out. 


      CHANGES IN ABILITY AND
      WILLINGNESS TO RAISE REVENUE
      FOR EDUCATION AND OVERALL
      FROM 1981-82 TO 1991-92
------------------------------------------------------- Appendix I:2.5

We also examined changes in the levels of ability to raise revenue
and willingness to raise revenue over time--from 1981-82 to 1991-92. 
For this analysis we determined the measures as described above,
except that we did not put the measures in index form--that is,
relative to the U.S.  average.  When we examined the change for the
nation as a whole, we determined that ability to raise revenue for
education, a measure of the nation's revenue base per child, was
$143,178 in 1991-92.  The nation's ability to raise revenue for
education in 1981-82 in unadjusted and therefore noncomparable
1981-82 dollars was $77,412. 

To provide comparability, we adjusted each total used in the two
measures of ability to raise revenue, for education and overall, so
that they would each be in 1987 dollars, using a deflator developed
by the Department of Commerce's Bureau of Economic Analysis.  This
deflator was developed specifically for state and local government
purchases of goods and services.  After the figures were adjusted, we
found that the nation's ability to raise revenue for education had
increased 26.6 percent from 1981-82 to 1991-92, from $94,752 to
$119,915.  We conducted similar analyses to determine changes over
time in the measure of ability to raise revenue overall.  We also
determined changes over time in our two measures of willingness to
raise revenue, for education and overall. 


DATA--SCHOOL-AGE POPULATION
CHARACTERISTICS
========================================================== Appendix II

This appendix provides additional data on the increase in public
school levels as well as the number of at-risk students.  Following
are the tables and figures presented in this appendix in order of
appearance. 

  Figure II.1 shows public school enrollment levels from 1980
     projected to the year 2000. 

  Table II.1 presents the data points for figure II.1. 

  Table II.2 shows the growth in specific at-risk populations of
     children (poor, special education, limited English proficient,
     and immigrant), 1980 to 1990. 

  Figure II.2 shows changes in enrollment by state. 

  Table II.3 presents the data points for figure II.2. 

  Figure II.3 shows changes in numbers of children in poverty by
     state. 

  Table II.4 presents the data points for figure II.3. 

  Figure II.4 compares the percent change among all children under 18
     and poor children under 18, 1980 to 1993.  We chose the under-18
     age group to provide a more comprehensive measure of the number
     of children who are, or will soon be, attending school. 

  Table II.5 presents the data points for figure II.4. 

   Figure II.1:  Enrollment Levels
   Have Begun to Increase After
   Reaching a Low in the Mid 1980s

   (See figure in printed
   edition.)

Source:  National Center for Education Statistics. 



                         Table II.1
          
           Public School Enrollment Levels, 1980-
                       81 to 2000-01

                                          Total enrollment
Year                                           (thousands)
--------------------------------------  ------------------
1980-81                                             40,877
1981-82                                             40,044
1982-83                                             39,566
1983-84                                             39,252
1984-85                                             39,208
1985-86                                             39,422
1986-87                                             39,753
1987-88                                             40,008
1988-89                                             40,189
1989-90                                             40,543
1990-91                                             41,217
1991-92                                             42,047
1992-93                                             42,816
1993-94 estimated                                   43,353
1994-95 projected                                   44,237
1995-96 projected                                   45,037
1996-97 projected                                   45,960
1997-98 projected                                   46,797
1998-99 projected                                   47,403
1999-2000 projected                                 47,911
2000-2001 projected                                 48,323
----------------------------------------------------------
Source:  National Center for Education Statistics. 



                         Table II.2
          
            Numbers of Various Types of At-Risk
                 Children in 1980 and 1990

                   School year   School year      Increase
                          1980          1990   over decade
Student type       (thousands)   (thousands)     (percent)
----------------  ------------  ------------  ------------
Poor school-age          7,200         7,600             6
Special                  4,142         4,762            15
 education\a
Limited English          1,839         2,311            26
 proficient
Immigrant                1,872         2,320            24
----------------------------------------------------------
\a Children 0 to 21 years old served in federally supported programs
for the disabled. 

   Figure II.2:  Changes in
   Enrollment Varied by State,
   Although Most Increases
   Occurred in the Southwestern
   and Western States Between 1980
   and 1993

   (See figure in printed
   edition.)

Source:  National Center for Education Statistics. 



                         Table II.3
          
           Changes in Public School Enrollment by
                State Between 1980 and 1993

                                                   Percent
                                                 change in
                                                enrollment
                    Enrollment    Enrollment  between 1980
State                  in 1980       in 1993      and 1993
----------------  ------------  ------------  ------------
Alabama                758,721       730,509         -3.72
Alaska                  86,514       125,564         45.14
Arizona                513,790       669,459         30.30
Arkansas               447,700       450,672          0.66
California           4,076,421     5,285,000         29.65
Colorado               546,033       625,062         14.47
Connecticut            531,459       493,500         -7.14
Delaware                99,403       105,547          6.18
Florida              1,510,225     2,039,385         35.04
Georgia              1,068,737     1,235,304         15.59
Hawaii                 165,068       179,876          8.97
Idaho                  203,247       236,774         16.50
Illinois             1,983,463     1,886,947         -4.87
Indiana              1,055,589       961,534         -8.91
Iowa                   533,857       497,912         -6.73
Kansas                 415,291       458,538         10.41
Kentucky               669,798       639,200         -4.57
Louisiana              777,560       799,917          2.88
Maine                  222,497       212,245         -4.61
Maryland               750,665       772,638          2.93
Massachusetts        1,021,885       878,734        -14.01
Michigan             1,797,052     1,613,700        -10.20
Minnesota              754,318       807,760          7.08
Mississippi            477,059       503,374          5.52
Missouri               844,648       870,086          3.01
Montana                155,193       162,891          4.96
Nebraska               280,430       284,458          1.44
Nevada                 149,481       235,800         57.75
New Hampshire          167,232       182,385          9.06
New Jersey           1,246,008     1,152,205         -7.53
New Mexico             271,198       321,164         18.42
New York             2,871,724     2,746,200         -4.37
North Carolina       1,129,376     1,123,636         -0.51
North Dakota           116,885       118,500          1.38
Ohio                 1,957,381     1,812,300         -7.41
Oklahoma               577,807       598,000          3.49
Oregon                 464,599       516,610         11.19
Pennsylvania         1,909,292     1,745,230         -8.59
Rhode Island           148,956       145,676         -2.20
South Carolina         619,223       636,297          2.76
South Dakota           128,507       151,073         17.56
Tennessee              853,569       857,051          0.41
Texas                2,900,073     3,616,457         24.70
Utah                   343,618       468,675         36.39
Vermont                 95,815       100,000          4.37
Virginia             1,010,371     1,045,472          3.47
Washington             757,639       916,928         21.02
West Virginia          383,503       313,750        -18.19
Wisconsin              830,247       841,856          1.40
Wyoming                 98,305       100,899          2.64
----------------------------------------------------------
Source:  National Center for Education Statistics. 

   Figure II.3:  Greatest Growth
   in School-Age Poverty
   Population Between 1980 and
   1990 Occurred in Southwestern
   and Western States

   (See figure in printed
   edition.)



                         Table II.4
          
          Percent Change in Number of Poor School-
          Age Children, 1980-90, and 1990 School-
                 Age Poverty Rates by State


                                             1980-
State                   1980        1990      1990    1990
----------------  ----------  ----------  --------  ------
Alabama              198,674     178,559     -10.1    23.3
Alaska                10,207      10,910       6.9     9.6
Arizona               90,072     136,626      51.7    20.3
Arkansas             111,691     107,170      -4.0    23.8
California           651,039     897,104      37.8    17.3
Colorado              63,062      82,083      30.2    13.8
Connecticut           65,610      50,611     -22.9     9.8
Delaware              18,098      12,342     -31.8    11.0
Florida              311,021     344,969      10.9    17.5
Georgia              249,998     229,402      -8.2    18.9
Hawaii                22,721      20,316     -10.6    10.5
Idaho                 28,254      32,279      14.2    14.5
Illinois             336,783     328,801      -2.4    15.9
Indiana              130,984     132,837       1.4    12.8
Iowa                  64,847      65,378       0.8    12.7
Kansas                49,397      59,578      20.6    12.8
Kentucky             168,030     161,587      -3.8    23.3
Louisiana            221,714     267,555      20.7    30.4
Maine                 36,249      26,853     -25.9    12.4
Maryland             104,310      82,612     -20.8    10.5
Massachusetts        140,978     112,691     -20.1    12.2
Michigan             254,479     288,557      13.4    16.7
Minnesota             80,983      93,242      15.1    11.4
Mississippi          180,439     177,895      -1.4    32.7
Missouri             139,765     150,951       8.0    16.3
Montana               21,083      29,340      39.2    18.4
Nebraska              37,105      36,655      -1.2    12.0
Nevada                14,653      23,065      57.4    11.8
New Hampshire         17,314      12,117     -30.0     6.4
New Jersey           202,184     134,371     -33.5    10.8
New Mexico            64,849      82,984      28.0    26.4
New York             626,784     531,845     -15.1    18.1
North Carolina       221,699     180,954     -18.4    16.0
North Dakota          18,941      19,931       5.2    15.9
Ohio                 279,040     322,358      15.5    16.2
Oklahoma              92,894     120,018      29.2    19.9
Oregon                55,332      67,926      22.8    13.4
Pennsylvania         310,663     284,692      -8.4    14.5
Rhode Island          23,353      19,306     -17.3    12.4
South Carolina       143,925     131,053      -8.9    20.0
South Dakota          28,336      26,501      -6.5    18.8
Tennessee            194,569     169,437     -12.9    19.5
Texas                573,661     794,774      38.5    23.4
Utah                  33,895      49,183      45.1    10.9
Vermont               14,048      10,695     -23.9    10.7
Virginia             158,083     129,565     -18.0    12.5
Washington            84,403     111,198      31.8    12.8
West Virginia         74,934      79,980       6.7    24.1
Wisconsin             96,167     121,585      26.4    13.4
Wyoming                7,515      12,443      65.6    12.7
==========================================================
United States     7,152,784\  7,571,259\       5.9    17.1
                           a           b
----------------------------------------------------------
\a Includes 27,949 poor children from the District of Columbia. 

\b Includes 18,375 poor children from the District of Columbia. 

   Figure II.4:  Numbers of
   Children Under 18 in
   Families--Especially Poor
   Children--Have Increased
   Between 1980 and 1993

   (See figure in printed
   edition.)

Source:  U.S.  Department of Commerce, Bureau of the Census, Current
Population Survey Reports. 



                         Table II.5
          
          Numbers of Children under 18 in Families
           and in Poor Families in 1980 and 1993


                  1980        1993      Number     Percent
----------  ----------  ----------  ----------  ----------
All         62,168,000  68,040,000   5,872,000         9.4
 children
Poor        11,114,000  14,961,000   3,847,000        34.6
 children
----------------------------------------------------------
Source:  U.S.  Department of Commerce, Bureau of the Census, Current
Population Survey Reports. 


DATA--EXPENDITURES
========================================================= Appendix III

This appendix provides additional data about total expenditures. 
Following are the tables and figures presented in this appendix in
order of appearance. 

  Table III.1 presents the data points for figure 1. 

  Table III.2 shows the total per pupil expenditures from the
     perspective of between-state comparisons. 

  Figure III.1 shows national averages of current per pupil
     expenditures from 1963-64 to 1992-93. 

  Table III.3 presents the data points for figure III.1 and shows the
     range of per pupil current expenditures, 1963-64 to 1992-93. 

  Table III.4 shows the range in per pupil expenditures within each
     state for 1989-90, using school districts at the 5th and 95th
     percentiles. 

  Figure III.2 shows the percentage increase in per pupil
     expenditures by state between 1981-82 and 1992-93. 

  Table III.5 presents the data points for figure III.2. 



                        Table III.1
          
             Both Total Expenditures and Public
           School Enrollment Increased During the
              1990s (in Constant 1993 Dollars)

                                       Total        Public
                                expenditures        school
                                 (dollars in    enrollment
Year                               billions)   (thousands)
------------------------------  ------------  ------------
1963-64                                  117        41,025
1964-65                                  127        42,280
1965-66                                  137        42,068
1966-67                                  146        43,042
1967-68                                  155        43,890
1968-69                                  161        44,903
1969-70                                  168        45,550
1970-71                                  173        46,894
1971-72                                  171        46,071
1972-73                                  174        45,726
1973-74                                  177        45,445
1974-75                                  182        45,073
1975-76                                  180        44,816
1976-77                                  177        44,311
1977-78                                  180        43,577
1978-79                                  179        42,561
1979-80                                  182        41,861
1980-81                                  179        40,877
1981-82                                  177        40,044
1982-83                                  177        39,566
1983-84                                  183        39,252
1984-85                                  187        39,208
1985-86                                  195        39,422
1986-87                                  204        39,753
1987-88                                  211        40,008
1988-89                                  226        40,189
1989-90                                  239        40,543
1990-91                                  248        41,217
1991-92                                  253        42,047
1992-93                                  254        42,816
----------------------------------------------------------
Source:  National Center for Education Statistics. 



                        Table III.2
          
            States' Total per Pupil Expenditures
           Ranged Between $3,700 and $10,100 for
                          1992-93

Per pupil
expenditure range
(in dollars)        States
------------------  --------------------------------------
$9,000 and above    Alaska, New Jersey, New York

8,000 -8,999        Connecticut

7,000 -7,999        Maryland, Michigan, Pennsylvania,
                    Rhode Island, Vermont, Wisconsin

6,000 -6,999        Delaware, Florida, Hawaii, Illinois,
                    Maine, Massachusetts, Minnesota,
                    Nevada, Oregon, Washington, West
                    Virginia, and Wyoming

5,000 -5,999        Arizona, California, Colorado,
                    Georgia, Indiana, Iowa, Kansas,
                    Kentucky, Missouri, Montana, Nebraska,
                    New Hampshire, North Carolina, Ohio,
                    South Carolina, Texas, Virginia

4,000 -4,999        Alabama, Arkansas, Idaho, Louisiana,
                    New Mexico, North Dakota, Oklahoma,
                    South Dakota, Tennessee

3,000 -3,999        Mississippi, Utah
----------------------------------------------------------
Source:  National Center for Education Statistics. 

   Figure III.1:  U.S.  Average
   Current per Pupil Expenditures
   Have Leveled off Since 1990

   (See figure in printed
   edition.)

Source:  National Center for Education Statistics. 



                        Table III.3
          
          National Current Expenditures per Pupil
            Enrolled for 1963-64 to 1992-93 (in
                 Constant 1993-94 Dollars)

                                         Average per pupil
                                               expenditure
Year                                          (in dollars)
------------------------------  --------------------------
1963-64                                              2,031
1964-65                                              2,160
1965-66                                              2,288
1966-67                                              2,461
1967-68                                              2,633
1968-69                                              2,768
1969-70                                              2,903
1970-71                                              3,099
1971-72                                              3,225
1972-73                                              3,392
1973-74                                              3,453
1974-75                                              3,551
1975-76                                              3,653
1976-77                                              3,759
1977-78                                              3,914
1978-79                                              3,961
1979-80                                              3,934
1980-81                                              3,895
1981-82                                              3,923
1982-83                                              4,077
1983-84                                              4,223
1984-85                                              4,455
1985-86                                              4,675
1986-87                                              4,840
1987-88                                              4,956
1988-89                                              5,197
1989-90                                              5,327
1990-91                                              5,352
1991-92                                              5,314
1992-93                                              5,296
----------------------------------------------------------
Source:  National Center for Education Statistics. 



                        Table III.4
          
           Within-State Differences Between High-
              Spending and Low-Spending School
                    Districts, 1989-1990

                                      Low-           High-
                                spending\a      spending\b
                                district\c  district\c per
                                 per pupil           pupil
                               expenditure     expenditure
State                            (dollars)       (dollars)
----------------------------  ------------  --------------
Alabama                              2,674           3,741
Alaska                               6,115          19,155
Arizona                              2,704           5,262
Arkansas                             2,543           3,705
California                           3,669           5,079
Colorado                             3,924           5,587
Connecticut                          5,523           8,304
Delaware                             4,249           5,805
Florida                              3,910           5,457
Georgia                              3,000           4,322
Hawaii                               4,288         4,288\d
Idaho                                2,441           4,332
Illinois                             2,672           4,239
Indiana                              3,335           4,980
Iowa                                 3,593           4,700
Kansas                               3,357           5,715
Kentucky                             2,509           3,520
Louisiana                            2,902           4,463
Maine                                3,910           5,473
Maryland                             4,532           6,246
Massachusetts                        3,807           7,182
Michigan                             3,224           5,609
Minnesota                            3,729           5,479
Mississippi                          2,478           3,596
Missouri                             2,803           4,557
Montana                              3,579           6,970
Nebraska                             3,530           6,048
Nevada                               3,691           6,672
New Hampshire                        3,604           5,914
New Jersey                           5,162           8,462
New Mexico                           3,460           6,577
New York                             5,439          11,725
North Carolina                       3,505           4,925
North Dakota                         2,995           5,356
Ohio                                 3,117           5,606
Oklahoma                             2,583           3,972
Oregon                               3,879           6,078
Pennsylvania                         3,794           7,058
Rhode Island                         4,953           6,646
South Carolina                       3,369           4,852
South Dakota                         2,833           5,052
Tennessee                            2,268           3,036
Texas                                3,035           5,452
Utah                                 2,381           4,257
Vermont                              4,168           6,701
Virginia                             3,642           6,058
Washington                           3,760           6,144
West Virginia                        3,160           4,023
Wisconsin                            4,289           6,545
Wyoming                              4,464           8,091
----------------------------------------------------------
Note:  Wayne Riddle and Liane White of the Congressional Research
Service are currently updating their analysis of disparities within
states with more recent data. 

\a 5th percentile. 

\b 95th percentile. 

\c Data listed are for unified school districts.  See the source for
additional data on elementary school districts and secondary school
districts. 

\d Hawaii has only one school district. 

Source:  Wayne Riddle and Liane White, "Variations in Expenditures
Per Pupil Among Local Educational Agencies Within the States,"
memorandum, Congressional Research Service, July 26, 1993. 

   Figure III.2:  Most States' per
   Pupil Expenditure Increased by
   at Least 25 Percent Between
   1981-82 and 1992-93 (in
   Constant 1992-93 Dollars)

   (See figure in printed
   edition.)



                        Table III.5
          
          Data Points for Figure III.2, Percentage
          of Increase in per Pupil Expenditures by
                           State


                                                   Percent
                   1981-82 (in                      change
                      constant                     between
                       1992-93                 1981-82 and
State               dollars)\a       1992-93       1992-93
----------------  ------------  ------------  ------------
Alabama                  3,032         3,572            18
Alaska                   9,598         7,901           -18
Arizona                  3,598         4,088            14
Arkansas                 2,737         3,859            41
California               4,198         4,614            10
Colorado                 4,365         4,766             9
Connecticut              4,836         7,652            58
Delaware                 4,583         5,750            25
Florida                  3,780         4,876            29
Georgia                  2,963         4,368            47
Hawaii                   4,137         5,332            29
Idaho                    2,874         3,471            21
Illinois                 4,056         5,307            31
Indiana                  3,295         4,995            52
Iowa                     4,296         4,970            16
Kansas                   4,034         4,926            22
Kentucky                 2,784         4,311            55
Louisiana                3,760         4,010             7
Maine                    3,275         5,624            72
Maryland                 4,525         6,060            34
Massachusetts            4,469         6,141            37
Michigan                 4,793         5,945            24
Minnesota                4,393         5,210            19
Mississippi              2,530         3,159            25
Missouri                 3,318         4,318            30
Montana                  4,314         4,907            14
Nebraska                 4,052         5,064            25
Nevada                   3,538         4,645            31
New Hampshire            3,595         5,368            49
New Jersey               5,385         8,770            63
New Mexico               3,826         3,929             3
New York                 5,836         7,770            33
North Carolina           3,129         4,426            41
North Dakota             4,138         4,284             4
Ohio                     3,634         5,332            47
Oklahoma                 3,972         4,090             3
Oregon                   4,685         5,585            19
Pennsylvania             4,441         6,372            43
Rhode Island             4,355         6,501            49
South Carolina           2,851         4,204            47
South Dakota             3,450         4,109            19
Tennessee                2,811         3,674            31
Texas                    3,204         4,270            33
Utah                     2,789         2,967             6
Vermont                  4,197         6,342            51
Virginia                 3,507         5,066            44
Washington               3,892         5,220            34
West Virginia            3,789         5,108            35
Wisconsin                4,217         5,974            42
Wyoming                  5,047         5,462             8
----------------------------------------------------------
Note:  Beginning in 1988-89, data reflect new survey collection
procedures and may not be entirely comparable with figures for
earlier years. 

\a Based on an index for state and local government purchases of
goods and services prepared by the Bureau of Economic Analysis, U.S. 
Department of Commerce.  These data do not reflect differences in
inflation rates from state to state. 

Source:  National Center for Education Statistics. 


DATA--FEDERAL, STATE, AND LOCAL
REVENUE SHARES
========================================================== Appendix IV

This appendix provides additional data on the federal, state, and
local shares of education revenues.  Following are the tables and
figures presented in this appendix in order of appearance. 

  Table IV.1 presents the data points for figure 2. 

  Table IV.2 presents the federal, state, and local contributions by
     state, 1991-1992. 



                         Table IV.1
          
            Federal, State, and Local Shares of
          Total Elementary and Secondary Education
            Revenues Between 1963-64 and 1992-93


                               Federal     State     Local
                              (percent  (percent  (percent
Year                                 )         )         )
----------------------------  --------  --------  --------
1963-64                            4.4      39.3      56.3
1965-66                            7.9      39.1      53.0
1967-68                            8.8      38.5      52.7
1969-70                            8.0      39.9      52.1
1970-71                            8.4      39.1      52.5
1971-72                            8.9      38.3      52.8
1972-73                            8.7      40.0      51.3
1973-74                            8.5      41.4      50.1
1974-75                            9.0      42.2      48.8
1975-76                            8.9      44.6      46.5
1976-77                            8.8      43.4      47.8
1977-78                            9.4      43.0      47.6
1978-79                            9.8      45.6      44.6
1979-80                            9.8      46.8      43.4
1980-81                            9.2      47.4      43.4
1981-82                            7.4      47.6      45.0
1982-83                            7.1      47.9      45.0
1983-84                            6.8      47.8      45.4
1984-85                            6.6      48.9      44.4
1985-86                            6.7      49.4      43.9
1986-87                            6.4      49.7      43.9
1987-88                            6.3      49.5      44.1
1988-89                            6.2      47.8      46.0
1989-90                            6.1      47.3      46.6
1990-91                            6.2      47.2      46.7
1991-92                            6.6      46.4      47.0
1992-93                            6.9      45.6      47.4
----------------------------------------------------------
Source:  National Center for Education Statistics. 



                         Table IV.2
          
          Federal, State, and Local Contributions
                    by State, 1991-1992

                               Federal     State   Local\a
                              (percent  (percent  (percent
State                                )         )         )
----------------------------  --------  --------  --------
Alabama                           11.4      58.8      29.8
Alaska                            11.5      68.0      20.5
Arizona                            8.8      42.4      48.8
Arkansas                          10.8      59.9      29.3
California                         7.5      65.9      26.6
Colorado                           5.0      42.8      52.3
Connecticut                        3.2      40.7      56.0
Delaware                           7.6      65.9      26.5
Florida                            7.3      48.4      44.3
Georgia                            7.7      47.7      44.6
Hawaii                             7.5      90.3       2.2
Idaho                              8.1      61.8      30.1
Illinois                           6.8      28.9      64.2
Indiana                            5.3      52.9      41.8
Iowa                               5.3      47.3      47.4
Kansas                             5.5      42.4      52.1
Kentucky                          10.1      67.0      22.9
Louisiana                         10.8      54.7      34.4
Maine                              5.9      49.8      44.3
Maryland                           5.1      38.2      56.7
Massachusetts                      5.3      30.7      64.0
Michigan                           6.2      26.6      67.2
Minnesota                          4.5      51.6      44.0
Mississippi                       17.0      53.5      29.5
Missouri                           6.4      38.0      55.7
Montana                            8.8      41.8      49.3
Nebraska                           6.2      34.3      59.5
Nevada                             4.2      38.7      57.1
New Hampshire                      3.1       8.5      88.4
New Jersey                         4.1      42.2      53.7
New Mexico                        12.4      73.8      13.8
New York                           5.6      40.3      54.1
North Carolina                     7.2      64.6      28.2
North Dakota                      11.1      44.8      44.1
Ohio                               5.9      40.8      53.3
Oklahoma                           4.6      62.2      33.2
Oregon                             6.4      30.6      63.0
Pennsylvania                       5.7      41.4      52.8
Rhode Island                       6.0      38.5      55.5
South Carolina                     9.0      48.3      42.6
South Dakota                      11.1      27.0      62.0
Tennessee                         10.5      42.2      47.3
Texas                              6.6      43.4      50.0
Utah                               6.9      57.2      35.8
Vermont                            5.1      31.6      63.3
Virginia                           5.8      31.1      63.1
Washington                         5.7      71.6      22.6
West Virginia                      7.6      67.2      25.2
Wisconsin                          4.4      39.4      56.2
Wyoming                            5.3      52.5      42.2
----------------------------------------------------------
\a Includes revenues from gifts and tuition and fees from patrons. 

Source:  National Center for Education Statistics. 


DATA--EDUCATION SHARE OF STATE
BUDGET
=========================================================== Appendix V

This appendix provides additional data on changes in the
apportionment of state budgets.  Following are the tables and figures
presented in this appendix in order of appearance. 

  Figure V.1 compares the apportionment of state budget shares in
     1987 and 1994. 

  Table V.1 presents the data points for figures 3 and V.1. 

   Figure V.1:  Apportionment of
   State Budget Shares in 1987 and
   1994

   (See figure in printed
   edition.)

Source:  1994 State Expenditure Report, National Association of State
Budget Officers, April 1995. 



                         Table V.1
          
             Changes in Apportionment of State
                 Budgets From 1987 to 1994


                                                   Percent
Budget sector                     1987      1994    change
----------------------------  --------  --------  --------
Elementary/secondary              22.8      20.3     -11.0
 education
Higher education                  12.3      10.5     -14.6
Cash assistance                    5.2       4.5     -13.5
Medicaid                          10.2      19.4      90.1
Corrections                        3.0       3.3      10.0
Transportation                    10.6       8.9     -16.0
All other                         36.1      33.1      -8.3
----------------------------------------------------------
Source:  1994 State Expenditure Report, National Association of State
Budget Officers, April 1995. 


DATA--ABILITY AND WILLINGNESS TO
RAISE REVENUE
========================================================== Appendix VI

This appendix provides additional data on ability and willingness to
raise revenue overall and for education.  Following are the tables
and figures presented in this appendix in order of appearance. 

  Figure VI.1 shows ability to raise revenue overall in each state in
     1992. 

  Figure VI.2 shows ability to raise revenue for education in each
     state in 1992. 

  Figure VI.3 shows willingness to raise revenue overall in 1992. 

  Figure VI.4 shows states' willingness to raise revenue for
     education in 1992. 

  Table VI.1 gives the data points for figures VI.1, VI.2, VI.3, and
     VI.4.  (See app.  I for a description of how these indexes were
     derived.)

  Table VI.2 provides information on the change in states'
     willingness and ability to raise revenue overall and for
     education between 1982 and 1992. 

   Figure VI.1:  States' Ability
   to Raise Revenue Overall in
   1992

   (See figure in printed
   edition.)

   Figure VI.2:  States' Ability
   to Raise Revenue for Education
   in 1992

   (See figure in printed
   edition.)

   Figure VI.3:  States'
   Willingness to Raise Revenue
   Overall in 1992

   (See figure in printed
   edition.)

   Figure VI.4:  States'
   Willingness to Raise Revenue
   for Education in 1992

   (See figure in printed
   edition.)



                         Table VI.1
          
          Ability and Willingness to Raise Revenue
           Overall and for Education in 1992, by
                 State (Index: U.S. = 1.00)


                              Educatio            Educatio
State                Overall         n   Overall         n
------------------  --------  --------  --------  --------
Alabama                 0.81      0.90      0.95      0.81
Alaska                  1.55      1.02      2.07      1.27
Arizona                 0.84      0.84      1.06      1.07
Arkansas                0.77      0.79      0.91      1.03
California              1.09      0.96      0.99      0.87
Colorado                1.01      0.99      0.98      0.97
Connecticut             1.33      1.23      0.92      1.00
Delaware                1.21      1.39      0.99      0.79
Florida                 0.91      1.10      1.03      0.93
Georgia                 0.93      0.96      0.92      0.91
Hawaii                  1.15      1.24      1.14      0.82
Idaho                   0.82      0.76      1.03      1.07
Illinois                1.08      1.08      0.87      0.87
Indiana                 0.91      0.89      0.94      1.09
Iowa                    0.90      0.97      1.07      1.05
Kansas                  0.95      1.00      0.95      1.04
Kentucky                0.83      0.85      0.98      1.01
Louisiana               0.89      0.94      0.97      0.91
Maine                   0.87      0.89      1.10      1.30
Maryland                1.09      1.09      0.92      0.97
Massachusetts           1.17      1.35      0.95      0.89
Michigan                0.94      0.85      1.07      1.20
Minnesota               1.03      1.02      1.15      1.08
Mississippi             0.71      0.79      0.97      0.88
Missouri                0.93      1.06      0.82      0.90
Montana                 0.80      0.81      1.13      1.31
Nebraska                0.97      1.08      0.99      0.99
Nevada                  1.10      1.06      0.88      0.84
New Hampshire           1.03      1.08      0.90      1.00
New Jersey              1.26      1.32      1.01      1.21
New Mexico              0.82      0.82      1.19      1.08
New York                1.19      1.16      1.26      1.12
North Carolina          0.93      1.05      0.89      0.85
North Dakota            0.85      0.97      1.10      1.00
Ohio                    0.93      0.99      0.94      1.02
Oklahoma                0.82      0.86      0.99      1.07
Oregon                  0.91      0.89      1.14      1.16
Pennsylvania            0.99      1.10      1.00      1.08
Rhode Island            0.97      1.03      0.99      1.03
South Carolina          0.82      0.87      0.97      1.03
South Dakota            0.87      1.01      0.89      0.94
Tennessee               0.89      1.03      0.83      0.68
Texas                   0.96      0.86      0.90      1.08
Utah                    0.80      0.60      1.06      1.14
Vermont                 0.91      0.88      1.14      1.39
Virginia                1.03      1.10      0.90      0.93
Washington              1.05      1.00      1.01      1.03
West Virginia           0.75      0.81      1.05      1.39
Wisconsin               0.94      0.94      1.10      1.19
Wyoming                 1.09      0.88      1.18      1.31
----------------------------------------------------------


                         Table VI.2
          
           Changes in Ability and Willingness to
          Raise Revenue Overall and for Education
                From 1982 to 1992, by State


                              Educatio            Educatio
State                Overall         n   Overall         n
------------------  --------  --------  --------  --------
Alabama                 26.5      40.5       8.4      26.5
Alaska                 -18.3      -3.4     -36.2      15.3
Arizona                 15.3      21.1      12.8       2.3
Arkansas                21.3      19.7      14.8      20.3
California              15.5      11.7      11.0      32.0
Colorado                10.3      20.8      15.8       0.3
Connecticut             35.5      15.6      18.3      17.2
Delaware                40.7      54.9       0.6     -22.8
Florida                 20.9      17.5      30.4       7.1
Georgia                 29.2      39.4       4.4       2.3
Hawaii                  31.9      57.8      13.2      -6.0
Idaho                   22.3      34.1      19.0       5.6
Illinois                22.7      32.0       6.3      -6.1
Indiana                 23.3      35.7      18.4      14.7
Iowa                    12.6      22.4      14.6       4.0
Kansas                  10.8       8.8       9.2       4.7
Kentucky                19.3      24.2      27.5      24.1
Louisiana               -3.5       5.4      14.1      43.3
Maine                   29.4      27.5      22.8      22.6
Maryland                29.9      42.5      -4.9      -8.2
Massachusetts           34.3      55.7       6.4     -20.5
Michigan                22.2      44.1      -2.0      -3.6
Minnesota               22.9      32.4       7.3     -14.0
Mississippi             17.7      19.6       7.9       8.7
Missouri                19.4      25.2      17.3       6.9
Montana                  1.4      13.6       7.0      13.0
Nebraska                18.7      18.9      10.5       6.5
Nevada                  18.1      15.8       0.6      32.3
New Hampshire           29.5      20.4      24.8       6.4
New Jersey              32.7      38.5      19.3       9.8
New Mexico               2.6      23.9      -2.3       1.9
New York                31.0      36.5       8.5       5.4
North Carolina          34.0      53.7      11.0      -1.7
North Dakota            -1.0       0.9       8.2      32.2
Ohio                    19.7      30.3      15.8      10.8
Oklahoma                -7.6       1.1      17.4      29.8
Oregon                  22.2      31.4       5.0      -5.4
Pennsylvania            26.2      29.6      14.5       4.7
Rhode Island            29.1      31.1      -4.6       3.1
South Carolina          30.4      42.4       8.6       6.3
South Dakota            24.2      33.4      -5.5       1.9
Tennessee               30.6      48.2       9.0     -13.4
Texas                    2.5       4.6      22.7      28.9
Utah                    16.2      23.0       3.7      -0.2
Vermont                 26.6       5.2      18.7      37.7
Virginia                26.0      37.4      14.3       2.7
Washington              23.9      39.8      10.0      10.7
West Virginia           11.6      33.6      13.6      27.8
Wisconsin               18.6      22.4       6.9      11.1
Wyoming                -12.9      -7.3     -11.3      70.2
==========================================================
United States           20.5      26.6      10.8       8.4
----------------------------------------------------------

GAO CONTACTS AND ACKNOWLEDGMENTS
========================================================= Appendix VII

GAO CONTACTS

Eleanor Johnson, Assistant Director, (202) 512-7209
Veronica Scott, Evaluator-in-Charge, (202) 512-7039
Ellen Kehoe Schwartz, Assignment Manager, (202) 512-7052

STAFF ACKNOWLEDGMENTS

Jerry Fastrup, Supervisory Economist, and Robert Dinkelmeyer, Senior
Analyst, provided valuable technical advice regarding public finance
issues. 

OTHER ACKNOWLEDGMENTS

This report benefitted greatly from comments from the following
education finance experts:  William Fowler, Education Statistician,
and Frank Johnson, Education Statistician, of the Department of
Education's National Center for Education Statistics; Wayne Riddle,
Specialist in Education Finance, and Liane White, Technical
Information Specialist, of the Congressional Research Service; and
Martin Orland, Senior Fellow, and Carol Cohen, Senior Research
Associate, of The Finance Project. 

