School Foundations - financing of public education

School Administrator, Jan, 1997 by Carol Merz, Sheldon S. Frankel

Local Control or Equity Circumvented?

Forming independent private foundations has become a popular way for local school districts to increase their financial resources. These foundations provide instructional materials and services, sometimes even financing facility renovations and supplementing teachers' salaries, which the districts' operational and capital budgets cannot accommodate.

Despite frequent reports by the news media, no one knows for certain how many foundations exist or how much money they raise. The Public Education Network, based in Washington, D.C., comprises 49 local education funds in 24 states and the District of Columbia. While these groups operate mostly in cities, the Michigan-based Educational Foundation Consultants recently suggested nearly 18 percent of the nation's public schools benefit from funds raised by associated tax-exempt foundations.

The Public Education Network, until recently known as the Public Education Fund Network, likes to make the distinction among two types of school foundations. Those organized by school district leaders typically exist to raise money to offset budget cuts, while the local education funds under the network's umbrella are created by forces outside the school district and tend to work for broader reforms.

School leaders familiar with the work of these funding groups raise significant questions about their efforts and effects. Some see foundations as possible only in affluent districts and worry they have become a way to circumvent funding equity. In some well-off districts with successful foundations, school leaders worry that state government will begin taking such ancillary funds into account in their aid distribution formulas. Others fear such private fund raising will supplant tax support for schools.

With the help of the Spencer Foundation, we recently studied the costs and effectiveness of educational foundations and looked at the broader legal, economic, political, and social implications of private fund raising for public schools today.

Tax Rollbacks

School finance across the nation has been undergoing change since the early 1970s when the decisions in the first equity lawsuits were handed down. Over the same time, states began to experience taxpayer revolts of varying magnitudes, which meant less money for schools or schools had to compete harder for tax dollars. Difficult economic times in various states and changes in school finance systems meant less money was collected under all formulas.

In response to these conditions, some communities formed private educational foundations to raise money in other ways. Most foundations qualified under section 501 (c) (3) of the Internal Revenue Code, meaning their largess was targeted strictly for educational improvements in local school districts. Some funds, however, have assumed a broader social service mission, while others serve the community at large, with schools being just one purpose.

Our study consisted of three parts. First, we examined newspapers across the country for reports of local school foundations. We also surveyed school districts in nine states with varying equity requirements, tax-limitation measures, and general economic conditions. Finally, we interviewed superintendents, attorneys, foundation employees and volunteers, and corporate donors who had experience with school foundations.

Most news coverage reported foundation activities and successes. Most stories appeared in smaller newspapers or in the regional news sections of major newspapers. In recent years the number of stories in major newspapers about the national trend of private school foundations has been increasing. Two of the more interesting were the Los Angeles Times' accounts of increased reliance on school foundation money when the 1994 bankruptcy of Orange County, Calif., left school districts with depleted funds. The Irvine School District asked its foundation to accelerate donations of $10,000 of the $23,000 the group usually raised to cover a revenue gap. Rather than financing extra programs or equipment, the Orange County educational foundations handed over their funds to buy textbooks and repair school buildings.

Educational foundations have received recent coverage in Time, The New York Times Magazine, and The Christian Science Monitor. These stories reported on the phenomenon of private giving to public education and gave examples of successful foundadons and their activities. Most coverage focused on how foundations build broad community support for the schools and help citizens at large participate in the education of the community's children. The Christian Science Monitor discussed the inequities of fund-raising capacity of two suburbs of San Antonio, Texas--Alamo Heights, an affluent area, and Edgewood, a poor district that filed the original lawsuit challenging the state's school finance system. Time highlighted the tension within districts when schools serve populations of differing wealth and donations are collected at the school level, as in booster clubs. Some districtwide foundations have been formed to address these issues. Time concluded, "Plainly, the days when taxpayers subsidized the full costs of pu blic education are gone.