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Volume 1, Number 1 March 2011


Understanding Texas School Finance Published Quarterly

Bragging Rights Texans love their local high school athletic teams. It is practically impossible to attend a sports event without seeing someone wearing the well-known, oversized foam hand, with the index finger extended in a perpetual “We’re No. 1” position. Not a huge hand, but large enough for the good people in the bleachers across the field (or court) to know that our team is the best and yours is something other than that. No hard feelings. Sadly, when it comes to state and local expenditures per pupil in public schools, Texas is not #1. Apparently, we are number 44, at least according to the 5th edition of the Texas Legislative Study (TLS) Group’s report, Texas on the Brink 2011. No one makes an oversized foam hand with 44 fingers extended and for good reason. Being 44th is nothing to brag about. Ironically, while Texas is number 44 overall, many Texas school districts are funded well enough to claim the #1 status. How can that happen? It happens because Texas public schools are not funded equitability. So while some fortunate Texas districts rise toward the #1 spot, the system holds anything close to the top prize far outside the reach of the majority of districts, even when they have adopted the highest property tax rate the state will allow. In fact, if every district were funded at the same low levels Texas law affords to most districts, we would be looking up at 44th place. And that’s inexcusable. Equity has never been the standard, and every serious plan to get us there has been shot down before it left the statehouse. Hopefully, in the face of multi-billion dollar cuts to public education, the rampant inequities will be much more difficult for those who would normally defend them to pretend to justify them now. In fact, a few promising school finance bills (promising in the sense of structure, not in dollar amounts for schools!) have been introduced that include significant strides towards equity, including some that fully equalize the system. While these efforts definitely represent major steps in the right direction, another funding scheme is emerging with intentions to maintain as much of the inequity as possible, given the state’s fiscal problems. If this effort is successful, the primary burden will once again be carried by the property tax payers and children of districts that have repeatedly been let down by the state leadership. Money makes a difference in the quality of educational opportunities available to children attending public schools. For rational people, this is a settled question. Money does matter, and, yes, well-spent money matters even more. But this fact is not only true with respect to how money is utilized in public schools, it also applies to how money is distributed among schools under state law. With each edition of InDepth, we will do just what the name implies – go deeper to lay out the facts and figures that demonstrate just how badly the current Texas public school funding laws treat children, most likely including your own, and how you are powerless to do anything about it without a change in Texas law. You’re invited to take the data, information and opinions offered in this InDepth and all the editions that follow to equip your district and community so that your school children may benefit from your efforts and know that, at least in their own school and community, they are truly #1. March 2011

Equity Center InDepth

Facing the Facts: School Finance Concepts

Blind to the Truth The Principle of Inequitable Equilibrium Let’s forget how we got into this funding mess for the moment and address the greater question of why the legislature has allowed it to continue for five years. “Allowed” it? Absolutely. And here is some insight as to why that is so. In 2003, Jeffrey Metzler published an analysis of public school funding in the United States, including a discussion of the difficulty in achieving equity and the rarity with which equity gains are maintained. He calls this the inequitable equilibrium of school finance and explains it like this: In many states, the distribution of education resources is primarily a function of the distribution of political power in the state. This distribution is the “equilibrium point,” and in many states it is an inequitable equilibrium insofar as it permits wealthy districts, even at lower tax rates, to spend more per student than poor districts.

That paints a very familiar picture. When the property-poor districts prevailed on the equity question in the early Edgewood legal cases, the legislature adopted a school finance plan in which wealthy, high-funded districts would phase down to a funding level that would still be significantly above the level that low- and mid-wealth districts would phase up to. However, in the end, the state failed to fully implement both the phase down by high-wealth, high-funded districts and the phase up by lower-funded districts. (continued on page 3)

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Equity Center InDepth

Our Silver Sponsor Metzler continues: My hypothesis is that while an outside event, such as a ruling against the state, may temporarily upset this equilibrium, the system often will gradually return to its equilibrium point, or something close to it. Thus, while a state may change its basic approach to education funding in response to outside pressure, the legislature often manipulates that approach in order to restore the previous equilibrium.

In Texas, the “outside pressure” has unfortunately been trumped by a healthy serving of “inside complicity.” Even given multiple opportunities to move to a more efficient and effective funding system, the legislature’s vision for public education focuses on avoiding being sued for breaches of minimum state constitutional provisions. Striving to achieve the minimum the Texas Constitution allows has resulted in a great disparity in educational opportunities and property tax rates between districts. Not unexpectedly, the districts with the highest tax rates are almost always the ones funded at the lowest levels. Metzler concludes that, “...those interested in a permanent shift to a more equitable distribution of education resources must either change the political equilibrium that exists in most states [and certainly in Texas!] or rely on courts to impose solutions on resistant legislatures.” (bracketed comment added) We are at a point where any meaninful change to Texas’ political equilibrium must be led by taxpayers tired of being taxed at unfair rates and parents tired of their children being denied the same educational opportunities routinely available in high-funded districts with lower tax rates. Metzler, J. (June 2003). Inequitable Equilibrium: School Finance in the United States. Indiana Law Review, vol. 36, page 5. Retrieved March 4, 2010,

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Equity Center InDepth

Facing the Facts: School Finance Concepts

Beyond the Capitol Dome

The Chronicles of an Underfunded District The local district impact of school funding decisions made at the state level is usually lost in the magnitude of a system that serves five million children with myriad needs. Statewide decisions are sometimes made like bombs dropping from 40,000 feet. The damage done to the communities below goes unrealized. Let’s imagine for a moment what this local impact looks like, without ignoring the collateral damage… The Scene: Local school district board meeting; a larger-than-normal crowd is present in response to rumors of program cuts in next year’s budget; the next agenda item calls for public comments. Board President: I have quite a few cards here requesting to address the board, so please remember to keep your remarks within the 5 minute limit. Nancy, you’re up first. Nancy: Thank you, Charlie. I had intended to scream that long, but will try to keep what I have to say as short as possible. Nancy continues: From what I have been told, I understand you have been working on next year’s budget and there will be extreme cuts. I’m opposed to these cuts. Last year, you asked us to pass a Tax Ratification Election to raise our tax rate to the $1.17 maximum. This community has always supported our schools and we passed it by a large margin. I want to remind you that you said we would be able to offer more and better programs for our children, to get them started early on the right track and get them ready for college. Is it true you are going to cut programs, but keep the $1.17 tax rate? That just doesn’t make sense to me, and I know it’s not what we want for our children. Board President: Yes, that is true, but it isn’t because it’s what we want to do… The board president turns to the superintendent: Dr. Smith, can you explain what our situation is? I know our taxpayers deserve an answer. Dr. Smith: I imagine you’ve all heard about the massive cuts to public education funding at the state level. We don’t know yet exactly what will happen, but we’re drafting several versions of next year’s budget based on the various options our state leaders are considering. We’re trying to make sense of what the cuts will do to us if any of the options are adopted. No one knows for sure what the final outcome will be, but we are trying to protect essentials. Nancy: Protect essentials? Is that what we’ve come to? We are at the maximum tax rate and we’re “protecting essentials”? Dr. Smith, we never have had a lot of the programs that other districts have. Are they “protecting essentials” too? Dr. Smith: I guess “essential” is in the eye of the beholder, Nancy. Lots of districts in our area will be cut just like us; in fact, the dollar amount of their cuts may be even higher than ours. But, you’re right in that some programs other districts may cut are programs we’ve never even considered having. And depending on what our state legislators decide, even after the cuts some of those districts may still end up with more funding than what we have before the cuts. At least that’s the way it has come out in the past. Nancy: How can that be true? We have the highest tax rate in the area! Dr. Smith: It is absolutely true. In fact, many districts have more money to spend with a $1.04 tax rate and no TRE than our state system allows us to have at $1.17. There are these things called “hold harmlesses” in the system that keep us from all being on a level playing field -- and they take up a lot of the money, too, that would otherwise go into the system for all schools. Nancy: Well that’s just wrong. How can they justify doing that to our kids? To Be Continued...

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Equity Center InDepth

Facing the Facts: School Finance Concepts

The Chronic Underfunding of Weights & Formulas

School funding program weights and formulas are usually based on available funds, not actual needs. Even those that were initially based on actual costs have not been updated in many years, despite substantial changes in costs or in the characteristics of school districts. Most of the current weights and formulas were established in 1984 by HB 72. The formulas for small districts, transportation funding, the weights for compensatory and bilingual education and most of the special education instructional arrangement weights have not changed since that time. In the case of transportation, the formulas are still based on costs districts incurred in the 1983-84 school year. Similarly, the current cost of education index (CEI) is based on school district characteristics and data from 1989. Several of the weights and formulas were known to be inadequate at the time they were adopted, but the real costs weren’t reflected for political reasons or to reduce the overall cost to the state. For example, the initial studies, largely confirmed by subsequent efforts, have consistently shown that funding weights for compensatory (currently 0.2) and bilingual (currently 0.1) education should both be 0.4 or greater. When HB 72 was adopted, the weights were set at lower levels out of concern that the increases from the extremely inadequate previous funding levels were too expensive and politically difficult. Another example is the small district adjustment for districts covering less than 300 square miles. Although initial studies indicated few cost differences with districts covering larger areas, these districts were described as “small by choice� and the formula was arbitrarily reduced by 37.5%. The impact of the CEI on Tier 2 funding was also arbitrarily reduced by 50% for political reasons. Recent attempts at updating the formulas and weights to more accurately reflect actual costs have failed, again largely for cost and political considerations. Studies indicating higher costs for compensatory and bilingual education programs have been routinely ignored. Attempts in the late 1990s and the early 2000s to update the existing CEI were rejected. Maintaining the CEI at current funding levels results in districts entitled to larger indices being short-changed and districts with lower indices seeing them go down, without justification. Another problem with the CEI studies has been the failure to adjust the regression analyses to neutralize the fact that wealthy districts can pay higher salaries than they have to, simply because they have the means. This results in not only being able to hire quality staff in abundance, often taking them from the districts not able to compete with the high salaries, but in retaining teachers of highest caliber for longer periods of time.

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Equity Center InDepth

From the Field: EC Members Speak

Princeton ISD’s Resolution to Ban Target Revenue We are proud to highlight Princeton ISD in From the Field: EC Members Speak, a new section of our InDepth newsletter. In this section, we will share projects, ideas or information from one EC member that may be helpful for all EC members. Princeton’s recent resolution to ban target revenue is the perfect example of how a district can get its board and community involved in communicating a succinct and crucial message to the legislature and the public. PISD used compelling data along with a well-written letter to tell its story of the unfair treatment of children and taxpayers they experience as a result of Target Revenue. (see resolution on page 5) If you’d like to take similar action in your district, visit the Equity Center’s Member Center online. You’ll see a new tab there called Member Forum. There you’ll find PISD’s documents and other items we’ve received from EC members that may help as you communicate with your community. Thanks, Princeton ISD, for sharing your ideas and keep up the good work! Do you have a successful local campaign, op-ed piece, TRE materials or any story from your district that may benefit other EC members or the fight for equity? If so, please call Lauren Cook at 512/478-7313 or e-mail We will post it in the Member Forum on our website and we may highlight it in our quarterly InDepth.

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WRA Architects

Equity Center InDepth

From the Field: EC Members Speak

Resolution IN SUPPORT OF AN ADEQUATE AND EQUITABLE SCHOOL FINANCE SYSTEM WHEREAS, The students of Princeton ISD deserve an adequate and equitable education. WHEREAS, The Target Revenue system does not provide for students in an equitable manner. WHEREAS, The following chart outlines the level of inequity in Collin County.

Collin County Districts Blue Ridge Farmersville Princeton Community Wylie Anna Allen Melissa Frisco Plano McKinney Lovejoy

Target Revenue $4,962 $4,984 $5,035 $5,216 $5,285 $5,496 $5,540 $5,601 $5,786 $5,817 $5,833 $7,534

Princeton WADA 3911 3911 3911 3911 3911 3911 3911 3911 3911 3911 3911 3911

Annual Tier I Funding at Princeton WADA $19,406,382 $19,492,424 $19,691,885 $20,399,776 $20,669,635 $21,494,856 $21,666,940 $21,905,511 $22,629,046 $22,750,287 $22,812,863 $29,465,474

Difference Princeton Would Receive at Target Revenue -$285,503 -$199,461 $0 $707,891 $977,750 $1,802,971 $1,975,055 $2,213,626 $2,937,161 $3,058,402 $3,120,978 $9,773,589

NOW, THEREFORE, BE IT RESOLVED by the Princeton Independent School District that: The Board of Trustees formally requests the Texas Legislature to abolish the Target Revenue System and move to a Formula Based System that provides: • School Districts access to similar revenue for a similar tax rate; and • Adequate revenue to meet the high standards established by both state and local governing entities


Carol Bodwell, President Princeton ISD Board of Trustees

March 2011

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John Murray, Secretary Princeton ISD Board of Trustees

Equity Center InDepth

News & Other Notes

11th Annual School Finance & Legislative Workshop January 30th, 2011

The Equity Center was delighted to host our 11th Annual School Finance and Legislative Workshop on Sunday, January 30th, 2011 at the Austin Convention Center. The record number of attendees, including Equity Center members, non-members, and legislative members and staff, was a true testament to the importance of addressing public school finance during this time of budget challenges. The program began with keynote speaker Senator Dan Patrick, a radio talk show host from Houston who serves as Vice Chair of the Senate Education Committee. Senator Patrick stressed the importance of the responsibilities entrusted to school administrators, a job he acknowledged will not get easier in the face of budget cuts. Senator Patrick discussed his strong support of equity and announced his bill to address class size mandates, Senate Bill 477, which he filed the following day. Wayne Pierce, Executive Director of the Equity Center, followed Senator Patrick’s presentation and unveiled the Equity Center’s plan for a school finance system that is good enough for every child. The plan focuses on bringing districts funded at the lowest levels, who often paying the highest tax rates, up to higher funding levels, while bringing the districts funded at higher levels down to a level that the education community agrees is good enough to offer

high-quality educational opportunities to every child. Pierce also encouraged members to be diligent in their quest for change during the legislative session. “Standing up for Texas children is never wasted effort,” Pierce said. “If the system is not good enough for your child, it’s not good enough for Texas.” The conference also included presentations from Equity Center Deputy Executive Director Ray Freeman, Quorum Report editor Harvey Kronberg, and former State Representative Paul Colbert. Freeman presented the Equity Center’s Money Matters report, prepared by Dr. Bonnie Lesley, which focuses on the value of quality and equity in our education system. Kronberg provided attendees with an analysis of the state’s political environment and answered questions on how to be most effective in influencing the legislative process. Colbert’s presentation focused on the budget, as he shared details about the structural deficit created by House Bill 1 in 2006. He also proposed solutions for cutting the public education budget without directly impacting students. We’d like to thank all of our members and sponsors who participated in the conference. We hope it was a valuable experience and we look forward to seeing you next year!

Our guest speakers from left: Sen. Dan Patrick taking a picture of the impressive crowd; the Quorom Report’s Harvey Kronberg; Paul Colbert.

Left: Executive Director and presenter Wayne Pierce talks with EC members Micheal French and Gail Haterius. Opposite page, from top, left to right: Check-in; Attendees listening to Sen. Patrick’s presentation; Lunch; EC members Mary Ann Whiteker & Dale Morton speaking with newly-elected Representative James White; Executive Director and presenter Ray Freeman talking with EC Grassroots Committee Chair Buck Gilcrease; Attendees taking notes during the “Money Matters” presentation.

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Equity Center InDepth

News & Other Notes

Equity Center Legislative Action Update Here are some of the ways the Equity Center is communicating about legislative issues this session: • Exectuve Director Wayne Pierce has testified before each committee that allowed for public testimony regarding school finance, three times at time of publication. • Over 100 staffers have attended our School Finance 101 classes and workshops since the end of last session. • The Equity Center has sent more than 50 Legislative Alerts/Updates to members from January through mid-March. If you’d like to contact your representatives, go to

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Equity Center InDepth

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Equity Center InDepth

Facing the Facts: School Finance Concepts

Death and Taxes A woman, whose husband had passed away the night before, asked the new pastor to officiate at the man’s funeral the next morning. The pastor agreed, but, not personally knowing the man, set about the community to gather some good things to say about the deceased. Unfortunately, the man turned out to be a scoundrel and absolutely no one had anything good to say about him. The next morning, the pastor was in utter panic as the funeral began, but, as he rose to speak, he thought of a way out and said to the attendees, “I really didn’t know Frank Smith, and I thought it would be more fitting to allow you, the people who knew him best, to tell the good things you remember about him.” It became very quiet and the pastor began to perspire when no one rose to speak. He tried one more time. “Now, surely one of you has something good to say about the departed.” Much to his relief, the pastor saw a hand go up in the back of the church. “Yes! You, sir!” said the pastor. The man rose and said, “I don’t know anything good about Frank Smith, but if nobody else is gonna talk, I’d like to say a thing or two about taxes…” And, so would we. Did you know? The average M&O tax rate adopted by the 100 school districts with the lowest funding per student (WADA) for each penny of adopted tax rate is $1.16, and, with that rate, they can access $5,583 per student. The average M&O tax rate adopted by the 100 districts with the highest funding is 1.00, and at that rate they can access $8,270 per student--after recapture. 292 (29%) districts are considered “Chapter 41,” but only 84, with about 2.2% of the state’s students, are true recapture districts. All of the others receive more in state aid than the amount recaptured, leaving 100% of local property taxes in the district. Recapture is a much-needed revenue stream to the state and without it, state and/or local taxes would rise in most districts. In 1999-2000 the state guaranteed a $35 per student (per ADA) per penny yield for facilities and over 91% of students were in districts that benefitted from it? In 2010-11 the state guarantees the same $35 yield in spite of the facilities costs doubling. Now only a little more than 50% of the students are in districts that can still benefit from the $35 yield, and that % declines each year. There is no recapture on I&S tax revenue, which allows the highest-funded 100 districts to have 8 times the buying power compared to the lowest-funded 100 districts.

With the state facing a very large deficit requiring a reduction in state public education funding, some members of the Texas Legislature want the districts historically funded at the very lowest levels to “share the pain” of funding cuts with the historically highest-funded districts?

Want to learn more about the news and events important to the Equity Center? “Like” the Equity Center on Facebook and “follow” us on Twitter! Our pages will give you quick links to the latest school finance news. On Facebook, search “Equity Center” and “like” our page. On Twitter, go to and click “follow.”

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Equity Center InDepth

News & Other Notes

Senator Robert Nichols Named Champion for Children Based on his history of recognizing the challenges faced by underfunded districts and the inequities that exist across the state, Senator Robert Nichols (R-Jacksonville) was named the Equity Center’s 2010 Champion for Children. In particular, his support of Senate Bill 982 (2009) and the efforts he made for its passage demonstrated his commitment to doing the right thing for all Texas school children. Sen. Nichols received the award at a reception on Tuesday, December 7, at the Peavy Primary Library in Hudson ISD. Hudson Superintendent Mary Ann Whiteker hosted the event with a wonderful turnout of over 40 guests. Superintendents across Sen. Nichols’ district attended to support the Senator and his accomplishments. When receiving the award, Sen. Nichols remarked that when he was first elected and began meeting with his superintendents, he would ask them whose numbers they trusted when addressing school finance issues. He said that his superintendents overwhelmingly responded that the Equity Center was the most trusted source, and thus began his working relationship with the organization. When concluding his remarks, Sen. Nichols emphasized the need for fairness and equity in the system, and reminded all participants that, no matter what, “it’s not about us; it’s about the kids.” Sen. Nichols joins an honorable group of past Champion for Children award winners, including Sen. Kevin Eltife, Sen. Leticia Van de Putte and Lt. Gov. Bill Ratliff.

Senator Robert Nichols with Hudson ISD Superintendent Mary Ann Whiteker and other Region 12 Superintendnets.

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Equity Center InDepth

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Equity Center InDepth

In Your Opinion

Recommendations Regarding State Budget Proposals for Public Schools During this budget challenge it is important that the state of Texas balance its budget in a way that is equitable to students, taxpayers and school districts. If By Daniel King cuts must be made in public education, state leaders should focus on reducing Superintendent of Schools the inequities and inefficiencies of the Target Revenue system and bring all disPharr-San Juan-Alamo ISD tricts into the formula system. I urge state leaders to move all districts to formula funding before cutting funding for any formula district. Approximately 200 districts (in the 2009-10 school year) are funded at the minimum formula level, while others are held harmless above formula through an increasingly arbitrary system of target revenues. One key Senator recently said “All districts must share the pain,” as a matter of fairness. Actually, it is unfair to cut districts that have been “bearing the pain” of being funded at the lowest levels for decades. Currently the lowest funded 200 districts in Texas are funded at an average rate of approximately $2,000 per WADA less than the highest funded 200 districts. That means that a district like PSJA has been operating with $60 to $80 million less in state and local funding per year than the average high target revenue district with a similar student population. Yet we all have to meet the same state expectations – expectations set by the very same people who decided to fund us at such low levels. It is unfair to districts that have been bearing the pain caused by inequitable funding for years to share the pain of this challenging budget situation, unless all districts are placed on formula funding. It is also important that property tax payers across the state receive equitable funding for their local school on a penny per WADA basis. The current Target Revenue system treats taxpayers around the state inequitably. By increasing the number of districts funded on the formulas (eliminating Target Revenue), the state can increase taxpayer equity. In the face of current budget cuts, Governor Perry has requested that state leaders look for maximum savings and efficiencies before looking for ways to increase revenue in the upcoming biennium. Before we identify maximum savings, we must acknowledge the following: 1. The state established an efficient formula for funding all school districts in 2006. Rather than fully implement the formula system, extra funding available at the time was used to place most districts on an arbitrary Target Revenue system as a temporary measure. The state could have used this additional revenue to enhance the formulas. The apparent intent was that over time, as revenue became available, the state would increase formula funding, moving more and more districts onto the formula system, until all districts were funded by the formulas. 2. In 2011, the state no longer has the luxury of funding districts above and beyond the formulas. Distributing revenue above what the state funding formulas require for different types of students and districts is inefficient and fails to find maximum savings. Hold harmless allocations and Target Revenue are inefficient because they fund districts at a higher level than what the state’s formula proposes to be the appropriate cost. It is impossible to maintain the target revenue system and make any legitimate claim to have eliminated all inefficiencies and maximized savings. (continued on page 15)

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Equity Center InDepth

Our Silver Sponsor Now to address efficiency. The best and most efficient system of funding is outlined below: 1. All school districts in Texas should be placed on the formula funding system for the upcoming biennium and thereafter, reducing the cost of public education by billions of dollars and eliminating inefficient funding distribution. Then consider the following: a. If the current formulas reflect an adequate level of funding, the job is done. Calculate total savings to the state. b. If more savings are required and the system is adequately funded, decrease formula funding for all districts in an equitable manner, and calculate total savings to the state. Note that it is impossible to equitably adjust funding unless everyone is funded through the formulas. c. If the current formulas do not provide sufficient funding to face district and student needs, adjust the formulas or increase the amount of money flowing into the formulas. Note that it is impossible to equitably adjust funding unless everyone is funded through the formulas. Once all districts are on formula, then the state can set aside funding for a few carefully selected grant programs that encourage the development of research, evidence-based experimental programs, and best practices. If this possibility emerges after all of the above has been implemented then I would ask the legislature and state leadership to prioritize early childhood education by continuing the pre-kindergarten grant program. Quality early childhood education is key to the success two of the largest and fastest growing demographic groups in Texas: English Language Learners (ELL) and economically disadvantaged children. The public school funding approach offered above will result in maximum efficiency, optimize savings to the state and maximize taxpayer equity in funding for students and schools. It is the only way to true equity and fairness.

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Equity Center InDepth

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