Traditionally, a locality measured its fiscal capacity as a ratio of the district’s property valuation divided
by the number of pupils within the system. This provides a property value amount on a per pupil basis. On the
surface, this seems like a fair means of comparing local capacity. But, this calculation method lacks an
important education component—the students’ needs. A high-poverty school district will have greater
proportional needs than virtually any other school district. Students who come to school well fed and already
possessing basic literacy and numeracy skills do not have the same educational needs as those who come to
school hungry and without years of reading and arithmetic experiences at home.
In addition, all other factors being equal, a school district with 20% of its students identified as eligible to
receive special education services will have a greater need than the district
with 10% of its students receiving special education services. Moreover, an isolated, rural school system has
different needs from those of an affluent, suburban district close to a bustling city’s cultural and intellectual
advantages. To have each district fund education independently based primarily on property wealth puts a far
greater burden on the poor than on the rich. Relying solely on local property values to fund education does not
meet the criterion of education as a state function. Nor does it ensure students’ educational equity.
Today, states have more sophisticated methods for determining capacity, and many states now include
the district’s and state’s income and sales tax measurements as a way to equalize assessments. State
constitutions and laws vary in how each state measures fiscal capacity.3
How school districts measure capacity is the hinge pin for determining how each state equalizes
education funding. For years, scholars have known that wide disparities existed in fiscal capacity within states,
and a single measurement of wealth (such as property) only exacerbated the problem. They know that taxation
needs to be equalized at the state level to accommodate variances in district capacity. In 1906, education
historian Ellwood Cubberley wrote, “any attempt at the equalization of opportunities for education, much less
any attempt at equalizing burdens, is clearly impossible under a system of exclusively local taxation.”4 How
states equalize these funds today is the fodder of state constitutional challenges and Supreme Court cases.
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