How Class Matters for School Funding

The book’s objectives are twofold. He discusses in some detail incremental reforms in school finance, but he contextualizes them in a Marxist framework. Backer asserts that the background for the gross inequities in school funding is “racial capitalism.” Eschewing the bland terminology of inequality, he locates the inadequacies and unfairness of school finance under a rubric of exploitation and kleptocracy.

It’s not clear how the Marxist framework informs his understanding of the issues at play, except to emphasize that the problems are very bad. There is no question that race plays a huge role in local government finance, but Backer doesn’t spend much time on it. He wants to emphasize the primacy of class.

The drawing of jurisdictional lines for schools, as for elections of all types, has been heavily influenced by patterns of racial residence. Racial segregation breeds income segregation. Racial and income segregation, cemented by housing discrimination that is facilitated by the zoning regimes of local governments, reinforce each other. That’s in part a result of federalism.

The typical left critique about public schools centers on funding inadequacy, which is to be solved by taxing the rich. The response of the Right is to claim that school governance lacks accountability, that too much money is wasted. This goes back to a debate that has gone on for fifty years: In public education, does money matter?

Little reflection is required to recognize that for the well-off, money certainly does matter. They are hell-bent on doing the best for their own children, by whatever means are available. As Backer notes, that includes thieving public revenues from less well-off neighbors.

The Right’s accountability criticism is seldom given content beyond vague screeds about bureaucracy and attacks on teacher unionism. In the 1980s, the Reaganite mantra was that liberal education policy was retarding “excellence.” It should not be doubted, of course, that in the gigantic enterprise that is the US public sector, money is wasted. The trick is figuring out what to do about it. The default reaction of the Right is to just cut across the board, eliminating muscle as well as fat.

A Variety of Obstacles

What is not so obvious in Backer’s stories is that what is in question is not narrowly the depredations of the rich or the capitalist class. The truly rich don’t need or use public schools, which is why they are a driving force behind the privatization movement. But it is rather the rapaciousness of upper-middle-class families that is the foundation for school funding problems at the local level, among many others. Here Backer’s class outlook leads him to gloss over the masses of people who reside between the poles of big capitalist and humble proletariat.

An example is in Backer’s discussion of opposition to referenda on bond issues. Voters often reject proposals for their local government to borrow money for school infrastructure, among other investments. Backer blames this on Christian-rightist hatred for public schools, on religious grounds.

He is also uneasy with voter preferences in general, as he well should be. (Not mentioned in the opposition to bond issuance are old folks whose children are past school age.) In my little corner of Virginia, for instance, minimum lot sizes in zoning regulations restrict housing supply, raising rents and house prices for all who cannot afford grand 5,000-square-foot houses on two-acre lots.

And these are liberals who are benefiting, Democratic voters, leveraging their financial interest with nonsensical celebrations of the “agricultural way of life” or environmental concerns. Similarly, many well-off suburban voters are simply unwilling to adequately fund public schools or redistribute tax dollars to districts that are hurting for resources.

A key failure point in US school funding, as for public services more generally, is its decentralized nature. Insofar as local jurisdictions have different levels of resources, since school funding depends on local revenue sources — usually the property tax — funding levels will vary significantly. A rich jurisdiction can raise much more revenue than a poor one, even if it sets the same tax rate. State governments may or may not take steps to constrain the inequalities. Local jurisdictions are much less able to tax anything, since taxpayers — households and firms — are more mobile across local boundaries.

In the state-local sector, funding-level adequacy is not the only metric. Much revenue is collected by state governments and redistributed to localities, often by formula grants. Patterns of redistribution have been the object of bitter political struggle. Incidentally, for all the noise it can make, the federal government is very much a minority stakeholder in school funding. Backer puts its contribution at 8 percent of education revenues.

As Backer notes, once a victory of sorts is achieved in state funding redistribution, complex implementation is yet another struggle. The profusion of detail favors the conservative status quo, just as complexity favors vested interests in regulatory competition. Political blowback and backsliding are not uncommon.

Reliance on the local property tax presents its own problems, which is why a constant progressive goal is to centralize more revenue collection at the state level, from where statewide property tax revenue can be redistributed, and where other, fairer forms of taxation are more feasible than in local jurisdictions.

Backer proposes labor-managed firms as part of a solution. Whatever you think of them — I like them myself — I don’t see any connection to school funding. A local jurisdiction can reap rich rewards from the taxation of high value–added industries, as my own county in Virginia does from our vast server farms, aka “data centers.” We might as well be sitting on an oil patch. Labor-managed firms, as a source of local public finance, present the same problem as the local property tax: even if we had many more of them, they would be distributed as haphazardly and unevenly as property tax revenue.

One timely story the book mostly misses is the shape of the current MAGA assault on local public schools, which centers on transphobia and criticism of diversity, equity, and inclusion or DEI. Parallel to “anti-woke” attacks on the integrity of public school governance, on teachers’ unions, and on the very content of instruction are the termites burrowing into the vast public revenues devoted to schools.

One such assault takes the form of efforts to bleed public school enrollment for the benefit of private Christian-dominionist academies that demand public subsidies in the form of tax credits. This of course is a close replay of the resegregation of schools in the South in the 1950s and 1960s following the Supreme Court ruling on Brown v. Board of Education. The Christian angle comes up in Backer’s discussion of opposition to bond issues that require referenda, but the sabotage is broader than that.

Another form it takes is attacks on modest efforts at the promotion of diversity, including at the better public schools. In other words, it is again a push for resegregation. Here in Virginia, the gambit was to pit Asian families against African Americans and Latinos. A related divide-and-conquer tactic is to bait minority families with scholarships that reduce revenues for students as a whole. And there are arrangements that amount to group scholarships, also known as “magnet schools.” These are ways to skim off the most motivated parents and dial down community activism.

Financing Public Schools

What can be done? As noted, Backer provides numerous examples of progressive responses. There have been victories. Vermont and Minnesota turn out to offer the best success stories. In the past, state constitutions stipulating a right to education have been the basis for legal claims that demand adequate and fair provision of local education. The formulas used to distribute state revenue to local governments are easy to adjust, in technical terms if not politically.

On the revenue side, Backer defaults to taxing the rich, citing Massachusetts’s “millionaire tax.” Taxation of income or wealth can be extremely productive, but we should understand that a million dollars is not the big deal it used to be. To make serious bank, state taxation has to become seriously progressive, which means not only instituting progressive rates of tax on income but also casting a wide net.

We will not see democratic socialism, or even a robust social democracy, until it becomes possible to increase taxes on the middle class, not just the rich. If the public is not willing to pay for more and better public services, there is something wrong with either our advocacy or the services in question.

In this vein, Backer is on the right track, suggesting a “value-added tax (VAT) for schools.” I would go further to suggest that the absence of a VAT is what separates the United States from other nations where social democracy has progressed further. To move toward democratic socialism, we will need a VAT to supplement revenues from income and wealth taxation.

Another major source of financing is one of Backer’s bêtes noires: bonds. In this, he has much company on the Left. It is of course true that mostly the wealthy can afford to save much, and they often choose bonds to that end. Thus, in simplistic terms, bond interest flows to them disproportionately as an income class.

Does this not enrich them? I would say it does not. The reason is that if a person of means could not buy bonds, he would buy some other asset, possibly one that is marginally less secure; but on the whole, he would not be less wealthy. For the wealthy, it’s always possible to adjust an investment portfolio in the direction of less risk. Instead of Tesla and Google, you own Ford and Bristol-Myers Squibb.

An additional reason to dislike bonds is that their tax treatment — the bond interest income is favored under the federal individual income tax — benefits those with higher marginal income tax rates.

On the other hand, bond finance expands the spending capacity of government. Without it, investment in longer-lived assets, such as infrastructure, would be much more difficult. The rage and confusion around public borrowing already makes public investment difficult enough. The tax treatment of municipal bonds (the term ordinarily applied to both state and local government debt) favors the wealthy, but the facilities this debt finances benefits the working class. That’s the trade-off.

Does it make sense to finance public investment with borrowing? A political reason is that it is easier to sell a project to voters if they don’t have to shell out the principal up front: buy now, pay later. But there is a deeper rationale — the idea of paying for an investment in the same time frame over which it throws off benefits, also known as “pay as you use.” In any case, borrowing capacity broadens the public sector’s spending horizons.

It is possible to imagine a more benevolent lending source than Wall Street, such as a public, national infrastructure bank. Proposals along such lines have surfaced in the past, including from otherwise conventional Democrats. The Biden administration, for instance, committed some serious money to public investment.

Backer alleges that the variations in interest charged to local governments are founded in racism. This is possible, but his evidence does not support his claim. The fact that disproportionately minority districts labor under higher rates does not substantiate a charge of racism. White districts on average, only due to higher average income and wealth, could be safer borrowers. To make the racism case, one would have to compare districts with different racial characteristics that are similar in other respects, especially income and real estate wealth.

I would acknowledge that lenders, the lords of finance, have an overriding ideological interest in racism, one that might cost them some business. That is the racial fundament of US capitalism. It crops up in numerous places throughout history.

For sellers of bonds, the principal factor in how much interest lenders demand is the borrower’s likelihood of timely payments. (A late payment is a default, since time is money.) Sellers consider a jurisdiction’s tax capacity, present and future, including property value and economic prospects. To cloud such an analysis with race costs the business money, at least at the micro level. It’s possible, but you have to believe lenders are so twisted by hate that they will forego business opportunities for the sake of it.

Land-Value Taxation

Getting back to what is to be done, it will also be important to abolish tax and spending limitations that hold back local government. This is not as easy as it might appear. I’m reminded of the failure to eliminate such restrictions in neighboring Prince George’s County, Maryland, then and now under top-to-bottom governance by African American Democrats.

A big policy idea that’s missing from New York’s Mamdani uprising so far, as well as from Backer’s book, is the potential of land value taxation for local government. Wealthy households and business firms can run away from most progressive taxes aimed at them, but land — as the old folks say, “They’re not making any more of it.” You can run, but you can’t take your land with you. (It’s somewhat amusing that so-called modern monetary theory has taken such a hold on the Left, while land value taxation, an idea with a storied history and an extensive literature, is largely ignored.)

On the negative side, it would pay to drive private schools out of the education business, particularly by blocking any access they might enjoy to public funding. These days, the privatizers’ model of choice is charter schools, private outfits that escape prudential regulation applied to public schools and still benefit from public subsidy. Decades ago, the model was private management of public schools, an idea that quickly died on the vine. Further back still, in the 1970s, it was speculated that “teaching machines” provided by defense contractors could replace overpaid teachers. Sound familiar?

As far as accountability or excellence are concerned, my bias is to let teachers teach free of administrative interference, much less the self-interested support from contract-hungry consultants and tech firms. Teachers have given up a lot to join the profession, especially now, so they should be relied upon to do a good job.

When it comes to fears of incipient fascism, Donald Trump tends to suck in all the oxygen. We would be wrong, however, to ignore the roots of MAGA. For example, in 2021, the loathsome Steve Bannon said, “The path to save the nation is very simple — it’s going to go through the school boards.” Backer’s book is a valuable guide to our response.