s^^ DEPARTMENT OF THE INTERIOR BUREAU OF EDUCATION BULLETIN, 1922, No. 6 STATE POLICIES IN PUBLIC SCHOOL FINANCE By FLETCHER HARPER SWIFT PROFESSOR OF EDUCATION. COLLEGE OF EDUCATION UNIVERSITY OF MINNESOTA WASHINGTON GOVERNMENT PRINTING OFHCE 1922 ''"»<»^ {" ADDITIONAL COPIES OF THIS PUBLICATION MAT BE PROCURED FROM THE SUPERINTENDENT OF DOCUMENTS GOVERNMENT PRINTING OFFICE WASHINGTON, D. C. AT 10 CENTS PER COPY LIBRARY OF CONGRESS RECEIVED JUN261922 DOCUMENTS DlVi«ION CONTENTS. Page. Author's prefatory note iv Declining importance of State school funds 1 Increasing school costs 1 The division of, school costs 4 Diminishing State support 5 Evils resulting from local support 13 School revenues and national aid 17 Federal land grants 20 Federal money grants 20 Existing and potential State sources of school revenue 23 Permanent school funds 26 Fictitious State permanent school funds 28 Productive public permanent school funds 30 Appropriations 33 State school taxes 34 State school mill taxes 36 Poll and miscellaneous taxes 37 Taxes on corporations, special types of property, income, inheritance, and occupations 38 Corporation taxes 39 Income taxes • 40 Inheritance taxes 41 The remedy 45 limited possibilities of permanent school funds 49 Appropiiations versus taxation 49 m AUTHOR'S PREFATORY NOTE. The present monograph has been "wiitten with a view to presenting in a simple and concise manner to the general educational public the most significant conclu- sions reached in the course of an extensive study of school finance, continued for several years and covering a number of States. Some of the data have been taken from bulletins of the Bureau of Education and some from Census Bureau bulletins. By far the largest number, however, have been taken from the following studies by the author and by graduate students work- ing under his direction: F. H. Swift: 1. Public School Finance in Alabama. 2. Public School Finance in California. 3. Public School Finance in Colorado. 4. Public School Finance in Illinois. 5. Public School Finance in Massachusetts. 6. The Declining Importance of State Funds as Sources of School Revenue. Richard A. Graves: 7. Public School Finance in New York. 8. Public School Finance in Vermont. E. W. Tiegs: 9. Public School Finance in New Jersey. Edwin C. Culbert: 10. A Study of State School Taxation and Appropriations in State School Tax States. Frances Elizabeth Kelley: 11. A History of Public School Support in Minnesota. It has seemed unwise, in view of the public for whom the present monograph is designed, to burden the text with footnotes. Fletcher Harper Swuft. University of Minnesota, Minneapolis, November 8, 1921. STATE POLICIES IN PUBLIC SCHOOL FINANCE. I. DECLINING IMPORTANCE OF STATE SCHOOL FUNDS. INCREASING SCHOOL COSTS. In 1890 the United States expended $140,000, 000 for public schools; in 1918 the amount spent was $763, 000, 000, an increase of 445 per cent. If a longer period be surveyed, the increase is even more astounding. Thus comparing the year 1871 with that of 1916, a lapse of 45 years, we discover an increase for the United States as a whole of more than 800 per cent, while the increase in expenditure by our chief divisions ranges from an increase of 675 per cent by the North Atlantic Division to an increase of 3,950 per cent by the Western Division. The numbers of millions of dollars expended for public schools, in the years 1871 and 1916, by the United States as a whole, by the five major divisions, and by the State in each of these di"vdsions which in 1871 ranked highest within its group, are shown by the following table: Table 1. — Millions of dollars expended for public schools, 1871 and 1916.^ Groups and States. 1871 1916 G9 640 29 205 28 248 4 63 3 42 2 81 9 68 6 40 1 8 1 4 1 32 Per cent of in- crease. 2 I. United States II. Divisions: North Atlantic North Central South Central South Atlantic Western m. Representative States: 3 New York (North Atlantic Division) Ohio (North Central Division) Kentucky (South Central Division).. Maryland (South Atlantic Division). California (Western Division) 827 675 785 1,475 1,300 3,950 655 566 700 300 3,100 1 Amounts taken from Report of Commis. of Educ, 1917, vol. 2, p. 80. 2 Computed. 3 States which in 1871 ranked highest within their respective divisions in school expenditures. The vast increases in school expenditure revealed by Table 1 are the result of the interaction of many different factors — the rapid increase both in total and in school population, the lengthening of the legal school year, the extension and increasingly effective enforcement of compulsory education laws, the placing by the community upon the school of a larger and larger number of functions, resulting in the introduction of many new types of studies and activities. It is impossible to consider here these various factors and the part they have played in increasing school costs. We may, however, show what is perhaps the most influential of all the above factors, namely, the growth in average attendance. In like manner, the increase in the annual average expenditure per child epitomizes the net result of the interaction of most, if not all, of the factors at work. Data bearing upon these two factors are gathered together in Table 2, which shows by 10-year periods the increase from 1870 to 1918 in (1) the number of children in average attendance, (2) the annual expenditure per child in attendance, (3) the total annual expenditure. 2 STATE POLICIES IN PUBLIC SCHOOL FINANCE, Table 2. — Increasing attendance and school costs in the Jnited States, 1870-1918. Years. Mil lions of ciiildren in average attend- ance. Average annual expendi- ture per child. Millions of dollars ex- pended. 1870 4 6 8 10 12 14 15 $15 12 17 20 33 44 49 63 1880 78 1890 140 1900 214 1910 426 1915 605 1918 763 Per cent of increa'ie 1^70 to 1918 275 22G 440 In Figure 1 are shown graphically the increase in dollars in per capita cost per pupil in average daily attendance; the increase in costs per capita of total population; and the increase (in cents) in the average cost per day for each pupil attending. Fig. 1.— The total per capita cost of education at various periods, 1870-1918.1 From Table 2 we see that in 1918 there were nearly 4 times as many children in average daily attendance as in 1870, that the expenditure per child was more than 3 times as gi'eat, and the total expenditure more than 12 times as great. Rapid as has been the increase in expenditure, it has not kept pace with the growing demand for educational opportunities and the growing costs. Burgess writes: The same items of school expenditures will cost roughly twice as_ much in 1920 as in 1915. This does not allow for any increase in school efficiency or in school accomo- dations. It is the sum required to buy the same kind and quantity of education the schools offered in 1915.^ 1 Taken from Bu. of Educ. Bui., 1920, No. 11, p. 65. 2 Burgess, W. Randolph. Trends of School Costs, pp. 114-115. STATE SCHOOL, FUNDS I DECLINING IMPORTANCE. 3 It is evident that the increase in school census will make inadequate in 1920 the quantity of education adequate in 1915. Moreover, taking the United States as a whole we may say that educational standards are to-day far higher than in 1915, a factor which will increase still further the expenditure for schools. That as a nation we are failing to provide thousands and thousands of prospective citizens with the educational opportunities essential to individual and national intelligence, morality, and welfare is only too evident. From almost every State come reports of an ominous shortage of teachers, buildings, and equipment, and accounts of frantic attempts to reduce in the name of economy school curricula to the narrow arid state of generations gone. Whatever one's individual attitude toward the situation, whether he believes it is essentially economic or regards it as resulting largely from a lack of public and professional idealism, the fact remains that adequate buildings, trained teachers, and a \T.tal curriculum can be provided only as sufficient revenues are secured and then distributed in a manner to secure results commensurate with expenditures. In other words, the educational crisis of which we hear on every hand is in its last analysis a financial crisis. In its presence we are confi'onted first by the demand that it be met, second by the query how. The most natural answer to the query just stated is by increasing local taxation. Even a cursory study of the history of school support in the United States will show that this is the manner in which increases in school burdens have been cared for during the last 50 years. Not only is tMs true, but it has been a commonly accepted principle that local taxation is not only the most just method of supporting schools but the most wholesome in its effects. But after 50 years of support by local taxation, we find ourselves in an educational situation marked by economic and educational inequalities. On the one hand, we have wealthy communities levying school" taxes of less than 1 mill and able from the proceeds to maintain schools of the liighest stand- ard; on the other hand, exceedingly poor communities levying taxes of over 100 mills, but scarcely able to maintain schools of minimum standard. In view of these and many other facts which might be cited, it would seem that the time has arrived when we should undertake to ascertain whether or not a thoroughgoing modification, perhaps, indeed, a complete reversal of our traditional policies of school support, may not be necessary. May not the solution of our financial difficulties lie in shifting the burden in such a manner as to make the major portion of its weight rest upon the State rather than upon the local communities? This, indeed, is the thesis which the following pages will present. The presentation will be made under the following topics: 1. The present division of the burden of school support between the States and their constituent local units. 2. The division of this burden in the past and the declining relative importance of State funds as sources of school reA^enue. 3. The effect of systems of local support as seen in educational and financial inequalities. 4. Recent notable efforts to secure larger State revenues for schools. 5. Imperative need of vastly increased revenue. 6. Sources from which such revenue may be secured: (1) From already existing or from newly provided sources. (2) From local, State, or Federal funds. 7. Existing Federal sources. 8. Existing State sources. 9. Conclusions and recommendations. 4 STATE POLICIES IN PUBLIC SCHOOL FINANCE. THE DIVISION OF SCHOOL COSTS. In the year 1918 approximately 75 per cent of the $763,000,000 expended in the United States on public schools was furnished by local units — districts, towns, town- ships. Approximately 8 per cent was furnished by the counties and 17 per cent by the State. A more accurate statement is presented in the following table: Table 3. — Division of burdens of school support, 1918, as shoion by percentage analysis of receipts. ^ State 2 16.8 County 7. 9 Local 75. 3 Total 100. How widely this distribution of school burdens among the various contributing units, Nation, State, county, and local community, varies in different States is shown by Table 4. Table 4. — Percentage analysis of school receipts on basis of the units furnishing the same in the United States and six selected States.^ Classes of sources. Federal'. State County Local (i. e., district or town) Balance from previous year Miscellaneous Total. United States, 1918. (2) 16.8 7.9 75.3 e) Alabama, 1915. 52.7 29.2 "is.'i' Califor- nia, 1918. 0.2 17.7 28.1 37.6 16.4 100.0 Colorado, 1915. 53.6 11.3 13.4 Massa- chusetts, 1917. 0.1 2.8 95.9 "'i.'2' New York, 1918. (5) 86.6 '3.' 9' Ver- mont, 1918. e) 21.4 73.3 "5.'3 1 Data taken from studies (published and unpubUshed) of public school finance in States named. ■ 2 Included in State receipts; a negUgible per cent. 3 Not reported. < Includes Federal and county. Tables 3 and 4 have shown the per cent of total school receipts furnished by each type of contributing unit. Our interest in the present case, however, lies especially in the question, what per cent of total school costs has been paid by the State, and further, how widely does the per cent furnished by the State vary? These questions are answered for the year 1918 by Tables 5 and 6, which show (Table 5) the States arranged in seven groups, and ranked on the basis of the per cent of school receipts provided by the State, and (Table 6) the number of States in each group, together with the State ranking highest, median, and lowest. Table 5. — Per cent of school burdens borne by the State.^ I. More than 60 per cent: 1. Alabama 63.7 II. 50-59 per cent: 2. Georgia 50. 4 III. 40-49 per cent: 3. Mississippi 49. 7 4. District of Columbia 48.8 5. Kentucky 46.5 6. New Jersey 45.3 7. Maine 44. 6 8. Texas 41.0 IV. 30-39 per cent: 9. Nevada 37.2 10. Utah 35.6 11. Maryland 31.7 12. Virginia 30. 5 V. 20-29 per cent: 13. Minnesota 28.5 14. Arkansas 28. 2 15. Delaware 26.8 16. Wyoming 26.1 17. Louisiana 24. 1 1 Bu. of Educ, Bui., 1920, No. 11, p. 122. 2 Receipts from Federal sources included in "State." 3 For the year 1917-18, Bu. of Ed. BuU., 1920, No. 11, p. 122, Table 44. STATE SCHOOL FUNDS *. DECLINING IMPOKTl^NCE. Table 5. — Per cent of school burdens borne by the State — Continued. V. 20-29 per cent — Continued. 18. Florida 23.1 19.5 Vermont 22. 3 19.5 California 22. 3 21. Michigan 22. 22. Washington 21.9 23. Arizona 21. 1 24. New Mexico 20. 7 VI. 10-19 per cent: 25. Tennessee 19.6 26. Wisconsin 18. 27. Indiana 17. 2 28. South Dakota 16. 6 29. North Dakota 15. 1 30. Oklahoma 14. 5 31. North Carolina 14. 2 32.5 South Carolina 13. 1 32.5 Idaho 13.1 VI. 10-19 per cent — Continued. 34. Montana 12.9 35. Missouri 12.0 36. Connecticut 10.2 VII. 0-9 per cent: 37. Pennsylvania 9. 6 38. New York 9. 5 39. West Virginia 9.2 40. Nebraska 8.7 41. Ohio 8.2 42. Illinois 7.7 43. Colorado 7.1 44. New Hampshire 6. 4 45. Rhode Island 5. 7 46. Oregon 5. 5 47 . Massachusetts 3.7 48. Kansas 2. 9 49. Iowa 2.2 Table 6. — Per cent of school burden borne by States — Summary. Groups. Per cent. Number of States in group. I ... More than 60 1 11 50-59 1 Ill 40-49 6 IV 30-39 4 V 20-29 12 VI 10-19 12 VII - - 0-9 13 Total 49 Comparative ranks: Highest, Alabama 63. 7 Approximate median, Tennessee 19. 6 Lowest, Iowa 2. 2 Various writers on school finance' have urged that the State ought to furnish from one-third to one-half of the total school revenue. From Table 6 we see that there are only two States in the Union which derive more than 50 per cent of their revenue from tliis source. Thirty-seven States — that is, approximately, three-fourths of the States-— receive considerably less than one-third of their school moneys from State sources. The per cent actually derived from State funds is less, and tha-t derived from local sources is greater than appears from the above tables for two reasons: (1) The moneys reported as State receipts in Federal bulletins from which our data are taken include certain Federal moneys, notably proceeds from Federal forest reserves and from Smith -Hughes grants; (2) because "nonrevenue receipts," i. e., local moneys derived from sale of school bonds, from temporary loans, and from sale of school prop- erty, are not included. DIMINISHENG STATE SUPPORT. However interesting and significant the distribution of the school burden at the present time may be, a matter of greater significance is the trend of tliis distribution. Are the States shouldering a larger or a smaller portion of the total cost from year to year? The answer to this question in the negative has already been suggested in an opening paragraph. Consider first the tendency in Massachusetts, New York, and Vermont — three of the oldest States, States in which consequently conditions may be 88213°— 22 2 6 STATE POLICIES IN PUBLIC SCHOOL FINANCE. expected to be more stable, and tendencies less varying than in some of the newer States. From these three States pass to a newer State, California, noted for its readi- ness to adopt new and progTessive educational policies. A special interest attaches to California, moreover, for the reason that it has been a pioneer in raising school revenues by placing State taxes on corporations and upon inheritances. After con- sidering the tendencies in these four States, attention will be turned to the United States as a whole. The tendencies in the four States just named are pTesented in tabular form by Tables 7, 8, 9, and 10, which follow: Table 7. — Neii} York school revenues, 1905-1918.^ [Amounts stated in thousands of dollars.] Sources. 190.5 1908 1912 1918 4,235 30.3 32,716 11,011 4,719 338 49,922 1,460 5,232 332 53,331 1,616 7,520 358 71,797 3,085 Total 48, -866 . 50, 440 60,512 82,762 Percentage analysis:_ 8.7 .6 66.9 23. S 8.4 .6 88. 4 2.0 8.7 . 5 88.1 2.7 9.1 .4 80.8 3.7 1 Data taken from an unpublished Study toy E-. A. Graves, graduate student in the college of education. University oi Ttf innesota. 2 In the"New York State official reports, income from permanent funds is included in the State appro- priation; in the present study the revenues received from those two distinct sources are separated. From Table 7 it is seen that the per cent oi the total annual school revenue in New York furnished by the State has varied very slightly during the last 14 years. There is, moreover, no evidence of any general tendency toward a decline of the importance of the State as a source of revenue. The most marked change appears in the per cent of revenue derived from local taxation. In the year 1905 this source furnidied about 70 per cent, but three years later it contributed over 88 per cent, and appears to have continued to furnish approximately this proportion of the revenue in each of the succeeding years presented in the table, although falling off slightly in 1918. Comparing, however, the large proportion of the total revenue, only a little less than one-fourth, reported in 1905 as derived fi'om miscellaneous sources and the per cent derived in that year from local taxation, with corresponding data for succeeding years, it is seen that the per cent of increase furnished by local taxation is ahnoat, thongh not exactly, equal to the per cent decrease reported as derived from miscel- laneous sources. It may well be, then, that the marked increase in local taxation after 1905 is more apparent than real; for the increase in the per cent of total revenue assigned to this source may he dne to the fact that revenues reported in 1905 as de- rived from miscellaneous sources were in succeeding years included among those reported as local taxation. "Wliether this be true or not, the fact remains that the per cent of the total revenue derived from State sources varies very slightly throughout the 14-year period under consideration, despite the fact that the annual expenditure during this period increased from 48 to 82 millions of dollars. From this considera- tion of tendencies in the wealthiest State, turn to Table 8, which presents the case of one of the poorest States, Vermont, a State which in fact ranked forty-fifth in the year 1918 in taxable wealth, there being only four poorer States in the entire Union. STATE SCHOOL. FUNDS; DECLINING IMPORTANCE. 7 Table 8. — Source and per cejit analysis of Vermont school rceeipt-'i, 1909 and 1918.^ Sources. Amounts, in thou- sands ot dollars. Per cent of total receipts. Decrease 1909 191S 1909 1918 ( + ). State 269 1,192 42 32 336 1,836 88 19 25 17.5 77.6 2,8 2.1 14.6 79.7 3.8 .8 1.1 -2.9 +2.1 + 1.0 -1.3 + 1.1 Total 1, 535 1 2. 304 IGO.O 100.0 1 Data taken from an unpublished study by Richard A. Graves, graduate student In education, college of education, University of Minnesota. Comparing the opening and closing years of the decade of school support in Ver- mont tabulated in Table 8, no startling changes are discovered. In 191S, town taxa- tion furnished 2.1 per cent more of the total school revenue than in 1909, and the State furnished 2.9 per cent less. This decline, slight as it is, is significant, as it indicates the tendency in an exceedingly poor State to throw a heavier and heavier share of the school burden upon local units already in hundreds if not thousands of cases heavily taxed. We may note further that, whereas in 1918 Vermont ranked twenty-seventh, 14 ranks below New York (thirteenth) with respect to annual current expenditm'e per pupil in average attendance, Vermont ranked sixth and New York ninth with respect to total expenditure for schools on each $100 of estimated taxable wealth.^ From this survey of tendencies in the richest and in one of the less wealthy States in the Union, turn to Massachusetts, a State which has long led in the policy of placin.g an overwhelming portion of the State financial burdens upon local units. Table 9. — Massachusetts school receipts, 1905, 1915, and 1916.^ Sources. Per cent of revenue. 1904-5 1914-15 1915-16 State: 1.21 .87 0.77 1.05 0.76 1.00 Total State 2.08 1.82 1.76 Local: Tax . . 96.57 1.35 97.22 .96 97.10 1.14 Total local 97.92 98. 18 98.24 1 Data taken from Reports of Commis. of Educ;, 1905, 1 : 411, Table 13, and 1917, 2 : 52 and 79. The commissioner's data do not include State appropriations for vocational education. Such an omission, of course, reduces the per cent derived from State appropriations. From Table 9 we see that in Massachusetts at the end, as at the beginning, of the 12-year period under consideration the State bore an almost negligible share of the burden of financing the schools. Throughout this period there was almost no change in the per cent of the revenue furnished by the local units. There was a slight decline in the year 1918 (not represented in Table 9), but this decline was only thirty-two him- dredths of 1 per cent. The increase in the proportion of the total revenue furnished J These ranks refer to the rank of States among the 49 imits (including District of Columbia) constituting the United States. Ranks computed from data taken from Bu. of Educ, Bui., 1920, No. 11, pp. 148-149, 153. STATE POLICIES IN PUBLIC SCHOOL FINANCE. by the local units was also less than 1 per cent, being in fact only twenty-two hun- dredths of 1 per cent. In the case of Massachusetts we have a Commonwealth for centuries wedded to the idea of local support and local control and correspondingly hostile to State support. Table 10 shows for the years 1909, 1913, and 1918 the total revenues received in Cali- fornia for both elementary and secondary schools. The total revenue furnished by the State to elementary schools is known as the "State school fund" and the total State reveniie furnished to secondary schools as the "State high-school fund." Table 10 shows the total "State school fund," the "State high-school fund," and the quota available from each for each pupil enrolled in the elementary and secondary schools, respectively, for the years indicated. Table 10. — California school revenue aiid State aid per child enrolled.^ Total re- ceipts for elemen- tary and secondary schools, millions of dollars. Thousands of pcr- pils enrolled in schools. State school fund. State high-school fund. Elemen- tary. Second- ary. Thou- sands of dollars. Per pu- pil en- rolled. Thou- sands of doUars. Per pu- pil en- rolled. 1909 12.8 20.7 29.7 312 377 448 34 58 126 5,741 6,614 6,139 S18. 38 14.85 13.68 333 572 948 S9.72 1913 9.85 1918 7.48 1 From an unpublished study by the author. From Table 10 we see that during the 10 years 1909 to 1918, although the annual expenditure for schools increased from $12,000,000 to $29,000,000, the total amount furnished by the State decreased per pupil enrolled in the elementary schools from $18 to $13 and in the secondary schools from $9 to $7. It was early in this decade that California abolished her State property school tax and adopted the policy of drawing her State school fund and her high-school fund largely from the proceeds of taxes on corporations and inheritances. Table 11 presents a comparison of the annual proceeds of property and poll taxes combined, with those of corporation and inheritance taxes. Table 11. — Corporation and inheritance taxes in California versus property and poll taxes as sources of school funds, 1909-1918.^ [Numbers in columns indicate dollars in millions and tenths of millions.] State school fund, annual total. Total de- rived from pro- perty tax and poll taxes. 2 Proceeds from taxes.2 Years. On corpora- tions. Inherit- ances net amount paid to State. Total. 1909 6.7 0.0 6.1 6.4 5.6 5.9 6.9 6.9 0.0 6.1 3.9 4.0 4.1 1.2 1910 1911 1912 10.3 10.8 12.9 13.5 14.9 15.6 16.3 1.0 1.5 1.6 2.9 3.1 3.8 2.7 11.3 1913 12.3 1914 14.5 1915 . 16.4 1916 18.0 1917 . .. 19.4 1918.. . 19.0 1 Data in Table 11 taken from an mipublished study on " Public School Finance in California," by the author. 2 Computed. 3 No property taxation after 1912, although a small revenue continued to be derived from delinquent poll taxes. STATE SCHOOL FUNDS : DECLINING IMPOET^NCE. 9 The constitutional amendment which prowled for the corporation tax specilied that public schools were to have the first claim upon the proceeds of this tax. The first year in which this tax became effective, 1912, it produced approximately two and one-half times as much revenue as had been produced by the school property tax and poll taxes in their most productive year, 1911. The total State school fund and high school fund in 1913 amounted to 6.1 millions and in 1918 to 7 millions, whereas in these same years the proceeds from State corporation taxes amounted to 10.8 millions (1913) and 16.3 millions (1918). It is e\ident that the decline in State aid per child enrolled — in other words, the decline in the relative importance of State-provided school funds — was not dire to the fact that the revenue produced by State corporation taxes was inadequate to provide a larger share of the school costs. The explanation lies rather in the fact that California, although having more than sufficient revenue, PER CSST OF SCHOOL SSYSmrB FKOM: 80 70 6o $0 40 20 30 40 50 60 Fig. 2. — Percentage of total school revenue derived from the various sources, 1S90-191S not merely to maintain her former quota per child but to increase the same, was un- convinced of the necessity of doing so. She accepted and practiced a principle accepted and practiced nationally, namely, that increases in school costs should be financed more and more by the local units, and that the State should shoulder less and less a proportion of the financial burdens of public education. In 1920 California recognized the necessity of a changed policy and took what is perhaps the most radical step yet taken by any State, in the direction of State aid, By a constitutional amendment (Art. IX, sec. 6) adopted November 2, 1920, she provided that the State shall grant $30 annually for every elementary or high-school child in average daily attendance. The tendencies we have discovered at work in individual States assume far greater significance when we discover that they characterize the history of school finance throughout the Nation, Figm'e 2 and Table 12 show the increase in the proportion I Taken from Bu. of Educ. Bui. 1920, No. 11, p. 54. 10 STATE POLICIES IN" PUBLIC SCHOOL FINANCE. of the total public school receipts derived from local sources, and the steady decline in the proportion furnished by the State during a period of 28 years, 1890 to 1918. Table 12. — Percentage analysis of public school receipts in United States, 1890-1918} A. Percentage analysis of total receipts. 1890 1895 1900 1905 1910 1915 1918 23.75 67.89 8.36 23.4 67.0 9.6 20.3 68.9 10.8 19.06 69.64 11.30 18.1 72.1 9.8 18.35 77. £0 4.15 3 16.8 75.3 7.9 Total 100.00 100.0 100.0 100.00 100.0 100. 00 100.0 B. Percentage provided by permanent funds,^ State taxes and appropriations. and by 5.45 18.30 4.7 18.7 4.2 16.1 4.37 14.69 3.2 14.9 2.90 15.45 2.9 13.69 Total 23.75 23.4 20.3 19.06 18.1 18.35 5 16.9 1 All data from reports of U. S. Commissioner of Education. 2 Includes some Federal moneys. s Includes S639, 057 of Smith-Hughes moneys. 1 Includes a negligible percentage from local funds. , ^, ^^ . , 6 This total is not identical with the figure given as State sources in part A of this table. The United States commissioner in this latest bulletin uses a different system of computation, so that changes were necessary in order to get data comparable with earlier years. The slight difference might be the result of omission of small Federal contributions included generally in State receipts. Table 12 reveals a continuous decline in the percentage of the total burden of school support borne by the State. Recalling that in New York and in Massachusetts the per cent of the total school revenue contributed by the State, although small, varied little throughout a considerable number of years, we are led to inquire whether the importance of the State as a source of school revenue may not vary considerably with the section of the country studied. The answer to this question is presented by Table 13, which shows the per cent of the total school revenue furnished by the State in the United States as a whole and for each of the major divisions in the years 1890, 1905, and 1915. It should be noted that the divisions are arranged in the order of the per cent contributed by the State in the year 1890. Table 13. — Decrease in per cent of total school receipts furnished by the State in the United States and iyi its five major divisions. Divisions. 1890 1905 1915 Decrease 1890 to 1915 (per cent). 23.75 17.11 17.61 29.40 46.39 65.23 19.06 12.63 14. 23 32.94 40.70 47.82 18.35 13.78 14.24 25.90 27.29 35. 72 5.40 Divisions: 3.33 2.37 3.50 19.10 29. 51 From Table 13 we see that the least decline in the importance of the State as a source of school revenue lies in the North Central Division, which in this respect ranked next to the lowest of the five groups in 1890, and the greatest decline in the South Central Division, the division which in 1890 ranked highest. The only group in which any increase appears in the years here presented is the Western. In thia group in 1905 the State furnished 3.5 per cent more of the total school revenue than it STATE SCHOOL FUNDS: DECLININO IMPORTANCE, 11 did in 1890. The reason for this is to be found in the fact that, of the 11 States included in the Western Division, 7 derived no revenue from permanent school funds in 1890, ^ whereas in 1905 each of these 7 derived a considerable percentage of its total school revenue from this source; moreover, of these 7 States 4 had been admitted recently; Montana and Washington were admitted in 1889, Idaho and Wyoming in 1890, Utah in 1896, while Arizona and New Mexico were not admitted until 1912. Table 14 Bhows the per cent of total revenue derived from permanent common school funds in the Western States in four selected years, and also the date of admission of these States. Table 14.: — Ptr cent of school reventt^ derived from pernmnent mmon school funds in Western Division. States. Year of admis- sion. 1890 1905 1915 1918 Western Division 29.4 32.9 25.9 5.1 California 1850 1859 1864 1876 1889 1889 1890- 1890 1896 1912 1912 0.18 .48 1.13 .27 .00 .00 .00 .00 .13 .00 .00 6.0 13. 53 2 47. 19 4.97 3.6 8.0 10.2 49.3 21.2 1.18 7.4 0) 6.67 26.83 7.41 12.5 6.65 12.63 38.4 4.62 24.51 1 3 Oregon 5 3 Nevada 19 7 Colorado 6 8 Montana 19 7 Washington. 5 9 Idaho Wyoming 12.8 24 1 Utah.. .... 4 6 Arizona New Mexico 4.2 20.2 1 Not reported separately. 2 For 1906. The greatest decrease in any of the di\T-sions included in Table 13 in the per cent of revenue furnished by the State was in the South Central and South Atlantic groups. Table 14 shows this decline in each of the seven States included in the South Central group, and in three South Atlantic States, namely, Georgia and the two Carolinas. These three States have been selected because in 1890 they ranked highest in the South Atlantic Division in respect to the per cent of their total school revenue derived from State sources. In considering the negligible per cent of total school revenue derived from local sources in 1890 it should be borne in mind that local taxation for schools is compara- tively new in the South. In many States it was not even permissible until very recently, e. g., in Alabama it was not permissible until 1901. Table 15. — Per cent of total school receipts provided by the State in the South Central States and three South Atlantic States in 1890 and 1918. 1890 1918 Increase (-t-)or States. Rank.a Per cent. *> Rank." Per cent. c decrease (-),per cent. Alabama 5 8 7 6 10 9 4 1 2 3 67.7 48.9 56.5 59.3 37.2 44.3 77.4 82.7 81.7 79.8 1 6 2 4 7 3 9 10 8 63.7 28. 2 50.4 40.5 24.1 49.7 14.2 13. 1 19.6 41.0 — 40 Arkansas -20.7 Georgia.. — 61 Kentucky —12 8 Louisiana — 13. 1 Missis.sippi -1-5.4 North Carolina -63.2 South Carolina —69.6 Tennessee -62.1 Texas — sas a Computed. 6 Computed from data of Rep. of Commis. of Ed., 1889-90, 1:22, by adding per cent derived from permanent funds and rents to per cent derived from State taxes. c Column 2, Table 44, Bu. of Educ. Bui., 1920, No. 11, p. 122. » Rep. of Commis. of Educ, 1889-90, 1, p. 22, Table 10. 12 STATE POLICIES IIS^ PUBLIC SCHOOL FINANCE. Of the 10 States inciuded in Table 15, ^lississippi is the only one in which a larger per cent of the total school reA^enue came from the State in 1918 than in 1890. In two States, Alabama and Georgia, the difference between the proportion of school revenues furnished in 1890 and 1918 was small. In every one of the rernaining seven States the difference was marked, varying all the way from a decrease of 12.8 per cent in Kentucky to approximately 70 per cent in South Carolina. In 1918 (see Table 6) Fig. -Rise and decline of the State as a source of school revenue. the States ranking highest, median, and lowest with respect to per cent of receipts furnished by the State, were Alabama, Tennessee, and Iowa. In order to amplify our comprehension of the history of the State as a factor in school finance, it has seemed v/ell to show here in Table 16 the part played by the State in the three States just named and in the two States ranking closest to each of the three. The rise and decline of the State as a source of school revenue in Alabama, Georgia, Kansas, Iowa, and in the United States is shown graphically in figure 3. EVILS FKOM LOCAL SUPPORT. * Table 1G. — Per cent of total school receipts furnished by the State} 13 states. 1X90 1895 1900 1905 1910 1915 1918 Alabama 67.76 5n. 53 44.29 7.07 81.69 19.53 3.35 7.23 2.90 80.6 72.9 81.9 .0 87.8 16.3 1.6 9.2 2.8 82.3 64.4 59.4 91.5 7.2 13.3 1.2 9.4 1.4 65.57 66.40 73.34 60.02 19.66 17.29 2.08 7.90 8.02 74.1 53.0 55.2 7.8 15.9 15.8 2.0 6.1 7.5 52.72 44.82 51.58 30.13 19.18 20.56 1.82 3.53 8.31 63.7 50.4 Mississippi New Mexico 49.7 20.7 19.6 Wisconsin Massachusetts Kansas Iowa 18.0 3.7 2.9 2.2 1 Includes certain moneys derived from Federal grants. Needless to say, the only one of these available to all the States was the Smith-Hughes grant, first apportioned among the States in 1918. II. EVILS RESULTING FROM LOCAL SUPPORT. ' The preceding chapter has shown conchisively that throughout the last 50 years the importance of the State as the bearer of school financial burdens has steadily declined. Despite a certain degree of progress in matters of centralization, administration, and control, and despite utterances of educational theorists and court decisions to the con- trary, schools in the United States continue to be in fact local institutions, dominated by the traditions and policies of district and town systems. These traditions have proven stronger than laws and judicial findings. Our schools have not only never ceased to be from the standpoint of support local institutions, but they have tended to become more and more so with each decade of our national history. It is true that the State directs the people of each community to maintain a school, but having done this, it says in effect: "Whether you maintain a good, a poor, or a thoroughly worthless school is largely a question to be decided by you. " Ever since Connecticut nearly ruined her schools (1801-1840) by attempting to support them entirely from the proceeds of her permanent school fund, local support has steadily gained favor both in theory and in practice until it has become little less than a fetish. The suggestion that the State levy a school tax sufficient to pay for the major part of school costs would to-day meet with violent opposition in nearly every State in the Union. Nevertheless, the fact remains that the local units upon which the burden is now placed are so unequal in wealth, and consequently in their ability to finance schools, that it is the height of absurdity to expect them to offer educational opportunities approaching any degree of equality. In the year 1914-15 counties in Colorado varied in wealth all the way from $22,000 to $1,800 per school child. It is evident that these differences, so far as financial ability is concerned, represent differ- ences in ability to provide school facilities. Even greater inequalities exist among the local units, i. e., school districts. Thus in Conejos County the valuation per child varied from $617 (district 29) to $26,500 (district 15). Similar conditions are to be found in varying degrees in every State in the Union. We must, however, be content with presenting the facts for three States, Massachu- setts, New York, and Colorado. Table 17 shows how widely the 63 counties composing Colorado varied with respect to their financial ability to support schools, the aid they received from the State, and the per cent of their total support derived from the State the county, and the district. 88213°— 22 3 14 STATE POLICIES IN PUBLIC SCHOOL FINANCE. Table 17. -Comparison of the financial ability and school burdens of certain selected counties in Colorado, 1914-15. Counties. "Washington Larimer Alamosa Hypothetical median . Pitkin El Paso Eagle Cheyenne Park Valuation of county per school child 6-21.1 Amount. SI, 822 3, 516 4, 4.50 5, 057 5,615 6, 003 7,291 9, 542 22,674 Rank. General county school taxi in mills (county high- school tax in- cluded) .2 Received from State fund. 2.00 1.25 1.10 l.GO U.QO 1.50 1.74 .60 1.66 Per child in average daily attend- ance.! e) 5.46 3.51 3.66 3.67 3. .38 3.65 3.80 3.07 a 61 Per teacher emplov- ed.i" 349 40 81 65 [■65 72 78 43 30 27 Per cent &f total school support received from— 3 State. 12 14 8 6 i7.3 5 5 6 4 3 'ounty. 27 9 19 15 6 17 19 27 12 17 31 Dis^ trict. 61 87 73 79 !>76.2 76 68 82 79 66 1 U. S. Bu. of Educ, Bui., 1917, No. 5, p. 37, Table 15. 2 Ibid., p. 43, Table 23. 3 Ibid., pp. 3.5-36, Table 14. ■• Data unavailable; see ibid., p. 38. ^ Computed. 8 Median in valuation, as wiU be evident from rank. From Table 17, we see that Park County, whose valuation per school child is over $22,000, receives more State aid per child than Cheyenne, Pitkin, or Larimer County, each of which has a far lower valuation and whose local tax is higher. Moreover, Park County, which is approximately four times as rich as Pitkin County, levies a county tax only eight-fifteenths as great, and whereas Park County receives from the State $3.61 per child, Pitkin receives only $3.38. Baca, the poorest of all counties, levies the highest county tax; yet of the counties selected, four, Alamosa, Pitkin, El Paso, and Larimer, receive much larger quotas from the State per teacher employed. The inequalities resulting from Colorado's present system of school support are even more evident when we compare district with district than when we compare county with county. Table 18 shows the wide variation existing between certain districts in Conejos and Otero Counties. Table 18. — A comparison of financial ability and distribution of school burdens in two counties (Conejos and Otero) of Colorado, 1914-15. Rank in val- uation. 'Valuation of dis- trict per census child.i Received from State fluids. District tax in mills. 3 Per cent of total support received from— Counties and districts. Per child in average daily attend- ance. Per teacher employ- ed.2" State. County. Dis- trict. Conejos County (27 districts):"' 29 1 7 $617 1,234 2,072 2,072 6,117 26,545 3,374r .5,752 7,475 9 7,792 8,109 10,227 21, 544 S9.24 5.65 3.49 4.38 2.93 3.69 3.08 2.42 5.32 2.95 2.91 2. 98 3.08 S171 181 93 98 32 59 68 81 60 65.50 77 67 64 7.00 1.06 3.20 3. 07 2.02 .68 6.5 2.1 2.7 2. ,55 2.7 2.6 2.0 21 26 15 14 9 7 5 2 6 7.1 7 7 5 35 47 24.3 24 16 12 10 4 11 12.5 14 13 9 44 26 27 61 5 147.... 14 21 27 1 6 ni 62 16 75 15 . . 81 Otero County (22 districts) :' 11 85 29 94 238. 83 Median ' 81 6 98 12 17 22 79 20 80 13 86 1 U. S. Bu. of Educ, Bui., 1917, No. 5, p. 39, Table 18. 2 Ibid., p. 40, Table 20. « Ibid., p. 42, Table 22. < Ibid., p. 41, Table 21. 5 The numbers by which the districts are named exceed the number of districts reported, Otero County only 22 districts are reported, but the sixth in rank is district 29. 6 Computed. 7 Median in valuation, as is evident from rank. 8 The median lies between the two districts 22 and 9. 9 A hypothetical district, included to indicate median valuation. ;., in EVILS FROM LOCIAL SUPPORT. 15 From Table 18 it is evident that in Conejos County, district No. 29; whose val- uation per child is just half that of district No. 26, taxes itself nearly seven times as much, receives 5 per cent less State aid, and 12 per cent less county aid, and furnishes from district revenues 17 per cent more. District- 15, whose valuation per child is more than four times that of district 16, receives from the State $27 more per teacher employed and $0.76 more per child in attendance. District 16 levies a tax of 2.02 mills, whereas district 15 levies a tax of only 0.68 mills, yet the latter district's val- uation is so much greater that she derives per cent more of her total school moneys from district revenue than does district 16. Similar conditions exist in Otero County, as will be readily seen by comparing district 29 with 23, or 23 with 9, or 20 with 13. Flagrant inequalities in educational opportunity are inevitable in a State where the schools depend for their support upon units so unequal in wealth and where the method of apportioning State aid is such as to exclude any recognition of these in- equalities. This expectation is amply borne out by the facts presented in Table 19. This table, based upon a recent study covering a period of eight years, is much more significant than a table presenting conditions in a single year. Table 19. — County inequalities of educational opportunity in Colorado. Item I — EnTollmeDt. Item II — School year. County. RaoLk.s Name. Children not enrolled. 1 County. Per cent. Num- ber. Rank.'' Name. Length of year. Sedgwick Kiowa . . . El Paso.. Elbert . . . Baca 46 117 4S3 4.55 278 Crowley Cheyenne.. . I Douglas Jackson Las Animas Pueblo Montezuma Baca 167 151 141 141 141 141 133 Item III — Teachers'salaries. •Item IV — Expenditure per child. County. Teachers' average monthly salary. li County. Annual ex- penditure Rank.3 Name. Rank.7 Name. per child enrolled.* 1 $81.00 64.50 59.00 53. .50 39. 00 1 16 31 46 62 San Juan $77. 31 15 Otero San Miguel Moffat Routt CostiUa 50.45 28 Bent 40.42 45 60 Kiowa Washington 33.65 21. 39 1 Ssjrgeant, C. G. Rural and Village Schools of Colorado, p. 14, Table 2, per cents computed. 2 Ibid., p. 4rl, Table 9. 3 Based on reports of 60 counties. Ranks computed; an eight-year average, 1906-1913. ♦Based on reports of 61 counties. Ranks computed; an eight-year average, 1906-1913. 5 These four counties fall in the same rank, having the same length of terra in days. 6 Ibid., p. 56, Table 13. ' Based on reports of 62 counties. Ranks computed; data for the year 1914-15. » Rep. of Colo. Sch. System, p. 60, Table 34. (Bu. of Educ, Bui. 1917, No. 5.) Table 19 shows us that during the eight years from 1906 to 1913 the proportion of children not enrolled in school varied aril the way fi'om 7 to 41 per cent, the school year from 98 to 167 days, teachers' average monthly salary from $39 to S81, and the expend- iture per child from $21 to |77. In a large number of States the school inequalities are far worse than in Colorado. A complete statement would necessitate an intensive survey of each of the 49 unite constituting the Union. We will confine further consid- eration to certain phases of the school situation in Massachusetts and New York. 16 STATE POLICIES IJST PUBLIC SCHOOL FUTAITCE. The local units in Massachusetts are cities and towns. For purposes of school admin- istration and support, these units are divided into four classes as follows: Class I, including 38 cities; Class II, including 75 towns, "population 5,000 or over; Class III, 116 towns, population less than 5,000 which maintain a high school; Class IV, 125 towns, population less than 5,000 which do not maintain a high school. In 1918 the average length of the school year in Massachusetts varied from 194 days (9 months and 2 weeks) in Brockton to 144 days (7 months and 2 days) in Peru. The average length of the school year for the 38 cities included in Group I was 176 days. Within this group the year varied from 194 days in Brockton to 158 days in Somerville. In other words, a child living in Somerville would have been excluded from school over 7 v\^eeks (36 days) during which a child in Brockton would have been able to go to school. Table 20 presents a comparison of the length of the school year of Brockton with that of the six cities in Class I which maintain the shortest school year. Table 20. — Inequalities in length of school year in Massachusetts, 1918^ Cities. Length of school year, in days. Comparison ■with Brockton. Num- ber of days less. Number less of— Weeks. Days Brockton . Lynn Revere Medford... Pittsfield.. Peabody . . Somerville 194 165 163 160 158 29 1 Table 20 based upon Mass. Statistics of Pub. Schs., 1917-lS. In Table 21 a comparison is presented of a group of New York rural one-teacher schooll districts all located in the same town. The advantage of such a comparison is that the conditions are probably as approximately equal as could be found when viewed from the standpoint of the burdens of maintenance and of the educational standards which ought to be met. Table 21. — Comparison of financial ability,^ effort,'^ and State aid of seven one-teacher rural school districts in town of Andover, N. Y.'^ District No. Enroll- ment. As- sessed valua- tion per child en- roUed.'' Total assessed valuation. Tax rate. Cost per child en- rolled. Total ex- pended. Total State aid. State aid Pfr child en- rolled.'' 9 13 13 22 11 17 27 21 S5, 555 4,901 4,211 2,620 1,787 1,750 1,476 S72, 209 63, 718 92, 640 28, 820 30,386 47,245 31,000 SO. 00387 .00517 .00328 .00867 . 00987 .00618 . 00750 !s35. 00 38. Oi 19.41 41.03 28.39 15.88 20.89 8454. 95 495. 51 428. 11 451.37 482.65 428.84 438. 79 $125 125 135 185 185 150 185 $9.61 7 9.61 6 6.13 5 16.81 2 . 10.93 3 5.55 4 8.80 1 1, e., assessed valuation, not as accurate as measure of abiUty as true valuation. 2 1, e., tax rate and expenditure. 3 Table 21 is taken from an unpublished study by Richard A. Graves, graduate student in education, Univ. of Minn., based upon N. Y. Educ. Dept. Rep., 1917, vol. 2, pp. 681-684. ■' Computed. SCHOOL REVENUES AND NATIONAL AIB. 17 The districts in Table 21 are arranged in order of their assessed valuation per child enrolled. It is evident that in the case of one-teacher districts, the maximum en- rollment of which does not exceed 27, the cost of maintenance need vary but little, since the important items of expense, such as teacher's salary, fuel, and insurance, are identical. This inference finds support in the data presented, where the total expenditure varies only from |428 to $495, a difference of less than $70. In total assessed valuation these seven districts vary from $92,000 (district No. 6) to $28,000 (district No. 5). District No. 2, which ranks next to lowest in wealth, ranks next to highest in total expenditure, and levies the heaviest school tax of all. The wealthiest district, No. 6, levies the lowest tax and spends the least money on its schools. This can not be excused on the ground that its school is small. For in point of fact. No. 3 is the only district which has a larger enrollment. It is unnecessary to carry further the consideration of the inequalities and injustices produced and perpetuated throughout the States in the Union by the existing systems of local support. Ptecog- nizing the situation as universal and varying only as to the degrees and forms in which it appears, we are forced to ask how these inequalities shall be remedied. State aid is commonly given either for fostering certain specified educational proj- ects, or is apportioned upon some general basis such as school census with a view of pro^'iding general relief. In the latter case there is often no regard for the comparative ability or effort of the units receiving the quota. Nevertheless, the principle that the State is the proper authority to even out educational inequalities has long been recognized by many of the States in their systems of State aid. Some few States, notably California and Colorado, have definitely taken this position. In 1913 Colorado created a minimum wage for teachers' fund (Session Laws, 1913, ch. 156) to be apportioned among districts unable to provide from all other available som'ces a sum sufficient to pay each teacher at least $50 per month for six months. California, by a constitutional amendment. No. 16, adopted in November, 1920, provided that the State must furnish $30 for each elementary and each high-school pupil in average daily attendance, thus practically doubling the former quotas of $15 and $17.50 per pupil. Louisiana, by a recent constitutional amendment, has added 1 mill to her rate of State school tax, by which it is estimated the proceeds will be increased by approximately $1,600,000. Texas, during the last two years, 1919 and 1920, has repealed her former maximum of $4.50 of State apportionment, and has increased the amount to $14.50, and passed a rm-al-aid law doubling the former appro- priation of $2,000,000. To this group of California, Louisiana, and Texas might be added the names of several other States which either have provided, or at the present time are attempting to provide, appreciably larger State revenues for evening out inequalities. These attempts are due in some instances to a recognition of the prin- ciple just cited, in others merely to a realization of the need of vastly increased school revenues. When such a realization has been reached, the question at once follows, which of the contributing units shall be called upon to provide the increase, the local units, the State, or the Federal Government? Before attempting to answer this question, it will be well to consider from what sources our school moneys are drawn at the present time. III. SCHOOL REVENUES AND NATIONAL AID. Every State in the Union derives pubKc-school moneys to-day from the Federal Government, from the State, and from one or more classes of local units, such as districts, townships, and towns. To these must be added in some States the county or, as in Louisiana, the parish. In the following paragraphs funds will be classified according to the unit which provides and distributes them, even though they are raised under the authority of some higher unit. Thus a school tax required by law to be levied in every county will be regarded as a State tax, provided the proceeds are paid into the State treasury and redistributed in accordance with pohcies deter- mined by the State and upon some general basis which disregards their origin. On the other hand, a tax such as the 6-mill tax in Montana, required by State law to be 18 STATE POLICIES I]Sr PUBLIC SCHOOL EUsTAlMCE. levied by every county but the proceeds of which are distributed by and within the county frora which derived, will be regarded as a county tax, and as such does not lie within the scope of the present study. The major portion of State permanent school funds has been derived from lands and moneys granted by the Federal Government. Nevertheless, such funds are properly classed as State, since the title and control of the same rests with the individual States. It is not sufficient to classify funds merely on the basis of the units providing them, for we wish to know whether the funds are derived primarily from taxes, from endowments, or from other sources. Tables 22, 23, and 24 show the different classes of funds from which Alabama, Colorado, and New York derive their revenue for schools. Table 22. — Sources of New York school revenues in 1918. Classes of sources. Federal. State. County. Town. District. United States de- posit fund;' common school fund; literature fund. Permanent to\\'n "gos- pel and school funds." and lands. II. School tax Bank tax . District tax. ni. Appropriations Smith -Hughes grant for voca- tional education. "Support of com- mon schools;" "support of academies and IV, Bonds academic departments;" attendanceof academic pupils; books, reproduc- tions of works of art, and appara- tus; teacher train- ing departments; teachers of physi- cal training. Bonds. Fines, tuition fines, tuition fees, etc. fees, gifts. 1 Although regarded as a State fund and so classed in all States, this fund strictly speaking belongs to the Federal Government. Table 23. — Sources of Alabama school revenue, 1918. Classes of sources. Federal. State. County. District. 16th section fund; school indemnity land fund; valueless sixteenth section fund; United States surplus revenue fund;i J. Wallace fund (Lawrence County). 3-mill property tax General, $161,500; county tax bonuses, Sl,000-S3,000 per county ; rural build- ing, $2,000 per coun- ty; county high school, S3 ,000 per school ; libraries , $100 per county to match Smith-Hughes grant. General Education Board; Anna T. Jeanes; John F. Slater; Phelps- Stokes ;Ilosenwald. Escheats; teachers' examination fees. and funds, n. Tax 1-3 mill tax; poll tax; dog tax. Not reported sep- arately, 20 dis- tricts in 16 counties. City. III. Appropriations IV. Private funds 2 Smith-Hughes V. Miscellaneous Students' fees; patrons' supple- ments. 1 See footnote to Table 22. 2 Placed under State because grants benefit entire State. SCHOOL REVENUES AND NATIONAL, AIB. Table 24. — Sources of Colorado school revenues, 1919. 19 Classes of sources. Federal. State. County. District. National forest reserve fund. Smith -Hughes grants. Fire fines Public school fund and lands. Appropriations Fines and forfei- $10,000 annioally to ad- minister Smith- Hughes work; appro- priations to match Smith -Hughes grants. Mining; State report publishing. For 21 different offenses. County high school.' 2.5 mills general county school tax; 4-mill high school tax; spe- ' cial bond tax. Truancy fines; tures. Bonds building fines. District bonds. School tax Special school tax; bond tax; high- school tax; teachers' retire- ment-fund tax. 1 For raising moneys for erecting and furnishing school buildings, for purchasing grounds, or for funding floating debts. No percentage analysis of the receipts of the three States presented in Tables 22 to 24 is necessary to convince us that fines, gifts, and tuition fees are relatively unimpor- tant sources of school revenue. New York and Colorado are alike in that they both draw the largest proportion of their local revenues from district taxes and bonds. In Alabama, on the other hand, the proceeds of district taxes are not reported separately, a fact in itself suggestive of their minor importance, and a fact which is further borne out by Table 5, which indicated that approximately 64 per cent of school revenue is derived from the State. In both Colorado and Alabama the county is utilized for purposes of school taxation. Bank taxes are the only county source in New York State. The Smith-Hughes fund in New York and the Federal forest reserve in Colorado are typical Federal sources. In each of these three States, State sources include permanent funds and appropriations. Alabama is the only one of the three which levies a State school tax. The surplus revenue fund in Alabama and the sixteenth section fund are both of Federal origin, but they are commonly regarded not only in Alabama, but in all States possessing them, as State funds, as the Federal Government exercises no control over their investment or use. The title to the sixteenth section fund is vested in the State, the surplus revenue fund belongs to the Federal Government, being merely a loan to the States. The Federal forest reserve and the Smith-Hughes are two important Federal sources of school revenue. Both belong to the Federal Government. From this survey of typical existing sources, of school revenue, in individual States, we may return to the question, which class of sources, local, State, or Federal, ought to furnish the large additional revenues which our present educational crisis demands. We may discredit the wisdom of attempting to solve om- problem by placing addi- tional and vastly heavier burdens upon local school units by recalling what has been stated in various preceding paragraphs regarding the disastrous results of this policy and the inevitable ill results of carrying it still further. There remain for us then only two possible groups of sources. State and National. NATIONAL AID. A previous paragraph has noted that every State in the Union now receives aid from the Federal Smith-Hughes fund. Attention has been called also to certain other Federal funds. From the standpoint of Federal aid, California is of more than usual interest, owing to the fact that it derives school revenue from no less than foiu- Federal funds, as will be seen from Table 25. 20 STATE POLICIES IN PUBLIC SCHOOL FINANCE. Table 25. — Federal moneys paid to California for jiublic schools} Federal fund. Amount. Units receiving. How expended. $8,568 16, 721 54, 491 State Added to principal of perpetual school .do fund. Vocational education. Added to unapportioned county Districts school fund. For tuition of Indian children. Total' 79, 780 1 Data taken from an unpublished study by the author. Public School Finance in California. Data for the year 1917-18. 2 Not reported. s Not including tuition for Indian children. FEDERAL LAND GRANTS. On May 20, 1785, Congress adopted its famous ordinance providing for the manner of surveying and selling Government land. This ordinance reserved the section numbered 16 in every congressional township for the support of schools. It was this ordinance which established a precedent that marks the beginning of a policy which still continues, and which resulted in providing generous endowments of Federal- lands for comm-on schools in every one of the 30 States carved out of the Federal domain. The 18 remaining States and the District of Columbia contained no Federal lands and consequently received no township school grants. Some Federal lands granted to the States have been given specifically for public schools; others, such as swamp lands, salt lands, and internal improvement lands, although not given specifically for schools, were granted under terms which made it possible to devote them to permanent State school funds, and many a State has done so. Every public land State admitted prior to California, 1850, received from the National Government for the support of public schools section 16. California and every subsequently admitted State, except Utah, Arizona, and New Mexico, re- ceived sections 16 and 36. These three last-named States received sections 2 and 32, as well as 16 and 36. In addition to township school lands aggregating approximately 94,000,000 acres, Congress has granted to public land States under separate acts 500,000 acres each of public domain to be used for purposes of internal improvement, salt lands aggregating over a half million of acres, and swamp lands aggregating over 64,000,000 acres. FEDERAL MONEY GRANTS. The most important grants of money made by the Federal Government to the States which have been used for the support of public schools include: (1) The United States surplus revenue loan of 1837; (2) per centum grants; (3) moneys given in lieu of school lands, as in the case of Indian Territory, which received $5,000,000 when admitted into the Union as a part of Oklahoma; (4) income from Federal forest reserva- tions; (5) Smith-Hughes subventions for vocational education. Per centum grants or funds have their origin in the policy adopted by Congress as early as the admission of Ohio in 1802, of granting to public land States a certain per cent of the proceeds of the sales of lands belonging to the United States, sold after the State's admission into the Union. The proportion granted has varied all the way from 2 to 15 per cent. California, Iowa, Kansas, Montana, Nebraska, Nevada, North Dakota, Oregon, South Dakota, Washington, Wisconsin, and Wyoming by their con- stitutions have devoted their per centum funds to the State's public school endow- ment fund. In 1837 Congress distributed among the 26 States then constituting the Union the so-called surplus revenue loan fund, or United States deposit fund. This fund con- SCHOOL REVEIsrTJES AND NATIONAL AID; 21 sisted of 28 millions of dollars which had accumulated as a surplus in the National treasury. Although the amounts distributed to the States were technically loans, is was assumed that the Federal Government would never recall them. Only 4 States, Michigan, Mississippi, South Carolina, and Virginia, appropriated no portion of this grant to education. Alabama, Delaware, Louisiana, Missouri, and New York set apart all of their respective quotas as separate school funds, or united them with permanent school endowments already existing. The remaining 17 States devoted a portion of their quotas to public schools. Chapter 192 of the act of Congress, May 23, 1908, provides that thereafter 25 per cent of all the moneys received fi'om each Federal forest reserve during any fiscal year shall be paid to the State or Territory in which said reserve is situated, to be expended as the State or Territorial legislature may prescribe for the benefit of public schools and public roads of the county or counties in which the forest reserve is situated. Twenty- seven States contain Federal forest reservations, the aggregate area of which in 1920 amounted to over 135,000,000 acres. ^ It will be seen that the forest reserve fund is not granted for the States but for the counties within the State in which such reserva- tions are situated. It rests with the State to determine what portion of the proceeds shall be devoted to schools. Colorado may be taken as an example. This State con- tains 63 counties, 42 of which contain portions of the national forest reserve. By an act passed in 1909 Colorado provided that the Federal forest reserve moneys shall be apportioned semiannually among the counties containing Federal reservations in proportion to the area of the forest reserve contained in each. "Not less than 5 per cent of the said proceeds shall be expended for either roads or public school fund in the discretion of the county commission." In addition to the grants of money already mentioned several others of minor importance have been provided, e. g., proceeds of fines for trespassing upon Federal lands, moneys paid as reimbursements to the States for war claims and war taxes. None of the money grants thus far described is available to all States; nor does any one of them represent an attempt of a vital sort to further a definite educational project. The passage on February 23, 1917, of the Smith-Hughes vocational education law marked the entrance upon an entirely new Federal school financial policy. Hei'e we have the attempt to provide liberal annual Federal grants for fostering a definite project, vocational education. Moneys are provided for maintaining not only trade and industrial studies in the public schools, but for providing training for teachers of these subjects. The Smith-Hughes grant is significant not only for these reasons, but because through the machinery it established and through the conditions it attached to the receiving of the quotas disbursed, it was able to direct if not to dictate policies, equipment, methods, and teaching qualifications in the field of vocational education in secondary schools. It was inevitable that the granting of Federal aid to teacher- training institutions and to secondary schools would soon lead to the question whether the Federal Goverimient ought not to grant assistance to the States in their efforts to meet the mounting costs in other educational fields, notably in that of elementary education. Out of a strong- conviction in the aflfirmative arose the Smith-Towner bill, which embodied pro- visions for a most marked enlargement of Federal aid to public schools. Indeed, it marked such a departure that before entering upon a statement of its provisions, it will be well to summarize our account of Federal aid thus far given. Such a summary can be most concisely presented in tabular form. Table 26 shows the most important Federal land grants which have been used by the States in toto or in part for schools. Table 27 makes a similar presentation of Federal money grants. 1 156,032,053 acres if Alaska be included. 88213°— 22 4 22 STATE POLICIES IF PUBLIC SCHOOL FIITAIS'CE. Table 26. — Federal lands available for public schools. Grants. Area in thousands of— Acres. 1 Square miles.s I. Township school lands (sixteenth, thirty-sixth, second, and thirty-second sec- tions) II. Lands available for schools at State's option: Internal improvement , Salt lands Swamp lands Total Grand total , 94, 164 11,469 606 64, 651 17 0. 101 76, 726 119 170, 890 1 Compiled from data furnished by the General Land OfiBce, Department of Interior, April 6, 1921. 2 Computed. Analysis.— (1) The following States received no land grants from the Federal Government: (a) the 13 original States — Connecticut, Delaware, Georgia, Maryland, Massachusetts, New Hampshire, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island, South Carolina, and Virginia; (6) Vermont, Kentucky, Maine, "West Virginia, and Texas. (2) Thirteen States received section 16 in each township— Alabama, Arkansas, Florida, Illinois, Indiana, Iowa, Louisiana, Michigan, Mississippi, Missouri, Ohio, Tennessee (a special case), and Wisconsin. (3) Fourteen States received sections 16 and 36 — California, Colorado, Idaho, Kansas, Minnesota, Montana, Nebraska, Nevada, North Dakota, Oklahoma, Oregon, South Dakota, Washington, and Wyoming. (4) Three States received sections 2, 16, 32, and 36 — Arizona, New Mexico, and Utah. Table 27. — Federal money grants. Fund or source. I. Moneys granted (all or iu part) specifically for schools: 1. Smith-Hughes grants 2. Federal forest reserve income 3. Moneys given in lieu of school lands 4. Special appropriations II. Moneys available for schools at State's option: 1.' Surplus revenue loan of 1837 2. Per centum grants 3. Federal land fines Available to — All States. States containing such reservations. Bureau of Education; tuition of Indian children in pubUe schools; education in Alaska and District of Columbia. Twenty-eight States (all States then included in the Union). All States containing Federal lands. Do. Table 28 shoves the Smith-Hughes grants provided annually and the uses of the same. It should be borne in mind that the amounts granted for teacher training and for salaries are available for a distribution among all the States only as reimbursements. Before a State receives its allotment, it must have spent in advance twice the sum indicated in Table 28, whereupon it will be paid out of the Federal fund a sum equal to one-half of the total expenditure. Needless to say, a considerable proportion of the grant available in the first year of its distribution, 1918, was not called for. STA31E SOUECES OF SCHOOL EEVE3>irU]|. Table 2-8. — Smith-JJughes Federal vocational education grants.^ (All numbers (not yeaxs) indicate millions or decimals b/" milUoTis of dollars.) 23 Total grant. Distribution of totai grant. - To the States. Fiscal year ending June 30. For salaries of teachers, super- visors, and direct- ors of — For teacher train- ing. ToFed- -eral Board of Voca- • Agricul- tiure. Home econom- ics, trade, and in- dustrial subjects. tional Educa- tion. 1918 1.8 2.5 3.1 3.-8 4.3 4.8 5.3 6.3 7.3 7.3 0.5 .8 1.0 1.2 1.5 1.7 2.0 2.5 3.0 3.0 (2) 0.6 .8 1.0 1.3 1.5 1.8 2.0 2.5 3.0 3.0 0.5 .7 .9 1,1 1.1 1.1 1.1 1.1 1.1 l.l 0.2 1919 . .2 1920 .2 1921 .2 1922 . .2 1923 . . .2 1924 . . .2 1925 - .2 1926 .2 Annually thereafter .2 1 Data taken from Bui. No. 1, Fed. Sd. for Voca. Educ, 1917, p. 62. 3 Rural population. ' Urban population. * Total population. The Smith-Towner bill was introduced into the United States Senate October 10, 1918, by Senator Hoke Smith, oi Georgia. This bill attempted to place upon the Federal Government the responsibility of evening out the educational inequalities existing among the States by reason of theii" inequalities in financial resources, differ- ences in educational history, and in standaa-ds. It recognized that the Nation was confronted with an unprecedented or at least a heretofore unrecognized problem. It provided for an annual grant from the Federal Government of $100,000,000 for (1) equalizing educational opportunities, (2) reducing illiteracy, (3) Americanization, (4) teacher training, (5) physical education and recreation. In each case, as in the Smith-Hughes gt-ants, the amount furnished by the National Government was to be matched by the State. The Smitli-Towner bill failed of passage by the last Congress. It has been succeeded by the Towner-Sterling bill, which attempts to -embody in revised form the major aims and principles of the Smith-Towner bill. The fate of the Towner-Sterling bill rests with the present Congress. IV. EXISTING AND POTENTIAL STATE SOURCES OF SCHOOL REVENUE. As might be expected, the States vary both as to the sources employed to furnish school revenues and as to disposition made of the revenues which such sources produce. Thus in some States the proceeds of escheats and certain fines are added to the princi- pal of the permanerrt, State school fund. In other States these proceeds are made a part of the current school revenue. The present chapter is concerned primarily with those sources which are employed to produce current revenue. The most satisfactory means of answering the question, what State sources are being thus employed at the present time, istomake a study of individual States. Table 29, which follows, answers this question for 9 States. 24 STATS POLICIES IN PUBLIC SCHOOL FINANCE. «§ § ^ CB 00-^ CD 'i> ^ CD .el -i-a.52 P,l3oi5!H Sots PI o a > c: m fin ■-' 3 a 0,0 Ph 2 -< 1 - d o (D tJ -is .T5 CO c^•'-' P - 1 d) CD d d o o o :^ iz; ;? ■^J-O'^ii XX U) ^ C3 CD "^ "^ • ca ro w J 1-5 iz; a 2 el's S ® oil Ph m "3 ^ -^^ 71 o ca o d^^ o ^ -i^ra >. - d d - d a dco d a>*^ T d 'o g 9 "g"5Sa -§1 o o S « S "^ d 3 S cc p CE P ca99 ca— miM o o c w B a iz; :z; 2 "o o rt 1 WO 1 0) o^o§--sa CD "ca d 13 -«^s-ag Cfl M o S d «- ^ a d aa^g^t^ m!2 d " , •assp .3 o c Ph ^ &H ^ 1^ ^ cS dr.; ca'+S X 2 s cc c p 1 c > 03 ,d 43^ ^ t^ m & CD 5 o d g g M z -^ i>,d O "1 •d ft I-. St

CD "ca ■d ca d g .a£ ^ o d c o cS3 ©Tl TJ CD fl m c3 '"' nd Tl rS CD r- - c3 3 _ffl£l O >-, o ^ •d d O cfl o ri d ox a a "o M » 03 ?. CD d ^ ,d iJ X3 « -Q« S-— o,p;-i -d 2 CDJ5 CD A CO o '^ " , o ,CO^ '-'■-< C->^ w CD lO T^ CD '^ O 'JO O --I -^ CD -* C^ 1-1 I o '0? ^ Cl 03 -. ca P. d S '3 "d fe o I-. □ i S o (Do in K' > rn ^ P- ■a C£> O) CD 5 -^ © (B 2 . "d 03 3'-' m 03 3 S 2 S? CO a ct^ •d d 3«© <1J "^ ^ m c3 rt j3 -w 03 o 03 o p c/3-r;„ 6S c8t3 "2 "5 ox) -d u §° '*-' 03 0) a =*;! *^ '^ n Xl rl ■d r! > ^'M g ^ 4J d -^ j-i rSfe55d &^|saS fe •-<» dllil >^ gf j3 5 cS o a 'Safe S-^'C ^ g,» 5 ^ 2i C^-d^oH o) !>>G o rt "^ ^a g-t; a =Q -S.g'S.D.S'S m STATE POLICIES I^ .PUBXJG SCHOOL FI]Sr.A]SrCE. It is evident from Taljle 32 that many of the funds annually reported as permanent public school funds should be eiscluded fi'om any statement which aims to show what relief the Nation derives from public school endowments. Table 33 shows the con- dition of the permanent school fund of those 37 States wliich possess produ^ctive funds, as reported in the latest statement issued by the Bureau of Education, iliams possesses no State productive permanent school fund strictly speaking. Nevertheless, she has township permanent funds, the aggregate value of wMch is approximately 119,000,000. In view of the faet that these township funds were derived from six-, teenth section lands, the source of State endowments in many States, it would be ob\dously misleading to exclude Illinois from Table 33, although aheady included in Table 32. Table 33. — Productive public per^manent school funds, State and local, in 37 States,^ 19MJ Value inmiHions of dollars. Annual income in thousands of dollars. Annual insome perpupilenrolled. States.3 Present. Prospect ivfi. Amount. Rank. Amount. Rank. Amount. Raafli. Amount. Rank. .0.38 K8.0)7.3 4.9 3. 4(.94) .48 .1.57 «.54 :21.04 12.19 4.8 :9..96 .41 5.0 .28.8 14.39 '6.63 ■9.4 K2.4)2.« 7.-8 .m 9.32 6(1.3) .:90 a9.3!6: 21 .=0 ' i-6.!59 ; .40 .25 ' .:06 17.0 81. 59 .:3.-8 : l.« 3. 23 . 18.6 1.0 4.75 1.'6 ^5 14 19 24 32 28 17 3 9 20 10 33 18 2 7 15 11 25 13 51 12 30 5 4 16 •34 S6 37, •6 1 22 26 23 « 29 21 27 46.1 7.3 . 46.3 : 3.;f) '- .48 ' 2. .60 36.9 ; 33.8 12.2 i 4.8 1 «.'9 : .41 ; ^.•0 - 53.-8 14.?3 : 73.1 37.2 : 2.656 ! 7.:9 ' 43.'8 ; ;9..3 : 1.4 30.,3 26.0 '6.6 ; .40 : .2 "io2!'0""; 84.2 • 13.-8 2.S53 , 3.2 31 .?6 - 1.9 ; 4.7 , 33.9 I 7 a 27 33 30 10 12 17 .24 1« 34 23 4 15 3 9 28 20 :8 19 31 B 14 22 35 86 i' .2 16 29 26 IB 32 25 11 124. 97 4(363)419.83 589. 86 149. 79 41.64 71.61 675.25 1,812.58. 723. 33 216. 54 524. 07 13.78 203.36 1,143.00 187.00 1,119.59 405. 95 163.13 278. 16 i586. 74 - .'358. 68 ; 27 15 11 26 32 31 10 B .9 22 13 34 23 6 24 7 16 25 19 12 18 $1.84 .70 2.94 .61 1.12 .36 -6.45 1.-67 1.28 .41 1.29 .06 .32 2.34 .28 9.80 1.35 11.24 .49 ■6.-85 .22 15 22 10 4. Connecticut 5. Delaware 23 21 6. Florida 27 7. Idaho 7 8. Illinois 5 J.6 20 10. Iowa 26 19 34 13. Massachusetts 14. Minnesota 28 13 15. Missouri 29 3 17. Nebraska 18 2 19 New Jersey 25 20. New Mexico 21. New York ,6 32 22 North Carolina 23. North Dakota 24. Oklahoma 1,183. 90 l,-840. 63 ;3S3. 71 5 2 17 7.05 3.34 2.63 5 8 25. Oregon 12 26. Pennsylvania 27. Rhode Island 28. South Carolina 29. South Dakota 30 Texas 23.41 4.68 1,,238. 76 3, 069. 22 245.97 87.31 106.75 :844.04 86.95 248. 92 485. 25 53 .35 4 1 -21 29 .2-8 8 50 20 14 .25 .01 8.95 2.79 2.23 1.41 .22 3.21 ' .27 .55 12.68 ai 35 4 aa 31. Utah 14 32. Vermont . 17 33. Virginia :33 34. Washington 35. West Virginia 36. Wisconsin i9 24 1 1 states not included in atbcwe taible: jya^ Ark., -Gia., Ky,, ILa., ffle., Mich., Miss,, TS. H„ ©Me, Thod., Dist. of Col. 2 All data taken from U. S. Bu.of Edac,,, JBul. 11, 1920,-Sta*istics.ar Sttfte Soiiooi Systems, 1917-^8, except where otherwise indicated. 3 Alabama possesses lands belonging to l'6th section ;fund and to-sc3iooriindemnity Iscnd fund, birt it is not included in this table because, as last as lands ar«:sdld, proceeds are -used for general State purposes and the amount credited to the township or districts. * Data in parentheses from an intensiye study by .the author, taiken direct from the official reports cS the States concerned. 6 Includes township funds, the aggregate value-olT^'hich exceeds »ia,0j3OyOOO. 6 Pub. Educ. in N. C. Rep. by State Educ. committee, 1920, p. 129. ^ Rep. of S. C. Comptroller iGenersfl, 1920, p. -21. STATE SOURCES OF SCHOOL BEVE2vrU|l. 31 Tables 32 and 33 liav^ attempted to sliow as accurately as possible the present con- dition of permanent school funds in the United States. The data in these tables, although essential to the present discussion, leave unanswered one of the chief ques- tions at issue, namely, to what extent we may hope to derive an appreciable quota of tlie greatly increased State school revenue now imperative, fi'om permanent school funds. Far more important than the value of the permanent State endowments is the per cent of the total school revenue derived h'om them, anf the possibility of so increasing the principal of these endowments as to render them increasingly signifi- cant forces. Table 34 shows the per cent of the total school revenue derived fi-om pennanent school fiinds in 34 States, arranged in alphabetical order. In Table 35 these same 34 States are airanged in eight groups, in order of the rank of the importance of their- permanent school funds. The data in Tables 34 and 35 are taken from the Bureau of Education Bulletin, 1920, No. 11, already referred to. Fifteen units are excluded frem these two tables as follows: (a) Foiu" States for which no data are pr^ented in the Federal bulletin, as follows: New Hampshire, North Carolina, Pennsylvania, South Carolina; (6) the following 11 units whose State permanent pulslic school funds have been shown to be nonproductive: Alabama, Arkansas, District of Columbia, Georgia, Illinois, Kentucky, Maine, Michigan, Mississippi, Ohio, Tennessee. Table 34. — Per cent, of public school rtvenue derived from public permanent common school funds, ^ 19 IS. -States. Per cent. States. Per ceat. States. Per cent. 'States. cent. 4.2 1.3 G.8 l.a 4.7 1.8 12.8 3.1 1.0 2.6 2.1 .2 .7 5.7 .8 12.7 3.2 19. 7 New Jersey - New Mexico New York Nortla Dakota Oklahoma Oregon 1.0 20.2 .4 13.3 14.3 5.3 .6 16. (> Texas 13 4 California Colorado Louisiana Maryland Massachusetts Minnesota Missouri Utah... „.. 4.0 3.5 Ciormsctiont. . 1.2 Delaware FJorida Washington West Virginia Wisconsin. ■Wyommg * 5.9 1 Rh<^e Island South Dakota L5 Tnriia-na, Nebraska 24 1 1 As reported, by Federal Bu. of Educ. Table 35. — Thirty-four States grouped and ranked according to per cent of totfil annual revenue derived from productive pernmntnt school funds, 191S. Groups. Per cent. Eanlc in order of — Percent Total »f total current rei-enuo derived revenue. from per- manent funds. 32 1 31 2 34 3 22 4 14 8 6 16 7 2.5 8 18 9 17 10 12 11 12 20 13 I. 25 to 19 percent II. 17 to 12 per cent... in. 7 to 5 per cent 24.1 20.2 19.7 16.6 14.3 13.4 13.3 12. -8 12. 7 6.8 5.9 5.7 5.3 Wyoming Now Mexico. . Nevada South Dakota, Oldahoma Texas North Dakota Idaho Montana Colorado Washington... Minnesota Oregon 32 STATE POLICIES IN PUBLIC SCHOOL FINANCE, Table 35. — Thirty -four States grouped and ranked according to per cent of total annual revenue derived from productive permanent school funds, 1918 — Continued. Percent. States. Rank in Drder of— Groups. Total current school revenue. Per cent of total revenue derived from per- manent funds. IV. 5 to 4 per cent 4.7 4.6 4.2 3.5 3.2 3.1 2.6 2.1 1.8 1.5 1.5 1.3 1.2 1.0 1.0 1.0 .8 . 7 .6 .4 .2 Delaware 33 26 29 30 13 6 11 24 27 15 10 2 19 5 4 21 9 3 28 1 23 14 Utah 15 Arizona 16 v. 4 to 3 per cent Vermont 17 Nebraska 18 Indiana 19 VI. 3 to 2 per cent. . Kansas Louisiana 20 21 VII. 2 to 1 per cent Florida 22 Connecticut Wisconsin . . 23.5 23.5 California 25 Virginia 26 Iowa 28 28 West Virginia 28 VIII. Less than 1 per cent Missouri Massachusetts 30 31 Rhode Island 32 New York 33 Maryland 34 Of the 34 States included in Table 35 having genuinely productive State per- manent school funds, only 9 derived more than 10 per cent of their total revenue in 1918 from these funds, and 7 of the 9 derived less than one-fifth from this source. The 3 States ranking highest in per cent of revenue derived from permanent school funds, Wyoming, New Mexico, and Nevada, are 3 of the 4 States ranking lowest with respect to total expenditure for schools. Within the group of 34 States, New York ranks highest with respect to total annual revenue, California, second, and Massa- chusetts, third. New York and Massachusetts both derived less than 1 per cent of their total annual school revenue from permanent school funds, and California only 1.3 per cent. Moreover, this per cent is too high in the case of California, because no less than 18 per cent of her perpetual fund (see Table 32) exists only as a nonproduc- tive State debt. Such data as have just been presented would seem to justify the conclusion that, if the State is to furnish a much larger proportion of the total school revenue in the future than it is furnishing at the present time, such increase is not to be derived from permanent funds. It may be well to note briefly certain other data and conditions which further justify this inference. Table 12 showed that the percentage of total receipts derived from all State sources decreased from 23.75 per cent in 1890 to 17.7 per cent in 1918, and that the percentage of total receipts derived from the income of permanent funds and school lands decreased from 5.45 per cent in 1890 to 2.9 per cent in 1918. Compaiing these data, we see that, rapid as has been the decline in the per cent of revenue derived from all State sources, the decline in the per cent de- rived from permanent funds has been even more rapid. For, whereas in the former case at the end of the 18-year period under consideration we have a decrease of ap- proximately 25 per cent, in the latter case the decrease exceeds 50 per cent. It will be well to follow these general statements by data showing the conditions in a number of individual States. Table 36 compares for the years 1905 and 1915 the STATE SOURCES OF SCHOOL REVENUE. 33 actual and prospective value of, and the per cent of school revenue furnished by, per- manent funds in two groups of States, A and B. The States included in group A are the 6 which in 1905 ranked highest with respect to the per cent of total revenue derived from permanent funds. Group B includes 6 States of which intensive studies have been made by the author or by a graduate student under his direction. ^ Table 36. — Public permanent common school funds, 1905 and 1915. [Amounts of funds expressed in thousands of dollars.] A. SIX STATES RANKING HIGHEST IN PER CENT OF TOTAL REVENUE DERIVED FROM PERMANENT FUNDS IN 1905. 1905 1915 States. Principal. Total intact. Esti- mated prospec- tive value. Approxi- mate per cent of total school revenue from in- comes and rents. Principal. Total intact. Esti- mated prospec- tive value. Approxi- mate per cent of total school revenue from in- comes and rents. Wynminf 173 1,6.51 52, 660 291 173 1,038 3,173 2,811 65, 660 2,414 17, 000 5,599 49.3 49.19 27.69 2 21.2 20.16 13. 53 1 1, 109 1 3, 197 1 68, 101 2,637 3 21,095 16,395 1 1, 109 12,817 68, 101 2,637 3 21, 095 16,395 14.3 Nevada (1906) Texas 3,217 1 69, 699 5,278 3 26, 095 21.2 1 13 Utah (1902) . . . 291 4.4 Oklahoma 10.5 Oregon 4,599 4,599 6.1 B. SIX STATES SELECTED FOR SPECIAL STUDY. Alabama California (1906). Colorado Illinois (1906)... New Jersey Massachusetts... 2,831 5,263 1,408 7,033 4,523 4,880 9.85 6.0 4.97 3.7 6 2.05 L21 ^ 3, 022 1 7,813 1 7,276 1 8, 109 6,215 5,000 3,237 5,663 16, 861 16, 605 6,187 '"i'llm 1 102. 836 1 20, 847 4,880 3.7 0.78 I 5.9 1 2.0 1.2 0.77 1 1916. 2 1904. 3 1918. * 1914 There are at least "two reasons besides those already presented why it Avould be unwarrantable to hope for the solution of school financial difficulties through the building up of vast public endowments sufficient to provide the increasing financial needs. First, the natural resources from which such funds might be derived, especi- ally public lands, have been largely disposed of or exhausted. Second, in a period such as the present, when the schools are threatened with financial shortage, neither State legislatures nor the people at large will be willing to devote large additional revenues to the principal of permanent funds bearing a small rate of interest. The tendencey will be, on the contrary, to devote to the current school fund, rather than to sequestered endowments, any large additional quotas of revenues aA^ailable for schools. If the solution of the difficulties is not to be found in the creation of A'ast State per- manent school funds, to what sources must we look? The answer is, either to State appropriations or taxation. APPROPRIATIONS. Of the 16.8 per cent of the total receipts for public schools derived from State sources in the year 1918, all except approximately 3 per cent was furnished by State taxes and appropriations. It is evident, therefore, that at the present time the 1 Five of these States have bsen studied by the author. The sixth. New Jersey, was studied by E. W. Tiegs, graduate student in education, LTniversity of Minnesota. 34 STATE POLICIES IN PUBLIC SCHOOL FINANCE. combined revenue from these two sources greatly exceeds in relative importance the revenues derived from all other State sources. Carrying the analysis further, it is seen that, of the 681 millions of dollars constituting the total receipts for public schools in 1918 derived from State, county, and local taxation and appropriations, 61 millions, or approximately 9 per cent, were derived from State appropriations, and 40 millions, or approximately 6 per cent, from State taxation. It is evident that the public schools are receiving more revenue from State appropriations than from State school taxes. Not only is this true, but the State appropriation is much more widely used at the present time than the State school tax, for there are in 1920 at least 19 States which levy no State school tax, whereas every State in the Union makes appropria- tions for schools. Prior to the passage of the Smith-Hughes Federal Act in 1917, there were certain States, such as Colorado, which had never pursued any continuous policy of making State appropriations for school support. But the fact that the Federal act requii'ed each State, in order to receive the Federal subvention, to match the Federal aid dollar for dollar, resulted in universalizing the policy of State school appropriations. It must be borne in mind that the Smith-Hughes Act was not in any sense the beginning of the policy of making State school appropriations. Without attempting to go into the history of this matter, we may note that this method of pro\iding school revenues dates back to early colonial days. The purpose at present is merely to call attention to the reason why every State now employs the appro- priation method, whereas many States still refrain from levying a State school tax. Educational appropriations fall into two classes, general and special. General appropriations are devoted to a fund distributed for general purposes. Special appropriations are made to maintain, foster, or encourage some special activity or project, such as vocational education, high-school teacher-training departments, or the State department of education. How widely States differ with respect to the extent to which they employ appropriations as a means of providing State aid has been revealed by tables already presented. Table 24 showed that the only appro- priation which Colorado makes is that necessary to receive and to administer the Federal grant for vocational education. In striking contrast to this. Table 29 showed that Mnnesota makes no less than 12 classes of appropriations; California, 10; Massa- chusetts, 8; New York, 7; and Alabama, 5.' The various types of appropriations have been shown in Table 22 for New York and in Table 23 for Alabama. It should be noticed that the moneys of which State school appropriations are constituted are frequently drawn from a State general fund, which in the last analysis is largely composed of the proceeds of State taxes. This being true, it is manifestly impossible to determine accurately how much of the revenue reported as derived from appropriations should, from the stand poin to f origin, be looked upon as proceeds of taxation. But however difficult and unsatisfactory it may be to undertake to separate appropriations from proceeds of taxation when viewed from the standpoint of origin, the fact remains that when \iewed from the standpoint of method or policies of finance, these two types of funds represent widely different principles, as will be shown in the concluding paragraphs of the present account. Reserving this subject for later treatment, we may now turn to the question of State taxation for schools. STATE SCHOOL TAXES. There are no less than four ways in which a State may levy State taxes for schools: First, a general mill tax may be levied on all taxable real and personal property, the proceeds of the same to be devoted to some general school fund; second, such a tax may be leaded for some special piu-pose, such as physical education, or high-school normal -training departments; third, instead of fixing the rate, the laws may provide for the levying of a general mill property tax sufficient to raise a fixed sum, leaving the rate undetermined; thus, Arizona provides that a State school tax shall be levied 1 The Alabama new school code of 1919 increased this number to 21. STATE SOUECES OF SCHOOL UEVENUBl 35 sufficient to raise $750,000; fourth, a State may provide for the levying of special taxes with the proviso that all or a portion of the proceeds of the same shall be devoted to schools. Such special taxes include income taxes, inheritance taxes, taxes on corporations, taxes on stocks and bonds, poll taxes, taxes on various specified occu- pations, and taxes on licenses. A study recently made dealing with conditions in the years 1919 and 1920 shows that 19 of the States levied no State tax of any sort for schools, whereas 29 States did. The States included in each of these two groups are shown in Table 37. Table 37. — Status of the State school tax, 1919-20. 29 STATES DEVOTING A STATE TAX TO SCHOOLS, i North Atlantic. South Atlantic. South Central. North Central. Western. 1. Maine. 2. Massachusetts. 3. New Hampsliire. 4. New Jersey. 5. Vermont. 1. Delaware. 2. Florida. 3. Georgia. 4. North Carohna. •5. Virginia. 6. West Virginia. 1. Alabama. 2. Arkansas. 3. Kentucky. 4. Louisiana. 5. Tennessee. 6. Texas. 1. Indiana. 2. Minnesota. 3. North Dakota. 4. Ohio. 5. Wisconsin. 1. Arizona. 2. California. 3. Nevada. 4. New Mexico. 5. Utah. 6. Washington. 7. Wyoming. 19 STATES NOT DEVOTING ANY STATE TAX TO SCHOOLS. 1. Connecticut. 1. Maryland. 1. Mississippi. 1. Illinois. 1. Colorado. 2. New York. 2. South Carolina. 2. Oklahoma. 2. Iowa. 2. Idaho. 3. Pennsylvania. 3. Kansas. 3. Montana. 4. Rhode Island. 4. Michigan. 5. Missouri. 6. Nebraska. 7. South Dakota. 4. Oregon. 1 The distinction between State and county school taxes made in the first paragraph of our discussion of school revenues and national aid (see above page 17) should be recalled at this point. This distinction ex- plains why Montana and certain other States are not included in the present table. Table 37 does not attempt to show either the type or the rate of the school tax levied by the 29 States levying such a tax. However important these two aspects of the present subject, we may postpone their consideration for the present. The signifi- cance of Table 37 is that it shows which of the States and what proportion of the entire gi'oup have adopted State taxation as a policy for raising school revenues. It is easy to discover from Table 37 that this policy is employed most by Southern States and least by Northern States. In order to show more accurately to just what extent this policy varies in different sections, it has seemed well to present the matter somewhat more precisely, as is done in Table 38. Table 38. — Number and per cent of States in each major division levying or not levying a State school tax, 1920. ^ Group or di\'ision. States levying. States not levying. Number. Per cent. Number. Per cent. 29 60 19 40 North Atlantic Division 5 6 G 5 7 56 75 75 42 64 4 2 2 7 4 44 25 South Central Division 25 North Central Division... 58 36 1 District of Columbia not included. Table 39 ranks the five major divisions of the States on the liasis of per cent of States of each division which levy some type of State school tax. 36 STATE POLICIES IN PUBLIC SCHOOL FINANCE. Table 39. — Major divisions ranlced on the basis of per cent of Slates therein ivhich levy State school taxes. Rank. Division. Per cent. 1.5 1..5 3 4 5 South Central 75 75 64 56 42 South Atlantic Western . . North Central. The ranks of the major divisions in Table 39 correspond closely to the ranks in Table 13, which showed the per cent of total school revenue derived from State sources in 1915. This would seem to suggest a direct relationship between the policy of State taxation for schools and the general policy of depending upon State versus local sources for school revenue. From this general statement of the extent to which the State school tax is employed as a revenue producer we may now turn to a more de- tailed consideration of the different types of State school taxes and the extent to which they are employed. STATE SCHOOL MILL TAXES. Three types of State school mill taxes are to be found to-day: (1) Mill taxes for general school purposes, rate specified; (2) mill taxes for general school purposes sufficient to produce a fixed sum, rate not specified; (3) a mill tax for special school projects. No less than 20 States levy a State mill tax on all taxable real and personal property the proceeds from which are to be devoted to general school purposes. The rate of such tax varies all the way from seven-tenths of 1 mill in Wisconsin to 4.6 mills in Utah, with an approximate median rate of 2 mills. The 20 States which levy a mill tax for general school purposes are as follows: Table. 40. — States levying general State will tax for schools. 1. Alabama. 6. Louisiana. 11. New Jersey. 16. Texas. 2. Arkansas. 7. Maine. 12. New Mexico. 17. Utah. 3. Florida. 8. Minnesota. 13. North Carolina. 18. Vermont. 4. Indiana. 9. Nevada. 14. Ohio. 19. Virginia. 5. Kentucky. 10. New Hampshire. 15. Tennessee. 20. Wisconsin. In Table 41 are shown the rates levied by the States included in Table 40, and the States levying the same. Table 41. — State mill property {ad valorem) public school tax for general school purposes. Rate in mills. States. 4.6 Utah. 3.5 Texas. 3. 5 New Hampshire (only on estates iu unorganized parts of the State). 3.2 North Carolina. 3. Alabama, Arkansas. 2.75 New Jersey .1 2.5 Louisiana. 2. New Mexico, Tennessee. 1. 8 Kentucky, Ohio. 1.5 Maine. 1. 36 Indiana. 1.0 Florida, Minnesota, Vermont, Virginia.^ 0.76 Nevada. 0. 70 Wisconsin. 1 It is doubtful whether New Jersey should be included in Table 41; see discussion in text following Table 42. 2 Plus supplementary taxes as foUows: On real estate, 0.8 miU; on tangible personal property, 0.4 miU. STATE SOURCES OF SCHOOL EEVENU^. 37 Some States in addition to a mill tax of specified rate, other States in place of it, provide that a State mill property tax shall be levied sufficient to produce a certain total sum, or so much per school child. In such cases the rate is left undetermined, and varies from year to year with the assessed valuation of the property of the State. This mode of taxation is employed by five States. In three of the five, New Hamp- shire, New Mexico, and Wisconsin, this tax is additional to a State school mill tax of specified rate. In the remaining two, Arizona and Washington, it is the only State school tax levied. Table 42 shows the States employing this type of school tax. Table 42. — State mill taxation for schools, rate undetermined. states. Basis of rate. Arizona Sufficient to raise $750,000. New Hampshire District tax sufficient to pay to State S2 per cMd in district. New Mexico Sufficient to raise $15,000 for vocational education. Washington Sufficient when added to the school income fund to produce $10 per child of school age. Wisconsin Sufficient to pay State aid for graded schools. New Jersey is in a class by itself, and, strictly speaking, belongs neither in Table 41 nor in Table 42. It was included in Table 41 because the law provides that such a tax shall be levied on real and personal property as, when added to a State school appropriation of $100,000, will produce a sum equal to a State 2.75 mills tax on all real and personal property. An analysis of the situation will show that in reaUty neither the amount to be raised by taxation nor the rate is determined, because the amount is not known until after the legislature makes its appropriation; and the rate is not fixed, because it depends upon both the appropriation of the legislature and the changes in assessed valuation.- The rate never actually reaches 2.75 mills. Widely different in purpose from the tax just described is a State mill property tax levied for the benefit of some special type of training or educational institution. This latter type of tax is levied by only seven States, the rate, as might be expected, being much lower than that of taxes levied for general school purposes. In fact, it varies from only five-tenths of a mill to five-hundredths of a mill, with an approximate median rate of two-tenths of a mill. It will be discovered that the States which levy taxes of this sort are largely the same as those levying State mill taxes for general school purposes. In fact, only two of the seven States constituting the former group (North Dakota and Wyoming), are not found in the latter also. These seven States, together with the rate and purpose of their special taxes, are presented in Table 43. Table 43. — State mill property tax for special school projects. Mill. States. Projects for which levied. 0. 5 Tennessee State high-school aid. . 2 Arkansas. Vocational education. . 2 North Dakota. County agricultural and training schools. . 2 Utah. State high-school aid. . 125 Wyoming. High-school normal training. .05 Indiana. Vocational education. . 05 Nevada. Physical trainmg. POLL AND MISCELLANEOUS TAXES. In a number of States poll taxes for school purposes are collected by minor con- stituent units, such as counties or towns. In only nine is a poll tax for schools a State tax. North Carolina levies the highest Statef school poll tax, $1.43, and Indiana the lowest, 50 cents. Twenty-five per cent of the proceeds of the tax levied by North Carolina may be devoted to pauper aid. Were this portion of each poll tax so used, the remainder, $1.0725, would still be greater than the State school poll tax levied by any other State. The tax rate is $1 per poll in the seven remaining States, namely: Arkansas. Georgia. Louisiana, Tennessee, Texas, Virginia, and West Virginia. 38 STATE POLICIES IN PUBLIC SCHOOL PUSTANCE. Two States devote to their schools the proceeds of State taxes which in the present account may well be claasiiied as miscellaneous. Georgia thus disposes of the pro- ceeds of dog taxes and taxes on shows; and West Vii'ginia of taxes levied on marriage licenses, State Licenses, a.nd forfeitures. It is interesting to note that every one of the States named in the last two paragraphs, except Indiana, is south of the Mason and Dixon line. TAXES ON CORPORATIONS, SPECIAL TYPES OF PROPERTY, INCOME, INHERITANCE AND OCCUPATIONS. Under this general heading are included income taxes, inheritance taxes, occupa- tion taxes, taxes on special classes of corporations, such as banks and railroads, various kinds of taxes on all corporations of a given State (California), and taxes on intangible property, such as stocks and bonds. The tendency of oiu" national industrial life away from what were once almost exclusively agricultural occupations to an in- creasingly larger proportion of manufacturing and commercial acti^dties has brought about a transformation in the character and in the form of property and wealth. Formerly wealth was represented almost entirely by real and personal property; to-day wealth and property are largely corporate, and many forms of income derived from sources other than tangible property can be reached only by a special form of taxation. Possession of real or personal property is in many cases not the truest index of ability or obligation to support governmental undertakings. Frequently a much truer index of ability and obligation is the possession of income, whether received as a salary or derived from intangible property, such as stocks and bonds. To-day on every hand comes the demand for vastly increased pubtie revenues not only for schools but for roads, public health, workers' pensions, and a multitude of other public projects. This demand is everywhere met with loud protest against any addition to the burden of taxation levied on land. This situation, together with the change in wealth from land to corpMjrate and intangible property, has given rise to the demand that new sources of public revenue be taxed. Such is the situation in which the schools find themseh'es, and the necessity of discovering new sources of revenue lends a peculiar interest to what any of the States may be doing aheady in the direction of taxing occupations, privileges, incomes, etc., which heretofore have furnished little or no school revenue. According to the most recent statement of the Federal Department of Commerce, taxes are leaded on corporation stock by 33 States, on sa^dngs banks by 9 States, and on inheritances by 42 States. It must be borne in mind that the taxes here referred to are State taxes. The number of States would be increased were States included in which taxes of these types are levied by counties. Taxes of the classes just referred to are le\ded as State school taxes in the following 10 States only: California, Delaware, Louisiana, Maine, Massachusetts, New Hampshhe, New Jersey, Utah, Texas, and Virginia. Undoubtedly, in some other States State revenue from taxes of the types now under consideration, although not devoted by law to the schools, ultimately reach them. This occurs where the proceeds are paid into some general State fund from which school appropriations as well as appropriations for other State projects are made. In California a portion of the proceeds of corporation taxes are devoted directly to the State high-school fund. The remainder of the proceeds is paid into the State general fund, of which in 1918 72 per cent was derived from the proceeds of coriroration taxes. Out of this general fund is paid State aid to elenientary schools and to certain other educational projects. Consequently, a large portion of the proceeds of corporation taxes reaches the schools by an indhect method. Table 44 shows the taxes on corporations, incomes, inherit- ances, and occupations levied for school purposes in the 10 States aheady named. STATE SOURCES OF SCHOOL EEVENUE^. 39 Table 44. — State school corporation, incoriu, inheritance^ and occupation tazes.^ Type of tax. State. Character of tax. I Corporation: Bank New Hampshire A bank tax on nonresidents at local rate; rates vary- widely. Proceeds of one-half of taxes on savings bank franchises; one-half proceeds of taxes on deposits of trust and bonding companies. 1.8 mills. Do Francliises Railroad All corpora- tions. Income. . Kentucky Tax on first-class railroad property at average of local rates. One mill tax (10 cents on every $100) on assessed valua- tion of intangible property and on rolling stock. Rates and bases vary .2 California TT Massachusetts. Delaware. California nr Inheritanc-e 3 Occupation Graduated scale dependent upon the value of the inher- itance and degree of relationship of heirs. One-fourth of proceeds of tax. TV Virginia. Louisiana. Delaware. Kentucky. Texas...". Utah (a) SI on mining licenses, plus 2 2 per cent of total pro- ceeds of mdning; seven-sixteenths of total proceeds of (a) and (6) go to the State school fund. 1 Compiled from data in an unpublished study on State School Taxation, by E. C. Culbert, graduate student in education, University of Minnesota. 2 See Table 47. 3 Certain other States devote proceeds of inheritance taxes to permanent funds; such States are not named here, as this portion of the present account is concerned only with taxes levied for current revenue. CORPORATCON TAXES. Table 44 shows that six States— New Hampahire, Maine, New Jersey, Kentucky, Virginia, and California — ^levy State school taxes on corporations. In each of the first three of these States very limited use is made of the corporation tax for school purposes. California, on the other hand, has developed this type of taxation exten- sively. Earlier paragraphs have related how this State abolished her State property tax for school purposes, and substituted therefor a State corporation tax. It was nat- ural that such a policy should result in levying such a tax upon all classes of corpora- tions. Table 45 shows that as a matter of fact California does include all corporations in this system of taxation. It will be seen that five classes are taxed on their gross receipts, one class (banks) on shares of capital stock, one (insurance companies) on gross premiums, and all other corporations on their franchises. The rates of taxation vary from 0.009 per cent to 5.25 per cent. Table 45. — California corporation taxes.^ [Largely devoted to public schools.] Corporations taxed. Tax levied upon — Rate per cent. 1. All railroad companies, including street railways 2. All car companies: Sleeping, palace, refrigerator, etc . 3. Express companies 4. Telegraph and telephone companies 5. Gas and electricity companies 6. Insurance companies 7. Banks, National and State 8. All companies not included in above seven classes . . . Gross receipts do do do do Gross premiums Shares of capital stock- Franchises 5.25 3.95 .009 4.2 5.6 2.0 1.16 1.2 1 Based on California revenue law, 1918, pp. 40-44, sees. 3664-65. At the time California entered upon her policy of making corporations rather than real and personal property the source of State taxation, she recognized clearly she 40 STATE POLICIES IST PUBLIC SCHOOL PINAIsrCE. was embarking upon an experiment (cf. State Controller's Rep., 1909-10, p. 28). How rapidly the new policy developed is shown by Tables 46 and 47, Table 46 shows the gTowth in the number of corporations assessed, and in the proceeds. Table 47 shows the rate of tax levied on the fii'st five classes of corporations named in Table 45 froin 1912 to 1918. In every case except that of express companies the rate in 1918 is greater than in 1912. Table 46. — California corporation taxes, 1912-1918.^ Years. 1911-12 1912-13 1913-14 1914-15 1915-16 Number of corpora- tions assessed. 19, 721 19, 693 20, 478 20, 979 21, 994 Proceeds, in millions of dollars. 10.38 10. 88 12.96 13.51 14.99 Years. 1916-17. 1917-18. Totals Number of corpora- tions assessed. 19, 623 18, 223 Proceeds, in millions of dollars. 15.64 16.37 94.73 1 All data from California State controller's Rep., 1916-1918, pp. 39-40. 2 Comprted. Table 47. — California corporation tax rates, 1912-1918} Companies. Rate per cent. Increase, 1918 over 1912.2 1912 1914 1916 1918 Amount. Per cent. 4.00 3.00 2.00 3. .50 4.00 4. 75 4.00 2.00 4.20 4.60 5.25 3.95 1.60 4.50 5.25 5.25 3.95 .90 4.20 5.60 1.25 .95 3-1.10 .70 1.60 0. 3025 Ca,r .3166 3-. 55 .20 .40 1 All data from Calif. State Controller's E 2 Computed. 3 Decrease. I] ep., 1916-1 STCOME 918, p. 39. TAXES A State income tax has long been advocated by many seeking to discover new sources of revenue for school purposes, and more recently municipal income taxes have been strongly urged as a panacea for present and future ills. The movement toward State income taxes, which appeared to be getting well under way, was given a distinct setback by the Federal income tax. Except for this setback, it is possible that many of the States would be levying a State income tax for school purposes. As it is, only 2 States, Delaware and Massachusetts, derive school revenues from this source. Delaware devotes $250,000 annually from income tax proceeds to the public schools, the balance of the proceeds being devoted to the State highway department. (Laws, 1917, p. 16, ch. 8, sec. 1; School Code, 1919, p. 32, sec. 212.) Massachusetts, by an act approved July 24, 1919 (General Acts, 1919 ch. 368), provided for an annual current "general school fund" to be derived from the proceeds of a State income tax. The fund provided for by this act is not a definite amount, but is to be a sum sufiicient to finance the projects described in Part I of the act, and to be available for maintaining these projects without further legislation. Table 48 shows the classes of incomes recognized by law, and the rates provided for each. STATE SOURCES OF SCHOOL EEVEjSTUiJ. 41 Table 48. — Massachusetts State income tax. Class. Annuities Professional earnings exceeding $2,000 per year. Gains in dealings Interest from money, notes, dividends , Rate per cent. 1.5 1..5 3.0 G.O It was estmiated that tliis act would result in making available for the schools an annual current fund of approximately $4,000,000, a little less than one-sixth of the then total annual school expenditure, and more than 19 times the income of the State permanent school fund. The amount actually derived from the income tax in the year 1919-20 amounted to $3,062,643. (Mass. Dept. of Educ. Bui. 1920, No. 11, p. clxxxix, column 55. )i Occupational taxes for school purposes are levied by only 2 States, Texas and Utah. Although termed occupational taxes in both States, in Texas they appear to be what are ordinarily termed licenses. The list of occupations taxed by Texas is a long one, and the rates vary from |1 to $300. ^ One-fourth of the entire proceeds are devoted to school support. Utah levies school occupation taxes on one pursuit only, namely, mining. On this industry two taxes are levied: First, a license tax of $1 on every "person (excepting em^ployees), corporation, or association" engaged in mining; second, a tax of 2 per cent on the total net proceeds. Seven-sixteenths of all moneys derived from these two types of taxes are added to the State school fund.^ INHERITANCE TAXES. At least 5 States, California, Delaware, Kentucky, Louisiana, and Virginia, devote to schools the moneys derived from taxes on inheritances. In 1918 California realized from State inheritance taxes, after paying costs of collection, a net sum of approxi- mately $2,725,000. The law provides that the first $250,000 of the annual proceeds of the State inheritance tax shall be devoted to the State current school fund for ele- mentary schools. Any excess over this amount is credited to the State general fund. This fund is used largely as a source of school appropriations, consequently a consid- erable part of the proceeds of inheritance taxes, in addition to those composing the specified $250,000, ultimately reaches the schools indirectly. Delaware provides that the proceeds of the State inheritance tax up to $100,000 shall be devoted to schools. Any excess over this amount is credited to the State sinking fund. Virginia devotes one-half of the proceeds of the State inheritance tax to the public school fund apportioned by the State on the basis of school population. The remaining half is returned to the county or district from which collected for the use of prim.ary and grammar grade schools. Louisiana, in contrast to Calif ormia, Dela- ware, and Virginia, provides that the entire proceeds of State inheritance taxes shall be used solely for the support of public schools. Owing to differences in interpretation of the law, the public schools of Kentucky have only recently received the moneys from the State inheritance taxes to which the 1 For a more complete account of this fund, and ofthemethodsof distributing it, .see Swift, F. H., Studies in Public School Finance (ready for press). 2 Sayles, Texas Civil Statutes, 1897; Supplement to the Statutes, 1906, p. 500, article 5049. 3 Utah Compiled Laws, 1917, sees. 59-62; Session Laws, 1917, ch. 97, sees. 1, 2, IS. 42 STATE POLICIES IN PUBLIC SCHOOL FINANCE. State educational authorities claim the schools are entitled. Supt. V. O. Gilbert, in his biennial report, 1918-19, p. xvii, presents the situation thus: In March, 1918, the State auditor refused to continue to credit the State school fund with its regular proportion of the inheritance tax. On November 22, 1919, the court of appeals decided that the State school fund was entitled to eigh teen-fortieths of all money received by the State from inheritance taxes. On account of this decision there 'has already been transferred to the State school fund more than $500,000. This money can not be distributed during the current school year. There will be a consid- erable balance at the beginning of the school year 1920-21, however, which will permit the declaration of the la'rgest per capita in the history of the State next July. Before leaving this topic something should be said concerning the variation in ratea and in classification of inheritances among the States under consideration. We may confine ourselves to Louisiana and Virginia. In Louisiana all estates valued at less than 110,000 are exempt. If the beneficiary of an estate valued at $10,000 or more is husband or wife or a direct asscendant or descendant, the rate is 2 per cent; if a col- lateral relative or a stranger, the rate is 5 per cent. Virginia classifies beneficiaries as follows: Class A, husband, wife, lineal ancestor or lineal descendant; class B, brother, sister, nephew, or niece; class C, all others. The rate of tax varies both as to classification of heirs and as to value of the estate. This is shown in the following table: Table 49. — Virginia system of inheritance taxation. Beneficiaries. Exempt valua- tion. Upper limit of exemp- tion to $50,000. $50,000 to $100,000. $100,000 to $500,000. $500,000 to $1,000,000. More than $1,000,000. Class A $10,000 4,000 1,000 Per cent. 1 2 5 Per cent. 2 4 7 Per cent. 3 6 9 Per cent. 4 8 12 Per cent. 5 Class B 10 Class C. 15 We have now described and to a limited extent discussed the various types of State school taxes which are levied to-day by the 29 States levying such taxes. Table 50 forms a fitting conclusion to this section of the account. STATE SOURCES OF SCHOOL EEVENUB* 43 pro- and de- pay t. road c on uca- > i ^1 • <-l o .«© • O^uj 1 e© .' 5S \m^ • -c I ; c oi '. a c ; "a :2 o "2 '3 "a o _o ;_c 1 c M :2 "o R D^ > 8 • > ) 2, c o 15 1 o ^ • c <£ ■ t-( & =2 g ^ :.§ S o 1 o d c c. c : (M •3 -a ■§ :a 1 CM d t3 S'^ !2 U4 <2 1 .go,-; "3 orgam nt w f $100 as a 1 a 3 .2 ° q lO c^ ,8 mil mills 5 mil ,2 mil distr 1 CO ■ n ' ^ : rn'rt" (M' rH rt o CC ^ O) CO « CM CO CM CO ! 2 „• o: C 03 o^ C-. "i ■ ■ ft t>. g "o 1 03 .a 1 •c:' ■ ^~* Hi 03 '■ rkansas alifornia elaware. lorida... 03 3 1 1 03 3 01 o 2 BS a g y (St- q; C3 O .3 "' 0) m O 3 03 •a 3 X .3 dj « oj ■<<'•' 00 05 d .-H im' CO ■* lO to t>^ or a-' d ^ oi CO »— ' rH PH 1— • 1—1 '"' T-1 •— 1 '-< CM CM CM CM 44 STATE POLICIES IN PUBLIC SCHOOL TINANCE. CQ G2 o5 cs3. 1^ J^ -*-3 So v; "^2 o g o^ .2:; '^ I-. w O j-i o aj rt Uj[ - - ft© ~ ■go ftaJ-g' bii a W^ (/J o o CJ3 o fc-i C >H 'r