Local Government Innovation & Redesign

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User Charges to Finance K-12 Education

I was surprised to read recently that "among all state and local governments, local school districts rely on user charges least." This goes against what I have heard anecdotally from friends and family members that are parents and/or teachers. Most parents that I've talked to feel that school districts have steadily increased user charges for auxiliary or extracurricular services like meals, transportation, athletics or after-school programs and clubs. Part of this may be due to the high visibility of user charges in K-12 schools compared to user charges in other state and local governments.

Wassmer and Fisher (2000) argue that school districts should increase user charges to "either supplement revenue or permit a tax reduction" in part because "these types of services tend to provide substantial private benefits" and "may be consumed by only a fraction of students in a school." One of the reasons that public school districts in Minnesota haven't used school fees to a greater degree is because state law prohibits public school districts from charging fees for necessary goods and services. These include instructional materials and supplies, required library books, required school activities, graduation caps and gowns, lockers, and student transportation to and from school for students that live more than two miles from the school. The argument for imposing these limits on school fees is that the state has a constitutional obligation to provide free public education to all students and therefore cannot deny students an education based on students' ability to provide books or other educational supplies needed to complete their educational requirements.

Many public school districts would not be able to offer extracurricular activities without the revenue generated from user charges. However, these charges create inequity among students and potentially lower quality education for lower income students. The positive effects of extracurricular activities such as academic clubs, music, art or athletics on educational outcomes have been well-documented. If lower income students do not have access to these activities, their education and quality of life are negatively affected. Inequities between school districts can also happen when affluent school districts are able to charge fees and spend at above-average levels compared to less wealthy districts. Check out this 2008 Information Brief from the Minnesota House of Representatives Research Department for a summary of Minnesota state law governing authorized and prohibited public school fees, the education expenses allowed under the state’s education tax deduction and credit, and an outline of student user fees in other states.

Finally, what is your experience with school fees? Do you think the use of school fees should be increased? Are school fees more acceptable than general tax increases?

Originally posted on PA5113, State and Local Public Finance, course weblog.


Ryan - I think you pose a very interesting question.

The progressive taxation proponent in me says that property taxes (or other general taxes) should be used as the primary funding sources for school related activities in order to promote fair access. That way people are essentially charged based on their ability to pay, but the services aren't doled out on that basis.

But there is another part of me that thinks that by raising general taxes to pay for specific activities takes away the incentive for citizens to choose the types of services they want. Instead of just consuming any and all school activities because "I already paid for it anyways", parents and students would feel somewhat constrained by the additional incremental costs, and so may be more selective about the services they choose to consume.

Is there a way to set up a system that promotes both of these values – both fairness of access and responsible consumption of these public goods?

Thanks for your comment, Susan.

While you raise an interesting point, I'm more concerned about access for all students and fairness between districts than overconsumption. I have my doubts about overconsumption - both as it relates to school activities and health care. Often times opponents of universal health care argue that if everyone has access to affordable, quality health care, then the services will be overconsumed and it will drive up the price. However, this doesn't seem to be a problem in countries that already have universal health care. Not to mention the overall benefits to society by having healthier citizens.

I'm all for responsible consumption of public goods but lower income families currently aren't even able to choose the school activities that they would like to consume. Depriving these students equal access to these activities not only hurts the students in the short term but also has long term costs for the larger community (much like our current health care system).

Does anyone else have an answer to Susan's question?

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