What do schools make money from?

Public schools primarily generate revenue from a combination of local, state, and federal government sources, with local property taxes being a significant component. Private schools, conversely, largely depend on tuition, donations, and endowments.

Public School Funding Sources

Public K-12 schools in the United States typically receive funding from three main levels of government: local, state, and federal. The precise proportions from each level can vary considerably depending on the state and individual school district.

Local Funding

Local contributions often form a substantial portion of a school district's budget.

• Property Taxes: School districts primarily generate revenue at the local level by levying local property taxes on residential and commercial properties within their boundaries. The amount collected depends on the property values and the tax rates set by the community. This remains a cornerstone of local school funding.
• Local Bonds and Levies: Communities may approve bonds to fund capital projects such as new school construction, major renovations, or technology upgrades. Special levies can also be passed for specific operational expenses or programs.

State Funding

States are generally the largest contributors to public education funding nationwide. These funds are typically generated through various state-level taxes:

• Sales Taxes: A percentage of sales on goods and services.
• Income Taxes: Taxes levied on individual and corporate incomes.
• State Lotteries: In some states, a portion of lottery proceeds is earmarked for education.
• State aid often plays a crucial role in equalizing funding among districts, providing more support to those with lower property tax bases or higher needs.

Federal Funding

While federal contributions represent the smallest share of public school funding, they are vital for specific programs and initiatives, ensuring equitable access and support for diverse student populations.

• Support for Low-Income Students: Programs like Title I of the Elementary and Secondary Education Act (ESEA) provide financial assistance to schools with a high percentage of students from low-income families.
• Special Education: Significant federal funding is allocated through the Individuals with Disabilities Education Act (IDEA) to ensure students with disabilities receive appropriate educational services.
• Specific Grants: Federal grants also support various areas such as improving teacher quality, vocational and technical education, school nutrition programs, and educational technology initiatives.

Other Revenue Streams for Schools

Beyond core government funding, schools, both public and private, often access additional funds to supplement their budgets and enhance educational offerings.

Private School Funding

Private schools operate under a distinct financial model compared to public institutions, primarily relying on non-governmental sources:

• Tuition Fees: This is typically the primary source of income for private schools, paid directly by students' families.
• Donations and Fundraising: Private schools heavily rely on contributions from alumni, current parents, foundations, and community members. Fundraising campaigns are common for operational costs, scholarships, and capital improvements.
• Endowment Income: Many established private schools have endowments—funds invested to generate long-term income, which can be used to support various school programs, scholarships, or faculty salaries.
• Grants: Private schools may also receive grants from foundations, corporations, or specific philanthropic organizations for particular projects or programs.

Supplementary Funding for Public Schools

Even public schools can sometimes supplement their budgets through non-governmental means:

• Grants: Schools and districts often apply for competitive grants from foundations, corporations, or non-profit organizations for specific projects, innovative programs, or technology enhancements.
• Parent-Teacher Organizations (PTOs/PTAs): These volunteer organizations conduct fundraising activities that contribute to school supplies, field trips, classroom equipment, and extracurricular activities.
• Partnerships and Sponsorships: Local businesses and community organizations may partner with schools, offering financial support or in-kind donations in exchange for recognition or collaborative projects.
• Fees: Public schools may charge fees for specific activities such as sports, clubs, or advanced placement exams, though core educational services are provided free of charge. School lunch programs also involve fees, although they are often subsidized for eligible students.

Overview of Common School Funding Sources

Understanding the diverse sources of funding provides insight into how schools manage their finances and deliver education.