Hidden Money: School-Supporting Nonprofit Funds and Rising Inequality

• In Event: Toward Understandings of Fundraising PTAs as Sites for Exclusion, Engagement, and (In)Equity

Abstract

The achievement gap between high- and low-income students in the U.S. grew by 40% since 1970, driven by faster growth in high-income areas (Reardon 2011, 2021; Matheny et al. 2023). Income gaps in college completion and selective college enrollment rates also increased (Bailey and Dynarski, 2011; Reardon et al. 2012). School funding increasingly favored low-income districts over this period, and spending improves achievement and graduation rates, with larger benefits among low-income students. School funding changes therefore predict more equal outcomes, yet gaps have increased due to gains in high-income areas.
One partial explanation for growing educational inequality by income, despite more progressive funding, could be hidden money from school-supporting non-profits (SSNPs), including parent-teacher associations (PTAs), booster clubs, and alumni associations, whose mission is to support local schools (Murray et al. 2019; Brown et al. 2017). More common in high-income areas, SSNPs may improve student outcomes by freeing district funds for instructional spending or by directly funding extra/curricular opportunities to enhance learning and develop “soft skills” (Putnam et al. 2012). SSNP revenues represented a tiny fraction of average district budgets before the 2008 recession (Nelson and Gazley 2014; Su 2012; Figlio and Kenny 2009; Greene 2005; Brunner and Imazeki 2005; Brown et al. 2017). But SSNP funds are highly skewed and we know little about how they have changed over time since the 2008 recession.
SSNP funds are a hidden source of inequality because they do not appear in district budgets. Inequality of school funding measures are downwardly biased because studies exclude SSNP funds. Using annual IRS non-profit tax data 1995-2020, this study addresses 2 research questions:
How much money do SSNPs raise annually and how unequally are those funds distributed by student income and race/ethnicity?
How has inequality of SSNP funds changed over time since 1995?

Data: Using IRS non-profit tax data from the Urban Institute’s (2022) National Center for Charitable Statistics (NCCS) Data Archive 1995-2020, this study identifies all SSNPs, geocodes them using street address in ArcGIS Pro, and links them to school districts using NCES shapefiles for school district boundaries. Total SSNP revenue, spending, and assets are measured annually for each district, allowing examination of inequality of SSNP funds across districts by student income and race/ethnicity, and changes in level and inequality of SSNP funds since 1995.

Hypothesis: SSNP funds increased and became increasingly unequal by student income and racial/ethnic composition since 1995.

Preliminary analyses suggest that hidden funds from SSNPs are unequal by income. Figure 1 shows the share of these hidden funds held by districts in each quintile of the income distribution over time. Districts in the top 20% of median household income held about 30% of all SSNP revenue per pupil in 1995, and that share increased to 45% by 2020.

Author

• Emily Rauscher, Brown University