(In)Equity in the Supplemental Local Funding to Education: The Case of Israel

• In Event: Economic and Finance aspects of Education

Proposal

Many countries allocate large resources from the central government to education and aspire to achieve equity. However, recently, local authorities play a more dominant role in funding education. This trend challenges the aspiration to achieve equity.
We analyzed the level of equity and equality in the supplemental resources allocated by the local authorities (LAs) to education system in their judication. Our findings revealed more equitable funding for LAs are characterized by high socio-economic, located at the center of the country, and most of the population is from the majority group. Our research provides a framework and a method for analyzing education policy especially in countries with large ethnic distribution, thereby improving their ability to provide equitable education for all students.

1. Literature Review
Recent studies find a positive causal relationship between equitable allocation and improved education outcomes. Moreover, this relationship is stronger among students from disadvantaged populations (e.g., Baker & Weber, 2021; Jackson, Johnson, & Persico, 2015; 2016; Jackson & Mackevicius, 2021; Lafortune, Rothstein, & Schanzenbach, 2018).
The source of education finance resources at the state level comes from local property taxes, state income taxes, and sales taxes. Accordingly, a higher collection of taxes influences the economic abundance, and a higher ability to finance education within the state (Howell & Miller, 1997). Thus, education local funding has a potentially adverse impact on equity, when states may vary in the education funds amount they dedicate in accordance with local incomes (Fischel, 2001; Rose, 2022).

2. Method
This research explores the challenge of decentralized education finance, specifically, that which stems from achieving equity in LAs' supplemental allocation. To this end we analyzed (a) the extent of equity and equality in the average LAs' supplemental allocation per-student and (b) the trend of equity and equality during the years 2014-2020. This comparison enabled us to detect future educational differences, and the state’s ability to achieve equity.
2.1. Data
The research datasets are based on the 'Local authorities - physical and financial data' reports (Central Bureau of Statistic, n.d.); and the Israeli Ministry of Education allocation reports (Israel Ministry of Education, n.d.).
LAs' characteristics:
Ethnic distribution - The composition of the population in the local authority.
SES – The socioeconomic level of those living in the LA.
Location - The LA’s location relative to the center or the periphery.
2.2. Methodology
In our research, the equity in resource allocation is analyzed in accordance with the conceptualization of Berne and Stiefel (1984, 1999). Horizontal equity is analyzed using by McLoone index and the coefficient of variation (CV). (Awwad, 2018; Verstegen, 2015).
Vertical equity in school finance research is analyzed using MLM analysis (multi-linear model) and the Spearman correlation (BenDavid-Hadar & Duani, 2018). In addition, the MLM analysis estimates the fundamental role of the budget year in shaping supplemental allocation per-student (Meroni et al., 2015).
Finally, this research examines equality using the Gini coefficient (e.g., Houck and Eom, 2012).
3. Results
This research has five main findings concerning the size of the average allocation per student, the extant of horizontal equity, the extant of vertical equality, the extant of equality, and the trends along the 7 years examined (2014-2020).
3.1. The size of the average supplemental allocation per student
The MLM analysis indicate that the LAs of a predominantly majority group allocate more supplemental allocation per-student in comparison to LAs of a predominantly minority group. In addition, LAs’ SES level explains the average supplemental allocation per-student, favoring LAs who have a higher SES level. In contrast, our results also show that location level has a negative effect. Such is, most peripheral LAs tend to allocate higher supplemental allocations per-student.
--Insert Table 1 here--

3.2. The empirical result of equity analysis
We found that the LAs' supplemental allocation per-student is less equitable in LAs of a predominantly minority population, compared with the LAs of a predominantly majority population. This finding was confirmed by the MLM analysis (r=1933.95*** (see table 1), by the McLoone index (Table 2) (e.g., over all=0.55, 2020; over all=0.68, 2020, respectively), and by conducting a coefficient of variation (CV) (Table 3) (e.g., over all, CV=1.01, 2020; over all, CV=0.70, 2020, respectively)
--Insert Table 2 here--
--Insert Table 3 here--

3.3. The empirical result of equality analysis
We found that the LAs' supplemental allocation per-student is less equitable in LAs of a predominantly majority group is less equal, compared with the LAs' of a predominantly minority group (e.g. high location level- Gini=0.231; Gini=0.112, 2020, respectively). In additional, in most cases, low SES LAs' allocate less equal supplemental allocation per-student (e.g. in LAs of a predominantly majority group, Gini=0.342; Gini=0.270, 2014, respectively. In LAs of a predominantly minority group, Gini=0.447 Gini=0.281, 2014, respectively).
--Insert Table 4 here--

3.4. The trends along the examined years
The MLM analysis indicates that along the examined years, the trends of equity in the allocation of supplemental resources strengthened. So that, in 2020 the allocation of resources is more equitable compared to the reference year, 2014 (r=80.03***) (see table 1).

4. Discussion and Conclusions
Our work reveals inequality based on the financial capabilities of the local authorities, especially according to the composition of the population in the local authority. The inequality leads to discordance between the government education funding policy aspirations to achieve equity and the inequitable allocation of education resources by the LAs. These findings are in line with empirical evidence of large opportunity gaps among school districts in various states in the US. when Majority-Black districts have less local capacity to raise revenues for their schools (Allegretto, García & Weiss, 2022; Baker & Weber, 2021; Green, et al., 2020).
This paper highlights the need, as well as provides a framework and a method for other educational systems, to examine their school finance policy, thereby improving their ability to provide equitable education for all. That is, policy makers should consider designing education funding policy for local authorities, similar to government education funding policy.

Authors

• Ruth Meoded, Bar Ilan University

• Iris BenDavid-Hadar, Bar Ilan University