Principles and Theories of the Economics of Education

Education is a very essential aspect and should be provided to all students in a country equally. In this respect governments should take initiatives of financing education in order to allow students from poor background to be able to access education. For instance, in the United States of America education is primarily under the responsibility of state and local government. Establishment of schools and colleges, development of curricula and determination of requirements for enrolment as well as graduation is the work of the state government and local communities in the United States of America. This topic is of great importance as it analyzes the historical and theoretical foundations of funding education. Evaluation of sources of revenues and their influence on educational results is also addressed in this study. This study sheds light to educational institutions, local, and state government in matters relating to education in a global perspective. More light is shed on the determination of capital and general expenditures of educational institutions and an analysis of the role of ethics in the process of making the financial decisions for educational institutions.

Historical perspective of financing education

A number of changes have occurred in the education systems of many countries in the whole world, as indicated by Dougherty (2004), particularly in matters relating to financing education. Most striking aspect has been the sharp drop in the public share of funding higher education and the recent interest in financing based on institutional performance. This has resulted in educational institutions particularly higher education to raise their tuition fees, cut costs by outsourcing services to external providers, and aggressively seek private finances. This has impacted the way these educational institutions provide equality of opportunities when enrolling. Currently, education in the United States of America is financed by the state and local governments but this vary drastically among states ranging from approximately 8% in New Hampshire to 74% in New Mexico. On average, states provide 50% of the funds that are required in district schools hence implying that almost a half of education in this country is financed by the state government (Guthrie, 2007).

Despite the fact that the state government funds education in many countries of the world, there are some people who study in private schools and hence they provide their own funding. This shows that the rationale of state funding is to equalize the whole process in the pursuit of making sure that students from all social classes are in a position to assess education (National Center on Education and the Economy, 2008).

Back in the year 1789, Thomas Jefferson was for the idea of free public education that was deemed imperative for the new democracy to grow and thrive. Despite the fact that Jefferson pushed very hard for free public education, he never witnessed government- funded public education during his time. This implies that in the olden days, the concept of government funded education was unheard off in the United States of America. According to National Center on Education and the Economy (2008), there is need for government budgeting for public education in order to bring about equality in school enrolment. This is because some educational institutions particularly the higher education discriminate upon the poor students as they are unable to pay for their tuition fees adequately. Today, as put forward by Wong (1999), parents in the United States of America expect their children to be provided with free education.

 

Sources of revenue and their influence of education outcome

Equity in education funding is generally defined as the aspect of equal per student expenditure in all school districts. Differences in expenditures among different school districts are typically brought about by a function of local tax rates and revenues. According to Dougherty (2004), it is very interesting, inspiring, rewarding, and exciting experience when studying in most of the developed countries but it may be very difficult to fund ones education. The concept of the state government partly paying education has resulted in parents and students paying a higher proportion of the cost of education as compared to other countries (Wong, 1999). Among the groups that are adversely affected by the increasing cost of education are the international students as they are not covered by any government grant. It would be cheap if the local government at district level was in charge of funding education as they are far much aware of the conditions of students in these schools. This is so because, as stated by Dougherty (2004), the local community is aware of the earning levels of parents in a certain district and hence they are better positioned in determining how these schools should be funded.

Challenges facing the concept of financing education

The concept of funding public schools has been challenged heavily in the courts throughout the past 40 years. In this case, the main issue is how equal funding of public education is carried out in the process of providing equal education to all students. These adequacy issues are centered to the academic standards and assessments. This is because some public schools are funded on the basis of how students perform at school. Poor students may perform lower than affluent ones because they do not have adequate learning resources.