An Alternative Approach to Measuring Horizontal and Vertical Equity in School Funding

Although the notions of vertical and horizontal equity are straightforward, con-structing valid measures of each has proven difficult in states that make revenue adjustments for multiple factors. In this article we introduce an alternative ap-proach for assessing horizontal and vertical equity that addresses this problem. This approach is based on the multivariate relationships between a school district's per-pupil revenues and the various factors used to determine per-pupil funding in the district's state. The vertical equity metrics are based on how close the linear relationships between per-pupil funding and vertical equity factors are to their intended values. We examine horizontal equity by looking at the unexplained variations in per-pupil funding levels from the same model. This leads to im-proved measurement of "equal treatment of equals " without assuming that all school districts have comparable funding needs. We use data for 292 public school districts in Indiana to illustrate how the new measures can be implemented and whether changes in the state's foundation program in 2005 resulted in gains in horizontal and vertical equity