The Historical Foundation of Educational Dispossession

The history of school finance in the United States is deeply rooted in local property taxation, a system that has perpetuated significant inequalities across districts for well over a century. As Allan Odden and Lawrence Picus (Reference Odden and Picus2020) note, the early structure of American public education placed fiscal responsibility almost entirely on local governments, meaning that the wealth of a community directly determined the quality of school available to its children. This arrangement went largely unchallenged until the landmark California Supreme Court case Serrano v. Priest (1971), which declared that education funding systems tied to local property wealth were unconstitutional, igniting a wave of school finance litigation across the nation (Superfine Reference Superfine2010). Shortly thereafter, the U.S. Supreme Court’s ruling in San Antonio Independent School District v. Rodriguez (1973) curtailed federal intervention by holding education was not a fundamental right under the U.S. Constitution, thereby pushing reform efforts back to the state level (Rebell Reference Rebell2009). These legal battles laid the groundwork for what scholars now frame as critical school finance, as David Backer and Roseann Liu (Reference Backer and Liu2015) argue that traditional school finance research has historically neglected how race, power, and political economy shape fiscal policy, and that a critical approach must center the experiences of historically marginalized communities. In this way, critical school finance builds upon but fundamentally challenges the liberal reform tradition, demanding that questions of redistribution be understood alongside questions of recognition and structural justice (Ladson-Billings Reference Ladson-Billings2006).

The historical inequities embedded in school finance systems have a direct and consequential relationship to school district debt, particularly for districts serving low-income and minority communities. School district debt operates within a longer history of educational dispossession that began with the forced removal of Indigenous peoples from their lands, the enslavement of Africans and their descendants, and the systematic denial of educational opportunities to communities of color (Du Bois Reference Du Bois1935; Williams Reference Williams1944). As Esther Cyna (Reference Cyna2022) documents, between 1880 and 1910 in North Carolina, because public school funding has long been tethered to local property tax bases, districts located in economically depressed areas have chronically operated with insufficient revenues relative to their student needs (Odden and Picus, Reference Odden and Picus2020). As such, Black residents paid six times more in taxes than White people, yet by 1910 the value of school properties attended by Black students was eight times lower. Moreover, the legacy of redlining lives directly inside school finance as the residential segregation it engineered became the geographic template upon which property tax-dependent school funding was built. This pattern of extracting resources from Black communities while denying them educational investment established the foundation for contemporary debt-based dispossession.

The architecture of modern school finance perpetuates this dispossession through property tax-based funding systems that encode historical patterns of residential segregation, redlining, and wealth extraction (Harris Reference Harris1993; Rothstein Reference Rothstein2017). When districts serving predominantly Black and Latino students must borrow to provide basic educational infrastructure that wealthier white districts fund through their tax base, this represents a continuation of dispossession: these communities are denied the accumulated wealth that would make borrowing unnecessary, then penalized with debt service costs that further reduce educational resources.

Contemporary Mechanisms of Dispossession Through Debt

To better understand dept, in this article I will review two large school districts—Chicago and, Philadelphia. While these school districts only represent two of the many large school districts across the United States, they provide a sample of the amount of debt that exist across school districts serving marginalized communities.

The Racialized Geography of Debt Burden

Racialized geography in school finance refers to how the spatial organization of race and wealth across neighborhoods and districts creates systemic funding inequalities that disadvantage students of color provided that most U.S. public schools are funded heavily through property taxes. The deliberate practices of redlining contributed to segregated communities with artificially lower property values and the generational wealth taken from residents of these communities continues to have profound effects on school funding today (Wilkerson Reference Wilkerson2024). When school funding formulas fail to provide sufficient resources for schools, the district must go to the bond market to issue a bond or borrow. However, municipal bonds typically require voter approval, which adds another racial layer. Older, White voters are less likely to approve bond referenda to fund public infrastructure, such as public schools, in predominantly Black neighborhoods—making municipal bond financing in the words of historian Destin Jenkins, an “infrastructural investment in whiteness” (Schirmer Reference Schirmer2023). As such, racialized geography has historically concentrated low property values in communities of color and those same districts are then deemed riskier borrowers and charged higher interest. Thus, leading to school district debt.

School district debt has grown substantially over the past two decades, from nearly $323 billion in 2006 to $443 billion in 2016, and further to $543.9 billion by fiscal year 2022 (U.S. Census Bureau 2024). This growth reflects not merely infrastructure needs but a systematic pattern where underfunded districts must borrow to provide facilities and resources that adequately funded districts purchase through current revenues. Districts serving the highest concentrations of students from low-income backgrounds receive approximately five percent less in state and local revenue than more affluent districts—about $800 less per student (Morgan and Amerikaner, Reference Morgan and Amerikaner2018). When debt obligations compound these funding gaps, dispossession intensifies. In fourteen states, districts with the most students of color receive at least five percent less funding than districts with the fewest students of color. Nationally, this gap amounts to approximately sixteen percent less in state and local revenue, roughly $13.5 million for a typical 5,000-student district (The Education Trust 2020). The resulting debt service then further reduces available educational funding, creating a spiral of dispossession were communities of color face compounding disadvantages across generations.

Defining Educational Kleptocracy

Kleptocracy in school finance refers to the organized, sustained theft of rights, land, capital, and labor from people of color for the benefit of wealthy White people through school funding and governance policies (Cyna Reference Cyna2022). This concept emphasizes that dispossession is not passive or accidental but requires active decision-making by government officials who design and implement policies knowing they will concentrate resources in White, wealthy communities while extracting them from communities of color.

In the context of school debt, kleptocracy manifests in several ways: the structuring of bond markets to favor wealthy investors over educational needs; the crafting of financial instruments that transfer risk to districts serving high-need students while guaranteeing returns to bondholders; the design of credit rating systems that incentivize districts to hoard resources rather than invest in students; and the creation of complex debt instruments that enable financial institutions to extract maximum value from public education systems.

Wall Street as Accomplice in Educational Theft

The entanglement of school finance with Wall Street represents kleptocratic theft disguised as technical financial management. During the 2008 financial crisis, financial advisors from private sector firms guided many districts to adopt complex debt instruments including capital appreciation bonds, interest rate swaps, and auction-rate securities. The payment structure can lead to districts paying as much as twenty-three times the amount borrowed (Bundy and Shifflett, Reference Bundy and Shifflett2013). When markets crashed, these arrangements devastated district budgets while enriching the financial institutions that designed them. CPS engaged in risky borrowing in an effort to lower interest rates on existing debt that backfired when the economy collapsed (Gillers and Grotto, Reference Gillers and Grotto2014). The district still faces consequences from this “crisis borrowing” more than a decade later.

In other examples, according to the Texas Bond Review Board (2023) data shows that school districts owe the most capital appreciation bonds (CABs) debt service at over forty-seven percent of total CAB debt-service owed among all local governments. According to the Texas Bond Review Board (2023) report, CABs are controversial because they don’t pay interest regularly. Interest on CABs compounds semiannually and accumulates over the life of the bond, generally resulting in higher interest rates than current interest bonds. According to the Texas Bond Review Board (2023) this can result in a “payback ration” where a school district borrows $1 million but eventually owes $10 million or more. These transactions were not neutral market mechanisms but actively designed instruments of wealth extraction. The racial composition of affected districts—predominantly serving Black and Latino students—reveals how kleptocracy operates through racial capitalism: communities of color become sites of extraction while White, wealthy communities avoid predatory financial arrangements. As Backer and colleagues (Reference Backer and Cyna2025) found, school districts serving larger populations of students of color pay significantly higher interest rates on their debt, regardless of their actual financial health or creditworthiness. This may explain why schools in Texas and Chicago might struggle to improve their junk bond ratings.

Credit Rating Agencies as Gatekeepers of Kleptocracy

Credit rating agencies like Moody’s, S&P Global, and Fitch Ratings function as gatekeepers that enforce kleptocratic priorities in school finance. These agencies assess district fiscal health based on budget reserves and tax base wealth rather than educational outcomes or student needs. Districts must maintain high ratings to access favorable interest rates, creating perverse incentives to hoard cash even when students urgently need resources. Chicago Public Schools is the only district among the nation’s twenty-five largest with a junk bond rating—receiving a Ba1 rating from Moody’s and BB+ ratings from both S&P Global and Fitch Ratings (The Civic Federation 2024). These “non-investment grade speculative” ratings force CPS to pay premium interest rates that drain additional resources from educational budgets. CPS treasurer and deputy chief financial officer Wally Stock noted, “We’re always fighting to get our credit ratings up. We’re still in the penalty box” (as cited in Ahmed and Bellware, Reference Ahmed and Bellware2025). An upcoming bond sale at the junk rating will further increase borrowing costs, diverting more of the district’s budget toward debt service rather than classrooms (Savidge Reference Savidge2025). Not including the upcoming bond sale (estimated at more than $600 million), CPS currently owes $9.1 billion in long-term debt and $13.9 billion in unfunded promised pension benefits. The credit rating system thus operates as kleptocratic infrastructure: it establishes rules that benefit bondholders at students’ expense, punishes districts that prioritize students over debt service, and naturalizes the subordination of educational needs to financial market demands.

State-Level Kleptocratic Policy Design

State legislatures engage in kleptocratic policymaking when they design school funding formulas that necessitate district borrowing while refusing to provide adequate base funding. Texas exemplifies this pattern: school districts in Texas accounted for 39.1% ($130.21 billion) of all local debt outstanding as of fiscal year 2024 (Texas Bond Review Board 2023). The state legislature has not increased the basic allotment (foundational per-student funding) since 2019 despite inflation surging over twenty-two percent (Dey and Edison, Reference Dey and Edison2026). Districts need an additional $1,300 per student just to maintain purchasing power from six years ago.

Nearly eighty percent of surveyed Texas districts face deficit budgets or insufficient resources (Dey and Edison, Reference Dey and Edison2026). More than half of Texas school districts anticipated budget deficits for fiscal year 2024, with more than fifty percent implementing cuts or using fund balances in 2025. Currently, forty-three percent of Texas districts are undergoing significant cuts. This forced austerity compels districts to borrow for basic operations while simultaneously extracting resources through recapture payments—representing theft where the state extracts resources from districts serving students while refusing to provide adequate base funding.

Furthermore, according to the Illinois State Board of Education, CPS is underfunded by more than $1 billion because of insufficient local and state support and the disproportionately large number of high-needs students it serves (Kids First Chicago 2024). The state covers ninety-seven percent of the employer contribution to the statewide teacher pension system but only thirty-five percent of CPS’s contribution (Chicago Public Schools 2024a). This historical inequity rooted in CPS teachers having their own pension fund means no other school district in the state has to use money that should go to students to contribute to teachers’ pensions to the same degree—CPS remains the only school district in the state with its own teacher’s pension system, separate from the statewide Teachers’ Retirement System (TRS)—and historically, this fund was funded entirely by Chicago taxpayers with little support from the state (Chicago Public Schools 2024b).

Theorizing Extraction in School Finance

Extraction in Critical School Finance refers to processes that pull wealth and resources from communities without adequate compensation or return. Super-expropriation intensifies extraction, involving the commandeering of resources without paying for them or paying enough to cover their replacement (Fraser Reference Fraser2016). In racial capitalism, people racialized as White are subject primarily to exploitation (paid a “living wage”), while those racialized as non-White face disproportionate vulnerability to expropriation of their labor, land, and resources with inadequate or no compensation.

School debt operates as a mechanism of extraction and super-expropriation in multiple ways. First, districts serving predominantly students of color must borrow for facilities and resources that wealthier White districts purchase through current revenue, creating an initial extraction of interest payments. Second, debt service diverts funds from educational programming to bondholders, extracting value from students and communities to benefit investors. Third, predatory financial instruments like capital appreciation bonds and toxic swaps super-expropriate by extracting value far beyond the original loan amount. Fourth, credit rating requirements that force districts to maintain reserves extract potential educational investments to satisfy financial markets.

Quantifying Extraction Through Debt Service

Chicago Public Schools’ allocation of $1 billion to debt service in fiscal year 2025 represents direct extraction from students to bondholders (Ahmed and Bellware, Reference Ahmed and Bellware2025). Last year, CPS paid $817 million in debt service payments for long-term loans and another $9 million of interest on short-term loans—money that could have covered the district’s deficit (Chicago Public Schools 2026). For students in CPS—predominantly Black and Latino—this extraction translates to larger class sizes, fewer counselors, outdated facilities, and limited enrichment opportunities.

The physical infrastructure of Chicago Public Schools provides a visceral example of how racialized debt compounds into resource extraction from students. The district’s aging infrastructure exemplifies how extraction through deferred maintenance compounds financial burdens. CPS buildings are, on average, eighty-five years old, with dozens built before 1900 (Chicago Public Schools 2026). A facility assessment completed in 2023 found $14 billion in needed repairs—$3 billion of which are considered critical (Chicago Public Schools 2024c). Since 2017, the district’s forty-seven severely under-enrolled schools (those sitting more than two-thirds empty) have cost more than $213 million to maintain and renovate. The emptiest buildings account for $400 million of the district’s estimated $3.1 billion in needed critical repairs (Chicago Public Schools 2026). The district is paying $100 million more in annual maintenance than it did in 2019 (Chicago Public Schools 2024c).

Because CPS doesn’t have any way on its own to raise money to make these repairs, it borrows money to make fixes, but never enough to make a dent in the long list of what is needed. Things like boilers and roofs often don’t get replaced, so more staff is needed just to keep things limping along and the district is paying $100 million more in annual maintenance than it did in 2019 (Chicago Public Schools 2026). The reason these basic repairs go unaddressed is structural, as cities like Chicago cannot put referendums on the ballot to ask for temporary tax increases to pay for school renovation—leaving the district taking on debt to fix its buildings or taking money out of the operating budget, which pays for programs at schools (Chicago Public Schools 2024d). The result is a direct, ongoing diversion of classroom resources because of the limitation in funding. The cycle, as stated in the district’s 2024 strategic plan is self-reinforcing—frequent repairs to aging roofs, windows, and boiler systems are often funded through general operating budget, meaning money that should reach students instead flows to bond holders and contractors, year after year, in a district serving predominately Black and Latino children (Chicago Public Schools 2024d).

Interest as Institutionalized Extraction

Capital appreciation bonds exemplify extraction through interest mechanisms. Texas Bond Review Board (2023) data shows that school districts with an interest and sinking fund (I&S) tax rate equal to or greater than $0.35 are more likely to have capital appreciation bonds than school districts with an I&S tax rate under $0.35. Historically, CABs have been used by school districts to enable them to remain under the fifty-cent debt ceiling that limits the property taxes assessed for debt service costs to fifty cents per $100 of assessed value.

Districts serving students of color face higher interest rates due to lower credit ratings, intensifying extraction. Chicago’s junk bond status forces the district to pay premium interest rates, extracting additional millions from educational budgets simply due to fiscal constraints created by inadequate state funding and the legacy of previous financial mismanagement. This creates a vicious cycle: underfunding creates fiscal stress, fiscal stress reduces credit ratings, reduced ratings increase borrowing costs, increased costs intensify fiscal stress.

Justin Marlowe, who leads the Center for Municipal Finance at the University of Chicago, explained the problem: “It’s one thing to be highly leveraged when you are a growing district. Sometimes, borrowing in that case is exactly the right thing to do. It’s a different story when your enrollment is flat or declining” (as cited in Ahmed and Bellware, Reference Ahmed and Bellware2025). The tradeoff, according to Marlowe, is “you pay a lot more in interest and fees and other costs unrelated to the district’s mission to educate students (as cited in Ahmed and Bellware, Reference Ahmed and Bellware2025).

Extraction Through Austerity and School Closures

When debt obligations force districts to close schools, extraction operates through multiple channels. In 2013, Chicago initiated the closing of fifty-four public schools—fifty-three elementary schools and one high school (Ahmed-Ullah et al., Reference Ahmed-Ullah, Chase and Secter2013). For every four schools that were closed, three were in predominantly Black neighborhoods. Over eighty-eight percent of the students affected by these closings were African American. These closures occurred in neighborhoods like Bronzeville, which are not only sites of demolished public housing but also of closed-down schools.

These closures were framed as fiscal necessity given debt obligations, but they represent extraction: the removal of educational infrastructure from communities of color to service debt owed to financial institutions. Students faced longer commutes, disrupted peer relationships, and concentration in overcrowded remaining schools—extracting educational opportunity, community stability, and child well-being to satisfy bondholders.

Philadelphia’s environmental hazards in school buildings reflect extraction through deferred maintenance. The district faces toxic conditions including lead paint and asbestos contamination (as cited in Ahmed and Bellware, Reference Ahmed and Bellware2025). Heavy debt burdens force districts to choose between servicing debt, maintaining safe facilities and other important decisions that impact students. in doing so, the debt creates a genuine structural tension in school finance as bond debt is legally senior to almost everything else in a districts budget. For example, when debt takes priority, student health is extracted—meaning children attend schools with documented health hazards because funds that could remediate these dangers instead flow to bondholders.

Understanding Racial Capitalism in Education Finance

As noted above, racial capitalism posits that capitalism is inherently racialized—racism is not incidental to capitalism but constitutive of it (Robinson Reference Robinson1983). Capitalism cannot accumulate except through producing and moving through severe inequalities among human groups, with racial hierarchies determining which groups face exploitation versus expropriation (Melamed Reference Melamed2015; Robinson Reference Robinson1983). School finance operates within this system, where the accumulation of wealth by bondholders, financial institutions, and wealthy White communities requires the systematic extraction of resources from communities of color through mechanisms like debt (Benson and Dumas, Reference Benson and Dumas2021).

In racial capitalism, race-making processes create differentiated vulnerability to exploitation versus expropriation. Districts serving predominantly White students receive adequate funding through property taxes rooted in accumulated intergenerational wealth, avoiding or minimizing debt. Districts serving students of color, located in communities that have faced historical dispossession and continue experiencing extraction, must borrow to provide basic education, then face expropriation through debt service (Seamster and Charron-Chénier, Reference Seamster and Charron-Chénier2017). This is not coincidental but structural. The foundation of modern capitalism rests on colonization and enslavement, dispossession, subjugation, and conquest (Williams Reference Williams1944). Schools in the United States were built on stolen Indigenous land, often funded through wealth generated by enslaved labor. Contemporary school debt continues this pattern: extracting resources from racialized communities to accumulate wealth for predominantly White bondholders and financial institutions (Green et al., Reference Green, Baker and Oluwole2021). In this case, as Robinson’s (Reference Robinson1983) research states, this extraction and appropriation operate as part of a system that historically drawn wealth, labor, land, and culture from communities of color toward the accumulation of White institution and individual wealth.

Property Taxation and the Racial Wealth Gap

Property tax-based school funding embeds racial capitalism in school finance. Due to historical practices of slavery, sharecropping, convict leasing, redlining, discriminatory lending, urban renewal (often termed “Negro removal”), and ongoing patterns of residential segregation, the racial wealth gap in the United States is vast and growing (Baradaran Reference Baradaran2017; Taylor Reference Taylor2019). The median White family holds approximately eight times the wealth of the median Black family and five times that of the median Latino family (Weller and Roberts, Reference Weller and Roberts2021). This wealth gap translates directly to school funding disparities. In 2000, the Philadelphia school district spent $6,969 a year per student, with seventy percent of Philadelphia’s students at or near the poverty line. This contrasted with expenditures per student in wealthier suburban school districts, such as Jenkintown School District ($12,076), Radnor Township School District ($13,288), and Upper Merion School District ($13,139) (William Penn School District et al. v. Pennsylvania Department of Education, 2023).

In Chicago, the primary source of operating revenue for CPS is local tax revenue, specifically property taxes that the school district levies itself. For fiscal year 2025, these revenues make up $5.1 billion of the $8.6 billion in operating revenue (fifty-nine percent) (Savidge Reference Savidge2025). CPS relies on the same tax base as the city of Chicago, which means residents are responsible for supporting both entities. As CPS debt accumulates, Chicago taxpayers—disproportionately low-income and of color—are on the hook to pay it. The property tax system thus operates as a racial capitalist mechanism: it naturalizes resource inequality by framing it as reflecting property values rather than historical theft; it perpetuates inequality by tying educational funding to wealth generated through racial dispossession; and it enables extraction through debt by forcing districts serving students of color to borrow while districts serving White students use current revenue.

The Racial Composition of Debt Burden

The concentration of school debt in districts serving students of color reveals racial capitalism’s operation. Chicago (serving 46.7% Hispanic and 36.6% African American students) carries debt exceeding $28,000 per student (Ahmed and Bellware, Reference Ahmed and Bellware2025). CPS is one of only three districts among the twenty-five largest where debt has consistently exceeded annual revenue—a sign of financial instability that disproportionately impacts communities of color (Ahmed and Bellware, Reference Ahmed and Bellware2025). In Philadelphia, where the student population is overwhelmingly students of color and fifty-four percent live in poverty, the district faces a $1.25 billion funding gap while trying to serve students with severe needs (Ahmed and Bellware, Reference Ahmed and Bellware2025). As of 2018, 38.6% of Philadelphia’s six- to seventeen-year-olds were living in poverty, and Black children were overrepresented among Philadelphia’s school-age population living in poverty at 1.7 times the representation of Latinx children and 5.5 times that of non-Hispanic White children (Economy League 2020).

This pattern reflects racial capitalism’s logic: communities of color become sites of extraction while White communities receive investment. Districts with the highest percentages of students of color receive approximately sixteen percent less in state and local revenue while often carrying disproportionate debt burdens (The Education Trust 2020).

Enrollment Decline and Racialized Extraction

Chicago’s enrollment decline reveals how racial capitalism structures which communities bear the burden of fiscal stress. In 2000, CPS enrollment stood at more than 430,000 students. By 2024, just slightly more than 330,000 students attended CPS—a consistent decline of as many as 10,000 public school students each year (Kids First Chicago 2024). Since 2000, Chicago has lost more than 260,000 Black residents, with the Black population now the lowest it has been since the 1960 census (Kids First Chicago 2024). The decline in Black residents is being driven by mass departure of these families from the city. Englewood, one of Chicago’s seventy-seven community areas, boasted nearly 100,000 people in 1960 but is now home to about 22,000 (Kids First Chicago 2024). These local population shifts are critical as we consider debt burdens: declining enrollment reduces per-pupil revenue while fixed debt obligations remain constant, intensifying extraction from remaining students who are disproportionately students of color living in poverty. Nearly one-third of CPS’s funding comes from the state of Illinois, which uses an evidence-based funding formula that relies heavily on prior-year student enrollment to fund school districts (Kids First Chicago 2024). As enrollment declines, revenue declines, but debt service requirements do not, creating an intensifying cycle of extraction from communities that can least afford it.

Moving Beyond Descriptive Analysis

Traditional school finance research describes inequality—documenting funding gaps, resource disparities, and outcome differences. Critical School Finance demands analysis of how inequality is actively produced through mechanisms like debt (Backer and Cyna, Reference Backer and Cyna2025). Inequality is not a natural condition but a produced outcome of policies, practices, and power structures that benefit some groups while extracting from others.

School debt produces inequality through multiple mechanisms. It creates direct resource gaps by diverting funds from instruction to debt service in districts serving students of color. It produces credit rating hierarchies that reward districts serving wealthy students while punishing those serving high-need students. It enables extraction through interest, fees, and penalties that transfer public resources to private investors. It forces school closures and budget cuts that concentrate in communities of color. Each mechanism actively produces inequality rather than passively allowing it to exist. Furthermore, as Frances Negron-Muntaner and Jason Wozniak (Reference Negrón-Muntaner and Wozniak2025) argue, school districts like CPS or those in Texas create K-12 debt so unique that it is the future labor and tax dollars of current children to the repayment of high interest bonds. Negron-Muntaner and Wozniak (Reference Negrón-Muntaner and Wozniak2025) belief was that by the time a student in a district like CPS or those in Texas, graduates, their public education has already been leveraged to support private financial markets, effectively “indebting” them before they enter the workforce. In essence, Negron-Muntaner and Wozniak argue that school finance isn’t just about balancing a budget, it is about who has the power over a community’s future.

Compounding Educational Disadvantage

Students attending schools in high-debt districts face compounding disadvantages. In Philadelphia, the standard budget for an elementary school is one teacher to thirty-three children, compared to research suggesting effective class sizes of one teacher to seventeen to twenty students (as cited in Ahmed and Bellware, Reference Ahmed and Bellware2025). The district has only 200 social workers serving over 100,000 students, far below the National Association of Social Workers’ recommendation of one for every 250 students (as cited in Ahmed and Bellware, Reference Ahmed and Bellware2025). In the 2017-2018 school year, there was one social worker for every 1,400 CPS students.

Philadelphia has only two paid librarians on the school district’s payroll, meaning more than one generation of Philly schoolchildren have gone through the district without having used a library or met a librarian (as cited in Ahmed and Bellware, Reference Ahmed and Bellware2025). The district has been cited as having one of the “worst school librarian ratios” in the United States. These resource deficits—directly linked to inadequate funding and debt burdens—actively produce educational inequality.

In Chicago, analysis by Illinois State Board of Education found that of CPS’s nearly $10 billion budget, only $5 billion (about fifty-one percent) is spent on the city’s school network. The other $5 billion goes to pension contributions ($1.2 billion), debt repayments ($800 million), capital spending ($600 million), and district administration and support services ($2.1 billion) (Illinois State Board of Education 2024). Illinois Report Card data shows CPS spends $15,700 on instructional spending per student—only about half of the full $30,000 CPS spends all-in per student (ISBE 2024). These disadvantages compound over time. Students in high-debt districts fall behind peers in well-funded districts, not due to lesser ability or effort but due to resource extraction through debt. By middle school, students in under-resourced schools have experienced years of larger classes, less experienced teachers, and limited enrichment. By high school, cumulative disadvantage manifests in test score gaps, reduced college preparation, and limited access to advanced courses (Anderson et al., Reference Anderson, Sadat and Sosa2021).

Academic Outcomes and Debt Burden

Research demonstrates clear connections between school spending and student outcomes. According to economist Rucker Johnson (Reference Johnson2015), children from low-income homes particularly benefit from increased school funding, with cumulative effects over time. Higher per-student spending correlates with better standardized test scores, higher graduation rates, and narrowed achievement gaps by race and poverty status (Johnson and Jackson, Reference Johnson and Jackson2019). When districts divert funds to debt service instead of instruction, these positive effects reverse. In Chicago, since 2012, CPS spending from state and local sources has nearly doubled, yet student proficiency in math is down seventy-eight percent while student proficiency in reading is down sixty-three percent (Illinois State Board of Education 2024). In 2022, not a single student was proficient in math in thirty-three public schools in Chicago (ISBE 2024). While multiple factors contribute to these outcomes, the diversion of billions of dollars to debt service rather than instruction plays a significant role.

CPS has $2.3 billion more to spend in 2024 than it did in 2019—a thirty percent increase. When adjusting for enrollment shrinkage, CPS has forty-three percent more funding on a per-student basis than it did just five years ago—$30,000 versus nearly $21,000 (ISBE 2024). Yet, massive debt obligations and pension costs consume resources that could otherwise support instruction, with the result that academic outcomes have not improved proportionally to spending increases.

Long-Term Inequality Reproduction

Johnson’s (Reference Johnson2015) research tracked students into adulthood, finding that sustained increases in school spending led to higher educational attainment, improved adult wages, and reduced adult poverty rates. The inverse holds true: when debt obligations reduce instructional spending, students experience diminished long-term outcomes including lower educational attainment, reduced lifetime earnings, and higher rates of adult poverty. For Black and Latino students, these effects compound with broader patterns of racial inequality. Students of color who attend under-resourced, high-debt schools enter adulthood with both the disadvantages created by educational extraction and the disadvantages created by racial discrimination in employment, housing, and wealth accumulation. School debt thus reproduces racial inequality across generations: it extracts resources from communities of color during childhood, produces educational disadvantages that limit economic opportunities, and perpetuates the wealth gaps that necessitate future borrowing.

This intergenerational reproduction reveals racial capitalism’s full cycle. Historical dispossession creates the racial wealth gap that necessitates school district borrowing in communities of color. Debt service extracts resources from students, producing educational disadvantages. Educational disadvantages limit economic opportunities, perpetuating the wealth gap. The wealth gap necessitates future borrowing, beginning the cycle anew with the next generation. Each iteration deepens inequality, transferring wealth from communities of color to predominantly White bondholders and financial institutions.

Demystifying School Finance

Critical School Finance’s first tenet, demystification (Backer and Cyna, Reference Backer and Cyna2025), demands making visible the power structures and extraction mechanisms hidden within technical school finance language. Terms like “debt service,” “credit ratings,” “bond markets,” and “fiscal responsibility” obscure the fundamental reality: school debt operates as a mechanism to transfer resources from students and communities of color to wealthy investors and financial institutions (Weber Reference Weber2010).

Demystification requires translating technical finance into plain language about power, extraction, and harm. When Chicago spends $1 billion on debt service, this means $1 billion extracted from students and teachers to benefit bondholders. When credit rating agencies demand reserve accumulation, this means resources withheld from students to satisfy financial markets. When the district must pay premium interest rates due to junk bond status, this means predatory financial institutions extracting additional wealth from communities of color.

Community organizations have begun this demystification work. In Chicago, groups like the Chicago Teachers Union and community coalitions have exposed how debt extraction harms students. During the 2013 school closure crisis, the Chicago Teachers Union publicized facilities analyses and resisted closures that disproportionately affected Black communities (Chicago Public Schools 2026). This demystification enables political mobilization by revealing the injustice hidden in technical language.

Counter-Interpellation and Challenging Financial Inevitability

Counter-interpellation involves refusing the subject positions that power structures assign. In school finance, this means rejecting the framing of students and communities as fiscal burdens whose educational needs must be subordinated to debt obligations and credit ratings. In school districts such as Chicago, Philadelphia and schools in Texas, these districts are often interpellated as “risky debtors” or failures by credit agencies and state legislatures. This framing makes school closures, staff layoffs, and high-interest borrowing seem like a neutral nicety rather than a political choice. Instead, counter-interpellation recognizes students as rights-holders deserving full educational investment and communities of color as having legitimate claims to resources extracted through historical and contemporary dispossession. Adopting a critical school finance lens can counter-interpellate these identities, reframing themselves not as irresponsible spenders but victims of predatory inclusion and extractive finance (Backer et al., Reference Backer2025).

When districts claim they must close schools or cut programs due to “fiscal responsibility,” counter-interpellation asks: responsible to whom? Bondholders or students? Financial markets or communities? The framing of debt service as inevitable and budget cuts as necessary naturalizes extraction. Counter-interpellation denaturalizes these processes, revealing them as political choices that prioritize investor returns over educational justice.

In 2021, Chicago Mayor Brandon Johnson’s opposition to CPS’s proposed budget represented a form of counter-interpellation. Marking one of the first times a mayor has opposed a budget from a Board of Education and schools CEO, Johnson rejected CPS’s 2022 proposed budget and urged a short-term alternative approach, challenging the inevitability of austerity measures (Kids First Chicago 2024). While the effectiveness of this opposition remains debated, it demonstrates the possibility of challenging financial arrangements framed as inevitable. While the Mayor’s opposition isn’t extraction, the budget itself—which he was opposing—contains the extractive elements. The proposed budget’s reliance on high-interest loans and the diversion of operating funds to “limping” infrastructure represents the very “self-reinforcing cycle” of extraction that CSF scholars like Backer and Cyna critique.

Organization, Mobilization, and Political Power

Critical School Finance recognizes that changing school finance requires building political power to challenge existing arrangements. This demands organizing communities affected by extraction to understand how debt harms them, mobilizing these communities to demand alternatives, and building coalitions powerful enough to transform school finance systems. Under CSF, the dominant interpellation calls for communities to see themselves as beneficiaries— grateful recipients of new construction, responsible stewards of fiscal obligation, cooperative partners in a finance system designed elsewhere and imposed upon them (Backer and Cyna, Reference Backer and Cyna2025).

The Chicago Teachers Union strikes of 2012 and 2019 exemplify this approach. In the 2019 strike that lasted eleven days, the union negotiated a contract with Mayor Lori Lightfoot that resulted in teachers winning smaller class sizes as well as more support staff including nurses, social workers, and librarians (Wikipedia 2026). The union organized around educational justice, connecting school finance to broader issues of racial and economic inequality. The strikes mobilized teachers, students, parents, and community members, building power to resist closures and budget cuts. While not fully successful in ending debt extraction, the strikes demonstrated the possibility of challenging seemingly inevitable financial arrangements.

The underfunding of majority Black and Brown school districts is not an accident of fiscal design or an unintended consequence of property tax dependence: it is the predictable output of a system built on racialized geography, sustained by legal structures that protect creditor claims over children’s welfare, and legitimized by a meritocratic ideology that converts inherited advantage into deserved outcome (Backer and Cyna, Reference Backer and Cyna2025). Recent movements connecting school finance to racial justice show organizing potential. Community groups in Philadelphia have organized around adequate funding, connecting historical underfunding to current educational conditions. These movements build on long traditions of Black, Latino, and Indigenous communities organizing for educational justice, refusing to accept that debt service must take priority over student needs.