Education Funding

4 Ways States Are Trying to Fix How They Fund Schools

By Mark Lieberman — February 14, 2023 6 min read
one woman and two men with a large calculator and next to large stacks of bills and coins.
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Texas is grappling with whether schools should get funding based on how many students are enrolled or their average attendance. Connecticut lawmakers want more dollars to support high-need students in magnet programs and charter schools. The newly elected governor of Nebraska is proposing that every district get a minimum allocation of funds from the state, regardless of their circumstances.

The latest regular round of state budget talks has revived scrutiny of the formulas that determine how—and how much—state funding flows to schools, with advocates in many places pushing for reforms that target more robust aid to schools and students in need.

In Pennsylvania, those discussions are happening with renewed urgency after last week’s ruling from a judge declaring that the state’s current school funding system, which results in major funding disparities between high-wealth and low-wealth districts, is unconstitutional.

But funding formulas elsewhere have garnered scrutiny even without a bombshell lawsuit. States often leave convoluted school finance systems in place years or even decades after the population or demographic data that power them have fallen out of date and the conditions in school buildings have radically changed. In Georgia, for instance, the current state funding formula hasn’t been rewritten since 1985.

Daryl McLaughlin, superintendent of the Perry schools in rural New York, said complexities in state funding formulas have real impacts on districts’ ability to meet the growing expectations society places on schools—everything from providing social-emotional support to offering self-contained classrooms for students who need special accommodations.

“When the formula is not making sense, the output for us is not making sense,” McLaughlin said.

The sources of school funding

Local districts in most places raise property taxes from residents to form the basis of their budgets. Many states contribute almost as much or even more than the local share, especially for districts in low-wealth areas that can’t raise as much in property taxes. The federal government supplies the smallest share of funds, between 8 and 10 percent on average.

The bulk of state aid filters down to districts via complex funding formulas that account for everything from geographic and demographic factors to services for populations of students like English learners or students with disabilities that cost more to provide.

Conventional wisdom and academic consensus on the appropriate amount of money necessary to provide an adequate education continually evolves, just as inflation trends affect the costs of particular services. Some formulas are designed to weather those shifts, while others aren’t.

These formulas are among the factors responsible for enormous disparities in school spending from state to state. Districts in Arizona and Nevada, for instance, on average spend less than $11,000 per student each year, while New York’s average hovers around $26,000. Wide disparities in per-student spending also exist between districts in the same state, and even between school buildings in the same district.

Here are a few examples of current debates surrounding states’ school funding formulas.

Balancing funding increases with formula rewrites

Fights over education spending often involve pushing for more dollars as well as changes to the underlying funding system.

In New York, for example, advocates spent much of the last decade pushing state officials to fulfill their promise to fully fund the state’s education formula.

Gov. Kathy Hochul last year announced plans to do just that—and, in turn, advocates are shifting their attention to how the state allocates that money, not just how much schools get in total.

Fifteen years after the formula was last tweaked, some of the underlying population data used to calculate district-by-district aid is two U.S. Census cycles out of date, said Jasmine Gripper, executive director of the Alliance for Quality Education, a New York-based advocacy group. Since then, housing insecurity in the state has increased notably, and the number of English-language learners has risen dramatically.

The biggest obstacle? “We all know that doing adjustments to the formula only makes it more expensive,” Gripper said. “Some people really don’t want to have an honest conversation about how to make the formula better.”

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In some cases, those conversations can drag out for years.

Colorado has long fallen short of constitutional obligations to provide sufficient general funds to schools and to help districts meet the federally mandated obligation for a comparable education for students with disabilities.

Last month, lawmakers promised to increase special education funding by at least 13 percent during this budget cycle, fully funding the state’s minimum obligations. But a committee convened in 2017 to rewrite the state’s funding formula said it still needs more time. The primary concern: developing a new formula that provides more aid to districts that need it without shortchanging other districts in the process.

Accounting for the extra costs of high-need students

Georgia is one of a handful of states that doesn’t devote specific funds to students whose families live in poverty. Lawmakers this year have once again raised the prospect of changing that, though it now appears unlikely to happen.

Meanwhile, New York City is in the process of changing its funding formula to provide more funding for students experiencing homelessness or seeking asylum. That funding would supplement federal support for homeless students that many critics have long deemed inadequate.

In Connecticut, funding discussions have centered around ensuring that high-need students in charter and magnet schools don’t get lost in the state’s effort to direct aid to the highest-need districts.

And in California, a spirited debate has raged for years over how to improve racial equity in school funding. Lawmakers last year passed a bill that would direct more aid to districts with large shares of Black students, but Gov. Gavin Newsom declined to sign the bill into law. This year, a similar proposed reform aims to provide more aid for low-income students—but advocates have pointed out that a majority of Black students, whose average test scores fall significantly below those of their white peers, don’t attend districts that would benefit from that approach.

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David Sciarra, executive director of the Newark-based Education Law Center, an advocacy group for children in low-income cities, looks at paperwork during a hearing in a school funding case before the New Jersey Supreme Court in Trenton, Wednesday, April 20, 2011.
David Sciarra, executive director of the Newark-based Education Law Center, an advocacy group for children in low-income cities, looks at paperwork during a hearing in a school funding case before the New Jersey Supreme Court in Trenton, Wednesday, April 20, 2011.
John O'Boyle/AP/Pool

Ensuring that formulas do what they’re intended to do

Funding formulas are so complex and multilayered that some changes to them can have unintended consequences.

In 2018, New Mexico passed school funding reforms designed to ease the burden on districts to fund construction projects. But four years later, some districts have seen the state share of construction costs drop dramatically, the opposite of what was intended. Several district leaders in the state have publicly raised the possibility of filing a lawsuit against the state if lawmakers don’t adequately address concerns about the change this year, the Valencia County News-Bulletin reported.

In Baltimore, a debate is raging between the city’s traditional public and charter schools over whether the state’s newly implemented funding formula, known as the Blueprint for Maryland’s Future, allows public schools to withhold 25 percent of charter schools’ per-student allocations.

Other funding formula debates center on broader philosophical disputes over the state’s role in education funding.

In Nebraska, the newly elected governor wants every district to get at least $1,500 per student from the state each year. Currently, more than half the state’s school districts get no state funding to offset the burden of property taxes on local residents. But the proposed funding reform would cost the state nearly $300 million, prompting concerns from some about accountability.

And in Texas, some observers questioning the longstanding practice of funding schools based on students’ average daily attendance rates. The state is one of only a handful without an enrollment-based funding system, which proponents argue is more stable and predictable. Skeptics of such an overhaul say that districts will lose motivation to enforce truancy policies if attendance doesn’t play a role in funding.

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