Education Funding

How States Are Rethinking Where School Funding Should Go

By Mark Lieberman — February 23, 2024 7 min read
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The Staunton schools in Virginia employ roughly 530 people. But according to the state, they only need 200.

That means the state only contributes to the cost of salaries for roughly 40 percent of the district’s staff. And even then, the state pays for only 40 percent of those 200 staff members’ salaries.

All told, the Staunton district spends $34 million, or $12,630 per student, on staffing. Local taxpayers cover half those costs.

This discrepancy is the result of a complex K-12 school funding formula that the state hasn’t altered in decades, and applies decades-old assumptions about school staffing and student services to schools operating in the 2020s.

“It’s a trainwreck, and it’s been underserving the school divisions for a long time now,” said Brad Wegner, budget director for the Staunton district.

An analysis of the state’s education funding approach commissioned by the legislature and published last July called for a major overhaul of the formula.

But the most recent state budget proposal by Gov. Glenn Youngkin, a Republican, doesn’t include any of the measures recommended in the report. Youngkin has said he backs the plan to revise the formula, and lawmakers have made tentative plans to start making changes in 2025.

Virginia is just one state where policymakers, researchers, and advocates have identified problems with the equations, weights, and other statistical measures their states use to figure out how much money schools get each year.

State funding formulas for K-12 schools are notoriously messy and complex. Policymakers, researchers, advocates, school district leaders, community groups, and parents are rarely in lockstep over how they should work.

To the public, and even to the lawmakers who execute them, they’re often inscrutable. And they’re always subject to change.

“You get what you get. No one really understands it,” Wegner said of Virginia’s formula. “I don’t think there’s any one person who could lay out the whole budget template that we get from the state, how all that math works.”

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Education Funding 4 Ways States Are Trying to Fix How They Fund Schools
Mark Lieberman, February 14, 2023
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Changes might not be happening this year in Virginia, but here are a few ways other states are looking to revamp their funding formulas for K-12 schools.

Adding weights for marginalized groups

The growing consensus in recent years among education researchers is that schools need more money to successfully educate students from low-income families, students of color, and English learners.

However, some funding formulas don’t dedicate extra money to students in the state who fit into those categories.

Others devote additional funds to some categories of students but not others, or they draw on data that’s out of date.

  • Colorado’s current formula allocates funds primarily based on the size of the district and the cost of living in the surrounding community. The number of students who live in poverty doesn’t factor in nearly as much. Legislators have proposed a new formula that would send districts significantly more money per student overall, and more weighted funding for students in poverty.
  • In Delaware, a recent report prompted by a school funding lawsuit found that students in high-need groups—English learners, students with disabilities, students living in poverty—were receiving between $4,000 and $6,000 per student less than the recommended investment in services for those populations. State lawmakers there have examined the reports but recently said they don’t expect major changes to the formula during the current legislative session.
  • Lawmakers in New Jersey want to increase the amount of state aid earmarked specifically for special education and transportation—two areas where many districts have seen dramatic cost increases in recent years, thanks to inflation and a rise in the number of students requiring special education services.
  • In Nevada, advocacy groups and some school leaders are worried after the number of students deemed “at risk” dropped by 75 percent after the state changed the source of that figure. The state is caught up in an ongoing debate over which categories of students need extra funding, and how to identify them.

Removing archaic and outdated components

Funding formulas are so complex and rife with political and administrative land mines that efforts to revise them often take years or even decades.

That’s especially problematic when the formulas include assumptions drawing on outdated figures for factors like salaries and population trends.

  • Mississippi’s “27% Rule” caps the share of education funding a district must cover with local dollars at 27 percent of its overall annual budget. The rule is designed to help ensure low-wealth districts receive plenty of state aid. But it also means districts in higher-wealth areas that can raise more local revenue end up spending drastically more on education than their lower-wealth counterparts, because districts can chip in additional local funds beyond the 27 percent share. State lawmakers have recently signaled a desire to revamp the funding formula and either revise or eliminate the 27 percent rule.
  • During the Great Recession, Virginia capped the number of support staff schools could hire to keep costs manageable, according to the state-mandated school funding report. But many of those caps remain in place, even as economic conditions and students’ needs have drastically changed.
  • Alaska’s school funding formula includes a provision known as the “disparity test” that’s unique to the state. To qualify for federal aid for school districts on government land, the state must demonstrate a gap of less than 25 percent in per-student spending between the highest- and lowest-funded districts, excluding outliers in either direction. If the state passes, it can use the federal impact aid in place of an equivalent amount of state money for schools. Districts have pushed back on the practice, allowed under federal law, arguing it leads to diminished funding for schools in the highest-need areas.
  • Oregon currently caps its special education funding for schools at 11 percent of a district’s student population. Washington state has a similar cap of 15 percent. However, many districts have a significantly higher percentage of students who need those services. Lawmakers in both states are pondering changes to that cap that would help districts avoid dipping into local funds to pay for costly special education services that are mandated by federal law.
  • New York City schools last year were receiving extra aid for homeless students based on a citywide count that took place at the end of 2022. But an influx of new families seeking shelter in 2023 meant schools faced much higher needs than they could pay for with the allocated funds. City officials have since updated the formula after months of delay, resulting in $9 million of additional weighted funding for schools to support homeless students.

Fundamental changes in strategy

Some funding formula tweaks affect only one piece of a much larger puzzle. For instance, several states including Colorado and Rhode Island are in the process of deciding how much to annually increase the base amount of aid schools get from the state before other parts of the formula are factored in.

Others aim to transform how the system works.


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