School Finance Research - Reason Foundation Free Minds and Free Markets Thu, 09 Mar 2023 06:20:22 +0000 en-US hourly 1 School Finance Research - Reason Foundation 32 32 Analyzing Nebraska’s proposed legislation impacting school finance and property taxes Thu, 09 Mar 2023 06:20:21 +0000 Two bills are being considered that aim to increase the state’s role in financing K-12 education and decrease local property tax burdens for school district residents.

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During their first legislative session under Gov. Jim Pillen, Nebraska policymakers are considering legislation that aims to increase the state’s role in financing K-12 education and decrease local property tax burdens for school district residents. Specifically, two state bills address the fact that Nebraska is one of the most property tax-dependent education systems in the country, and many of its rural school districts get no state equalization aid under the state’s K-12 funding formula. However, while the legislation would help alleviate property tax burdens, there’s a substantial exception baked in that would prevent taxpayers from getting dollar-for-dollar property tax relief from the increase in state funds.

Backed by Gov. Pillen, Legislative Bill (LB) 583 would increase state reimbursements for special education expenditures as well as ensure that every school district—including the many rural Nebraska school districts that currently get no state formula aid—receives a minimum of $1,500 per student amount in state aid, also called Foundation Aid.

The bill would also set aside $2 billion in revenues to be collected from state taxpayers in a series of years in an Education Future Fund to sustain further increases in state education funding. All told, this would result in about $270 million in new revenues for K-12 education in the immediate year following the bill’s enactment.

Another bill, LB 589, aims to make the new influx of state funds from LB 583 result in a reduction in property tax burdens. This bill would cap the annual allowable growth in state and local school district revenues, both property tax and non-property tax, at three percent. Note that reimbursement funds for special education and donations are excluded from these revenues, which means that the increase in special education reimbursements wouldn’t count toward a school district’s revenue growth cap. Additionally, an amendment introduced would exclude payments on the principal and interest of bonds from the revenue growth limit. There are also exceptions allowing for higher revenue growth caps for districts that have substantial growth in total student enrollment or enrollment of low-income or English learner students. 

Laying aside these exceptions, however, the many Nebraska school districts that rely primarily on property taxes should see a necessary reduction in property taxes from the new per-student Foundation Aid and the three percent annual budget growth cap.

Take the example of Centura Public Schools, a school district with 442 students in the 2022-2023 school year that is heavily reliant on local property taxes. LB 589 specifies that all local and state revenues, excluding only special education funds and private grants and donations, should be used to calculate a district’s three percent revenue growth limit. According to the district’s most recent annual financial report (AFR) from the 2021-2022 school year, Centura receives $6.61 million from those funding sources. Now, if Centura were to receive $1,500 per student under LB 583, that would represent an estimated $663,855 increase in funding—a 10% increase on the funding sources considered under the cap based according to the district’s latest AFR.

Assuming Centura doesn’t qualify for any of the enrollment growth exceptions granted in LB 589, the new aid from the state would require a reduction in property taxes for the district to meet the three percent revenue growth limit. Based on the district’s AFR figures, Centura would only be able to grow its budget by an estimated $198,237. Therefore, the new state aid should result in an estimated total property tax reduction of about $465,618, spread across all property taxpayers in the district. These calculations are all summarized in Table 1.

Table 1
Revenue SourceAmount
TOTAL REVENUE FROM LOCAL SOURCES (exc. Private grants, donations)$6,240,608
TOTAL REVENUE FROM STATE SOURCES (exc. SPED aid, SPED transportation)$340,054
LB 583 Estimates 
Foundation Aid Estimate$663,855
Estimated % increase from Foundation Aid10.05%
3% of State & Local Revenues with Exclusions$198,237
Property Tax Reduction Estimate$465,618
*All calculations are estimates based on the author’s interpretation of the bill text and are for illustrative purposes only. 

This dynamic would apply to many of Nebraska’s other small, property tax-dependent school districts—the influx in state aid would necessitate a reduction in their property taxes to meet the three percent revenue growth limit.

But problematically, LB 589 provides a pathway whereby Centura–and similarly situated school districts– could minimize the property tax relief by allowing districts to override the revenue growth limit with the approval of 60 percent of the district’s voters in a special election. It also allows district school boards to override the revenue growth limit without petitioning voters at all if they receive an affirmative vote from at least 75 percent of school board members.

According to the bill, voter or school board approval would allow districts with “no more than four hundred seventy-one students”—which would include Centura—to have a revenue growth cap of seven percent instead of three percent. This cap would cut Centura’s required property tax reduction down to about only $200,000, a very small reduction in property taxes considering that Centura levied $5.55 million in local property taxes in the 2021-22 school year.

The advantages of LB 589 and LB 583 are that they aim to gradually decrease Nebraska’s heavy property tax burdens by increasing the state’s role in financing K-12 education. Future state investments would be subject to the same budget growth limits and should result in further property tax relief. But for the many Nebraska districts in similar situations as Centura, the current provisions in LB 589 that allow for school boards or voters to override the proposed three percent revenue growth limit risk creating a dynamic where $2 or $3 in new state funds are required to achieve only $1 in property tax relief.

To achieve cheaper and more immediate property tax relief, state legislators could consider removing provisions in LB 589 that allow school districts to increase their revenue growth cap with school board or voter approval.

More fundamentally, Nebraska lawmakers should also examine every aspect of how the state Tax Equity and Educational Opportunities Support Act (TEEOSA) formula works and how it’s funded. There are many problems in Nebraska’s education funding system that should be addressed, such as how the state formula sorts districts into complex, non-transparent comparison groups to determine base funding and how most Nebraska school districts raise more than their formula share from local property taxes alone. State policymakers shouldn’t pass up this opportunity to decrease the formula’s overreliance on property taxes and to make the formula more transparent and student-centered.

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Clearing up definitions of backpack funding Wed, 01 Mar 2023 06:02:00 +0000 Portable education funding that follows students to their schools is often called “backpack funding."

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For school choice programs to succeed, state leaders need to account for whether their K-12 funding system has portable education funding, i.e., dollars that follow students to the school of their choice. Portable education funding is also often called “backpack funding,” but this term can refer to several things. 

In a new Reason Foundation policy brief, Public Education Without Boundaries, our team analyzes how school finance systems can get in the way of dollars following students across school district boundaries. Advocates of backpack funding should also pay attention to how dollars follow students between individual public schools, between public and private education environments, and how the whole education funding system ultimately ties together. In each case, backpack funding hits new roadblocks and requires different policy solutions.

1.       District-to-District Backpack Funding

An important subset of backpack funding concerns how education dollars follow students when they attend public schools outside of their residentially-assigned school district boundaries. Without strong funding portability mechanisms, school districts have weak financial incentives to welcome transfer students via cross-district school choice. The recent policy brief, Public Education Without Boundaries, tackles this problem and identifies three primary culprits preventing funding portability between public school districts.

First, most states have a group of school districts that are “off-formula,” meaning the districts can raise more than all the funding they are entitled to under their state’s main funding formula from local tax sources alone. Put simply, off-formula school districts create funding portability problems because they often don’t lose or gain funding when students transfer out or transfer in.

A second problem for funding portability between school districts is local education funding, which often comes from local property taxes. These taxpayer funds are often raised to support public school operations and finance construction projects, but because these local taxpayer funds aren’t raised based on student enrollment in schools or the district, they again don’t follow students when they transfer out of a school district.

The third funding source that doesn’t follow students easily is any state funding stream that’s not based on current enrollment figures or is not based on enrollment at all. To illustrate, in 2018, Missouri’s K-12 funding system funded 194 school districts based on past revenue amounts rather than current their student counts. Again, this means that a student transferring into any of those Missouri school districts doesn’t generate new funds for the district and that a student transferring out doesn’t take any funding away from the district if they leave.

Achieving backpack funding between school districts means finding ways to make these kinds of education funding sources—which don’t typically follow students—portable. 

One model for how to do this is in Wisconsin, which sets a single, statewide per-student funding amount that follows each student to their new school when they transfer to a new district. That calculated amount accounts for state and local funds–including some dollars that are not portable–which are then deducted from a sending school district’s state revenues. While this amount doesn’t include all funding devoted to a student in their home district, it exemplifies a way that other states can factor in education revenues from different sources and ensure that they come out of a sending district’s budget and follow transfer students out and to their new schools. 

2.     School-to-School Backpack Funding

Importantly, even if policymakers follow examples like Wisconsin to ensure education dollars are portable across school district boundaries, ensuring that funding follows students within school district boundaries when students transfer to a new school within the same district is a separate challenge. While all states have funding formulas ensuring that at least some education dollars follow students across district boundaries, none have statewide policies requiring that districts implement backpack funding at the school level. Therefore, implementing school-to-school backpack funding is a district-level decision that only a small subset of school districts across the country have implemented to some degree.

The standard method most school districts use to allocate dollars within their boundaries is to allot staffing and program-specific funding to each school. Under this common model, school resources aren’t usually thought of in terms of dollars. Budgets are largely administered at the district level, so school principals aren’t directly dealing with the financial effects of students transferring in or out of their schools.

This widespread practice of districts allocating staffing and programs to individual schools has several negative effects on within-district school choice as well as overall funding fairness. When dollars don’t automatically follow children between schools, districts might not be willing to allow for within-district choice because it can complicate budgeting for each individual school. 

Additionally, it’s long been noted that this budgeting practice based on staff positions leads to large per-student funding disparities between schools within the same school district due to differences in staff salaries between campuses. And as new state reports on federally mandated school-level spending data show, this practice often shortchanges schools serving high-need students. 

Achieving backpack funding within districts requires a different toolkit than what’s required to get backpack funding between districts. At the local level, school district leaders need to commit to a weighted student funding mechanism to fund individual schools and implement it with fidelity so that schools are funded solely based on the individual needs of the students they serve. 

Similarly, state policymakers could also advance legislation that requires districts to fund their schools on a weighted funding model and that gives students the option to choose schools within their boundaries. While these efforts would require substantial cultural shifts whereby districts place more budgeting responsibility on individual schools, they would lead to school-to-school backpack funding that fosters both public school choice and funding fairness.

3.       Public-to-Private Backpack Funding

Another definition of backpack funding expands the previous definitions to include non-public education environments. An example of public-to-private backpack funding would be universal education savings accounts (ESAs)—like the accounts recently implemented in states like West Virginia, Iowa, and Arizona. Universal education savings account programs are for all students in a state, regardless of their income or whether they are currently enrolled in public schools, private schools, or homeschooling.

In most cases thus far, students only qualify for an education savings account once they have withdrawn from the public school system. Also, ESAs and private school vouchers are often tied to the per-student amounts under the state’s education funding formula. When a student withdraws from a public school district to utilize an ESA or voucher, that state per-student amount generally leaves the district and follows the student. 

However, the problems that occur with district-to-district backpack funding also apply to public-to-private backpack funding. Local funds outside of the formula and state grants outside of the formula don’t typically follow ESA students, and off-formula school districts won’t typically see a reduction in funding when a student leaves to use an ESA. 

4.       Universal Backpack Funding

Finally, having a universal ESA is not all that’s required to have universal backpack funding. To achieve true universal backpack funding, policymakers need a single mechanism that allows for district-to-district, school-to-school, and public-to-private education choices. Education savings account amounts would need to be calculated similarly to how the per-student funding amount is calculated in the Wisconsin example above so that non-portable education funds become portable. 

Coming up with a single mechanism that accommodates all forms of backpack funding requires policymakers to make the public K-12 funding system more compatible with ESAs. When public school funding mechanisms have a mixture of portable and non-portable dollars, it’s difficult to have ESA amounts that are similar to the per-student funding levels in the public schools without costing the state extra money to make up the difference between the education dollars that follow students out of a school district and the dollars that are left behind in the district losing the student. 

As more universal education savings account bills make their way through legislatures and to governor’s desks across the country, policymakers should also consider how universal backpack funding can help streamline their education funding mechanisms so that all students are funded the same way, regardless of the schools they attend or the environments they are educated in.

Universal backpack funding would help break down the divide that exists between students being educated in public and private environments and ensure that all education funding follows students wherever they go to learn.

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Funding Education Opportunity: Examining public school enrollment losses and sectors with gains, state education legislation, and more Fri, 24 Feb 2023 16:01:00 +0000 Plus: South Carolina mulls expanding open enrollment, Texas governor calls for school choice reforms, and more.

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Where exactly did the 1.2 million students who left the public school system go during the COVID-19 pandemic? Until now, data on this topic has been hazy at best, but a new Urban Institute essay by Stanford University’s Thomas S. Dee featuring data from the Associated Press and data journalists at Stanford University’s Big Local News provides a snapshot of where approximately 58% of the 1.2 million students who left public schools went. Dee reviews K-12 enrollment changes by sector from 21 states, plus Washington, D.C., between the 2019-20 and 2021-22 school years.  

In the 21 states examined, public K-12 enrollment declined in every state except for three states and the District of Columbia. The AP and Stanford found that public K-12 enrollment dropped by approximately 711,000 students in those locations. California and New York experienced massive enrollment declines, with nearly 271,000 and 133,000 students leaving public schools. 

By contrast, K-12 enrollments increased in other schooling sectors. Homeschool enrollment grew by about 184,000 during the pandemic, as likely would’ve been expected, with the homeschooling sectors in Florida and New York growing the most. 

Private school enrollments also grew, but more modestly, increasing by nearly 103,000. Florida, again, and Tennessee experienced the most significant growth in their private schools. 

Yet, the private and homeschool sector growth only accounted for about 40% of public school enrollment losses. Dee estimated that population changes, such as students moving to other states and declining birth rates, accounted for more than a quarter of public school enrollment losses. 

At the same time, the report estimated that 240,133 students remain unaccounted for. These unexplained losses featured most prominently in California and New York, where nearly 152,000 and 60,000 students remain missing, respectively. 

Some absences are likely due to unregistered homeschooling and families not enrolling their children in kindergarten, which is optional in nine of the 21 reviewed states. In these cases, Dee estimated that skipping kindergarten accounted for almost 40% of unexplained absences.

Nonetheless, some students have not attended school for multiple years now. Researchers have previously estimated that the lifetime earnings of students who experienced just one year of learning loss could be reduced by more than 9%, so there will be long-term concerns about many of these students and their futures. 

These public school enrollment declines have also hastened financial crises for many school districts that were unprepared for them, especially urban ones. For instance, Minneapolis Public Schools announced an impending fiscal crisis due to declining enrollment last fall.

With fewer students in public schools and an increasing number of families more comfortable with switching schools, public school districts will need to up their game as they navigate a more competitive education marketplace. Research shows that school districts can positively respond to competitive pressures by implementing measures like open enrollment. 

Policymakers should weaken school district monopolies, so students have options outside of their residentially-assigned schools. Oftentimes students drop out of school because of bullying by other students, not feeling like they fit in with classmates, not getting the academic attention they need, or conflicts with teaching staff. Policies, such as education savings accounts and open enrollment, provide students with flexible schooling options to transfer to schools that fit their needs. Education savings accounts, in particular, allow for significant educational customization, paying for tuition, books, physical therapy, transportation, and much more.

From the states

State policymakers continue to advance school choice proposals nationwide.

The Utah State Senate failed to pass a proposal (S.B. 166) to make microschools legal in the state.

In Idaho, the Senate Education Committee passed a proposal (S.B. 1038) that would establish approximately 6,600 education savings accounts. These accounts could be used to pay for various approved education expenses, such as private school tuition or textbooks. There are no income restrictions on the accounts. 

The Arkansas Senate passed Gov. Sarah Huckabee Sanders’ LEARNS Act (S.B. 294), which would initially establish education savings accounts for students who are homeless, in foster care, have disabilities, or are assigned to failing public schools. However, student eligibility would expand by 2026 to all K-12 students. At the same time, the proposal would also remove any caps on charter schools and student transfers through open enrollment. Currently, the bill has 25 cosponsors in the Senate and 55 cosponsors in the House, providing a supermajority and majority, respectively.

What to watch

South Carolina policymakers are thinking about expanding open enrollment. Proposals in the South Carolina House and Senate would expand public school choice, allowing students to transfer to public schools other than their assigned ones. Currently, some public school districts in the Palmetto State permit students to participate in within-district open enrollment, but the new proposal would require all school districts to participate in cross- and within-district open enrollment. During his testimony, Reason Foundation Senior Policy Analyst Christian Barnard recommended adding transparency provisions to strengthen the proposal.

Texas governor’s State of the State address calls for school choice reforms. Texas Gov. Greg Abbott called K-12 education an “emergency item” this legislative session. Noting that Texas successfully implemented education savings accounts (ESAs) for students with special needs during the pandemic, Gov. Abbott stated that Texas now needs to establish universal state-funded ESAs for all Texas families. 

Recommended reading 

A Poor Poverty Measure
Ishtiaque Fazlul, Cory Koedel, and Eric Parsons at Education Next

“While it has been understood for some time that school lunch enrollment as a poverty indicator is blunt and prone to error, the magnitude of the problem has not yet been fully appreciated. In exploring the rules, features, and processes of the National School Lunch Program, we find that the program’s design, incentives, and lack of income-verification enforcement likely contribute to the oversubscription.”

Stockton, Calif., School Officials Could Face Criminal Charges after Audit Finds ‘Sufficient Evidence’ of Relief Fund Fraud
Linda Jacobson at The74

“The audit by an independent California agency largely focused on a questionable $7.3 million contract paid for with pandemic relief funds. In 2021, former officials appeared to ram through the purchase of 2,200 ultraviolet air filters designed to kill COVID despite multiple warnings that they weren’t following laws and procedures, the report said.”

The Stakes Are Only Getting Higher For Pandemic School Aid Spending
Marguerite Roza at Forbes

“Districts need to plan now so students don’t face chaos at the start of the 2024 school year with classrooms and teachers shuffled, programs abruptly dropped, demoralized staff, and leaders focusing on nothing but budget woes. Past experience tells us that deep cuts are often inequitable and impact our neediest students the hardest.”


Are you a state or local policymaker interested in education reform? Reason Foundation’s Education Policy team can help you make sense of complex school finance data and discuss innovative reform options that expand students’ educational opportunities. Please reach out to me directly at for more information.  

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California’s schools need to adapt to the state budget woes Tue, 14 Feb 2023 05:00:00 +0000 Gov. Gavin Newsom’s recently-released budget projects a $22.5 billion deficit, which means school districts will likely need to rightsize operations.

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California’s public school students recently showed historic declines in standardized test scores due in part to school closures and other COVID-19 pandemic-related learning disruptions. Amidst a growing state budget device, state legislators and local school leaders need to help students get back on track with smart policymaking.

California Gov. Gavin Newsom’s recently-released budget projects a $22.5 billion deficit, which means school districts, especially those experiencing dramatic student enrollment declines like the Los Angeles Unified School District, will likely need to rightsize operations. School districts should be finding cost savings in areas such as reductions to the currently very generous post-employment health care and dental benefits for retirees, which are controlled at the district level.

California policymakers should also allocate any remaining federal funding for pandemic relief to tutoring services and programs that allow local school leaders the most discretion over how to use the money to help students. As of Sept. 30, 2022, California schools had spent just over 43 percent of the $21.5 billion federal stimulus funds allocated to the state’s school districts and charter schools during the pandemic. School districts need to ensure they don’t create new costs that outlast federal funding set to dry up. Schools must be shrewd about whether or not to add new staff. Many school districts aren’t in a financial position to make new hires due to their declining student populations.

Los Angeles Unified and Oakland Unified School District have heavily invested in tutoring, universal summer school, and small-group literacy programs since the spring of 2020. These programs may help explain why each school district gained ground in some reading metrics and experienced less significant overall National Assessment of Educational Progress (NAEP) score declines than many other urban school districts across the country. And because different student populations have vastly different learning needs, the more discretion local leaders have on how to use these resources, the better.

At the state level, policymakers should resist the urge to funnel education dollars through specific grants and earmarks. These programs make it difficult for school leaders to prioritize the programs they see helping their students when budget cuts are necessary.

Finally, California must consider ways to provide families with more education choices. Improving the state’s public school open enrollment programs is one way to do so. Ensuring that all public schools are participating in within-district and cross-district open enrollment would allow students to enroll at public schools that better fit their academic and social needs.

A 2021 study conducted by the nonpartisan Legislative Analyst’s Office gave the state’s biggest open enrollment option, the District of Choice program, good marks. Students using the program often enrolled in higher-performing school districts, and districts that lost students to the program showed increased community engagement in an effort to win families back. By consolidating and expanding California’s open enrollment offerings, policymakers would empower more families to find education options that better fit their children’s needs. Unfortunately, a recent Reason Foundation study of K-12 open enrollment policies found California’s open enrollment programs fall short in every key benchmark, so much work is needed.

With the state facing a significant budget deficit, federal COVID funding to schools set to dry up in 2024, and the need to help students make up for learning losses suffered during the pandemic, California’s schools and policymakers have their work cut out for them in 2023. But practical solutions like improving open enrollment policies and rightsizing schools can start to put the state on the right path to providing a higher-quality education to California’s students.

A version of the column previously first appeared in the Orange County Register.

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How K-12 education is funded Fri, 03 Feb 2023 05:00:00 +0000 Funding for K-12 public education is a shared responsibility between federal, state, and local governments.

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Funding for K-12 public education is a shared responsibility between federal, state, and local governments. Figure 1 provides a snapshot of these revenue sources in the 2019– 2020 school year.

Flow chart of how K-12 education is funded

State policymakers have little say over how federal education dollars are allocated and used, so this policy brief focuses exclusively on state and local funding.

While school finance systems vary considerably across states, school districts generally rely on four distinct revenue streams that can be broadly categorized as follows:

State Funding Formula Aid is a state’s primary method of delivering education dollars to school districts. A combination of state and local dollars fund most state formulas through a foundation program. Arizona, for example, employs a funding formula where each student receives $4,775.27, using weights to augment that funding for students with greater needs. Additionally, each school district in the state is assumed to tax at a certain rate locally to contribute toward that per-student amount, with the state filling in the gaps when districts can’t cover the full amount locally.

Outside-the-Formula State Aid are allotments that often come in the form of restricted-use grants for specific purposes such as reading intervention, textbooks, and staffing positions. These are funded exclusively by the state. Continuing with the example of Arizona, the state allocates various grants outside of its core formula for items like school safety and teacher salary increases.

Local Operating Levies are local education dollars raised by school districts to support operating expenses such as teacher salaries, classroom supplies, and routine maintenance. These often require voter approval, but school boards sometimes have the discretion to determine levy amounts within set limits. Georgia, for instance, allows school district boards to levy local property taxes above and beyond their formula contribution to support school operations.

Local Capital Levies are local education dollars raised by school districts to support capital expenses such as construction, equipment, and building improvements. These usually require voter approval and are often used to pay off bonded debt.

Importantly, every state education funding formula is heavily based on school district enrollment. While states vary on how enrollment-sensitive their funding systems are, overall, school districts in every state generally gain or lose funds when enrollment increases or decreases, all else being equal.

This column is an excerpt from Public Education Funding Without Boundaries: How to Get K-12 Dollars to Follow Open Enrollment Students

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Pennsylvania public schools need funding reform, not more money Mon, 30 Jan 2023 06:00:00 +0000 Data show Pennsylvania schools are well funded. But how this funding gets to students is a problem.

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On the campaign trail this year, Josh Shapiro championed more money for public schools. Now that Democrats control Pennsylvania’s House of Representatives for the first time in over a decade, the state’s governor-elect will likely find ample support for that goal.

“Everyone knows that our schools are chronically underfunded,” said state Rep. Matthew D. Bradford (D-Montgomery County) in a recent press conference concerning Pennsylvania election results. 

But data show Pennsylvania already spends plenty on public education.

Between 2002 and 2020, Pennsylvania’s real education revenue skyrocketed by 49%, going from an average of $14,434 spent per student to $21,524 per student, placing the Keystone State at fifth-highest in the country for K-12 per-student funding. During this time, Pennsylvania’s public school enrollment plummeted by 11.7%, but the state still increased its share of inflation-adjusted funding by some $3.4 billion.

Incredibly, these figures don’t even account for more recent spending and enrollment trends, including record-breaking education appropriations in each of the past two years and a nearly 3% public school enrollment decline since the start of the COVID-19 pandemic.

In short, more money is being spent on fewer students – but where are all those dollars going?

For starters, they aren’t boosting teachers’ take home pay. Despite historic funding levels, Pennsylvania’s teachers are taking home less on average, as real salaries fell by 3.7% between 2002 and 2020. Instead, the state’s education dollars increasingly go to two main expense categories: employee benefits and new staffing positions.

From 2002 to 2020, real per-student spending on employee benefits – which includes expenses such as teacher pensions and healthcare – grew by 173.6%. This growth exceeded that of every state’s except Hawaii and Illinois, and Pennsylvania now spends $5,656 per student on benefits alone. A key driver of this spending is the increasing cost of paying for pension debt. Pension debt, also known as unfunded liabilities, is the shortfall in assets needed to pay for retirement benefits already promised to current and future retirees.  

Research by the Reason Foundation shows that Pennsylvania’s teacher-pension unfunded liabilities grew from $8.22 billion in 2002 to $49.28 billion in 2020, due in part to unrealistic investment-return projections combined with insufficient contributions. As a result, education dollars have increasingly gone to cover this shortfall, with employer pension contributions now accounting for 34% of payroll expenses, according to the retirement-research organization Equable Institute.

Additionally, Pennsylvania’s public schools have been on a hiring binge despite losing over 207,000 students in the last two decades. In 2020, there were 4.9% more teachers and 15.8% more non-teachers compared to 2002 levels, as a total of 23,321 staff members were added to public school payrolls. Non-teachers – which include support staff, administrators, and instructional aides – now outnumber teachers in the state.

The merits of these staffing trends are debatable, but there’s no doubt that public schools have doubled down on hiring and have more staff in schools than ever before.

With the state’s Commonwealth Court set to rule on a years-long school finance case, there will be calls for even more public school spending. But Shapiro would be wise to focus on structural reforms that make better use of education dollars, starting by addressing teacher pension costs and eliminating a hold-harmless provision in the state’s funding formula that both Republicans and Democrats recognize as unfair.

He should also continue to back Lifeline Scholarships, which give some students access to funding for educational expenses, including private school tuition. Shapiro strayed from Democrats’ typical opposition to school-choice programs by voicing his support for the scholarships, and doing so may have given him a boost this November. A recent poll by EdChoice shows that most parents favor this type of policy. 

Finally, the governor-elect should push for changes to the state’s antiquated public school student-transfer law, which makes it hard for students to access available seats across school district boundaries. A recent study by the Reason Foundation gave Pennsylvania’s student-transfer policy low marks, hitting only one-of-five best-practices benchmarks. States such as Wisconsin, Arizona, and Florida all have open-enrollment policies that make it easier for students to exercise public school choice.

At a time when public school enrollment is plummeting and funding stands at record levels, Pennsylvania policymakers need to find ways to put public education dollars to better use for students.

A version of this column was previously featured in RealClear Pennsylvania.

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How state education funding formulas work Fri, 27 Jan 2023 06:00:00 +0000 Funding formulas collect and distribute education dollars to schools.

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Many school finance formulas can be traced back to the 1920s, when foundation programs were designed to guarantee school districts a funding floor while accounting for their ability to raise local education dollars. The key feature of this approach is that state and local tax revenue contribute to what is essentially a single pot of dollars that funds school districts. Although lower-wealth districts receive a disproportionate share of state formula aid under foundation programs, all districts are ultimately funded according to state formula calculations.

Foundation formulas take different forms across states (and not every state uses one), but generally operate using three basic steps:

STEP 1: Determine School Districts’ Revenue Entitlement: The state calculates how much revenue each district will receive, commonly referred to as a “revenue entitlement.” States have varying approaches, but formulas are often based on some combination of enrollment counts, student characteristics, and district characteristics.

STEP 2: Determine School Districts’ Local Share: The state calculates the share of each district’s revenue entitlement that can be covered by local revenue sources—often property taxes. Usually, this calculation is based on a uniform local property tax rate that is either assumed or mandatory for districts to levy. The higher a district’s local wealth (i.e. its ability to pay), the greater its local share will be. Nebraska’s formula, for example, assumes each school district will impose a local property tax rate of $1 for every $100 in assessed valuation.

STEP 3: Determine School Districts’ State Aid: A school district’s local share is then subtracted from its revenue entitlement to determine its state aid. If a school district can’t raise its full revenue entitlement from local sources, the difference is backfilled with state aid. Generally, most school districts require state aid to meet their revenue entitlement under a foundation program. However, many states have at least some districts that are off formula, meaning they raise their entire revenue entitlement locally and don’t receive any state aid. Off-formula districts tend to be property-wealthy and are generally unaffected by the state’s funding formula.

Map of how an education foundation funding formula works

This column is an excerpt of Public Education Funding Without Boundaries: How to Get K-12 Dollars to Follow Open Enrollment Students.

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Public education funding without boundaries: How to get K-12 dollars to follow open enrollment students Tue, 24 Jan 2023 15:00:00 +0000 How to ensure state and local education funds flow seamlessly across district boundaries.

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States are increasingly enacting open enrollment policies that give students options across school district boundaries. But this is only half the equation. Policymakers must also ensure that education dollars follow the child to the school of their choice, a concept referred to as funding portability. Without sufficient portability, school districts have weak financial incentives to enroll transfer students and may limit opportunities for families. Non-portable dollars also reinforce district boundaries, which lock families into public schools based on where they can afford to live, not what is necessarily best for their children.

The primary culprits inhibiting funding portability are districts that are entirely locally funded due to high property wealth, and both local education funding and state funding streams that aren’t sensitive to changes in enrollment.

New Hampshire provides a valuable case study that illustrates these problems. In total, 39 of the state’s 237 districts are off-formula and don’t generate additional state aid when new students enroll. Moreover, nearly two-thirds of New Hampshire’s non-federal education dollars are generated locally and aren’t portable across school district boundaries. As a result, most districts only receive a fraction of their average per-pupil spending amounts when enrolling additional students, which weakens financial incentives for an open enrollment program.

Ideally, school finance systems should “attach” dollars directly to students so that all state and local education funds flow seamlessly across district boundaries. States vary considerably with how close they are to this vision, and the first step for policymakers is to take stock of funding portability in their state. From there, states can take three different pathways to improve portability: comprehensive school finance reform, targeted solutions, and creating a distinct funding mechanism that supports open enrollment. While all solutions are worth considering, the most direct approach is to follow Wisconsin’s lead by establishing a stand-alone funding allotment for public school open enrollment. Three best practices can help policymakers craft this funding policy.

Uniform: Start with a Single Statewide Base Per-Pupil Amount

Open enrollment funding policy should center around a single per-pupil amount that follows students across school district boundaries, an approach Wisconsin has successfully employed for more than two decades. This provides robust transparency while also guaranteeing that all school districts are operating under the same set of financial incentives. There are numerous ways to set this amount, but policymakers should strive to maximize the share of overall state and local per-pupil funding attached to students.

Responsive: Account for Students’ Needs

Policymakers can attach weights or additional per-pupil amounts to students with disabilities and other categories of need. For example, Wisconsin provides a greater per-pupil amount for students with disabilities, plus reimbursement for costs that exceed this amount up to a specified limit, which is paid for by students’ home districts.

Incentivize: Tap into Local Education Dollars

Ideally, states should ensure that local dollars follow the child across school district boundaries. One way to do this is to deduct a per-pupil amount from home school districts’ state aid for each student who transfers out and allow it to follow the child across district lines. Tapping into local dollars ensures that districts’ incentives are maximized, and this approach negates the need for district-to-district billing of local dollars, which is undesirable because it reinforces the idea that dollars belong to districts, not the students.

Fundamentally, establishing portable education funding moves states closer to a boundaryless public education system—an idea first pioneered by Milton Friedman. In its purest form, this means eliminating residential assignment and funding students directly so that they can choose whatever option best fits their needs.

Download the full policy brief: Public Education Funding Without Boundaries

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How will K-12 student enrollment changes impact public schools? Tue, 20 Dec 2022 05:01:00 +0000 Pandemic enrollment loses and declining birth rates are bad news for many school district budgets.

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Enrollment in public schools nationwide has drastically declined since the onset of the COVID-19 pandemic in 2020, dropping by more than 1.2 million students between the 2019-20 school year and the 2022-23 school year. For many school districts, student enrollment projections remain uncertain as families have become more comfortable shopping for other school options like virtual private schools or homeschooling co-ops. This continued decline in public school enrollment, which is more pronounced in urban school districts, will have serious impacts on school district finances.

As American Enterprise Institute’s Nat Malkus and doctoral student Cody Christensen pointed out in Education Next, “If enrollment remains lower in the future, smaller districts could lose hundreds of thousands of dollars annually, and larger districts could lose millions, compared to pre-pandemic revenues.”

Declining U.S. Birthrate Likely to Impact Student Enrollment

Public school enrollment declined by 3% or more in 19 states between 2020 and 2022, according to the American Enterprise Institute’s “Return to Learn Tracker,” which has recorded K-12 enrollment trends since 2020.

But many states were experiencing enrollment declines well before the pandemic and March 2020. In fact, K-12 student enrollment dropped in 22 states between 2002 and 2020. While school districts in some regions might regain some of these students in future years, other factors, including low birth rates, will likely contribute to lower student counts going forward.

Between the 2010 and 2020 censuses, the country’s under-18 population decreased by 1%, from 74.2 million to 73.1 million, USA Facts reported in 2021. The smaller child population is in part due to the long-declining U.S. birth rate, which has been below replacement since 1971 and experienced a notable decline after 2007. 

In fact, the U.S. population under the age of 18 dropped in 27 states between 2010 and 2020. “When birthrates decline, we see a drop in kindergarten enrollment five years later that tracks from one school grade to the next,” Tulane University Professor Douglas N. Harris and Valentina Martinez-Pabon, postdoctoral associate at Yale University, pointed out in Education Week.

Although the United States has long bolstered its low birth rate with immigrant populations, net immigration fell by about 75% between 2016 and 2020. Moreover, immigrant fertility rates declined by 158,000 births between 2008 and 2019, even though the number of female immigrants who were of childbearing age increased by 9%. In 2019, “for what is almost certainly the first time in American history, the immigrant fertility rate was below replacement level,” wrote Steven A. Camarota, director of research at the Center for Immigration Studies, in National Affairs.

Declining U.S. and immigrant birth rates are bad news for many school districts’ budgets because states use student enrollment figures to allocate education funds. Thus, school districts with declining enrollments will likely face financial repercussions. 

However, not all school districts will feel the effects of lower student counts immediately. More than half of states have hold harmless provisions, which let school districts use previous years’ attendance records to calculate state funding. This practice allows schools to receive funding for students who are no longer enrolled. For example, Pennsylvania is one state that employs a generous hold harmless provision. According to the non-profit Children First, “The [Pennsylvania school] districts have lost a total of 167,000 students since 1991-92 — a fifth of their student body — but they haven’t lost any money, instead of receiving increased funding each year. They now have $590 million tied to students they no longer educate.”

During the COVID-19 pandemic, 22 states adopted temporary hold harmless provisions, which let school districts continue to receive funding based on student counts from before 2020. Most of these temporary hold harmless provisions were set to expire after the 2021-22 school year, but at least four states extended their pandemic hold harmless provisions through the 2023-24 school year.

Once these temporary provisions expire, however, some school districts will likely experience significant financial blows as their student counts reflect the pandemic-era exodus from public education. “Even a 1% loss of enrollment tends to be financially destabilizing for districts,” Hannah Jarmolowski and Marguerite Roza of the Edunomics Lab at Georgetown University wrote in a 2021 report

Urban School Districts’ Enrollment Challenges

Minneapolis Public Schools is one district that has found itself in financial straits due to its student population changes. The Minneapolis Public Schools (MPS) Finance Committee announced in November 2022 that the school district “is approaching an impending fiscal crisis” due to declining enrollment.   

Projections indicate that MPS enrollment will only be 23,000 students in 2028, 12,000 fewer students than in 2018. However, the pandemic merely exacerbated an existing enrollment exodus as the district’s enrollment had steadily declined since the 2002-03 school year when the district served more than 46,000 students. Moreover, the recent  MPS report showed that “the number of children ages 5 and under living in the city fell 17% between 2020 and 2021,” indicating that the district’s enrollment challenges will only get worse.  

Minneapolis is not the only urban school district facing difficult financial decisions. Earlier this year in California, Oakland Unified School District’s Board of Education voted to close seven schools over the next two years. Time Magazine reported that, as of February, the school district’s enrollment had declined by more than 4,000 students during the past five years. 

Similarly, Boston Public Schools’ (BPS) enrollment dropped for the eighth year in a row, and the district has hemorrhaged more than 8,000 students over the last decade. The Boston Globe reported that “96 out of the district’s 120 schools were underenrolled” last year. In addition to the Boston School Committee voting to permanently close three middle schools in 2021 in response to low student counts, Boston Mayor Michelle Wu also proposed renovating or consolidating 15 schools by the 2025-26 fiscal year.

These examples are snapshots of the enrollment challenges that some school districts, especially urban ones, now face. Research has shown that urban school districts that relied on remote learning the longest has more enrollment loss. AEI reported that the school districts that stayed remote the longest lost 1.2% more students in the 2021-22 school year than in the previous year. On the other hand, school districts that returned to in-person learning sooner, oftentimes those located in suburban or rural areas, mostly experienced enrollment rebounds. 

Thankfully school districts can weather much of the potential financial storm by adapting to new enrollment figures. The University of Miami’s Bruce Baker showed that school districts across the nation rightsized after student counts dropped when many students opted for charter schools during the early 2000s. School districts like Newark City Schools in New Jersey and Kansas City Public Schools in Missouri reduced overhead or administrative expenses and, as Baker puts it, these school districts “have largely been able to achieve and maintain reasonable minimum school sizes, with only modest increases in the shares of children served in inefficiently small schools.” 

However, rightsizing is easiest when school districts plan for the long term by using actual student counts and avoiding overly rosy projections. Shortsightedness can lead to painful layoffs or substantial budget deficits, as experienced by the School District of Philadelphia and Detroit Public Schools last decade. 

A Guide to Rightsizing

A key to effective rightsizing is flexible spending options for district and school leaders. As Reason Foundation education researchers pointed out, right-sizing is about “optimizing all facets of operations with the goal of providing high-quality options to all students at a cost that aligns with revenues.” This means that state policymakers must resist the temptation to make overly prescriptive policies that tie the hands of school leaders. It is important to maximize flexible spending options for district leaders to ensure that education funds are not tied to well-intended but overly-specific schooling inputs or other mandates, such as class-size requirements. 

For example, when state education dollars are earmarked for specific music instruction or counseling services, school district leaders can’t repurpose those funds for more pressing priorities even when budget cuts are necessary. Prioritizing flexible spending options for school districts helps ensure that school leaders have more options when they have to reduce expenditures and lets them use funds in ways that are best for their students.

Amidst the economic uncertainty and high inflation, some states will need to tighten their fiscal belts, especially as federal emergency relief funds dry up. California’s Legislative Analyst’s Office published a report last month estimating the state will face a $24 billion deficit in 2023-24. The report urged California legislators to “consider saving reserves for a recession when the budget problem could be twice as large as the one identified in our outlook.”

School districts should act now to prevent flat-footed responses to potentially lower enrollments in the years ahead. The good news is that school districts can adopt a variety of policies that can relieve tight budgets. A few of these policies are discussed below.

Adopt Weighted Student Funding. This policy allocates education funding to students based on their real needs and the money follows the students to the school within the school district in which they enroll. For instance, students in Atlanta Public Schools receive additional dollars based on their grade level, prior academic performance, or if they are English Language Learners or living in poverty. Weighted student funding (WSF) ensures that resources are directed to the schools that students actually attend. This means that under-enrolled schools are no longer unfairly subsidized by schools with higher enrollment. As a result, school budgets are based on actual student counts instead of staffing positions.

“WSF mitigates these problems by equalizing dollars for similar students and by empowering local leaders with the flexibility to make budgeting decisions that are best for their communities,” Reason Foundation’s Christian Barnard wrote. In fact, a 2019 nationwide study by the U.S. Department of Education showed that “WSF district administrators reported that …53 percent… of their total operational spending was under school discretion, compared with 8 percent in non-WSF districts.”

Currently, at least 30 school districts and Hawaii have implemented weighted student funding. 

Adopt K-12 Open Enrollment. This policy lets students transfer to a public school with available capacity other than their residentially assigned one. Open enrollment breaks the artificial lines drawn by school district boundaries and catchment zones and allows students to enroll in schools that are a good fit for them. For districts facing declining enrollment, this policy presents an opportunity to attract new students from other school districts. In fact, rural school districts in Texas have been found to use open enrollment to keep the lights on when too few students live inside the district boundaries to support the district. These school districts actively seek to attract students from other districts to make ends meet. Currently, only 11 states have mandatory open enrollment laws.

Leverage Retirements and Staff Leaving. While labor might feel like a fixed cost to many school districts, it does not have to be. As aging teachers and staff retire or leave, school districts should resist the temptation to replace them if they’ve lost students in recent years. Labor is often a school district’s biggest cost so being wise with staffing is a key to balancing the budget. In fact, Edunomic Lab’s Marguerite Roza notes that staff turnover can be an “opportunity to stash more in reserves, use stipends to boost the pay for current staff to pick up some of the load or issue a service contract. Reducing the overall staff count results in fewer dollars tied up in benefits and more dollars available to retain existing staff in a downturn.” 

Closing Under-Enrolled Schools. Unfortunately, massive enrollment loss can mean that some school districts must prepare to close under-enrolled schools. Permanent school closures often face formidable pushback from affected families, even when the closures would benefit most students. As a result, school district leaders need to prepare a robust strategy that is transparent and shows parents why those schools must be closed and how students will be served.

Paul Hill and Parker Baxter from the Center for Reinventing Public Education have pointed out that a successful strategy for necessary school closures must include clear metrics for closures, public data on all schools, and transparency. They wrote, “School system leaders need to strike a balance between using simple, transparent criteria while providing enough leeway to consider subjective factors, such as school leadership quality or whether the low-performing school seems to be improving. These criteria also need to be spelled out in advance.”

While rightsizing a school district is often painful, it can make education funds more flexible and versatile, ultimately benefiting students. When education dollars are flexible and reflect actual student counts, school leaders can make the spending decisions that will help their students best. 

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Why teacher salaries are flat as school spending soars Wed, 23 Nov 2022 05:30:00 +0000 Benefit costs, staffing trends and class sizes may explain why teacher salaries have remained flat while K-12 education spending has grown.

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In a recent poll published by Harvard’s Education Next, 60 percent of respondents, and nearly half the Republicans surveyed, thought teachers should be paid more than their statewide average. With red states such as Florida, Oklahoma, and Iowa prioritizing the issue in 2022, an important question policymakers should be asking is why record levels of public-education spending haven’t already led to teachers being paid more.

Nationwide, inflation-adjusted average teacher salaries have been nearly flat since the turn of the century, going from $64,986 in 2000 to $65,090 in 2021. But there’s significant variation among states, with inflation-adjusted pay increasing by 10 percent or more in nine states — including Washington, Massachusetts, and Oklahoma — and decreasing by 20 percent in Indiana over that same timeframe. Average teacher salaries now range from less than $48,000 in Mississippi to nearly $88,000 in New York.

Many factors play into salary trends, with cost-of-living contributing to differences across states. Less noticeable is that the U.S. teacher workforce has shifted over time with proportionally fewer veterans in classrooms, making longitudinal comparisons imperfect. But when average salaries are broken down by experience level a similar picture emerges: Teacher salaries have barely outpaced inflation.

None of this means that taxpayers haven’t done enough to support public schools. Between 2002 and 2020 real U.S. public education spending increased by 25 percent per student and now stands at over $16,000 per student on average. In total, per-student education revenue increased in 49 of 50 states from 2002 to 2020 with ten states boosting funding by more than 33 percent.

In short, more education money hasn’t resulted in larger paychecks for teachers in many states. For instance, Illinois has increased education funding by 55 percent per student, yet average teacher salaries have declined, with similar trends playing out in Connecticut, Pennsylvania, and elsewhere.

So where are education dollars going, if not to boost teacher salaries?

For starters, real spending on employee benefits — a Census reporting category that includes teacher pensions, health insurance, and other expenditures — increased by 79 percent between 2002 and 2020, going from $1,907 per student to $3,406 per student. Salaries accounted for 74 percent of teacher compensation in 2004 they now account for just 65 percent, mainly due to ballooning retirement debt.

But pension benefits haven’t gotten better for many teachers, they’ve only grown more costly. For years, most states have failed to adequately fund their retirement obligations, with the public retirement research organization, Equable Institute, estimating a nationwide shortfall of $878 billion in teacher pension plans. As a result, an average of 20 percent of public school payrolls are eaten up by employer pension contributions, most of which goes to cover debt costs that don’t benefit current teachers.

Public schools have also been on a hiring binge in the last couple of decades as the latest available data show staff growth — nearly 7 percent for teachers and 20 percent for non-teachers — outpaced a modest 2 percent bump in public school student enrollment nationwide. This trend is especially pronounced in Pennsylvania, where over 23,000 employees have been added to the state’s public-school payrolls despite a 12 percent enrollment dip since 2002. Such a stark contrast leaves no doubt that public schools have prioritized staffing up over teacher salaries, a costly strategy with little student performance benefits to support it.

Differences in average student-teacher ratios between states also highlight the inherent tradeoff between teacher salaries and class sizes. All else being equal, states forgo increases to teacher pay when they use new education funds to decrease class sizes or to keep class sizes small. State variations in average class size might explain why lower-spending states with above average student-teacher ratios like Nevada and Utah pay teachers better than their spending rankings would suggest, while relatively higher spenders with low student-teacher ratios like West Virginia and North Dakota pay teachers less.

To be sure, there isn’t a simple answer to whether the country’s 3.2 million teachers are underpaid as compensation is more than just salaries and local context matters. But any meaningful policy aimed at delivering more dollars to teachers requires fixing the structural problems diverting education funding away from salaries. At the state level, this involves tackling the pension debt crisis by paying down legacy costs, like Arizona and Michigan have done in recent years. School-district leaders should also reconsider spending priorities, which might mean standing up to teachers’ unions that push for expanding membership rolls.

With the amount of money being spent on K–12 education in most states, there’s no reason for teacher salaries to be an issue. But without structural reforms, there’s little reason to expect that more funding will deliver the payday that teachers expect and voters want.

A version of this article previously appeared in National Review.

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California’s Prop. 28 would erode local control of education budgets Tue, 18 Oct 2022 04:00:00 +0000 California's Proposition 28 dedicate $800 million to $1 billion a year for arts and music programs.

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Proposition 28 advocates in California warn that chronic underinvestment in arts and music education is risking the state’s future competitive advantage. Prop. 28, on the statewide November ballot, would change California’s constitution to dedicate $800 million to $1 billion a year for arts and music programs.

In 1989, the state constitution was changed by voters through Prop. 98, a school finance mandate setting minimum education funding levels. Today, through Prop. 98’s formula, California is required to spend roughly 40% of the state’s general funds on K-14 education—public schools and community colleges. California is spending $95 billion on K-12 education in its most recent state budget.

Advocates are right to worry whether California’s next generation will be equipped for jobs of the future. Despite spending the equivalent of $17,000 per pupil, California’s students are underperforming the national average on standardized testing. For example, the National Assessment of Educational Program, which is called the nation’s scorecard, shows only 29% of California’s eighth graders were at or above proficiency in mathematics, and 30% were at or above proficiency in reading in 2019, the most recent year available.

It’s fair to ask, why should arts and music education spending be mandated by the state constitution, especially when student proficiency in core areas like reading and math is far from desired? Only a few years ago, then-Gov. Jerry Brown championed eliminating so-called “categorical funds” which earmark state education money for specific programs. However well-intentioned the funding restrictions are, they inevitably narrow local school officials’ budgeting options. Brown saw this problem plague Oakland during his time as mayor of the city. When he returned to Sacramento, Brown reformed the state’s K-12 finance system by reducing formula complexity and empowering local policymakers who are, by definition, closer to students. Several studies have given this reform high marks, and California school district superintendents have shown widespread support for the new funding formula.

The state government already mandates that school districts provide visual and performing arts instruction for students in first through sixth grade. It also requires them to be offered as an elective, for seventh- and eighth-graders.

To graduate from a California high school, students must also complete a year’s coursework in the arts or supplement this requirement with a foreign language or career technical education. Additionally, nearly half of California’s school districts have independently adopted even more rigorous arts and music graduation requirements on top of the state’s.

The best practices in education finance policy show that governments should be moving away from state spending mandates and toward giving local leaders and schools more control over how money is spent to best serve their students. The more that local school districts are empowered by state government and held accountable by parents and voters, the more that education reforms and innovation can be responsive and effective.

For example, under California’s 2017 District of Choice Program, a school district may designate itself as a District of Choice, which allows students from other localities to enroll in its programs as long as space permits. Under this environment of open enrollment, school districts have been incentivized to build tailored programs, including some schools specializing in the arts, foreign language, science, and technology. Expanding and improving the state’s open enrollment program so that every school district in the state participates could further benefit students.

Going forward, California would benefit from implementing “learn everywhere” policies. The state board could approve education providers offering curricula that allow students to take courses from California’s large array of businesses and nonprofits in the music, arts, and entertainment industries. Students could earn credits while developing skills with professionals from diverse artistic backgrounds.

Arts and music are important for students, and many innovative options are available to California’s schools. Unfortunately, decades of rising state education spending show that an influx of tax dollars does not guarantee improved student outcomes. In this case, Prop. 28 would tie the hands of legislators and school officials with unnecessary budget mandates that ultimately mean less flexibility for students and teachers.

A version of this column first appeared in the Orange County Register.

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Funding Education Opportunity: How public school open enrollment impacts upward mobility, education issues on statewide ballots, and more Thu, 29 Sep 2022 14:42:00 +0000 Plus: Arizona school choice news, the latest school staffing, enrollment and spending trends, and more.

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Residential assignment has long constrained student opportunities because it intertwines schooling and housing. All too often, access to a better public education depends on a family’s ability to move to a more expensive neighborhood.

In fact, the median cost of housing in zip codes associated with highly ranked public schools was four times higher than the median cost of homes in zip codes associated with the lowest ranked public schools, according to a 2019 report by the Senate Joint Economic Committee.

When the price of admission to a public school is built into the cost of housing, mortgages function like fees to a private school. Accordingly, residential assignment’s de facto sorting mechanism—property wealth—often isolates students into socioeconomic enclaves. 

New research from Harvard University Economics Professor Raj Chetty explains why this segregation sets low-income students up for failure. His work, Social Capital Volumes I and II, shows that schools are important institutions where students form key social networks and explains how cross-class interaction can form “‘bridging’ social capital,” which is most closely connected to upward mobility. In fact, Chetty finds that students with more cross-class interactions, or economic connectedness, are more likely to rise out of poverty.

Chetty’s research identifies two equally important factors that affect good economic connectedness: exposure to higher-income individuals and friending bias. Exposure to higher-income individuals at school can translate into upward mobility because students have more opportunities to build relationships with people with high social economic status. 

Unfortunately, residential assignment is a major barrier to economic connectedness for many students because it limits their exposure. 

“About half of the social disconnection between low- and high-income Americans is due to differences in exposure. For example, high-income people attend high schools that are disproportionately attended by other high-income people,” Chetty observed.

Weakening the ties between housing and schooling through school choice, including K-12 public school open enrollment, could be a key way to provide students with greater exposure. 

Open enrollment lets students enroll in any public school with open seats regardless of where they live. Strong open enrollment policies operate as a form of public school choice and provide pathways for children to transfer to schools that are a better environmental fit, are safer, or offer AP courses and specialized curricula. For instance, Reason Foundation research showed that families in Texas and Florida use open enrollment to find better educational opportunities for their children.

Most importantly, however, Chetty’s work shows how open enrollment could give more students the opportunity to achieve the American dream

Overcoming residential assignment barriers is key to student-centered education. Government-imposed boundaries wrongly lock students into geographic monopolies, limiting their education options. Not only could these students access education options that are the right fit via robust open enrollment policies, but students could also unlock the social networks that are crucial to upward mobility.

From the States: Education initiatives on statewide ballots this November

In Massachusetts, voters may impose an additional 4% tax on incomes over $1 million. The new revenue would fund K-12, college, and university education, as well as public transportation spending. Massachusetts already spends more than $21,000 per pupil on K-12 education and has increased total education revenue by 26% in the last two decades, despite experiencing a 6% enrollment loss.  

California voters will have the chance to approve or deny an initiative that would earmark at least 1% of all state and local tax revenue from public schools exclusively to arts programs. Proposition 28’s opponents are wary of tying local school district leaders’ hands through “ballot-box” budgeting, especially as public school student enrollment declines. The state’s Legislative Analyst’s Office proposal estimates Prop. 28 would cost $800,000-to-$1 billion annually. The proposal comes after California allocated an additional $9 billion to its public school system in 2022.

Illinois voters will choose whether or not to add workers’ collective bargaining rights to the state constitution via Proposition 1, which is supported by teachers’ unions, among others. Critics say, if the proposition is passed, public sector unions would be given a newly-created constitutional right that would allow them to negotiate on a potentially limitless list of subjects and potentially block all future laws and reforms that might impact them.

In Idaho, a ballot initiative to increase education spending by more than $300 million through new corporate and individual taxes, even if approved, will now be voided following this month’s emergency legislative session. Gov. Brad Little signed a bill with a sales tax-funded annual spending increase of $330 million for K-12 schools, which will effectively replace the ballot initiative. Pressure to reform Idaho’s funding system overall was a frequent subject of the emergency session’s debate. 

What to watch

School spending vs. student enrollment
Data from Burbio released this month tracks enrollment declines in districts across the country, from Los Angeles to Fairfax, VA. It shows how severe many school districts’ enrollment declines have been since the pandemic started. Yet, while enrollment numbers are declining, education spending continues to increase in most states. This latest data mirrors education spending and enrollment trends seen well before the pandemic. For example, New York increased inflation-adjusted public school spending by over $26 billion between 2002 and 2020 while losing 10% of its student population over that time. 

Arizona school choice opponents fail to prevent education savings accounts expansion
The Arizona citizen’s referendum led by Save Our Schools (SOS), appears to have failed to block the nation’s biggest expansion of education savings accounts (ESAs). Despite its initial claim of gathering 141,714 signatures last Friday, this week, SOS all but conceded that its collected signatures fell well short of the 118,823 needed to overturn the law. This reversal occurred after the Goldwater Institute released projections that SOS was likely to have submitted approximately 88,866 signatures. Arizona’s secretary of state is expected to release the final signature count in mid-October.   

Corey DeAngelis: Why the COVID-19 pandemic changed the face of education forever
In a new ReasonTV interview, Corey DeAngelis explains why “backpack funding” is here to stay, why Texas is terrible on school choice, and why even non-parents should care about education reform. 

Recommended Reading 

On a Per-Student Basis, School Staffing Levels Are Hitting All-Time Highs
Chad Aldeman at The74Million
“In the 2020-21 school year, staffing levels hit all-time highs, and the typical public school district employed 135 people for every 1,000 students it served.”

‘Flagrantly Illegal’: Law Firm Files Lawsuit To Stop Biden’s Student Loan Forgiveness
Robby Soave at Reason
“President Joe Biden’s plan to forgive hundreds of billions of dollars in student loan debt violates both federal law and the Constitution, according to a just-filed lawsuit from the Pacific Legal Foundation.”

The End of School Reform?
Chester Finn, Jr. and Frederick Hess in National Affairs
“It goes without saying that opportunities for agreement are difficult to spot right now, and such a coalition would have to pull against the centrifugal forces of polarization — a marked contrast to the previous era in which prominent politicians and advocates found centrism a source of political reward.”

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Nebraska’s K-12 education funding system lacks transparency, relies too heavily on property taxes Fri, 09 Sep 2022 16:15:00 +0000 Nebraska ranks third in the nation for the proportion of total K-12 public school revenues it derives from local revenue sources.

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For decades, Nebraska’s public school funding system has exerted a major influence over the state’s tax policy. 

In 1989, the state adopted the Tax Equity and Educational Opportunities Act (TEEOSA), in an attempt to alleviate disparities in property tax burdens and education funding between districts by having the state take on a larger responsibility for funding public schools. 

However, in the last 30 years, this funding formula has become outdated and increasingly failed to reduce property tax burdens on school district residents, especially those in rural areas. 

Currently, Nebraska ranks third in the nation for the proportion of total K-12 public school revenues it derives from local revenue sources, trailing only New Hampshire and the District of Columbia. These local tax sources–primarily property taxes–comprised 59.5% of the state’s public school funds in the 2019-2020 school year. This is a problem because it creates an education system that is too dependent on local wealth, leading to large disparities in education funding and tax rates. 

While implementing comprehensive school finance reform is a politically arduous process, Nebraska can’t afford to wait.

TEEOSA lacks transparency and doesn’t fund students fairly. School districts in the lowest property wealth quartile receive $13,048 per student from state and local sources on average, while districts in the highest property wealth quartile receive $23,245 per student.

Additionally, substantial increases in property assessments have rendered the current formula irrelevant for most of the state’s rural school districts. Nebraska residents’ frustration over rising property tax burdens has caused policymakers to adopt the band-aid solution of increasing individual property tax credits to partially offset increases in taxes for some property owners. 

However, the only sustainable education-related solution to alleviating high property taxes in Nebraska is to reform the state’s school finance system. At the same time, state policymakers should also use this opportunity to adopt a fairer, more streamlined, and student-centered formula. 

The decline in TEEOSA’s ability to fund school districts fairly and control property taxes began in the early 2000s. At the beginning of the millennium, most Nebraska school districts qualified for state equalization aid. But in the 2019-2020 school year, the number of school districts receiving equalization aid was just 34%. In other words, two-thirds of Nebraska’s school districts today are almost fully reliant on property taxes to fund schools and receive no equalization aid from the state. Additionally, the Local Effort Rate—the property tax rate school districts use to raise formula funds—varies substantially across the state.

The main factor that has driven most Nebraska school districts off the state funding formula is the skyrocketing values of agricultural lands. This phenomenon has driven a wedge between the state’s rural and urban school districts. On one side, Nebraska’s urban school districts serve most of the K-12 population and have a large proportion of low-income students. They are also less dependent on property taxes and receive the lion’s share of state equalization aid. This constituency is primarily concerned with how the state funding formula accounts for student needs.

On the other hand, the state’s rural districts rarely receive equalization aid from the state and have large property tax burdens—but they’re also more highly funded in per-student terms compared to the more urban school districts. Understandably, the rural constituency is more concerned with how the state funding formula imposes significant property tax burdens on their residents (for more data on K-12 funding patterns in Nebraska, see Reason Foundation’s resource here).

No singular reform will address all the issues with TEEOSA. Reason Foundation partnered with the Platte Institute to create the Nebraska K-12 Education Funding Reform Model, a new tool that allows Nebraskans to explore potential reforms to the state’s education funding system. 

Nebraska policymakers should consider forming a study committee with the goal of developing a better K-12 funding model. A politically viable proposal would likely include a permanent reduction in local property tax reliance for K-12 funding, a transparent student-centered formula, and other elements that make the reform attractive to rural and urban school districts. 

Modernizing Nebraska’s school finance system means adopting a model where taxpayers and students are treated fairly, regardless of where they live. State policymakers can get the momentum going by forming a study committee with that concrete goal. 

Find the full Nebraska K-12 Funding Reform Model here.

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Nebraska K-12 Education Funding Reform Model Fri, 09 Sep 2022 16:15:00 +0000 Nebraska K-12 Funding Reform Model allows users to simulate how changes to the state’s school funding system might affect each school district in the state.

The post Nebraska K-12 Education Funding Reform Model appeared first on Reason Foundation.

To help policymakers and stakeholders explore pathways to reforming Nebraska’s outdated K-12 funding system, Reason Foundation created the Nebraska K-12 Education Funding Reform Model. Because the tool requires background knowledge of the state’s current funding system, this column will first provide an overview of how the state currently funds public school districts and then give instructions on how to start using this interactive tool. 

How the TEEOSA Formula Works

Nebraska’s core K-12 funding formula, the Tax Equity and Educational Opportunities Act (TEEOSA), controls about 94% of all state and local school operations funding in Nebraska. Put simply, the TEEOSA formula calculates school district funding as follows:

Needs – Resources = State Equalization Aid

The formula uses three basic steps:

Step 1- Determine School District Needs: The state first calculates each school district’s revenue entitlement, or Need, based on a wide array of factors. The key factors are student enrollment counts, concentrations of students in poverty, counts of limited English proficiency students, and qualifying special education expenses from the previous year. The result is a total revenue figure for each school district that will be covered by local and state funds.

Step 2- Determine District Resources: The state determines how much of a school district’s revenue entitlement can be covered by local property taxes, allocated income tax funds, and several other revenue sources. The property tax contribution is called the Local Effort Rate, and it was $1 for every $100 of adjusted property valuation in the 2020-2021 school year. Importantly, the Local Effort Rate is an assumed contribution, not a required one. Most school districts in Nebraska tax below the Local Effort Rate. Districts can also keep any revenues they raise locally that exceed their Need calculation.

Step 3- Determine State Equalization Aid: For any school districts that can’t cover their Need calculation from the revenue sources in Step 2, the state fills the difference with state equalization aid. This ensures that every school district in Nebraska at least receives its revenue entitlement as determined by Step 1. About two-thirds of Nebraska’s school districts don’t qualify for state equalization aid. This is very often because their Local Effort Rate is more than enough to meet their Need calculation.

How to Use the Nebraska K-12 Funding Reform Model

Improving the fairness of Nebraska’s K-12 finance system and alleviating property tax burdens will require shifting school district revenue sources and streamlining the state’s funding formula. Reason Foundation’s Nebraska K-12 Funding Reform Model allows users to simulate how changing the state’s school funding system might affect each school district in the state. With this tool, stakeholders can make changes to the school district’s Local Effort Rate and state funding formula mechanisms in the Model Input Panel on the lower-left corner of the screen. Once changes are made, users can hover over individual districts to view the financial effects and view summary impact charts on the right side of the screen. 

Users can also select from three different pre-loaded scenarios to get a sampling of the tool’s capabilities. Note that none of the three scenarios are being endorsed by Reason Foundation or the Platte Institute.

Assumed Local Effort Tax Rates

Using this tool, users can make changes to the assumed Local Effort Rate. After decreasing the Local Effort Rate in the Model Input Panel under the Tax Rates tab, one can evaluate how any change will affect school district funding, district tax rates, and the additional state equalization aid required.

For example, if one decreases the statewide assumed Local Effort Rate from $1 (meaning $1 for every $100 of assessed property valuation) to $0.75, they can view different summary results on the right side of the screen. In this scenario, the model estimates that 73 school districts see an overall increase in per-student funding, 145 districts see an increase in per-student state equalization aid, and 157 districts see a decrease in tax rates. Moreover, the total amount of state equalization aid required increases from $880 million to $1.269 billion. Notice also that no changes are expected for the formula Need calculation since changing the assumed Local Effort Rate should have no impact on this calculation.

State Formula Mechanisms

The second major component users can change in the model is how the state funding formula is calculated. Nebraska funds school districts by calculating the Need for each school district. This calculation is based on a complicated formula that factors in both individual student characteristics—such as poverty, limited English proficiency (LEP), and special education—as well as district size and district comparison groups. In the Model Input Panel, users can change different aspects of the current formula by selecting tabs labeled Basic Funding, Poverty Funding, SPED Funding, or LEP Funding. Under any of these tabs, users can deviate from how that funding component is currently calculated and simulate how adopting a more student-centered formula would affect individual districts and state equalization aid.

For example, under Basic Funding, a user can select the “single base” option and make no adjustments for school district size. This selection models the effects of funding each school district based on a single per-student amount, regardless of size. If users select a single base amount of $10,000 per student, the model estimates that 30 school districts see an overall increase in per-student funding and 33 districts see an increase in their per-student formula Need calculation. Notice the model estimates no changes to tax rates, since changing formula calculations alone doesn’t impact tax rates.


Importantly, the Nebraska K-12 Funding Reform Model has limitations when it comes to modeling tax policy changes. For instance, the model can’t probe potential tax reform strategies such as broadening the state sales tax base or changing property valuation practices—two issues that require separate analyses. The model also doesn’t account for the impact of property tax credits on individual taxpayers. The tool is limited to evaluating how changes to the assumed Local Effort Rate can impact actual district-wide property tax rates. It also assumes that any additional state funds required to compensate for decreases in property taxes are available. 

The Nebraska K-12 Funding Reform Model is an excellent resource for stakeholders to better understand the state’s funding system and its dependence on property taxes. The model also empowers users to explore potential reform pathways to make the state K-12 finance system more transparent and fair to both taxpayers and students. 

The post Nebraska K-12 Education Funding Reform Model appeared first on Reason Foundation.

Increases in education spending have little correlation with actual student counts, data show Thu, 18 Aug 2022 14:05:00 +0000 Our analyses show almost universal spending increases across all states between 2002 and 2020 while at the same time, many states struggled to cope with shrinking K-12 student enrollments.

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The latest update to Reason Foundation’s K-12 Education Spending Spotlight provides a snapshot of K-12 education finance in all 50 states and the District of Columbia from 2002 to 2020. Based on the newest Census Bureau data available for the 2020 fiscal year, Reason’s Spending Spotlight shows how school spending and student enrollment changed before COVID-19 hit and the pandemic’s impact on both. 

Between 2002 and 2020, 49 out of 50 states increased their inflation-adjusted per-pupil education spending. North Carolina was the only state that did not increase its inflation-adjusted education spending during that period.

On average, between 2002 and 2020, nationwide K-12 education spending increased by more than $3,200 per pupil, or by 25%.

Reason’s K-12 Spending Spotlight illustrates that many states increased their education funding even as they were losing students. In fact, 22 states experienced declining student enrollments between 2002 and 2020. Yet, all of those states losing students, except Michigan, increased their overall K-12 education inflation-adjusted education spending during that time. 

For example, New York’s inflation-adjusted revenue increased by $26.4 billion between 2002 and 2020. This is a 51% increase in spending. Yet, New York’s overall K-12 student enrollment dropped by 11% during that time.

Similarly, Illinois’ K-12 enrollment has declined by more than 6% since 2002 but the state increased its per-pupil revenue by more than $7,100 in inflation-adjusted dollars between 2002 and 2020. In total, Illinois increased its inflation-adjusted education spending by $12 billion even though it was serving fewer students.

These examples illustrate a ubiquitous disconnect between education funding and student enrollment. For nearly 20 years, state policymakers have almost universally embraced policies that increased education funding regardless of how their state’s K-12 student population might be changing.

The COVID-19 pandemic has only accelerated existing enrollment declines in K-12 education. For instance, New York and California–home to the two largest public school districts in the nation–witnessed statewide enrollments decline by 5.9% and 4.4% respectively between 2020 and 2022.  

Despite the drop in student enrollments during the pandemic, California policymakers recently approved increasing K-12 education funding by $9 billion for the 2023 school year–an increase of nearly 13%.

The enrollment declines in those states were not anomalous as the American Enterprise Institute’s Return to Learn Tracker pointed out, “Nineteen of 46 states declined by 3% or more and [only] five states saw net gains from 2020 and 2022.”

Families dissatisfied with their public school options during the pandemic chose alternative education options, such as homeschooling and private schools at record rates. In fact, the Associated Press reported that homeschooling participation increased by 63% during the 2020-21 school year, only dropping by 17% during the following academic year. At the same time, Catholic private schools’ enrollments–defying waning projections–increased by more than 62,000 students nationwide between the 2020-21 and 2021-22 school years.

The student enrollment losses experienced during the pandemic will only build upon the declines that nearly half of the states saw between 2002 and 2020. 

With federal stimulus dollars flowing freely until 2024, many school districts won’t feel the fiscal effects of lower enrollment rates for the next several years, especially since many states have implemented hold-harmless provisions in response to the pandemic.

In an Education Commission of the States’ brief, Eric Syverson and Chris Duncombe explained that “these policies typically allow districts to use their prior year, pre-pandemic enrollment or attendance numbers to receive the same amount of funding for the current year.”

Twenty-two states extended their temporary hold harmless provisions through at least the 2021-22 school year, ensuring that they would continue to receive the same per pupil funding as in 2020, despite changing K-12 enrollments. Illinois and three other states have committed to holding school districts harmless through the 2023-24 school year. 

To avoid flat-footed responses to an impending fiscal cliff, “school districts should get their fiscal houses in order now, while they have flexibility in their budgets,” Reason Foundation’s Aaron Garth Smith pointed out in The 74.

While COVID-19 exacerbated existing enrollment trends, the nearly 20-year decline in student enrollment means that policymakers have had more than enough time to read the tea leaves and prepare for funding changes.

This means that state policymakers must reverse course. Instead of allowing bureaucracy and special interest groups to drive K-12 education funding, policymakers should ensure that funding corresponds to actual students in classrooms. 

Reason Foundation’s K-12 Education Revenue Spending Spotlight is available here.

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Frequently asked questions on student-centered funding Mon, 01 Aug 2022 16:00:00 +0000 Student-centered funding puts student needs as the focus of education funding decisions. 

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What is student-centered funding?

Student-centered funding is an approach to K-12 education finance that ties education funding to individual students. Unlike other school finance approaches, student-centered funding puts student needs as the focus of education funding decisions. 

Student-centered funding can take many forms but typically sets a base funding amount for regular-program students, with additional weights added for classifications such as English language learners, special education, and poverty. Under this system, a student would generate the same level of funding regardless of geographic location or what type of school they attend. Student-centered funding is based on four principles: 

Fairness: Education dollars should be allocated based on the needs of individual students. 

Transparency: School finance formulas should be streamlined and easy for parents, teachers, and school administrators to understand. 

Portability: Education funding should not be tethered to a student’s zip code and should follow the child to the school of their choice.

Flexibility: Education leaders who are closest to kids are in the best position to decide how education dollars are spent.

The ideal student-centered funding system would follow a path like this:

A flow chart explaining how student centered funding would work for a state education finance system.
What are the benefits of student-centered funding?

Student-centered funding models account for student needs through weights, are based on up-to-date student enrollment numbers, and are not heavily tied to property wealth.

In many states, relying on local property tax revenue to determine student funding causes serious disparities across school districts. Not only does this put kids on uneven playing fields, but it can also make it difficult to implement open enrollment programs that give families options across school district boundaries.

The below chart highlights key differences between outdated education funding models and student-centered funding.

The positive aspects of student-centered funding models
Are there other names for student-centered funding?

Yes, student-centered funding is often referred to as weighted-student funding, student-based budgeting, or fair student funding.

Student-based budgeting also refers to district-level funding reforms that district administrators can adopt to increase funding fairness, transparency, and flexibility. Student-based budgeting systems can empower school principals and other school leaders to make localized decisions for their students. 

Which states have student-centered funding?

No school finance system is perfect, but 39 states employ some form of student-centered funding.  

In 2013, California’s Local Control Funding Formula (LCFF) streamlined more than 30 categorical grants into a single weighted-student formula. A study by Education Trust-West found that this change helped drive substantial improvements in equity. LCFF remains a popular reform—in a survey of superintendents, 82 percent agreed that it is leading to greater alignment among goals, strategies, and resource allocation decisions, and 74 percent indicated that the financial flexibility enabled their district to match spending with local needs. A separate survey found that, of those familiar with the law, 72 percent of likely voters and 84 percent of parents viewed it positively.

Hawaii implemented a student-centered funding plan in the 2006-07 school year. The state continues to fine-tune its weighted-student formula in response to school leaders, community stakeholder concerns and other issues as they arise. However, since its introduction, the weighted-student formula has provided a much more equitable, needs-responsive, and transparent way to fund Hawaiian schools while boosting community engagement in key decisions about their local schools.

Most recently, Tennessee passed a law to use a new student-centered funding formula to fund school districts in the state. Before the reform was signed into law in the spring of 2022, Tennessee was one of only nine states that still employed a resource-based formula for allocating education dollars to school districts. This approach put the focus squarely on inputs such as staffing ratios rather than students’ needs and was mired in layers of complexity that reduced transparency.

Policymakers should keep in mind that there isn’t a one-size-fits-all solution to school finance, and weighted-student formulas should be based on the unique needs of a state’s students.                               

Would student-centered funding impact public school open enrollment?

Open enrollment policies allow students to enroll in public schools outside of their residentially-assigned school building or school district. These policies provide school choice within public school systems and student-centered funding supports robust open enrollment. 

In fact, for open enrollment policies to work effectively schools must be fairly compensated for accepting transfer students. Research from California’s public schools shows it’s critical to get the financial incentives right in order for school districts to accept transfer students. Student-centered funding models that attach education dollars to students are one way to ensure this happens. 

Does student-centered funding impact charter schools?

Student-centered funding not only ensures education dollars are getting to the students that need them most, but it also makes it easier for states to offer families diverse education options outside of the traditional public school system.

Across the United States, public education systems are increasingly becoming untethered to zip codes via policies like charter schools, public school open enrollment, private school choice, and innovative learning methods like micro-schools. As student populations become more mobile and choose to attend a school outside of their residentially-assigned public school district, it will be crucial for states to make student-centered funding reforms.

Reason Foundation’s Christian Barnard outlined how this problem is impacting Arizona:

“This school-finance system is causing a number of issues for students and schools because it hasn’t been updated to reflect today’s choices, including charter schools, or modernized to the funding system needed when kids choose a school other than their assigned neighborhood school. First, there’s the funding gap between charter schools and district schools. Because district schools have access to various local property tax sources for facilities and daily school operations that charter schools do not, the average charter-school student receives $1,308 less in funding than the average district-school student. In a state where the Arizona Charter Schools Association finds more than one in five students now attend a charter school, this inequity is a major problem.”

How are weights used in a student-centered funding formula?

States use weights to deliver extra funding to support certain student populations. The most frequently used weights are for low-income students, English language learners, and special education students.

Oftentimes, resource-based funding formulas can restrict district flexibility over spending decisions, which can lead to greater inefficiency. This can lead to insufficient services and poor student outcomes for not just higher-need students, but all students in a school district. 

How can state policymakers implement student-centered funding formulas?

To help students and families, state policymakers should pursue four policy goals to fully adopt student-centered funding. These goals can be adopted separately over time or as a part of a comprehensive funding overhaul.

1. Streamline: Allocate education dollars based on students’ needs using a weighted student formula.

2. Equalize: Determine funding levels based on students, not by property wealth or zip code.

3. Empower: Deliver flexible education dollars and give families options outside of their residentially-assigned public schools.

4. Inform: Show parents and taxpayers how education dollars are allocated and spent.

Want more information on how your state can implement a student-centered funding formula?

Check out our Student-Centered Funding Roadmap for Policymakers here. 

The post Frequently asked questions on student-centered funding appeared first on Reason Foundation.

Modeling Arizona education funding reform scenarios Fri, 24 Jun 2022 16:00:00 +0000 This analysis models how change to Arizona's school finance system would impact the state's school districts, charter schools and overall K-12 budget.

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Reason Foundation’s new Arizona K-12 Funding Reform Model allows users to model how changes to components of the state’s school finance system would impact education funding. Most features of the state’s school finance formula—like the base dollar amount per student, the weight for English learners, and weights for special education students—can be altered using the model. The tool will summarize the funding impact of these changes for each school district and charter school in the state and users can turn off or turn on the various local sources of revenue for school districts. Note that this model does not include federal funds or state categorical grant funds, and it is based on complete funding data published by the Arizona Department of Education for the 2020-2021 school year.

You can explore the interactive model here: Arizona K-12 Funding Model

Another unique feature of the Arizona K-12 Funding Reform Model is that it allows users to consider cases where school districts may want to opt-in to different funding formulas. While this isn’t an option for school districts under current law, it’s a policy that’s been proposed by recent legislation. Specifically, users can consider how any changes to the model might incentivize school districts to opt-in to receive funding from the state’s charter school funding formula or to opt for a per-pupil transportation funding amount rather than receive transportation funding based on school bus route miles.

The model’s features are intended to give policymakers and researchers insights into how Arizona’s flawed school finance system can be streamlined and strengthened. While K-12 finance reform is a big political lift, the tool empowers users who have some familiarity with the state’s funding system to explore how reform options could impact school districts and charters across the state.

The model includes several pre-loaded scenarios that will be explored below. Users should note that none of the three scenarios are being endorsed by Reason Foundation and they are only being used to understand the model’s capabilities and to explore potential reforms.

Scenario 1: Some Changes Proposed in SB 1269 of 2022

The first pre-loaded scenario in the model tool mirrors some of the changes included in a bill proposed in the Arizona legislature during the 2022 session, SB 1269. This scenario simulates the following changes to the state’s funding system:

  • Increases the Base Level Amount per student to $4,413.37 (2.5% increase, based on the 2020-2021 base per student amount)
  • Eliminates the Teacher Experience Index (TEI)
  • Eliminates the Additional Teacher Compensation
  • Eliminates the Transportation Revenue Control Limit (TRCL)
  • Proposes per pupil transportation amount to $347 (for districts that want to opt-in to a flat, per student transportation funding amount)
  • Adds a middle school weight of 0.198 (this change wasn’t in SB 1269)

Scenario 1 eliminates some unfair aspects of the state’s funding system, such as the teacher experience index (TEI), which directs greater funding to half of the state’s districts with more experienced teachers. Notably, it also repeals the transportation revenue control limit (TRCL), a funding source that allows districts to raise local transportation funds based on outdated student enrollment counts without voter approval. To counterbalance these cuts, Scenario 1 also increases the 2020-2021 base funding amount per student by 2.5 percent.

The model’s map and summary charts provide helpful data that estimates how these changes could affect Arizona school districts. Under Scenario 1, 121 school districts would see a reduction in overall funding, 104 would see an increase, and one district would see no change. Statewide, the average per pupil funding for Arizona district students would increase from $9,050 to $9,159 per student, and the amount of state equalization assistance required from the state budget for both districts and charters would increase from $4.992 billion to $5.244 billion (a $252 million increase).

Users can also look at the Transportation Comparison under the Modeled Output selection, which shows how many districts would have an incentive to opt into Scenario 1’s flat $347 per pupil transportation funding amount rather than receiving funding as they currently do under a transportation route mileage-based funding formula. This view shows that 70 districts would receive more transportation funding under the flat per-pupil allocation. These districts that opt for a flat per pupil transportation allocation would also have the added benefit of additional spending flexibility.

Scenario 1 simulates several important and much needed changes to the state’s K-12 finance formula. All eliminated funding factors such as the TEI and additional teacher compensation measures distort student funding fairness. But the most impactful component of Scenario 1 is the elimination of the TRCL. Statewide, districts receive about $80 million in additional funding from TRCL and it is a major revenue source for many of Arizona’s small school districts. For instance, users can hover over the southern region of the state with their cursor and see that some of the small districts in this region would lose substantial funding from the elimination of TRCL (e.g., Sonoita Elementary District). While this does not mean that eliminating TRCL isn’t possible or necessary, it is a reality that policymakers will have to consider when reforming Arizona’s funding system.

Scenario 2: Cleaning Up the Formula and Boosting the High-Incidence, Low-Need Special Education Weight

Scenario 2 simulates four changes included in Scenario 1. These are:

  • Increases the Base Level Amount per student to $4,413.37 (2.5% increase, based on that year’s base amount)
  • Eliminates the TEI
  • Eliminates Additional Teacher Compensation
  • Increases the weight for “DD, ED, MIID, SLD, SLI, and OH” to 0.1 (this is AZ’s mild disability weight and the largest student disability group by far)

Like Scenario 1, Scenario 2 also eliminates unfair features of Arizona’s funding formula and again increases the base funding amount per student by 2.5 percent. Scenario 2 also proposes an increase to the mild disability weight from .003 to 0.1, or from $13.24 to $441.34 for each student in this category. This attaches additional funds to students with a developmental delay, emotional disability, mild intellectual disability, specific learning disability, speech/language impairment, or other health impairment. Students in these groups comprise a large majority of Arizona’s special education population and most of them spend the biggest portion of their time in general education classrooms.

The map and summary charts estimate how Scenario 2 would impact every district and charter in the state. Under this scenario, 138 school districts would have higher funding, 59 would have lower funding, and 29 would see no change compared to current levels. Statewide, the average funding for traditional district students would increase from $9,050 to $9,105 per student, and the amount of state equalization assistance required for districts and charters would increase from $4.992 billion to $5.078 billion, an $86 million increase.

Scenario 2, like Scenario 1, would eliminate some of the most glaringly unfair features of Arizona’s funding system and counterbalance those cuts with both an increase to the base funding amount and a substantial boost to the mild disability special education weight. Interestingly, Scenario 2 wouldn’t be nearly as costly to the state budget as Scenario 1 because rather than adding a weight for all middle school students as the first scenario does, it would include a targeted funding increase for special education students.

Scenario 3: Merging Funding Formulas for Charters and Districts

The model’s District-to-Charter Formula view allows users to analyze how many school districts would be incentivized to opt into the charter school funding formula when considering changes made in the model. Interestingly, this view shows that even when no changes are made to the current funding system, 75 Arizona school districts would already have an incentive to opt into the charter formula. Although this isn’t an option under current state law, it was a proposed change in SB 1269 in 2022.

This is because the charter formula provides additional state funding primarily for facilities (known as Charter Additional Assistance, CAA) while traditional districts rely on voter-approved bond levies and other levies for school operations to raise additional funds beyond what the formula provides. While many traditional districts can raise more locally than what charters receive from CAA, these 75 districts either raise less from their local levies per student than the charter CAA amount or they can’t pass any local levies at all.

Scenario 3 gives users a good opportunity to further explore this charter formula opt-in feature under the following changes to the District-to-Charter Formula tab in the Model Input Panel:

  • Increases CAA (Pre-schoolers with disabilities, grades K-8) from $1,875.21 to $2,200 per student
  • Increases CAA (grades 9-12) from $2,185.53 to $2,500 per student

If users look at the District-to-Charter Formula map, they can see that these parameter changes in Scenario 3 increase the number of districts that would be more highly funded under the charter formula from 75 up to 96—about 42 percent of the state’s school districts. This insight highlights how further increases to CAA could both close the average funding gap between districts and charters and make the reliable funding streams from the charter formula a more appealing option for a large share of Arizona’s traditional school districts who can’t easily raise funds from local levies.

While the model summary charts themselves don’t allow users to estimate the cost to the state budget of 96 districts opting into the charter formula, users can download the modeled data directly and quickly generate an estimate of this cost. If all 96 school districts that would be better off under the charter formula opted in, it would cost the state an estimated $188.7 million. Additionally, because the CAA amount would also increase for each charter student, users can pull from state-reported charter enrollment data to estimate that there would be an additional state cost of $74.8 million for the funding increase to charters.  


The three scenarios explained above are only a sampling of the Arizona K-12 Funding Reform Model’s capabilities. None of these scenarios should be interpreted as explicit policy recommendations, but they illustrate how this new tool provides users with transparent data and allows them to test the viability of potential reforms to Arizona’s school finance system.

The post Modeling Arizona education funding reform scenarios appeared first on Reason Foundation.

Arizona K-12 Funding Reform Model Fri, 24 Jun 2022 16:00:00 +0000 Arizona’s K-12 funding system is broken, but gaping differences in funding levels aren’t the only problem—it wasn’t designed to support an education ecosystem with robust school choice for families.

The post Arizona K-12 Funding Reform Model appeared first on Reason Foundation.

Reason Foundation’s Arizona K-12 Funding Reform Model is now available for education advocates to explore potential school finance policy solutions in real-time.

You can explore the interactive model here: Arizona K-12 Funding Reform Model

Arizona’s K-12 funding system is broken, with research showing the state’s highest property-wealth school districts generate $5,599 per pupil more on average than their lower-wealth counterparts. For instance, Queen Creek Unified School District gets 184% more per student than Isaac Elementary School District due to factors that have nothing to do with student needs. Matthew Ladner, director of the Arizona Center for Student Opportunity, also notes that nearly one-third of districts receive at least twice as much funding per-pupil as Snowflake Unified, Arizona’s lowest-funded district.

But gaping differences in funding levels aren’t the only problem. Equally as important is the fact that the school finance system—a relic of the 1980s—wasn’t designed to support an education ecosystem with robust school choice for families. With 21% of Arizona’s K-12 public school students now attending charter schools and many more exercising open enrollment, it makes little sense to continue tying dollars to local property wealth and the whims of low-turnout revenue elections.  

Over the past decade, the number of charter students in the state has nearly doubled yet, on average, students in charters receive $1,308 less per pupil compared to school districts and not all dollars follow students across district boundaries when families decide to transfer, leaving hundreds of thousands of students shortchanged. Reason Foundation’s Christian Barnard summarizes Arizona’s situation perfectly:

“School choice is becoming mainstream, and that’s great news. But before long, states will also need to grapple with updating school-finance formulas that fail to fund all kids fairly, are too reliant on local taxes, and don’t easily accommodate student movement between schools.”

Unfortunately, school finance reform is a daunting task for state legislators even when there’s widespread agreement on its merits. For example, it was only after years of deliberation that Tennessee finally adopted a student-centered funding system this past May, and until recently Texas was allocating billions of dollars each year through its Cost of Education Index, which adjusted funding using demographic data from 1989-1990.    

The reality is that politics is deeply ingrained in public education, and calls for greater equity only get you to the start line of the funding reform marathon. Many policymakers just want to know: how would a policy affect my school district’s bottom lines?

This type of information can be tough to come by, which is why Reason Foundation’s education policy team developed the Arizona K-12 Funding Reform Model. This tool, which streamlines several datasets into one dynamic interface, allows policymakers and advocates to explore complex policy solutions in real-time, including the estimated impacts on 226 school districts and 427 charter schools, and the state’s K-12 budget. Users can explore myriad combinations of reforms including adjustments to special education weights, changes to the base level amount, and the effects of replacing local levies with state dollars.

Our team mapped three reform scenarios, which are discussed here, to help users get started.

But this is only the start, as we aim to revise our model over time to reflect updated data, stakeholder feedback, and innovative policy solutions. Arizona’s K-12 funding system is in desperate need of repair, and stakeholders should be empowered with the tools needed to get reforms across the finish line. To learn more or to schedule a training, please e-mail  

Click here to use the Arizona K-12 Funding Reform Model

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Arizona’s school funding system is outdated and broken Thu, 14 Apr 2022 04:00:00 +0000 Arizona's proposed school finance reform would address some of the stark school funding disparities across Arizona school districts.

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Arizona’s 42-year-old school funding system is broken. The system is far too reliant on local property taxes and other outdated funding mechanisms that fail to fund all public school students fairly. 

That’s why State Rep. Michelle Udall (R-LD25) has introduced a strike-everything amendment to Senate Bill 1269, sponsored by State Sen. Vince Leach (R-LD11), that would make important reforms to Arizona’s current K-12 finance system. The proposal would increase the amount of education funding most Arizona students receive each year and improve the overall fairness of the state’s education finance system. 

While critics of the proposal are concerned that the legislation is moving too quickly and too late in the legislative session, this reform is desperately needed for Arizona students and schools.

Arizona’s SB 1269 would eliminate several often-criticized components of the state’s school funding system. These components include additional funding for school districts with more experienced teachers and a transportation funding mechanism that allows districts to raise funds based on outdated student enrollment figures. 

Importantly, the proposal would also address some of the stark school funding disparities across Arizona school districts. By allowing school districts that can’t raise additional local funds via bonds and tax overrides to access additional funding streams through a State Student Funding Formula, the proposal would be a boon for property-poor school districts that have struggled for years to keep up with their neighbors who pass bonds and overrides to raise extra funding. With voter approval, these school districts could opt-in to a new state funding formula, which provides stable, reliable, and equalized funding for students.

This provision would make a meaningful step toward severing the tie between local property wealth and school funding in Arizona. Eventually, other districts that are tired of going back to local voters to raise more money every few years could also sign-on.

Another consequential change in the legislation is the repeal of the Transportation Revenue Control Limit (TRCL), which is a provision in Arizona’s funding system that allows districts to raise additional dollars locally without voter approval to fund transportation based on old student counts. This is an unfair provision that arbitrarily favors some school districts based on historic enrollment patterns and legislators have been aware of this issue for decades.  

In addition to moving away from TRCL, the legislation would provide districts another opt-in opportunity to receive a flat per-student amount for transportation rather than continuing to receive mileage-based reimbursements for transportation. This is another needed change that would make Arizona’s transportation funding more adaptable to the state’s robust school choice environment where students frequently attend school outside of their residential boundaries. It would also provide transportation funds for charter schools, which currently serve over 20 percent of the state’s students. 

Other funding formula provisions that SB 1269 would eliminate, such as the teacher experience index and additional teacher compensation, should also be welcomed by advocates of funding equity. The teacher experience index unfairly directs additional dollars to districts with more experienced teachers, regardless of student needs. This practice is especially problematic given research indicating that additional teacher experience is often negatively correlated with student need levels. Also, additional teacher compensation isn’t available to charter schools, which receive an average of $1,308 less per student when compared to district schools.

While this reform would be consequential, Arizona Senate Bill 1269 would only be a first step that addresses some of the most glaring problems in the state’s education funding system. 

At some point, the burden of proof should shift to those upholding the education system’s status quo. Critics of the SB 1269 need to defend why nothing should change after years of lawsuits and multiple analyses exposing the deep unfairness of Arizona’s school finance system. 

Arizona’s students, particularly those in the state’s lowest-funded school districts, can’t afford to wait any longer. 

A version of this column previously appeared in the Western Tribune.

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Biden doubles down on Title I funding increase in 2023 budget proposal despite program’s poor record Wed, 30 Mar 2022 17:45:00 +0000 The administration wants to double the funding for a federal program that has failed in its aim to close achievement gaps between low-income and higher-income students.

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This week, President Joe Biden released his $5.8 trillion budget proposal for 2023 which included a plan to more than double Title I education funds for low-income students. Biden’s 2022 budget proposal included the same plan to double federal Title I spending, but in the end, Congress only approved a 6% increase, about $19 billion less than what the administration requested. 

While Congress is equally unlikely to pursue the president’s proposal this year, it’s important to note why doubling down on Title I funding would be such a flawed strategy. Research consistently shows the program, intended to provide federal funding for schools with higher percentages of children from low-income homes, has failed in its aim to close achievement gaps between low-income and higher-income students since its inception in 1965 as part of the Elementary and Secondary Education Act. For example, a study by researchers at George Mason University concluded: 

“Given the modest evidence on academic gains and gaps closure attributable to Title I, and considering that the program costs about $15 billion per year, we conclude that Title I compensatory program has been largely ineffective in accomplishing its goal of closing the achievement gaps between disadvantaged and non-disadvantaged students.”

The ineffectiveness should come as no surprise to those familiar with how Title I works. After Biden proposed the 2022 Title I windfall last year, my colleague Christian Barnard and I highlighted just a few of the program’s faults in National Review:

“The current formulas are riddled with complexity, including political provisions that have nothing to do with students’ needs. For example, states are guaranteed a minimum amount of funding even if their share of Title I–eligible students doesn’t warrant it. As a result, Title I dollars are delivered like buckshot, ranging from Idaho getting $984 per eligible student in 2020 to Vermont getting $2,590 per eligible student — 163 percent more per pupil than Idaho. Title I spending needs to be fixed, not increased.”

Keep in mind that President Biden’s Title I proposal comes at a time when many public schools are already flush with cash, thanks to $190 billion in federal COVID-19 relief funding that is supposed to prioritize students in high-poverty school districts. Not only that, but public schools are also facing sharp enrollment declines, meaning the budget proposal calls for spending more money on fewer kids when K-12 spending is already at record levels. 

Policymakers should be skeptical of continuing to pour more money into a broken federal program. Instead, they should pursue reforms that make Title I dollars flexible, so they support giving families more opportunities and the ability to customize their education. For example, Congress could update the program’s allocation rules and ensure the aid follows students to their public or private school of choice.

Lawmakers could also overhaul the program’s complex web of formulas and non-transparent compliance rules that contribute to school districts’ ineffective spending of the federal funding.

There are a lot of needed reforms to reduce achievement gaps and improve outcomes for low-income students, but pouring more money into Title I isn’t one of them.

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