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How State Funding Formulas for K-12 Schools Work

Michael Nutter

October 4, 2017

Most states use very similar formulas to determine how much each district within their borders receives. Unfortunately, these formulas frequently fall short of their goal to provide struggling schools with the resources they really need.

As recent research from Harvard has discovered, a child’s economic environment can have a substantial impact on their future finances. The Harvard study tracked a group of children whose families moved from high-poverty neighborhoods to lower-poverty neighborhoods to see the effect the move would have on their later financial success and career growth. By the time they reached their mid-twenties, the children who were less than 13 years old at the time of the move earned a 31% higher average annual income than the control group.

There are a number of contributing factors to this remarkable disparity, but foremost among them is the increased access to better-funded schools. While there are avenues designed to bring school districts in low-income areas the supplementary funding they need to provide a better education, the sad truth is that these measures often don’t work the way they were intended.

Shared Funding Responsibilities

In a typical year, states provide around 45% of the total funding for their public schools, though this figure can vary significantly from state to state and from district to district. The federal government usually provides just under 10% of public schools’ funding, primarily through categorical funds that are designated for a specific use like special education, Limited English Proficiency instruction, or career and technical training.

The rest of public school funding (nearly half) comes from local property taxes. Though not always directly related, a school’s relative wealth is usually factored into the amount of funding it receives from the state. Most state funding formulas account not only for the number of students a school district enrolls, but for the surrounding community’s ability to “self-fund,” as well.

As a result, the per-student funding a state provides to each district tends to be at least partially dependent upon variables like the value of houses in the area, the average family income in the community, and the number of enrolled students who receive free and reduced-price lunches. It’s not uncommon for a state to provide, say, $4,500 per student to a school in a low-income neighborhood while only providing $2,000 per student to a wealthier school. The assumption is that higher-income neighborhoods will be more able to secure ample funds through local property taxes.

Inequality and Standard Funding Formulas

Unfortunately, changing socioeconomic patterns in the U.S. have complicated our property tax-based funding system — as a result, lower-income school districts frequently find themselves at a distinct budgetary disadvantage.

Since property values in lower-income neighborhoods are, to put it obviously, generally lower than those in wealthier areas, a low-income community might have to tax its citizens at a rate three or four times that of a higher-income community in order to match the latter’s overall funding. Needless to say, governments in these communities often have a hard time passing the kind of tax increases necessary to properly fund their schools. Ultimately, this means that school districts in low-income, low-property value areas end up receiving less per student funding than wealthier school districts, even once state-level adjustments are taken into account.

What’s more, funding for high- and low-income schools alike has yet to rebound from cuts made in the wake of the 2008 recession. According to the Center on Budget and Policy Priorities, as of the 2015-2016 school year, “at least 25 states are still providing less ‘general’ or ‘formula’ funding…per student than in 2008. In seven states, the cuts exceed 10%.” This ongoing shortfall affects every school district, but especially those that are unable to compensate for it with robust property taxes.

Claiming Every Dollar Your District Deserves

In light of these harsh realities, it is absolutely essential for every school district to optimize its processes for securing funding. A tool like Vinson’s CheckPoint EMIS platform enables school districts in the state of Ohio to continually check and verify their data throughout the school year, ensuring that every funding-related variable — from total student population to number of IEPs — can be accounted for.

As long as the current system remains in place, a tool like Vinson’s will remain a critical part of how school districts secure the money they need to educate the next generation of Americans.

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