Portable education funds are dollars sensitive to student enrollment, meaning school districts gain or lose funding with changes in student counts. Public schools generally lose funding when enrollment falls, but K-12 funding systems vary substantially across states.

Reason Foundation’s funding portability metric measures the strength of this relationship, looking exclusively at state and local education funding. The main benefits of having a higher portability score are:

• Compatibility with Private School Choice: When education funds are sensitive to enrollment, dollars can follow the child to public school alternatives.
• Compatibility with Public School Choice: Public schools have greater financial incentives to accept transfer students when greater shares of education funds accompany them across district lines.
• Better Incentives: Public schools have a stronger incentive to be responsive to parents’ needs when funding tracks closely with enrollment.
• Efficiency: Tying public school funding to enrollment gains or losses ensures that resources aren’t held up in declining-enrollment school districts.

This analysis examines the K-12 finance systems in five states through a portability lens. With public education changing rapidly, policymakers must assess whether their approach to school finance can support a dynamic ecosystem characterized by parent choice, competition, and tightening state budgets. We start with a brief overview of our methodology, summarize each state’s portability score, and then compare these scores to school choice funding levels in each state. 

The takeaway from our findings is clear: K-12 finance formulas can substantially impact how school choice programs are funded, which in turn can affect the options available to students and the costs to taxpayers.

Methodology

The criteria used to calculate funding portability scores are summarized in Table 1 below. For each state, we gathered data, reports, and other information directly from state education agencies and other public sources. We used school finance documents, state statutes, and direct contact with state education agency officials for each funding source or allocation stream to determine whether it is provided to school districts based on marginal changes in student enrollment. Importantly, local dollars that contribute to state formula funding were considered similarly to state formula dollars since they are essentially allocated from one pot of funding.

Table 1: Funding Portability Score Criteria

_{This approach was developed based on the work of researchers at Georgetown University’s Edunomics Lab, to whom we owe a debt of gratitude. Our work does not replicate their methodology and has a distinct objective. However, the results of our research might be similar in some instances. For more information, see https://edunomicslab.org/category/student-based-allocation/.}

State Scores

The following section summarizes the results of our portability analysis in each of the five states examined: Arizona, Arkansas, Georgia, New Hampshire, and Oklahoma.

1.      Arizona

In the 2023 fiscal year (FY), Arizona’s non-federal K-12 budget was $13 billion, or $11,503 per student. Of that amount, $10.5 billion, or $9,295 per student, is portable. As a result, Arizona’s portability score is 80.8%, the highest score of the five states examined.

Arizona’s public school funding is highly sensitive to student enrollment because a large share of K-12 funding is allocated through the state’s funding formula, which uses weighted-student funding to tie dollars to students. However, the state still has room for improvement.

The largest pot of dollars that aren’t portable are school district secondary property tax levies, which total nearly $1.8 billion. These are voter-approved levies for capital bonds, dollars to supplement district operations, and other purposes. Because these property tax funds are district-specific, they are not sensitive to student enrollment. Similarly, there is $186.4 million in other special property taxes that are district-specific and not tied to enrollment. From state funding sources, Arizona has $616 million in programs that aren’t allocated based on enrollment, as well as $370 million in state grants outside of its formula that are for specified school programs.

2.      Arkansas

In FY 2023, Arkansas’ non-federal K-12 budget was $5.6 billion, or $12,451 per student. Of that amount, $3.9 billion, or $8,730 per student, is portable. As a result, Arkansas’ portability score is 70.1%, ranking only behind Arizona in the states examined.

Arkansas scores high because a large share of K-12 funding is allocated through the state’s funding formula, the Matrix, which is sensitive to student enrollment. Additionally, many of the state’s largest grants outside of the formula—such as funds for low-income students, those in alternative learning environments, and English learners—are also allocated on a per-student basis and thus are portable.

Arkansas’ K-12 funding system still has a portion of dollars that aren’t portable, with the largest pot being non-formula property tax levies that total $771.0 million. These are voter-approved levies for capital bonds, dollars to supplement district operations, and other purposes. From state funding sources, Arkansas has $265.9 million in small, restricted grants for career education, special education, and other programs that also aren’t allocated based on enrollment.

3.      Georgia

In FY 2023, Georgia’s non-federal K-12 budget was $23.8 billion, or $13,652 per student. Of that amount, $10.3 billion, or $5,914 per student, is portable. As a result, Georgia’s portability score is 43.3%, a relatively low score compared to other states. This is mainly because a small share of K-12 funding is allocated through the state’s funding formula—the Quality Basic Education (QBE) formula—which is the only source of funding that is portable. Georgia also provides $545.8 million in funding to partially equalize local levies for school districts with low property wealth in per-student terms, dollars that are also sensitive to enrollment.

Most other funding sources outside the QBE, however, aren’t portable. The largest pot of non-portable dollars are school district property tax levies, which total nearly $8.4 billion when excluding property tax funds that contribute to the QBE. These are levies for capital bonds, dollars to supplement district operations, and other purposes. There is also $2.2 billion in various kinds of local sales taxes that are district-specific and not sensitive to enrollment. From state funding sources, there is $615.7 million in state grants for capital funding, pre-kindergarten, and other special programs that aren’t portable. Finally, the state also provides $387.1 million in categorical grants for transportation, nursing, sparse school districts, and other purposes that aren’t allocated based on enrollment.

4.      New Hampshire

In the 2022 fiscal year, New Hampshire’s non-federal K-12 budget was $3.3 billion, or $19,827 per student. Of that amount, $854.4 million, or $5,067 per student, is portable. As a result, New Hampshire’s portability score is 25.6%, the lowest score of all five states examined. Most of the Granite State’s portable dollars are allocated through its Equitable Education Aid (EEA) formula, which has several allocations tied to student enrollment.

The primary reason for New Hampshire’s low score is its reliance on local tax dollars that don’t contribute to the state’s EEA formula. In total, non-formula local revenue accounted for $2.3 billion or 70.2% of all K-12 dollars. Another key driver of non-portable funding is the state’s Stabilization grant, a hold harmless provision that provided $157.5 million to districts that experienced funding losses in 2012 when New Hampshire adopted changes to its funding formula. About 33% of school districts still receive Stabilization funding, the same share as when it originated in 2012.

5.       Oklahoma

In FY 2022, Oklahoma’s non-federal budget was $6.9 billion, or $9,888 per student. Of that amount, $6,402, or $4.5 billion, was portable. As a result, Oklahoma’s portability score is 64.8%, ranking third of the five states examined. The Sooner State’s relatively strong score reflects the fact that most of its K-12 dollars are allocated through funding allotments and weights in its Foundation Aid and Salary Incentive Aid formulas, which tie dollars to enrollment.

The lion’s share of non-portable dollars in Oklahoma’s funding system—about $2.4 billion—are local dollars that don’t contribute to either of the state’s funding formulas. Additionally, the state has about $211 million in intermediate revenues that also aren’t allocated based on student enrollment.

How does portability affect school choice funding?

Across these five states, there are a few drivers of non-portable dollars, including hold harmless provisions and state categorical grants. However, the primary factor harming portability is non-formula local dollars. It’s worth emphasizing that, in many states, many local K-12 dollars are portable since they contribute to the state’s funding formula. For instance, in Arizona, local funding accounts for 37.4% of state and local education funds, but less than half of this funding is non-formula. But in other states, such as New Hampshire, the bulk of local dollars are non-formula.

School choice policy designs vary, but each state’s portability score can be compared to the financial support provided to their programs. To do this, we first obtained school choice funding data for each state from EdChoice and public school funding from each respective state education agency. We then calculated the share of per-student dollars that school choice participants receive on average compared to the average per-student funding public schools receive. The results in Table 2 paint a clear picture: states with more portable K-12 funding systems tend to have a greater share of dollars following school choice participants.

The most striking comparison is between Arizona and New Hampshire. Both states tether school choice funding to their respective funding formulas: 83.2% of dollars follow the school choice participants in Arizona compared to only 25.7% in New Hampshire. This is due to the fact that Arizona’s funding system allocates most of its K-12 dollars through the state’s funding formula, while New Hampshire’s funding system relies heavily on non-formula local dollars that stay with school districts regardless of enrollment changes.

Interestingly, even in states where school choice funding isn’t tied directly to per-pupil formula amounts—Arkansas, Georgia, and Oklahoma —their portability scores still predict the share of funding that follows school choice participants. For instance, Oklahoma’s portability score of 64.8% is nearly identical to its school choice funding share of 65.7%. This is likely because school choice programs are designed to reflect the revenue lost when students leave public schools rather than trying to achieve funding parity for school choice participants. 

The takeaway is clear: when it comes to school choice, K-12 finance systems are important determinants of how much funding follows the child.  

Table 2: Comparing K-12 Funding Portability with School Choice Funding

_{Note: The ESA amount and public school funding comparisons were made using the most recent available data at the time of writing. As a result, some of the years might not match. However, this shouldn’t substantively affect the observed trends. 
*Includes ESA participants with disabilities, who receive higher scholarship amounts. The median award amount, excluding these students, is $7,409. Using this amount instead would yield a school choice share of 64.4%.
**Oklahoma funds participants based on family income. $6,500 is the median scholarship amount of the five tiers.}

Conclusion

Generally, states with weighted-student formulas that limit non-formula dollars will score highest on Reason Foundation’s funding portability metric. Low-scoring states can still implement private school choice programs, but incompatible K-12 finance systems could result in lower funding amounts for school choice participants. A large gap between per-student public school funding and choice scholarship amounts can have negative downstream effects. Choice programs with comparatively low scholarship amounts can limit students’ options since states that spend more on public education also tend to have higher tuition costs at private schools. Similarly, if policymakers in low funding-portability states want to achieve better funding parity between choice programs and public schools, they can only do so at an additional cost to taxpayers. 

At a time when school choice is fueling demand for new K-12 options, school finance reform is one way for states to incentivize a robust supply of providers. School finance reform can also help lessen the burden on taxpayers as public education enters a new era that features more choice and competition.  

The post Which K-12 finance systems foster school choice? appeared first on Reason Foundation.

Under the proposal, individuals and businesses would receive tax credits for donating to scholarship-granting organizations —nonprofits that would award funds to students for things like private school tuition, homeschooling curricula, and other educational purposes. The program would initially be capped at $5 billion annually, or enough to fund about one million students at $5,000 each.

Proponents say the federal program would bring school choice to all 50 states, making about 90% of all U.S. students eligible to participate overnight. While we share this goal, there are practical reasons to respect federalism with school choice. 

For starters, a federal school choice program would establish a one-stop shop for Congress to impose nationwide mandates on participating private schools. In its current form, the bill’s language already includes a deal-breaker: participating private schools would be forced to accept all students with disabilities and follow the Individualized Education Plans (IEP) created for them by public schools. IEPs are notoriously bureaucratic documents that specify things like required services and accommodations, paying little attention to student outcomes.

While many private schools specialize in special education—at least 137,000 special needs students participate in school choice—some aren’t set up to provide these services. And for students with disabilities, making private schools more like public schools defeats the whole point of school choice: providing alternatives to public schools’ byzantine special education system.

But this would only be the start of federal intrusion into private schools. The next time Democrats control Congress, they can rewrite the law to teachers’ unions benefit such as subjecting private schools to curricular standards, testing mandates, on-site inspections, admissions requirements, and more. 

While attacks on school choice are nothing new, a federal program that would be the biggest in the nation raises the stakes too high for everyone. Regulations like these would standardize private schools, resulting in fewer meaningful alternatives for families. It’s hard to see how this wouldn’t happen–just look at how Congress has weakened the federal D.C. private school voucher program over time, or the regulatory bureaucracy that has evolved around other federal tax credits.

A federal school choice program would also kill state-level momentum at a crucial time. School choice advocates are on a roll, passing 16 programs with universal student eligibility since the start of COVID-19. But even in red states, lawmakers phasing in these programs, including West Virginia, Louisiana, and Arkansas, face fierce opposition over the cost to state budgets, putting planned school choice program expansions at risk. 

“We have this line item [education savings accounts] that continues to just expand that may have been good in concept when we chose to do this, but the application now we see is causing some problems,” says West Virginia Republican delegate Dana Farrell, who, notably, is supportive of school choice. 

Even though state-level concerns about escalating choice program costs are overblown, a federal program might lead state leaders to decide that the budget battles aren’t worth it, while giving opponents an easy talking point. Similarly, states considering new policies, such as Mississippi and Montana, would have weaker incentives to invest state dollars if federal tax credits are covering the tab. 

Every family should be able to choose the education that aligns with their unique needs and values. For states without school choice programs, the best path forward is to convince state lawmakers and voters that private alternatives are good for kids and can strengthen public schools. But achieving this aim through Congress is shortsighted and threatens the core pillar of school choice: reducing the government’s role in K-12 education. Federal school choice would be a step in the wrong direction.

The post Don’t trust the federal government with the nation’s largest school choice program appeared first on Reason Foundation.

Montana employs a hybrid education funding formula that has features of multiple formula types—student-centered, resource-based, and program-based formulas. As a result, substantial shares of education dollars are ineffectively delivered to school districts based on inputs, not individual student counts. Notably, only seven states use resource-based funding as their primary funding formula to allocate education dollars to school districts because they’re generally opaque and restrictive. Furthermore, no states employ program-based funding as their primary formula. This puts Montana in the minority of states.  

What are the drawbacks of Montana’s approach to K-12 funding?

Rather than putting the focus on students’ needs, Montana’s education funding formula is built around the needs of school districts. When legislators make critical decisions, the conversation should be squarely on kids and outcomes, not school districts and inputs, like staff counts. Importantly, Montana’s funding formula is also opaque, with only a handful of experts who understand how money is distributed.

What are the most pressing problems with Montana’s funding formula?

Montana’s basic entitlement lacks a coherent purpose. Rather than targeting additional dollars to rural or sparse districts with low enrollment, it instead provides a foundational grant, or a funding floor, to all districts.  

Additionally, Montana’s base funding amount (i.e., per-Actual Number Belonging) isn’t uniform. Most states have a standard per-student amount that is sometimes adjusted by grade level. But Montana uses so-called “decrement” funding that reduces transparency and further subsidizes districts with low enrollment.

Finally, Montana’s Quality Educator Payments focuses on inputs rather than students. Under the program, each school district in the state receives a set amount ($3,566 in the 2024 fiscal year) to fund each licensed educator and other licensed professionals, such as social workers, counselors, psychologists, and others. These payments incentivize hiring additional non-teaching staff because each employee generates an additional state subsidy. Additionally, research shows that teaching credentials have a weak relationship with student achievement and Montana students would be better served by allowing school districts to spend these dollars flexibly instead.

What about how local property tax dollars are equalized under the state’s funding system? 

The way Montana equalizes local property tax dollars is also a problem. Reason Foundation research shows that Montana’s higher-wealth school districts generally receive more funding per student, that greater local tax effort (i.e. districts with higher tax rates) is associated with lower per-student funding, and that higher school district poverty rates are also associated with lower per-student funding. Montana’s equalization mechanism is complex but fails to accomplish its primary goal: to streamline K-12 education dollars in a way that’s fair for students and taxpayers.

What education funding reforms should state policymakers pursue to help students and schools? 

Montana should fully adopt a student-centered funding formula as its primary way to allocate education dollars. Student-centered funding is an approach to K-12 education finance that ties education funding to individual students. It can take many forms, but typically sets a base funding amount for regular-program students, with additional weights added for classifications such as special education. Policymakers should also streamline how local dollars are equalized among school districts to reduce funding disparities, increase transparency, and result in greater tax fairness. 

Which states have student-centered funding?

The majority of states—30 states—use student-centered funding as the primary formula to allocate education dollars to school districts. This includes states with rural student populations similar to Montana, including Oklahoma, Nebraska, and New Hampshire.   

What are the benefits of student-centered funding?

Unlike other school finance approaches, student-centered funding puts student needs as the focus of education funding decisions. It also gives policymakers a clear policy lever for allocating dollars based on their goals and priorities for public education, such as improving special education services or career and technical education. Finally, student-centered funding is a transparent approach to school finance that encourages local flexibility over spending decisions.

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 special education students, English language learners, and low-income students. Sometimes weights target additional dollars to gifted and talented students or students enrolled in career and technical education. Ultimately, policymakers can choose weights based on their K-12 priorities.

Is student-centered funding the same thing as school choice?

No, student-centered funding is not a school choice program. Both red and blue states use student-centered funding to allocate dollars to public school districts. For example, states such as Texas, Tennessee, Utah, Kansas, California, and Oregon all employ some form of student-centered funding.

What is an example of a state that has adopted student-centered funding similar to what Montana should do?

Most recently, Mississippi adopted student-centered funding in 2024, and Tennessee adopted it in 2022. But California’s transition to student-centered funding—just over a decade ago—provides valuable research and insight.

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 funding fairness.

The Local Control Funding Formula remains a popular reform. In a survey of California’s school district superintendents, 82 percent agreed that the funding formula leads to greater alignment among goals for serving students, strategies, and resource allocation decisions, and 74 percent of superintendents indicated that the financial flexibility enabled their school districts to better match education spending with their schools’ local needs. A separate survey found that, of those familiar with the California law, 72 percent of likely voters and 84 percent of parents with school-aged children viewed it positively.

The post Frequently asked questions about Montana school finance reform appeared first on Reason Foundation.

Lawmakers in Montana are joining more than a dozen states trying to expand their school choice program offerings in 2025. House Bill 320 (H.B. 320) would establish the Montana Academic Prosperity Program for Scholars (MAPPS), which would allow tax credits for donations or individual tax credits to fund students’ scholarships for private school tuition or other private educational expenses such as learning supplies or tutoring. The bill allows up to $4 million in donation tax credits from individuals or corporations and another $4 million in individual tax credits for families.

All school-age children in the state would be eligible for the program. The maximum individual scholarship amount would be equal to the statewide BASE school funding formula amount divided by statewide public school enrollment, or an estimated $7,289 per student.

If the total dollar value of donation credits or individual tax credits reaches 80% of the maximum amount, the aggregate limit of tax credits must be increased by 25% for the succeeding school year. For example, if families claim $3.2 million or more in individual tax credits in the program’s first year, the aggregate limit for the next school year will be increased to $5 million. The same process applies to the aggregate $4 million limit on MAPPS donation tax credits.

Fiscal impact variables

Montana policymakers and stakeholders are likely interested to know how the MAPPS proposal would impact the state budget. Due to the cap on the aggregate dollar amount of tax credits, the total cost of the MAPPS program would be $8 million in its first year of enactment. That amount equals only 0.26% of the state’s proposed budget for Fiscal Year 2026 and 0.3% of K-12 revenues in Fiscal Year 2024.

Additionally, that total cost figure overstates the program’s true cost because it doesn’t account for the potential share of MAPPS participants who would otherwise enroll in public schools, commonly called switchers. Because switchers would otherwise receive taxpayer resources in public schools without MAPPS, they produce counterbalancing savings that offset the program’s total cost.

Savings from switchers

Estimating the dollar amount that each switcher student saves for the state budget is difficult due to complexities in the state’s K-12 funding structure. Montana’s public school funding system includes funding streams based on student enrollment, other funding streams that account for factors like district size or the number of certified personnel, and local property tax sources that may be indirectly sensitive to student enrollment but don’t directly impact the state’s general fund. As such, the funds returned to the state budget when students leave a public school for MAPPS will vary from district to district and student by student.

Using Fiscal Year 2025 school budget data published by the state’s Office of Public Instruction, this analysis estimates that the state saves an average of $5,600 for each individual student who leaves a public school. This estimate incorporates state funding streams like direct state aid, guaranteed tax base aid, and other state funding streams that are generally sensitive to student enrollment. The estimate excludes any state funding streams (e.g., Quality Educator Payments) that aren’t enrollment-sensitive, as well as all local revenue sources. Importantly, Montana school districts may use current-year or three-year average enrollment counts for funding purposes, meaning that some of the state savings from switchers will be delayed over a multi-year period.

Switcher rates

Another key variable affecting the fiscal impact of H.B. 320 is the share of participants who are switchers, i.e., the switcher rate. Data from other states indicate that switcher rates for universal-eligibility school choice programs tend to be lower than 50% in the initial years since families already using private education are often the first to apply. For example, Arizona has a universal ESA program with no caps on costs or enrollment. In the Arizona program’s first year, the state reported that 21% of about 30,000 participants in first through twelfth grades were previously enrolled in Arizona public schools. By year two, the overall switcher rate had risen to 32%. A separate Reason Foundation analysis estimates that, after accounting for kindergarten participants and Arizona program participants who previously enrolled in the ESA before it became universal, the switcher rate after two full program years was 47%.

This analysis assumes initial switcher rates in Montana will likely be between 21% and 32% in the initial years. This is because Montana has a less robust school choice landscape than Arizona—e.g., no public charter schools and smaller existing private school choice offerings. Since Montana families are comparatively less aware of school choice availability, it will likely take time for families in public schools to learn about the program and decide to participate, keeping initial switcher rates low.

Average scholarship amounts

While the maximum scholarship under MAPPS is estimated at $7,289 per student, actual scholarship amounts under the program will vary from student to student depending on how much families claim in individual tax credits or how much they receive from student scholarship organizations. The lower the average scholarship amount, the higher the total number of scholarship recipients and the higher the potential number of switcher students. H.B. 320 also sets aside up to 10% of the tax credits to fund the program’s administration. This means an aggregate of $7.2 million in tax credits would directly fund scholarships.

This analysis estimates the net cost of MAPPS by assuming a range of average scholarship values—100%, 80%, and 60% of the maximum.

State fiscal impact estimate

Using all the above variables, the net fiscal impact of MAPPS on the state budget will be between $6 million at the high end and $4.3 million at the low end. These values range between 0.20% and 0.14% of the state’s proposed budget for Fiscal Year 2026.

The net fiscal impact is lower than the total program cost because each switcher saves the state budget an average of $5,600. The true program cost will be closer to the upper estimate if switcher rates are around 21% and the average scholarship for program participants approximates the maximum ($7,289 per scholarship). The program’s true cost will be closer to the lower estimate if switcher rates are around 32% and the average scholarship for program participants is 60% of the maximum ($4,374 per scholarship). All estimates are summarized in Table 1.

Table 1: Net State Budget Cost Estimates for MAPPS, FY26

Due to the modest amount of credits proposed in H.B. 320, the net cost of the MAPPS program would represent a small fraction of the state budget. For reference, the net costs in Table 1 are comparable to the state’s Data for Achievement payments. These state payments equal $23.58 per public school student and are intended to cover minor district-level costs like collecting and entering student achievement data into the statewide system. In fact, if the aggregate amount of tax credits afforded under MAPPS were quadrupled, the net program costs under the same range of assumptions from Table 1 would still be no more than 1% of the state budget.

In the long run, the MAPPS scholarship proposal will likely accrue net savings to taxpayers because the proposed maximum scholarship amount is only about half of per-student revenues in the state’s public schools (see Figure 1).

Conclusion

If adopted, it’s important that future cost estimates for the MAPPS program account for counterbalancing savings and don’t only examine the total program cost. Montana House Bill 320 would represent a very small cost to the state budget, even as the aggregate dollar value of credits increases in the coming years.

The post Assessing the fiscal impact of the Montana Academic Prosperity Program for Scholars appeared first on Reason Foundation.

Arkansas enacted the Literacy, Empowerment, Accountability, Readiness, Networking, and School Safety (LEARNS) Act in 2023. This new K-12 education law changed the state K-12 curriculum and prioritized new funding for teacher raises, school safety, broadband access, and other purposes. A key feature of the new law adopted the Educational Freedom Account (EFA) program. This program allows families who don’t use public schools to receive state funds for education expenses like private school tuition, tutoring services, testing fees, and educational supplies. By adopting the EFA program, Arkansas became the 11th state in the nation to adopt a universal school choice initiative—meaning it will be eligible to all resident students at full implementation.

As expansive school choice programs proliferate nationwide, tens of thousands of families are newly gaining access to education options outside of the traditional public school system. At the same time, lawmakers and other stakeholders want to know how these programs will impact their state’s budget. For each participating student who would have otherwise enrolled in an Arkansas public school, the state’s EFA program generates about 10% in net state savings because EFA scholarship values are 90% of per-student public school formula funding from the prior year. On the other hand, EFA students already using private education represent a pure cost to the state because they weren’t previously receiving any public resources. This column analyzes how these savings and costs counterbalance one another and estimates the net fiscal impact on the state’s K-12 education budget.

Executive summary

• Scholarship amounts for the EFA are equal to 90% of per-student state funding formula dollars from the prior year. Those amounts were $6,672 in year one, $6,856 in year two, and an estimated $6,994 in year three.
• Eligibility was limited to specific populations and high-need students in the first two years (2023-24 and 2024-25). This includes students with disabilities, in foster care, in low-performing public schools, and kindergarteners. The EFA program will be available to all Arkansas families starting in the 2025-26 school year.
• The estimated share of participating students who would have otherwise attended public school in Arkansas’s EFA program—or the switcher rate—was 34.8% in the first year and 27.5% by the second year. These students saved the state $17.2 million in year one and $30.6 million in year two.
• Accounting for total program costs and offsetting savings from switcher students, the net state budget cost of the EFA was $20.3 million in year one (0.3% of the total state budget) and $67.7 million in year two (1.1% of the total state budget).
• Based on data from universal school choice policies in other states, the net state cost of Arkansas’s EFA in year three will range between a high-end estimate of $209.2 million (3.3% of the governor’s proposed budget) and a low-end estimate of $126.9 million (2% of the total proposed state budget).
• The net cost projections indicate that the state’s universal program will be affordable. The net cost of Arkansas’s EFA at full implementation will be comparable to the routine annual increases given to the state’s public schools.
• Data from other states suggest that the net cost of the EFA program will peak at $263 million annually in the first few years of universal eligibility and decrease over the medium and long term.
• The net costs of funding expansive, universal school choice in Arkansas should also be considered against the benefits of empowering tens of thousands of families statewide with more educational options.

Program design and student eligibility

The LEARNS law dictates a three-year timeline for the EFA program to be phased into universal eligibility. The law allows only applicants under specific eligibility criteria for the first two years and then expands to universal eligibility by the 2025-2026 school year.

• Year 1 (2023-2024): In the first year of the EFA, applications were only available for students with disabilities, first-time kindergarteners, children in foster care, children in active-duty military families, homeless students, and children coming from F-rated public schools or Level 5 school districts (the lowest performing schools, as determined by the state). Students previously participating in the Succeed Scholarship program were also eligible. The number of participants in year one was capped at an amount equal to 1.5% of the state’s public school population.
• Year 2 (2024-2025): In the second year of the EFA, applications were available to all students eligible in year one and expanded eligibility to include first-graders and students in D-rated public schools. It also expanded to include children of veteran parents, parents in the military reserves, first responders, and law enforcement officers. Additionally, allowable uses for the EFA broadened to include the kinds of expenses typically incurred by homeschooling families—which effectively made those families newly eligible. The number of participants in year two is capped at an amount equal to 3% of the state’s public school population.
• Year 3 (2025-2026): By year three, the EFA will be available to all school-age children in Arkansas. Participation will only be limited by the amount of funds appropriated for the program. Under the governor’s current proposed budget, a maximum of 39,600 students would be eligible to participate in the program. Scholarship amounts would be an estimated $6,994 per participant.

Fiscal analysis

Methodology

To measure Arkansas’s school choice program’s net fiscal impact on the state budget, one must estimate both the total program costs and the offsetting savings from students who would have otherwise attended public schools. Four key variables are required to determine this net fiscal impact.

1. Scholarship amounts per student: The amount of funds each choice program participant receives. For years one through three of the EFA, students respectively receive $6,672, $6,856, and $6,994 each. Additionally, a small number of students previously participating in the Succeed Scholarship program receive $7,413 each.
2. Total program enrollment: The total number of students participating in the school choice program.
3. Portable public education funding per student: The amount of funding a school district loses when a student leaves the public education system to participate in the choice program. For clarity, this analysis will only consider Arkansas’s public school per-student formula funds as portable funds. In years one through three of the EFA, those amounts were, respectively, $7,618, $7,771, and an estimated $8,162 per student.
4. Switcher rates: The share of choice program participants that would have otherwise enrolled in a public school.

Year 1 fiscal analysis

The Arkansas Department of Elementary and Secondary Education (ADESE) published complete student participation data for year one of the EFA program. In 2023-2024, there were 5,548 total EFA users. Participants received $6,672 each unless they were previously enrolled in the Succeed Scholarship program, in which case they received $7,413. The state-reported total cost of the EFA in year one was $34.9 million.

EFA users who would have otherwise attended public schools generate state savings that counterbalance some of the total cost. Of the total participants, 630 came from the Succeed Scholarship program, and an estimated 18%—999 students—were enrolled in public schools in the immediate prior year. Because prior Succeed Scholarship participants were required to be previously enrolled in public schools to be eligible for the program, they are also counted as switchers. That means 1,629—or 29.4%—of EFA program users in year one were switchers.

One further adjustment is needed. The 29.4% switcher figure likely understates the true switcher rate of Arkansas’s EFA program because it counts all 1,664 kindergarten participants as non-switchers because it’s their first year of formal education. Because it’s impossible to know how many kindergarten enrollees would have otherwise attended public schools, this analysis assumes that the same share of kindergarten participants (18%) as total program participants would have been switchers.

After applying the switcher assumption to kindergarten EFA enrollees, the final estimate for the number of switchers for year one of Arkansas’s EFA program is 1,928, or 34.8%. By not attending public schools, each switcher student saves the state $7,618 in funding formula dollars. Therefore, switchers generated a total savings of $17.2 million to the state. After accounting for these offsetting savings, the estimated net cost of Arkansas’s EFA program in year one was $17.7 million. That amount equals 0.3% of the total state budget in the same year.

Year 2 fiscal analysis

ADESE has only published limited participation data for year two of the EFA program. In 2024-2025, 90% of students participating in year one continued using the program in year two. Under the expanded eligibility criteria and higher enrollment cap, about 9,300 additional students were added to the program. As such, there were 14,297 students using the EFA in the 2024-2025 school year. They received $6,856 each, with previous Succeed Scholarship recipients still receiving $7,413. For year two, the total cost of the EFA program was $97.5 million.

ADESE has not yet published more detailed information on student participation by eligibility group or switcher rates for year two. However, the Arkansas Times obtained and published year two participation data via a Freedom of Information Act request.

According to the data obtained by the Arkansas Times, 18% of all enrollees after the first two years of applications were previously enrolled in traditional public or charter schools. That share is equal to about 2,573 participants. Like year one, a further adjustment is needed to estimate how many kindergarteners would have otherwise attended public school. About 31% or 4,432 EFA participants enrolled under kindergarten eligibility. Again, assuming an 18% switcher rate, an estimated 798 of them are switchers. When combining that switcher amount with an estimated 567 former Succeed Scholarship recipients (adjusted to a 90% figure due to the retention rate from the prior year), there were an estimated 3,938 switchers in year two of the EFA program or 27.5% of participants.

In public schools, each switcher student would have received $7,771 each through the state funding formula in 2024-2025. Therefore, switchers generate a total savings of $30.6 million to the state. After accounting for these offsetting savings, the estimated net cost of Arkansas’s EFA program in year two was $66.9 million. That amount equals 1.1% of the total state budget that year.

Year 3 fiscal projection

Since applications have not yet been collected, participation data for year three of Arkansas’s EFA program is unavailable. Because the EFA expands to universal eligibility in the third year, policymakers and researchers expect a large increase in participation. Anticipating this application surge, Gov. Sarah Huckabee Sanders has proposed doubling the state’s EFA budget from the prior year, raising it to $187.5 million and adding another $90 million in surplus revenues in case program demand is higher ($277.5 million in total). If both appropriations are approved, that new amount would fund about 39,600 scholarships at $6,994 each.

Like years one and two, estimating the net fiscal impact of the state’s EFA requires calculating the total cost and offsetting savings from participants who would have otherwise attended public schools. Although Arkansas-specific data is not yet available, participation and switcher data from other states that have adopted universal school choice programs can be used to formulate projections.

Differences in policy design and school choice context make each state program unique. Arizona is the state most analogous to year three of Arkansas’s EFA program. That’s because Arizona had no eligibility restrictions on applications in its first year of expansion into universal eligibility (2022-2023), just as Arkansas’s EFA program will be in year three. In the Arizona program’s first year, the state reported that 21% of about 30,000 participants in first through twelfth grades were previously enrolled in Arizona public schools. By year two, the overall switcher rate had risen to 32%. A separate Reason Foundation analysis estimates that, after accounting for kindergarten participants and Arizona program participants who previously enrolled in the ESA before it became universal, the switcher rate after two full program years was 47%.

Even so, all three of these percentages likely still understate the true switcher rate in Arizona since it had four already-established private school choice programs that likely served substantial shares of switcher students. Out of caution, this analysis will exclude any consideration of additional Arizona ESA students who were switchers who may have transferred from these programs.

Thus, this analysis will include a range of cost estimates based on switcher rates of 21%, 32%, and 47%.

Year 3 fiscal projections under maximum participation

If the total $277.5 million in funding in Gov. Sanders’s proposed budget is used by Arkansas students in year three of the EFA program, a reported 39,600 students would be participating. If the program switcher rate is at the low end of 21%, there would be 8,356 switchers yielding $68.2 million in counterbalancing savings. Thus, the net state budget cost under the low-end switcher estimate would be $209.3 million.

If switcher rates are at the mid-level rate of 32%, there would be 12,553 switchers yielding $102.5 million in counterbalancing savings. Thus, the net state budget cost under the mid-level switcher estimate would be $175.0 million.

If switcher rates are at the high-end rate of 47%, there would be 18,454 switchers yielding $150.6 million in counterbalancing savings. Thus, the net state budget cost under the high-end switcher estimate would be $126.9 million.

Table 1: Net State Budget Cost of Arkansas EFA Program Under Maximum Participation, by School Year

Year 3 fiscal projections excluding proposed reserves

It’s also possible that EFA applications won’t meet the full 39,600 scholarship amount available under the governor’s proposed budget in the program’s first year of universal eligibility. Although it’s reasonable to assume that a large majority of families already using non-public education would enroll in the EFA soon after becoming eligible, there are reasons why some or many families may not participate. First, not all Arkansas private schools have opted to participate so far. While a reported 128 private schools accepted EFA students this school year, Private School Review reports that there are currently 191 private schools in the state. If these schools don’t opt into the program in the coming year, the families they serve won’t be able to participate in the EFA program. Homeschooled families are also less incentivized to participate in school choice programs because they aren’t paying private school tuition, and their community has historically been skeptical of any government involvement in home education.

In a scenario where the governor’s proposed $90 million in EFA program reserves aren’t needed, the total EFA program cost would be $187.5 million. Under the same range of switcher assumptions adopted earlier in this analysis, the net cost of the program would range from $85.5 million to $141.3 million in year three.

Putting the costs in context

As this analysis illustrates, the Arkansas EFA program’s true cost (i.e., net cost) is substantially lower than its total cost. That’s because switchers generate substantial offsetting state fiscal savings that can account for as much as half of the total costs (see Figure 1).

Figure 1: True EFA Cost as a Share of Total Program Costs, FY24 through FY26

Moreover, even under the maximum proposed participation of 39,600 scholarships, the net costs of Arkansas’s EFA program are affordable when evaluated against the entire state budget. In the first two years, the net costs of the EFA program were at or below 1% of the total state budget. Based on projections for Arkansas’s EFA program at universal eligibility, the net costs of the program will likely amount to between 2% and 3.3% of the state’s proposed budget (see Figure 2).

Figure 2: Estimated Net Costs of Arkansas EFA Program as a Share of the Total State Budget, FY24 through FY26

The net costs of Arkansas’s school choice program under maximum proposed participation are comparable to the state’s routine public school spending increases. For comparison, during the first two years of the Arkansas EFA, public schools received about $168 million in new ongoing state formula funding and another $183 million in ongoing state funding to increase minimum teacher pay to $50,000 statewide. Arkansas also just completed its biennial public school funding formula review, where state analysts recommend further funding increases to the state legislature that are usually approved. The proposal would add at least $270 million in ongoing public school formula funding over the next two school years.

Importantly, the net cost of the EFA will likely peak in the program’s first few years of universal eligibility and subsequently decrease as larger shares of new EFA participants switch from public schools and increase the counterbalancing state savings. This is already occurring in Arizona, where most interested ESA participants who were already enrolled in private education joined the program in the first two years. Additionally, the share of total enrollees switching from Arizona public schools increased from 21% to 35% between FY23 and the first quarter of FY25.

Arkansas has about 30,000 students currently in private schools and another 33,000 homeschoolers. Assuming a peak share of 80% of the private school students and 50% of the homeschooled students participate in the EFA program over the next few years, the maximum amount of non-switcher EFA enrollees would be about 41,000. Assuming also a 32% program switcher rate by that point, the total program cost would be $418 million, and the net cost would be $262 million.

From the peak cost point, net program costs will likely stay flat or decrease even as total program costs climb. Few non-switchers will enroll in the EFA after that point because most interested families already using private education will have joined the program. Instead, new participants will largely come from public schools. Depending on how many public-school switcher students opt into the program in the coming years, the net cost of the program will decrease and stabilize between $253 million (assuming a 40% switcher rate) and $237 million (assuming a 50% switcher rate) annually. Note that these projected amounts are based on constant FY26 funding amounts. Figure 3 illustrates this long-term cost dynamic. While total program costs will likely grow as the program matures, net costs will be stable because most new enrollees are switchers.  

Figure 3: Trajectory of Net EFA Program Costs from Near-Term Peak to Long Term, in Constant FY26 Funding Amounts

To be sure, the timeline for achieving the peak, medium-and long-term program costs displayed in Figure 3 is speculative and could range from five to 10 years. For reference, achieving the long-term 50% switcher rate for the program under current assumptions would require 8.6% of the current public school population, about 41,000 students. In any case, the net program costs will remain stable over varying timelines of switcher rate increases.

As a few final notes, this analysis doesn’t account for other taxpayer savings that accrue over the long run as public schools scale back operations in response to declining enrollment. It also doesn’t account for any lags in state savings that result from Arkansas school districts using prior-year enrollment counts, nor does it account for declining enrollment funding received by some school districts when they lose students to the choice program.

Conclusion

Beyond state budget considerations, the costs of Arkansas’s Educational Freedom Accounts should be weighed against their benefits for student learning, parental involvement in education, and the K-12 education landscape. For example, 40% of participants in the program during the first two years were students with disabilities. This means that thousands of families with high-need children could choose another educational option outside of traditional public education. Thousands of additional young families were given new educational options right at the start of their children’s educational careers. State leaders should consider these families and the thousands more who want more options as they deliberate the budget for the first year of the EFA’s universal eligibility.

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Public schools have lost nearly 1.2 million students since the start of the COVID-19 pandemic, and many school districts need to make the difficult and politically fraught decision to close neighborhood schools.

With declining birth rates, increased homeschooling, and more parents embracing private and charter schools, the National Center for Education Statistics (NCES) projects public schools will lose another 2.7 million students by 2031-32. Enrollment is expected to fall 15% from 2022-23 levels in California and New Mexico, with New York not far behind at nearly 14%, according to NCES. 

With fewer students—and less funding—widespread public school closures, while challenging, are necessary and inevitable. However, the most recent federal data from 2021-22 shows that they were down by nearly one-third compared to pre-pandemic levels. There were fewer closures because districts plugged budget holes with the $190 billion in federal COVID-19 relief funding they got during the pandemic. But these federal dollars are expiring, and schools now feel the fiscal impact of losing students. 

Without more recent school closure data, policymakers and other stakeholders are in the dark on a critical policy issue. 

To shine a light on declining public school enrollment and school closures, Reason Foundation attempted to collect data from all 50 states via public information requests and other public sources. We obtained data from 15 states and excluded charter schools, alternative schools, and programmatic closures from the analysis to get the clearest picture possible of public schools. While our dataset has limitations—including rural states like Idaho and Vermont with relatively few schools to close— it provides much-needed insight into how things are playing out across states, including California, Colorado, Florida, Iowa, New York, Utah, and Virginia. 

Our findings indicate that public school closures in these 15 states are on the upswing, with trends varying by state. In the three years before the COVID-19 pandemic (from 2017-18 to 2019-20), total combined school closures in the 15 states examined ranged from 84 to 99 a year. However, in 2020-21, they fell to 69 across the 15 states, and then again to only 65 in 2021-22, a 34% drop-off from 2019-20.

Importantly, total school closures started returning to pre-pandemic levels in 2022-23, with 82 total school closures across the 15 states and continued rising in 2023-24 with 98 closures—almost the same number as 2019-2020. 

Chart 1: Public School Closures by School Year (15 States) 

At the state level, there were notable increases in school closures in the last two school years. For instance, Colorado jumped from 11 closures in 2022-23 to 26 closures in 2023-24, and South Dakota went from no school closures in 2022-23 to 11 closures in 2023-24, with both states exceeding their pre-pandemic school closure levels by large margins in 2023-24.

Meanwhile, states like New York, Nebraska, and Iowa each returned to pre-pandemic closure levels by 2023-24 after sharp declines during the pandemic. 

But California bucked these trends. Before the COVID-19 pandemic, the Golden State had 31 school closures in 2019-20, with closures then falling each year until 2023-24, when it had only seven closures—even fewer than Utah, which had eight.  

Chart 2: School Closures by State 

All told, total public school closures across the 15 states returned to pre-pandemic levels before federal relief funds expired in September 2025. However, given the magnitude of enrollment drops, many districts seem to be delaying the inevitable, just as experts feared.

This appears to be the case in California, where only a handful of public schools were closed in 2023-24 despite statewide enrollment plummeting by 5.1% between 2019-20 and 2022-23 (the latest federal enrollment data available). An analysis published by The 74 identified more than 1,400 schools in California where enrollment fell by at least 20% during the pandemic, including 125 schools in the Los Angeles Unified School District alone—that’s one in five of the district’s schools.  

For many school districts, the recent years with significant federal relief funding was a missed opportunity that could’ve been spent to help smooth the transition for affected students. Now they’ll have to right-size without this budget cushion. But there’s also evidence that districts in some states—such as Colorado—took advantage of the additional dollars, with closures rising in each of the last three school years. This head start should be welcome news, though the trend is likely to continue: between 2019-20 and 2022-23, Colorado’s public schools lost over 42,000 students—about 4.6% of total enrollment.

Public school closures are difficult for communities, but declining enrollment means school boards must make tough decisions. While our 15-state dataset indicates that school closures have risen in the past two years, this is only the start of a difficult road ahead.

There’s much that state policymakers can do to help support this needed transition, but a good first step is requiring state education agencies to publish the most recent data on closed schools. Better yet, they could also publish annual data on under-enrolled public schools, so they know whether school boards are dealing with the problem or just kicking the can down the road. Transparency will be paramount in the coming years.

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The SOQ is non-transparent and unfair

The SOQ controls 58% of all state and local funds in school division budgets—over $11.5 billion in 2022-2023—and delivers most dollars through opaque student-to-staff ratios and other prescriptive inputs. Virginia’s “resource-based” funding approach is used by a diminishing share of U.S. states, only about one-third at present, and it’s not hard to see why. The SOQ utilizes over 100 different ratios to determine what staff, from classroom teachers to librarians, school divisions need at minimum to educate their students. The formula also has separate calculations for other costs like transportation, school supplies, and utilities. Further compounding the complexity are dozens of state grants funded largely by lottery and incentive funds outside of the SOQ for purposes such as early reading intervention and boosting funding for at-risk students.

Navigating all these funding allocations and demonstrating adherence to their prescriptions, as divisions are required to do, is a lot to ask. It pulls local leaders away from tailoring their budgets to student needs and into a compliance mindset. Worse, putting the focus on staffing inputs also leads to unfair funding patterns. 

As Figure 1 shows, the lowest-poverty school divisions in Virginia receive the highest funding per student. And because most SOQ staffing ratios and input cost assumptions ignore student needs, funding patterns aren’t closely related to child household poverty rates for divisions outside of the lowest poverty quintile. Instead, the higher-funded divisions in Virginia are those in cities or counties with higher local wealth that can supplement SOQ funds with additional local dollars.

Figure 1: Virginia K-12 State and Local Funding Per Student, by Poverty Quintile (2022-2023 School Year)

Updating the SOQ won’t solve underlying problems

A core problem with the SOQ is its attempts to tailor funding to actual spending practices at school divisions. For example, the formula allocates support staff based on “prevailing practice” at school divisions statewide. Essentially, it recognizes certain types of support staff, looks at how many of those support staff divisions tend to employ for every 1,000 students, and then assumes that’s the number of support positions each division needs. As another example of this prevailing practice approach, the formula funds all SOQ-recognized staffing positions, instructional and non-instructional, based on a complicated statewide average salary calculation (the Linear Weighted Average) of what divisions are actually paying for those positions. As a result, each division is funded based on the same salary structure, which limits their ability to recruit and retain staff tailored to their needs.

However, as documented by a 2023 report published by Virginia’s Joint Legislative Audit & Review Commission (JLARC), the SOQ systematically fails to account for actual spending practices at school divisions. For example, JLARC highlights that the Linear Weighted Average salary calculation underweights higher-spending school divisions with higher-paid staff. Additionally, the formula has had a cap on the number of support staff that the SOQ will fund for more than a decade, which is now substantially lower than what divisions actually spend on those positions. These are just a few of the SOQ issues the report flags for Virginia policymakers to address. 

However, trying to capture and adequately fund all the spending practices at school divisions is the wrong-headed approach in the first place. First, it focuses on staffing and other resource inputs, which are one-size-fits-all. State policymakers aren’t well-situated to know how many librarians, gym teachers, or reading specialists a specific school division needs, and they shouldn’t be making budgetary tradeoffs for local leaders. Additionally, trying to bring the SOQ more in line with prevailing practices at school divisions fails to recognize resource scarcity. Virginia’s state education funding grew by 18.6% between the 2020-2021 and 2022-2023 (see Figure 2) school years, adding about $1.45 billion in state funds alone. This new funding outpaced inflation over that period.

Figure 2: Virginia K-12 Funding and Enrollment Growth, 2021-2023

And yet many stakeholders argue that those increases still aren’t enough. But that’s likely because the long-running SOQ fight over how to adequately fund every public school input diverts the attention of policymakers away from specific student populations and instead to flatly raising overall spending levels across divisions. More specifically, reforming the Linear Weighted Average salary calculation or lifting the support staff cap wouldn’t target new funds to higher-need students or lower-wealth school divisions. Instead, those changes would perpetuate the cycle where new funding further locks in division funding and spending patterns, unilaterally drives up prevailing practice costs, and then requires more funding—all while leaving existing unfair funding patterns unaddressed.  

To demonstrate this dynamic, Figures 3 and 4 illustrate how recent increases in SOQ funding from FY 2021 to FY 2023 were distributed between divisions of varying local wealth and poverty rates. 

Figure 3: Per-Student Distributions of State SOQ Funding Increases by Division Poverty Quintile, 2021-2023

Figure 4: Per-Student Distributions of State SOQ Funding Increases by Division Wealth Quintile, 2021-2023

As Figures 3 and 4 illustrate, recent increases in state SOQ funding between 2021 and 2023 have been distributed relatively flatly across school divisions, with little differentiation based on property wealth or poverty. That’s not the most efficient or fair way to use new state education funds. 

It’s also important to recognize that, despite major shortcomings in the SOQ, Virginia school divisions have continued hiring more support staff and raising teacher salaries (see Figure 5). While JLARC reports that the true prevailing support staff level is about 26 staff for every 1,000 students, divisions actually employ about 49 support staff for every 1,000 students due to positions that aren’t recognized by the SOQ. Nearly all divisions, and those with greater wealth to a larger extent, already leverage billions in local revenues outside of the SOQ to fund these additional expenses. 

Figure 5: Growth in Virginia K-12 Staff and Teacher Salaries, 2021-2023

The SOQ does few things well by trying to do far too much. Instead, state leaders should overhaul the existing formula by adopting weighted student funding (WSF), an approach used by the majority of U.S. states and spanning the political spectrum from California to Tennessee.  

Adopt weighted student funding

WSF is a simpler and more transparent approach to school finance. States grant each student a base dollar amount and attach additional weights to students with greater needs (e.g., ELL, special education, low-income). Instead of attaching resources to convoluted staffing ratios or other input assumptions, states using WSF place few restrictions on funds and give school districts more flexibility. Importantly, WSF states also often include weights for small and rural school districts that recognize their unique budget challenges. 

By attaching resources to individual students, WSF allows state policymakers to efficiently target new funds to different student populations rather than general staffing categories. It also requires local leaders to make their own strategic budgeting and staffing decisions. 

While the 2023 JLARC report estimates that converting the SOQ into a weighted formula could cost $1.2 billion, adopting WSF doesn’t need to be that expensive. Ultimately, the final cost depends on the range and magnitude of the weights adopted and the base funding level set, both of which can be based on various cost assumptions. But under WSF, those assumptions aren’t prescriptions, and dollars still have to be allocated in a student-centered manner. 

Conclusion

Because of the flawed structure of the SOQ, most recommendations to improve it don’t address its core problems. If policymakers don’t want to preserve the status quo in K-12 education, doubling down on funding divisions’ prevailing practices is the last thing they should pursue. Instead, Virginia should adopt a student-centered funding approach so that any new funds can be targeted more fairly and transparently based on student needs. This puts students, not staff, at the center of K-12 funding conversations and gives local leaders the flexibility to serve their unique student populations. 

The post Virginia’s K-12 funding system needs an overhaul, not tweaks appeared first on Reason Foundation.

Wrapping up the adequacy review

As the adequacy review draws to a close, both the Arkansas House and Senate Education Committees are deliberating and drafting final recommendations to update the state funding formula for the 2025-2027 biennium. Drafts were due on Oct. 16, and final reports are due to the Senate President Pro Tempore and Speaker of the House on Nov. 1, 2024. While these final reports have traditionally generated only small tweaks in the matrix—the state’s main funding formula—the findings will also impact larger formula reform proposals during the 2025 legislative session.

Key education finance reforms for Arkansas to pursue

Earlier installments of this series presented K-12 funding trends that emerged from the state’s annual statistical reports and summarized the key findings from Arkansas’s biennial adequacy reports. In short, these reviews highlighted that while Arkansas has a relatively streamlined funding system, property wealth still has a greater impact on revenue allocation than student needs. Additionally, the state’s adequacy reports highlight that the matrix—the state’s primary funding formula—has changed little since its adoption in 2003. It is simplistic in some of its assumptions around individual student needs.

To address these shortcomings, Arkansas policymakers should (1) collapse the state’s categorical grants into a weighted-student formula, (2) more accurately account for low-income and special education populations, and (3) preserve the existing student-centeredness and flexibility of the current formula. 

Adopt weighted student funding

Arkansas already has some core elements needed to build a weighted student formula, which is the practice of establishing a base per-student amount and adding weight multipliers that augment funding for higher-need students. Under the current system, each student already receives a base dollar amount. Additionally, the state has several categorical grants that allocate additional per-student amounts for students from low-income families (between $538 and $1,613 per qualifying student, depending on poverty concentration) and English learners ($366 per qualifying student). 

However, too many state grants divert funds away from the core goal of the state funding formula, which is to provide general education funds based on student counts and leave spending decisions largely to local leaders. State grants outside of the matrix comprise 15.3% of state and local education dollars, or $815.9 million. While some of them are based on student characteristics, many others are for items like teacher professional development, declining enrollment, and other purposes that often come with spending restrictions and reporting requirements. 

Arkansas policymakers can improve their funding system by collapsing most or all these separate grants into the state funding formula. Funding streams geared toward higher-need students should be converted into weights that augment per-student amounts for those student populations and that are mixed in with general formula funds. Fully adopting weighted student funding would simplify budgets for district and charter school leaders, increase flexibility and transparency, ease reporting requirements, and tie funding more directly to student counts and individual student needs. Additionally, re-formatting these separate grants as weights would ensure that any future increases in formula funding also translate to additional support for higher-need students. 

More accurately account for students from low-income families

Effective adoption of weighted student funding also requires better measurement and funding of students in specific higher-need categories. Enhanced Student Achievement Funding—Arkansas’s largest categorical grant for students in low-income households—has two main problems. 

First, it uses outdated and inaccurate measures of economic disadvantage because it is based on students who qualify for the federal free and reduced-price lunch (FRPL) program. Because of several federal programs that allow many school districts to receive federal school lunch subsidies without collecting any FRPL applications or to collect them less frequently, many school districts do not have up-to-date counts of FRPL students. While the state tries to work around this problem by using FRPL counts taken prior to districts entering these federal arrangements, the counts are now nearly a decade old in many districts. Beyond being outdated, using FRPL as a poverty measure can lead to inflated poverty counts because income thresholds for the program are above the federal poverty line. As a result of both outdated and inflated counts, more than half of the state’s districts have FRPL counts of over 70% of their student population. 

A second major problem with Arkansas’s Enhanced Student Achievement grant is that it sorts school districts into three tiers based on the percentage of their FRPL students. The lowest tier is for districts with less than 70% FRPL students and uses a multiplier of $538 per FRPL student. For districts between 70 and 90% FRPL, the multiplier is $1,076 per FRPL student. For districts over 90% FRPL, the multiplier is $1,613 per FRPL student. Problematically, these dollar multipliers are applied to all FRPL students in a district so that a district could stand to lose or gain substantial funding if they move from one tier to another. It also leads to districts with similar poverty rates receiving very different levels of support from the grant. 

The consequence of the flawed poverty measures and the steep funding cutoffs is poor resource targeting for students from low-income families (see Figure 1).

Figure 1: Enhanced Student Achievement Funding vs. U.S. Census Child Poverty Rates 

Figure 1 illustrates the strange funding patterns that result from these flawed mechanisms. Instead of FRPL counts, the x-axis displays estimated percentages of children in low-income households as measured by the U.S. Census Bureau. The clustering of districts in the $200-$400 per-student range and the $700-$1,000 per-student range is a result of the FRPL funding cliffs. However, also notice that those tiers often don’t track closely with the poverty rates as measured by the Census Bureau. For instance, Dermott and Wynne—despite having similar federal poverty rates of 29% and 30% respectively—have an Enhanced Student Achievement funding gap of $1,386 per student favoring Dermott (includes all students, not just low-income). 

To more fairly fund low-income students, the state should move away from FRPL counts and use a method like direct certification, where states individually verify family income status through their participation in federal means-tested programs such as the Supplemental Nutritional Assistance Program or other programs where proof of need is family-specific and up to date. This reform was adopted by Massachusetts in 2015, and it allowed the state to better target funds to low-income students. Enhanced Student Achievement funds should also be converted to a single formula weight so that the funding cliffs are eliminated and all low-income students are treated more fairly. 

More accurately account for special education students

Arkansas’s funding formula also has simplistic assumptions for special education (SPED) students. Instead of funding SPED students through a separate funding stream, the matrix assumes school districts need 2.9 special education teachers for every 500 students or $441 per student. This methodology is flawed because it doesn’t recognize differences in either the proportion or severity of disabilities across school systems. The average Arkansas district has 14.1% of students identified as SPED. However, those rates vary significantly across districts from 1% to 26%. Districts also have different profiles in types of disabilities—e.g., some have large shares of students with speech and language impairments, and others have high shares of students with autism. 

To be sure, the state does have reimbursement funding for high-cost SPED students for student expenses above $15,000, but those reimbursements aren’t a reliable way to differentiate by disability severity because they aren’t guaranteed, and districts have to submit detailed claims to get them. 

Instead of providing a flat per-student amount for special education, Arkansas should adopt an approach used by many other states. It should adopt funding weights based on the actual counts of SPED students and differentiate them based on the degree of additional services they need. Florida, for example, places SPED students into multiple tiers based on how frequently they receive additional services. Students in higher tiers receive additional per-student funding amounts. 

Preserve the student-centeredness and flexibility of the current formula

Arkansas’s matrix is a funding formula, not a spending formula. In other words, the state formula isn’t attempting to prescribe how districts should spend their formula dollars. While the matrix per-student amount is built on basic assumptions around the typical kinds of staff and inputs a school district needs, it would inhibit flexibility to force districts to spend funds in line with those assumptions. After all, state adequacy report data show that districts and charters frequently make expenditure decisions that depart from matrix assumptions, a good sign that local leaders exercise their ability to customize budgets. Adopting weighted student funding would build on this foundational principle, and any other reforms pursued by the legislature in the near term should maintain it. 

Keeping dollars unrestricted and tying them more closely to individual student needs through weighted funding also benefits school choice. If the weights are applied to Arkansas’s new Education Freedom Account program—which allows families to take their education dollars to an educational setting of their choice—it would incentivize private schools and other providers to cater services to higher-need students. Similarly, higher-need students seeking to transfer across district lines or enroll in charter schools would also be treated more favorably. 

Conclusion 

Arkansas is in a good position to build on recent K-12 reform successes and pursue comprehensive school finance reform in the coming year. The state has leaders who are championing the issue. Rep. Bruce Cozart (R-Hot Springs) plans to sponsor a bill in the coming session, similar to one he advocated last year, that implements weighted student funding. The policy recommendations and analysis featured in this series could refine that effort. 

Arkansas K-12 Education Finance Series

• A short history of school finance reform and look at 2024’s adequacy review process
• Adequacy review findings and recommendations so far
• How Arkansas schools are funded
• Teacher pay before and after the 2023 LEARNS Act
• How to improve the state’s school funding system 

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Teacher salary changes from the 2023 LEARNS Act

While Arkansas’s overall public school funding system has changed little in recent years, the Literacy, Empowerment, Accountability, Readiness, Networking, and Safety (LEARNS) Act of 2023 introduced many consequential changes in areas outside of the state funding formula. Notably, the legislation enacted a universal school choice program that was implemented in the 2023-2024 school year. The law increased the state’s minimum starting salary for teachers from $36,000 to $50,000 and required that all teachers receive at least a $2,000 raise. These raises were fully funded by $183 million in new state funds. 

While Arkansas is not alone in recently adopting across-the-board increases in teacher pay, the LEARNS Act raises are larger than what other states have pursued. Consequently, this prong of the LEARNS Act will have a substantial impact on the state’s school finance system moving forward. 

Teacher pay before LEARNS

Full-time teachers comprise half of all public school staff in Arkansas’s public education system. One of the adequacy review reports published by the Arkansas Bureau of Legislative Research (BLR) in August highlights trends in Arkansas teacher salaries up to the 2022-2023 school year—the year immediately prior to the enactment of LEARNS. According to the report, the average teacher salary in Arkansas in 2023 was $54,803, ranking it in the lower middle of the pack compared to other southern states and contiguous states. 

Prior to LEARNS, the BLR report finds that there were substantial disparities across Arkansas school districts and open enrollment charter schools in average teacher pay. Average salaries were as high as $68,421 (Fayetteville) and as low as $43,895 (Bradford). The report also examined how average teacher salaries vary across the state based on student and district characteristics. In 2023, teacher salaries were about $6,100 higher per teacher in urban districts than in rural districts and about $4,200 higher for district schools in comparison with charter schools. Districts with higher shares of students in free and reduced-price lunch populations (a proxy measure for family income status) had modestly lower average teacher salaries, but districts with larger shares of minority students had modestly higher average teacher salaries. 

For decades, Arkansas has set a statewide minimum salary schedule that all school districts must abide by. This schedule enforced minimum salaries for teachers that move up in steps based on their years of experience and level of educational attainment. These state minimums are exemplified in Figure 1:

Figure 1: State Mandated Minimum Salary for Teaches with Zero Years of Experience, School Years 2021 thru 2023

Notably, Figure 1 illustrates that the statewide minimums in 2023—even for teachers with master’s degrees and 15 years of experience—were less than the new statewide $50,000 minimum implemented by LEARNS in 2024. To be sure, school districts are allowed to supplement that minimum with their own salary schedules that pay teachers more. In 2023, 140 out of 234 Arkansas school districts offered salary schedules above the statewide minimum. 

A working paper published in June by researchers from the University of Arkansas provides additional information on where district salary schedules were situated prior to the LEARNS Act enactment. They report that 55% of school districts had all salary schedule steps below $50,000 in 2023 and that another 36% of districts had some of their salary schedule steps below $50,000. This fact will be important to remember when the discussion turns to the first year of the LEARNS raises. 

As a side note, Arkansas has a Teacher Salary Equalization Fund that directs additional funds to school districts with average teacher salaries “below the statewide target average annual salary.”  Importantly, the state’s “target” average annual salary, which is not the same thing as the average annual salary, is not met by nearly all school districts. Consequently, the fund does almost nothing to equalize salary disparities between districts because nearly all districts receive it as a flat distribution of $185 per student. 

In 2023, the last year before the enactment of LEARNS, more than half of Arkansas teachers earned less than $50,000. These differences stemmed mostly from differences in funding levels (as detailed in part two of this series), teacher experience and educational attainment, and district-level salary schedules.

Teacher pay after LEARNS

Researchers from the University of Arkansas found that, after the first year of the enactment of the LEARNS teacher raises, results are mixed, and many effects will require more time to assess. All Arkansas teachers received at least a $2,000 raise under the legislation, and the average teacher received a $6,000 salary increase. Districts at or near the state minimum salary schedule in 2023—often rural and high-poverty—received the largest benefits from the new law. This should put them on a more even playing field to find talent moving forward, although it’s too early to detect changes in recruitment and retention. By directing more funds to lower-salary, lower-funded districts, the law appears to have targeted more funds to higher-need students and likely improved funding fairness in the short run. 

However, early pushback to LEARNS raises revolves around two key issues: (1) the compression of most district salary schedules and (2) the uncertainty around how future funding increases will be allocated. 

In short, the LEARNS Act caused a radical compression of traditional salary schedules. The 55% of districts with salary schedules entirely below the $50,000 mark—even for experienced, highly educated teachers—began paying all teachers the same salary regardless of seniority. The additional 36% of districts with only some of their schedule steps below $50,000 compressed those steps in a similar fashion and then doled out $2,000 raises to all teachers above that benchmark. This has frustrated veteran teachers in Arkansas who had to work years prior to LEARNS to approach a $50,000 salary while their newly minted peers are now getting paid the same. 

To be sure, moving away from traditional salary schedules was the intent of the LEARNS Act. The new law established a single statewide minimum salary, throwing out the minimum schedule steps. But now, most school districts in Arkansas have an unclear path forward because the state only provided the ongoing funds to achieve the new minimum for everyone and provide one-time raises. District leaders, whether they wish to re-implement seniority-based pay or pursue a performance-based salary scheme, will have to adjust their budgets and staffing profiles over time to do so. Those adjustments are more difficult, though certainly possible, without clarity on what future state increases in funding will look like. 

Discussion

Proponents of increasing teacher pay have much to like in the LEARNS Act raises. The law guaranteed raises for all teachers, and higher-need, hard-to-staff districts got more assistance. Those skeptical of the rigid salary schedules (like this author) used by most school districts nationwide also laud the state for taking a big step away from seniority-based pay since there’s limited evidence that teacher experience or educational attainment is linked with improved student outcomes. 

However, a major concern about the LEARNS Act is that it is, by definition, not a student-centered funding reform. Funds were not doled out based on student enrollment counts or student needs. The concerns of district leaders over how future funds will be distributed are well placed because the LEARNS Act raises didn’t follow a reliable formula based on student needs or district property wealth. Even if the LEARNS salary increases directed more funding to lower-funded and higher-need districts, distributing benefits based on teachers instead of student counts and student needs (e.g., poverty, special education, etc.) is unsustainable if the goal is to preserve per-student funding fairness. For many reasons, districts with lower salary schedules don’t always have the highest-need student populations, and higher-poverty school districts don’t always have lower-paid teachers. 

State legislators should move forward with a renewed focus on improving the fairness and student-centeredness of Arkansas’s school finance system. The next and final installment of this series will examine policy reform options that allocate dollars more fairly on sustainable, student-centered terms and that maximize the portability of funds so that most dollars can follow students when they exercise school choice.

Arkansas K-12 Education Finance Series

• A short history of school finance reform and look at 2024’s adequacy review process
• Adequacy review findings and recommendations so far
• How Arkansas schools are funded
• Teacher pay before and after the 2023 LEARNS Act
• How to improve the state’s school funding system 

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California Proposition 2 allows the state to issue $10 billion in general obligation bonds for the construction, improvement, and repair of educational facilities statewide. The measure would allocate up to $8.5 billion for California’s K-12 school buildings and up to $1.5 billion for the state’s community colleges.  

Fiscal Impact 

According to the Senate Appropriations Committee analysis:

The bill’s authorization of $14 billion in general obligation bonds for school construction projects could result in General Fund costs in the tens of billions of dollars to repay, with annual costs in the high hundreds of millions of dollars each year. This estimate assumes an interest rate of 3.75 to 5.0 percent and a 30-year maturity.

Proponents’ Arguments 

California school districts have historically relied on state school bond measures like Prop. 2 to fund important capital projects and building repairs. However, the last successful state school bond initiative was in 2016. That money has since dried up, and a new state bond initiative is overdue. School districts need more funds to keep school buildings in adequate and safe condition, and they are relying on this initiative because they have already approved about $3.5 billion in facilities projects.  

Without the successful adoption of Prop. 2 in November, the already-approved capital projects and others will need to be delayed or covered exclusively by school districts themselves. In that case, district residents would have to pay higher taxes for local bonds and school districts would potentially need to divert resources away from classrooms. Research also shows that students attending schools that are in good condition perform better on standardized tests and have better attendance rates. By passing Prop. 2, voters will ensure that schools have fair access to adequate resources to update aging school buildings and better serve their students.  

Opponents’ Arguments 

Local voters in California can and should shoulder the cost of capital construction and renovation in their school districts. This increases local accountability for school district spending and prevents the state from taking on debt and interest costs.   

Also, Prop. 2 and past measures like it over-subsidize wealthy school districts that are more likely to pass local bonds and that are already spending more on K-12 schools than their peers. The public interest law firm Public Advocates is suing the state over the ballot language, claiming that the state should do much more to subsidize capital costs in lower-wealth districts and do much less for higher-wealth districts that can already afford it.  

This initiative is just like past school bond initiatives—it concentrates benefits for some wealthy school districts, disperses costs across the state, and racks up state debt.  

Discussion 

Proponents of Prop. 2 have a difficult case to make. Nearly three-quarters of California’s school districts have declining enrollment, and over 1,400 schools have lost at least 20% of their students since the pandemic. Also, federal staffing and financial data expose some troubling long-run trends from 2002 to 2020. Despite no aggregate change in enrollment over that period, total staff in California public schools increased by 6.7%, and non-teaching staff increased by 26.3%. Moreover, inflation-adjusted revenues increased by 35.8%, and inflation-adjusted debt more than tripled.  

To be sure, it’s likely true that California school buildings need repairs. But in an environment where many districts have already received large infusions of cash and need to make tough decisions regarding school closures, the state shouldn’t be subsidizing capital costs before districts right-size their operations.  

It’s also true that the state funding structure in Prop. 2 will largely go to the wealthiest districts, which get between $4,000 and $5,000 per student more in state facilities funding according to a 2023 report from the University of California Berkeley. That’s because property-rich districts are more likely to pass bonds and take on bigger projects.  

Even worse, the sliding-scale formula the state uses to determine what percentage of approved projects it will support makes little distinction between wealthy districts like Beverly Hills or Laguna Beach and property-poor districts like Lindsay or Parlier. Under Prop. 2, the state would still cover 60% of approved project costs for renovations and 50% for new construction in the wealthiest districts, and only five percentage points more for the poorest districts.  

Voters are already accustomed to covering the bulk of local school bond measures in California, which are typically approved at a rate of 73%. Indeed, school districts in California already have $220 billion in debt and liabilities, which is over $40,000 per student. And most of it is bond debt. Instead of the state taking on debt to make it easier for local school districts to also take on debt, the state needs to adopt stricter standards for when capital projects—and school closures—are necessary.  

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Highlights from 2024 adequacy reports so far

As detailed in earlier series installments, Arkansas is conducting a biennial adequacy review. A 2007 state Supreme Court ruling mandates that the legislature must regularly review the adequacy of the state’s K-12 funding system to remain compliant with Article 14 of the state constitution “to maintain a general, suitable and efficient system of free public schools.” 

The Arkansas Bureau of Legislative Research (BLR) takes the lead in analyzing the state funding system. So far, they have published their findings in several rounds of reports and presentations, with the most recent tranche released in early June.

This commentary will highlight some of the key findings thus far. The first and second installments of this series already looked at some of the earliest publications about the review process. This entry will not cover the BLR report on student achievement trends, since the primary focus is on funding. The latest reports on teacher salaries will be examined separately in the next installment.

1. Funding system overview

Before examining allocation patterns for different funding streams, the BLR first details the assumptions underlying the Arkansas K-12 funding formula. The state funding formula, which includes the matrix foundation formula and other supplemental state grants, has been developed and updated over the years using recommended best practices from school finance consultants Odden and Picus.

The bulk of the state funding system goes into the matrix, which is ultimately the flat foundation dollar amount that all students receive. While informed by certain staffing assumptions, the matrix is a funding formula and not a spending formula. In other words, districts aren’t required to staff their schools or form budgets according to matrix inputs. Nonetheless, the BLR report notes from a recent survey of district superintendents that “71% said the matrix moderately or extensively guided staffing decisions.” Table 1 shows the breakdown of these cost assumptions in per-student terms.

Table 1: 2023 matrix input cost assumptions

Additionally, the report summarizes the state’s four major categorical grants and several other small supplemental funding streams.

The matrix has changed little since its initial adoption in 2003. Between 2005 and 2023, the assumed grade distributions, and staff ratios haven’t changed except for slight decreases in library/media specialist ratios, slight increases in PAM teacher ratios, and the addition of a secretary position for every 500 students. While the report doesn’t flag any overall issues with this structure, it does point out some flaws in how the Odden and Picus recommendations—which estimated costs for a prototypical school of 500 students—were adopted by the legislature to apply to a prototypical school district of 500 students. The BLR analysis also argues that matrix ratios for instructional staff might not provide sufficient funds for school districts to meet state class-size accreditation standards, especially for small districts and small schools.

2. Resource allocations

In keeping with the three major cost divisions in the per-student matrix amount, BLR divides its analysis of funding allocation and spending patterns into three separate reports: school-level staffing, school-level resources, and district-level resources. Each report compares matrix assumptions with actual school system spending in these areas. Importantly, many categories see higher spending than the matrix formula assumes because the matrix isn’t the only source of education funding. Highlights from each report are summarized below.

School-level staffing

Because school-level staff comprise the majority of matrix funds—$5,230 of the $7,413 amount—this report is the longest of the three. It examines how school system spending on all categories of school personnel compares with matrix school-level staffing assumptions. It also examines how spending levels on these categories vary by region, minority student population, and poverty (as measured by students participating in the federal free or reduced-price lunch program).

The report finds that current matrix assumptions regarding school-level staff—though simplistic in some areas—align with initial recommendations from 2003. The report notes that higher-poverty school systems tend to spend more per student on instruction, corroborating the allocation patterns noted in part two of this series. It also notes that districts in cities, with larger minority populations, and with higher poverty rates each generally spend more per student on special education.

Finally, the BLR report recommends consideration of grade-level weights for foundation funding, adopting special-education funding that more closely aligns with variation in student and district-level needs, and decreasing reliance on paraprofessionals for special education.

School-level resources

This BLR report examines school-level funds that generally aren’t full-time equivalent staff. The matrix assumes about $658 of the $7,413 per-student amount for these categories. For some of them—instructional materials, technology, substitutes—school systems tend to spend about twice as much as the formula assumes. On others—supervisory aides, extra duty funds—less is spent than the formula assumes.

In general, the report notes, best practices research on these cost categories is limited. It makes the case for adequate technology, quality materials so that teachers don’t need to prepare their own curriculum, and the importance of competitive pay for hall monitors and other employees who are supervising students.

District-level resources

The report examines matrix funds that aren’t school-specific, which includes operations and maintenance (O&M), transportation, and central office spending. These items comprised $1,513 of the $7,413 per-student amount in the 2022-2023 school year. On all three categories, school systems spent about twice what the matrix formula assumed. Charter schools spent about twice as much on central offices than school districts.

The BLR report also covers recent recommendations from Odden and Picus and national benchmarks for each category of district-level resources. It highlights that about 2,000 more orientation and mobility staff would be needed in the state to meet the official recommendations of the Commission of Public School Academic Facilities and Transportation. The BLR analysis also notes that Odden and Picus recommended in 2014 that the state use a transportation formula based on actual need, not a flat per-student amount as the matrix currently assumes.

3. Facilities funding

BLR reports that, between 2005 and 2023, the state has provided an average of $90 million annually, or about $1.7 billion total, to support major school construction projects. Over that period, the state covered about half of qualifying project costs. The state’s share increased after adopting a modified wealth index in 2021 which accounts for average local income. Still, many school facility projects don’t qualify for state assistance, meaning most facilities’ renovation, maintenance, and construction costs are covered locally. For reference, Arkansas school systems spent over $1.1 billion on capital and debt service costs in the 2022-2023 school year alone.

The report also highlights that, since the state facilities program began in 2005, payments have followed little to no discernable pattern based on district poverty rates or minority populations. Districts receiving the highest state facility payments usually have higher local property tax rates to service debt.

4. Funds outside of the matrix

The major state and local revenues outside of the foundation matrix were covered in part two of this blog series. However, this report also analyzed each funding stream separately, and some additional insights are noteworthy.  

The Enhanced Student Achievement (ESA) grant, Arkansas’s revenue supplement for students from low-income families and the state’s largest categorical grant, totals more than $230 million. The report notes that the ESA grant has additional dollars for districts with concentrated poverty, creating funding cliffs between districts with modestly different poverty rates. It discusses past recommendations by state school finance consultants that Arkansas consider adopting a single poverty weight and potentially adding other poverty measures beyond qualification for the National School Lunch (NSL) program. 

Both of these problems–the funding cliffs and using NSL program participation to measure poverty–were examined in a past Reason Foundation policy study. That study noted that sharp changes in state ESA funding resulted in districts with very similar poverty rates receiving substantially different allocations. For example, Lamar School District, despite having only a two percentage point smaller population of students in the federal NSL program, received half as much funding per student from the ESA grant as Dardanelle Public Schools. Additionally, the continued use of NSL participation to measure poverty in Arkansas is problematic because changes in federal policy over the last 15 years have caused more school districts to artificially label students as qualifying for NSL, even if they aren’t low-income.

Additionally, the BLR report notes that expenditures on items not considered in the matrix were considerable, totaling $2.1 billion in 2022-2023. About half of these expenditures come largely from local revenues to pay for facilities construction and bonds. The other half were expenditures on items including instructional aides, food services, and athletics.  

Overall, the BLR analyses are thorough and provide excellent insight into the Arkansas K-12 funding system. The reports highlight that the matrix is simplistic in some places, especially as it pertains to differences in grade-level needs, special education populations, and transportation. The next installment of this series will examine the teacher salaries report and how the Literacy, Empowerment, Accountability, Readiness, Networking, and Safety (LEARNS) Act has impacted teacher pay statewide.  

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Public school enrollment is falling fast, and hold harmless policies that provide funding protections for school districts are becoming increasingly costly. These policies can broadly be classified in two ways, with each type serving different aims.

Declining enrollment protections allow school districts to use previous, rather than current, student counts for funding purposes. This promotes stability by giving school districts time to adjust to revenue fluctuations caused by enrollment losses. Similarly, funding guarantees promise school districts a minimum level of state aid and are often used as a political bargaining chip to help legislators pass school finance reforms. Across states, many hold harmless policies were in place even before the COVID-19 pandemic.

But such hold harmless policies fund “ghost students” or set arbitrary funding floors, which have opportunity costs. For instance, these dollars could be otherwise devoted to raising per-student funding for all school districts or to directing greater funds to higher-need students.

Hold harmless policies also reduce the incentive for school districts to right-size operations or innovate in response to budget constraints. Finally, they run the risk of becoming entrenched in school finance systems over time, outliving their intended purpose.

In many cases, it’s unclear exactly how much these provisions cost and which districts benefit most from them. As a result, policymakers can’t easily assess their effectiveness or whether these resources could be put to better use for students. With widespread public school enrollment losses in the wake of the COVID-19 pandemic, the financial costs of some hold harmless policies have increased exponentially. This trend is likely to continue, with the National Center for Education Statistics projecting that nationwide public school enrollment will fall by 5.1% between 2021 and 2031 as many states continue to lose students. This, combined with the rise of school choice policies such as Education Savings Accounts and public school open enrollment, also raises the stakes for policies that effectively fund students twice.

This study shines light on the issue by assessing declining enrollment provisions across three states: California, Missouri, and Oklahoma. It also analyzes separate funding protections in California and Missouri. Because it is sometimes claimed hold harmless policies benefit low-income students, particular attention is given to trends related to school district poverty levels.

California

• In 2022-23, 789 of 931 school districts—or 84.7%—received declining enrollment funding. As a result, there were an estimated 400,974 ghost students statewide, costing the state $4.06 billion or 6.2% of total formula aid. Charter schools were not eligible for this funding.
• Los Angeles Unified School District had an estimated 50,417 ghost students, costing the state $507.74 million or $1,459 per student.
• On average, the state’s highest-poverty school districts weren’t the largest beneficiaries of declining enrollment funding per student.
• In 2022-23, 148 school districts received hold harmless funding via California’s Minimum State Aid (MSA) policy, which guarantees funding based on 2012-13 levels. The majority of these school districts (111) were property-wealthy districts that didn’t otherwise qualify for state formula aid. MSA funding for school districts totaled $186.1 million.

Missouri

• In 2021-22, 256 of 518 school districts—or 49.4%—received declining enrollment funding. As a result, there were an estimated 44,997 ghost students statewide, costing the state $197.04 million or 4.7% of total formula aid. Charter schools were not eligible for this funding.
• On average, the state’s highest-poverty school districts weren’t the largest beneficiaries of declining enrollment funding per student.
• In 2021-22, 200 school districts received hold harmless funding via Missouri’s large school hold harmless (LSHH) and small schools hold harmless (SSHH) provisions, which guarantee funding based on 2005-06 and 2004-05 or 2005-06 levels, respectively. Combined, these policies cost the state about $134 million and sent state aid to 17 property-wealthy school districts that otherwise wouldn’t qualify for state formula aid.
• Clayton and Brentwood—two of the highest-funded school districts in the state— received $546 per student and $580 per student in LSHH funding, respectively.

Oklahoma

• In 2022-23, 155 of 541 school districts in Oklahoma—or 28.7%—received declining enrollment funding. As a result, there were an estimated 3,777 ghost students statewide, costing the state $14.03 million or 0.6% of total formula aid.
• On average, the state’s highest-poverty school districts weren’t the largest beneficiaries of declining enrollment funding per student.
• The per-student amounts allocated through this provision were substantially lower than in California and Missouri.

3 Key Takeaways

Putting it all together, this study has three key takeaways for state policymakers.

1. Declining enrollment provisions can have substantial opportunity costs, but context matters.

Hold harmless policies divert dollars away from funding school districts based on current enrollment counts and students’ needs. California and Missouri illustrate how declining enrollment provisions can consume a substantial portion of state education budgets during periods of widespread enrollment losses. In comparison, Oklahoma allocated only a modest portion of its formula aid through its declining enrollment policy.

As declining enrollment provisions become costlier, policymakers can look to states such as Texas, Arizona, and Indiana, which all fund school districts solely based on current-year enrollment counts. Alternatively, lawmakers can make their declining enrollment provisions less generous, as Oklahoma did in 2021, by going from a two-year look back to a one-year look back.

2. Funding guarantees can allocate dollars arbitrarily and undermine state funding formulas.

Hold harmless policies can long outlive their intended purpose and arbitrarily benefit subsets of school districts at the expense of overall funding fairness. This is especially true of funding protections, which are often aimed at ensuring state aid for wealthy school districts.

For example, California’s Minimum State Aid (MSA) guarantee was designed to shield some districts from funding losses related to a funding formula overhaul in 2012-2013. This policy directed $126.6 million in state funds to 111 property-wealthy school districts that wouldn’t otherwise receive any state funding.

Although funding protections are entrenched in statute, lawmakers sign off on them each year they persist. Eliminating outdated hold harmless policies can be politically challenging, but is a worthwhile policy goal.

3. The relationship between declining enrollment funding and school district poverty rates is tenuous.

Across the three states examined, there isn’t a clear relationship between declining enrollment funding and school district poverty levels. For instance, California’s highest-poverty school districts (Quartile 4) received less declining enrollment funding on average than its lower-poverty school districts (Quartiles 2 and 3).

If targeting additional dollars to low-income students is a policy goal, there are more effective ways to accomplish this. For instance, all states examined in this study have funding weights in their formulas that provide additional resources for economically disadvantaged students. This is a more precise and transparent approach to divvying up education dollars.

Many states employ hold harmless policies similar to those examined in California, Missouri, and Oklahoma. Policymakers in each state should evaluate the cost of these policies, their distribution patterns, and whether they’ve outgrown their original purpose. In a context where states are still rebounding from COVID-19 enrollment shocks and many are projected to have stagnating or declining K-12 populations over the next decade, it becomes increasingly expensive to shield districts from the resulting financial effects. Ultimately, legislators should ensure that K-12 dollars are tied to their strategic goals for
public education.

Full Study—Billions: The Cost of State Hold Harmless Policies in K-12 Education

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How Arkansas K-12 public schools are funded

Arkansas currently has 475,207 public school students enrolled in 237 school districts and 23 open enrollment charter schools. Over the decade before the pandemic, the state saw a modest 2% growth in public school enrollment. While enrollment dipped early in the pandemic below 470,000 students, it has since partially rebounded to where it was in the fall of 2019 at nearly 480,000 students.

As outlined in the first installment of this series, Arkansas’s current school finance system is largely a product of the Lake View litigation spanning from the 1990s to the mid-2000s and has changed little since the Arkansas Supreme Court resolved the case in 2007. While education funding in every state is complex, Arkansas enjoys a relatively streamlined and straightforward funding system.

Before explaining the basic mechanics of Arkansas’s K-12 finance system, it’s first helpful to see a summary of the state’s major revenue buckets for public schools. All revenue figures are from the 2022-2023 school year, the most recent year for which complete data is available. For clarity, public school districts and open enrollment charter schools will be displayed separately.

Table 1: School district revenues (state and local)

As Table 1 shows, matrix funding comprises 64% of all state and local funding in Arkansas school districts, additional local property taxation and local receipts comprise the next 20.7%, and the remaining revenue is comprised of state-restricted and unrestricted grants.

Table 2: Charter school revenues (state and local)

Table 2 shows the major revenue buckets for Arkansas’s 23 open enrollment charter schools. These figures do not include district conversion charter schools, which are included in Table 1.

The matrix

Recall that the matrix formula is based on staffing and cost assumptions and evaluated by state experts and the legislature in Arkansas’s biennial adequacy reviews. It establishes a uniform per-student amount that each district will receive. In the 2022-2023 school year that amount was $7,413 per student. The matrix is also a foundation funding formula, meaning it funds school districts with a mixture of state and local funds and equalizes differences in local property wealth between districts. Most states employ some form of foundation formula for school funding.

To contribute to the matrix in Arkansas, all school districts must levy a uniform tax rate (URT) of 25 mills. A mill is equal to $1 in local tax revenue raised for every $1,000 of assessed property wealth and that assessment includes real, personal, and utility property. Due to differences in property valuations across districts, the 25-mill URT covers varying shares of each district’s total matrix funding.

Once it’s determined how much each school district is estimated to raise from the URT, the state supplements each district’s URT with state equalization aid to guarantee that each district receives $7,413 per student.

State grants

Because the matrix foundation formula does not account for most categories of higher-need students, Arkansas has four major state categorical grants targeted largely to students in these groups (all totals include both school districts and charter schools):

1. Alternative learning environment (ALE)

This grant is intended for students who spend time outside of standard classrooms in alternative learning environments, such as those with special needs or other academic or behavioral challenges. Grant amounts are based on the amount of time students spend in alternative classrooms with a multiplier amount of $4,890 per student. Total ALE funding in 2022-2023 was $31.2 million.

2. English language learners (ELL)

This grant is intended for students who aren’t proficient in English. It employs a flat multiplier of $366 per identified ELL student and totaled $14.7 million in 2022-2023.

3. Professional development (PD)

This grant funds district-level professional development programs for school staff. It employs a flat multiplier of $37.50 per student and totaled $17.7 million in 2022-2023.

4. Enhanced student achievement (ESA)

This grant directs additional funds for low-income students who qualify for free or reduced-price lunch (FRPL). The grant sorts districts into three tiers depending on the overall proportion of their students who qualify for FRPL and uses different aid multipliers in each tier, which are multiplied by a district’s total enrollment. The lowest tier is for districts with less than 70% FRPL students and uses a multiplier of $538 per student. For districts between 70 and 90% FRPL, the multiplier is $1,076 per student. For districts over 90% FRPL, the multiplier is $1,613 per student. ESA funding totaled $240.8 million in 2022-2023.

In addition to the four main categorical grants, Arkansas has restricted grants for gifted and talented student programs, career education, and for other purposes. Beyond the state’s restricted grants, Arkansas has several small unrestricted grants for districts seeing substantial enrollment increases or decreases, for bonded debt assistance, for isolated school districts, and for other purposes.

Other local revenues

While every school district in Arkansas imposes the uniform tax for the state funding formula, most districts raise additional funds from voter-approved local mills. Additional mills often service debt for bonds that fund facility improvements and construction. Debt service mills are imposed by 231 of Arkansas’s 234 regular school districts and range from as little as 1.3 mills to 29.8 mills. Arkansas school districts also sometimes levy additional property taxes for operations. In the 2022-2023 school year, 61 regular districts levied additional mills for maintenance and operations, ranging between 0.12 mills to 10 mills. Arkansas school districts raise about $771 million from these other local revenue sources.

Allocation trends

When excluding federal funds, Arkansas has a slightly progressive funding system—meaning that students in low-income households receive modestly more funding (1% more) on average than students in non-low-income households. According to the Urban Institute, Arkansas is above the national average in funding progressivity. The primary drivers of this allocation trend are the additional funding allocated to low-income students through the state’s enhanced student achievement grants and the fact that low-income students aren’t overly concentrated in districts with low property wealth. Figure 1 summarizes this trend for higher-poverty and lower-poverty school districts. Charter schools are excluded since they do not have residential boundaries and reliable federal poverty data. Poverty figures are drawn from the latest Small Area Income and Poverty Estimates for school districts published by the U.S. Census Bureau.

Figure 1: Arkansas Per Student Funding, Higher Poverty and Lower Poverty Districts

As Figure 1 illustrates, school districts with 25% or more students in poor households receive $729—or 5.7%—more per student than districts with 15% or less students in poverty. For reference, the average childhood poverty rate in Arkansas is 18.8%. Most of the additional funding for higher-poverty districts comes from state-restricted funding and the largest grant in that category is enhanced student achievement funding, which is intended to provide higher funding for low-income students and higher concentrations of low-income students.

While the prevalence of students from low-income households has a modest impact on district funding distributions, variations in district property wealth have a more pronounced effect on allocation patterns.

Figure 2: Arkansas Per-Student Funding, Higher Property Wealth and Lower Property Wealth Districts

Figure 2 demonstrates that school districts below the state average district property assessment per student—or less property wealth per student—receive $1,320 less (10.3% less) per student than districts above the mean property assessment. Notice that lower-wealth districts receive more from state foundation aid and less from local URT funds because the foundation formula is designed to equalize differences in property wealth across districts.

Most of the disparity between the two district groups in Figure 2 is explained by additional non-URT local funds that higher-wealth districts raise through voter-approved property tax overrides to pay for bonds and supplement district operations. While some of the non-URT local funding disparity is offset by the fact that lower-wealth districts receive more per student from state-restricted funding, voter-approved local tax overrides still determine much of the funding disparities between districts in Arkansas.

Summary observations

1. Arkansas has a relatively streamlined and flexible funding system.

A substantial share—about two-thirds—of all state and local K-12 funding is allocated through the state foundation formula. Additionally, only 10.6% of funds come from state-restricted grants, and those restricted grants still provide district officials reasonable flexibility with how the funds may be spent. The state could further streamline the funding system by collapsing restricted grants into the formula and treat those funds instead as funding weights, which would further equalize funding between districts based on local taxing capacity and provide some more flexibility. Future additions in this series will explore how Arkansas can make further improvements.

2. Property wealth has a greater impact on revenue allocation patterns than student needs.

While Arkansas does provide additional funding for higher-need students through some of the state’s restricted grants, 20.7% of K-12 funding comes from local revenue sources outside of the foundation formula. Problematically, these local funds exert a greater impact on allocation patterns than state grants for special education, low-income, an English-learner students.

The next installment of this series will examine the state adequacy report findings thus far, focusing on the funding patterns highlighted by the revenue allocation reports, the best practices sections of those reports, and the impact of the LEARNS Act legislation from 2023.

The post Arkansas K-12 education finance series: How Arkansas schools are funded appeared first on Reason Foundation.

Louisiana policymakers, like those in other states that have adopted universal school choice programs, will be keenly interested in how this proposal might affect the state budget, school districts, and taxpayers. While nobody can predict the exact level of demand a new school choice program will have, it’s possible to estimate the fiscal effects of school choice programs under various scenarios. 

Executive Summary

• The LA GATOR Scholarship proposal would greatly expand educational options for Louisiana families, especially those who are low- and middle-income.
• The proposal reserves higher annual individual scholarship amounts for special education students ($15,099 per school year) and families below 250% of the federal poverty line ($7,550 a year). Individual students in households above 250% of the federal poverty line receive an estimated scholarship of $5,190 annually.
• At most, proposed individual scholarship amounts are equal to about half of the total per-pupil spending in Louisiana public schools.
• Under scenarios where student participation rates in the ESA are relatively low, the estimated short-run net fiscal costs of the proposal would be equal to less than 2% of total public school revenues based on estimates generated by the K-12 School Choice Calculator. 
• If student participation rates are higher, the estimated short-run net fiscal costs of the proposal would be equal to less than 5% of total public school revenues. 
• Many of the families already choosing alternatives to public schools are low- and middle-income. U.S. Census Household Pulse Survey data indicate that about half of Louisiana children already in private schools are in households making less than $75,000 per year. 

Louisiana House Bill 745’s Design

Allowable Uses and Standardized Testing

House Bill 745 (HB 745) would establish an education savings account that families can use so long as they aren’t enrolled full-time in a public school. Account funds can be spent on qualifying education expenses, including private school tuition, tutoring services, educational supplies, contracted public school services, and transportation. The bill provides for the administration of standardized tests to participating students, which can include state tests required of public schools or a nationally norm-referenced test approved by the state school board. Additionally, the LA GATOR Scholarship would replace the state’s existing Student Scholarships for Educational Excellence private school voucher program. 

Student Eligibility 

The LA GATOR Scholarship Program would be implemented in the following order:

• Year 1 (2025-2026): In the first year of the program’s enactment, the LA GATOR Scholarship Program would only be available to students previously enrolled in the Educational Excellence voucher program, students entering kindergarten, students previously enrolled in public schools, or students in households at or below 250% of the federal poverty line ($78,000 per year for a family of four). At this phase, at least 85% of Louisiana students would be eligible because most are enrolled in public schools. 
• Year 2 (2026-2027): In year two, all eligibility criteria would remain unchanged, except the student household income threshold would rise to 400% of the federal poverty line ($124,800 per year for a family of four). 
• Year 3 (2027-2028): In year three, all Louisiana students will be eligible for the ESA. 

Scholarship Amounts

The bill’s language indicates that LA GATOR Scholarship amounts would be based on the average state and local funding in the minimum foundation program (MFP), the state’s main public school funding formula. This school year, the average state and local per-student MFP allocation was $9,437 per student. Importantly, the formula is not the only source of revenue for Louisiana public schools, because they also receive non-MFP funding from local property taxes, other state grants, and federal grants. 

ESA amounts under the proposed bill vary based on student household income and special education status:

• Special education students: Students with an individualized education plan or a similar plan developed by a private school receive scholarship amounts equal to 160% of the average state and local MFP amount per student, or $15,099 annually. 
• Students at or below 250% of the federal poverty line: Roughly two-thirds of Louisiana students meet this criterion, and they would receive scholarships equal to 80% of the MFP amount, or $7,550 annually. 
• All other students: All students in households above 250% of the federal poverty line receive scholarships equal to 55% of the MFP amount, or $5,190 annually. 

Estimating the Potential Fiscal Effects of HB 745

Note: For more details on how to estimate the fiscal effects of school choice, see the methodology section of the K-12 School Choice Calculator co-published by EdChoice and Reason Foundation. 

Estimating the fiscal effects of HB 745 requires a basic accounting for scholarship amounts, eligible student populations, and fixed and variable costs in Louisiana public schools. More importantly, the key variables determining the fiscal effects of the proposal will be the participation rates among students who would otherwise have gone to a Louisiana public school (switchers), and participation rates among students who would have otherwise not enrolled in a public school (non-switchers). Switchers generally yield fiscal savings to taxpayers because they are opting out of a higher-cost public school that they otherwise would have attended without the program. By contrast, non-switchers are a pure cost to taxpayers, because, under the program, taxpayers are now paying for an education that the non-switcher student’s household would have otherwise purchased. 

In states with no previous private school choice programs, measuring switcher and non-switcher rates once a program is implemented is more straightforward. Students who leave public schools to use the school choice program are switchers, while students who were already receiving a private education are non-switchers. But for states that already have established choice programs, as Louisiana does, estimating switcher rates is trickier because students have already left public schools thanks to a choice program. 

Louisiana has had three limited-eligibility private school choice programs for more than a decade. Combined, these three programs already serve about 8,400 students who are in low- and middle-income households, in lower-performing school districts, or who have disabilities. HB 745 would eliminate and replace the largest of the three existing programs, but it’s unclear how enrollment or participation in the other two would be affected by the LA GATOR Scholarship.

Another important variable affecting the popularity of a school choice program is how regulations can deter private schools from participating. Louisiana’s existing programs have stricter testing requirements than HB 745, meaning that participation rates for the LA GATOR Scholarship could be higher than those of Louisiana’s existing choice initiatives.

Cost Scenarios

With these factors in mind, the K-12 School Choice Calculator, co-published by EdChoice and Reason Foundation, provides general estimates of what House Bill 745 could cost taxpayers under various student participation scenarios. For simplicity, the calculator will only be used to examine fiscal effects once the program is fully implemented in year three. Because the scholarship amounts are broken into three tiers, each tier will be treated separately and then combined to arrive at a net fiscal effect estimate. Short-run fiscal effects estimates treat some public school expenditures as fixed since some costs can’t be immediately eliminated when students leave public schools (e.g. central office, capital bonds). Long-run fiscal effects estimates treat all public school costs as variable since all costs can be adjusted over time when enrollments change in public schools. 

Note that all cost estimates are annual figures and are likely overstated because current ESA amounts are being compared to the latest federal public school cost data, which is several years behind. Note also that non-public take-up rates for the special education components are 0% because the calculator assumes all qualifying students will have an individualized education plan, meaning they have to have been previously enrolled in a public school. 

Scenario 1 estimates the fiscal impact of House Bill 745 in the case that take-up rates from both switchers (public) and non-switchers (non-public) are low, set at 1% and 20% respectively. Real cost figures would be closer to this estimate if many Louisiana private schools opt not to accept the ESA funds and if many families are unaware or uninterested in the program. About 35,000 students would use the LA GATOR Scholarship under these assumptions, yielding a short-run net fiscal cost of $166.6 million (equal to 1.7% of public school revenue) to taxpayers and a long-run net fiscal cost of $102.2 million (1.2% of all public school revenue). 

Scenario 2 estimates the fiscal impact of the proposal if 50% of students already not enrolled in public schools accept the funds and the public school take-up rate remains unchanged from Scenario 1. Real cost figures would be closer to this estimate if more private schools choose to participate in the LA GATOR Scholarship program and more families already enrolled in private schools are aware of and interested in the ESA. About 76,000 students would participate in the program under these assumptions, yielding a short-run net fiscal cost of $434.9 million (equal to 4.5% of public school revenue) and a long-run net fiscal cost of $388.1 million (4% of public school revenue). 

Scenario 3 estimates the net fiscal impact if 3% of public school students and 50% of non-public school students participate in the ESA. Real costs of the program would be closer to this estimate if awareness of and interest in the program is higher among all families and many private schools choose to participate. Over 90,000 students would participate under these assumptions, yielding a short-run net fiscal cost of $412.2 million (4.3% of public school revenue) to taxpayers and a long-run net fiscal cost of $288.7 million (3% of public school revenue). 

Interpreting the Results

While not exhaustive, the three scenarios estimate fiscal effects policymakers could expect from House Bill 745. As the cases illustrate, switcher rates and take-up rates have a substantial impact on the fiscal outlook—and these are the hardest variables to forecast. 

Additionally, fiscal effect estimates are different from estimating how the LA GATOR Scholarship would impact Louisiana’s state budget. For the state budget, the short-run fiscal effect estimates are more informative since the variable cost assumptions used in the school choice calculator are roughly equivalent to minimum foundation program funding, funds the state can recuperate when students leave public schools for the ESA. 

These results don’t account for other potential taxpayer cost offsets, such as decreases in the number of students using the state’s other private school choice programs or the private school tuition tax deduction. Scenario cost estimates also appear modest when compared with the magnitude of recent increases in public education funding and Louisiana’s K-12 public education budget, which totals $9.67 billion according to the latest federal data. 

LA GATOR Scholarship Fiscal Effects Estimates Compared to Public School Revenues

Finally, large shares of families in Louisiana already have their children enrolled in private schools or homeschooling when compared to other states, indicating that many households are paying taxes into a public education system from which they don’t directly benefit. Many of the families already not enrolling their children in public schools are low- and middle-income as well. New data from the U.S. Census Household Pulse survey (which should be interpreted cautiously) estimates that 46% of private school students in Louisiana are in households making less than $75,000 a year. 

While Louisiana legislators are considering other more limited education choice proposals this session, House Bill 745 would enable all families to choose and customize their child’s education.

*Editor’s Note: The scholarship amounts and fiscal effect estimates in this post were updated on March 29, 2024, to reflect the latest fiscal note data released by the Louisiana Legislative Fiscal Office.

The post How the Louisiana GATOR Scholarship ESA bill could impact students and taxpayers appeared first on Reason Foundation.

Most school finance reforms, including this one, face uphill political battles. The Mississippi Adequate Education Program (MAEP), the state’s current formula implemented in 1997, has persisted despite multiple concerted efforts to fix it. 

The INSPIRE Act, though imperfect, would finally eliminate many of the longstanding problems in MAEP and replace it with a more streamlined and transparent funding formula that better accounts for individual student needs and empowers local leaders with more flexibility. 

INSPIRE is a significant improvement from the Mississippi Adequate Education Program

House Bill 1453 would implement sweeping changes to Mississippi’s K-12 finance system. 

1. Adopts weighted student funding

The most consequential reform proposed by the INSPIRE Act is the adoption of comprehensive weighted student funding (WSF). When a state uses WSF, its primary K-12 funding formula allocates a consistent per-student amount across school districts and includes weights that augment the per-student amount for students with additional learning needs, such as low-income and special education students. WSF is an increasingly common education funding model used by 33 states. 

The Mississippi Adequate Education Program currently uses weighted student funding to a limited degree because it has a base student amount and includes a 5% weight for students who qualify for free and reduced-price lunch (FRPL). However, MAEP falls short of comprehensively utilizing WSF because most categories of additional funding for higher-need students are funded by separate state grants called add-on programs that are outside of the basic formula. These add-on programs are directed for special education, gifted education, vocational education, transportation, and other purposes. 

The fact that these grants aren’t in MAEP’s basic funding formula might sound like an unnecessary technical distinction, but it’s not. A key advantage of WSF systems is that they are also foundation formulas—meaning they streamline most education funding into a single coherent formula that equalizes funding between school districts of varying local property wealth. Foundation formulas direct greater aid to districts that have less local wealth. The more states rely on grants outside of foundation funding—which Mississippi currently does with add-on program funding—the less they are accounting for differences in local resources in allocating state funds. 

The INSPIRE Act would improve funding fairness and better target education dollars to higher-need students by adopting the following funding structure:

Importantly, the INSPIRE formula would replace the Mississippi Adequate Education Program under House Bill 1453, meaning that all add-on program funding except for transportation would be replaced by these weights. Eliminating the add-on programs improves fairness and flexibility because it eliminates the practice of allocating staffing positions based on staffing ratios and district-specific costs for students in special education, gifted, and career and technical education programs. 

2. Adopts enrollment-based student counts

Another meaningful reform adopted by the INSPIRE Act is that it counts students based on average daily membership (ADM), or enrollment. Under MAEP, Mississippi is one of just seven states that still funds schools based on average daily attendance (ADA). Although proponents of ADA-based funding argue it incentivizes school districts to keep students in school, there’s little evidence to support that claim. Instead, ADA tends to shortchange higher-need districts because disadvantaged students are more likely to miss school. Moreover, many of the reasons that students miss school—like chronic health issues and poverty—are beyond district control. This means the use of ADA unfairly and ineffectively penalizes higher-need districts. In fact, a previous Reason analysis of this practice in Mississippi calculated that the use of ADA shortchanged districts with attendance rates lower than the state average by nearly $19 million in the 2018-2019 school year. 

3. Other reforms

INSPIRE would implement several other positive reforms. 

• Better poverty measure: Fourty-four states, including Mississippi, allocate additional funding for low-income students. Of that number, Mississippi arguably does the worst job of targeting resources for low-income students with its current “at-risk” funding because the state uses the broadest count mechanism (FRPL) and has the lowest weight (5% of the MAEP base amount per student). According to the National Center for Education Statistics, 99.6 percent of Mississippi’s students qualify for free and reduced-price lunch under the federal National School Lunch program. This FRPL share is significantly inflated due to multiple changes in federal policy over the past decade and during the COVID-19 pandemic, and it now has little use for identifying low-income students. The INSPIRE Act would adopt a more generous poverty weight while reducing the number of students qualifying for the funding. Massachusetts adopted a similar reform in 2015. 
• Elimination of 2002 hold harmless provision: INSPIRE would repeal a provision ensuring that all Mississippi districts receive the same amount of state support for MAEP formula costs and several other non-formula grants that they received in 2002. According to Mississippi First, 10 school districts benefit from this law. 

Lingering issues and a competing bill

Although Mississippi House Bill 1453 would be a significant reform, most of the changes only impact how state education funds are allocated. How local education revenues are raised and retained by school districts is largely untouched by the INSPIRE Act. This includes the current requirement that districts raise 28 mills toward the funding formula and a law that no more than 27% of a district’s formula allocation can be covered by local mills. The 27% rule provision benefits wealthy districts by allowing them to tax at a lower rate locally than the prescribed 28 mills and still receive state formula funds. Moreover, although the current formula prescribes 28 mills, 81 of the state’s 148 school districts currently raise over 50 mills for K-12 operations. Per-student funding disparities between districts stem largely from how much each district can raise locally in Mississippi, an issue that state leaders should continue examining even if HB 1453 becomes law. 

Additionally, the persisting political issue of whether Mississippi’s formula is “fully funded” likely wouldn’t go away under the INSPIRE Act because the bill retains annual inflation adjustment language that the state legislature can choose to ignore. The full funding issue is also salient because a competing Senate bill—SB 2332—aims to preserve MAEP and soften the definition of full funding. The Senate bill would raise the 27% millage cap to 29.5% and require that 90% of state MAEP contributions be spent on instruction. Though some of the changes proposed in Senate Bill 2332 would marginally improve the current education funding system, Mississippi’s students would be better served by a formula overhaul. 

Bipartisan appeal of HB 1453

Understandably, partisan coalitions will have different reservations in the face of a sweeping education proposal like House Bill 1453. But, the proposed reforms in the INSPIRE Act should have broad political appeal. Comprehensive weighted student funding systems are operated in blue states, purple states, and red states. Student-centered funding is used in states with robust private school choice and states with no private school choice at all. To those on the left, weighted student funding has appeal because it prioritizes disadvantaged students. For conservatives, the model is attractive because it attaches funds to individual students. Finally, all parties are on board with the idea of ensuring taxpayer dollars are allocated transparently and united in their commitment to better serve Mississippi students. 

The post Mississippi’s INSPIRE Act would upgrade the state’s school finance system appeared first on Reason Foundation.

In recent years, however, some of these accusations have softened because they are increasingly wrong or difficult to defend. 

Compared to all 50 states, California has had the ninth-fastest growth in education funding over the last two decades. It now ranks 17th in the nation in per-student spending, well above the national average. California’s students also made notable academic progress during this period. 

While it’s easy to argue that significant spending increases are the primary driver of student achievement gains, the real explanation is more complicated.

According to a new Reason Foundation study, California’s inflation-adjusted K-12 education funding grew from $12,471 per student in 2002 to $16,934 per student in 2020, a 35.8% growth rate ranked ninth highest in the United States.

Over a similar period, California students made significant gains in math and reading scores on the National Assessment of Educational Progress (NAEP), often called the Nation’s Report Card. From 2003 to 2019, the state’s 4th-grade NAEP reading scores increased by 11 points (+5.3%), ranking second in the country in growth rate. The state’s 4th-grade math scores rose by seven points (+3.2%), ranking 16th in improvement during that time. California’s 8th-grade NAEP reading scores also increased by eight points (+3.1%), ranking first in the nation in growth, while its 8th-grade math scores grew by nine points (+3.2%), the eighth-best improvement.

These results set California apart from other states that have seen little improvement in student achievement despite significant increases in education funding from 2002 to 2020. New York, which leads the nation in per-student funding and funding growth, saw almost no improvement in NAEP scores and declined by three points in 4th-grade reading and four points in 8th-grade reading.

Washington, which grew education funding at a higher rate than California and ranked fifth nationally in per-student revenue growth, was largely stagnant on the NAEP from 2003 to 2019.

These other state case studies complicate the narrative that more education spending reliably boosts student achievement. So, what else can help explain California’s progress?

Most notably, California has increased public school choice. It has one of the largest charter school sectors in the country, with over 1,300 charters serving 11.7 percent of the state’s public school population. 

According to Stanford University’s Center for Research on Student Outcomes, students in California charters outperform similar students in traditional public schools in reading and math. Since 2000, California’s charter school population has nearly quadrupled—meaning that charter growth has likely driven some of the gains in student achievement over the period examined in Reason Foundation’s study.

Another possible driver of California’s NAEP gains is the state’s relatively streamlined and flexible funding formula. Adopted in 2013, California’s Local Control Funding Formula emphasizes channeling greater resources toward higher-need students and allowing for local flexibility. This contrasts with the more restrictive and complex funding formulas of states like New York and Washington.

California’s NAEP results also shouldn’t be overstated.

Notwithstanding the strong growth, the state’s 4th and 8th-grade students still rank within or near the bottom 10 states in all testing categories examined. Additionally, the state’s NAEP outcomes slipped after the COVID-19 pandemic—albeit less so than most other states—and achievement gaps based on race and income have widened since the onset of the pandemic.

For California’s students to recover and continue making progress, state leaders need to go deeper than calling for more money. Examining the expansion of the school choice and local control policies that had student achievement trending upward before COVID-19 would be an excellent place to start.

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

The post The key to improving California’s public schools isn’t more money appeared first on Reason Foundation.

Full Study: Public Education at a Crossroads
Detailed Reports for All 50 States

Introduction

Public education is grappling with an unprecedented set of challenges in the wake of the COVID-19 pandemic. For starters, nationwide public school enrollment is down by over 1.2 million students compared with pre-pandemic levels, including losses exceeding 5% in New York, Oregon, and Mississippi.

Research suggests that families are increasingly choosing homeschooling or private schools, with demographic factors—such as drops in school-age populations—also contributing to enrollment declines. Because states generally tie funding to student counts, this could have substantial effects on school district budgets.

Students also fell behind during COVID-19, with 2022 National Assessment of Educational Progress results showing historic losses for 4th and 8th graders in both reading and math.

“The breadth of the declines across states is breathtaking,” concluded Mark Schneider, the director of the U.S. Department of Education’s Institute of Education Sciences. These losses were especially steep for students who were already behind their peers, and Stanford University’s Eric Hanushek estimates they could result in 5.6% lower lifetime earnings on average.

Additionally, school districts are heading toward a fiscal cliff when $190 billion in K-12 federal relief funding expires in 2024. Available data suggest that many have used these temporary dollars to plug budget holes and make permanent commitments, such as pay raises and hiring new staff, which will prove untenable in the coming years. Absent substantial funding boosts, staff layoffs and school closures could be on the horizon for these school districts.

Labor strife has also shut down classrooms in places such as Los Angeles, Minneapolis, and Columbus, with teacher salaries shaping up to be an important topic on the campaign trail ahead of the 2024 elections, as inflation continues to eat up paychecks. In his 2023 State of the Union address, President Joe Biden remarked, “Let’s give public school teachers a raise,” and Sen. Bernie Sanders recently introduced legislation that would boost teacher salaries nationwide. According to Sen. Sanders, “No public school teacher in America should make less than $60,000 a year.” 

But even against the backdrop of battles over public school curricula—and fears of economic recession—legislatures in both red and blue states have made sizable investments in public school funding, including teacher salaries.

Finally, as school choice gains in popularity—states such as Arkansas, Iowa, and Utah adopted comprehensive programs in 2023—public schools must adapt to a more competitive environment that increasingly values personalization over standardization. A survey by Tyton Partners indicates that more than half of parents now want to lead and tailor their child’s education, with 79% believing that learning should happen beyond just classroom walls.

Public schools must become more responsive to students’ needs or risk further enrollment losses, especially as students gain access to options that offer greater customization.

Putting it all together—enrollment declines, learning loss, unsustainable budgets, union activism, curricular battles, and the rise of school choice—public education is clearly at a crossroads, and the decisions made today will shape generations to come. To be sure, much has changed since 2020 when the COVID-19 pandemic swept the nation, but pre-pandemic education trends provide policymakers with a critical anchor for navigating post-pandemic decisions.

About This Study: Public Education at a Crossroads

The primary objective of this study, Public Education at a Crossroads, is to provide a comprehensive snapshot of K-12 public education resources and outcomes so that policymakers are better equipped to make these choices. By bringing together key revenue, expenditure, enrollment, staffing, and student performance data from the past two decades, this report gives stakeholders in all 50 states a solid foundation for assessing public education trends at a crucial moment. Looking forward, they should use this information to ask important questions like what their goals are for students and whether resources are being deployed toward those aims.

Importantly, this study is geared toward shining light on the school finance decisions made by state and school district officials over time, and not evaluating the degree to which those decisions have been effective. Nevertheless, longitudinal outcomes on the National Assessment of Education Progress (NAEP) exams are included since they are a straightforward and common way to measure student progress. While these data have limitations, they serve as a useful barometer for student achievement and how public schools are performing. Because student demographics vary considerably across states, NAEP data for low-income students are provided to allow for more meaningful comparisons.

Similarly, state rankings are provided for context, so that readers can easily compare where states stand in relation to each other and the U.S. average on various metrics. The timeframe considered in this study—2002 to 2020—was selected based on the availability of state-level school finance summary data from the U.S. Census Bureau at the time of writing.

The study starts by presenting an analysis of nationwide and state-level data, including five key trends with public education resources and outcomes. It is then divided into three sections, which provide a more granular look at the data and state rankings: revenue and expenditures, enrollment and staffing, and student outcomes. This is then followed by a detailed overview of our methodology, concluding with state appendices, which summarize the key trends and rankings for all 50 states.

Note that these rankings aren’t necessarily ordered from best to worst and are subject to interpretation. For instance, some readers might interpret a high ranking in per student revenue growth as positive, while others will view this more skeptically.

Analysis: National Snapshot and Key Trends

Nationwide, inflation-adjusted public school revenues grew from $12,852 per student in 2002 to $16,065 per student in 2020, as displayed in Table 1. These revenue figures include all local, state, and federal dollars for both operating and capital expenses. Available data suggest there were two key drivers of this increase: employee benefits and new staffing positions. Benefit spending grew by 78.6% per student—or $1,499 per student—while growth in public school staff increased by 13.2%, outpacing a 6.6% increase in student enrollment.

For context, public schools added staff (779,107) to their payrolls equivalent to a quarter of enrollment growth (3,124,575). About three-quarters of this staffing increase was accounted for by non-teachers, which in 2020 comprised 52.1% of public school staff across the U.S. Notably, average inflation-adjusted teacher salaries decreased between 2002 and 2020, going from $64,522 to $64,133. Table 1 summarizes these trends.

Table 1: Key U.S. Public School Spending, Staffing, and Enrollment Trends (2002-2020, Inflation-Adjusted)

Student assessment results on the National Assessment of Educational Progress (NAEP) can shine a light on academic progress during a similar period. Table 2 summarizes NAEP score growth across six exams on the administration dates that most closely match the spending, staffing, and enrollment data.

Overall, reading scores were largely flat across all grade levels, while math scores showed improvement in grades 4 and 8 but then flattened for 12th graders. For low-income students, indicated by the free or reduced-price lunch program (“FRL” in Table 2) proxy, reading scores grew for 4th and 8th graders but declined for 12th graders. Math scores for low-income students grew across all three grade levels.

Table 2: U.S. NAEP Score Growth by Subject

These national observations, combined with state-level data, reveal five key trends during the period examined.

Key Trend #1: Education funding is up in nearly every state.

Between 2002 and 2020, 49 of 50 states saw real increases in revenue per student, with funding growth exceeding 50% in five states—New York, New Hampshire, Illinois, North Dakota, and Washington. Notably, all three levels of government increased public education funding, with nationwide federal, state, and local contributions per student, growing by 20.2%, 18.9%, and 32.9%, respectively. In 2020, education funding in nine states surpassed $20,000 per student, with New York topping the list at $30,723 per student.

Why It Matters: Public education revenue per student has almost invariably grown in inflation-adjusted terms since 2002. States differed significantly in the level of additional funding during this timeframe and there was a period of declining or stagnant revenue in the aftermath of the Great Recession, but the fact remains that education spending has consistently increased nationwide and was at historic levels even before the COVID-19 pandemic.

Key Trend #2: Teacher salary growth lagged funding growth in all 50 states.

Nationwide, total inflation-adjusted education dollars increased by 25% per student while average teacher salaries fell by 0.6% from 2002 to 2020. Table 3 summarizes this comparison for the top 10 states in funding growth, ranging from 34.5% per student in Delaware to 70.2% per student in New York. Of these states, real average teacher salaries declined in three—Illinois, Pennsylvania, and Delaware—and were fairly flat in New Hampshire and Connecticut. Notably, Illinois’ inflation-adjusted per-student revenue increased by $7,141 while its real average teacher salary fell by $3,301.

Figure 1: U.S. Revenue per Student Growth vs. Average Teacher Salary Growth (2002-2020, Inflation Adjusted)

Because teachers are paid based primarily on years of experience, a decline in average teacher tenure might contribute to the trend of flat or declining real salaries in some states. However, national data published by NCES suggest that average teacher salaries have been largely flat over time, even when comparing teachers with similar years of experience.

Table 3: Average Teacher Salary Growth for the Top 10 States in Funding Growth

Why It Matters: Sizable increases in education funding in many states have not translated into higher teacher salaries. Stagnant salaries, combined with high levels of inflation, could increase pressure on policymakers to increase education funding even more even though past increases often haven’t improved teacher pay.

Key Trend #3: Public school staffing growth is far outpacing student enrollment growth.

Between 2002 and 2020, U.S. public school enrollment increased by 6.6% while total staff grew by 13.2%. At the state level, staffing growth exceeded student growth in 39 of 50 states. Much of this can be attributed to growth in non-teaching staff, which increased by 20% across states. For context, the bulk of non-teachers in 2020—about 59.8%—were classified by NCES as Other Support Services Staff and Instructional Aides, with only about 10.8% classified as district-level staff. In other words, many non-teachers are school-level employees.

Table 4 summarizes staffing growth for the 10 states with the largest enrollment declines, which ranged from 6.2% to 14.3%. Notably, total staff increased in eight of these states. For instance, Connecticut’s total staff grew by 14.1% while its student enrollment declined by 8.2%.

Figure 2: Public School Staffing vs. Student Enrollment Growth (2002-2020)

Table 3: Staffing Trends for the Top 10 Enrollment Decline States

Why It Matters: A prevailing trend across states is to add new staff, regardless of enrollment levels. Although this trend is decades in the making, many school districts will face tough fiscal decisions in the coming year when federal COVID-19 relief funding dries up, especially given the magnitude of recent enrollment losses. This could lead to widespread school closures, layoffs, and other measures as district officials are forced to right-size operations. Legislators will also face pressure to increase funding as a way to avoid these difficult decisions.

Key Trend #4: Education dollars are increasingly going toward spending on employee benefits.

Nationwide, real spending on employee benefits increased by $1,499 per student, or 78.6%, from 2002 to 2020. Table 5 shows the top 10 states for growth in benefit spending per student, with all states more than doubling spending on this Census expenditure category that includes pensions, social security, health insurance, life insurance, worker’s compensation, unemployment compensation, and tuition reimbursement. Revenue growth per student is included in the table to show how this relates to overall funding growth in each state. Notice that, in six of the 10 states, benefit spending growth represented over half of their revenue increases, with nearly all of Hawaii’s per-student funding growth going to this expense category alone.

Table 5: Benefit Spending Per Student Growth vs. Total Revenue Per Student Growth

Why It Matters: Education dollars are increasingly devoted to covering employee benefits. Notably, many of the states with the highest increases in education revenue also saw the highest increases in benefit spending. Research shows that pension debt is a primary driver of this trend, with Equable Institute estimating $878 billion in unfunded liabilities nationwide. As a result, more funding is going to cover pension costs, even while states have reduced benefits for teachers.

Key Trend #5: There isn’t a consistent relationship between funding growth and outcomes across states.

There isn’t a consistent relationship between funding growth and student achievement, even when students’ income status is accounted for. Table 6 compares NAEP score growth for 2003-2019 in three high funding-growth states with three low funding-growth states. Because NAEP administration dates don’t align with the period otherwise examined in this study (2002-2020), inflation-adjusted revenue figures for 2003-2019 are provided for each state in Appendix 1 and used in Table 6. This allows for accurate comparisons between funding growth and NAEP score growth.

Notably, New York had a substantial increase in per student funding, but its scores were largely flat, including declines in both 4th and 8th-grade reading. The lone bright spot for the Empire State was a four-point increase in 8th-grade math for low-income students. In comparison, Idaho saw increases across all subjects, including positive gains for its low-income students, without increasing its per-student funding. Compared to its neighboring state of Washington (a high funding-growth state), students in the Gem State achieved the same or better growth across all subjects.

To be sure, low-income students in Illinois—where per student funding growth was among the highest in the nation—demonstrated impressive NAEP gains. However, these NAEP increases are similar to those observed for low-income students in Arizona, which posted the largest NAEP increases for its overall student population despite a funding increase of only 1.4%.

Table 6: NAEP Score Growth for Three High and Low Funding-Growth States

Figure 3: NAEP Score Growth for Low-income Students for High and Low Funding-Growth States (2003-2019)

Why It Matters: These trends indicate that further statewide investments in public education don’t automatically lead to increased student achievement on standardized tests. Factors beyond overall per-student spending can lead to performance gains in states with low spending growth and can hold achievement flat in states with high spending growth.

Full Study — Public Education at a Crossroads: A Comprehensive Look at K-12 Resources and Outcomes

The post Public education at a crossroads: A comprehensive look at K-12 resources and outcomes appeared first on Reason Foundation.

This section of the Public Education at a Crossroads study begins by examining revenue trends and then provides expenditure data for the following spending categories: support services, instruction, employee benefits, capital expenditures, and debt.

As noted in an earlier section, nationwide, inflation-adjusted public school revenues grew from $12,852 per student in 2002 to $16,065 per student in 2020. These revenue figures include all local, state, and federal dollars for both operating and capital expenses.

Revenue Trends

Figure 4 shows nationwide revenue growth by funding source, and Table 7 shows revenue per student growth for all 50 states between 2002 and 2020. These data include federal, state, and local education dollars, and this time period was selected based on the availability of continuous state-level summary data from the U.S. Census Bureau.

Nationwide, inflation-adjusted K-12 revenues grew by $3,213 per student or 25% between 2002 and 2020. During this time, nearly every state increased education funding, with per-student revenues increasing by at least 10% in 41 states and growth exceeding 50% in New York, New Hampshire, Illinois, North Dakota, and Washington.

Figure 4: U.S. Public Education Revenue Growth by Funding Source (2002-2020)

In 2020, education funding in nine states surpassed $20,000 per student, with New York topping the list at $30,723 per student, followed by Connecticut and New Jersey.

That year, per-student funding was the lowest in Idaho, Utah, and Mississippi. Importantly, cost-of-living differences might skew unadjusted comparisons of per-student funding levels across states. For instance, in 2020, Idaho spent the least on K-12 education ($9,802) but is a low-cost state compared to higher spenders such as New York, Illinois, and New Jersey.

Table 7: Total Revenue per Student Growth (2002-2020)

Growth of Total K-12 Revenue per Student From 2002-2020

Expenditure Trends

1. Pupil Support Services

Table 8 shows expenditure trends broken down by support services, which includes spending on salaries, benefits, supplies, materials, and contractual services. (Note that some expenditures classified under support services—such as curriculum development and instructional development—are related to instruction, as discussed in Section 3.2.2 of the full report.)

The Census Bureau breaks down support service expenditures by seven primary functions, which are defined as follows:

• General Administration: Includes expenditures for board of education and executive administration services.
• Instructional Staff Support: Includes expenditures for instructional supervisors, curriculum development, instructional staff training, and other services.
• Operation and Maintenance of Plant: Includes expenditures for building services (e.g., HVAC), security, and upkeep of grounds and equipment.
• Pupil Support Services: Includes expenditures for social work, counseling, record-keeping, and several categories of services such as medical, dental, nursing, psychological, and speech.
• Pupil Transportation Services: Includes expenditures for transporting students and maintaining vehicles.
• School Administration: Includes expenditures for principal services.
• Other Support Services: Includes expenditures for central office support and business services such as research, development, data processing, budgeting, and purchasing.

Between 2002 and 2020, U.S. inflation-adjusted support service expenditures grew by $974 per student or 25.4%. A total of nine states saw increases of at least 50%, with New Hampshire, Hawaii, Vermont, Connecticut, and Washington all exceeding 60%.

At the other end of the spectrum, five states had growth rates below 10%—North Carolina, Florida, Oklahoma, Michigan, and Idaho. Idaho was the only state where per-student spending on support services did not increase during the time period examined.

Nationwide, pupil support services increased the most, as displayed in Figure 5. In 2020, New Jersey spent the most on support services at $8,027 per student, followed by Vermont at $7,895 per student and Alaska at $7,894 per student. Utah, Idaho, and North Carolina spent the least on support services per student that year.

Figure 5: Support Services Expenditure Growth by Function, National Average (2002-2020)

Table 8: Support Services Spending per Student Growth (2002-2020)

Growth in Support Services Spending per Student (2002-2020)

2. Instruction

Table 9 shows expenditure trends for instruction, which includes spending on salaries, benefits, supplies, materials, and contractual services. In comparison, real spending per student on instruction grew at a lower rate than support services, averaging 20%, for an increase of $1,364 per student.

Four states saw increases of at least 50% for instruction— New Hampshire, New York, Hawaii, and Illinois—and per-pupil spending on instruction declined slightly in Indiana, Idaho, and Wisconsin.

In 2020, nine states spent more than $10,000 per student on instruction, with New York topping the list at $17,813 per student. Arizona, Idaho, and Utah spent the least on instruction that year.

Table 9: Instruction Spending per Student Growth (2002-2020)

Growth in Instruction Spending per Student (2002-2020)

3. Employee Benefits

Benefit spending played a substantial role in the trends observed in both support services and instruction spending categories.

Overall, inflation-adjusted spending on employee benefits increased in all 50 states between 2002 and 2020, growing by $1,499 per student or 78.6% nationwide, as shown in Table 10. This Census expenditure category includes pensions, social security, health insurance, life insurance, worker’s compensation, unemployment compensation, and tuition reimbursement. Research suggests that much of this observed growth is driven by rising teacher pension costs due to unfunded liabilities accumulated over time.

A total of 14 states doubled their per-pupil spending on benefits, with three—Hawaii, Illinois, and Pennsylvania—seeing increases exceeding 170%. In comparison, four states had relatively modest growth rates below 20%—Wisconsin, Idaho, West Virginia, and Florida.

4. Capital Expenditures

Nationwide, inflation-adjusted capital expenditures grew by $129 per student or 7.9% between 2002 and 2020, as shown in Table 11. This Census reporting category includes building construction, building improvements, and equipment expenses but does not include maintenance and repairs.

Capital outlays per student decreased in nearly half of all states but more than doubled in eight states.

Table 10: Employee Benefit Spending per Student Growth (2002-2020)

Growth in Employee Benefit Spending per Student (2002-2020)

Table 11: Capital Outlay Spending per Student Growth (2002-2020)

Growth in Capital Outlay Spending per Student (2002-2020)

5. Total Debt per Student

Table 12 summarizes total debt obligations, which do not include retirement obligations. Overall, per-student debt in the U.S. increased by $3,811 per student, growing by 55%.

Five states—Indiana, Montana, Rhode Island, California, and North Dakota—saw per-student debt grow by more than 200%, while 11 states saw this figure decline.

Table 12: Total Debt per Student Growth (2002-2020)

Growth in Total Debt per Student (2002-2020)

Full Study — Public Education at a Crossroads: A Comprehensive Look at K-12 Resources and Outcomes

The post Public education at a crossroads: K-12 education revenue and expenditure trends 2002-2020 appeared first on Reason Foundation.