Today, Reason Foundation published our 2025 K-12 Education Spending Spotlight, which brings together over two decades of school finance data for all 50 states. With nationwide funding approaching $1 trillion and outcomes declining—nearly 40% of 4^th graders aren’t reading at a basic level on the National Assessment of Educational Progress— it’s critical to examine how dollars are spent and why they aren’t producing better results.    

Reason Foundation’s interactive tool, which includes data on expenditures, staffing, teacher salaries, debt, and student outcomes, can help answer those questions and is available here.

There are five key trends to know, but here’s the big takeaway: despite record funding, K-12 finance faces structural problems that undermine student achievement.

Between 2002 and 2023, public school funding rose by 35.8% from $14,969 per student to $20,322 per student after adjusting for inflation. New York now spends $36,976 per student followed by New Jersey at $30,267 per student, and funding now exceeds $25,000 per student in eight states, including: Vermont ($29,169 per student), Connecticut ($28,975), Pennsylvania ($26,242), California ($25,941), Rhode Island ($25,709), and Hawaii ($25,485).

Since the start of the COVID-19 pandemic, the largest increase in per-student spending has occurred in California, rising 31.5% from $19,724 in 2020 to $25,941 in 2023.

Michigan, Kentucky and Missouri were the next biggest percentage increasers, all spending 17% more per student in 2023 compared to 2020. Per student spending also rose by over 15% during that period in Hawaii, New Mexico, Arizona, Mississippi and Alabama.

Figure 1: Inflation-Adjusted Public School Revenue (2002-2023)

All 50 states increased K-12 funding from 2002 to 2023, but inflation-adjusted average teacher salaries fell by 6.1% between 2002 and 2022, decreasing from $75,152 to $70,548 per year. 

From 2020 to 2022, due in part to high inflation during and after the pandemic, the average teacher’s salary decreased by more than five percent in 38 states. They declined the most in North Carolina (−9.6%), New Mexico (−8.8%), South Carolina (−8.7%), West Virginia (−8.6%), and Mississippi (−8.2%).

Research shows that effective teachers are critical to student learning, so why aren’t more education dollars showing up in teacher paychecks?

One reason is that public schools are spending more money on non-teaching staff, such as instructional aides, counselors, social workers, psychologists, and instructional coordinators. Nationwide, non-teaching staff increased by 22.8% between 2002 and 2023, while public school enrollment only ticked up by 4.1%. 

This raises important questions, such as whether public schools have drifted too far from their academic mission and whether special education costs have gotten out of control.

Another reason teacher salaries aren’t increasing is that benefit spending has risen sharply, going from $2,221 per student in 2002 to $4,022 per student in 2023—an 81.1% increase. 

In 2023, employee benefit costs in New Jersey were the highest in the nation at $8,333 per student. In New York, the cost was $7,949 per student.

Research indicates that these costs are largely driven by teacher pension debt. States have failed to set aside enough funding to cover their pension promises, and now the bills are coming due. Benefit spending increased by 194.1% per student in Hawaii, 171.3% in Vermont, 169.9% in Illinois, 167.1% in New Jersey, and 166.4% in Pennsylvania.

Figure 2: Inflation-Adjusted Spending Per Student on Employee Benefits and Salaries (2002-2023)

But these aren’t the only structural issues. With enrollment falling by nearly 1.2 million students since the start of the COVID-19 pandemic, public schools will need to become more efficient by closing schools and reducing staff counts. Available data suggest that school districts have been slow to close under-enrolled schools, and the number of non-teaching staff in public schools has increased since 2020. This is unsustainable, especially since the National Center for Education Statistics projects that enrollment losses will persist for years to come.

There are no quick fixes, but one thing is certain—policymakers can’t expect a good return on investment from public schools unless structural problems are addressed. Focusing on academics, paying down pension debt, and right-sizing schools are difficult but necessary reforms that can pay dividends in the long run. 

From the states

The New Jersey Senate Education Committee advanced a proposal that could significantly limit charter schools. It would ban virtual and prohibit charter school boards from contracting with for-profit entities to manage or operate the school, and “impose residency requirements for some charter school trustees,” the New Jersey Monitor reported. Harry Lee, the president of the New Jersey Charter School Association, argued that this legislation could be “read as a moratorium on charters.”

What to watch

Also in New Jersey, on the campaign trail, Gov.-elect Mikie Sherrill supported expanding the state’s Interdistrict Public School Choice Program–a form of open enrollment. This policy is in much need of reform and hopefully she will keep this campaign promise. As of the 2023-24 school year, more than 5,000 students used it to attend public schools other than their assigned ones. Despite being operational for more than 25 years, participation is one of the lowest in the nation due to an artificial cap imposed by then-Gov. Chris Christie’s administration in 2012. 

The New Hampshire Supreme Court issued a decision clarifying the state’s cross-district open enrollment law, which allows students to transfer to schools in other districts. The court stated that every school district must have an open enrollment policy and that a transfer student’s home district is responsible for 80% of tuition costs, even if the home district’s policy is not to have an open enrollment policy. New Hampshire’s law ranks 21st among the 50 states nationwide, according to Reason Foundation’s open enrollment best practices, but the state scored just 45 out of 100 points, receiving an F grade for its transfer policies.

Tennessee Speaker of the House Cameron Sexton (R-Crossville), expressed interest in expanding the state’s private school scholarship program. Launched last year, the program provided $7,300 scholarships to 20,000 students to pay for private school tuition. While the program is scheduled to increase the total number of scholarships available to 25,000 during the 2026 school year, Sexton argued that the expansion should be greater, as 42,000 students applied for scholarships.

The latest from Reason Foundation

–Public schools without boundaries 2025: Ranking every state’s open enrollment laws

–Policymakers are increasingly supportive of public school choice

–Open enrollment is an important part of school choice in California

–Los Angeles Unified School District celebrates mediocre test scores

Recommended reading 

Ohio school districts shouldn’t be allowed to declare students “impractical” to transport

Aaron Churchill at the Fordham Institute

“Ohio districts have used this loophole to deny transportation to thousands of public charter and private school students—and this was the way Columbus ducked their transportation responsibilities last year…Statewide, almost 23,000 charter and private school students were declared impractical last year (roughly 8 percent), while only 592 out of more than 1.4 million district students—a miniscule fraction—were deemed as such. In other words, non-district students were nearly 200 times more likely to be denied transportation than students attending district schools.”

Contested questions in public schools

Ilana Redstone at National Affairs

“Despite the post-pandemic increase in the popularity of private schools and homeschooling, the vast majority of American children have continued, and likely will continue, to receive a public education. However, doing so in an institution that hasn’t acknowledged its failures ensures that both the educational crisis and its associated erosion of democratic norms will persist. This means that rebuilding trust in this institution matters — although doing so will require us to first understand how public schools lost their way.”

Rulemaking must resolve ambiguities in federal school choice law—and fast

Jim Blew at Education Next

“Governors should be prevented from adding requirements not found in the federal law, such as prohibiting SGOs from focusing on specific student groups or educational approaches. Similarly, new governors should not be allowed to remove an organization from a state’s list unless that organization falls out of legal compliance; this stipulation would preempt the sudden disruption of a student’s education due to politics.”

___________________________________________________________________________

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

The post Funding Education Opportunity: Study examines K-12 education spending, teachers’ salaries and benefit costs appeared first on Reason Foundation.

Policymakers must have the best data possible to inform their public education decisions. The following analysis from Reason Foundation’s K-12 Education Spending Spotlight brings together the latest figures from the U.S. Census Bureau and National Center for Education Statistics and highlights five key insights from our tool and their implications for state policymakers and other stakeholders.

These critical insights include examining and ranking every state’s total K-12 and per student public school funding, the public school enrollment levels in every state and how states continue to hire more non-teaching staff even as they lose students, how and why teachers’ salaries are failing to keep up with inflation in nearly every state, how much public school funding is increasingly being shifted to cover pension debt, and the disappointing student scores on key standardized tests since the pandemic.

Total U.S. public school funding is approaching $1 trillion and now exceeds $25,000 per student in eight states.

Nationwide, public school funding increased by 35.8% between 2002 and 2023, rising from $14,969 per student to $20,322 per student after adjusting for inflation, Reason Foundation’s K-12 Education Spending Spotlight finds.

In total, U.S. public schools received $946.5 billion in funding in 2023, with New York topping all states at $36,976 per student, followed by New Jersey at $30,267 per student.

Notably, eight states exceeded $25,000 per student in 2023: New York, New Jersey, Vermont ($29,169 per student), Connecticut ($28,975), Pennsylvania ($26,242), California ($25,941), Rhode Island ($25,709), and Hawaii ($25,485).

The lowest-spending state, Idaho, was the only state spending less than $12,000 per student. Utah, Oklahoma and North Carolina spent less than $14,000 per student.

Since the start of the COVID-19 pandemic, the largest increase in per-student spending has occurred in California, rising 31.5% from $19,724 in 2020 to $25,941 in 2023.

Michigan, Kentucky and Missouri were the next biggest percentage increasers, all spending 17% more per student in 2023 compared to 2020.

Per student spending also rose by over 15% from 2020 to 2023 in Hawaii, New Mexico, Arizona, Mississippi and Alabama.

Nationally, compared to pre-pandemic levels, K-12 funding is up by 8.6%, rising by $1,610 per student in real terms between 2020 and 2023. However, the bulk of these new education dollars, since 2020—approximately $1,181 per student—are from the $190 billion in federal COVID-19 relief funding that public schools received during the pandemic. While non-federal dollars increased by $429 per student during this time, this is a departure from pre-pandemic trends, when state and local funding rose by $1,089 per student between 2017 and 2020.

Policy implications of K-12 funding levels

For policymakers, K-12 funding has increased dramatically in the past couple of decades, with public schools in all 50 states seeing substantial increases. However, with federal pandemic relief funding now expired, combined with rising economic uncertainty, declining public school enrollment, and increased competition from school choice and homeschooling, the era of unrelenting public school funding growth may be coming to an end. Public school funding is at record levels, and state and local policymakers should shift the focus to maximizing the impact of existing K-12 dollars in ways that can improve student outcomes.

Public school funding is increasingly spent on employee benefits, including teacher pensions.

Inflation-adjusted K-12 education spending on employee benefits—which includes teacher pensions, health insurance, and other expenses—increased by 81.1% between 2002 and 2023, rising from $2,221 per student to $4,022 per student, Reason Foundation’s analysis shows.

In comparison, real spending on employee salaries grew modestly, rising from $8,449 per student to $9,098 per student, a 7.7% increase. As a result, for every new $1 that public schools spent on employee salaries between 2002 and 2023, benefit expenditures rose by $3.27. In 12 states, growth of employee benefits exceeded 100%, including Hawaii (194.1%), Vermont (171.3%), Illinois (169.9%), New Jersey (167.1%), and Pennsylvania (166.4%), as shown in Table 2.

In 2023, employee benefit costs in New Jersey were $8,333 per student. In New York, the cost was $7,949 per student. Vermont and Connecticut also spent more than $7,000 on employee benefits per student they serve.

Employee benefit costs also exceeded $5,000 per student in Pennsylvania, Illinois, Michigan, Massachusetts, Delaware, New Hampshire, Rhode Island, Wyoming, and Alaska.

Policy implications of rising benefits costs on K-12 spending

Research shows that teacher pension debt is the primary driver of rising benefit spending. For years, states have failed to set aside enough money to cover the pension benefits promised to teachers, resulting in hundreds of billions of dollars in unfunded liabilities (i.e., the difference between the total pension benefits owed to teachers and the dollars available in pension funds). Today, this means that more K-12 education funding must be used to cover pension costs, even while many states have reduced benefits for teachers, rather than in classrooms.

Policymakers should take steps to reverse this trend by paying down pension debt as fast as possible to avoid high-interest costs and modernizing antiquated assumptions and benefit designs. Otherwise, pension costs will continue to eat up a greater share of teachers’ paychecks and school districts’ budgets.

Despite plummeting enrollment, the surge in public school staffing has persisted.

Between 2002 and 2023, the number of public school staff increased by 15.1%, while student enrollment grew by only 4.1%. The bulk of new K-12 hires were non-teachers, which increased by 22.8%, such as counselors, social workers, speech pathologists, and instructional aides.

In comparison, the number of teachers rose by 7.6% during this time. Nationwide, non-teaching staff now account for over half, 52.5%, of all public school employees, up from 49.2% in 2002. Table 3 shows the growth in non-teaching staff, while Table 4 displays enrollment growth.

Since the start of the COVID-19 pandemic, the public school staffing surge has persisted. Despite public school enrollment falling by 1.18 million students between 2020 and 2023, public schools added over 81,000 non-teaching staff to their payrolls during that period.

For example, California has lost 318,532 students since 2020, but has added 3,400 non-teaching staff members, while New York has lost 159,701 students but has added 6,996 non-teaching staff members.

Public school enrollment fell in 39 states from 2020 to 2023.

The 2% increases in public school enrollment in Idaho and North Dakota were the largest gains in the country. The only other states where public school enrollment grew from 2020 to 2023 were South Dakota, Delaware, Louisiana, Utah, Alabama, Montana, Texas, Florida and South Carolina.

With a 6% decrease in public school enrollment, Hawaii has experienced the largest decline in public school students since the pandemic. Enrollment also decreased by more than five percent in New York, Mississippi, Oregon, and California, and by at least four percent in New Mexico, New Hampshire, Illinois, West Virginia, Colorado, Kentucky, Washington, Rhode Island, and Michigan, according to Reason Foundation’s analysis.

Policy implications of decreased public school enrollment and current staff sizes

With the National Center for Education Statistics projecting a 5.3% decline in public school enrollment between 2024 and 2032, current staffing levels are unsustainable. School closures are on the horizon in places like Boston, Houston, Seattle, and Oakland, but it will also be important to reduce staffing to levels that match enrollment.

To minimize the need for layoffs, school districts can leverage staff resignations and retirements, while also giving greater scrutiny to costly across-the-board pay increases. Critically, public schools should also consider the return on investment from decades of adding non-teaching personnel to their payrolls and whether this aligns with their core educational mission.

The average teacher salary has declined significantly since the onset of the COVID-19 pandemic.

Nationwide, the average inflation-adjusted teacher salary fell from $75,152 in 2002 to $70,548 in 2022, the most recent year with complete data available, a 6.1% decline, Reason Foundation finds.

However, most of this drop in teachers’ salaries occurred in the aftermath of the COVID-19 pandemic. Between 2002 and 2020, the average teacher salary remained virtually flat, decreasing by 0.6% to $74,698—but then from 2020 to 2022, it dropped by $4,151, or 5.6%.

From 2020 to 2022, the average teacher’s salary decreased by more than five percent in 38 states. They declined the most in North Carolina (−9.6%), New Mexico (−8.8%), South Carolina (−8.7%), West Virginia (−8.6%), and Mississippi (−8.2%).

Only one state, Minnesota, increased teachers’ salaries after the pandemic.

As a result of the decreases following the pandemic, only 10 states experienced positive gains in average teacher salary between 2002 and 2022, with Washington (18.6%), New York (12%), and Massachusetts (11.7%) leading the list, as shown in Table 5.

In comparison, three states saw teacher salaries decline by more than 20% from 2002 to 2022: North Carolina, Michigan, and Indiana.

Policy implications of teachers’ salaries declining

For over two decades, large and regular increases in public school funding haven’t boosted teacher salaries, and this is unlikely to change without structural reforms.

First, it’s important to understand why teacher salaries stagnated between 2002 and 2020. Public school revenue grew by $3,742 per student (25%) during this period, but funding increasingly went to cover the costs of support services spending, which rose by $1,135 per student (25.4%), and employee benefits, which increased by $1,745 per student (78.6%).

Because teacher pay is tied to years of experience and educational attainment—and teacher salaries vary substantially by state—it’s also possible that demographic shifts in the teacher population contributed to the observed trends. However, available federal data make it difficult to draw firm conclusions. While the share of teachers with over 20 years of experience has declined, educational attainment has increased, with the proportion of teachers holding only a bachelor’s degree falling over time.

What drove the decline in teacher salaries between 2020 and 2022?

Teacher turnover and other factors played a role, but historic inflation levels were likely the most significant factor. In the 2022 school year, the average monthly price level was 9.6% higher than it had been just two years earlier, negating funding increases from state legislatures and eating into teacher paychecks. Large and widespread increases in nominal pay would’ve been required just for teacher salaries to keep pace with inflation, let alone increase, during these years.

For policymakers, the key takeaway is that public school spending decisions, combined with rising pension costs, are eating into teachers’ paychecks. Even if teacher demographics have shifted over time, school officials are increasingly prioritizing spending education funding on non-teaching personnel, while unfunded pension liabilities also consume a larger share of K-12 dollars.

Student outcomes were falling even before the COVID-19 pandemic, despite record funding levels.

The National Assessment of Educational Progress (NAEP) is the gold standard for measuring national and state K-12 outcomes in math, reading, and other subjects. While the National Center for Education Statistics (NCES) publishes average scale scores that are precise, they also publish more intuitive proficiency levels: Basic, Proficient, and Advanced.

Importantly, the proficient benchmark is an aggressive target that doesn’t equate with grade-level proficiency or meeting state standards. According to NCES, “Students performing at or above the NAEP Proficient level on NAEP assessments demonstrate solid academic performance and competency over challenging subject matter.” For this reason, our analysis focuses on the share of students who perform below the basic performance threshold.

Across all four subjects examined—4th and 8th-grade math and reading—the trend is clear: the share of students scoring below NAEP basic fell between 2003 and 2013, increased by 2019, and then grew sharply in the wake of the COVID-19 pandemic in 2022. Except for 4th-grade math, scores regressed again from 2022 to 2024, and outcomes in all four subjects were worse in 2024 than in 2003. These figures are presented in Table 6 below.

For low-income students, a similar trend is observed, as shown in Table 7. Student performance improved from 2003 to 2013, worsened before the pandemic in 2019, and then dropped dramatically in 2022.

By 2024, low-income 8th graders fared worse than they did in 2003, while 4th-grade students still performed slightly better. Notably, performance in three of the four subjects was worse in 2024 than in 2022.

Policy implications of NAEP scores

For policymakers, a pressing concern is the widespread failure of public schools to get students back up to speed in the wake of the COVID-19 pandemic, despite receiving $190 billion in federal Elementary and Secondary School Emergency (ESSER) relief funding during the pandemic.

Research shows that public schools were given more than enough money to reopen safely; yet, many used the windfall to prioritize things other than academics, even as students fell behind. For instance, researchers at Georgetown University’s Edunomics Lab estimate that approximately 20% of the federal pandemic relief dollars were allocated to school facilities, including building repairs and HVAC upgrades. While this was permitted under the law—and some public schools used their federal relief funds wisely—ESSER was a policy failure, especially when viewed through the lens of student achievement.

It’s also notable that, even before the pandemic, student outcomes were trending downward despite record education funding levels across states. For example, 34% of 4th graders and 27% of 8th graders scored below basic on NAEP reading in 2019. While gains were made between 2003 and 2013, a large share of students still scored below the lowest performance threshold in this peak year.

Conclusion

In the years ahead, policymakers will need to address a complex set of K-12 challenges, including declining public school enrollment, bloated staffing for current and projected enrollment levels, mounting pension costs and debt, stagnant teacher salaries, and underwhelming academic outcomes. These problems arose during a period when public schools saw historic funding increases, and money alone won’t solve them.

Instead, lawmakers will need policy solutions that address their root causes and maximize the use of existing K-12 funding. Reason Foundation’s K-12 Education Spending Spotlight aims to help them get started.

Related: K-12 Education Spending Spotlight Archives

The post K-12 Education Spending Spotlight 2025: Annual public school spending nears $1 trillion appeared first on Reason Foundation.

However, this loss of public school students and funding for them shouldn’t come as a shock to state policymakers and school districts. Before the pandemic, 17 states, such as Illinois and Michigan, were already experiencing declining enrollment. 

One major contributing factor to declining K-12 enrollments is the birth dearth: fewer babies means fewer students. According to the Centers for Disease Control and Prevention, the number of births in the U.S. decreased by 16% between 2007 and 2024, resulting in nearly 700,000 fewer children being born in the US in 2024 than in 2007. 

Fewer kids being born, combined with increased competition from private and charter schools, put lower enrollment rates on the horizon for many states. The pandemic exposed parents to many more educational options and made the enrollment decline happen faster and worse than expected in some cases. 

These lower student counts have significant implications for school district finances because education funding is generally based on the number of students enrolled. When school budgets shrink due to significantly fewer students, districts have to rightsize through a combination of staff reductions, school closures, or other cost-cutting measures. 

But many school districts delayed closures, relying on federal COVID-19 relief funds to keep their under-enrolled schools afloat. 

Reason Foundation research examined school closures in the 15 states that provided data, including California, New York, and Florida. Table 1 below shows the relationship between school closures and enrollment fluctuations before and after the pandemic’s onset in these 15 states.

Table 1: Public school closures before and after 2020

For example, as California’s enrollment declined by 0.9%, more than 55,000 students, between 2018 and 2020, the state’s school districts closed 63 schools. Yet only 65 schools closed in California between 2020 and 2024, when the state’s public school student counts plummeted by 5.2%, or nearly 325,000 students.

By contrast, Colorado’s public school districts faced the reality of declining enrollments sooner. Only 12 schools closed in Colorado between 2018 and 2020 as the state’s student population increased by about 0.3%. Yet this growth was reversed after the pandemic. Colorado closed 51 schools, as its public student counts dropped by 5.2%, or almost 48,000 fewer students, between 2020 and 2024. 

Unfortunately, Colorado’s initiative wasn’t the norm. Data from these 15 states showed that most delayed school closures, likely because they had federal funds temporarily bolstering their budgets. If this enrollment and closure trend holds in the other 35 states, it means that widespread school closures will likely need to occur in the coming years, as districts are forced to close or consolidate schools to reflect lower student counts and reduced funding.

To make closures fair and cost-effective, state lawmakers should have a process to identify empty schools. For example, when the student counts in Indiana school districts decline by 10% over a five-year period, they must review school building occupancy and identify schools that could be closed.  

Right-sizing schools and increasing transparency aren’t the only reforms available to policymakers. They can eliminate unfair funding protections, such as hold harmless provisions that provide funding based on outdated student enrollment figures and give districts funding for students who no longer attend those schools, spreading resources thin.

Notably, 15 out of the 16 states with declining enrollment provisions that give districts money based on outdated student counts experienced overall enrollment declines since 2020. These states are ripe for education funding reform. A better policy is to base education funding on current student counts so school districts have incentives to rightsize when their local enrollments drop. 

In the post-pandemic K-12 education landscape, there are fewer students enrolling in traditional public schools than in previous decades. Combined with the birth dearth, it’s unlikely that public school enrollments will rebound in the near future. This makes it imperative that policymakers and school leaders implement reforms that fund students and streamline school closures.

From the states

In other significant developments, policymakers in New Hampshire took a step forward on K-12 open enrollment while Vermont took a step backward, and a federal school choice bill became law.

In New Hampshire, lawmakers passed Senate Bill 97-FN, codifying a statewide within-district open enrollment program. Students can now transfer to any public school inside their residentially-assigned school district with open seats. The bill currently awaits Gov. Kelly Ayotte’s signature.

Vermont Gov. Phil Scott signed House Bill 454, which limits how families can use public dollars to pay for private school tuition. Previously, students who lived in school districts that didn’t serve their grade level could use public education funds to pay for tuition at the private school of their choice. Under the new law, however, eligible students cannot use their education funds to pay for private schools located outside of Vermont or for private schools located inside a school district that offers schooling at all grade levels, likely excluding private schools in areas with denser populations. Moreover, only private schools where 25% or more of students are publicly funded are eligible to receive public funds. This new law is a major blow to Vermont’s private school scholarship program, the oldest in the nation. 

At the federal level, President Donald Trump signed the Educational Choice for Children Act into law, codifying the first federal tax-credit scholarship program. Eligible students must come from households whose incomes don’t exceed 300% of the median gross income of their locality, according to the K-12 Dive. Scholarships are only available to students who live in states that opt into the federal program. Students can use their scholarships to cover approved educational expenses, including tuition, tutoring, transportation, and homeschooling costs.

What to watch

In Ohio, a Franklin County Judge ruled that the state’s EdChoice Scholarship, a voucher program benefiting 140,000 students, is unconstitutional. However, the judge did not order the program to stop until after appeals, acknowledging that shutting down the program would cause “significant change to school funding in Ohio,” according to The74. Ohio Attorney General Dave Yost has appealed the ruling.

In Wyoming, a Laramie County district judge paused the implementation of the state’s private school scholarship program, which was codified during the 2024 and 2025 legislative sessions. The ruling said the program likely violates the state constitution, which “bars the legislature from appropriating money for educational or benevolent purposes to any person or entity ‘not under the absolute control of the state,’” according to the Cowboy State Daily.

Recommended reading 

Democrats’ School Choice Dilemma
Michael J. Petrilli in The Wall Street Journal

“It’s a tough dilemma. Will Democratic leaders opt their states into the new federal school choice program, allowing families to accept scholarships that are funded by charitable donations from taxpayers nationwide—scholarships that don’t cost their state a penny, and therefore can’t be said to be taking any money from their public schools?Or will they bow to the demands of the teachers unions and bar the schoolhouse door instead, creating a grand opportunity for GOP candidates running against them?”

New Federal Tax Credit Boosts School Choice—But Blue States Face Big Decision
Matt Barnum in The Wall Street Journal

“The law, enacted earlier this month, will soon allow taxpayers to redirect a portion of their tax bill to nonprofit scholarship-granting organizations or SGOs. The taxpayer could write a check of up to $1,700 to an SGO but get that full amount back via a reduction of the same amount in their income taxes, instead of a regular tax deduction for the donation. It is a donation that doesn’t ultimately cost the donor anything.”

Parents Win Key Supreme Court Test in Mahmoud v. Taylor
Joshua Dunn at Education Next

“Recognizing what a disaster the case was for the school district and the public education establishment, American Federation of Teachers president Randi Weingarten lamented on X that the case “should have been worked out on a local level, it’s a shame it went all the way to SCOTUS. Parents must have a say about their own kids, they are our partners in education.” Except a belligerent school board that was too stubborn or mathematically challenged to count votes on the Supreme Court made that impossible.”

The post Funding Education Opportunity: School districts slow to close schools despite losing students appeared first on Reason Foundation.

But despite what United Teachers Los Angeles and others might claim, LAUSD’s budget woes aren’t due to a lack of funding. According to the latest federal data, LAUSD received nearly $26,900 per student in fiscal year 2023. Taxpayers sending over $537,000 for each LAUSD classroom of 20 students is enough to provide a good education for kids.  

Instead, LAUSD’s problem is its lavish spending. Between 2012-13 and 2024-25, the district’s enrollment plummeted by 164,000 students, yet it added over 17,000 non-teachers such as instructional aides, school counselors, and social workers. The district also doled out a 21% pay raise to teachers in 2023, knowing that billions in federal COVID-19 pandemic relief dollars were set to expire the following year.   

California ranks fourth in the nation in public school spending growth since 2002, which has masked LAUSD’s financial mess. However, after two years of budget deficits and the current economic uncertainty, the state budget is projected to tighten in the coming years, and the district’s mishandling of COVID-19 reopening has accelerated its enrollment declines. 

LAUSD can do a few things to get its fiscal house in order, or it risks the same fate as school districts like Oakland and San Francisco, which are on the brink of insolvency.   

For starters, LAUSD needs to cut spending to sustainable levels. On average nationally, labor accounts for roughly 80-90% of typical public school budgets, so personnel reductions are unavoidable for LAUSD. This is never easy, but can be done in ways that minimize disruptions to classroom learning, such as trimming back on administration and non-instructional school staff. Regular attrition, such as retirements and resignations, can also be leveraged to minimize the need for pink slips.

LAUSD can also save money by reducing its facilities footprint. Research published by Available to All indicates that nearly half of the district’s elementary schools have experienced enrollment declines of 50% or worse in the past two decades, leaving an estimated 160,000 empty seats. 

Underutilized schools are costly to maintain and spread the school district’s financial resources thin, which can result in fewer elective classes and enrichment opportunities for kids. School closures are politically challenging but necessary if LAUSD is going to get on a sustainable path.  

Next, LAUSD can mitigate enrollment losses by giving families more options. States and school districts across the country are moving away from residential assignment, where students are zoned to schools and have limited or no options. Public school open enrollment gives students access to seats in schools regardless of where they live, putting parents in the driver’s seat and creating a competitive environment where public schools are incentivized to innovate, improve and attract students.

A study on LAUSD’s Zones of Choice program—a limited form of open enrollment—suggests that embracing an expansive policy would pay dividends for the school district. In their working paper on the impact of the Zones of Choice program, the University of Chicago’s Christopher Campos and the University of California-Berkeley’s Caitlin Kearns found significant gains in student achievement and college enrollment, which they attribute to increased competition. 

“The evidence demonstrates that public school choice programs have the potential to improve school quality and reduce neighborhood-based disparities in educational opportunity,” the researchers conclude.

Next, LAUSD can mitigate enrollment losses by giving families more options. States and school districts across the country are moving away from residential assignment, where students are zoned to schools and have limited or no options. Public school open enrollment gives students access to seats in schools regardless of where they live, putting parents in the driver’s seat and creating a competitive environment where public schools are incentivized to innovate, improve, and attract students.

A study on LAUSD’s Zones of Choice program—a limited form of open enrollment—suggests that embracing an expansive policy would pay dividends for the school district. In their working paper on the impact of the Zones of Choice program, the University of Chicago’s Christopher Campos and the University of California-Berkeley’s Caitlin Kearns found significant gains in student achievement and college enrollment, which they attribute to increased competition. 

“The evidence demonstrates that public school choice programs have the potential to improve school quality and reduce neighborhood-based disparities in educational opportunity,” the researchers conclude.

The solutions to LAUSD’s fiscal woes are straightforward—spend less, give parents choices, and focus on academics. The challenge will be overcoming objections from United Teachers of Los Angeles and other groups that oppose anything that disrupts the failing status quo. However, adopting these reforms would be a win-win for the district and students and would be worth the political fight.

A version of this column first appeared at the Los Angeles Daily News.

The post How LAUSD can deal with budget deficit, declining enrollment appeared first on Reason Foundation.

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.

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.

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The National Center for Education Statistics (NCES) expects these downward trends in public school enrollment to continue. It projects statewide enrollment losses of 15.7 percent by the 2031-2032 school year.

With decreased enrollment and federal pandemic relief funding expiring, Southern California school districts face severe budget crunches. State and local budgets for the next fiscal year are still being developed, but LAUSD’s projected deficit is $94.5 million, Long Beach Unified’s expected deficit is $54 million, and Santa Ana Unified’s is facing a whopping $180 million budget deficit.

School districts facing these massive deficits should be looking to right size. However, new data from Reason Foundation shows that California’s public schools have been slow to respond to the red ink and loss of students. In fact, California has actually closed fewer public schools in recent years. In total, California closed 31 public schools in 2019-2020 but only closed seven public schools statewide in 2023-2024, which is even fewer public school closures than in smaller, rural states like South Dakota and Utah.

Today, California has thousands of underutilized schools. Statewide research published by The 74 shows that 1,400 public schools lost at least 20% of their enrollment during the pandemic, 125 of which were in LAUSD. Underutilized schools are expensive to operate and spread resources thin, which isn’t good for students.

Generally, public school funding is tied to student enrollment, and fewer students mean fewer dollars. But during the pandemic, California’s public schools got a windfall of federal relief cash, and non-federal funding rose faster than in any other state—by $1,691 per student after adjusting for inflation.

California also has a generous hold harmless provision in its funding formula, allowing public schools to collect funding for students they had in previous years but who are no longer at the schools—known as “ghost students.” A Reason Foundation study estimated that California funded 401,000 ghost students in 2022-2023, costing taxpayers $4 billion.

Together, these policies insulated public schools from making difficult budget decisions like closing underutilized schools, even allowing them to give in to teacher union demands for salary increases and bonuses. For example, LAUSD—which got billions in federal COVID relief funds—gave teachers a 21% hike pay hike in 2023 and doled out pay bumps to counselors, psychologists, nurses, and others.

With federal relief dollars expiring and a bleak state budget outlook, school districts are beginning to face fiscal reality. California’s Legislative Analyst’s Office estimates that the state’s budget deficit could grow to $30 billion by 2028-2029, which would put future K-12 funding increases in jeopardy. Statewide, inflation-adjusted public school funding grew by 59% per student between 2002 and 2022, but declining enrollment puts schools in unchartered waters.

School closures are difficult and politically fraught, and they will not alone balance school district budgets. However, they are critical to properly serving the students still in public schools, right-sizing spending, and reaching fiscal sustainability.

State policymakers should shine a light on the problem by requiring the state to collect and report on vacant and underutilized school buildings annually. That way, taxpayers and other stakeholders can hold public schools accountable for being good stewards of public resources. For their part, local policymakers must tackle enrollment declines and school closures head-on and resist attempts to delay or block plans to reduce their facilities footprint.

Ultimately, California’s public schools must prioritize the students still in them, which will require closing schools and making other difficult decisions such as staff and programmatic reductions.

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

The post Southern California school districts are serving fewer students and facing massive budget deficits appeared first on Reason Foundation.

With falling birthrates and parents increasingly looking to K-12 alternatives—such as private schools and homeschooling—state and local policymakers will need to adapt to the new enrollment reality. Here are five ways they can address the challenges posed by declining enrollment.

1. Shine a light on empty school buildings

Transparency is a foundational tool for addressing K-12 enrollment declines. While states typically publish enrollment data, this isn’t enough.

Underutilized schools often signal financial problems and can mean that families are dissatisfied with the school’s educational quality. Indiana provides a framework for identifying public school facilities that are vacant or underutilized across the state, a critical step for policymakers. 

Passed in 2023, Indiana Senate Bill 391 established reporting requirements for school districts whose enrollment declined by 10% or more in the preceding five years. School districts subject to the law must conduct an annual review to identify buildings eligible for closure under the policy. These findings must be reported to the Indiana Department of Education, including an accounting of designed occupancy rates and usage information (e.g., classroom instruction, office space, storage, or special-use classrooms).

While some states make similar information available—typically requiring school districts to publish lists of vacant facilities— they generally fall short. For example, Arizona’s vacant space report fails to capture reliable data about underutilized facilities, with most districts reporting none. In comparison, Indiana’s approach ensures that policymakers, taxpayers, and other stakeholders can fully assess whether school districts are operating efficiently using data collected by the state.

2. Strengthen rights for charters and other K-12 providers 

School districts are often reluctant to let go of unused space, even when there are motivated buyers or tenants. One reason is that they don’t want to do business with their competition, which is why about 18 states have adopted right of first refusal laws, giving charter schools priority to purchase surplus facilities. For example, school districts in South Carolina must allow charter schools to purchase or lease surplus buildings at or below the market rate before offering them to the public. But school districts can easily get around these laws by not designating buildings as vacant, a limitation that Indiana lawmakers also recently addressed.  

For years, Indiana has required school districts to sell or lease surplus facilities to charter schools for just $1—an ambitious policy with little practical effect. However, Indiana’s policy now broadens eligibility to include underutilized buildings, defined as those operating below 50% capacity in the current and prior two school years. While the law makes some exceptions for school districts (e.g., if the building is used for special student populations at 30% capacity or more), it also allows charters to petition the Indiana Department of Education for a final ruling on closure if they can’t reach an agreement for an eligible building within 45 days.

Indiana strengthened its right of first refusal policy by looking beyond vacant facilities and establishing a clear appeals process that the state’s attorney general can enforce. Policymakers in other states could consider extending these rights to non-profit K-12 providers as well.

3. Eliminate funding protections

Many states have hold-harmless provisions that protect school districts against revenue losses. These policies untether the relationship between funding and student needs, especially during periods of declining enrollment.

Hold harmless policies generally take two forms: 16 states have declining enrollment protections that allow school districts to use prior years’ student counts for funding purposes, while 22 states have funding guarantees that ensure school districts get a minimum level of state aid.

While hold-harmless policies have benefits—such as making budgets more predictable or serving as a bargaining chip to get needed reforms across the finish line—they also have substantial drawbacks. For instance, hold harmless polices weaken the incentive for school districts to right-size or innovate in response to enrollment losses and can also strain state budgets. Reason Foundation estimates that in 2021-22, Missouri’s declining enrollment provision cost the state $197 million—nearly 5% of the state’s total formula aid—while two of its funding protections cost the state another $134 million.

State policymakers should assess the cost of hold-harmless policies and whether these education funding dollars could be used better, which is critical when public school enrollment is falling and states can’t afford to spread dollars thin.  

4. Shore up teacher retirement systems

Teacher pension plans are underfunded by hundreds of billions of dollars today, a problem that public school enrollment declines will likely exacerbate. States have failed to set aside enough money to cover the pension benefits promised to teachers, resulting in unfunded liabilities (i.e., the difference between the total pension benefits owed to teachers and the dollars available in pension funds). For instance, Texas’ teacher pension plan had an estimated $70.4 billion in unfunded liabilities in 2023, California’s had $85.6 billion, and Ohio’s had $20.2 billion.

As enrollment falls—and the number of public school teachers likely drops—pension contribution rates for teachers and school districts will continue to rise to service pension debt. As a result, pension costs would consume a larger share of teacher paychecks and school district budgets, leaving fewer dollars for things like pay raises, tutoring, or classroom technology.

Policymakers should take steps to reverse this pension “crowd out” by paying down teacher pension debt as fast as possible to avoid high-interest costs and modernizing antiquated assumptions and benefit designs. For example, states should make more realistic assumptions about their plans’ investment returns and future demographic patterns, which is vital in ensuring solvency. Committing to long-term fiscal discipline in pension funding and modernizing retirement design can prevent the problem from worsening and help mitigate unforeseen increases in contributions.

5. Modernize facilities funding and management

School districts should right-size their facilities footprint in the short term to minimize underutilized or vacant buildings. While some might resist selling assets that might be used in the future—and various legal and regulatory barriers exist that may complicate any divestiture—districts shouldn’t hold onto buildings that aren’t operating in a way that advances their educational mission. 

But long-term changes are also needed to how districts manage their portfolios of real property assets.

As public school enrollment declines over time, it could become increasingly difficult for districts to pass general obligation bonds that finance facility construction and improvements. This challenge could become greater in states with robust school choice programs such as open enrollment, education savings accounts, and charter schools. As more students attend schools other than their residentially assigned ones, voters might be reluctant to support local funding measures that they don’t directly benefit from.

They might also object to paying for facilities that benefit students who don’t reside within district boundaries (and whose parents don’t pay local taxes to the district). For instance, Arizona’s Queen Queek Unified—where most of its students are out-of-district transfers—has had difficulty getting voters to approve bonds in recent years, which some blame on the state’s open enrollment program.

To overcome these and other challenges, K-12 policymakers should look to public-private partnerships (P3s). The basic idea is that private companies can partner with public agencies to help build or improve facilities through a combination of support, including finance, design, construction, operations, and/or maintenance. A similar approach has been adopted for other public infrastructure assets such as airports, water/wastewater systems, and various social infrastructure facilities like courthouse facilities, hospitals, and university campus development. 

P3s offer several advantages, including cost savings, improved project outcomes, timeliness, and risk-sharing between public and private entities. For instance, in 2021, Prince George’s County Public Schools (PGCPS) entered a P3 arrangement to finance, design, build, and maintain six new schools over 30 years. This deal will save the district an estimated $180 million and expedite construction.

Conclusion

With fewer students in public school classrooms, state and local policymakers should pursue policies that right-size public education. While these solutions aren’t always easy, they can build a foundation for a more sustainable education system in the long run, which is better for students, educators, and taxpayers.

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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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However, to do this, President-elect Trump will need the support of Congress. U.S. Rep. Thomas Massie (R-KY) announced plans to introduce a proposal to abolish the department in 2025. Massie told ABC News, “There’ll be one sentence—only thing that will change is the date: The Department of Education shall terminate on December 31, 2026.” Rep. Massie has introduced proposals to eliminate the department since 2017.

This isn’t the first time the department has been on the chopping block. In 1982, President Ronald Reagan supported closing the agency, but Republican lawmakers didn’t have the votes necessary to eliminate it.

Today, President-elect Trump could face the same problem. Even though Republicans control both the U.S. House and Senate after the November elections, they fall short of holding a supermajority in the Senate chamber by seven votes. 

As Cato Institute’s Director of Educational Freedom Neal McClusky explained, it’s doubtful that the Trump administration could convince seven Democratic senators to break ranks with their party and support Republican efforts to abolish the department. 

Even if Republicans managed to collect the necessary votes, shuttering the agency would be a much larger task today than in the 1980s. 

Since its establishment, the department’s appropriation grew from nearly $53.6 billion in 1980 to about $111 billion in 2021 after adjusting for inflation, an increase of 106%. While the Department of Education delivers some funds for K-12 education, most go to higher education. The New York Times reported that “more than 70% of its $224 billion annual budget goes to the federal student aid program.”

However, closing the Education Department wouldn’t eliminate every program or end all federal spending on education. The Heritage Foundation’s Lindsey Burke, who wrote the Project 2025 chapter on dissolving the department, argues that federal policymakers should “reform, eliminate, or move the department’s programs and offices to appropriate agencies.” 

For instance, she suggested block-granting most funding under the Individuals with Disabilities Education Act (IDEA) and moving its administration to the U.S. Department of Health and Human Services.

Yet others are worried that the juice isn’t worth the squeeze. The American Enterprise Institute’s (AEI) Kevin Kosar explained to The74, “Go ahead, abolish the Department of Education…But if you scatter all of its programs to other departments, you’ve gotten rid of 4,100 people, and you have to hire people in other departments to process those grants and aid applications anyway. So how much juice are you getting from that?”

Plus, some argue that the temptation to use the Department of Education as a cudgel against opponents in deep blue states may prove too great for Trump, as AEI’s Rick Hess pointed out in Education Next.  “We’re likely about to see something we’ve never seen before: a Republican Department of Education aggressively and unapologetically exploiting every last bit of its executive authority,” Hess writes. 

The president-elect has yet to announce his plans to eliminate federal agencies, large or small. Regardless of the scope of his ambitions, the incoming president and his supporters should anticipate dogged attacks from teacher unions and school districts that support a large federal role in K-12 education. At the end of the day, the agency should pursue policies that are in the best interest of students and their families.

From the States

In other important education and school choice developments across the country, North Dakota Gov. Doug Burgum called for universal school choice and North Carolina policymakers sent more funds to the state’s private school choice program.

After the South Carolina Supreme Court ruled the state’s private school choice program unconstitutional, the Chairman of the Senate Education, Sen. Greg Hembree (R-District 28), is exploring alternatives. Specifically, he aims to introduce a private school choice proposal with different funding mechanisms to circumvent the issues raised by the court.

In North Dakota, Gov. Doug Burgum called for universal school choice earlier this month in his budget address. Last year, the governor vetoed a school choice proposal because he said the bill didn’t “go far enough.” In his address, Gov. Burgum explained, “This is not about public versus private education. This is about ensuring that every student has what they need to support a pathway to career, college or military readiness. We recommend the Department of Public Instruction develop a program that drives an ESA [education savings account] forward to continue putting North Dakota on the map for serving all students — public, private and homeschool.”

The North Carolina General Assembly overrode Gov. Roy Cooper’s veto and codified a proposal that sent $95 million to public schools and an additional $463.5 million to the state’s Opportunity Scholarship. According to EdNC, this likely ensures that all children on the program’s waitlist will receive a scholarship.

In Mississippi, House Speaker Jason White (R-District 48) announced plans to introduce a proposal to establish a targeted private school choice program in 2025. The program would provide education savings accounts to students assigned to failing public schools.

What to Watch

New Hampshire policymakers will divvy up education-related proposals by funding and policy.

This year, education-related bills in New Hampshire will be split between two House committees, one focusing on policy and the other on funding. Between 2008 and 2022, the number of education-related bills introduced increased by about 160%, overwhelming committee members. The Speaker of the House decides which committee bills will be sent to.

In January, students can submit applications to Alabama’s new private school scholarship program. Eligible applicants’ families’ income can’t exceed “300% of the federal poverty line for the preceding tax year,” 1819 News reported. 

The Latest from Reason Foundation

–The most consequential school choice and education freedom bills of 2024 at Reason Foundation
Reason Foundation tracked 156 bills across 35 states. Twelve of these proposals were signed into law, expanding both private and public school choice for students.

–The most important public school open enrollment laws and proposals of 2024 at Reason Foundation
Three states significantly improved their open enrollment laws this year. These reforms included key changes, such as making public schools free to all students, establishing statewide within-district open enrollment, and improving transparency.

Recommended reading 

“Education Should be Handled at the State and Local Level”
Frederick Hess’s interview with Rep. Virginia Foxx (R-NC) at Education Next

“Sending 300 percent more funding to K–12 schools than what is typically allocated by the Department of Education without instituting strong transparency and accountability measures is reckless. Money is not a cure-all, and it is irresponsible to throw more money at a problem and call it a solution.”

Red-State Referendum Defeats Are Cause for Contemplation, Not Bravado
Frederick Hess at Education Next

“For what it’s worth, it strikes me that, in Kentucky and Nebraska, choice advocates forgot what had fueled their recent success. The tough work of navigating legislatures has brought a healthy discipline to choice advocacy. In wooing individual legislators, advocates have focused on program design, showing minimal short-term budget impact on district schools, and delivering the practical, reassuring message, “We just want to give families more options.” The referenda fights lacked that tight focus. The appeals got too online and too abstract.”

School Closures Are Way Down, but Delaying These Hard Choices Makes Things Worse
Chad Aldeman at The74

“Too many district leaders closed their eyes to financial reality and hoped for societywide population trends to suddenly reverse. But there are signs they may be starting to grapple with the harsh budget truth.”

The post Funding Education Opportunity: Will Trump shutter the U.S. Department of Education? appeared first on Reason Foundation.

Figure 1: Open Enrollment Best Practices and State Ranking Methodology

In the study, the policies and metrics that expand school choice options most, such as statewide cross- and within-district open enrollment, receive the highest values, while complementary metrics that bolster good open enrollment laws, such as transparency provisions, received lesser values. A good statewide cross-district policy requires all of the state’s public school districts to accept transfer students so long as seats are available at the incoming schools.

Overall, Reason Foundation found that only five states—Oklahoma, Arizona, Idaho, West Virginia, and Utah—scored an “A” in overall open enrollment policies. Oklahoma’s open enrollment law is the best in the nation, scoring 99 out of 100 points. The state’s only minor deduction was because school districts aren’t required to inform denied applicants in writing why they were rejected.  

Idaho’s open enrollment laws were ranked second best in the country. Arizona and West Virginia also earned “A” grades and tied for third place. 

Figure 2 summarizes every state’s open enrollment grade and overall score. 

Figure 2: Ranking States Open Enrollment Laws

Seven states’ open enrollment laws earned “Bs,” including Florida, Kansas, Colorado, and Delaware. In most cases, these states can easily improve their solid rankings by improving open enrollment transparency reports for parents and lawmakers. 

For instance, if Florida law required state agencies to collect and publish open enrollment data in an annual report, the state’s score would improve from a B+ to an A.

In many cases, states could significantly improve their rankings by requiring all school districts to participate in within-district open enrollment. For instance, if Wisconsin adopted this policy, it would improve to 5th place nationwide instead of 10th. 

Unfortunately for public school students, most states have a lot of work to do. Our rankings give 33 states grades of “F,” largely because they don’t require school districts to participate in cross-district open enrollment. Weak open enrollment policies like these let school districts opt out of the program and block transfer students they perceive as undesirable or don’t want to accept. 

In some cases, such as Ohio, state policymakers could expand existing cross-district open enrollment policies so all school districts participate. This reform would significantly strengthen Ohio’s law, as well as those in 25 other states.

However, some states don’t have codified voluntary open enrollment programs, leaving transfer policies wholly up to school districts. For instance, four states–Alaska, Maine, North Carolina, and Maryland–tied for dead last, scoring zero points in the report. While some school districts may permit transfers in these states, open enrollment is not codified in state law.

The good news is that open enrollment is succeeding in places where it has been implemented and there is a lot of appetite for open enrollment policy. Last year, state legislators introduced at least 85 proposals involving open enrollment. Ultimately, three states–Indiana, Oklahoma, and Nebraska–codified proposals that significantly improved their open enrollment laws.

Moreover, K-12 open enrollment is a popular form of public school choice with parents of school-aged children, with 75% of parents with kids supporting it, according to national polling by EdChoice and Morning Consult. Plus, data from Colorado, Wisconsin, and West Virginia show that open enrollment is the most popular form of school choice. 

In the 2025 legislative sessions next year, state policymakers and school choice advocates advance policies that help students attend schools that are the right fit, regardless of where they live, and open enrollment can be an important part of that.

What to Watch

Kentucky, Colorado, and Nebraska voters will consider ballot measures related to school choice while voters in Florida and California review ballot measures on school board elections and funding.

Kentucky advocates are making their final appeals to voters about Amendment 2, which would let the legislature fund K-12 students outside of traditional public schools. If the constitutional amendment passes, the legislature could codify school choice programs, such as charter schools or private school scholarships. In 2021, the legislature codified a tax-credit scholarship program, which was later ruled unconstitutional by the state Supreme Court the next year. Opponents of the amendment argue it will take funding away from traditional public schools.

In Colorado, Amendment 80, another constitutional amendment, would establish a right to school choice for every child. While Colorado has robust public school choice options via charter schools and open enrollment, the state does not offer private school choice programs. 

In September, the Nebraska Supreme Court ruled that a referendum to partially repeal a new private school choice program could appear on the November ballot. Last spring, the legislature codified Nebraska Education Scholarships, which families can use to pay for private school. Policymakers appropriated  $10 million to the program, which prioritizes students from low-income families.

Florida voters will decide about Amendment 1, which would implement partisan school board elections. Since 1998, school board elections have been non-partisan. If the amendment passes, candidates would have to disclose their political affiliations. Proponents argue that this will make elections more transparent, while opponents claim that the elections will become more politicized. 

A California ballot measure, Proposition 2, would let the state “issue $10 billion in general obligation bonds for the construction, improvement, and repair of educational facilities statewide,” Reason Foundation’s Christian Barnard wrote. Proponents argue that the school districts need funds to maintain school buildings, especially since approved funding from the last state bond initiative in 2016 is gone. Opponents argue that state bonds generally benefit wealthy school districts most and that local taxpayers should pay those costs instead.

After Student First Technologies failed to effectively roll out Arkansas’ Education Freedom Account–the state’s private school scholarship program–the Arkansas Department of Education will terminate its contract with Student First Technologies as of December and is seeking bids from new vendors. “A new contract is expected to be awarded by November 18,” the Arkansas Advocate reported. Five new companies submitted applications as of the Oct. 18 deadline.

Former President Donald Trump stated support for school choice at the federal level, calling it the “civil rights movement of our time.” While most education funding is state and local and should be that way, Trump said that “federal dollars [should] follow the student,” according to Fox News.

The Latest from Reason Foundation

–What the Birth Dearth Means for Public Schools at The Dispatch

Fewer students, increased competition from homeschools, charter and private schools, and a massive fiscal cliff mean that traditional public schools must adapt if they hope to successfully compete in the post-COVID education landscape. 

–Florida Amendment 1 would implement partisan elections for district school boards 

–Kentucky Amendment 2 would allow state funding for non-public education 

–California Proposition 2 would issue $10 billion in public education facilities bonds 

–Arkansas K-12 education finance series: Teacher pay before and after the 2023 LEARNS Act

–Arkansas K-12 education finance series: How to improve the state’s school funding system

–Virginia’s K-12 funding system needs an overhaul, not tweaks

Recommended reading 

Should the Wealthy Benefit from Private-School Choice Programs?
Derrell Bradford and Michael J. Petrilli at Education Next

“The well-off are a powerful constituency, and the public school apparatus has offered them an educational and financial package so lucrative that few people could (or do) say no, whether they reside in red states or blue. Thus, in building a “diverse” constituency to ballast themselves politically, the public schools have appealed not in a targeted way to the needy, but broadly and most beneficially to those who need very little. And, to date, this strategy of subsidizing the rich has worked brilliantly for the system.”

Earn-and-Learn Education
Bruno V. Mann at National Affairs

“Today’s earn-and-learn apprenticeships are cultivating both hard skills and soft networks. Building on the traditional registered-apprenticeship model, these programs foster opportunity pluralism at the K-12 and post-secondary levels. This moves the locus of learning from the campus to the workplace — and that is good news for young Americans.”

No Silver School-Spending Bullets
Marguerite Roza and Maggie Cicco at Education Next

“Districts can tweak their own budgeting processes, but some small nudges from states could help reorient budgeting on a larger scale. Specifically, states could require that student outcomes be reviewed as part of the budget process and that the budget be reviewed when new test scores emerge. And states could establish minimum financial training requirements for district leaders and board members so they are better equipped to factor in returns on investments during each budget cycle.”

The post Funding Education Opportunity: Grading states’ K-12 open enrollment laws appeared first on Reason Foundation.

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.

Kentucky Amendment 2 would authorize the legislature to fund K-12 students outside of the traditional public schools.  

Amendment 2 would allow the legislature to fund alternative schools like charter schools or provide tax-credit scholarships, vouchers, or education savings accounts that families could use at schools they chose, including private schools.  

Fiscal Impact 

This amendment has no direct fiscal impact. 

Proponents’ Arguments 

Proponents argue that this measure is necessary since it will create an environment whereby families can choose their children’s schools. Until now, the government has assigned students to their schools based on where they live. If this amendment passes, the legislature could fund education options other than traditional public schools, such as charter schools, tax-credit scholarships, vouchers, or education savings accounts. This could create a fairer system since students and their parents could select schools outside the state’s traditional public school system that are a better fit, giving families agency in school selection. Parents know what is best for their children, including which schools are the right fit.  

Moreover, this reform would remove the 130-year-old “handcuffs” binding legislators today and prevent them from funding alternative schools or school choice. Freed of these constrictions, Kentucky policymakers can pass education laws supported by the people who elected them.  

Opponents’ Arguments 

Opponents argue that Amendment 2 would let policymakers divert funds from public schools, investing in private schools that are unaccountable to taxpayers. Experience from other states that have passed such laws finds that the fiscal costs associated with vouchers are high, often ballooning more than estimated projections, and they subsidize the education costs of existing private school students at the expense of public school students. Moreover, these new costs will especially hurt rural public schools, which are already in need of additional funding.  

Critics argue that, ultimately, the amendment would undermine K-12 public education, the backbone of Kentucky’s communities. Voting against it will protect the state’s public schools, taxpayer dollars, and local communities. 

Discussion  

Families in Kentucky have limited educational options if they cannot afford to pay for private education. This means that even though Kentucky law requires parents to send their children to school, they often lack real education options other than their assigned schools. Many families use school choice policies to attend schools that are a better fit, reflect their religious convictions, are safer, or have better academics. Kentucky should ensure that families have a diverse array of choices for how to use state funding for their child’s education, even if that is to send them to a religious school. Amendment 2 would be a step in the right direction since it would let the legislature direct public funds to schools outside of traditional public schools.  

Private school choice programs offer an array of benefits, such as access to safer schools, better academics, or increased graduation rates. As of 2023, 84% of the 187 studies on private school choice programs showed positive effects, 10% showed null effects, and only 6% showed negative effects. At the same time, competition between private and public schools can encourage schools to improve, benefitting both private and public school students. 

Moreover, a 2021 analysis of Florida’s tax-credit scholarship program traced the program’s effects on students for 15 years. Most notably, the report found that the private school choice program benefitted public school students’ behavior and academics. While all students benefitted, low-income students showed the most improvement. The authors attribute these gains to the ripple effects of competition, which encourage all schools to improve.  

While private schools don’t have the same bureaucratic accountability required of public schools, they face a more immediate form of public accountability: parents who can take their education dollars to a competitor. Private schools that fail to meet the needs of students close since dissatisfied families leave.  

The additional cost of school choice programs depends on varying factors, such as appropriations, student eligibility, and program type. For instance, a universal voucher could initially increase costs as current private school students use it. However, a universal tax-credit scholarship, like the one proposed in 2022, would not incur increased costs to taxpayers since the accounts are funded by tax-free donations.  

Fears that school choice policies will destroy local communities are overwrought. Most public schools, including rural ones, already compete with nearby private schools for students. In fact, seven in 10 students living in rural areas live within 10 miles of a private elementary school. Data from states with robust school choice programs show that public schools can successfully navigate a more competitive education marketplace. For instance, since charter schools were introduced in Arizona 30 years ago, the state has only consolidated rural school districts in two counties, closed one school district (which had no charter or private schools in it), and created one new school district. This illustrates that school choice is not a death knell for public schools or their communities. 

The post Kentucky Amendment 2 would allow state funding for non-public education appeared first on Reason Foundation.

This begs the question, ‘How exactly is the head of a federal agency fighting for public education?’ Even the chancellor of New York City Schools recently emphasized that K-12 education should remain a state issue. “Ultimately, I go back to the fact that education is still within the full purview of the states,” Chancellor David C. Banks told The New York Times.

Accompanied by Becky Pringle, president of the nation’s largest teacher union, the National Education Association (NEA), Secretary Cardona revealed some of his cards at a roundtable in Michigan, “When we talk about fighting for public education, we gotta fight for our educators too,” he said. 

In particular, Cardona emphasized how Public Service Loan Forgiveness (PSLF) programs signal a strong federal investment in K-12 education by forgiving eligible teachers’ student loans. To date, the PSLF program has covered approximately $4 billion in debt for nearly 470,000 teachers.

Unfortunately, we can’t say that PSLF for teachers paid off for students. “Despite decades of reform efforts, substantial public investment, and increased staffing levels, outcomes in public schools, especially those serving disadvantaged communities, have barely budged in half a century,” the American Enterprise Institute’s Robert Pondiscio explained.

For instance, Reason Foundation’s K-12 Spending Spotlight shows that, on average, 4th- and 8th-grade students taking the National Assessment of Educational Progress failed to make significant progress, if any, between 2003 and 2019 in math and reading.

Given this failure to improve national test scores and student learning, recently exacerbated by pandemic-induced learning loss, Secretary Cardona’s joint bus tour with the NEA’s president, campaigning for federal handouts for teachers, appears tone-deaf at best. There are important differences between fighting for public school students and fighting for teachers’ unions.

To make matters worse, PSLF programs help subsidize a broken system where teachers are rewarded for earning degrees that might not even help them improve student learning.

For instance, at least 46 states pay teachers with master’s degrees more on average than teachers with only bachelor’s degrees. However, Stanford University’s Eric Hanushek’s research showed that teachers’ master’s degrees don’t improve student outcomes. “Perhaps most remarkable is the finding that a master’s degree has no systematic relationship to teacher quality as measured by student outcomes,” Hanushek finds.

Taxpayers should not pay double for degrees that fail to impact student learning. Instead of promoting policies at the state and federal levels that encourage degree inflation, policymakers should reconsider how to make careers in public education more attractive and accessible. 

For one, state policymakers should ensure that increases in education revenues make it into instructional salaries. Teachers in many states have not seen salaries increase even as there have been massive increases in overall education funding. Reason Foundation research showed that total K-12 revenues increased by 25% between 2002 and 2020. However, “inflation-adjusted spending on instructional salaries hardly budged, increasing from $4,920 to $5,145 per student,” an increase of just five percent for teachers.

Additionally, state policymakers should remove unnecessary barriers to the teaching profession, such as requiring teacher licenses. These exams are poor predictors of candidates’ teaching abilities and impose financial barriers to entering the profession.

Reforms like these can help states attract and retain good teachers who can help students recover from learning loss and improve in the years ahead.

From the states

North Carolina policymakers vote to expand private school scholarship funding.

In North Carolina, the state Senate and House passed a supplemental spending plan that includes $248 million for the state’s Opportunity Scholarship, which parents can use to pay for student’s education expenses, such as private school tuition or transportation. This new funding aims to provide scholarships to the 55,000 children who were waitlisted for the program after the General Assembly removed eligibility caps from it. The proposal now goes to Gov. Roy Cooper’s desk, and the Associated Press reported that Senate leader Phil Berger anticipates a veto and “an override vote would be more likely in November.”

What to watch

Arkansas’ Attorney General Tim Griffin announced that private schools participating in the state’s private school choice program are not subject to Freedom of Information Act requests. He argued that even though private schools accept state funds, they are not intertwined with the state since private schools existed and operated independently of the state before the scholarships were established. Moreover, he argues the state did not delegate its education authority to private schools since public schools will continue to operate free of charge to students and “under State control,” Griffin announced, according to the Democrat Gazette. Opponents say private schools that accept taxpayer dollars should have to follow the same rules as public schools.

South Carolina’s Supreme Court ruled that the state’s Education Scholarship Trust Fund Program, a targeted education savings account, is unconstitutional. Codified in 2023, the program would have provided eligible recipients (students whose families earned 200% or less of the Federal Poverty Limit) with scholarships valued at $6,000. In a 3-2 ruling, the state Supreme Court stated that the program financially benefits private schools in violation of the South Carolina Constitution.

Recommended reading 

A Vast Right-Wing Conspiracy?
Jay P. Greene at Education Next

“If [Joshua] Cowen were to critically examine his own argument, he might consider alternatives to his contention that school choice has only spread across the country because billionaires used their wealth to weave a vast conspiracy that has hoodwinked people into ignoring the “overwhelming” evidence against vouchers. He might consider the possibility that other people interpret the evidence differently and also assign different importance to various kinds of outcomes.”

Should Schools Hire More Staff or Pay Teachers More?
Paul Peterson at Education Next

“We are still refining our analysis, but our early results indicate that the recent run-up in non-teacher employment is not as troubling as it seems. In states without a duty-to-bargain law, hiring other school employees yields at least as much gain in math achievement as hiring additional teachers. If districts have a shortage of employees who provide nutritional, medical, social, psychological, and other needed services, then hiring more of them may be beneficial. The need for additional hires may be especially large in states without duty-to-bargain laws.”

The Miseducation of America’s Teachers
Daniel Buck at National Affairs

“Our nation’s teacher-preparation system is broken. Our educators enter the profession woefully unprepared for their jobs. The large majority attend programs at university schools of education, where they read and discuss esoteric academic literature that contains no references to classroom-management techniques, lesson pacing, learning assessments, or other practical knowledge. These schools are boxing academies that don’t teach their students how to duck and weave.”

The post Funding Education Opportunity: Student loan forgiveness is not the answer to strengthening public education appeared first on Reason Foundation.

A new Reason Foundation report reviews the current open enrollment data collected and shows how to improve transparency for parents and lawmakers.  Most states don’t require state education agencies (SEAs) to collect or publish data on open enrollment. Only 13 states require their education agencies to collect data on the number of students using their open enrollment programs.

Even fewer states require agencies to collect school district-level data showing the number of denied transfer applicants and why those students were rejected. In some cases, SEAs collect these data but aren’t required to publicly publish their findings on their websites.

Only three states, Oklahoma, Kansas, and Wisconsin, meet Reason Foundation’s robust transparency best-practices recommendations. However, even Oklahoma could do more to improve its open enrollment transparency reports.

This data dearth is a problem for parents looking for public schools and policymakers looking to improve their laws. Thorough open enrollment reports, like Wisconsin’s, can inform policymakers, families, and taxpayers about how school districts need to improve. 

For instance, families can use these reports to hold school districts accountable for their open enrollment practices, especially districts that may reject transfer applicants, such as students with disabilities, at high rates.

Plus, open enrollment data can show how students use the transfer programs and how open enrollment can help school districts attract students and improve. 

For instance, the latest data from Arizona, Wisconsin, Florida, and Colorado showed that more than 658,000 students used open enrollment to attend traditional public schools other than their assigned ones. 

Figure 1: Open Enrollment Transfers in Select States

In these cases, approximately 10% of students in traditional public schools used open enrollment. However, 28% of Colorado’s public school students transferred to public schools other than their assigned ones.

Additionally, this data revealed that students tended to transfer to schools in better-ranked school districts. 

While urban and suburban school districts generally attract the most transfers, thousands of students also transferred to rural school districts in these states. Notably, 31% of Wisconsin’s cross-district transfer students chose rural schools. 

These findings are consistent with a 2021 report published by California’s Legislative Analyst’s Office, which found that small and rural school districts used open enrollment to bolster their enrollment. The per-student funding that comes with transfer students can help these school districts remain fiscally solvent, especially if the school district is experiencing declining enrollment. 

Unfortunately, many states, such as Georgia, don’t even require their SEAs to collect the data showcased here. This leaves the public in the dark about how open enrollment affects them, helps students, and the programs’ impacts on school districts. 

In 2023, at least three states codified proposals that require SEAs to collect open enrollment data.

This year, proposals in at least four states that would have required SEAs to collect open enrollment data were introduced but weren’t signed into law. 

State policymakers should ensure that their open enrollment laws are bolstered by robust transparency provisions to ensure that policymakers, taxpayers, and families can make informed decisions about open enrollment.

From the states

Texas policymakers prepare for the 2025 legislative session.

In Texas, the House Public Education Committee met to discuss private school choice efforts backed by Gov. Greg Abbott. Republican Chairman Brad Buckley said, “Parents have the ultimate power when they make a school choice decision. And they’re the ones that can decide whether or not the school is meeting the needs of their kids,” the Dallas Morning News reported.

What to watch

Florida’s Personalized Education Program, an education savings account administered through the state’s tax-credit scholarship program, expanded so up to 60,000 students can receive scholarships during the 2024-45 school year. So far, 81% of the nearly 40,000 applications submitted have been approved. Already, this is a 64% increase in participation in the program compared to last school year. Eligible applicants, like homeschooled students, cannot be full-time students at public or private schools.

A circuit court judge denied Arkansas’ attorney general’s motion to dismiss a lawsuit arguing that the state’s private school choice program is unconstitutional. The lawsuit claims that the program, codified under the LEARNS Act in 2023, violates the state constitution since it diverts funds from their intended purposes and uses public funds for unauthorized or illegal purposes. To date, more than 16,000 students applied for these scholarships for the 2024-25 school year.

Kentucky’s Pulaski County Board of Education faces scrutiny after posting information on its website urging voters to oppose an upcoming ballot initiative this fall, which would amend the state constitution to make private school choice programs legal. Rep. Thomas Massie (R-KY) accused the school district of breaking the law and engaging in electioneering. Amendment 2, the upcoming ballot initiative, is a contentious issue. In 2021, the state legislature overrode Gov. Andy Beshear’s veto, codifying a tax-credit scholarship program. But, in 2022, the Kentucky Supreme Court ruled that the program was unconstitutional. Amendment 2 aims to resolve the issue.

The Latest from Reason Foundation

—Rural West Virginia families embrace open enrollment
The state’s latest data shows large numbers of rural students using open enrollment, helping debunk the myth that open enrollment only benefits urban and suburban school districts.

—Oklahoma now has the best open enrollment policy in the country
The state’s 2024 updates to its open enrollment law make it better than policies in other top-scoring states, including Florida, Arizona, and Idaho.

—Arkansas K-12 education finance series: Adequacy review findings and recommendations so far
In the final installment of a three-part series, Reason’s Christian Barnard examines the details of Arkansas’ education funding system and how to improve it.

Recommended reading 

Why Markets Matter in Education
Michael Q. McShane at The Show-Me Institute

“Markets offer three mechanisms that facilitate school choice. First, they allow for a level of diversity in school offerings that traditional, centrally managed school systems are not able to. Second, they encourage competition between providers, improving the quality of school options for students and families. Third, markets are incredible information gathering institutions, and a more market driven system can help bring attention to better educational practices and ways to meet family needs that can then be copied by other schools.”

For Microschools, ‘Location Has Been the Hardest Thing.’ Florida Made It Easier
Greg Toppo at The74

“But policymakers are also realizing that if microschools are to thrive, they can’t be regulated the same as larger schools, Hoffman said. ‘They’re only serving 30, 40, maybe 50 families. They’re not serving hundreds of families. The size of the buildings that are necessary, the land that’s necessary, is not going to be the same.’”

Researchers: Higher Special Education Funding Not Tied to Better Outcomes
Beth Hawkins at The74

“From state to state, diagnoses are wildly inconsistent, raising questions about the subjectivity of how students are funneled into special ed. New Mexico, for example, diagnoses specific learning disabilities in 8% of students, versus less than 3% in Kentucky and Idaho. However, despite identifying a high number of children with learning disorders, New Mexico has some of the lowest literacy rates among special education students in the country.”

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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.  

The post Arkansas K-12 education finance series: Adequacy review findings and recommendations so far appeared first on Reason Foundation.

“This budget remarkably insulates K-14 funding from cuts, abides by constitutional requirements to restore funding in the future, and even provides a modest cost-of-living increase, all amid a record budget shortfall,” said Kevin Gordon, president of Capitol Advisors Group, a consultancy company.

However, California’s state budget crunch shows no signs of abating. And with public school enrollment projected to drop nearly 16% by 2031-32, the fiscal outlook for many public school districts is bleak, despite record funding boosted by COVID relief funding in recent years.

A new Reason Foundation study shows how state policymakers can adapt and better use K-12 dollars. The report examined two California hold-harmless funding policies that provide extra funding to schools based on outdated enrollment numbers and factors unrelated to students. 

First, it looked at how California calculates education funding for school districts. States like Texas, Indiana, Arizona, and others divvy up state education dollars based on the number of students currently in their schools. But California lets school districts choose the highest number of the current year’s enrollment, the prior year’s enrollment number, or the average number of students in its schools over the three most recent prior years. This results in taxpayers sending money to public schools for “ghost students”— kids who are no longer in classrooms but still generating funding for schools.

Hold harmless policies are supposed to make public school budgets more predictable, but they also have steep price tags. Statewide, Reason Foundation finds California taxpayers sent public schools $4 billion for 401,000 ghost students in 2022-23. Over 6% of the state’s total K-12 formula aid was allocated based on ghost students—a large share considering this is more than half of what’s spent on grants for disadvantaged kids, a supposed priority under the state’s Local Control Funding Formula (LCFF).

Most of California’s school districts received funding for ghost students, with over 300 districts getting at least $1,000 per student. Top recipients of taxpayer money for students no longer in their schools included San Diego Unified ($90.9 million), Long Beach Unified ($73.8 million), and Santa Ana Unified ($59.3 million), which each had thousands of ghost students. 

The biggest winner was the Los Angeles Unified School District (LAUSD), which collected $508 million for 50,400 ghost students in the 2022-23 school year, Reason Foundation finds.

For years, students have been fleeing LAUSD. Between 2015-16 and 2022-23, the district’s enrollment dropped by 15% for various reasons, including parents looking for better schooling options and moving to more affordable places. 

Ghost student funding reduces school districts’ incentives to improve or budget responsibly. It has allowed LAUSD and other districts to kick the financial can down the road, putting off difficult decisions like school consolidation or staff reductions. For example, while losing all those students, rather than make tough choices, LAUSD added 1,800 new staff during the COVID-19 pandemic and gave out pay raises last year because its funding didn’t reflect the student exodus. To balance its books, LAUSD’s $18.4 billion budget for 2024-25 is tapping into its reserves, which it could deplete in the next few years.

The study also evaluated California’s Minimum State Aid (MSA) policy, which requires school districts to receive as much state aid as they did in 2012-13, regardless of current enrollment or local wealth. In 2022-23, 148 districts got MSA funding totaling over $186 million. Most beneficiaries were Basic Aid school districts—property-wealthy districts that don’t qualify for state formula aid and are often higher-spending.

For example, Pacific Grove—which spent over $28,500 per student in 2022-23—got $1,624 per student in MSA funding. Santa Monica-Malibu got $1,043 per student in Minimum State Aid funding despite spending over $25,000 per student. It’s clear that MSA now only serves to top off the coffers of school districts that are already flush with cash.

For California lawmakers, the solution is straightforward. Education funding should be tied directly to students actually in schools, which is what LCFF is intended to do. California should allocate K-12 education funding based on current year enrollment and eliminate Minimum State Aid giveaways undermining the state’s funding formula. Doing so would be fiscally prudent and start to put the right incentives in place for public schools.

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

The post California taxpayers spent $4 billion on 401,000 students no longer in the state’s public schools appeared first on Reason Foundation.

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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