The typical composition of K-12 education funding breaks down like this:
States direct dollars to local education agencies (LEAs)—which are usually school districts—based on a comprehensive formula. Ideally, states leverage their education funding authority to ensure equity and adequacy for all schools, though many states still fall short of this reality.
Local education funding is far more fractured and almost entirely dependent on local property wealth. Parent organizations’ private fundraising is a tiny fraction of school funding, but it is also the most inequitably distributed with the least transparent reporting: "In fiscal year 2013-14, the nation’s 50 richest PTAs [the wealthiest 0.05%] raised and spent $43 million [~10% of total PTA spending] for the nation’s most affluent schools."
Over the last decade, education funding experts have shone a light on how regressive or progressive state school funding is. In this context, regressive funding means that the state’s highest-poverty districts receive less combined state and local funding than the state’s lowest-poverty districts.
An EdBuild analysis of fiscal year 2014 data showed that 27 states had regressive funding: school districts serving the fewest poor students have more per-pupil funding than those serving the greatest number of poor students. Urban Institute performed a similar analysis of education funding progressivity by state, which also included federal funding. They found that the addition of federal funding helps balance out funding between high and low-wealth districts, leaving just a handful of overall regressive states.
However, the underlying regressivity of state and local funding in many states meant that federal funding largely served to fill gaps or achieve a very limited level of progressivity. Only in a handful of states was there enough funding to ensure that students in poverty received the substantially greater funding needed to support them to succeed.
The 2022 “Equal is Not Good Enough” report from The Education Trust reveals that inequities in school and district funding persist. Across the country, districts with the most students of color on average receive substantially less (16%) state and local revenue than districts with the fewest students of color, and high-poverty districts receive 5% less state and local revenue than low-poverty districts. The districts with the most multilingual learners receive 14% less state and local revenue, compared with districts with the fewest multilingual learners.
The most salient theme in state funding is a shift towards more equitable and need-sensitive K-12 funding allocations. Definitions of student need vary, but common categories taken into account in school funding formulas include:
Less frequently considered but also important are students who are experiencing homelessness or housing instability, and students with limited or interrupted formal education (SLIFE).
Districts receive targeted federal funding for some of these students, although there are also several "unfunded mandates" associated with serving some of these student populations—scenarios where districts are required by federal law to meet certain compliance requirements, but do not receive any (or not nearly enough) federal funding to comply with those obligations. IDEA, the law guaranteeing rights and providing federal funding for students with disabilities, is famously underfunded, with analyses estimating that targeted IDEA grants only cover between 10-20% of special education costs to districts.
Flexibility of funding is also an important equity consideration. Local money is generally unrestricted, but these dollars are more easily raised in high-wealth districts, giving school leaders in low-wealth districts far less flexibility in addressing student needs. Federal dollars, in contrast, usually have many strings attached to ensure they are spent on intended student groups. Some state funding comes in the form of flexible per-pupil aid, but much also comes through limited-use grants or reimbursements for specific costs. As a result, the wealthiest districts, with more local money at their disposal, have the greatest latitude, while high-need districts face the most restrictions.
To better support student resource equity, more states and even districts are turning to Weighted Student Funding (WSF). In this type of resource allocation model, state policymakers determine a series of student-need categories (economically disadvantaged, special education, etc.) and apply a multiplier or "funding weight" to the dollars provided for those students.
> See how a state funding formula translates to district revenue based on enrollment groups in the Arizona School Finance Portal.
For example, for every $1 of funding for a pupil with no identified needs, students with disabilities may receive $2.50; multilingual learners may receive $1.40. Total LEA funding allocations are determined by applying these funding rules to the specific student population counts at each school district. These formulas are often highly complex with a variety of rules and weights.
Here are some examples of state funding overhauls that focus more on need-based allocations:
And in February 2023, Judge Renée Cohn Jubelirer determined that Pennsylvania's funding formula, which relied heavily on local dollars, was inequitable and unconstitutional (here's her 800-page ruling). There's a powerful moral clarity in the language of this decision that rejects the state’s argument that those gaps are an inevitable and acceptable side effect of a locally controlled education system. Judge Cohn Jubelirer said the burden of remedy rests on the Legislature and Executive branches of Pennsylvania government.
Since then, a bipartisan commission has proposed eight large changes, and PA lawmakers passed a 2024-25 budget with a record-setting $1.11 billion investment in K-12 education. Still, this year-one number falls short of the five-year $6.2 billion increase sought by the lawsuit winners.
We’ll be watching Pennsylvania over the next few years to see what additional reforms are in store.
The past decade has seen modest improvements in resource equity as a result of state funding model reform. Despite these advances, major inequities persist. And unfortunately, most state funding models are not yet equipped to adapt to two major trends in public education: student needs are increasing, and student enrollment is decreasing.
Special education designations have increased by more than 10% over the past 10 years, with students who receive special education services now making up 15% of the population; the English Learner population is growing; and student mental health needs are increasing, with only about half of schools feeling equipped to meet those needs.
Furthermore, a number of states are launching universal Education Savings Account programs to offer alternative education pathways for families—and while it remains to be seen to what degree these new choices will accelerate enrollment decreases beyond current forecasts, it’s broadly predicted that these offerings will only contribute to enrollment and revenue declines in traditional public schools.
The broad shift to weighted student funding models should be flexible and responsive to the growth and increasing prominence of higher-need populations.
Historically, states have relied on the Free or Reduced-Price Lunch designation as a proxy for low-income status in state formulas, but this is becoming a less valid indicator of economic need as schools and districts move towards community-level calculations of eligibility for subsidized school meals, a change that provides more students with access to free meals but reduces the accuracy of the count of students in the school or district that should receive supplemental funding under the state formula. Instead, many states are trying to use direct certification data (such as data from other state agencies regarding SNAP or TANF participation) for individual students' households as the qualifying criterion. In making this move, some states have allowed students to also qualify for funding through the low-income weight if they are homeless, migrant, or foster youth. States could and should add distinct weights for these populations as well, rather than just using them as additional ways to qualify for the same low-income weight.
Meanwhile, total enrollment is declining by 1-2% per year and birth rates indicate that the declines will continue for years to come.
With more than half of education funding determined by student counts, this setup spells decreasing total revenue coupled with increasing per-pupil costs—you don’t have to be a math whiz to understand that this equates to a troubling financial scenario. We must stress that current funding formula systems are not yet equipped to adapt well to enrollment declines. There are two likely potential scenarios with existing state formula models:
We are deeply concerned that at least some states will perceive enrollment declines as an opportunity to save funds in a recession. At first glance, it may seem reasonable that the dollars should scale down with student counts. The problem is that school budgets do not easily scale up and down due to the high percentage of fixed costs (you can’t pay a teacher 7% less if a 4th grade class is 26 students instead of 28 students).
Generally, formulas have dealt with enrollment declines in ways that provide transition time, using policies like calculating funding based on the greater of last year’s student count or the average of the previous 3 years’ counts—but districts will need better, more permanent ways to adjust, because these declines are not a blip.
To the extent that state policymakers are even aware of the long-range implications, they have not yet found good solutions to this problem. The future may rest in governments facilitating intergovernmental cooperative agreements that allow schools to use parts of their facilities to host other public and community services. Any viable paths forward—especially ones that prioritize equity for the most vulnerable student populations—will require far more innovative, collaborative, and nimble resource allocation models at the school, district, and state levels.
Beyond enrollment declines and population shifts, the next decade poses additional challenges of looming economic and political volatility, labor shortages, and a host of threats to the traditionally rigid unit economics of K-12 education. Whether these inequities improve or worsen from here will hugely depend on state leaders’ willingness to seek innovative, iterative approaches to funding K-12 education with a special focus on ensuring equal access to high quality educational opportunities for all students.
As Judge Cohn Jubelirer wrote in the 2023 Pennsylvania decision: “All witnesses agree that every child can learn. It is now the obligation of the Legislature, Executive Branch, and educators, to make the constitutional promise a reality in this Commonwealth."