Funding for K-12 schools generally is based on formulas that include an amount per pupil or teacher, with adjustments based on student needs and capital outlay and debt. This memorandum provides an overview of school finance formulas across the United States in 2018, capturing the choices of all states at that particular moment in time.
School Finance History
In the early 1900s, flat grants providing a basic dollar amount per student, regardless of wealth or need, financed public schools. Beginning in the 1920s, many states started using a new system, “foundation formulas,” with funding provided on a sliding scale based on the relative wealth of school districts. In the 1930s, states began to adjust formulas based on costs associated with certain student populations, such as students at risk of failure and students with disabilities.
Beginning in the 1960s, states further adjusted formulas for a number of reasons, including to create greater equity among districts, as well as to account for district size and regional cost differences.
The 50 States
A look at each of the individual state formulas finds wide variations in formula provisions; however, there are many similarities. Major formula components are described below, which are adopted from a state inventory of public education finance systems in the United States undertaken by University of Nevada Professor Deborah A. Verstegen and updated via surveys of states’ education agencies conducted periodically. The latest update includes formulas in effect during the 2017-2018 school year.1
Basic Formula Components
Foundation programs provide a uniform per pupil or per teacher amount of funding using state and local funding. Forty states use this approach.2 Complete funding by the state for K-12 education occurs only in one state: Hawaii. Hawaii is also the only state that has only one school district.
Combination systems are used in nine states to combine full state funding, flat grants, or funding based upon varying tax rates.
Adjustments for Various Needs Within Foundation Formulas
Forty-one states provide supplemental funding for low-income or at-risk students based upon three factors: being qualified to receive free or reduced-price lunch or breakfast, the actual number of students determined at risk of failure, or concentrations of low-income students. Nine states provide no additional funding for this group.
Of the other adjustments made by the states:
- Twenty-three states provide additional funding for English language learners;3
- Four states provide additional funding for gifted and talented students;4
- Twelve states provide funding for remote and small schools;3 and
- Eight states provide additional funding for career and technical education.3
Examples of other adjustments include additional funding for transient students or different funding based upon different grade levels.
Capital Outlay and Debt Service
Multiple methods are used to assist school districts with capital outlay or debt service costs. Assistance can range from grants to loans to little or no state assistance for major facility projects.
Kansas allows school districts to levy a local property tax to fund capital outlay expenditures, which is capped at eight mills. Using the capital outlay formula, some school districts are eligible for Capital Outlay State Aid to provide equalization aid for property tax equity. Kansas also allows a school district to issue bonds of up to 14.0 percent of its assessed valuation, with the approval of the majority of the electors in the district, to finance construction of school facilities. Some school districts are eligible to receive Capital Improvement State Aid to help pay the costs associated with capital improvement bonds to provide equalization aid for property tax relief. There are three rates for Capital Improvement State Aid, depending on when the bond was approved by voters.
Special Education
States use one of four methods to pay for special education services:
- Per pupil funding based upon a weighted pupil count or a flat grant;3
- Cost reimbursement with definition of eligible costs;
- Per teacher or instructional unit funding; or
- Funding based upon total student population rather than special education eligibility.
Kansas provides state aid in the form of reimbursement for the “excess costs” associated with providing special education services. The reimbursement rate is set in statute at 92.0 percent of total state excess costs, but the statutes also provide for prorating state aid if the appropriation for Special Education State Aid does not equal 92.0 percent of excess costs. Excess costs and the statutory amount of state aid are calculated using a statutory formula.
- More detailed information about each state can be found at https://schoolfinancesdav.wordpress.com. See also, Deborah A. Verstegen, A Quick Glance at School Finance: A 50 State Survey of School Finance Policies (2018). ↩︎
- Kansas is one of the states that use this approach. ↩︎
- Kansas is one of the states that use this adjustment. ↩︎
- Kansas provides additional funding for gifted and talented students through the Special Education State Aid rather than through the foundation formula. ↩︎
by Jennifer Light
Fiscal Analyst
785-296-4410