The Problem
Missouri’s foundation formula for funding school districts is outdated. It allocates too much state aid to some property-rich districts because it relies on outdated information about property values. Because of hold-harmless provisions, it also sends money to some districts for students who aren’t there. Finally, the formula provides additional funding for some categories of high-need students but does so in an unnecessarily complex and arbitrary manner.
The Solution
Revise the Missouri foundation formula to reflect updated property values, phase out outdated hold-harmless provisions responsibly, and provide additional funding to high-need students in a simple and transparent way.
Key Facts
- The formula is designed to equalize funding between property-poor and property-rich districts, but it uses outdated property values to determine local communities’ wealth levels, distorting funding calculations.
- It includes multiple hold-harmless provisions that misallocate resources by providing funding for students who are not enrolled.
- The formula provides additional funding for certain high-need student groups, but does so in a complex and arbitrary manner.
The Formula Is Stuck in the Past
Missouri’s school funding formula is not designed for 2025 and beyond. It was enacted in 2005 and should be updated to reflect the modern context of public education in Missouri. The formula has three central problems.
First, as in other states, the Missouri formula aims to send more funding to poorer areas by adjusting for local revenue capacity. It does this through an expectation of local tax effort from all communities, with the idea being that at similar property tax rates, wealthier areas can raise more revenue locally. The problem is that the Missouri formula determines the expected local effort based on property values as of 2005. Changes in local wealth over the past two decades are not reflected, resulting in distorted estimates of local capacity and misallocated state aid.
Second, the formula has several hold-harmless provisions that have outlived their usefulness. Hold-harmless provisions are typically used to ease the transition from an old formula to a new one, but Missouri’s provisions have been in place for decades. Seventy-five percent of small districts receive the same amount of funding that they received in 2005, rather than the amount calculated by the formula based on actual enrollment today, because the 2005 amount is higher.
Third, while the formula includes extra funding for students with disabilities, low-income students, and English learners, the calculation mechanism is overly complicated. For example, when the number of students from a particular category exceeds a threshold level, the district receives additional funding for every student above the threshold. But if the percentage of students is below the threshold, the district receives no additional funding. A more tractable and modern approach is to simply provide additional funding for each high-need student in the formula.
An additional benefit of modernizing how we provide additional funding for high-need students is that each student’s funding level under the formula will be clearly identified. This will make it easier for state funding to follow students to schools of their choice as Missouri’s school choice landscape improves.
Policy Recommendations
- Draft a new foundation formula based on current student counts and updated local effort measures. The new formula should also include built-in mechanisms for regular updates to property values and student counts.
- Target additional funding to students based on their needs in a simple and transparent way.
