Education
Education Funding Formula
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Missouri’s foundation formula for funding school districts is outdated. It allocates too much state aid to some property-rich districts because it relies on outdated information about property values. It also sends money to some districts for students who aren’t there because of open-ended hold-harmless provisions. Finally, the formula provides extra 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Revise the Missouri foundation formula to reflect annually updated property values, phase out outdated hold-harmless provisions responsibly, and provide additional funding to high-need students in a simple and transparent way.
The Formula Is Stuck in the Past
Missouri’s school funding formula was enacted in 2005 and should be updated to reflect the modern context of public education in Missouri. There are three central problems with the formula.
First, as in other states, the Missouri formula is intended to direct more state funding to communities with less capacity to raise revenue locally. It does so by estimating the amount of local revenue a district can generate at a given property tax rate, recognizing that wealthier communities can raise more revenue with the same tax effort. The problem is that Missouri still calculates this local capacity using property values from 2005. Changes in local wealth over the past two decades therefore are not fully reflected in the formula, distorting the distribution of 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 in 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 gets no additional funding. A better approach is to simply provide additional funding for each high-need student.
Another benefit of modernizing how we provide additional funding for high-need students is that each student’s funding level 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 that reflect modern differences in wealth across Missouri. The new formula should also include built-in mechanisms for regular updates, such as automatic recalibration of property values and student counts, to prevent it from becoming outdated.
- Target additional funding to students based on their needs in a simple and transparent way. Remove arbitrary thresholds of high-need students that trigger additional funds and instead implement consistent per-student funding.
