Generous weights should be applied to the base amount for economically disadvantaged students, with funding increasing based on the concentration of such students in the district. This can be done either with a single, sliding-scale weight, or with two weights: an initial weight applied for every disadvantaged student and an add-on weight applied for disadvantaged students that make up more than a given percentage of district enrollment. This approach both recognizes the needs of individual disadvantaged students and provides appropriate support for districts serving high-poverty populations.

To arrive at a count of eligible students, the state should directly certify students as economically disadvantaged based on their inclusion in existing state and federal programs and designations. These should include Medicaid, the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF), and the Food Distribution Program on Indian Reservations (FDPIR), as well as homeless, foster, and refugee students. States with high costs of living should also include programs with higher income eligibility thresholds, such as the expanded Medicaid program and Children’s Health Insurance Program (CHIP). Additionally, because safety-net programs may enroll fewer disadvantaged students in certain districts, including those serving immigrant communities and some rural areas, the state should offer districts the option to administer a state-funded income survey and to use those results if they reveal a higher count of disadvantaged students.

Generous weights should be applied to the base amount for English-language learners (ELLs) in three tiers, with greater levels of funding provided for students with lower levels of current English language proficiency. This approach allows the state to provide different levels of resources for ELLs with different needs and recognizes the costs facing districts that enroll a higher proportion of low-English-proficiency students. The state should also employ a mechanism to account for the diseconomies of scale associated with serving a small number of ELLs overall.

Examples include:

1. Set a minimum ELL count for districts with few ELL students and provide funding on that inflated basis.

2. Increase the ELL weight for districts enrolling few ELL students.

3. Provide per-pupil funding for districts to participate in a regional ELL program rather than providing for district-level instruction.

The state should provide funding for students with disabilities in 5 weighted tiers. Students should be assigned to different tiers using a hybrid system incorporating both diagnoses and students’ abilities. Students whose diagnoses tend to carry lower instructional costs are assigned to one of the three lower-funded tiers based on their diagnoses. Students whose diagnoses are either more variable or tend to carry higher costs are assigned to tiers based on the abilities listed in their Individualized Education Programs (IEPs). This can be done using a scoring system that assigns point values to particular abilities and skills; each IEP is scored and the point total translates into one of the weighted tiers. This hybrid system is more complex than a purely diagnosis-based assignment scheme, but it allows for better targeting of funds for the students with the most complex diagnoses. Separate from the system of weighted funding, the state should maintain a high-cost fund specifically to support individual students whose resource needs are especially high.

The state should include prekindergarten and full-day kindergarten as funded grades in the state funding formula. Treating these grades in the same manner as all the others provides important support for a PK-12 public school system. Within the K-12 system, while unified districts are unlikely to see a significant funding impact from grade-level weights, the state can use these weights to signal its support for particular educational priorities, such as a K-3 weight to support early learning and literacy or a 9-12 weight to support college- and career-readiness programming. (These weights will have more practical effect in states where elementary and secondary grades tend to be separated into different school districts and in districts where high student mobility rates cause student populations to fluctuate from grade to grade.)

Absent a strong political imperative, there is no particular need to provide specific funding for gifted students. If gifted students are appropriately identified, they will make up roughly the same proportion of every district, and any weights are likely to just increase all districts’ funding to the same degree. Instead, the base amount should simply be set high enough to account for gifted instruction, and these programs should be funded out of general instructional dollars.

Generally speaking, no adjustment to funding should be made for general within-state cost differences. While adjustments can be made for specific cost drivers, an adjustment that is driven only by general local cost of living or local wage data is more likely to worsen inequities than resolve them. This is because high-cost areas generally have healthy local tax bases that yield ample school dollars. Extra support for these areas is not an effective use of limited state funds. There may sometimes be districts that do not fit this description—districts where the cost of living is high but the per-student value of tax base is relatively low. Rather than address this challenge through a cost adjustment on the allocation side of the funding formula, however, it should be handled by setting revenue-side policies that do an effective job of decoupling districts’ ultimate funding amounts from their local wealth levels. For recommendations in this area, see the Local Revenue section.

Most states contain districts for which sparsity and/or isolation pose significant challenges. In these states, funding should be provided through two separate weights that are applied to the base amount: One for sparsity and one for isolation. First, the state should apply a sliding-scale weight to the base amount for each student enrolled in a sparse district. The weight should be higher in districts with fewer students per square mile and phase out entirely at greater student densities. Second, the state should apply a flat weight to the base amount for students in districts that are isolated—those with a U.S. Census designation of “rural-remote,” as well as districts that the state considers isolated because they are separated from other districts by geographic barriers that make travel challenging.

The state should specify a required local share tax rate. Districts must levy this tax rate to fund the local share of the formula. This share is deducted from the total formula amount, and the state provides the balance as state aid. If the required tax rate yields more than the formula amount, the excess raised must be remitted to the state and used to support state education aid distributions to other districts. This structure provides for funding equity within the formula amount and also preserves fairness with regard to the return that districts receive on their required tax effort. A district wishing to spend more than its formula amount may levy optional taxes to raise extra dollars, up to an overall funding cap that is set at a percentage of the formula amount. Districts doing this should have to provide matching dollars to the state to support state education aid distributions to other districts: For every above-formula dollar a district raises and spends locally, it must remit a second dollar to the state. This pairing of a spending cap with a matching requirement allows districts some latitude in local spending but ensures that no district can self-finance higher budgets without also supporting the spending of other districts. The requirement to provide matching dollars may also disincentivize too-high spending by high-wealth districts.

See EdBuild’s complete recommendations for a more thorough discussion and a visual illustration of this policy.

States should not allow local school taxes, apart from the property taxes discussed under “Local Share and Property Taxes.” Most local taxes fall short of equity on both sides of the funding calculus (the funding distribution and the apportionment of the funding burden). Regarding distribution, districts see greater revenues if they happen to contain certain taxable assets and are unfairly disadvantaged if not. Regarding the funding burden, local taxes tend to demand too much of low-income payers. Other than property, the most common local tax for education is sales. Sales taxes are regressive generally, because lower-income families spend a larger share of their income on sales-taxable goods. Local sales taxes tend to be especially regressive, lacking grocery exemptions and other mechanisms for mitigating regressiveness. Even income taxes are generally flat taxes at the local level. States should not allow districts to rely on these inequitable local taxes. Instead, they should seek to raise education revenue progressively, at the state level.