School Finance Reforms

Reform Efforts

Efforts at school finance reform in the states have often included:

• Reforms to move from equity to adequacy. Over the past decade, many state courts have found that state education finance systems have failed to live up to their constitutional mandate to deliver an acceptable level of education services. State remedies have shifted the focus of state policies from requiring equity across districts to determining and financing educational adequacy for each district.



• General revenue reforms with direct impacts on education. Several states have changed funding sources for education. Particularly noteworthy are shifts away from local property taxes or toward other revenue sources. The majority of states currently use a foundation plan¹ to guarantee a minimum level of funding; however some states use flat grant², full-state funding³, percentage equalization⁴, or guaranteed tax base/yield plans⁵ to fund school districts.



• Special education financing reforms. Concern that special education costs have been increasing, as well as the availability of new federal funding sources, has prompted many states to consider reforming special education financing arrangements.



• Spending on statewide assessments. With the implementation of the No Child Left Behind Act and related state reform efforts, states are spending significant amounts on achievement tests in an increased range of grades at the elementary and secondary levels. High school exit exams are included in the cost of some statewide assessments.

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¹ Foundation plans establish both a specific per-student funding amount and a specified local tax rate that each school district must levy. The state provides the difference between the amount of revenues raised from the local tax rate and the foundation funding level.
² The state guarantees a minimum amount of funding for schools in a flat grant funding plan. The plan allows local voters to decide any programs beyond the minimum level of funding.
³ The state assumes full responsibility for the cost of education in a full-state funding system.
⁴ Percentage equalization allows the local districts to set a level of spending and once the level is determined, the state equalizes the district’s ability to raise funds.
⁵ The guaranteed tax base/yield plan functions in the same way as the percentage equalization plan except the plan focuses on taxation rather than spending.