by Josh McGee
Today’s blog is the first in a series about Arkansas school funding. Our goal is to provide straightforward, data-driven explanations of things like:
- How the Arkansas K-12 funding system works;
- How our education funding compares to other states;
- How the funding formula distributes funds across districts; and
- What the state might do to improve the funding formula.
Tackling school funding is timely because the Arkansas House and Senate Education Committees are currently studying the issue, as is required by Act 57 of the Second Extraordinary Session of 2003. The resulting Adequacy Report will inform any changes to Arkansas’s education funding in the 2025 legislative session.
As part of the Adequacy Report process, the Education Committees consider a lot of great information related to education funding. You can find past reports here and this year’s materials here. Our blog post series will supplement this information by providing a curated researcher perspective on school finance and engaging a broader audience in the school funding discussion.
Where does school funding come from?
Schools receive most of their funding from state and local taxes. Historically, roughly 90 percent of education funding is from state and local sources, with the remaining 10 percent coming from the Federal government. Most state and local dollars are allocated to districts based on the state’s funding formula. The state funding formula lays out how much money each district will receive, how funding is divided between state and local sources, and any restrictions on how schools can spend their dollars.
State education funding formulas are often very complicated, making it difficult for most stakeholders to understand how they work. Part of the challenge is that these formulas evolve over decades as legislators tweak formula parameters and add/eliminate programs and requirements. School funding formulas in most states have also been impacted by court rulings that push legislatures to make changes that move school funding toward the subjective ideals of adequacy and equity.
This is true in Arkansas where our school funding formula is highly informed by the Lake View court case which spanned 15 years from 1992 until 2007. In a series of decisions, the courts ruled that the state’s education funding system was unconstitutional on both adequacy and equity grounds. The courts pushed the legislature to make changes that would clearly define adequacy, increase funding to meet that definition, and improve the distribution of resources across districts with varying poverty levels.
The legislature made a lot of changes in response to these court decisions. Some of the most important changes include adopting a student-based funding model, a minimum local tax rate, and policies that provide more resources to students and districts that need more support. The legislature also instituted the Adequacy Report process which, as noted above, occurs between legislative sessions and is meant to result in an agreed upon definition of adequacy and an associated recommendation for the base/foundation per-pupil funding amount.
Arkansas’s has a student-based school funding formula.
Arkansas now has a student-based funding model that is similar to many of our neighbors, including Texas and, with its recent adoption of TISA, Tennessee. Student-based funding models provide districts with a base/foundation funding amount for each student and additional resources for students who need more support. These models contrast with resource-based or program-based funding models that primarily allocate dollars to cover the cost of inputs (e.g., teachers’ salaries) and programs. Check out EdBuild’s FundED for a summary of state funding formula types.
Student-based formulas focus policymakers on students’ needs and whether resources are being allocated in a way to meet differing levels of need. Resource- and program-based formulas often allocate dollars in ways that are unrelated to student need because existing inputs and programs are not aligned with that need. For example, in many places, wealthier districts attract more experienced teachers, and resource-based formulas allocate more resources to those districts because experienced teachers cost more.
Student-based funding formulas provide a base amount of funding for each student.
Under student-based funding formulas districts receive a base or foundation amount for each student. For the 2023-24 school year, districts in Arkansas receive foundation funding of $7,618 per student.
Determining the right foundation amount is subjective and highly context dependent. There is no scientific, objective way to derive the “right” answer for how much is needed for an adequate education. As a state, we must choose how much of our limited resources we will invest in our education system. Data and evidence can inform this choice, but they cannot provide the answer. Currently, Arkansas invests one out of every five budget dollars in K-12 education. In future posts, we’ll explore this more and compare our level of investment with other states.
While there is no “right” answer for how much money is needed for K-12 education, the courts required that Arkansas have some justification for the amount it spends rather than just pulling a number from thin air. That is why we now use a cost model called the “Matrix” to inform the state’s foundation funding amount.
The Matrix is a cost model for how much it take to run a prototypical school. Importantly, the Matrix is not a plan for how districts should spend the dollars they receive. It is simply an exercise used to inform the Education Committees’ recommendation for per-student foundation funding.
Using the Matrix as a district spending plan and/or holding districts accountable for aligning their spending with the Matrix would likely have negative consequences. We know that student needs and community context vary a lot across the state and that different education models and supports work better for different kids. Treating the Matrix like a spending plan would result in all schools looking the same regardless of student needs or outcomes, resulting in a lot of misalignment between school spending and students’ needs.
Given the varying needs and contexts across the state, it is also unlikely that a group of people sitting in Little Rock can effectively decide how all schools should spend their money to best serve students. Local school leaders working with families are better situated to understand and determine how to meet students’ needs. Luckily our current funding formula allows districts a lot of flexibility in how they spend foundation funding, which represents the majority of Arkansas education dollars (~60%).
Student-based formulas also provide additional dollars for students who need more support and for particular programs and types of districts.
In a student-based formula, the foundation funding amount represents the cost of educating the average student. However, many students face unique challenges and require additional resources to reach their full potential. States with student-based funding models, like Arkansas’s, generally provide additional funding for certain types of higher-needs students either by increasing the foundation amount by a certain percentage or flat-dollar amount.
Arkansas’s school funding formula provides additional dollars on top of the foundation amount for students living in poverty, students attending districts with concentrated poverty, English language learners, and students in Alternative Learning Environments.
While most state and local funding flows through student centered elements, Arkansas’s funding formula also includes some elements that are not student based (e.g., district isolation funding). Providing funding outside of the student-based formula can be necessary in some circumstances, but it can also create misalignment between students needs and spending.
To explore how other states’ funding formulas work, check out this great state funding formula review or explore the state formula descriptions on Funded.
Arkansas’s has a good school funding formula, but there are opportunities for improvement.
In response to court decisions, Arkansas adopted a student-based school funding model that provides districts with a base amount of funding for each student and with additional dollars for students who need more support. This model reflects many best-practice recommendations and is similar to models used in most of our neighboring states, including Texas and Tennessee. However, Arkansas’s formula is complex and, in some cases, not well aligned with student needs or state priorities, creating opportunities for improvement.
In our next posts, we will compare Arkansas’s school funding to other states, focusing on our immediate neighbors and we’ll look at the distribution of funding across Arkansas school districts. So, stay tuned for some great charts!
Over the coming months, we plan to write several posts on school funding. Please let us know if there are topics or questions that you would like us to address.