This column is the first in a series examining Arkansas’s K-12 funding system and the state legislature’s biennial adequacy review process. The series aims to analyze how Arkansas got its current education funding system, how it works, and what components policymakers should improve to achieve a modernized education funding formula that is better for students and more amenable to education choice.
The LEARNS Act
In March 2023, Arkansas Gov. Sarah Huckabee-Sanders signed the Arkansas LEARNS Act into law. It was one of the most substantial reforms of Arkansas’s education system in recent decades. With the adoption of LEARNS, Arkansas became the fifth state in the nation to adopt some version of universal school choice. Several additional states followed suit.
Under the program, Arkansas families can access 90% of the state’s per-student public school formula amount—or $6,672 out of the $7,413 base amount in the 2023-2024 school year—to be used in an education savings account (ESA). Families may use ESA funds for private school tuition or to purchase other education services, such as tutoring, music instruction, or special education services for their children. While the program first gives access to low-income families, it will be available to all Arkansas families by the 2025-2026 school year.
In addition to adopting a universal school choice program, the LEARNS Act also made other consequential changes, including:
- Raising the state’s minimum starting salary for teachers from $36,000 to $50,000 annually beginning in the 2023-2024 school year.
- Providing funding for raises for veteran teachers of at least $2,000 a year in the 2023-2024 school year and performance-based pay incentives.
- Repealing a law that makes it difficult to terminate poor-performing teachers.
- Strengthening the state’s public school open enrollment law, which allows public school students to transfer to public schools other than their residentially-assigned schools.
According to a fiscal impact study published by the Arkansas Department of Education, the program cost $297.5 million in the 2023-2024 school year and will cost $343.3 million in the 2024-2025 school year. Most of that total price tag is accounted for by teacher raises, estimated to cost $180 million annually, and the new education savings account program, projected to cost $46.7 million this year and $97.5 million next year.
The LEARNS Act will have a substantial ongoing impact on Arkansas’s K-12 education system. Arkansas’ compensation for new teachers is now far more competitive than it was, especially compared with neighboring states like Mississippi and Oklahoma. Early evidence suggests that Arkansas’ school choice program is popular among families, with over 4,700 children already utilizing the program, according to the state’s initial report published in Sept. 2023. However, the LEARNS Act does little to reform a bedrock feature of the state’s K-12 education: the school funding formula.
How Arkansas got its current education funding system
Even though school finance reform is needed in Arkansas, it’s unsurprising that the LEARNS Act didn’t wade into the issue. Like many other states, decades of litigation have heavily shaped Arkansas’s current K-12 funding formula.
The Lake View School District No. 25 v. Huckabee lawsuit, initially filed in 1992, alleged that Arkansas’s education funding system was unconstitutional because it was inequitable and inadequate. The plaintiffs contended that Arkansas students were underperforming children in neighboring states, the state’s teachers had low pay, higher-need students weren’t receiving additional support, there were substantial funding disparities between school districts, and funding decisions were primarily being made based on available resources, not student needs.
After a Chancery Court judge agreed with Lake View in 1994 that the state’s education funding was unconstitutional, the case continued to move through the courts over the next decade with periodic steps taken by the state legislature to add features to the education finance system in an attempt to bring school funding into compliance with the state constitution.
Despite multiple consequential education finance reforms adopted by the state legislature after the initial Lake View ruling, the Arkansas Supreme Court ruled in 2002 that the legislature had to take further action to define an “adequate” public education. While the word “adequate” does not appear in the education article of the Arkansas Constitution (Article 14), the state Supreme Court ruled the legislature must define an adequate public education and make corresponding reforms to rectify the unconstitutional K-12 funding system.
After several more years of actions from the legislature and court evaluations, the Arkansas Supreme Court ruled in 2007 that the state had taken sufficient steps to become constitutionally compliant. Between the original Lake View finding in 1994 and the case’s ultimate resolution in 2007, the state legislature adopted much of the current funding framework. The legislature amended the state constitution to include the minimum uniform tax rate required of all school districts, adopted the foundation formula approach, established the funding matrix to define adequacy, and implemented a minimum salary schedule for teachers, among many other changes. Cumulatively, the court found that these reforms ensured all public school districts in Arkansas had the necessary resources to provide an adequate and equitable education.
Moving forward, the Arkansas Supreme Court laid out what the state legislature needed to do to continue adhering to Article 14 of the state constitution. A key practice for remaining constitutional, the state Supreme Court declared, was to conduct regular studies on the adequacy of Arkansas’ K-12 education funding. Therefore, the state now conducts biennial adequacy studies, and the next review began earlier this month.
The findings of these year-long adequacy studies are published in reports from the Arkansas House and Senate with recommendations for how the education funding system should be updated. They comprehensively examine the foundation matrix framework developed by education consultants and school finance experts Allan Odden and Lawrence Picus in 2003. The matrix sets the main formula’s per-student dollar amount based on various staffing and service needs assumptions and their corresponding costs. Each underlying assumption in the matrix is examined considering current academic research literature, and district expenditure patterns are compared with matrix assumptions. Additionally, the adequacy reviews include examinations of student academic performance, funding fairness and expenditure patterns across districts, and categorical grants outside of the formula for students with additional needs.
How to get more out of the 2024 adequacy review process
Even with the prolonged judicial interventions from the mid-1990s to the late 2000s, state courts have largely refrained from being overly prescriptive in how public education is delivered in Arkansas. So long as the legislature remains committed to the core policies it adopted during the Lake View case and to the adequacy review process itself, further judicial involvement seems unlikely.
In fact, the state’s education funding system has been essentially unchanged since the Lake View case’s resolution. As the 2021 fiscal year (FY) edition of the Arkansas school finance manual summarizes and the most recent edition confirms, the staffing ratio assumptions in the matrix have been almost entirely unchanged since FY 2005. Similarly, the three subcomponents of the matrix that determine per-student funding for school-level staff, school-level resources, and district-level resources have only seen modest increases since FY 2005. The Arkansas Legislature, the Arkansas Department of Education, and the Arkansas Bureau of Legislative Research are the key players in the adequacy review, and they stick to a standardized statutory procedure.
Altogether, these factors lead to a process that produces useful data and analysis and that can make needed tweaks to the funding system. However, the adequacy review process is primarily geared toward maintaining constitutional compliance rather than optimizing policy for students in Arkansas. As such, getting more out of the adequacy review process requires legislators to think beyond constitutional compliance and consider direct ways the education funding system can be improved.
To be sure, the core reforms adopted by the legislature during Lake View shouldn’t be abandoned. The existing funding system is already streamlined, relatively fair, and affords school districts ample flexibility.
Importantly, all installments of this series will highlight and explain key insights from the adequacy review process and incorporate the latest developments in the state’s K-12 education landscape.
Streamlining and improving the state’s education funding system
The next installment of this series will give an overview of how the state’s education funding system works, accounting for all state and local dollars. That includes funds outside the foundation formula, such as categorical grants and additional local funds.
Subsequent installments will make a case for why a vital principle of the matrix, namely that it is a funding formula and not a spending formula, should be preserved because it empowers local decision-makers with flexibility over resources. Later installments will also examine areas of the system that can be improved. For instance, Enhanced Student Achievement funding for low-income students has built-in funding cliffs that need to be remedied so that districts with similar poverty rates don’t stand to gain or lose substantial amounts of dollars due to small changes in poverty rates. Additionally, the funding matrix assumptions on special education don’t account for differences in individual student needs and may need to be differentiated to account for variations in student disabilities.
The final installments will explore how further streamlining Arkansas’s funding system and collapsing some categorical grants into formula weights would aid school choice. Under the LEARNS Act, education savings account amounts aren’t weighted for students with additional learning needs, which may discourage some families from participating in the new program. This means that optimizing public education funding to include weights can also improve the state’s ESA program.
Arkansas took a bold step with the LEARNS Act. Now, further expanding education opportunities requires taking a close look at how Arkansas’ school funding can be better leveraged to fit the unique needs of all students, regardless of their zip codes.