As school choice gains traction, states also need to update their school-finance formulas
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As school choice gains traction, states also need to update their school-finance formulas

States need to update school-finance formulas that fail to fund all kids fairly, are too reliant on local taxes, and don’t easily accommodate student movement between schools.

The public’s appetite for school choice continues to grow. Legislators in at least 32 states have already introduced bills to expand or create private school-choice programs during 2022 legislative sessions. Charter schools have seen substantial growth during the pandemic.

School choice is becoming mainstream, and that’s great news. But before long, states will also need to grapple with updating school-finance formulas that fail to fund all kids fairly, are too reliant on local taxes, and don’t easily accommodate student movement between schools.

States that are new to this high level of interest in school choice should pay attention to what’s going on in Arizona. Arizona has a long legacy of education freedom and has pioneered many important policies to expand school choice, including education savings accounts, state-backed private-school scholarships, a strong charter-school sector, and a robust open enrollment policy. Unfortunately, Arizona’s K–12 education-funding system still lacks the student-centered funding mechanisms crucial to sustaining educational freedom. Other states can expect similar issues if they don’t modernize their funding systems.

Though it’s difficult to provide a statewide estimate of how many Arizona students are utilizing school-choice options, in 2017 the nonpartisan Center for Student Achievement and Yale University researchers estimated that 47 percent of students in Maricopa County — the state’s largest county — were not attending their residentially assigned district school and instead opting for charter schools or other public schools outside their attendance zones.

Suffice it to say that school choice has been a smashing success in Arizona. Researchers from the Stanford Achievement Project found that between 2008 and 2018, Arizona ranked first in the nation in both overall student achievement growth and achievement growth for low-income students. But the state’s school-finance system hasn’t been updated since 1980 — the same year the Oldsmobile Cutlass was the best-selling car in America.

Arizona’s current funding system is complex. It starts with a relatively strong student-centered formula that accounts for individual student needs and funds schools through a combination of state and local tax dollars. But other than the formula, the system also features restricted state grants for items like school safety and additional support staff, as well as a variety of local taxes for operations, school facilities and other specific purposes.

This school-finance system is causing a number of issues for students and schools because it hasn’t been updated to reflect today’s choices, including charter schools, or modernized to the funding system needed when kids choose a school other than their assigned neighborhood school. First, there’s the funding gap between charter schools and district schools. Because district schools have access to various local property tax sources for facilities and daily school operations that charter schools do not, the average charter-school student receives $1,308 less in funding than the average district-school student. In a state where the Arizona Charter Schools Association finds more than one in five students now attend a charter school, this inequity is a major problem.

Second, while school districts’ reliance on local property-tax funds may have made sense in the past when most students were stuck with their neighborhood school, it makes little sense now. Local tax dollars are sometimes raised in Arizona with little to no input from local voters; instead, the taxes are decided by school boards alone. Even for local taxes that are put to a vote, the education dollars frequently don’t follow students who opt for a different school. Also, they lead to unfair funding outcomes because the same amount of money isn’t accessible for school districts with lower property values.

Finally, as school choice grows, transportation poses a logistical challenge for families and schools. The state’s current education formula still funds transportation based on clunky school-bus route mileage calculations that often don’t accommodate families going in myriad different directions to their school of choice. While the state recently adopted a grant program to help communities innovate around this problem, it can’t compensate for the fact that the main education transportation funding mechanism, which limits students to big yellow school buses and traditional bus routes, leaves many families to fend for themselves in finding ways to the best school for them.

Other states with widespread school choice, like Michigan and Ohio, are focusing on similar problems in their school-funding formulas. While Ohio has made strides in making its education-funding system more flexible and student-centered, there remains work to be done to ensure school districts, charters, and private schools are cooperating with each other to coordinate transportation.

Arizona legislators can set an example for those states and others by fixing their funding system so that it no longer treats students unequally. Doing so would entail adopting a single education-funding formula for all students, regardless of the school they attend, and allowing money to move seamlessly with students to their schools. Specifically, state policymakers should move away from relying on local taxes for school bonds and operations and look to have state revenues take greater responsibility for school funding. Transportation funding also should be made more flexible and untethered from outdated yellow school-bus routes.

With school-choice laws booming, soon it won’t just be Arizona with tens of thousands of families zigzagging school-district boundaries to get their children into the schools that fit them best. As states embrace school choice and student populations become increasingly mobile, they should also adopt equally mobile and flexible school-finance systems.

A version of this column previously appeared in National Review.