K-12 open enrollment is on the rise, with 16 states now ensuring that families can enroll their students in public schools across school district boundaries when seats are available.
Research across diverse states, including Florida, Colorado, Texas, California, and Wisconsin, shows that students who use open enrollment tend to transfer to higher-performing schools. They also use open enrollment for a variety of reasons, including to access different instructional models, specialized and advanced coursework not available at their residentially assigned school, or to escape bullying.
While Kansas, Arkansas, Nebraska, Oklahoma, and others have adopted strong open-enrollment laws in recent years, Missouri lawmakers have not followed suit. One of the biggest obstacles seems to be financial concerns raised by school district officials about how to accommodate incoming transfer students and make up for the loss of outgoing students.
The following analysis addresses three frequent fiscal objections to public school open enrollment and explains why they shouldn’t prevent the Show-Me State from embracing a strong policy that benefits public school students and school districts alike.
Objection #1: Local education dollars don’t follow transfer students to their new school districts.
The most common financial concern is that receiving school districts wouldn’t receive full per-student funding for enrolling transfer students.
“Many of the states that have this [open enrollment] are more reliant on state funding,” claimed Otto Fajen, a lobbyist for the National Education Association.
While it’s true that local education dollars don’t follow open enrollment participants, this doesn’t mean school districts aren’t fully compensated for the costs of serving the incoming students. That’s because state funding generated by a transfer student typically exceeds the student’s marginal cost.
Open enrollment participants—just like students moving from another school district or state—would be added to the receiving school district’s membership count, thereby increasing state funding for attendance. Except for hold-harmless districts (addressed below), all school districts would receive at least the State Adequacy Target (SAT) multiplied by the receiving school district’s dollar value modifier. The SAT, which is subject to appropriation, is $7,145 per student in 2025-26.
Under Missouri’s school finance formula, transfer students who are eligible for Free and Reduced Price Lunch, are classified as Limited English Proficiency, or have an Individual Education Plan, could generate additional state funding for receiving school districts, depending on the concentration of those students they already serve.
Importantly, school district costs don’t increase or decrease in direct proportion to enrollment. For example, many schools have unused capacity and can enroll additional students without hiring more teachers, purchasing curricula, or constructing new facilities.
School district costs spike only when enrollment reaches a tipping point—such as when classes are full, or a building runs out of space. That’s why every state’s open enrollment policy considers school capacity, allowing districts to set transfer caps based on factors such as programs, buildings, class sizes, and grade-level capacity. As a result, school districts aren’t required to accept transfer students if doing so would necessitate hiring new teachers, renovating buildings, or taking on other costly line items. This means that revenue from transfer students should more than offset marginal costs.
Objection #2: Some districts will lose funding from outgoing students faster than they can trim costs.
In the short term, school district costs can be difficult to trim in response to funding losses from enrollment declines.
For instance, public schools can’t easily reduce teaching staff if enrollment losses are spread across several grade levels—they still need a teacher whether there are 25 students in a classroom or 20. But adjusting budgets to reflect declining enrollment is part and parcel of K-12 finance, with tools such as forecasting, revenue reserves, and leveraging staff attrition helping to smooth out changes. But there are other important factors to consider.
Research shows that open enrollment incentivizes school districts to improve, with many underenrolled districts seeing the opportunity to attract transfers to strengthen their budgets.
For example, a report by California’s nonpartisan Legislative Analyst’s Office (LAO) found that school districts that lost students to open enrollment responded by engaging stakeholders and making programmatic changes that improved student retention and attracted transfer students. A separate LAO report found most of the districts opting into the state’s voluntary program were rural, with the median district generating 22% of its enrollment from transfer students alone.
Studies from states such as Ohio, Colorado, and Texas had similar findings, showing open enrollment helps rural districts and drives overall improvements.
Another consideration is that Missouri’s school finance system includes a generous declining-enrollment provision that helps mitigate the financial strain if a district experiences enrollment declines.
Rather than funding school districts based on a single year’s enrollment count, as many states do, Missouri allows districts to use the higher of the current year’s Average Daily Attendance or the first or second preceding school year’s Average Daily Attendance. While this approach has drawbacks, its primary benefit is greater budget predictability, which helps school districts with declining enrollment.
Objection #3: Hold-harmless school districts won’t be compensated for enrolling transfer students.
Missouri has two provisions that complicate how K-12 dollars are allocated to public schools: a large school hold harmless (LSHH) funding guarantee and a small school hold harmless (SSHH) funding guarantee. School districts with a prior-year Average Daily Attendance (ADA) greater than 350 are guaranteed at least their per-pupil state aid amount received in 2005-06 (LSHH), while those with a prior-year ADA of 350 or less are guaranteed at least their state aid amount in the higher of either 2004-05 or 2005-06 (SSHH).
Missouri’s hold-harmless policies were originally adopted to facilitate the transition to a new funding formula, but decades later, they serve no purpose and would complicate funding for transfer students.
For Missouri’s 167 hold-harmless school districts (about 30% of all districts), the LSHH and SSHH policies override the state’s funding formula, resulting in more state aid than they would otherwise receive. While other school districts receive full state funding for each new student, hold-harmless districts’ revenue is tied to what they got two decades ago.
This means that under an open enrollment program, LSHH and SSHH districts would receive partial or no state aid for transfer students, leaving them with additional costs without state funding to offset these expenses.
Nevertheless, because hold-harmless districts are at a fiscal advantage, it’s reasonable to expect them to participate in open enrollment even with reduced or no additional per-student funding. After all, they already receive more state aid than what’s provided under the state formula.
But if lawmakers want to address the concerns of the LSHH and SSHH districts, they could do so with a provision that guarantees full state formula aid for each enrolled transfer student. Importantly, only students who transfer between hold-harmless districts represent a new cost to the state, since students transferring from non-hold-harmless districts already generate state funding for their home school districts. This would be a prudent compromise if it meant more public school options for Missouri’s students.
Conclusion
Funding concerns are a key barrier to adopting a statewide open enrollment program that would give students more public school options. But policymakers should rest assured that these objections are either unfounded or easily resolved. Research shows that adopting a robust open enrollment can benefit students, improve public schools, and help shore up school district budgets. Missouri can adopt a strong open enrollment policy that addresses districts’ funding concerns and allows students to choose the best school for them.