How to Improve Missouri’s Education Funding Formula
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Policy Brief

How to Improve Missouri’s Education Funding Formula

Missouri’s school finance system fails to ensure that education dollars are allocated in a fair and transparent manner.

In the 2017–18 school year, just over $12.5 billion dollars were spent on public education in Missouri. Approximately one-third of this total was financed from state coffers via a funding formula that distributes state dollars to each of the 518 school districts in the state. This formula is based (primarily) on the number and type of students in each district and on the district’s ability to raise local funds through property taxes.

Ideally, school funding formulas would fund students, not school buildings—meaning that they would be based directly on the number of students and any unique characteristics that may make them more or less expensive to educate. This would allow for a more equitable flow of funds as students moved between school districts.

Missouri’s funding formula is student-based to a certain extent, but there are ways that it could be improved. It’s true that in 2005 Missouri policymakers took important steps toward improving the state’s school finance system, both to better reflect district wealth and to make the system more student-centered. But there are still significant cracks in the foundation that must be addressed. For example, most districts across the state are still using property values from 2005 to demonstrate their ability to raise local funds.

In addition, some districts receive additional money from the state for students who have unique characteristics, such as disabilities—but other districts do not. Finally, funding for students who participate in the single public school choice program in the state—charter schools in Kansas City and St. Louis—is problematic and inequitable.

This paper highlights these problems and provides recommendations for student-centered reforms that promote fairness, transparency, and local autonomy. School finance policy is more than just complex formulas and calculations—it’s a foundational component of public education that directly affects all of Missouri’s students and classrooms.

Key Takeaways

• In Missouri, low-income students, students with disabilities, and students with limited English proficiency don’t necessarily generate additional revenue for their districts, in contrast to most weighted-student funding systems. Instead, only districts that exceed a specified threshold for each subgroup of students receive additional weighted student funding for a given category.

• Analysis of Missouri’s 2017–18 school finance data indicates that there is a moderate-to-strong correlation between a district’s property wealth and the revenue it receives, as districts with higher assessed valuation per average daily attendance (ADA) tend to generate more state and local operating dollars per ADA.

• There are three provisions in Missouri’s funding formula that guarantee districts a funding floor, or holds them “harmless.” These involve guaranteeing at least the 2004 spending per student; using 2005 property values unless property values have declined, but not if they have increased; and using the highest enrollment for the past three years. As a result, a substantial portion of education dollars are allocated inefficiently rather than being spent based on actual need.

• Education revenue raised by Proposition C, a 1-percent state sales tax, diverts state revenue to districts that have no demonstrated need.

• The State Adequacy Target (SAT) is a foundational dollar amount per student that is intended to ensure an adequate level of funding for all districts. Because the SAT is not allowed to decrease, “fully funding” the formula requires increasing spending.

• In the 2018–19 school year, more than 50 percent of Kansas City public school students chose a charter school. Because KCPS receives less funding from the state than what is owed to the charter schools, the charter schools will not be fully funded this year.

Missouri’s school finance system fails to ensure that education dollars are allocated in a fair and transparent manner that maximizes productivity. Although Missouri’s funding formula is designed to allocate dollars strategically, it currently contains provisions that substantially diminish its effectiveness. Policymakers must address these problems urgently since school finance policy is a foundational component of public education: A fair, transparent, and flexible funding system is needed to foster a productive education system that puts students first.

The full report is available at the Show-Me Institute’s website.

How to Improve Missouri’s Education Funding Formula

Aaron Garth Smith is the director of education reform at Reason Foundation, a nonprofit think tank advancing free minds and free markets.

Susan Pendergrass is director of research and education policy at the Show-Me Institute.