Tennessee is one of only nine states that still employ a resource-based formula for allocating education dollars to school districts. This approach puts the focus squarely on inputs rather than students’ needs and is mired in layers of complexity that reduce transparency. As a result, policymakers lack an effective lever for targeting dollars to students and are thus unable to formulate a coherent strategy for allocating the state’s $9.655 billion in state and local funding.
Our analysis of Tennessee’s school finance system reveals five key findings:
- Only 3% of education dollars are allocated based on student characteristics.
- Only 16% of education dollars are flexible for district and school leaders.
- Funding for low-income students is neither regressive nor progressive.
- In multi-system counties, county school districts tend to be at a funding disadvantage compared to municipal and special school districts.
- Local wealth equalization is unnecessarily complex and opaque.
Tennessee should modernize its school finance system by adopting student-centered funding, a strategic approach to K-12 education funding that involves several policy reforms that are tailored to local needs and preferences. These policies can be adopted separately over time or as part of a comprehensive overhaul. Specifically, we have four recommendations for state policymakers:
1. Streamline dollars into a weighted student formula.
Most importantly, operating revenue should be streamlined into a weighted student formula that allocates dollars based on individual students’ needs. The concept is simple: a per-pupil foundational allotment is established for regular program students, then weights are added to this amount for selected categories of need. States such as Texas, South Carolina, California, and others all use some form of weighted student funding.
2. Reform Tennessee’s approach to equalizing local education dollars.
At the very least, Tennessee could eliminate the more complex Tennessee Advisory Commission on Intergovernmental Relations (TACIR) six-criteria model and fully adopt the Center for Business and Economic Research (CBER) model, which uses only the county property tax and sales tax bases. This would improve transparency by simplifying the current redundant system of using both models at once. But policymakers could go even further to ensure that students, not local wealth, are the primary determinant of funding levels. Ultimately, the goal is to streamline all or nearly all operating dollars into one coherent funding system where state and local dollars work together.
3. Resist the urge to add new complexities.
To the extent possible, policymakers should resist the urge to adopt policies that replace existing complexities with new ones.
4. Leverage public school open enrollment and transparency for accountability.
One way to help ensure accountability for spending and outcomes is to adopt universal inter-district open enrollment, a policy that allows families to enroll in public schools across school district boundaries. Tennessee currently lacks a robust open enrollment policy that would give families easy access to other public schools that they may, for a variety of reasons, believe to be a better fit for their child. Another pathway to stronger accountability that avoids rigid restrictions is to improve transparency in how education dollars are allocated and spent. Stakeholders and parents should have easy access to school finance data.