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Last fall, Tennessee Gov. Bill Lee set the stage for comprehensive K-12 school finance reform by his administration would 鈥減ursue a rigorous review of our state鈥檚 education funding to ensure we are properly investing in students and stewarding our resources well.鈥� 

After months of subcommittee meetings and public town halls to discuss possible changes to how the state allocates education dollars to districts, Tennessee Education Commissioner Penny Schwinn recently released a showing how the Volunteer State could transition to a student-centered funding model. Essentially, they鈥檙e looking to replace their current complex, non-transparent funding system with a simpler formula that better accounts for student needs and enhances local flexibility over education funds.The policy ideas included in the draft are encouraging and would likely accomplish these objectives.

Tennessee is one of only a of states that employ an outdated resource-based funding formula with its model. It uses over 40 components to calculate funding levels for budget items such as administrative staff, counselors and textbooks. 

In a published this week by Reason Foundation, we estimate that only 3 percent of Tennessee state and local education operating dollars were allocated based on student characteristics in the 2019-20 school year. In comparison, Marguerite Roza of Georgetown University鈥檚 Edunomics Lab that states such as Texas, Colorado and California disburse at least two-thirds of funding on the basis of student needs.

As a result, Tennessee鈥檚 school finance system lacks a reliable lever for targeting dollars to groups such as low-income students and English learners and is among the least transparent in the nation. Not only that, but the state鈥檚 current approach could make district and school leaders reluctant to innovate, with an estimated having explicit or implied spending restrictions that limit local flexibility. School leaders know what their students and staff need, yet both real and perceived barriers stand in their way. 

But Tennessee鈥檚 funding problems run deeper than lack of local control. The state鈥檚 approach to calculating local share amounts (i.e. how much revenue districts must contribute to Basic Education Program funding) employs that are unnecessarily complex, and its three types of public school districts 鈥� county, municipal and special school districts 鈥� operate under .

Ultimately, this disjointed mix prevents policymakers from prioritizing resources for higher-need students. 

For example, despite the state鈥檚 efforts to direct additional funding to at-risk kids, our analysis shows almost no correlation between districts鈥� per-pupil funding and U.S. Census poverty rates. The analysis also finds that county school districts tend to be at a funding disadvantage compared with the municipal and special school districts within their boundaries.

Fortunately, the state’s released this month takes important steps to address these problems. Most importantly, it would eliminate the outdated funding model and streamline revenue into a weighted formula that targets additional dollars to categories such as student poverty, special education and English learners. This would immediately improve transparency while also providing policymakers with an effective mechanism to boost funding equity and local flexibility.

Research on California鈥檚 transition to a weighted-student funding formula backs this up. In 2013, the Golden State adopted its bipartisan , which collapsed more than 30 categorical grants into a simplified allocation system. A by Education Trust-West showed 鈥渄ramatic鈥� improvements in funding equity, noting, 鈥淏y 2015-16, three years after LCFF was enacted, district funding became the most equitable that it had ever been among years of available data.鈥� Local school leaders also give the reform highmarks. In a of superintendents, 74 percent indicated they鈥檙e better able to match spending with local needs and 70 percent agreed that it is leading to improved academic outcomes.

To be sure, Tennessee’s draft framework for K-12 education funding reform could be improved, especially since it doesn鈥檛 address the state’s byzantine local revenue policies and still includes some funding streams that aren鈥檛 student-centered. But policymakers are on the right path to adopting a more fair, transparent and flexible school finance system. With the state experiencing a hefty budget surplus, legislators have a historic opportunity in 2022 to make students the focus of Tennessee鈥檚 funding strategy for K-12 education. This would be a win for kids, educators and taxpayers.

 is director of education reform and  is an education policy analyst at Reason Foundation.

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