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The Bottom Line

    Implementing a New Funding Model in a K-12 District

    The concept of student-based budgeting (SBB) is closely associated with equity. By making students the primary input, SBB reduces the possibility that other factors like neighborhood prosperity, school performance, or historical perception will influence resource allocation.

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    School funding systems vary by state, but in the typical state, the financing of K-12 education is shared roughly equally by the state and local governments (with the federal government covering less than 10 percent of the cost).


    Nationwide, per-student K-12 education funding from all sources (local, state, and federal) is similar, on average, at the districts attended by low-income students ($12,961) and more affluent students ($12,640), a difference of 2.5 percent in favor of low-income students.


    The concept of student-based budgeting (SBB) is closely associated with equity. By making students the primary input, SBB reduces the possibility that other factors like neighborhood prosperity, school performance, or historical perception will influence resource allocation. With SBB, student need is quantified and assigned a funding weight, based on factors like grade level, language proficiency and economic status.


    Implementing SBB with fidelity requires more than just a change to the funding formula. A discussion about SBB can quickly become a discussion about who should be responsible for creating the budget, how to connect budget line items to performance goals, and how to make the budget process as inclusive as possible. In other words, a shift to SBB can sometimes feel a little overwhelming. What’s essential for a school district considering switching to a new funding model like SBB? Here are some things to consider before transitioning to SBB.




    Set a realistic time-line. Successful districts don’t transition to student-based budgeting overnight. A big transition like this takes several years. Often, the first year will only include a pilot group of schools or hold-harmless measures to scale the change over time.


    Understand your current context. Ask how resources are currently distributed across your district. To weigh funding, districts must have a good understanding of need and measured objectively. Traditionally, districts rely on quantitative measures like grade level, IEP hours, language proficiency, FRPL status, and/or student performance. Consider where potential gains and potential losses in funding will occur.


    Communicate with stakeholders. Talk to board members, students, parents, teachers, and principals. There should be no surprises. It’s incumbent upon district leaders to communicate the need for this change. There will inevitably be “winners” and “losers” with weighted-funding, and this must be communicated sensitively to stakeholders.




    Create the formula. The allocation formula should be weighted so that students with the highest need receive the most resources. Those priorities should be determined in partnership with stakeholders. Ideally, the district should assemble a core, cross-departmental team focused on implementing SBB successfully.


    Project enrollment and create accountability. Districts should develop a process for accurately forecasting how many and what type of students will be enrolled at each school and each grade. This will be the primary input into the funding formula. Funding should be adjusted later for schools that exceed or miss their enrollment target.




    Account for most spending at the school level. Most district spending must be attributed to individual schools in order to accurately represent all the resources being expended at a school. This style of accounting is different than what many districts do now, but it will also be a reporting requirement under ESSA, so you can get ahead of the new regulations.


    Consider limited exceptions and make contingency plans. Certain programs incur higher costs, like magnet schools. Consider whether those costs are justified, and if so, how to fund them. Be transparent about the costs and benefits. It’s also a good practice to set aside a small reserve fund for the unexpected.


    Empower principals. When principals are responsible for planning and executing their own budgets, resources are often used more effectively and better account for the local school context. However, school leaders need the right training, tools, and processes to succeed with autonomy.


    Budget with a goal in mind. The purpose for each budget line item should be connected to a larger strategic goal for the school or district. Including a written narrative with each budget can help to further explain its intended goal.


    Evaluate progress. Following implementation, districts should plan an annual review process. SBB is intended to help realize greater equity and more strategic budgeting. It should be analyzed regularly with respect to those goals, and adjusted when necessary. One way to infuse transparency is to commit to publishing an annual report of the prior year’s spending by school.


    Ready to get started?


    Whether you’re just starting to research how your district is funded, weighing who has control of district finances, or taking action to implement a new funding model, we hope this series has been helpful.


    Allovue works with districts and state departments of education across the country to allocate, budget, and manage spending. Allovue's software suite integrates seamlessly with existing accounting systems to make sure every dollar works for every student. Allovue also provides additional services such as chart of accounts and funding formula revisions.