- Most states across the country fund public schools by focusing primarily on the actual needs of students, but North Carolina relies on an overly complex system that focuses more on inputs like programs and staffing ratios
- Tennessee became a national leader in school finance reform in 2022 when it enacted a four-tiered, student-based funding formula in the span of about half a year
- North Carolina should emulate Tennessee’s example by abandoning its antiquated, resource-based funding system and implementing one that better reflects the needs of students
Tennessee has become a national leader in school finance reform, and North Carolina should follow its lead, according to a report by the John Locke Foundation’s Center for Effective Education.
After reforming its education funding formula in 2022, Tennessee joined the vast majority of states that use student-based funding formulas to finance public schools. These formulas allocate a base amount of funding per student, plus additional money based on particular students’ unique needs — typically things like having special needs, being an English language learner, or attending a small school or district.
According to Locke’s report, 30 states plus Washington, D.C., use funding formulas that are based primarily on the needs of students. Ten additional states use student-based elements as part of hybrid funding formulas.
North Carolina isn’t one of these states.
K–12 Education Funding Formulas (2024)
Source: EdBuild, accessed June 10, 2024
To serve students better, North Carolina should follow Tennessee’s lead by transitioning to a system that better reflects student needs and abandoning its antiquated and overly complex system that focuses on inputs, such as programs and staffing ratios, rather than student needs and outcomes.
Timeline of School Finance Reform in Tennessee
Tennessee’s reforms are all the more remarkable because of the speed with which they were achieved. Policymakers and education reform leaders accomplished in a little over six months what often takes years of focused effort.
Although the case for school finance reform had been building for decades, the idea gained momentum in Oct. 2021 after Gov. Bill Lee announced that the state would review its 30-year-old funding formula, which was an outdated system that doled out education funding based on an overly complex system of nearly 50 different formulas — very much like North Carolina’s current system still does.
During the next few months, stakeholders provided feedback on what should be included in the new formula, subcommittees convened by the Tennessee Department of Education received these comments, and a steering committee relied on them to create the first draft of a bill to enact a student-based funding formula.
The basic structure of Tennessee’s new funding formula was released in Jan. 2022, just a few months after the review process began. Legislation to enact the formula was introduced in February, approved by the legislature in April, and signed by the governor in May.
By staying focused on the big picture and not getting bogged down in minute details, policymakers accomplished the Herculean task of school finance reform in just over half a year.
Main Elements of Tennessee’s Student-Based Funding Formula
The new Tennessee Investment in Student Achievement (TISA) formula is a student-based funding formula with four tiers.
TISA Formula and Allocations for the 2023–24 School Year
Source: Tennessee Department of Education
Most funding is distributed through the base, which allocates a set amount of money per student ($6,860 in 2023–24).
The per-student allocation may be augmented with weighted funding, which is distributed for each student experiencing economic disadvantage, attending a Title I school, hailing from a small or sparsely populated school district, or having one or more unique learning needs (with funding increasing based on the severity of the learning need).
Direct funding is provided to cover the costs of certain programs and services, including career and technical education and early literacy programs.
The TISA formula also distributes outcomes funding, designed to reward districts that meet student growth and achievement benchmarks, such as improved test scores and higher numbers of industry credentials earned by students.
Why Tennessee’s Student-Based Funding Formula Is a Model for North Carolina
No funding formula will ever be perfect. Nevertheless, Tennessee’s funding formula is a model for North Carolina and other states that still rely on resource-based funding formulas because it is transparent, simple, flexible, and fair, and because it promotes greater accountability in school finance.
A 2016 review of North Carolina’s funding formula famously observed that it takes the average school business officer at least two years — if not more — to understand the state’s method for funding public schools. By contrast, information on Tennessee’s funding formula is relatively easy both to obtain and understand. Its basic structure is simple and easy to follow.
The TISA formula also lets school district leaders have more control over how education dollars are spent. Unlike Tennessee’s old formula, which contained many express or implied restrictions on how money could be used, the flexibility embedded in the new TISA formula allows district personnel to use money for what their students need.
Not only is the TISA formula flexible, but it is also fair because although not every district receives the same amount of money, all districts are funded the same way — based on the needs of the students they serve.
Finally, and perhaps most importantly, the TISA formula promotes accountability in school finance. The purpose of education funding is to provide for the education of students. If districts receive money from parents and other taxpayers, they should be held accountable for whether they achieve that goal. The TISA formula requires every school district to submit an accountability report annually to demonstrate return on investment. A board meets to review these reports and suggest ways districts can improve.
This accountability system isn’t perfect. Early research suggests that the timing of the annual accountability reports, combined with the difficulty in getting school districts to collect the required feedback from the public, has diminished their utility.
Nevertheless, Tennessee points the way toward a school finance system that promotes accountability, considers students’ needs, and is flexible, fair, streamlined, and transparent. The case for school finance reform has been building in North Carolina for years. It’s time to follow Tennessee’s lead.
