Report: Millions in school funding goes where kids were, not where they are now

(The Center Square) – Missouri and Oklahoma should adjust school funding when enrollments drop instead of allocating amounts based on policies using previous numbers, according to a report by the libertarian Reason Foundation.

An analysis of the two states found millions in state education funds were being sent to school districts with declining enrollment. The report, “The cost of state hold harmless policies in K-12 education,” stated the declines in public school enrollment after the COVID-19 pandemic aren’t being balanced with adjustments in state funding policies.

“Hold harmless” policies in Missouri allow state funding levels to be maintained when the school district experiences a decline in enrollment. In Oklahoma, a weighted average daily membership during the first nine weeks of the school year or the preceding year, whichever is greater, is used for funding.

The report found 256 of Missouri’s 518 school districts in 2021-22, 49.4%, received “declining enrollment funding. As a result, there were an estimated 44,997 ghost students statewide, costing the state $197.04 million or 4.7% of total formula aid.”

In Oklahoma, the report stated 155 of 541 school districts, 28.7%, received “declining enrollment funding. As a result, there were an estimated 3,777 ghost students statewide, costing the state $14.03 million or .6% of total formula aid.”

"I think there's some nuance that's not captured in this," Kari Monsees, a deputy commissioner with Missouri's Department of Elementary and Secondary Education, said in an interview with The Center Square. "The reason there are hold harmless provisions are because of the legislative process and the ability to getting funding bills passed so there aren't big losers. In part, they're designed to get through the political process."

Monsees also said Missouri's policies provide a smoothing effect when there are fluctuations.

The analysis found the highest-poverty school districts in the states weren’t the largest beneficiaries of the “declining enrollment funding per student.”

The report recommends state funding of school districts should be based solely on current-year enrollment. It also advocated for legislators to review hold harmless policies.

“Although funding protections are entrenched in statute, lawmakers sign off on them each year they persist,” the report stated. “Eliminating outdated hold harmless policies can be politically challenging, but is a worthwhile policy goal.”

The report’s authors, Aaron Garth Smith and Christian Barnard, stated there’s not a clear relationship between funding for school districts with declining enrollment and a district’s poverty level. Their research found the states have allowances to provide additional funding for poor students.

“Policymakers in each state should evaluate the cost of these policies, their distribution patterns, and whether they’ve outgrown their original purpose,” according to the report. “In a context where states are still rebounding from COVID-19 enrollment shocks and many are projected to have stagnating or declining K-12 populations over the next decade, it becomes increasingly expensive to shield districts from the resulting financial effects. Ultimately, legislators should ensure that K-12 dollars are tied to their strategic goals for public education.”

The Education Trust, a left-leaning advocate for more funding for schools, stated a similar finding in a 2021 blog post.

“Hold harmless policies that exist past their utility, in this case addressing enrollment shifts, can end up benefiting districts with fewer students and needs at the expense of higher-need districts in the long run,” the post stated . “Hold harmless policies should be phased out over time so that money goes back to following students, and states can free up funds as they spend down federal aid.”