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A Primer on Student-Based Budgeting

School district superintendents have to make hundreds of decisions every year, from weather-based school closings to hiring decisions. But perhaps no set of decisions is more fraught with challenges (and opportunities) than school budget allocations.

The annual process of allocating school budgets is the district leader’s chance to articulate priorities for the coming year. It is also the time when schools come to learn when they will have to eliminate staff positions or change programming.

Particularly in resource-constrained districts, there is no perfect method of budget allocation. Broadly speaking, there are two approaches that districts can take, a staffing model and a weighted-student formula.

Under a staffing model, districts look at each school’s projected enrollment and allocate staff accordingly. Under this model, districts take into account things like class size and the specialized staff (art, music, and foreign language teachers, for example) needed to provide a rich curriculum and sufficient teacher planning time. While district-level staff typically present initial staffing allocations to schools, schools usually have an opportunity to appeal to make changes to the standard allocation.

While staffing models are usually based on formulas (for example, the number of teachers in a grade is determined by dividing the number of students in a grade by the district’s desired class size), there are often exceptions and ranges used to make allocations, a process that can become confusing and may not look transparent.

If your desired class size is 24 students in 3rd grade but a given school is projected to have 27 third graders, should you allocate one or two 3rd grade teachers? At what point would you allocate the second teacher? Districts often lack clear policies on such questions and the lack of transparency can be frustrating to both schools and community members. What is more, the feeling that staffing decisions are being made from the school district level rather than by the school and community can alienate school communities.

An alternative funding model that strives to address these challenges is the weighted-student formula. Under a weighted-student model, every school is funded by a formula that assigns weights to students based on a set of demographic characteristics that influence how much it costs to educate them.

For example, schools may receive more funding for each student in the early elementary grades than for students in upper elementary grades. Schools may receive additional funding for English language learners, low-income students (typically those receiving free and reduced-price meals) and students with special needs.

To determine a school’s total budget allocation, the district only needs to plug the projected number of students for the upcoming school year and their demographic characteristics into the formula. The formula produces a total school budget and the school then has some latitude to make resource and staffing decisions within their allocated budget. Of course, these staffing decisions must adhere to requirements related to class size, course offerings, and student services.

The weighted student funding formula is more transparent and provides schools and their communities with more agency in making budgeting decisions. But the model is not without its own set of challenges.

[Read More: How Should States Weight Funding for Disadvantaged Students?]

The formula itself is full of expressions of a district’s philosophy and priorities. Funding early elementary grades at a higher rate may reflect the true cost of educating young children. But it may also favor school communities with growing populations of young children, a characteristic common in gentrifying communities.

Similarly, providing additional funding for low-income students is a good way to direct additional resources to the students with the greatest need. But the approach may provide less funding to a small school with a high poverty rate than it does to a very large school with a low rate but higher number of students in poverty. Some formulas attempt to provide additional funding for concentrations of poverty to address this challenge.

Moreover, if a district has a wide variety of school sizes and school types it can be difficult to build a formula that accounts for the diversity. A very small school may not receive sufficient funding through the formula to account for the basic needs of the school. On the other hand, a very large school may receive a disproportionately large allocation because the formula fails to take into account the economies of scale that a large school enjoys. Districts that support magnet schools, specialty schools, selective schools, alternative schools, and other non-standard programing can also struggle to develop an inclusive formula.

Finally, the weighted student model is, in part, intended to encourage schools to increase their enrollment. In theory, a principal who knows that she will receive additional funding if she can recruit additional students will have an added incentive to knock on doors and visit with community members to attract students. To the extent that this approach is effective, it is a positive for the school and the district, which in turn may receive additional funding for increased district-wide enrollment.

But enrollment cuts two ways. Schools that lose enrollment due to demographic shifts, changes in local school options, or other reasons face constant changes in their annual allocations, making staffing difficult.

It’s possible to build in controls in a weighted student model to account for many of these challenges. But building in such things as funding minimums and maximums to account for school size reduces transparency, one of the model’s main benefits.

The enrollment projection process itself can be fraught with challenges, particularly in districts with high student mobility rates. Once funds are released to a school, it is difficult to pull them back (and perhaps to eliminate the staffed positions that they support), even if the projected students do not materialize.

[Read More: Transforming School Funding: A Guide to Implementing Student-Based Budgeting]

Similarly, while a district can create a reserve of funding to address enrollment projections that are too low, giving schools the opportunity to hire after students arrive at the start of the school year means that schools are hiring only staff who are available at that time and research shows that they’re not typically high-quality candidates.

There is, of course, no perfect solutions for allocating school budgets and state and federal funding that have their own formulas or restrictions further compound districts’ challenges. But there are several steps districts can take to make their school budgeting as effective as possible:

  • District leaders should recognize that the method by which they allocate funds to schools will not, by itself, solve issues related to transparency. Every method of allocating school funds is fraught with complexity and is fueled by subjective decisions.
  • Under either allocation method, community engagement is key. Because budgets are, by necessity, complicated it is critical to build in opportunities for community members to have genuine influence on budget decisions. The most effective community engagement is not a one-time presentation when budgets are allocated to schools but a long-term conversation about district priorities.
  • District leaders should recognize the value of consistency. The annual school budget season represents a big opportunity for district leaders to influence what is happening in schools. As such, it can be tempting to tinker with the way that funds are allocated each year. But even modest changes can be experienced as disruptive to school communities and district leaders should operate with caution when making changes.
  • Despite the best efforts of district leaders, it is hard to present district and school budgets in a way that it is easy for the community to understand. Using clear expense categories and using them consistently can be helpful.
  • Remember that a school district budget is not a financial exercise, it is an expression of the district’s priorities. As such, it is important to spend at least as much effort communicating about the budget as you might spend developing it. District leaders often agonize over budget decisions, but then present them with the briefest of explanation. Remember that in presenting a budget you are also presenting a vision for the future of your district and its children.