How to Design a State Education Aid Formula That Is Equitable, Adequate, and Politically Feasible: The Case of Connecticut 
Using Connecticut as a case study, the author shows how to design a public K–12 school-funding system that is equitable, adequate, and politically feasible. Connecticut, which relies heavily on local property taxes as a funding source for its schools, exemplifies states that have highly inequitable public education funding systems. While Connecticut has revised its state education aid formula several times since the late 1980s, the current version has been criticized because it is not derived from data analysis and it is not based on a student performance level that would determine its adequacy.
For his formula, the author first develops a measure of the gap between a school district’s education cost to achieve a common student performance target and its revenue capacity, both of which are estimated using school district characteristics that are outside the direct control of local officials at any given point in time. Although districts with larger cost-capacity gaps, on average, receive greater amounts of state aid per pupil under Connecticut’s existing school-aid distributions, significant inequity and inadequacy remain. The author then proposes a gap-based formula that allocates state aid in a way that closes districts’ cost-capacity gaps. The formula can include provisions such as minimum and maximum levels of aid to increase its political feasibility.
Key Findings
- Four factors significantly affect a school district’s per-pupil education cost: the percentage of school-age children from families living in poverty, the percentage of students living in single-parent or non-family households, whether a district has more than or fewer than 2,000 enrolled students, and whether or not a school district is a regional district.
- Districts with the highest child poverty rates or the lowest property wealth per pupil tend to have the largest cost-capacity gaps, because, on average, they have the highest education cost and the lowest revenue capacity.
- Districts with the largest enrollments, highest child poverty rates, least property wealth, or largest pre-aid gaps tend to have the largest gaps after receiving aid. While these districts, on average, receive the largest amounts of state education aid per pupil, the aid amounts are not sufficiently large to compensate for their pre-aid gaps.
- In fiscal year 2019, more than 61 percent of Connecticut school districts received less aid than they needed to close the cost-capacity gaps and reach a common student performance target, according to the author’s calculations.
- In that year, the state would have had to increase the aid pool relative to the actual aid by 44.40 percent under the author’s formula with the provision that prevents a district from receiving less aid than it currently receives.
Implications
A gap-based formula for Connecticut could significantly improve both the adequacy and the equity in the state’s school funding system. When the formula includes policy tools to increase its political appeal, however, it would require a larger state aid pool than would otherwise be necessary and also would not completely eliminate the inequity in school funding. The gap-based formula can be adapted and applied to other states.
Abstract
After being sued for inequity and inadequacy in school funding, many states have reformed their education aid policies. Using Connecticut as an example, this paper shows how to design a state education aid formula that can effectively address funding inequity and inadequacy while taking political feasibility into account. It first develops a measure of the gap between education cost and revenue capacity, both of which are estimated using school district characteristics that are outside the direct control of local officials at any given point in time. It then uses each district’s cost-capacity gap to evaluate the state’s existing education aid distribution. This paper shows that while larger-gap districts, on average, receive greater amounts of state aid per pupil under Connecticut’s existing distributions, significant inequity and inadequacy remain. This paper proposes, as a potential solution, a gap-based formula that allocates state aid to close the cost-capacity gaps. The formula includes tools such as minimum and maximum levels of aid to increase its political appeal. The research method and the formula design that this paper presents are sufficiently general and flexible to be adapted easily and applied to other states.