Understanding Oklahoma Public School Funding

Parents want a better understanding of how schools are funded and which solutions they should be advocating.

By now, most Oklahoma families are well aware of the budget challenges facing our public schools. At dinner parties, around water coolers and on playground benches across Green Country the discussion seems to have shifted. Parents want a better understanding of how schools are funded and which solutions they should be advocating to help alleviate the current budget crisis. Here’s what you should know about Oklahoma public school funding.

School Funding 101

First, it’s important to understand that Oklahoma schools are supported through a combination of state, local and federal funds. Tulsa Public Schools, for example, receives 37 percent of its budget from the State of Oklahoma, 27 percent from local revenue like property taxes, 20 percent from the building and bond fund, 13 percent from the federal government, and 3 percent from private grants. Some funding sources place restrictions on how money gets used, while other funds are unrestricted and leave spending to the discretion of the district.

The funds that are appropriated by the State Legislature to support education are referred to as state aid. The amount of state aid a district qualifies for is based primarily on student headcount and attendance, with a few other factors weighed into the calculation, such as the number of special education students, bilingual students, gifted students, and economically disadvantaged students in the district. For many districts, state aid represents a big portion of the overall budget, but according to the Oklahoma Policy Institute, Oklahoma’s state aid spending per pupil has fallen by a staggering 26.9 percent since 2008.

Equalization and Local Control

Before state aid is distributed, local sources of revenue such as property taxes are subtracted from a district’s allocation. In effect, communities that invest more in their schools at a local level see their state aid proportionally decreased. The Oklahoma Policy Institute found that 35 school districts in Oklahoma do not receive any foundation or salary incentive state aid due to this equalization process.

The intention behind equalization is admirable. Without some form of equalization process, poorer communities are often unable to effectively educate their children, and a state’s education system can become starkly polarized.

“Oklahoma’s funding formula is one of the most equitable state aid systems in the United States. It balances the two most important factors involved in school funding – the resources available at the local level and the learning needs of specific students within each district,” says State Superintendent of Public Instruction Joy Hofmeister. “While no system is perfect, we believe the funding formula is highly effective in its purpose – to make an equitable distribution of the state’s tax dollars to its public school districts.”

Tulsa Public Schools Superintendent Deborah Gist agrees that equalization is an important goal, but says it can leave local communities with few options for increasing their investments in education. “You want to be able to educate all children,” Gist says. “You also don’t want to hinder a community from going above and beyond.”

The equalization balancing could actually hold back districts that are looking for ways to increase funds.

“What I am advocating for is a change to state practice so that Tulsans could vote to do something to support our schools without lowering the state’s investment,” she says.

Tulsa City Councilor Blake Ewing also supports establishing a baseline of acceptable core funding that every student in Oklahoma is entitled to. If cities want to go above and beyond that baseline, he believes they should have the opportunity to do so without negatively impacting state support. He also takes issue with the fact that the equalization process addresses funding levels, but not educational reality.

“It is really naive to suggest that the conditions in Tulsa Public Schools are even remotely equal to the conditions in [non-urban parts of] Oklahoma,” Ewing says. “The urban situation is just different, and I think there should be some acknowledgement of that somehow through the state funding model.”

While education issues may not be traditionally considered within the purview of the mayor or the city council, city leaders appear willing to join the conversation. Tulsa Mayor G.T. Bynum recently published an op ed about the funding crisis facing Tulsa schools, and city officials have met with the school board to talk about possible solutions.

“There is an acknowledgement by [elected officials] in the area that nothing has a greater impact on the success of our community than the quality of our schools,” Ewing says.

Budgeting Challenges

Lack of state funds isn’t the only challenge facing officials charged with managing district budgets. Constantly moving spending targets and payment dates are also an issue. Joe Stoeppelwerth is the treasurer for Tulsa Public Schools. He says that managing the district’s cash flow is a big challenge.

“Most of our ad valorem tax revenue is collected in January, but we have commitments to fulfill all year long regardless of when we receive our state aid payments,” explains Stoeppelwerth.

Dr. Gist says that the state has created an unhealthy budget climate that is “so close to the edge that anytime the revenue is short, then everybody is cut.” In addition to economic factors such as oil prices, she says that outdated policies have contributed to the current deficit.

“It’s hard to help people understand the absurdity of this kind of a structure and the expectation that entities like school districts can try to function in that kind of environment,” Gist says.

It’s clear that the road to this point was long and winding. Yes, the price of oil has an impact on state revenues. Yes, policy decisions at the state level do, too. When it comes to school budgets specifically, there is something else to consider: lottery income has consistently fallen short of expectations.

“I am often asked about lottery funding – specifically ‘what happened to the lottery money?’” Stoeppelwerth says. “While these funds are part of the revenue stream used for state aid, that revenue stream did not bring in as much as was expected.”

Stoeppelwerth says that before the lottery program was put in place in 2007, it was projected to bring in $150 million annually; however, the actual contribution from lottery funds to K-12 public education has been between $60 and $70 million each year – less than half of initial projections.

Other Revenue Sources

Many Tulsa voters will recall the $415 million bond which passed in 2015 and focused on capital improvement projects for schools like replacing portable buildings with permanent classrooms and building storm shelters, plus investments in buses, books and technology.

Why not pass another bond measure to ease some of the current funding challenges?

“Bonds are very, very specific to capital projects,” Gist says. “They are for buildings or pieces of equipment that have capital value. They can’t pay for teacher salaries or staff…so they are limited.”

Moreover, the 2015 school bond effectively replaced a pre-existing bond that was being retired, so it did not increase property taxes. Any additional bond measure passed before the current bond expires would likely increase taxes – not necessarily an easy sell to all voters.

Another idea that has recently been floated is the creation of new tax increment financing (TIF) districts within Tulsa. According the City of Tulsa, this process uses projected future gains in taxes within a specific area to finance improvements. It works because when a development or public project is carried out, there is often an increase in the value of surrounding real estate, which then leads to increased tax revenues. However, a TIF district only generates income if the baseline is low and something happens to generate a burst of money, for example, when a new shopping center is built.

Councilor Ewing is skeptical that creating TIF districts would move the needle for area schools. “I don’t know that [TIFs] would generate enough money to really impact the district,” he says.

Alternative Approaches

Funding approaches differ widely from state to state, but several of the states cited in a recent report as having best-in-class school funding models have something in common: adequacy targets. States like Massachusetts and Missouri set adequacy goals that reflect the amount of funding it takes to provide an education to every student based on actual regional costs associated with public education, such as teacher salaries or building maintenance.

“We could still have an equitable funding formula but allow communities to invest in their schools,” Gist says. “That’s something that happens in states all across the country.”

It’s clear there isn’t one magic bullet that will solve Oklahoma’s well-documented school funding crisis. First, legislators will need to agree on a sustainable way to collect enough revenue to cover all of the state’s core services, including public education. Setting a realistic adequacy target for state funding could establish a transparent baseline that reflects economic realities. Officials may also consider allowing communities to supplement rather than replace state funding using local revenue.

“My primary interest is equity for students in their access to high-quality education across the state,” Hofmeister says. “However, it is time to review the funding formula to make certain it works as intended. We have begun that process, as have others.”

According to Superintendent Gist, Tulsa Public Schools is also working on a review of what it would take to adequately fund local schools. That review is expected to be complete by the end of the summer.

“You don’t want to prevent a local community that says…we want to have a world-class education system because we believe that’s best for our families and our economy,” Gist says. “I’m very confident that [creating a world-class education system] would show people that when you do invest in education, everything starts to boom.”