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What Would Student-Based Allocation 
Mean for Pennsylvania School Districts?

MARGUERITE ROZA
Georgetown University

AMANDA WARCO
Georgetown University

In recent months, policymakers across the country have been exploring state 
school financing formulas with the goals of promoting equity, transparency, 
and adequacy. Toward that end, state leaders are considering a new model for 
disbursing state education funds called “student-based allocation” (SBA)—one 
that would allocate funds on the basis of students. In fact, many states already 
have some sort of formula using students as the basis, although in practice, 
most essentially use a hybrid set of allocations such that the portion of funds 
allocated on the basis of students varies substantially across states. This analy-
sis of 14 states shows that among the sampled states, between 0 and 85% of all 
state and local funds is allocated on the basis of students. In Pennsylvania, after 
operating in the absence of a formal allocation formula for several years, the 
Basic Education Funding Commission (BEFC) was tasked with recommending 
a new finance scheme for funding the state’s schools. In this paper, we outline 
the rationale behind SBA and investigate the extent to which the BEFC proposal 
would allocate funds on the basis of students.

One of a state’s primary responsibilities is to divide up the public 
funds for K–12 schooling. Each state has a set of finance policies that 
together determine how the state and local funds are allocated so 

that districts can then apply them to schools and classrooms. Different states 

COMMONWEALTH, Volume 18, Issue 1 (June 2016). © 2016 The Pennsylvania Political Science Association. 
ISSN 2469-7672 (online). http://dx.doi.org/10.15367/cjppp.v18i1.82. All rights reserved.



20 MARGUERITE RoZA AnD AMAnDA WARCo

use a host of variables, formulas, and other mechanisms to determine how 
much each district receives. Because of the tremendous political lift involved 
in changing state formulas, they don’t change much from year to year. Rather, 
states tend to layer new program funds on to the old model, or make minor 
tweaks here or there to address the greatest pain points. Eventually, a formula 
may seem broken enough that a state tackles it from top to bottom.

Such appears to be the case in Pennsylvania, where a State Commission 
(called the Basic Education Funding Commission, or the BEFC) was tasked 
with developing a whole new state education funding formula. Of interest in 
Pennsylvania is a mechanism called “student-based allocation” (SBA), also 
known as weighted student funding (WSF). With SBA, state (or state and 
local) funds are deployed on the basis of students and student types (poverty, 
disability, etc.). SBA has garnered interest among state leaders largely for its 
promise to improve equity and transparency, while ensuring that districts 
with higher needs students receive appropriately higher allocations. Further, 
as state leaders face both increasing costs and highly constrained resources, 
some state leaders are seeking SBA as a means to facilitate greater productivity 
and financial sustainability in their state education systems.

In this paper, we outline the rationale behind SBA and investigate the 
BEFC proposal against that rationale. Drawing on data from Pennsylvania 
and other states’ SBA systems, we compare Pennsylvania’s current and pro-
posed allocations to those of 14 other states. And we analyze what the BEFC 
proposal would mean for the relative share of state funding allocated accord-
ing to student versus district characteristics.

State Leaders Look to SBA to Enhance 
Equity and Productivity

The specifics of state funding formulas vary widely. But what many states have 
in common is incremental layers of formula iterations that can unintention-
ally work to create inequities among districts, hinder efficient use of public 
funds, and inhibit system-wide productivity. As states rethink their allocation 
systems, many are considering student-based allocation as a way to tackle 
these three challenges.

Student-based allocation emerged in the United States two decades ago 
as a means for large districts to better deploy funds to schools.1 The funding 
formula is student driven: A fixed dollar amount is set for each student type 
and funds flow on the basis of students, with higher-needs students generat-
ing incrementally more money. The funds remain flexible so that each locale 
can spend them as needed. This formula departs from traditional district 



What Would Student-Based Allocation Mean for Pennsylvania School Districts? 21

Figure 1. SBA Can Be Used to Deploy Funds at Different Levels in the System. (Image created 
by authors.)

allocations that tend to assign positions to schools (one teacher for every 25 
students, one counselor for every 300 students, etc.). Big districts like Hous-
ton, Boston, Baltimore, Denver, Cleveland, Chicago, and others now use SBA 
at the district level to distribute funds to schools.

More recently, state leaders have taken an interest in using SBA to push 
state (or combined state and local) funds to districts (or directly to schools) 
as illustrated in Figure 1. While some states do allocate a foundational 
per-pupil payment (a foundation formula), what sets SBA apart is that stu-
dent need drives the variation in the fixed per-student amounts paid out. 
And that weighted formula replaces a range of ways that states are funneling 
dollars to districts and schools beyond just their basic formula. For instance, 
some states drive funding for high-needs students through categorical alloca-
tions or designated program funding (such as funds for reading coaches, grad-
uation specialists, and so on). Separate state allocations are often layered on 
for designated efforts for STEM initiatives, teacher bonuses, AP coursework, 
textbooks, and much more, creating opaque and complex allocations that may 
work to undo any equitable distribution created by the basic formula. Other 
states lean on funding formula mechanisms like hold-harmless provisions for 
enrollment decline,2 adjustments for size and urbanicity, or to offset charter 
school growth. Several states like Delaware and Idaho don’t use a foundation 
formula at all, but rather allocate staff positions based on student enrollment 



22 MARGUERITE RoZA AnD AMAnDA WARCo

(and then reimburse districts for actual salaries of the allowable staff counts) or 
use some other arrangement altogether (like a grandfathering formula, where 
all districts get some percentage of their previous year’s allocation regardless of 
changes in the number of students served or the mix of student needs).3

SBA has surfaced as a solution to frustrations with existing state allocation 
formulas, which have been criticized for being

•  complex, opaque, and unfair
•  too prescriptive, inflexible and onerous in terms of compliance
•   inequitable because districts get uneven revenues (often driven by 

the interplay of local and state monies) and districts with greater 
student needs don’t receive sufficiently greater resources to meet 
their students’ challenges

•   inefficient and unproductive, since current formulas protect dis-
tricts from making needed adjustments to changing enrollments 
or conditions

Proponents say SBA simultaneously addresses the complexity (district 
leaders know that an English language learner will generate $X allocation, 
a homeless student will generate $Y), f lexibility (schools can individualize 
resources to match their staff and students’ strengths and needs), and equity 
concerns (students with greater needs trigger larger allocations).

Further, SBA is thought to replace policies that are considered inefficient 
with policies that promote productivity-enhancing adaptations. A criticism 
of some existing funding formulas is that they fund “phantom students” by 
delivering more funds to districts than would be justified by their actual 
enrollment (Roza and Fullerton 2013). These policies can take the form of

•  extra funds for declining enrollment districts
•  offsets for districts that lose students to charters
•  small districts subsidies
•  minimum allotments for categorical allocations

In each case, the affected districts receive funds in excess of what they 
would receive if only the students on their rolls were funded. All told, these 
kinds of provisions drive more funds to some districts than are warranted 
under the total state enrollment figures and corresponding lower per pupil 
allotments for all other districts (assuming limited state funds). Hold-harm-
less provisions, for instance, are also thought to insulate district leaders from 
making the adaptive (and therefore productivity-enhancing) changes (such 



What Would Student-Based Allocation Mean for Pennsylvania School Districts? 23

as right-sizing, but also adopting new delivery models) needed to better meet 
the size of the shrinking student rolls. In other words, the policies intended to 
“protect” these districts may be enabling a more sluggish response to changes 
that should be happening with enrollment fluctuations.

Nudging districts toward greater adaptability—the thinking goes—is 
important in a labor-intensive sector where costs will likely outstrip revenues 
in coming years. With labor costs rising faster than revenue streams, school-
ing could suffer from steady decline over successive years of incremental cuts, 
provided that services remain stuck in a fixed delivery model that doesn’t 
adapt to the kinds of changes that have fueled productivity improvements 
in other service sectors (Roza 2013). In order to make productivity improve-
ments, districts need to seek new delivery models that allow schools to do the 
most with scarce, but fairly allocated, resources.

In California, state leaders recently replaced a reportedly complex and 
onerous system of categorical funding with a student-based formula called 
the Local Control Funding Formula (LCFF).4 For each district, the state deter-
mines the target spending, based on the mix of students and student types, 
and then applies the expected local funds toward that target. State funds then 
make up the difference. (Table 1 shows how much is allocated for each student 
by grade level and need.) Districts then have f lexibility in how they apply 
funds, and then own the corresponding responsibility for improved outcomes. 
LCFF isn’t a pure SBA model, however, as state leaders did leave a pool of 
funds in a hold-harmless provision to protect some districts from large losses 
in the first few years of implementation.

Table 1: California’s student-Based Allocation Formula

student Types* Allocation

Grades K–3 $7,557

Grades 4–6 $6,947

Grades 7–8 $7,154

Grades 9–12 $8,505

  

Limited English +20%

Poverty† +20%

Foster youth

    

+20%

Source: Data from California Department of Education, “Local Control Funding Formula Overview,” 
last reviewed November 25, 2015, accessed February 11, 2014.

* In California, students receive the weight only once even if they fall into multiple categories. Often, 
in other state formulas, students receive the weight amount for each category that applies to them.

†High-poverty districts are also awarded a 50% weight for each poor student above 55%.



24 MARGUERITE RoZA AnD AMAnDA WARCo

A similar model was proposed in Colorado, but the Colorado formula was 
tied to a ballot measure that was defeated at the ballot box in 2013.5 In the last 
three years, leaders in Ohio, Illinois, Georgia, Arizona, and Delaware have 
also made proposals to advance student-based allocation, and in some cases 
those are still pending.6

Concerns about Flexibility and Districts’ 
Adaptability to Changes

This policy proposal is not without skeptics. Some worry that with greater 
local flexibility, districts would still yield to pressures from advantaged par-
ents, unions, or other forces to spend money unwisely or in ways that ill serve 
the most disadvantaged students.

Others remain concerned that, since a student-based formula only funds 
students, it isn’t sensitive enough to differences in districts created by nonstu-
dent factors. For instance, SBA formulas don’t take into account the historic 
district enrollments (for shrinking districts), charters, small size, high trans-
portation costs, etc. Skeptics worry that districts with these and other char-
acteristics may be less equipped to serve students with the available funding. 
And finally, some worry that, if not clearly defined or limited, districts may 
have an incentive to over-identify certain types of students.

Pennsylvania’s BEFC Tasked with Devising  
a More Sustainable State Allocation Formula

Plenty has been written about how Pennsylvania’s existing formula isn’t a for-
mula at all.7 At one point, Pennsylvania did have a student-based formula on 
the books, but it hasn’t been used in several years. Rather, recent years’ state 
funding has been allocated by just adding a percentage each year to whatever 
each district received the year before, regardless of any changes in student rolls. 
Not surprisingly, growing districts are seeing per pupil allocations fall, while 
districts that have lost students are now funded at higher per pupil allocations.

Other changes in student needs are also not considered, including the rapid 
rise in the percentage of students in poverty. As the BEFC reports, the percent-
age of students eligible for free or reduced lunch has risen from 35% to 48% over 
the last decade (Basic Education Funding Commission 2015). Given the higher 
needs associated with these student characteristics, districts are understandably 
concerned about a state formula that ignores these changing student needs.

Much of the back and forth in Pennsylvania has also concerned the over-
all level of state funding and its interactions with local money. This paper 



What Would Student-Based Allocation Mean for Pennsylvania School Districts? 25

doesn’t tackle the question of how much money was or would be put into 
the state formula, but rather focuses on the means of deploying it. However, 
also at issue is the constant worry that state sources will remain insufficient 
to meet the rising cost factors in Pennsylvania’s districts. In Pennsylvania, 
like in other states, labor costs are outpacing state revenues, forcing tradeoffs 
within districts that put pressure on the financing model. For instance, from 
2004 to 2008, the benefits load on salaries (a number that should remain fixed 
if benefits were growing at the same rate as salaries) jumped from 30% to 
37%.8 With cost pressures mounting, and given the constrained nature of state 
funds, there is pressure for the state system to fund schooling in a way that 
helps promote productivity improvements.

The BEFC Proposal Would Deploy Funds  
by Both Student and Nonstudent Factors

Given the above conditions, the BEFC considered SBA for the state. In the 
summary report, the BEFC makes a proposal for a hybrid state allocation 
formula that involves divvying up state monies in ways that include elements 
of student-based allocation, while also driving a portion of funds to districts 
on the basis of nonstudent factors:9

a.  Student-based factors include poverty and English proficiency. As 
the BEFC has outlined, poverty is a student factor relevant to learn-
ing. The BEFC’s formula includes three types of poverty weights 
to take into account varying levels and concentration of poverty. 
Similarly, students with limited English proficiency are awarded 
an additional 60% allocation.

b.  The formula recognizes local revenue capacity. Whereas a SBA model 
could include local funds in its generation of a per pupil allocation, 
the BEFC formula applies a local income and capacity index (an 
index designed by the BEFC that takes into account district median 
income and property tax wealth), which works similarly to channel 
more funds to those districts with less local wealth.

c. Th e BEFC’s formula insulates districts from changing enrollment 
and corresponding financial implications. Rather than base alloca-
tions on actual current year student counts—as a pure SBA formu-
la would—the BEFC bases allocation on a rolling three-year aver-
age. In doing so, districts with declining enrollment are funded for 
more students than actually attend the district, while some are not 
receiving funds for all the students on their rolls in a given year. 



26 MARGUERITE RoZA AnD AMAnDA WARCo

The BEFC’s rationale is to protect declining enrollment districts, 
but at the same time, that adjustment for “phantom” students 
means declining enrollment districts aren’t making the year-to-
year adaptations justified by their enrollment changes.

d.  The BEFC channels higher per pupil amounts according to district 
characteristics. In the SBA design, district characteristics aren’t 
weighted, only student ones. The BEFC formula, however, factors in 
some district characteristics to its formula, including size, sparsity, 
and attendance at charters.10 The result is that the dollar amount 
generated for a third grade student with limited English proficiency 
in one district is different from that generated to a student with the 
same characteristics in another district.

The BEFC Proposal Yields 37% of Funds 
Driven on the Basis of Pupils

The BEFC proposed formula, like those in other states, contains some ele-
ments of a student-based allocation system, and yet has some funding factors 
that don’t involve student types. Given that most states are some hybrid of 
different funding formula types,11 our team has been conducting an ongoing 
study (thus far in 14 states) to measure the portion of state and local mon-
ies delivered via student-based allocation.12 Measuring progress toward full 
student-based allocation can inform state policymakers as they take stock of 
the current finance policies and set goals for future policies.

The study analyzed all state and local funds in each state and determined 
the portion of any state and local funds deployed with a student-based for-
mula. To be considered student based, the allocation had to deploy a fixed 
amount of money on the basis of students or student types. The study con-
sidered all state and local public funds for K–12 education, excluding any 
long-term obligations like debt for facilities.13 The study then investigated the 
percentage that would be allocated if Pennsylvania swapped its current alloca-
tions and instead deployed all its funds using the BEFC-proposed formula.14

Figure 2 captures the findings for each of the 14 states including Pennsyl-
vania’s allocations both in the current form and using the BEFC formula for 
all allocations. As is evident in the figure, states vary widely on the portion of 
funds delivered on a student basis. New Jersey, California, and Minnesota all 
distribute more than 75% of the state and local funds on a student basis. Dela-
ware, Idaho, Tennessee, and Washington have low percentages, since these 
states deliver funding primarily through a staffing formula.

At present, none of the funds in Pennsylvania’s existing model are deliv-



What Would Student-Based Allocation Mean for Pennsylvania School Districts? 27

ered via SBA (hence the 0%), as the state is essentially utilizing a hold-harmless 
mechanism. If the state instead adopted the BEFC formula for all its funding, 
that percentage would jump to 37%. Relative to the other SBA states, that fig-
ure is low, although a substantial increase over its current figure of 0%.

Why does the BEFC proposal only yield 37% of the funds delivered via 
SBA? The nonstudent factors, such as charters and district size, are partly to 
blame. A pure student-based formula would ignore district size and the school 
type, and fund only the students. The responsibility for the district, then, 
would be to craft delivery models that were more suited for smaller enroll-
ments or could transfer those same per pupil allotments to charters. Some 
schools already do this, relying on staff with multiple roles. For instance, a 
principal of a small school might also teach a class, or instead of a full time 
gym teacher or nurse, the school might contract with a personal trainer or 
nursing service in order to buy services in smaller increments.

Another reason that the BEFC formula doesn’t yield a higher percent-
age of funds delivered via SBA is that its basis is on the three-year rolling 
enrollment average and not actual current year enrollment. And finally, the 
BEFC doesn’t use a student basis for counting local funds toward its formula 
allocation (rather, it uses a local capacity index). The result is that local funds 
together with state funds don’t generate a predictable dollar amount for a 
particular student type. That dollar figure will continue to vary by district.

Note: Reported figures augment analysis initially reported by Miller, Roza, and Simburg 2014 with authors’ 
analysis based on publicly available state and local education funding sources, legislative language, and  
allocation reports.

Figure 2. Portions of State and Local Education Funds Delivered via SBA. (Image created by authors.)



28 MARGUERITE RoZA AnD AMAnDA WARCo

A Window of Opportunity in Pennsylvania

The reason that state education finance formulas stay in place for decades 
is that the politics are challenging. Education tends to be the largest item in 
state budgets, and every locale has something to gain or lose with a potential 
formula overhaul. At the same time, when the window for change opens, leg-
islators have an enormous responsibility as the next formula will likely be in 
place for decades into the future.

No one can say for certain what schooling will look like two decades from 
now, let alone understand how cost structures will be redefined. For instance, 
will population density be a moot factor given technological changes that 
might be able to group students in a shared course miles apart? Will the school 
year be redefined and staffing roles dramatically altered? For state leaders, 
designing an allocation system amid such uncertainty is tricky, particularly 
given that so many years may pass before there is the opportunity to modify 
the system. But the one thing we know will still be there in two decades are 
the students. Aligning money with the students offers some promise that a 
finance formula will be able to stand the test of time.

As Pennsylvania’s leaders continue to explore solutions to its ongoing state 
financing issues, this is the moment to take stock of both the opportunity and 
the extent to which proposals meet the state’s long-term goals. We can expect 
that leaders will have different opinions on what’s best for Pennsylvania, and 
for how districts should be expected to operate with public funds. This analy-
sis compares the existing and proposed state models with those in other states, 
to illustrate the range of solutions being generated in states across the country. 
As leaders size up their options and make decisions about the future of Penn-
sylvania’s education-finance formula, understanding the scope and implica-
tions of the proposals before them is critically important.

NOTES

1. For a more complete history and description on WSF, see Roza 2014.
2. Here we refer to “hold-harmless provisions” as provisions that states include to 

prevent a year-to-year decrease in funds to a district. Most often such hold-harmless pro-
visions work to ensure that a district’s total funding level doesn’t dip below the previous 
years’ level, despite decreases in actual student enrollment. For further discussion of the 
impact of this type of hold-harmless, please see “Funding Phantom Students” (Roza and 
Fullerton 2013).

3. For instance, Pennsylvania’s formula does not take into account enrollment at all, 
but rather works as a uniform percentage adjustment to the previous year’s funding level.

4. See Freedberg 2013.
5. Simpson 2013.
6. See, for example, Smith and Snell 2015 and Illinois Business Journal 2015.



What Would Student-Based Allocation Mean for Pennsylvania School Districts? 29

7. For one example, see “Pennsylvania’s Historic School Funding Problem” (Penn-
sylvania 2015).

8. Author’s calculations based on National Center for Education Statistics data from 
2004 to 2008. For additional discussion of rising labor costs see the BEFC final report 
including testimony from Marguerite Roza on page 24.

9. Pennsylvania created a similar task force in 2013 to study the state’s approach to 
special education funding. That task force ultimately made recommendations to use a 
formula that would create three funding tiers for special education students (based on 
what districts had been spending on those students in previous years) and adjust that 
funding according to district-based characteristics. In 2014–2015, the state amended the 
funding formula to allocate $19.8 million through the new formula. Since the formula 
amounts were tied to the previous years’ funding levels, it is not student based. The BEFC 
was tasked with revising the Basic Education Funding calculation only, which does not 
include the special education funding.

10. Charter schools are public schools that operate independently of school dis-
tricts. Approaches to funding charter schools vary across states. In Pennsylvania, charter 
schools receive their funding through the district. BEFC mistakenly considers percentage 
of district attendance in a charter in their weighted student formula as a “student” char-
acteristic, rather than a characteristic of the district.

11. Hawaii is the closest to a pure SBA model, although the state has only a single 
district.

12. See an earlier reporting on a portion of these findings in Miller, Roza, and Sim-
burg 2014.

13. Federal funds, which represent 9–12% of total K–12 revenues, were excluded from 
this analysis, as were funds for long-term debt and capital costs.

14. Note that at the time of writing the legislature was not considering adopting the 
BEFC formula for all its funds, so the model here is a hypothetical policy model for future 
years.

REFERENCES

Basic Education Finance Commission. 2015. Report and Recommendations. http://basic 
educationfundingcommission.pasenategop.com/files/2014/08/final-report-061915 
-.pdf (March 8, 2016).

Freedberg, Louis. 2013. “Reform of California’s School Finance System Likely.” EdSource, 
June 4. http://edsource.org/2013/governor-brown-eyes-yet-another-education-victory 
/32907 (March 8, 2016).

Illinois Business Journal. 2015. “Manar, Others Detail Proposed Changes to Education 
Funding in Illinois.” February 7. http://www.ibjonline.com/localheadlines/1670-
manar-others-detail-proposed-changes-to-education-funding-in-illinois (March 8, 
2016).

Miller, Larry, Marguerite Roza, and Suzanne Simburg. 2014. “Funding for Students’ Sake: 
How to Stop Financing Tomorrow’s Schools Based on Yesterday’s Priorities.” The SEA 
of the Future 3 (May): 19–31.

Pennsylvania School Funding Project. 2015. Pennsylvania’s Historic School Funding Prob-
lem. http://www.paschoolfunding.org/the-problem/pennsylvania%E2%80%99s-his 
toric-school-funding-problem/ (March 8, 2016).

Roza, Marguerite. 2013. “Leveraging Productivity for Progress: An Imperative for States.” 
The SEA of the Future 2 (May): 8–17.



30 MARGUERITE RoZA AnD AMAnDA WARCo

———. 2014. “Weighted Student Funding.” In Encyclopedia of Education Economics and 
Finance, ed. Dominic J. Brewer and Lawrence O. Picus. Los Angeles: Sage Publica-
tions, 835–838.

Roza, Marguerite, and Jon Fullerton. 2013. “Funding Phantom Students.” Education Next 
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Simpson, Kevin. 2013. “Voters Reject Big Tax Hike, School Finance Measure Amend-
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ci_24462841/voters-reject-big-tax-hike-school-finance-measure (March 8, 2016).

Smith, Aaron, and Lisa Snell. 2015. “Moving toward Transparent and Student-Based 
Funding Reform in Georgia.” Georgia Public Policy Foundation, December 4. http://
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funding-reform-in-georgia/ (March 8, 2016).




