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Oklahoma’s Outdated Education Funding System Is Costing Students Hundreds of Millions of Education Dollars Each Year

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Oklahoma’s K-12 school funding system is depriving students of much-needed education funds. The state’s hold harmless policy allows school districts to receive education funds based upon student enrollment counts from up to two years ago. This means that school districts across the state are receiving thousands of dollars for students they are no longer educating.

Under this practice, Oklahoma is funding “phantom” students—i.e. students who no longer attend a district—and artificially inflating the state’s public school enrollment numbers.

Consequently, scarce education dollars are being spread among a greater number of the state’s students, which is a big problem when budgets are tight, and policymakers must make every education dollar count.

The cost of this practice isn’t trivial. Based on enrollment data from the past three school years, published by the state department of education, we estimate that Oklahoma funded 55,012 phantom students for the 2020-2021 school year. This amounts to 7.93 percent of the state’s total public school enrollment this year.

We can estimate the cost of funding these phantom students by multiplying the phantom student count by the funds the state provides on a per-student basis, which was $3,581.44 in 2020. The result of this calculation? $197 million.

This means that the state’s current funding practice is punishing the real students enrolled in school districts by depriving them of nearly $200 million statewide, or about $284 per student.

This year though, Oklahoma legislators are seeking to correct this provision and provide fair funding to school districts and students through House Bill 2078, which was recently passed from the statehouse and is set for a vote in the senate.

In response to the legislation, some stakeholders are raising concerns that the act, if passed, would “financially punish” districts with declining enrollment and exacerbate the state’s teacher shortage, among other negative consequences.

Of course, any new piece of legislation will inherently come with tradeoffs. To get a clear and fair picture, let’s examine what HB 2078 would and would not do and if such an act would make Oklahoma unique among other states in how it counts student for school funding.

Currently, Oklahoma’s hold harmless policy allows school districts to receive state aid based on a current year student enrollment count, that of the prior year, or that of the second preceding year. Importantly, aid payments are based only on enrollment from the first nine weeks of whatever school year a district uses to determine funding. HB 2078 would simply modify this policy so that districts can only choose from either the current year or the immediately preceding year. Note that the practice of basing payment on a nine-week count at the beginning of the year would be retained.

Now, here’s what HB 2078 would not do.

The act would not “financially punish” school districts with declining student enrollment. Instead, the legislation would better ensure that public education dollars are determined based on where students are currently enrolled and not by outdated student counts.

Additionally, the bill still contains generous provisions that allow districts to use an enrollment count from the prior year. Plus the enrollment count would be based only on the first nine weeks of that year—likely a time window where district enrollment is at its highest. Thus, the legislation retains a substantial portion of Oklahoma’s hold harmless policy and still gives districts a financial cushion on which they can reliably plan budgets.

Moreover, this legislation would not make Oklahoma an outlier in how it counts students to determine how much each of the state’s school districts receive. In fact, we estimate that 15 other states base school funding solely on current year student counts for all districts, that nine more states fund schools based on prior year counts without any hold harmless provisions, and that still seven more states fund districts based on the current school year and include hold harmless allowances that are more modest than that currently used in Oklahoma.

Though it does not remove Oklahoma’s hold harmless policy entirely, signing HB 2078 into law would promote equity and advance the principle that education dollars should follow students to the school they are actually receiving their education at. Opponents might claim that this will result in winners and losers, but that’s exactly what the current funding formula already does.


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