The money held for a few years. State tax revenues unexpectedly surged, federal relief funds flooded into school districts across the nation, and the more serious structural issues with K–12 education financing remained politely hidden. However, that window is now closed. Legislators in dozens of states are now directly confronting the $190 billion in pandemic-era emergency school relief that has mostly expired: funding formulas that don’t reflect the modern world.
You’ll see that the numbers don’t add up when you stroll through the hallways of many mid-size public school districts today. fewer pupils occupying seats. more pupils with unique learning requirements. Employee expenses are rising. Additionally, state capitals that previously had surpluses in their budgets are now seriously discussing cuts. A number of pressures have been building for years, and 2025 appears to be the year that the tensions will finally come to light during floor votes and budget hearings.
Oregon provides a rather striking example of the current situation. IEP-eligible students are limited to 11% of all students under the state’s special education funding formula. The real percentage has increased to 15%. That gap, which amounts to about 20,000 students, represents actual kids getting specialized support, tailored instruction, and modified equipment without any additional funding. Earlier this year, the governor’s office started talking to K–12 stakeholders in an effort to find temporary fixes while a more comprehensive reform of the formula proceeds more slowly. It’s still unclear exactly what that temporary fix entails and who will pay for it in the interim.
The situation in Virginia is of a different kind. For the first time since the 1970s, the state is considering revising its school funding formula. According to a 2023 legislative audit, the formula consistently underestimates the number of employees needed by 51%. This is not a rounding error; rather, it represents a half-inaccurate workforce calculation based on figures that were modified during the Great Recession and were never reviewed. That is the kind of structural misalignment that quickly causes political unrest in a state where K–12 education accounts for about 30% of the annual budget.
Additionally, Alabama is reexamining a formula that has been in use for more than 30 years and considering whether to switch to a weighted student funding model that would take into consideration variables like English language learner status. In a recent interview, Krista Kaput, a senior analyst at the nonprofit Bellwether, stated clearly that a state shouldn’t approve a formula and declare the issue resolved. The majority of lawmakers seem to quietly concur; they’re just debating the political and financial implications of making any real changes.
No formula revision can completely address the additional layer of difficulty caused by enrollment decline. Between 2019 and 2022, K–12 enrollment fell by about 1.2 million students nationwide. Families switching to private schools or homeschooling account for about 40% of that decline, which was hastened by pandemic disruptions that left many parents looking for other options. In just a few years, twelve states now provide universal eligibility for private school choice programs, and states like Louisiana are introducing new universal education savings account programs despite facing anticipated deficits. When fully implemented, Louisiana’s new LA GATOR program is expected to cost at least $258 million annually; however, the state’s own fiscal office has cautioned that actual costs are difficult to estimate.
Seeing states increase school choice programs while claiming they are unable to adequately fund the public schools those families are abandoning is almost paradoxical. Arizona, which started a universal ESA program in 2022, is already dealing with higher-than-expected costs. With a projected savings of more than $244 million, Governor Katie Hobbs suggested limiting eligibility to students who had attended public school for at least 100 days. It was rejected by lawmakers. The bill continues to rise.
Underlying all of this is a deeper trend: demographics. Since 2007, the birth rate in America has been steadily declining. Marguerite Roza of Georgetown’s Edunomics Lab has observed that over time, what may appear to be a slight decline in fertility adds up to something nearly catastrophic for school enrollment. Regardless of the number of students who still require substantial assistance, fewer children translate into fewer students, and in the majority of funding models, fewer students translate into less money.
Whether state legislatures are prepared to make the difficult decisions they have been putting off for years will determine what happens next. The federal safety net has vanished. The years of surplus are over. Additionally, the formulas were never truly created for the schools that exist today in far too many places.
