State aid represents the funds that are appropriated by the State Legislature for school districts, and distributed by the State Department of Education through the State Aid Formula.
State aid is based on three categories: foundation aid, incentive aid, and transportation aid. Foundation aid, by far the largest category, is determined primarily by the number of students attending in each district, with allowances made for various student characteristics represented as grade and categorical weights. For example, a 3rd grader may “weigh” 1.051 points in the state aid formula, while a 1st or 2nd grader counts as 1.351 points. Other points are added due to a variety of factors, such as for special education students (which varies based on the student’s disability), gifted students, economically disadvantaged students, or transportation needs in isolated rural districts, to determine a weighted average daily membership (WADM).
Historically, state aid was based on the higher of the current or two previous years’ student counts (WADM). Thus, if a district’s student count increased, the State Aid was adjusted in the current year. If a district’s student count decreased, state aid did not decrease for two years. However, legislation passed in 2021 (HB 2078) eliminated the two-year look-back provision; beginning with the 2022-23 school year, state aid is based only on the current year or previous year’s student count.
The state aid calculated using these student counts is then reduced for local revenue collections by subtracting “chargeables”, which include a district’s ad valorem property taxes, motor vehicle collections, gross production taxes, school land earnings, county 4-mill taxes, and rural electric association taxes. Decreasing state aid for those districts that bring in more local tax revenue helps to equalize overall funding between wealthier and poorer areas of the state. About 40 mostly rural school districts receive enough local property and gross production tax revenue that they are “off the formula” and do not receive state aid funding, except for small amounts of transportation aid.
Districts receive an initial state aid allocation in August and a revised mid-year allocation in December or January.