Rhode Island’s Funding Formula After Ten Years: Education Finance in the Ocean State

PROVIDENCE, RI – The Rhode Island Public Expenditure Council released a report on Rhode Island’s education finance system today. The report, the third in RIPEC’s series on municipal finance, found that the overhaul of the state’s education finance system a decade ago has been successful in increasing the state’s share of overall education revenues and in targeting this increased aid to poorer districts. However, despite efforts to make education funding more equitable, some of Rhode Island’s poorest districts are still among those with the lowest per pupil expenditures in the state.

“Rhode Island’s education system has wide-ranging implications for state and local budgets and the economy,” said Michael DiBiase, President and CEO of RIPEC. “As a state, we spend generously on K-12 education, and policymakers should be consistently assessing the education funding formula both in terms of the return on this significant public investment and the equitable distribution of funding.”

Rhode Island makes relatively large investments in K-12 education­; in fiscal year (FY) 2019, the Ocean State ranked ninth among U.S. states in per pupil education revenues ($19,169) and exceeded the nation in per pupil revenues by 20.2 percent.

The implementation of the school funding formula has resulted in significant growth in the state’s investment in K-12 education. In FY 2012, the first year of implementation of the formula, state revenues for education made up 32.0 percent of total revenues, significantly less than local revenues, which made up 58.2 percent of total revenues. However, state revenues increased to 37.3 percent of total revenues in FY 2020 and contributed to 60.8 percent of total growth in education revenues between FY 2012 and FY 2020. State education revenues totaled $995.5 million in FY 2020, compared to $1.46 billion in local revenues.  

Despite a large increase in state investment and redistribution of funding to needier school districts under the formula, stubborn inequities remain. Except for Providence, which spent slightly more than the statewide per pupil amount in FY 2020, districts with low property wealth and higher levels of students living in poverty tended to have low total per pupil expenditures—Pawtucket and Woonsocket were in the bottom five in per pupil expenditures in FY 2020, while Central Falls was in the bottom ten.

RIPEC found that wealthier districts are able to contribute local revenues above and beyond what the state identifies as the core cost of education, while needier districts, constrained by limited property wealth and relatively high property tax rates, are challenged in their ability to increase their local contribution.

More recently, Rhode Island public schools were allocated $581.5 million in federal pandemic relief funding.

DiBiase noted that “Rhode Island’s school districts have received an unprecedented amount of federal aid. We strongly encourage school districts to use these funds strategically to address the learning loss which resulted from pandemic-related disruptions to in-person schooling.”

Given the report’s findings, RIPEC offers the following considerations for state and local policymakers:

  • The state should continue to increase its share of total education revenue. Despite the growth in state investment in education, Rhode Island’s system is still more reliant on local revenue than the nation overall. The state should enact reforms to the funding formula with the aim of establishing a roughly even balance of state and local revenues, consistent with the education revenue mix nationwide.
  • Further state aid should be targeted to support disadvantaged communities. The state should ensure that greater investments are targeted towards districts with relatively low property wealth and high proportions of students living in poverty, with an aim of bringing these communities at least to the current level of statewide per pupil expenditures.
  • The state should strengthen local maintenance of effort requirements to ensure that state funding supplements, rather than supplants, local funding.  The state should require that local districts demonstrate MOE by maintaining at least the same level of spending year-over-year on a per pupil basis and consider removing exceptions in law which allow for local communities to decrease local contributions. 
  • Discretionary funding tied to school improvement should be allocated to RIDE.  While the state’s funding formula is based on educational expenses as inputs, there are no streams of funding that are meaningfully tied to educational outcomes.
  • Federal relief funds should be used strategically to maximize the impact on student learning.
  • The state’s constitution should be amended to include a judicially enforceable guarantee to a meaningful and adequate education. K-12 education reform is not currently being approached with the urgency demanded by the serious shortcomings within Rhode Island’s education system, which is approaching a state of crisis. A constitutional amendment would stimulate the action needed to achieve serious legislative reform of school funding or otherwise give the courts standing to rule the current system unconstitutional.

The executive summary can be found here. An interactive data set that accompanies the report can be found here.

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