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It’s a really bad way to fund schools — but Texas may adopt it anyway

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For years many public school districts have been begging states for more funding, strapped for cash to provide basic resources for students and teachers. Last year’s teachers strikes in Republican-led states underscored the funding problem, with educators demanding not only pay raises but also more money for schools — and school funding was the key education issue in the November midterm elections.

A number of newly elected governors are addressing the issue, with promises of significant funding boosts for public schools. In Texas, the state legislature is holding its 2019 session and new House Speaker Dennis Bonnen, a Republican, is trying to persuade conservative legislators that a boost in school funding is necessary. A decade ago, the state contributed 48.5 percent of the cost of education. By 2017, it had declined to 42.4 percent.

A new report by a Texas state commission on school funding recommended major changes in the formula. In this post, veteran educator and public education advocate Carol Burris writes about the recommendations that make sense, and the big one that doesn’t, something called “outcomes-based” school funding. She answers these and other questions: What is that? Where has it been used and how well does it work, if at all?

Burris is a former New York high school principal who serves as executive director of the Network for Public Education, a nonprofit advocacy group. She was named the 2010 Educator of the Year by the School Administrators Association of New York State, and in 2013, the National Association of Secondary School Principals named her the New York State High School Principal of the Year. Burris has been chronicling problems with modern school restructuring and school choice for years on this blog.

This is what inadequate funding at a public school looks and feels like — as told by an entire faculty

By Carol Burris

Texas has a problem. After years of inadequately and inequitably funding its public schools, the chickens have come home to roost. Texas now ranks 46th in the country in fourth-grade National Assessment of Educational Progress reading proficiency, dropping from its previous dismal rank of 41 in 2015. For several years there has also been discontent around the college readiness of its high school students.

The Texas decline should come as no surprise. For nearly a decade, the state has decreased its funding for schools, making an inequitable school funding system even more unequal. The rapid expansion of charter schools has further drained public schools of funds.

Texas public schools have two revenue streams — the local property tax and state funding. State funding is supposed to make the system more equitable — closing the gap between districts that are property poor and property rich. Texas itself is not a poor state and yet state funding has steadily decreased.

Last fall, UT News estimated the decline in state revenue to schools to be close to 12.6 percent per pupil between 2008 to 2017, despite a 13.7 percent increase in student enrollment.

In order to address the problem, the Texas Commission for Public School Finance was created. Last month it issued its final report, “Funding for Impact: Funding for Students Who Need it the Most.” As its title notes, the commission concluded that school funding should be redesigned to provide “equitable funding for students who need it the most.” This is critical in a state where nearly 40 percent of all families headed by single moms live in poverty.

There are some good things in the report. The commission acknowledged that poverty matters and preschool should be expanded. It also proposed the usual ineffective and harmful ideas like evaluating teachers by test scores and merit pay.

But perhaps the most startling feature of the report is its recommendation to use outcomes-based funding as a critical component of the school funding system. Outcomes-based education funding is highly controversial. It is ineffective and can make inequities worse. And this Texas version, which is especially bad, will result in the rich getting richer and the poor getting poorer with funding going to students who need it the least, not the most.

What is outcomes-based funding in education?

Outcomes-based funding, also known as performance-based funding, is based on the belief that if schools are paid for performance, better outcomes will result. It carries with it the unspoken assumption that somehow teachers and principals are “slackers” and have far more control of how students perform on tests than they are willing to admit. The foremost Florida legislative advocate of performance funding was described as believing this: “[Y]ou could get performance altered by money. If you put a pot of money out there, people would change their behavior in order to chase that money.”

Where has outcome-based education funding been used?

Outcomes-based funding has been used to greater or lesser degrees at the college level for about 40 years in an attempt to increase retention, graduation and course completion rates. According to the publication Inside Higher Ed, “So far 35 states tie some funding for public colleges to metrics like graduation rates or degree production.”

The idea of using outcomes-based funding in elementary and secondary public schools has been pushed by the conservative Hoover Institution, absent any evidence that it works. At the K-12 level, Arizona and Ohio have limited outcomes-based funding programs. Those programs have never been evaluated for their efficacy. Ohio’s program received a negative review from Ed Next, which recommends that it be overhauled or scrapped. This is significant given Ed Next’s predilection for applying business principles to schools.

What do we know about the effects of outcomes based funding?

Most of what we know is based on studies of its use in community and four-year colleges. According to Inside Higher Ed:

Research findings about the effectiveness of state-based performance funding so far have been mixed. But the two new studies add to a growing amount of research that indicates the policies may not work or have unintended consequences, with some of those problems being linked to design flaws.

A report by the Century Foundation summarizes the lackluster results found by peer-reviewed research studies that found, in nearly all cases, no effects or negative effects from its use. For example, a 2013 study by Hillman and colleagues found that some state outcome funding systems limited or negatively impacted student retention and graduation rates. In some cases, outcomes-based policies have even resulted in negative outcomes such as increased selectivity by the schools, or an increase in the number of students earning a “certificate” with fewer earning a diploma. After a decade of using outcome-based funding, the state of Pennsylvania has seen no increase in its graduation rate.

Research that looks at the unintended negative consequences of the use of outcomes-based funding in community and four-colleges has found that indeed adult behavior is changed by putting out “a pot of money.” Some colleges are engaging in behaviors such as the narrowing of the school’s mission, adding restrictions to student admission, watering down academic standards and even “gaming” the system in order to capture performance based funding.

Such behaviors occur because institutions quickly learn how to increase funding by altering their practices. Lyle McKinney of the University of Houston and Linda Hagedorn of the University of Iowa studied the Texas outcomes based community college funding system known as the Students Success Points Model to find out which kinds of students would be the most “profitable” for community colleges to recruit. They examined the “student success points” awarded to different student groups in a large urban community college system in Texas. They found that the most attractive student to recruit and serve were young Asian students who attended full-time, received Pell Grants and took remedial courses just below college level. The least likely students to generate outcomes-based funding were African American, older, part-time students and students who entered with a GED.

The more that states rely on this model for funding, despite the fact that it has not produced the desired outcomes, the greater the temptation for cash-strapped community colleges to engage in recruiting efforts that will lead to increased funding. According to The Education Trust, “POBF [Performance Outcomes Based Funding] policies have not led to better outcomes for students, and in some cases led had a disproportionately negative impact on low-income students.”

Outcomes-based funding and the recommendations for Texas schools

Page 30 of the report proposes the use of $400 million for outcomes-based funding to increase reading levels of students in third grade. Specifically, it proposes the following:

...[D]istricts would receive outcomes funding equivalent to an additional weight equating to $3,400 for every low-income student achieving third-grade reading proficiency at the Meets standard and an additional weight that would equate to $1,450 for every non-low-income student achieving proficiency at the Meets standard, producing a total outcomes funding pool of approximately $400 million funded in 2019–2020. ...

The money allocated to schools would be used for programs pre-K to 3 to increase third grade reading scores.

For those concerned with equity, this proposal is absurd. It rewards districts that have the greatest number of students reading at the level of proficiency. Given the effects of parental wealth as well as per pupil spending on student achievement, the wealthiest districts, not the poorest districts, in the state would be rewarded. These already advantaged districts would then have additional funds to reinvest in programs which would make their students even more successful the following year, further widening the gap between have and have-not schools.

Let me present a concrete example. At University Park Elementary School, which is part of the affluent Highland Park District, 87 percent of all of its third-grade students achieved at the “Meets” Reading standard in 2017. None of the students are economically disadvantaged. That means that the school would receive $126,150 (87 × $1,450) for every 100 third-graders.

Dorie Miller Elementary in the San Antonio School District is a very different school. Ninety-four percent of its students are economically disadvantaged. Thirty-seven percent are English language learners. Only 24 percent of its students achieved the “Meets” standard in Reading in 2017. Even at the higher rate of compensation for disadvantaged students, this school would only receive $81,600 (24 × $3,400) for every 100 students.

In other words, a school in which nearly all students are meeting standards and where students come from high wealth households would receive substantially more funding for remediation than one of the state’s most disadvantaged schools. This is not only illogical, it contradicts the report’s goal of “equitable funding for students who need it the most.”

Outcomes-based funding will not close the gap in third-grade reading. It will widen it. And the unintended consequence will be the students in the neediest districts in the state will spend an inordinate amount of time being drilled to increase their scores on a test in order to chase the dollars the school desperately needs.

Outcomes-based funding and the report’s recommendations for college, career and military readiness

Page 30 of the report also proposes the use of an additional $400 million for outcomes-based funding to increase the college, career and military readiness of graduating seniors. Specifically, it proposes the following:

Given the critical nature of achieving a postsecondary education beyond high school, the commission recommends that each public school annually receive incremental funding above the basic allotment for every graduating high school senior that does not require postsecondary remediation (as determined by the ACT, SAT, Texas Success Initiative Assessment or Armed Services Vocational Aptitude Battery) and either:

• Enrolls in a post-secondary institution; or
• Graduates high school having achieved an industry-accepted certificate; or
• Enlists in the military.
Based on a current desire to provide outcomes-based funding equitably based on current 2018 proficiency levels, districts would receive funding of (1) an additional weight that would equate to $5,380 for every low-income senior graduating and meeting one of the three targeted achievements listed above; and (2) an additional weight that would equate to $2,015 for every non-low-income senior meeting the target, producing a total outcome funding pool of approximately $400 million funded in 2019–2020.

The money received would then be prescriptively used to increase “readiness” rates.

Let’s take a look at the districts that house the two elementary schools we examined above belong in order to see how they would fare.

The wealthy Highland Park School District had a 2017 college readiness rate of 92.5 percent. None of its students pursued an industry certificate and 0.8 percent enlisted in the armed service. That totals to 93.3 percent meeting the standard in the recommendation. The district would receive about $188,000 (93.3 percent at the readiness standard × $2,015) for every 100 students in its graduating class.

Eighty-two percent of the San Antonio School District’s 2017 graduating class received free or reduced-priced lunch. In 2017, 31.3 percent of its disadvantaged students met the college ready standard, 0.6 received an industry certificate, and 2.6 percent entered the military. Therefore, the district would receive 34.5 × $5,380 for every 100 graduates, plus a small amount for the few non-disadvantaged students who met the criteria.

San Antonio would receive about $186,000, slightly less than what wealthy Highland Park would receive.

Now let’s examine “the outcome,” to borrow a favored term from the report.

All but 7 percent of Highland Park’s students are college, career or military ready. That means that Highland Park, per 100 seniors, would receive $26,857 a student to make them college, career or military ready ($188,000 ÷ 7). San Antonio, however, where 65.5 percent are not meeting the readiness standard would get about $2,840 for each student who was unprepared.

It bears repeating: $26,857 to use per “not ready” student in the wealthy district and $2,840 to use per “not ready” student in the poor district. If you apply the same logic to third-grade reading funding the same gaping differences result.

How does this provide “equitable funding for students who need it the most?”

Equally as worrisome is what cash-strapped districts might do to increase their funding. The easiest way to get a funding boost would be to push students not perceived to be “college and career ready” into the military. Given what we know about the present college readiness rates, the student who would most likely to be pushed by high schools to enlist would be Black or Latino, disadvantaged, learning disabled or English-language learners. This would be an unintended (or perhaps intended) consequence of this wrongheaded policy.


The research from nearly four decades of outcomes-based funding at the postsecondary level is clear: It does not work. In addition, like high-stakes testing, it pushes schools to engage in behaviors that are neither equitable nor in the best interest of students.

If the writers of the report were sincere in their stated desire to provide equitable funding for students who need it the most, they would allocate extra funding to schools based on the proportion of students not meeting the standard. There is no reason to reward schools for serving an affluent or selective population.

Hopefully the Texas legislature will be wise enough to correct this glaring inequity. Outcomes-based funding is nothing more than a thinly veiled disguise to widen the distance between the have and have-nots and to curry favor with those who think schools should be run like businesses. Chalk it up to one more bad idea from the proponents of corporate school reform.

CORRECTION: A previous version incorrectly said that 40 percent of households are supported by single moms living in poverty. It now correctly says that nearly 40 percent of all families headed by a single mothers live in poverty.

For more on the effects of performance-based funding, see studies by Nicolas Hillman and colleagues including “Performance Funding in Higher Education: Do Financial Incentives Impact College Completions?” “State Higher Education Performance Funding: Data, Outcomes and Policy Implications,” “State Higher Education Performance Funding for Community Colleges: Diverse Effects and Policy Implications,” and, “Evaluating the Impacts of ‘New’ Performance Funding in Higher Education."