Until the current school funding model is redesigned to one that is based on students instead of on institutions, even the most potentially revolutionary educational models will fail, according to a new financial report.

The report, “Funding Students, Options, and Achievement,” part of  Digital Learning Now’s Smart Series, stresses that today’s school finance system was not created with the flexibility needed to support the wave of educational innovations, such as online learning, spreading across the U.S.

“Decades of layering on attempted fixes to a broken system have only created a funding structure that is fraught with a growing list of problems,” the report says. “Today’s broken school finance system stifles innovation; locks in outdated delivery models; restricts universal student access to divers, high-quality learning opportunities; and ignores the relationship between spending and student outcomes.”

(Next page: Detailed design principles)

By studying examples of effective school funding redesign at some state and local levels in varying states, the report’s authors say there are four design principles that can help ensure a student-centered finance system that will allow dollars to follow students to high-quality online and blended learning options, create mechanisms for ensuring quality, and foster educational innovation.

Weighted

Funding should reflect individual student needs by “attaching ‘weights’ to students funding amounts based on factors that affect the cost of educating certain students, such as poverty, special needs, ELL/LEP, or gifted,” the report states.

One state with a weighted school funding (WSF) model is Hawaii, which implemented a WSF formula beginning in 2006. According to the report, the state’s formula allocates a specific dollar amount for each student enrolled based on “characteristics that impact their learning and achievement.” These characteristics and their weights are determined annually by the Committee on Weights, a group made up of educators and community members.

Other areas with WSF models include Utah, Colorado, Georgia, San Francisco, New York City, Baltimore, and Boston.

Flexible

A flexible finance system does not restrict funds or designate them for particular uses such as salaries, note the report’s authors, and thus creates a greater school-level autonomy.

For example, in the 1990s Cincinnati awarded flexibility to high-performing schools and Boston became the “best-run urban district in the country” with a similar approach, notes the report.

Building on these lessons, three dozen urban districts joined the CRPE Portfolio District Network, where flexibility is one of the seven design principles.

Portable

The principle of portability ensures that dollars can follow students to the school or course that best suits their individual needs—including fractional funding for full-time or part-time options.

The report notes that school finance expert Paul Hill describes a “backpack” of funding—a portable system where each student would have an account holding information about what educational funding sources were available to him/her and the schools or providers where it had been or could be distributed.

This backpack of funding would allow each student to carry their dollars to any eligible school or course provider where he/she enrolls, allowing students and their families to “shop for the best combination of courses and experiences their backpack funds could cover,” explains Hill. This funding would “impact existing schools’ budgets immediately, creating incentives for schools to avoid losing students to other educational institutions or instructional providers.”

Performance-based

To ensure quality, a performance-based system creates incentives tied to student outcomes that reward performance and completion, explains the report. Options include attaching a portion of provider payment and/or eligibility to student achievement data.

Florida is a known example of a performance-based system. For examples, Florida Virtual School supports around 400,000 course enrollments annually. It receives half of the funding for each course enrollment up front, and the other half based on successful completion.

Utah, Indiana, and Arizona are other areas that support performance-based school funding.

The report’s authors stress that all those interested in school funding redesign begin with the Fordham Institute’s 10 recommendations listed in the report “Fund the Child: Tackling Inequality and Antiquity in School Finance.”

For the full list, as well as deeper discussions on school finance collections, the cost of educating a student, a schematic on evaluating school finance systems, and many more detailed state and local example of funding redesign, read the report: http://www.digitallearningnow.com/wp-content/uploads/2013/04/Funding-Paper-Final.pdf

“A funding system can’t cause innovation: It can only interfere with it or let it happen,” said Hill.

“However,” concludes the report, “if states and district followed the design principles noted in the report, this might cease to be the case. A student-centered system…would go a long way towards ensuring universal student access to innovations in teaching and learning that we are only just beginning to discover.”