South Carolina Education Funding Reforms Could Pay Dividends for Students, Taxpayers

Add South Carolina to the list of states pursuing bold changes to their K-12 school finance systems. Gov. McMaster’s 2022 Executive Budget outlines a plan to simplify how $5.4 billion in state education funding is doled out to school districts. To see why this would be a win for students, school leaders, and taxpayers, consider how it would improve the convoluted way South Carolina currently funds its schools.   

Research shows that South Carolina’s current K-12 school funding model leads to a weak relationship between districts’ per-pupil funding levels and student needs, meaning dollars aren't leveraged as effectively as they could be to improve student outcomes. Furthermore, property-wealthy districts tend to generate more per-pupil funding than their property-poor neighbors, despite levying lower local tax rates.  

Worse still, the Palmetto State’s approach to school finance lacks any semblance of transparency, and there are only a handful of experts who actually understand how it works. 

These issues can be attributed to the fact that South Carolina delivers education dollars through a patchwork of 29 allocation streams that determine the make up of a school district’s budget. Most of these streams divvy up funds for specific resources such as reading coaches, counselors, and supplies that come with top-down mandates. Not only does this drown educators in red tape, but also makes it difficult for legislators to target funding to kids who need it the most.

Fortunately, South Carolina’s funding system does include one bright spot: its Education Finance Act (EFA) allocates its portion of dollars using a weighted-student funding model, which sets a foundational amount for regular program students and adds weights for various student characteristics such as disability status, poverty, and Limited English Proficiency. 

This student-centered approach helps maximize fairness and transparency, but only about 38% of state education dollars are allocated through it. The rest are distributed through a labyrinth of separate programmatic and resource-based grants that make up most of the 29 allocation streams mentioned previously. 

But Gov. McMaster’s proposal would take an important step toward changing that. Under his plan, $328.7 million dollars that are currently distributed via the Education Improvement Act would be streamlined into the state’s EFA, with an additional $120 million in new funding added to help smooth the transition for school districts. It would also direct a greater share of funding to low-income students by increasing the state’s poverty weight, while simplifying how special education dollars are allocated.

All of this would be accompanied by improvements to how school finance data are reported by school districts and the state’s department of education, shining a light on how billions of tax dollars are allocated and spent.

To be sure, Gov. McMaster’s proposed reforms do not address every problem with South Carolina’s funding system since it fails to streamline all education dollars into one coherent formula and some outdated spending restrictions are left in place. A national survey of principals and district administrators by Education Week suggests this could be a missed opportunity because 51% say that state legislators are the biggest obstacle to making spending decisions that address students’ needs.

Nevertheless, the reforms would better leverage the good features of South Carolina’s funding system while eliminating some of the bugs. Moving a greater share of dollars into the state’s EFA would help put the focus on students and provide a much-needed infusion of transparency, which research suggests could pay dividends for the state’s public education system.