Adequacy: An approach to school funding based on the idea that the funding schools receive should be based on the estimate of the cost of achieving the state’s educational goals. It tries to answer two questions: How much money would be enough to achieve those goals and where would it best be spent?¹

Appropriations: Funds set aside or budgeted by the state or local school district boards for a specific time period and specific purpose.¹

Assessed Value: The value of land, homes, and businesses set by a county assessor for property tax purposes.¹

Average Daily Attendance (ADA): The total number of days of student attendance divided by the total number of days in the regular school year.¹  ADA is not the same as average daily membership (ADM) or enrollment. ADA may be the primary driver of district school funds generated by a state’s education funding formula.

Average Daily Membership (ADM): A count of the students enrolled in each school and district.¹ This count may happen on a single day or on multiple days throughout a school year.²  ADM represents how many students are enrolled in school and may be the primary driver of district school funds generated by a state’s education funding formula.

Base Amount: The minimum guaranteed per-student dollar amount that the state allocates to districts through a weighted funding formula.⁸

Bond: Some districts generate additional local revenue using a bond/levy. School bonds are loans that allow the district to fund large capital projects like building new schools or renovating older school buildings. School districts levy a higher millage rate on the public in the form of temporarily higher taxes to pay back the value and interest on the bonds. The possibility of higher taxes means bonds are usually voted on by the local public before they can be issued.³

Capital Outlay: Money spent for major physical changes to a school, such as new buildings, renovations, reconstruction, or certain new equipment. Capital outlay also includes the repayment of debt related to such expenditures. These investments in the physical structure of a school are expected to last for a number of years.^1,9

Categorical Funds/Aid: Also called direct funding, these are funds distributed by states based on student characteristics or specific program needs. Funds are often allocated through grants or reimbursements. For example, a state may provide additional funding for a tutoring program.

Deficit: When the government spends more than it collects in revenue in a fiscal year.

Education Savings Accounts (ESA): Private savings accounts funded by a deposit from the state government and managed by a caregiver. After withdrawing their child from the public school system, caregivers use the funds to purchase specified educational services such as tutoring, online courses, or private school tuition. The amount provided via an ESA varies by state and may have certain eligibility requirements.¹⁰

English Language Learner or English Learner: Students whose home language is not English, and who are enrolled as a multilingual  learner in school and who may qualify for additional funding in a state funding formula.¹

​​Expenditure: The dollars actually spent (as opposed to planned or allocated) at a school or district. These should consistently be compared to total funding (revenue) and the annual plan for spending (budget).^{1 9}

Fiscal Year (FY): The annual period for an operating budget. The most common school district fiscal year runs from July 1 to June 30 and is named for the closing calendar year. For example, July 1, 2022 to June 30, 2023 is referred to as Fiscal Year 2023, often abbreviated FY23.⁹

Funding Formula: A customized combination of enrollment and staffing ratios and/or weighted student funding to calculate funding allocations to districts or schools. Funding formulas should make funding more fair and equitable based on student needs.⁴

Guaranteed Tax Base (see also Wealth Equalization): Sometimes referred to as Tax-Levy Equalization or School Finance Equalization, funding levels are determined by a formula that equalizes the taxes paid on the base amount of property within the district.³

Grant: Some states allocate grants to districts for specific purposes, such as teacher professional development or out-of-school time programs.  Typically districts must apply for these grants through a competitive application process.

Hybrid Model: Hybrid models often combine aspects of multiple allocation models including weighted student funding, resource-based, and/or program-based models.⁴

Individuals with Education Disabilities Act (IDEA): The federal law that requires that all children with disabilities be provided a free and appropriate education from infancy through 21 years of age.¹

Local Fiscal Capacity: The potential ability of local governments to fund education from their own taxable sources, relative to their cost of providing services.

Local Education Agency (LEA): A public board of education or other public authority within a state that maintains administrative control of public elementary or secondary schools in a city, county, township, school district, or other political subdivision of a state.^1,9

Local Share or Match: The required share of total formula funds that local jurisdictions must allocate to schools in order for each school district to receive its state-funded share of dollars. Some states do not require their districts to contribute to make a local match in order to receive state funding for operating expenses (e.g. North Carolina).

Local Revenue: Local revenue is generated by a combination of property tax, sales tax, and income tax, and is a major funding source for many school districts across the country.^1,9

Maintenance of Effort: These are laws that require local funding bodies to allocate at least the same amount of funding to school districts as was budgeted the previous year for operating expenditures, excluding capital outlay and debt service, unless there is a decline in student enrollment. Maintenance of effort laws ensure that financial contributions by one funding body are used to enhance existing financial support from another. For example, these laws ensure that new or increased state funding provides additional support to schools, and does not result in simply replacing existing local funding, also known as supplanting.^2,9

Millage or Mill Rates: The tax rate used to calculate the local property tax amount. The rate represents the amount per every $1,000 of a property’s assessed value. For example, “one mill” would equal $1 in tax for every $1,000 in assessed-value. The sum total of all the millage rates equals the property tax rate for a particular locale.³

Outcomes-Based Funding: Also known as performance-based funding. Used primarily in postsecondary policy, outcomes-based funding allocates a portion of a funding formula based on performance, often including student outcomes such as assessment scores. Additionally, they may more heavily weigh students from low-income backgrounds, students with disabilities, multilingual learners, and other groups.⁶

Per-Pupil Expenditures: The dollars a school district spends in one fiscal year divided by the number of students the district is responsible for educating. This differs from per-pupil revenue because districts can contribute and withdraw money from “rainy day” funds (see Fund Balance) so revenues will not always reflect expenditures. The Every Student Succeeds Act requires that districts report per-pupil actual expenditures at the school level broken down by federal and state and local fund sources.¹

Per-Pupil Revenue: The total amount of revenues from all sources allocated to K–12 education, divided by the number of students as determined, most often, by average daily attendance or average daily membership. The formula for per-pupil revenue is based on the amount budgeted by a state rather than on what is actually spent by districts and states to provide services.¹

Primary Funding Model: Money provided for general purposes to cover basic costs of education such as teacher salaries and instructional materials. Models include student-based, resource allocation, and hybrid (See respective terms for definitions).⁴

Property Tax: A tariff assessed to the value of real estate levied by the governing authority and paid by the owner of the property. Property taxes are subject to assessed value calculations, millage rates, and tax policies of personal- or privately-owned properties.⁴

Reimbursement System: Districts submit receipts of eligible expenditures to the state and the state reimburses districts for all or a portion of those expenditures.⁴

Reserves: Funds state or local governments set aside to cover unexpected expenses or future needs. Also commonly referred to as “rainy day” funds.

Resource-Based Model: This is a type of funding model that occurs when all districts receive a minimum amount of resources. Resources could be staffing, services, or programs, and are often based on a ratio of staffing to students.

Revenue: The amount of money coming into the district from state and federal allocations and local tax dollars. Typically, revenue increases and decreases with enrollment.⁹

Scholarship Tax Credit: States provide income tax credits to businesses and individual taxpayers for donating funds to a nonprofit scholarship granting organization. These nonprofit organizations, which manage and distribute the funds, give private school tuition scholarships to eligible students.¹⁰

Special Education (SPED): Students who qualify for targeted funding and services under the Individuals with Disabilities in Education Act (IDEA).¹

State Education Agency (SEA): The agency primarily responsible for the supervision of a state’s public elementary and secondary schools.^1,9

Supplement, not supplant: A provision across numerous federal grant programs, such as Title I that allocates district funds based on the number of low-income students they serve, that requires federal funds to add to (or supplement) and not replace (or supplant) other funds (state/local) in providing general educational services. This provision has been part of the Elementary and Secondary Education Act (ESEA) and other federal grant programs since 1970 and is maintained in the Every Student Succeeds Act (ESSA). The purpose of the provision is to ensure that federal funds are utilized to benefit the intended population in the authorizing statute and not being used to fund the basic education that the LEA would have provided in the absence of federal funds.⁷

Surplus: When the government collects more revenue than it spends in a fiscal year.

Tax Effort: The level of taxation needed to generate the same amount of tax revenue as another governmental entity. Because some governmental entities have wealthier tax bases, they can tax a smaller percentage and still generate the same level of resources as an area with a smaller tax base.⁸

Vouchers: Publicly funded scholarships that allow students to attend a private school instead of a public school. The state provides a set amount of money for private school tuition either to a caregiver or directly to the private school. Voucher amounts vary by state and may have certain eligibility requirements.¹⁰

Wealth Equalization: A policy tool utilized in some states to reduce funding gaps between districts by redistributing resources more equally. This approach is sometimes called district power equalization because it allows each district to tax and spend as if they had the same, or more equalized, local property tax base. Equalization policies can help eliminate the inequities that foundation funding can produce by providing additional levels of funding to school districts with higher tax efforts rather than distributing solely based on student characteristics.⁸

Weighted Student Funding (WSF): A student-based funding system by which individual students, based on their characteristics (e.g., low income, multilingual learner, or special education status, or rurality), are given additional funding in the form of a “weight,” suggesting they need a percent of funding over the base level of funding. For example, a student from a low-income background may be funded with a weight of .4, meaning the funding for that student will be 1.4 times the base level of funding.¹

1. EdSource. (2004). A Glossary of School Finance Terms. https://edsource.org/wp-content/publications/SchFinGlossary04.pdf
2. New America. (n.d.). Maintenance of effort. https://www.newamerica.org/education-policy/topics/school-funding-and-resources/school-funding/federal-funding/title-i/fiscal-requirements/maintenance-effort/
3. Allovue. (n.d.). How State & Local Dollars Fund Public Schools. https://blog.allovue.com/how-state-local-dollars-fund-public-schools#:~:text=Local%20revenue%20is%20generated%20by,school%20districts%20across%20the%20country.
4. Education Commission of the States. (2021). Glossary of K-12 Education Funding. https://www.ecs.org/glossary-of-k-12-education-funding/
5. Tennessee Advisory Commission on Intergovernmental Affairs. (2022). A Users’ Guide to Fiscal Capacity in the Basic Education Program Funding Formula. https://www.tn.gov/content/dam/tn/tacir/commission-meetings/2022june/2022June_Tab9FisCap_UsersGuidePgs.pdf
6. Dougherty, K. J., & Vikash, R. (2011). The impacts of state performance funding systems on higher education institutions: Research literature review and policy recommendations. Community College Research Center at Teachers College Columbia University. https://files.eric.ed.gov/fulltext/ED527751.pdf
7. New America (n.d.). Supplement, Not Supplant. https://www.newamerica.org/education-policy/topics/school-funding-and-resources/school-funding/federal-funding/title-i/fiscal-requirements/supplement-not-supplant/
8. Education Commission of the States. (n.d.) State Information Request: School Finance Equalization. https://www.ecs.org/wp-content/uploads/State-Information-Request_-School-Finance-Equalization.pdf
9. Central Michigan University. (n.d.). School Finance 101 Glossary. https://www.thecenterforcharters.org/wp-content/uploads/2023/03/School-Finance-101-Glossary.pdf
10. Wixom, M. A. (n.d.). School choice glossary. Education Commission of the States. https://www.ecs.org/wp-content/uploads/School_Choice_Glossary-3.pdf