Written Public Comment to SFIC 7.23.25

We believe it is a constitutional and policy imperative for Montana to implement a statewide student-centered funding formula design as the primary way to fund public education.

The following is a copy of a written public comment letter submitted to the School Funding Interim Commission for consideration at their August 14, 2025 meeting.

July 23, 2025
RE: School Funding Interim Commission

Dear Committee Members,

When considering review or revision of the public school funding formula, Frontier Institute urges the committee to prioritize the following general areas required by our Constitution and Montana Law:

What the Law Requires 

Montana’s Constitution requires K-12 public education to guarantee equality of educational opportunity, to be free and open to all students, and to be equitably funded (Article X, Section 1).

The Montana Supreme Court has further clarified that to satisfy the constitutional requirements our school finance system must be based upon a determination of the needs and costs of the public school system and be designed and based upon educationally-relevant factors (Columbia Falls v. State). Needs, costs, and factors have historically been defined in 20-9-309 MCA.

HB 153 from the 2025 Montana legislature updates 5-20-301 MCA which outlines the priorities for this study commission. In addition to reassessing the educational needs and costs related to the K-12 public education system, the legislature has directed this commission to specifically consider additional priorities when recommending changes to the state’s funding formula, including:

• Transparent. This commission must strive for a funding formula that is understandable and transparent in addition to equitable.
• Accountable. Ensure funding is directed towards classroom instruction rather than towards admin costs and that funding rewards performance outcomes.
• Maximum Parental Choice. Allow for maximum parental choice within the public school system and eliminate the need for tuition payments between school districts.

Current School Funding System Falls Short

In addition to failing students, Montana’s current public school funding system fails to meet the legal obligations outlined above.

Not Transparent: Montana’s school funding system is notoriously complex and opaque. Public school leaders have long recognized that the funding formula is “near impossible” to decipher and generates confusion and distrust among lawmakers and the public. Montana is in the minority of states which utilize a complex hybrid education funding formula with features of multiple formula types—student-centered, resource-based, and program-based.

Not Equal: Funding complexity, coupled with reliance on local property taxes, are significant impediments to allowing funding to easily follow students as families exercise choice seeking alternative public schools to better accommodate their needs. This is a violation of the Constitution’s equality of educational opportunity guarantee and the directive from the 2025 legislature to promote maximum parental choice.

Not Equitable: The current funding system does not adequately represent a student’s needs/costs and factors relevant to driving student outcomes, it is based primarily on school district inputs (such as number of staff etc.). Data from Edunomics Lab demonstrates that even schools with nearly identical demographics and per-student funding levels see wide disparities in outcomes. This indicates a substantial gap between the relationship of funding and student needs.

Specific problems related to equity in school funding include:

• The basic entitlement lacks purpose. Rather than targeting dollars to districts with greater student need, it instead provides a funding floor to all districts.
• Educationally-relevant factors are inadequate. The six educationally-relevant factors outlined in 20-9-309 MCA are NOT adequate to estimate student needs and costs.
• Equalization mechanism is flawed. The Reason Foundation has shown that per-student funding disparities in Montana schools are still often driven by local property wealth, despite GTB property tax equalization.

Not Accountable: Frontier Institute data shows that since 2017, MT public schools have directed less of their total funding towards high quality instruction in the classroom and more towards serving administration and facilities. Edunomics data shows that despite funding increases over the last decade, statewide math and reading performance continues to decline. And as already noted, public school funding bears no relationship to student outcomes. This violates the directive from the 2025 legislature to promote accountability for funding and reward performance.

Recommendations

Based on the shortcomings of the current system, we believe it is a constitutional and policy imperative for Montana to implement a statewide student-centered funding formula design as the primary way to fund public education. Here’s what that means:

Student-Based Allocation. The large majority of funding should be allocated on a per-student basis based on individual regular student needs/costs, with additional funding weights for special educationally-relevant factors.

Benefits:

• More Equitable. More accurately allocated based on individual student needs/costs and educationally-relevant factors, rather than school inputs.
• More Transparent. Simple weighted per-student funding allocation can be easily understood.
• More Accountable. Simple policy levers that can easily be adjusted by over time to respond to new dynamics or drive improved performance.
• More Equal. Funding allocated based on student need enhances equality of educational opportunity.

Statewide Funding. Ideally, all funding is derived from state revenue rather than local revenue.

Benefits:

• More Equitable. Funding is not tied to district property wealth, reducing funding disparities.
• More Transparent. Revenue derived from one tax authority rather than split between many.
• More Accountable. Reducing reliance on voted local property taxes to fund programs means schools can be more responsive to student needs.
• More Equal. Funding can easily follow the student between public schools while maintaining equalization, enabling policies which allow greater parental choice.

Flexible Funding. Ideally, all funding is flexible and unrestricted, eliminating numerous categorical/resource-based funding silos for retirement, transportation, tuition, buildings, etc.

Benefits:

• More Transparent. Enables simpler budgeting and public engagement with school finances.
• More Accountable. Empowers schools to be more responsive to local student needs and will ease locally-driven school district reorganization efforts.

Maximum Parental Choice. A statewide student-centered formula eliminates the need for enforcing the “lines” around schools and clears the path for the state to expand statewide inter-district and intra-district open enrollment policies.

Benefits:

• More Accountable. Parental choice is the ultimate accountability mechanism.
• More Equal. Public school students can attend any public school of their choice within the state that better accommodate their needs.

Stakeholder Alignment

Our recommendation to adopt a statewide student-centered formula aligns well with the recommendations made to this committee by other education stakeholder groups, such as the priorities identified by School Administrators of Montana (SAM) in their June 23rd public comment. We find particular alignment with SAM’s goal of reducing reliance on local property taxes and guaranteeing fair resource distribution across all districts.

Thank you for your time and leadership as you consider Montana’s school funding formula and please don’t hesitate to contact us if we can support your work.

Sincerely,

Kendall Cotton
President & CEO
Frontier Institute