State Share of Funding Schools

The state TEEOSA formula estimates what it should cost each school to provide an education as part of the calculation of state aid for K-12 schools. This estimate is termed a school’s formula need. A school’s spending, the spending of its twenty closest-sized peers, along with adjustments and allowances for factors like poverty, limited-English programs, and transportation are included in the formula need calculation. Because formula needs provide an assessment of what it should cost to provide an education, it can be a good basis from which to compare the state contribution towards educating students in schools across the state.

TEEOSA aid as a share of formula needs ranges from 0.2% – 85% across schools. Equalization aid (formula needs minus resources) makes up the bulk of TEEOSA aid, but net option funding, allocated income tax payments, and community achievement plan aid are also distributed under the TEEOSA aid umbrella. Figure 3 plots the number of schools falling in four different categories across the range. As Figure 3 illustrates, a majority of the state’s schools (143 districts or 59 percent) receive 10 percent or less of their formula needs’ funding from TEEOSA aid. Additionally, TEEOSA aid provides 1 percent or less of the dollars necessary to fully fund formula needs in 83 school districts (34 percent). Thus, most of Nebraska’s school districts rely heavily on property taxes to fund the cost of education. And, most of these schools are small, rural, agriculture-based districts.

Figure 3. Teeosa Aid Share of School Formula Needs, School Year 2020-21

Reforming the state aid formula is an annual topic of discussion in the Legislature. Each year a multitude of proposals are introduced proposing ideas for reform. This year, one proposal, LB 454, seeks to address the problem highlighted in Figure 3 by providing schools property tax stabilization payments. The goal of the payments is to reduce the reliance on property taxes in school districts currently receiving an insignificant share of their formula needs funding from the state. Enacting changes to school funding are always controversial and never easy. Taxpayers in rural school districts, though, could benefit from the changes proposed in LB 454.