Should Oregon change the way it funds public schools? A new study says ‘Yes’

Oregon has a problem with its schools.

School districts all over the state are facing millions of dollars in budget cuts this spring — including $40 million in Portland and $25 million in Eugene — on the heels of deep cuts last year. Financial pressures fueled recent teacher strikes in Albany and Portland.

Year after year, lawmakers have spent more on schools only to fall short of aspirations when it comes to key markers such as graduation rates and test scores.

There’s plenty of debate over how public schools should be funded in Oregon every time lawmakers get together, and this session is no different. But as former Sen. Michael Dembrow put it to lawmakers at a special hearing last week, everyone is on the same page about one thing — something has to change.

Is the problem that Oregon doesn’t spend enough on schools, or is it that schools aren’t spending the money in the right way? The answer, according to a new landmark study, is “yes.”

Staff from the American Institutes for Research presented their findings to state lawmakers last Wednesday. AIR is a nonprofit, nonpartisan research group headquartered in Virginia.

Their big takeaway is that Oregon has to spend significantly more money to get higher academic outcomes, and it needs to be smarter about how schools spend that money in order to get the kind of outcomes they want. The researchers suggest things like eliminating the state’s special education funding cap and factoring in different costs for more rural districts in Eastern Oregon.

Legislators are eager to use this information to inform several individual policy decisions this session, but some are interested in revamping the state’s decades-old system entirely.

So, how did we get here?

AIR’s six-part report came at the request of state lawmakers last year.

Researchers were tasked with studying Oregon’s unique school funding framework, known as the Quality Education Model, or QEM. Their goal: to analyze the state’s current structure and provide alternative options.

But to understand today’s school funding troubles, we need to go back nearly 30 years.

Oregon leaders started the QEM back in 1999 and established a volunteer Quality Education Commission by statute in 2001. The commission is made up of professionals who analyze whether legislative appropriations are meeting schools’ needs, as defined in the model. The commissioners put out a report for the legislature every two years.

Public schools in Oregon have long been jointly paid for by state taxes — think income taxes — and by local governments that collect property taxes. But in the 1990s, a series of anti-tax ballot measures fundamentally changed the school funding equation.

Voters at the time approved property tax limits that shifted the burden of funding schools from local school boards to the state. This meant spending became more standard across the board, but also forced schools to compete with other public services — such as healthcare, transportation and housing — for limited state dollars.

Schools account for a huge chunk of spending from the state’s general fund — more than a quarter of the total. And the Student Success Act, passed in 2019, helped significantly lessen the gap between what the state was spending on schools and what schools needed.

Since the commission’s first report in 2000, the gap between what the QEM says schools need and what they actually get has varied, from as vast as 38% to as narrow as 5%. A spike after COVID-19 seen in the 2022 report raised the gap back up to roughly12%, and as Dembrow explained, sparked the talks happening today.

The commission requested last year that the governor and legislature invest in research to update the QEM and start to implement changes based on the findings.

Dembrow — who led the Senate education committee for years and through this process — said the original goal was to turn the findings into a legislative package for the 2025 session. Now, he thinks responding to the array of observations and suggestions will take more time.

“I think you’ll agree that the findings here in these reports are so rich, so complex and ultimately so consequential,” he said, “that what these reports need next is to be examined, analyzed and discussed deeply and broadly before new models … are created.”

Key findings: Money, targets and national comparisons

AIR’s research shows that despite Oregon’s added investments in recent years, more is needed.

In fact, depending on how significant of a jump lawmakers want in student outcomes, there’s a roughly 30% gap between what Oregon has spent on schools in the past and what’s needed to meet its targets. That’s about a $5,000 per student deficit.

Researchers also found that the “where” matters a lot. Per-student expenditures in the western half of Oregon are relatively homogeneous, they said, particularly across districts located in the Portland-Eugene corridor. But there’s a lot more variation in Eastern Oregon.

In that region, the report says, some very small school districts spend large amounts per student, while larger districts spend closer to the state minimum.

When compared with Washington, Idaho, Montana and Colorado, researchers found that Oregon spends a good chunk of its money on education. However, Oregon has low levels of “funding equity,” meaning less money is used to boost districts with higher student poverty levels.

They also found that despite higher spending patterns, Oregon isn’t seeing those investments result in academic improvement.

Data they analyzed from the National Assessment of Educational Progress, or NAEP, showed that Oregon had the lowest average fourth and eighth grade math and reading test scores compared to those peer states. The state was also below national averages.

Researchers analyzed the pandemic’s effect on Oregon schools as well, and to no one’s surprise, the answer was bad.

Chronic absenteeism jumped significantly. Math and reading scores dropped and haven’t recovered fully. School enrollment decreased. And schools serving greater concentrations of students with disabilities, who are economically disadvantaged or who were English learners were hit even harder.

At the same time, Oregon experienced the second-largest increase in state and local revenues per student among the 50 states.

Researchers described the rise in spending as an “earnest effort” to meet the need, but one that ultimately fell short.

And lastly, AIR researchers found that the number of students receiving special education services in Oregon schools has gone up, similar to national trends. Oregon’s increase was largely driven by students with moderate- and high-cost disabilities, they said, while the number of students with lower-cost disabilities has actually gone down.

Why does that matter? Not all disabilities services are the same.

Researchers found that districts with larger shares of students with moderate- or high-cost disabilities spent on average $5,380 more per special education student than districts with more lower-cost students.

In the 2022-23 school year, Oregon school districts spent about $1.2 billion on special education programs, according to the study, which translated to a statewide average special education expenditure of $15,237 per student.

A few suggestions

Much of the six-part study was fact-finding in nature and didn’t get into the nitty-gritty of daily operations or how to hold schools accountable for how they use their money. But, researchers provided some policy recommendations along with their key findings.

The way the Quality Education Commission calculates need is one of two best practices, according to AIR researchers, so after nearly three decades, there isn’t a need to throw it out. However, they still think Oregon should implement some changes.

For example, the commission could incorporate additional goals beyond a statewide graduation rate when assessing the cost of achieving “educational adequacy.”

The state does track things such as the number of students who regularly attend school, test scores, how many ninth graders are on track to graduate and the rate of third graders reading at grade level.

But researchers said that adding a target date and goal for reaching specific goals — like standardized test proficiency rates — could push schools to better match state funding efforts with academic outcomes.

Researchers also outlined a way the state can change the funding formula itself.

Oregon already gives extra funding based on specific student demographics, but researchers say the state could give more weight based on the number of students a district serves who have higher needs. Specifically, researchers suggest sending more money to districts with higher percentages of students from low-income households.

In many states, including Colorado and Washington, the amount of funding provided for each student identified as being economically disadvantaged increases as the concentration of these students increases in a district. That’s not the case right now in Oregon.

“Our findings suggest that not every district in Oregon is granted the resources necessary to ensure that all students have an equal educational opportunity,” the study states.

Researchers also suggested Oregon lawmakers consider “regional prices” in a funding formula. That way, they argue, the state can help ensure that district purchasing power is equivalent across the entire state — not hitting more rural parts of the state harder. Currently, 12 states, including Colorado, use regional price adjustments in their school funding.

Some of their suggestions for improving special education funding may come to fruition soon.

Based on their findings, AIR suggested three key policy changes to help students with disabilities: change the way the state calculates how much of the State School Fund goes to special education; eliminate the state’s funding cap for students with disabilities; and consider additional appropriations for Oregon’s High-Cost Disability funds.

Some of those ideas are already in bill form this session and picking up traction at the Capitol.

State leaders say they’re optimistic that the report’s findings and suggestions could improve how Oregon directs money to schools, which would hopefully, improve the schools themselves.

“In a world of necessarily scarce resources, implementing the funding structure outlined in this report, even gradually, may seem daunting,” the study states. “However, each and every one of Oregon’s students deserves a high-quality education that enables them to pursue fulfilling and gainful future lives, regardless of their needs or where they attend school.”

Read the executive summary of the study here or the full six-part report here.