Oklahoma Education and You

Right now, Oklahoma’s school funding system has a trust problem. The growth of school choice initiatives, including open transfer laws and private school vouchers, the growth of large ad valorem projects such as wind farms over the past twenty years, calls for the elimination of property taxes, and arguments about why increased education spending hasn’t resulted in better educational outcomes are all points of contention. Governor Stitt has called for an audit of how schools spend money. The audit should also examine how schools are funded, as inefficiencies in that system affect schools.

Oklahoma’s funding formula is overly complex, and while state education leaders tout its equity relative to other states, it falls short in clarity, efficiency, and overall equity among schools. Consider this. At the beginning of FY25, Oklahoma Schools held over $1.5 billion in unobligated cash in their General Funds alone. That’s a pile of unused cash.

Forty-three school districts were so wealthy locally that they received no Foundation or Supplemental Salary Aid. This occurs whenever the district’s local ad valorem funding plus the amount of revenues counted as chargeables in the state funding formula are so high that it is more than the amount that the school would be funded if it were a district (such as a charter school) that has no local ad valorem or chargeable revenues.

Charter school funding through the formulas is the clearest way to see what the legislature actually intends for schools to receive, because they have no ad valorem or other chargeable revenues that influence per-weighted-pupil funding.

Looking at the FY25 final Foundation aid calculation sheets, districts that received no foundation or salary incentive aid collected over $41 million more than they would have if funded as charter districts. Altogether, Oklahoma school districts received $184,718,128.85 more than they would have, but some districts received less. That doesn’t seem equitable.

A first step toward equity is to eliminate local chargeable revenues. Oklahoma’s current formula counts a long list of local and quasi-local revenues as chargeables against Foundation Aid. Without getting too much into the weeds, the method by which revenues such as gross production, motor vehicle tax, school land earnings, and R.E.A. tax are distributed makes each district subject to revenue swings and forces districts to be intentional about maintaining large enough fund balances to manage those swings.

Chargeables make it more difficult for school boards and superintendents to explain revenue shortfalls to their constituents, and the fact that they result in adjacent districts and counties sometimes being wildly unequally funded erodes trust in the system as a whole.

In FY25, in the general fund alone, the non-ad valorem chargeable-type streams were $510.1 million before even counting the county 4-mill, and about $707.1 million if the county 4-mill is included. That is too much money to keep treating as a side allocation.

Oklahoma should abolish local chargeables as formula inputs, except for a clear local property-tax capacity measure. The state treasury should collect all other uneven, non-ad valorem streams and deposit them in a single Education Equalization Fund. Funds from this pool should then be redistributed to districts per student based on the formula.

That would do more than simplify bookkeeping. It would stabilize district budgeting. Instead of each district having to guess how a spike or drop in local chargeable collections will hit state aid, the state could smooth those swings and distribute the money transparently.

Local ad valorem dollars are perhaps the clearest example of how Oklahoma’s current funding formula does not match common education in Oklahoma. The idea behind local ad valorem taxes funding schools is that residents of a school district fund their children’s education. However, with Oklahoma’s open transfer law, the growth of charter schools, and the expansion of private school tuition tax credits, parents are often funding one school district while their child attends another. Add to this the fact that large capital projects create huge disparities in local valuations.

Data centers likely will make this worse. We’ve already seen this with windfarms and the Google Data Center in Mayes County. Wind farms raised several Oklahoma school district valuations. Many counties granted manufacturing exemptions to wind farms, so they did not pay local ad valorem taxes. Schools in those districts still received their funding, but it came from the state budget, including for sinking fund levies.

So, districts around the state accumulated wealth in their general and building funds and built facilities with taxpayer dollars from outside their school districts. In FY25, Google received $39 million in tax relief. A good portion of this ended up going to Pryor public schools. Guess who paid for it. The answer is all Oklahoma taxpayers. How is this fair? Unfortunately, not much can be done about what has gone on before, but Kansas gives us an example of how, moving forward, the system can be made fairer.

Oklahoma already includes an equalization component for Building Fund Equalization with Redbud funding. It should also institute a recapture mechanism for truly excess local property wealth, whereby districts send money back to a state equalization fund if their local ad valorem collections exceed a set threshold. That would make the system fairer both for students and taxpayers. A taxpayer in a lower-wealth district should not have to shoulder a higher tax burden for a dramatically weaker yield. And a taxpayer anywhere in the state has a legitimate interest in whether unusually high local collections are being used in a way that serves statewide

educational fairness, given that state income and sales taxes already help finance all schools.

A different type of recapture mechanism can be used to address the $1.5 billion in General Funds at the beginning of FY25. Like Kansas, Oklahoma should treat carryover balances at the end of one fiscal year as revenue in the next fiscal year. This will make districts spend funds allocated by the legislature in the fiscal year intended, and place the onus on the legislature to adequately fund schools, including mandates they often impose without enough money to implement.

School leaders will argue that carryover amounts are necessary for cash flow at the beginning of the school year before federal funds or ad valorem funding come in. However, Oklahoma law already allows schools to borrow from their own funds. So, cash sitting in the school’s bank accounts designated for the building fund, child nutrition, or sinking fund can be used for cash flow purposes. This would incentivize schools to build up their Building Fund reserves that can be used to help with capital improvements rather than use them for operational costs, as many do.

Additionally, Oklahoma can reform the federal programs’ funding mechanism from a spend-first, then wait-for-reimbursement system. Other states allow districts to receive federal funds before purchases, then provide proof of the expenditure. Oklahoma can do this as well.

A modern Oklahoma formula could be much simpler.

Statewide, it would begin with a single base amount per weighted student.

It would then apply an improved mechanism to address differences across districts in sparsity, poverty, special education, English Learners, and transportation.

The state treasury would collect volatile non-ad valorem streams now treated as chargeables and place them in an Education Equalization Fund.

Local ad valorem, including county 4-mill in the local-capacity measure, would remain part of the local share but would be capped relative to formula aid, with equalization for weaker districts and recapture for truly excess capacity.

Finally, prior-year unrestricted general fund balances would be counted against the succeeding year’s state aid, as Kansas counts general fund balances in local foundation aid.

That is not radical. It is simply a cleaner statement of what school finance should do: count what districts already have, count what students need, and distribute state resources fairly.

This would improve adequacy, efficiency, equity, and transparency.

It would improve adequacy because the state could direct a larger, more stable statewide pool toward actual student need rather than letting revenue spikes remain fragmented. It would also remove the argument that school fund balances are a reason schools don’t need more money.

It would improve efficiency because districts would spend less time budgeting around uncertain chargeables and reimbursement lags, and the state would spend less time running a maze of offsets. Additionally, all schools would be forced to run their districts strictly based on student count. Much-needed consolidation would likely occur.

It would improve equity because property wealth and local economic luck would matter less in determining how much each district can raise to educate students.