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School Finance Glossary


Adequacy An approach to school funding [that is based on the] idea that the amount of funding schools receive should be based on some 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. The state Legislature and local school boards must vote every year on appropriations.1

Average Daily Attendance (ADA): The average number of students present at a school during the time it is in session. ADA differs from average daily membership, or ADM, which represents how many students are enrolled in school. Because of factors that may result in a student missing school, such as truancy or sick days, ADA results in an overall lower student count than ADM. When per-pupil revenues or expenditures are divided by a district’s ADA, it results in a higher figure than if divided by a district’s ADM.2

Average Daily Membership (ADM): A measure of student enrollment. ADM represents how many students are enrolled in school and is commonly used for per-pupil funding calculations. ADM is also the primary driver of funds generated by the state’s education funding formula, the Basic Education Program (BEP). A district’s ADM generates funding calculated by the BEP formula for a variety of components, including positions, supplies, equipment, and textbooks. ADM is different from average daily attendance (ADA), which calculates the average number of students present at school during the time it is in session. Because of factors that may result in a student missing school, such as truancy or sick days, ADA results in an overall lower student count than ADM.2


Base Amount: The minimum guaranteed dollar amount that the state allocates through the foundation formula to each district per student.3

Basic Education Program (BEP): A formula that determines the funding level required for each school district to provide a common, basic level of service for all students. Adopted in 1992, the formula consists of 46 components grouped into four categories: Instructional Salaries and Wages, Instructional Benefits, Classroom, and Non-classroom, etc. … Thus, the BEP is generally termed a funding formula rather than a spending plan. … Calculations using the BEP formula are performed as a two-step process: (1) determination of total funding levels, and (2) division between state and local shares, with adjustments for local jurisdictions’ ability to pay.2

BEP Review Committee: State law requires the State Board of Education to establish a review committee for the Tennessee K-12 education funding formula, the Basic Education Program (BEP). The committee is directed to meet at least four times a year and regularly review the BEP components. The committee is to provide an annual report on or before November 1 of each year to the Governor, the State Board of Education (SBE), and the education committees of the Senate and the House of Representatives. The report is to include recommendations on needed revisions, additions, and deletions to the formula, as well as an analysis of instructional salary disparity among school districts, including an analysis of disparity in benefits and other compensation among districts.2


Capital Outlay: Capital outlay refers to expenditures for the acquisition of, or additions to, major fixed assets such as land or buildings. Capital outlay also includes the repayment of debt related to such expenditures. Capital outlay is included in the state’s education funding formula, the Basic Education Program (BEP), as a non-classroom component.2

Categorical Funds/Aid: States distribute funds based on student characteristics or program needs. Funds may be allocated using grants or reimbursements. For example, a state may provide a funding supplement for a small or isolated school district, based on that designation alone.3

Census-Based Funding: The state allocates funds to each district based on an assumed level of enrollment, regardless of the district’s actual demographics. This type of funding can be used in foundation formula model funding and resource allocation model funding.3

Cost Differential Factor (CDF): The cost differential factor (CDF) is used to adjust salary calculations in the state’s education funding formula, the Basic Education Program (BEP), for school districts in counties where wages in non-governmental sectors are above comparable statewide figures. The CDF was developed based on the idea that school districts in counties with generally higher wages may need to offer higher salaries to attract and retain teachers. Counties with above-average wages receive an increase in funding for salaries and retirement contributions, and counties with average or below-average wages do not receive an increase.

BEP 2.0, passed in 2007, eliminated CDF from the funding formula. Because BEP 2.0 was only partially phased in, however, counties qualifying for a CDF adjustment received 50 percent of the calculated CDF. The 2016 changes to the BEP decreased CDF adjustments to 25 percent, and the appropriations act further reduced CDF to 20 percent in fiscal years 2017-18 and 2018-19, and 16 percent in fiscal year 2019-20. In fiscal year 2019-20, 15 districts were receiving CDF adjustments. The CDF is still slated to be eliminated from the BEP formula contingent on future increases to the Instructional Salaries and Wages category.2


Economically Disadvantaged Students: Economically disadvantaged students are identified for multiple purposes, [including an additional allocation in BEP funding for school districts to meet their educational needs. Beginning in the 2016-17 school year, economically disadvantaged students (or “at risk” students) are defined – for purposes of school accountability and BEP funding – as those who are directly certified for specific state and federal assistance programs, and those who are identified as homeless, migrants, or runaways as well as students in foster care. Students who are directly certified are those whose families are participating in the Supplemental Nutrition Assistance Program (SNAP), Temporary Assistance for Needy Families (TANF) program, or Head Start.2

Note: The Education Trust uses students from low-income backgrounds to identify economically disadvantaged students.

Expenditure: The dollars actually spent (as opposed to planned) at a school or district. These should consistently be compared to total funding (revenue) and the annual plan for spending (budget).4


Fiscal Capacity: A statistical estimate of a county’s relative ability to raise revenue. When applied to the Basic Education Program (BEP), the state’s K-12 education funding formula, fiscal capacity estimates result in the state directing a higher proportion of state funds to districts with less ability to raise local revenue, a process known as equalization.4

Under the BEP, the state funds 70 percent of both instructional components (i.e., instructional salaries and wages, and instructional benefits), 75 percent of classroom components, and 50 percent of non-classroom components on a statewide basis. The level of state funding for individual districts varies considerably, however. For example, a district with higher fiscal capacity has been determined through the BEP formula to possess a greater ability to raise revenue through local sources and may receive state funds of 50 percent for classroom components, while a district with lower fiscal capacity has been determined through the BEP formula to possess less ability to raise local revenues, and as a result may receive state funds of 75 percent for the same classroom components.2

Flat Weight: A single weight or dollar amount allocated by the state for students or districts that qualify based on certain factors or student needs. Allocations determined by flat weights do not vary based on specific program needs or student characteristics. For example, a state may provide a fixed dollar amount for each student whose family qualifies as low income to help fund additional programs to support the needs of those students.3

Full-Time Equivalent (FTE): Often misunderstood to mean Full-Time Employees, in school finance FTE stands for Full-Time Equivalent. Regarding the people employed at a district, [the FTE] it is the ratio a person works out of the 40 possible hours in a workweek. Someone working 60 hours a week would be 1.5 FTE, and someone working 10 hours a week would be .25 FTE. In reference to higher education, FTE relates to a student’s class load, where full time may be 14 hours of classwork per week and a student enrolled ½ time would be considered .5 FTE.4


Grant: The state allocates funds to districts that demonstrate eligibility and/or a need for funding.3

Guaranteed Tax Base: 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. The state provides higher levels of funding to [districts with lower-property wealth] than to higher property wealth districts.3


High-Cost Services Funding: This type of funding is often coupled with other funding distribution methods, and funds can be distributed as grants or reimbursements. For example, a district may be responsible for the cost of special education services up to a certain threshold, but if costs exceed that threshold, a state may provide additional funding to the district.3

Hybrid Model: Hybrid models often combine aspects of foundation formula models, resource allocation models, and various cost factors.3


Instructional Components: The state allocates funding based on the cost of resources, such as staffing, classroom supplies, or other educational materials. Funding is sometimes provided for a bundle of resources. Funding for resources is often allocated based on the characteristics of the student population.3


Local Match: The required share of total Basic Education Program (BEP) funds that local jurisdictions must allocate to schools in order for each school district to receive its state-funded share of BEP dollars. The Tennessee Department of Education uses the BEP funding formula to calculate a total dollar amount for each public school district, which is then funded on a shared basis between the state and each local jurisdiction that operates a school system (county, municipal, or special school district). The majority of districts are funded by their local jurisdictions at levels above their required BEP local match.2


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

Multiple Weights: More than one weight or dollar amount [can be] allocated by the state based on certain factors or student needs. States [may] vary the amount allocated based on student need. For example, some states vary funding for students learning English as a second language, allocating more funds to students who are less fluent in English.3


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.4

Per-Pupil Revenue: The dollars a school district receives from all funding sources in one fiscal year divided by the number of students the district is responsible for educating.4

Primary Funding Model: Money provided for general purposes to cover basic costs of education such as teacher salaries and instructional materials.3


Reimbursement System: Districts submit receipts of eligible expenditures to the state, and the state reimburses districts for all or a portion of those expenditures.3

Resource-Based Allocation: All districts receive a minimum base amount of resources. Resources could be staffing, services, or programs, and are often based on a ratio of staffing to students.3

Revenue Sources: Funding for school districts include those from federal, state, and local government funding. In fiscal year 2018-19, Tennessee’s districts overall received 48 percent of current revenues from state funds, primarily through the Basic Education Program (BEP). The state’s BEP funding comes from state sales taxes, and mixed drink and cigarette taxes. Districts received another 41 percent of their revenues from local sources, primarily from property taxes or payments in lieu of property taxes, local option sales taxes, and − for municipal districts − appropriations from city general funds. The remaining 11 percent of districts’ revenue came from federal funding, primarily from grants passed through the state for school breakfast and lunch programs, Title I programs that serve low-income students, and IDEA programs for students with disabilities.2


Student-Based Budgeting (SBB): A system in which the funding available to a school is based on the overall enrollment of the school. In its simplest form it is an assigned dollar [amount allocated] per-pupil [and] multiplied by enrollment to determine a total budget allocation.4

Student-Based Foundation: Districts receive a base amount of funding per student, with additional money or weights added to provide additional supports to students with a higher need.3


Teacher or Instructional Unit: Funding is distributed by setting the number, or target number, of teachers or instructional support staff that state funds will support. Teacher or instructional unit funding is often calculated based on the number of students enrolled.3


Weighted Student Funding (WSF): A student-based funding system by which individual students, based on their characteristics (e.g., low income, ELL, or SPED 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 low-income student may have a weight of .4, meaning the funding for that student will be 1.4 times the base level of funding.4