School funding needs to be allocated in a stable and predictable way so that schools can plan their development over the coming years. Formula funding involves the use of objective criteria with a universally applied rule to establish the amount of resources each school is entitled to. Well-designed school funding formulas are an effective means to distribute funding for current expenditure in a transparent and efficient way. By including weights to distribute additional funds to particular student and/or school categories, formula funding can also play a critical role in aligning the distribution of resources with educational priorities, such as promoting greater equity.
School resources
Well‑designed school funding policies are crucial to achieving quality, equity and efficiency in school education. While the overall level of school funding matters, the strategies used for allocating these funds are equally vital.
Key messages
School autonomy over the use of funds provides schools with flexibility to use allocated resources to fit specific needs. When school autonomy, accountability and support are intelligently combined, they can impact positively on teaching and learning. But the effect of schools' budgetary autonomy on processes and outcomes requires a strengthening of school leadership and management structures, and support with technical budgeting tasks. It is also linked to school size and school network policies. Providing the structures and support to help schools group together and share resources can help achieve economies of scale and a more effective use of funding.
The public funding of private schools is typically combined with parental choice systems that are intended to encourage greater quality and variety in the types of education on offer. To counteract adverse effects on equity, school systems should require all publicly funded providers to adhere to the same regulations regarding tuition and admission policies, monitor adherence to these regulations, ensure transparency and accountability for the use of public funding by providers, and provide all families with adequate access to information and support so that they can make informed choices for their children.
Context
Frameworks for allocating public funding to schools
Formula funding plays an important role in the amount of resources received by public primary and lower secondary educational institutions from local governments. However, local governments make a greater use of administrative discretion, incremental costs, and bidding and bargaining to allocate public funds than is the case at higher levels of government.
Basis used to allocate funding to public primary educational institutions, by category of funding (2019)
Use of funding formulas to allocate public funds
Funding formulas are the most commonly used basis for allocation of public funds to primary and lower secondary educational institutions among OECD countries and other participants. In the vast majority of countries, they are used by central or state governments to allocate all or most funding for all categories of expenditure, with the exception of funding for capital expenditure.
Proportion of public funding allocated by central or state governments to public primary educational institutions (or the lowest level of governance) using funding formulas, by category of funding (2019)
