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Opportunities and Challenges of Student-Based Budgeting

Like most funding distribution systems, student-based budgeting (SBB) comes with a set of opportunities and challenges. The goal of SBB is to increase funding equity, transparency, and flexibility, thus empowering principals to design schools that best meet their students’ unique needs. It is also a complex system that requires a high degree of leadership and collaboration. 

The Student Based Budgeting Toolkit provides an introductory guide, real-world planning tools, stories from SBB districts, and a nuts-and-bolts guide to setting up an SBB mode.

Just getting started? The below blog, adapted from Naomi Calvo’s article in District Administration  magazine, explains the main opportunities and challenges of SBB.

What is Student-Based Budgeting?

Student-Based Budgeting (SBB) goes by many names, including Student-Based Allocations (SBA), Weighted Student Funding (WSF), Fair Student Funding (FSF), or Student-Centered Funding (SCF). Regardless of its name, SBB is a funding system whereby dollars follow students based on student need. It describes any district funding model that: allocates dollars instead of staff or materials, is based on the number of students, and uses objective and measurable student characteristics as weights.


Funding equity

Under an SBB model, students with the same types of needs get the same amount of funding, regardless of which school they attend. Any funding differences across schools are deliberate and based on student or school needs.

This is in contrast to the typical “staffing formula” approach to funding, in which schools are allocated staff positions based on set staffing ratios. Staffing formulas often result in inequities because students do not come in neat class-size bundles. Consequently, there is a “cliff effect”: a single additional child can trigger an entire extra position.

Let’s say that the formula allocates one teacher per 25 students. The arrival of a 26th student means that the school gets another teaching position, and you end up with two classes of 13 students each. Likewise, if the formula allocates one guidance counselor per 400 students, a school with 400 students gets one guidance counselor and a school with 401 students gets two counselors.

In districts that use staffing formulas, it is not unusual to find that some schools spend twice as much as other schools on a per-pupil basis, even after taking into account the type of students served. These differences in funding are unintentional and often unrealized.

Budget transparency

Districts with SBB have to decide which student and school characteristics should be weighted and by how much. Typically, this sparks a discussion on what the appropriate funding level is for high-need students, whether high school students cost more or less to educate than elementary school students, how much more it costs to run a small school or a specialty school, and whether it is worth the extra cost.

Resource flexibility

When principals are allocated dollars instead of fixed staffing positions, they have a greater ability to tailor resources in a way that best meets their schools’ needs, assuming that contracts, regulations and policies are also revised to enable this flexibility.

A school struggling to raise teaching quality might decide to invest in small classes and an instructional coach, while a school with an already strong teaching force might decide to extend the school day. As school needs change over time, resource use can shift as well. In many districts, significant changes to collective bargaining agreements may need to be made in order to give principals the true flexibility they need to use their resources strategically.

Strong leadership

We need the best and the brightest to run our schools, but in many ways, the typical principalship is not designed to attract or keep creative, entrepreneurial leaders. In centralized districts, principals’ hands are often tied, and they are not able to make key decisions about their schools. The autonomy and accountability that comes along with SBB changes the principal’s job description and may attract a different type of professional into the principalship.

Incentives to attract and keep students

SBB is often combined with a "portfolio model" school system, where parents have some choice over which school their child attends. Since schools receive dollars for every additional child, they have an incentive to reach out to the community and be responsive to parents in order to attract their target number of students.



SBB requires major changes to a central office’s structures, organization and mindset. For example, the central office may need to develop a more robust "customer service" mindset, where departments work collaboratively with schools to "get to yes" as much as possible, rather than monitor compliance.

Additionally, developing a meaningful formula of what to weigh and by how much is challenging. Much of the necessary research base is lacking, and inevitably, the politics of different interest groups create rocky shoals to navigate. These types of questions might surface: How much should an ELL student cost? What about an autistic student? As the research base on effective programs and associated costs for special needs students get better, it will be easier for districts to set their formulas.

Fiscal oversight, compliance and accountability

SBB districts must create fiscal oversight systems to ensure that funds are spent appropriately and must also make sure that schools are compliant with state, federal and union regulations. This is much harder to do when the district isn’t controlling resources directly. In addition, SBB requires rethinking the accountability system to make sure that principals are held accountable for results.

Increased data needs

SBB requires more and better data. For example, an SBB district needs enrollment projections that estimate not just how many children will enroll in a particular school next fall, but how many of them will be ELL students, how many will be special education students, and how many will be whatever other student types are weighted.

When enrollment projections are off, funding is off, and that means dollars need to be added or subtracted after the school year has started and actual head counts come in. It’s hard for principals to budget effectively when funding levels are uncertain, and it can be disruptive for the students if staff assignments change after the school year has begun.

Principal capacity

SBB involves giving up a large portion of control to principals, and districts worry: Will principals do the right things with their newfound autonomy? Since most principals do not have prior experience with aligning resources around their instructional goals, districts must provide intensive support and training so that principals can budget effectively.

Providing high-quality, ongoing training for principals has proved challenging for many SBB districts. The central office would need to devote more resources to it and hire people with the right skill set and ability to run good training programs.

Added leadership burden

SBB requires principals to be both the chief academic officers and the chief executive officers of their schools. Many principals see themselves as instructional leaders and feel that the operations/ budget side is a distraction from their main work.

Some schools have successfully solved this problem by hiring school business officers to shoulder the administrative work, or they have changed the role of the assistant principal. In other cases, it’s a matter of getting what is and isn’t decentralized right, so that principals have the flexibility they need to design their schools well but don’t have to deal with things like ordering toilet paper.

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