Before 2021, Oklahoma law allowed school districts to receive funding based on one of three different student counts—current-year enrollment, prior-year enrollment, or enrollment from two years prior, whichever was greatest—allowing schools to receive funding for “ghost students” who did not actually exist within those districts.

In 2021, state lawmakers voted to restrict that practice, requiring that schools’ per-pupil funding be based on either the current-year enrollment or the final weighted average daily membership of the preceding school year.

A new report from the Reason Foundation shows an enormous reduction in ghost-student funding Oklahoma has since occurred—a decline of nearly 93 percent.

In the 2020-2021 school year, enrollment figures for Oklahoma schools indicated that districts would receive at least $195 million combined for 55,236 “ghost” students who did not attend classes in the district but were nonetheless included in enrollment counts used to determine state funding.

By the 2022-23 school year, the Reason report found just 155 of 541 school districts in Oklahoma—or 28.7 percent—received declining-enrollment funding. There were an estimated 3,777 ghost students statewide, costing $14.03 million.

State Rep. Kyle Hilbert, a Bristow Republican who authored the legislation reforming the system, said the report shows lawmakers made the right choice when they voted to restrict ghost-student practices.

“When passing this legislation, there were countless falsehoods thrown at the Legislature, particularly directed at former Senator Zack Taylor and myself. However, the Oklahoma Legislature stood firm that the math and the truth was on our side,” Hilbert said. “This report by Reason verifies everything we said three years ago. House Bill 2078 has ensured an additional $180 million is being spent on students that actually exist instead of ghost students. I appreciate my colleagues in the Legislature and Governor Stitt for getting this important funding reform passed three years ago. Oklahoma students are already reaping the rewards.”

The Reason report, “Billions: The Cost of State Hold Harmless Policies in K-12 Education,” notes that so-called “hold harmless” funding provisions that result in districts being paid for ghost students are touted as providing financial stability to districts with declining enrollment.

But the report notes those policies have opportunity costs that are often overlooked.

“For instance, these dollars could be otherwise devoted to raising per-student funding for all school districts or to directing greater funds to higher-need students,” the report states. “Hold harmless policies also reduce the incentive for school districts to right-size operations or innovate in response to budget constraints.”

The report examined Oklahoma, Missouri, and California, and found that ghost-student funding often benefits districts whose student populations primarily come from higher-income brackets rather than schools that predominantly serve poor students.

“Across the three states examined, there isn’t a clear relationship between declining enrollment funding and school district poverty levels,” the Reason report stated. “For instance, California’s highest-poverty school districts (Quartile 4) received less declining enrollment funding on average than its lower-poverty school districts (Quartiles 2 and 3).”

Educators Defended the Previous System

Defenders of Oklahoma’s prior system argued that ghost-student funding was a financial protection for small rural schools in particular. But in the 2020-2021 school year, a majority of ghost-student funding went to larger districts in urban areas.

That year, the Oklahoma City school district’s funding would have been based on an enrollment figure that included nearly 6,800 ghost students, while Tulsa had 3,291 ghost students. Just 22 districts accounted for 30,691 ghost students that year, or more than 55 percent of the total 55,236 double-counted students statewide, based on enrollment data.

In 2021, the Oklahoma State School Boards Association (OSSBA) called ghost-student funding a “budget stabilization mechanism,” and said that passage of HB 2078 would result in “destabilizing and shrinking budgets, staffing, programs, and class sizes” at schools.

The head of the Cooperative Council of School Administrators (CCOSA), a lobbying organization that represents roughly 3,000 school superintendents and other school employees, also defended “ghost student” funding.

But since passage of the reform, there has not been a rash of school-district closures and overall school funding has reached historic levels.

COVID prompted a significant number of families to change schools to ensure either in-person instruction during COVID or receive online learning from an established provider, which significantly inflated ghost-student numbers during the 2020-2021 school year. Ghost student figures were expected to decline in subsequent years as the impact of COVID fell in Oklahoma.

But the Reason study suggests Oklahoma would have likely continued to spend far more money on ghost students today had the 2021 reform not been enacted.

Missouri has a system similar to the one used in Oklahoma prior to 2021. In Missouri, school districts can receive funding based on the highest of current year enrollment, prior-year enrollment, or second prior-year average daily attendance.

Reason found that in the 2021-22 school year, 256 of 518 Missouri school districts—or 49.4 percent—received additional funding due to the state’s declining enrollment provision. It is estimated that there were 44,997 ghost students statewide in Missouri, involving the diversion of $197.04 million from districts with stable or growing enrollment.

Those Missouri figures are similar to the ghost-student funding figures in Oklahoma prior to the passage of House Bill 2078 and are dramatically greater than the post-reform figures now seen in Oklahoma.

“In a context where states are still rebounding from COVID-19 enrollment shocks and many are projected to have stagnating or declining K-12 populations over the next decade, it becomes increasingly expensive to shield districts from the resulting financial effects,” the Reason report stated. “Ultimately, legislators should ensure that K-12 dollars are tied to their strategic goals for public education.”