Under current Oklahoma law, school districts can receive payment for students who have not attended in two years, informally referred to as “ghost students” since they exist only on paper. Members of a state Senate committee have now voted to reform the funding formula to reduce the number of “ghost students” claimed by districts.

“It’s really more about efficiency within the formula to me and moving more towards the funding following the student, and schools not being funded for kids that they’re not educating,” said Sen. Zack Taylor, R-Seminole.

Under current Oklahoma law, state funding for schools is distributed based on several factors, including the highest daily membership of the two preceding school years. As a result, schools with declining enrollment can receive continued funding for students who transferred to other districts, graduated, or even moved out of state.

“There are approximately 50,000 students in the state of Oklahoma that are in some way double-funded,” Taylor said. “They may be attending a different district, but with the three-year high another school district could also be receiving that funding.”

This year’s enrollment figures show Oklahoma districts can claim more than 55,000 “ghost students” for funding purposes, which translates into around $195 million allocated to school districts to pay for the education of children who do not exist in those districts.

House Bill 2078, by Rep. Kyle Hilbert and Taylor, would instead base school districts’ state funding on student enrollment from either the preceding school year or the current school year, whichever is higher. Under the legislation, schools would no longer be paid for students who departed two years ago.

If all excess students were eliminated from the figures used to allocate school-district funding, Taylor said funding would increase by $245 for every student in every school across the state.

However, HB 2078 charts a different course by still allowing districts to be paid for student counts from the prior year even when enrollment declines.

Had HB 2078 been law this year, school-district enrollment data shows the number of potential “ghost students” claimed by school districts would have been reduced from 55,236 to 46,343, a decline of 16 percent.

The bill’s provisions would take effect in the 2022-2023 school year.

Taylor said many other states tie school funding more closely to actual enrollment. He said 15 states, including Texas, have “real time” funding tied to current-year enrollment, while nine states allow a one-year “lookback,” and another seven states provide for a one-year lookback with a “hold harmless” provision. The changes in HB 2078 are similar to the seven states with hold-harmless protections, he said.

To assist districts with long-term planning, HB 2078 would waive the current cap on school district savings, referred to as “carryover,” for the next two years. When the cap is reimposed in subsequent years, the bill boosts it by 20 percent.

Oklahoma’s 500-plus public-school districts reported $982 million in combined carryover savings at the end of June 2020, an increase of 48 percent over three years, and carryover could surge even more this year due to substantial unspent federal bailout funding.

However, many school administrators oppose HB 2078. In some instances, districts are receiving millions in surplus funding thanks to “ghost student” payments.

Just 22 districts account for 30,691 “ghost students” this year, meaning just 4 percent of Oklahoma school districts will receive roughly 55 percent of the $195 million in “ghost student” payments allowed under the existing school-funding formula.

Sen. Cari Hicks, D-Oklahoma City, suggested the legislation would create “additional churn” among teaching staff because districts would be “in an uncertain budget situation” and begin layoffs if they are no longer paid for students who departed two years prior.

“We need schools to be able to plan,” Hicks said. “This bill does not give fiscal solvency to those districts to be able to make those hard decisions in order to really keep families engaged and excited about the neat things that can happen in their public schools.”

But Taylor said HB 2078 “creates a more efficient model within the funding formula.”

“It’s my belief that if they are not educating those kids in that school they should not be paid for those kids,” Taylor said.

Critics have also argued that lawmakers should “fully fund” schools rather than eliminate payments for non-existent students. But Taylor noted those critics seldom provide details.

“I just don’t understand the resistance here,” Taylor said. “This is not a huge change. Honestly, I would be more for moving towards real-time funding, just to be real frank about it. And then we can have the discussion separately about how much money we need to be sending per student. I’m glad to have that debate, happy to have that debate. In fact, I’ve had that debate ever since I was elected in 2017 to the House of Representatives, and I asked the question over and over and over again: What does it mean to ‘fully fund’ education? Exactly how much money do we need to be spending per student? Once I’ve been told that we need to be back at the 2008 high-water mark of funding. Well, you know what? I voted on tax increase after tax increase after tax increase. I voted for more taxes than I ever thought I would in my life to get us to that point. And it’s still never enough.”

From 2015 to 2018, lawmakers approved $1.1 billion in recurring tax increases and other revenue measures, including tax increases on income, fuel, tobacco, vehicle purchases, and energy production, as well as many fees.

HB 2078 passed the Senate Finance Committee on a vote of 9-4. The bill must also pass out of the Senate Appropriations Committee before it can receive a vote from the full Senate.