Funded: State Policy Analysis

Tennessee has a primarily resource-based formula. It determines the cost of delivering education in a district based on the cost of the resources, such as staff salaries and course materials, required to do so. The categories of students considered in Tennessee’s funding policy are students in certain grade levels, English-language learners (ELLs), students from low-income households, students with disabilities, students identified as gifted, students enrolled in career and technical education (CTE) programs, and students in sparsely populated districts.

Tennessee expects school districts to contribute to the funding of their public schools, with the amount of the local share based on districts’ property values and the proceeds from local sales taxes and the incomes of residents, with rates set to satisfy a statewide expected local contribution share. Districts in Tennessee are permitted to raise and keep additional local revenues for regular district operations.

Students from low-income households generate supplemental funding in Tennessee. The state considers specific grade levels, populations of ELLs, students with disabilities, students identified as gifted, and students enrolled in career and technical education programs in the allocation of funding for staff costs. Supplemental funding for sparse school districts is provided through a program-specific allocation.

Tennessee uses a resource-based funding formula and therefore does not use a base per-student amount as the basis for its funding.

Tennessee expects school districts to contribute revenue to their public schools. The amount each district is expected to raise is based on a combination of its property values, its residents’ income, and an estimate of its revenue from local sales taxes, with rates set to satisfy a statewide expected local contribution share.

Tennessee’s resource-based formula considers three categories of resources: instructional components, funded 70% by the state; classroom components, funded 75% by the state; and non-classroom components, funded 50% by the state. These contribution levels hold true on average across the state. However, each district is expected to contribute a different amount locally, depending on its ability to pay, as measured equally by two difference indices. The first index considers only the county’s ability to raise education funding through property and sales taxes. The second considers property values, taxable sales, student enrollment, and per capita income.

The combined measure of fiscal capacity is applied at the county level. Therefore, the state and local shares for a county-level school system would be the same as the state and local shares for a city-level school system within the same county. Once a district’s local capacity percentage is calculated, this figure is multiplied by the district’s resource costs in each category and then by the statewide average local share for that category (such as 70% for classroom components) to determine the dollar amount of the district’s expected local contribution. However, school districts in Tennessee that choose to do so may raise more money locally.

Tennessee sets a floor for local property tax rates. All counties must raise revenues sufficient to fund school districts’ expected local share of the formula amount. Additionally, property tax rates in certain school districts require legislative approval.

In Tennessee, very few school districts directly impose local property taxes; counties and municipalities impose property taxes. Revenue from county property taxes is distributed to school districts in proportion with the student count of each district. Counties must raise revenues sufficient to fund their local school districts’ local shares of the formula amount (see “Expected Local Share” for more information). Separately, certain school districts may levy their own local property taxes, but the rate must be approved by the state general assembly.

School districts in Tennessee receive revenue from local property taxes, sales taxes, and other local taxes. Very few school districts directly impose local property taxes. School districts receive revenue from property taxes imposed by counties and municipalities and may also receive a portion of other taxes imposed by counties or municipalities, including sales taxes; taxes on electricity, gases, and other fuels; and motor vehicle taxes.

Both counties and municipalities in Tennessee may impose an optional local sales tax as long as the combination of the county and municipality rates do not exceed 2.75%. If a municipality within a county that imposes a local sales tax also imposes a local sales tax, it may impose only the difference between the county tax rate and 2.75%. Local sales taxes must be approved by voters in the relevant jurisdiction. Half of the revenue from local sales taxes is designated for schools. Revenue from a county sales tax is distributed to the school districts within the county in proportion with the student count of each district. Unlike Tennessee’s state sales tax, the local sales tax is applied only to the first $1,600 of any purchase.

Counties may also levy taxes on the sale, purchase, or use of electricity, natural or artificial gases, or other heating fuels. These taxes are fixed at a rate of 0.5%. Counties in Tennessee may also impose other local taxes that can be used to support education, including motor vehicle taxes, called “wheel taxes.”

Tennessee provides different levels of funding for students in different grade levels. It does so through its resource-based formula, which assigns student-to-teacher ratios to four different grade spans and provides funding for teacher positions accordingly.

The state assigns a student-to-teacher ratio of 20 to 1 for grades K-3, 25 to 1 for grades 4-6, 25 to 1 for grades 7-9, and 22.08 to 1 for grades 10-12. These ratios determine the number of teaching units to which a district is entitled. Specialists, principals, assistant principals, and guidance counselors are also assigned to elementary schools in accordance with student-to-staff ratios that differ from those used for secondary schools. Once all staff units are calculated for a district, with grade-level variation taken into account, the district receives a flat amount per unit that was $48,330 in FY2021. These calculations form the basis of districts’ state education funding.

Tennessee provides increased funding for English-language learners (ELLs). It does so through its resource-based formula by specifying student-to-staff ratios for ELLs and providing funding for staff positions accordingly.

The state assigns a student-to-teacher ratio of 20 to 1 for ELLs. This ratio determines the number of ELL teacher units to which a district is entitled. The state also allocates funds for ELL translator units based on a student-to-translator ratio of 200 to 1.

Once all staff units are calculated for a district, the district receives a flat amount per unit that was $48,330 in FY2021. These calculations form the basis of districts’ state education funding.

Tennessee provides increased funding for students from low-income households. It does so in the form of a flat allocation for each student from a low-income household, which was $940 in FY2021. This figure is adjusted for inflation annually.

Students are eligible for this supplemental funding if they are directly certified as eligible for free meals because they live in households receiving assistance under the Supplemental Nutrition Assistance Program; Temporary Assistance for Needy Families; or Women, Infants, and Children program. Also eligible are other students deemed to be “at risk,” including students experiencing homelessness, students from migrant families, and students in foster care.

Tennessee funds special education using a resource-based system, determining the cost of delivering special education services in a district based on the cost of the resources, such as staff salaries and course materials, required to do so.

For staff costs, the state defines student-to-teacher ratios for 10 levels of special education service provision. Students are assigned to one of the levels based on the services detailed in their individualized education programs. The number of students receiving services at each level is converted into teacher units, which are each funded at a standard level ($48,330 in FY2021). Tennessee also specifies student-to-staff ratios for special education supervisors, assistants, and assessment personnel. For classroom costs, the state provides funding for special education materials and supplies ($36.50 per special education student in FY2021), instructional equipment ($17.00 per special education student), and travel ($17.25 per special education student) based on average costs from the three most recent years, adjusted for inflation.

Tennessee provides increased funding for gifted and talented students as part of special education funding.

Tennessee includes gifted and talented students in the count of special needs students for funding purposes. This means that gifted students are counted along with students with disabilities for the purposes of allocating funds for special education teachers and other personnel, materials and supplies, instructional equipment, and travel. See “Special Education” for a description of this allocation.

Tennessee provides increased funding for career and technical education (CTE) programs. It does so using a resource-based system, determining the cost of delivering CTE instruction in a district based on the cost of the resources, such as staff salaries and course materials, required to do so.

For staff costs, the state assigns a ratio of 16.67 full-time-equivalent students (FTE) for 1 teacher for CTE programs. This ratio determines the number of CTE teacher units to which a district is entitled. The state also allocates funds for CTE supervisor units based on a student-to-supervisor ratio of 1000 to 1. Once all staff units are calculated for a district, the district receives a flat amount per unit, which was $48,330 in FY2021. For classroom costs, the state provides funding for CTE materials and supplies ($157.75 per FTE CTE student in FY2021), instructional equipment ($99.75 per FTE CTE student), and travel ($50.50 per FTE CTE student) based on average costs from the three most recent years, adjusted for inflation.

Tennessee does not provide increased funding for districts based on the concentrations of students from low-income households. However, Tennessee does provide funding for individual students from low-income households (see “Poverty” for more information).

Tennessee provides increased funding for sparse school districts through its transportation funding system.

Transportation funding is distributed according to a formula set by the commissioner of education that considers total transportation expenditures, miles transported, and density of pupils per mile traveled. These factors are based on a three-year average of data submitted by each district.

Funding for charter schools in Tennessee is calculated based on local school district revenue.

For each student they serve, charter schools receive an amount equal to the total average per-student funding in the district in which they operate. Charter schools authorized by local school districts receive almost all of their funding (except for funding for capital outlay) through the local school district that authorized them. For charter schools authorized by the state Public Charter School Commission or the Achievement School District, the commission or the Achievement School District is treated as the local school district; the state provides formula funding to these entities, which in turn distribute the funding to each charter school they authorize.

Charter schools in Tennessee receive a share of local tax revenue. Charter schools receive the total per-student funding in the district, including tax revenue raised by local school districts.

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