Tennessee School Funding & Policy Project

A New Era with the TISA Funding Formula​

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5.1 From BEP to TISA: A Paradigm Shift?

 

To apply the critical lens developed in the Michigan research to Tennessee, it is essential to first understand the state's recent and significant shift in school finance policy. For over 30 years, Tennessee funded its public schools through the Basic Education Program (BEP), a complex, resource-based formula that allocated funds based on staffing ratios and dozens of line items like textbooks and transportation. Critics argued the BEP was outdated, opaque, and failed to adequately account for the varying needs of students.  

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In 2022, following an extensive public engagement process, the Tennessee General Assembly passed the Tennessee Investment in Student Achievement (TISA) Act, which took effect for the 2023-2024 school year. TISA represents a fundamental paradigm shift from a resource-based to a student-based funding model. The new formula is designed to be more transparent, flexible, and equitable by tying funding directly to individual students and their specific needs. The transition was accompanied by a new, recurring state investment of $1 billion, intended to ensure that every school district in the state received more funding in the first year of implementation than it had under the old BEP system.  

 

5.2 Anatomy of the TISA Formula

 

The TISA formula is constructed from four primary components, which combine to determine the total funding allocation for each Local Education Agency (LEA), including both traditional school districts and charter schools.  

1. Base Funding: This is the foundational component of the formula. Every student in the state generates a uniform base funding amount, which was set at $6,860 for the inaugural year. This amount is intended to cover the core costs of education and is subject to annual appropriation by the state legislature.  

2. Weighted Allocations: Building upon the base, TISA applies additional funding "weights" for students with specific, higher-cost needs. A crucial feature of the formula is that these weights are "stackable," meaning a single student can generate funding from multiple categories simultaneously. The primary weights include:  

   • Economically Disadvantaged: A 25% weight is applied to the base amount for each student identified as economically disadvantaged (e.g., through TennCare eligibility, foster care status, or direct certification).  

   • Concentrated Poverty: An additional 5% weight is applied for students residing in areas with high concentrations of poverty, typically defined by Title I eligibility.  

   • Small and Sparse Districts: A 5% weight is applied for students in small districts (1,000 or fewer students) and another 5% for students in sparse districts (counties with low population density).  

   • Unique Learning Needs (ULN): This is a broad category with a range of weights from 15% to 150% of the base amount. It provides additional funding for students with disabilities (with ten different levels based on need), English Learners (with weights of 20%, 50%, and 70% based on proficiency), and students with characteristics of dyslexia.  

3. Direct Allocations: These are funds provided entirely by the state (100% state-funded) for specific, high-priority statewide programs. Unlike the base and weighted funds, these do not require a local match. Key direct allocations include per-pupil funding for K-3 literacy programs, 4th-grade literacy tutoring, Career and Technical Education (CTE) programs, and postsecondary readiness assessments like the ACT. Notably, TISA also includes a direct per-pupil allocation specifically for charter school students, a significant departure from the Michigan model.  

4. Outcomes Funding: This is a smaller, 100% state-funded component that provides bonus funding to districts for achieving specific academic outcomes, such as improving 3rd-grade reading proficiency or increasing the number of students earning industry credentials.  

 

5.3 The Critical Mechanism: Local Contribution and Fiscal Capacity

 

The most complex and analytically critical component of the TISA formula is the mechanism for determining the local share of funding. While TISA is a student-based formula, it remains a cost-sharing partnership between the state and local governments. Statewide, the formula is designed so that the state funds 70% of the total cost of the base and weighted allocations, with local governments collectively responsible for the remaining 30%.  

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However, the required contribution for any individual county or school district is not a flat 30%. Instead, each county's share is determined by its "fiscal capacity"—its estimated ability to raise revenue to support education. This fiscal capacity index is calculated annually by averaging two separate statistical models: one produced by the University of Tennessee's Boyd Center for Business and Economic Research (CBER) and the other by the Tennessee Advisory Commission on Intergovernmental Relations (TACIR). These models analyze a county's economic strength, primarily through its property and sales tax bases, to produce a relative measure of its wealth compared to other counties. A county with a higher fiscal capacity index is required to cover a larger percentage of its TISA-generated costs from local revenues, while a county with a lower fiscal capacity index receives a larger share of its funding from the state.  

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This fiscal capacity mechanism is the primary channel through which local wealth influences school funding in Tennessee. Unlike the direct and transparent link between property value and local revenue in Michigan, TISA's design shifts the locus of potential inequity to the opaque, technocratic calculation of this index. While appearing objective, the variables that underpin the fiscal capacity models—property values and sales tax generation—are themselves the products of historical patterns of economic development, investment, and segregation. A central analytical challenge for a Tennessee study, therefore, is to investigate whether this fiscal capacity formula accurately accounts for historical disadvantages and results in an equitable distribution of the local funding burden, or if it merely launders pre-existing wealth disparities through a complex formula, creating a system that is "equitable on paper" but still yields racially disparate outcomes in practice.

 

A Framework for Investigation - Applying the Michigan Model to Tennessee

 

To critically evaluate the equity of Tennessee's TISA formula through the lens of the Michigan research, a rigorous, quantitative investigation is required. This framework outlines the guiding questions, data sources, and analytical methodology necessary to conduct such a study.

 

6.1 Guiding Research Questions for Tennessee

 

Adapting the core inquiries from the Michigan studies to the specific context of the TISA formula yields a set of precise research questions that can guide the investigation:

1. Overall Funding Variation: How does total per-pupil funding (the sum of base, weighted, direct, and local contributions) in Tennessee vary by the racial (i.e., percentage of Black students vs. White students) and socioeconomic (i.e., percentage of economically disadvantaged students) composition of its school districts?

2. The Impact of Geographic Costs: After developing and applying a Tennessee-specific Adapted Comparable Wage Index for Teachers (TN-ACWIFT) to adjust for regional differences in labor costs, how large are the real, inflation-adjusted funding disparities between districts with different demographic profiles?

3. Wealth, Capacity, and Demographics: What is the statistical relationship between a district's underlying property wealth (total assessed value of property per pupil), its officially calculated "fiscal capacity" index under TISA, and its student demographics? Does the fiscal capacity model accurately reflect or potentially mask wealth disparities correlated with race?

4. Local Effort vs. Required Contribution: Do communities with higher concentrations of Black and economically disadvantaged students exhibit different levels of "local fiscal effort" (defined as total local education revenue as a percentage of total local property value) compared to their required local contribution as determined by the TISA formula?

5. Charter School Funding Equity: How does the total effective per-pupil funding for Tennessee's charter schools (including the TISA base, weights, and the specific direct allocation for charters) compare to that of traditional public schools, particularly after controlling for student demographics and geographic location? Is the direct allocation sufficient to close the "facility gap" and other funding shortfalls?

 

6.2 Data Sourcing and Variable Construction

 

A robust, quantitative analysis is contingent upon the availability of high-quality, disaggregated public data. Fortunately, Tennessee's state agencies, particularly the Department of Education (TDOE) and the Comptroller of the Treasury, provide a wealth of publicly accessible data files that make a study of this nature feasible. The following table provides a blueprint for the data collection phase of the research, identifying the key variables needed and their primary public sources. This roadmap is the cornerstone of the framework's feasibility, providing an actionable guide for a research team to assemble the necessary comprehensive dataset.

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Proposed Data Sources for Tennessee School Finance Analysis

• Variable CategorySpecific Variable(s)Primary Tennessee Data Source(s)Snippet ID(s)

• District-Level FundingTotal Revenue (State, Local, Federal)TN Dept. of Education (TDOE) Data Downloads; State Report Card

• TISA Allocations (Base, Weighted, Direct)TN Comptroller TISA Interactive Dashboard

• Per-Pupil Expenditures (PPE)TN Comptroller OREA PPE Dashboard

• Student DemographicsEnrollment (ADM) by district/schoolTDOE Data Downloads (Membership File)

• Race/Ethnicity (% Black, % White, etc.)TDOE Data Downloads (Profile Data Files)

• Economically Disadvantaged Status (%)TDOE Data Downloads (Profile Data Files)

• English Learner (EL) Status (%)TDOE Data Downloads (Profile Data Files)

• Students with Disabilities (SWD) Status (%)TDOE Data Downloads (Profile Data Files)

• Property Wealth & Local FinanceTotal Assessed Property Value by County/SSDTN Comptroller "Tax Aggregate Report"

• County/Municipal Property Tax RatesTN Comptroller "Tax Aggregate Report"; CTAS Tax Statistics

• County Fiscal Capacity IndexTN Advisory Commission on Intergovernmental Relations (TACIR)

• Geographic & Labor CostsAverage Wages by County/Metro AreaU.S. Bureau of Labor Statistics (BLS) QCEW

• Human ResourcesAverage Teacher/Administrator Salaries by DistrictTDOE Data Downloads; OREA "Mapping TN Education"

• Teacher Turnover/Retention Rates by DistrictTN Educator Survey; TDOE "Teacher Retention Report"

• Charter School Enrollment, Demographics, LocationsTDOE Annual Charter School Report

 

 

6.3 Analytical Methodology

 

With the dataset assembled, the research would proceed through a series of analytical steps designed to mirror the Michigan study's approach while adapting to the unique features of the TISA formula.

1. Data Aggregation and Cleaning: The first step involves collecting and merging all data from the sources identified in Table 1. Data should be aggregated at the school district (LEA) level. It is crucial to obtain data for multiple academic years, particularly the years immediately preceding and following the implementation of TISA (e.g., 2021-22 through 2024-25), to allow for a pre-post analysis of the reform's impact.

2. Constructing the TN-ACWIFT: Following the methodology outlined in the Michigan research , a Tennessee-specific Adapted Comparable Wage Index for Teachers (TN-ACWIFT) must be constructed. This involves using county- or metropolitan-statistical-area-level wage data for college-educated professionals (excluding teachers) from the U.S. Bureau of Labor Statistics to create a regression-based index of geographic labor cost variation. This index will then be used to adjust all nominal funding and expenditure data for each district, allowing for a more accurate comparison of the real purchasing power of educational resources across the state.  

3. Funding Level Analysis: With ACWIFT-adjusted data, the analysis will proceed to quantify funding disparities. Per-pupil revenues (total, state, and local) will be calculated for each district. Districts will then be grouped into quartiles based on their student demographic composition (e.g., Quartile 1: districts with the lowest percentage of Black students; Quartile 4: districts with the highest percentage). The average per-pupil revenue for each quartile will be compared to identify any regressive, flat, or progressive patterns in funding distribution.

4. Wealth and Capacity Analysis: This step probes the relationship between a district's actual economic base and its state-defined funding capacity. The total assessed value of property per pupil will be calculated for each district using data from the Comptroller's Tax Aggregate Report and TDOE enrollment files. This raw measure of property wealth will then be correlated with the official TACIR/CBER Fiscal Capacity Index and the demographic profile of the district. This analysis will determine whether the fiscal capacity model effectively neutralizes wealth differences or if it allows property-poor, high-minority districts to be assessed with a disproportionately high local funding burden.  

5. Local Fiscal Effort Analysis: Mirroring the Michigan study's innovative approach, this step will calculate the "actual" local fiscal effort for each district. This is done by dividing the total local revenue raised for education by the total assessed value of property in the district. This metric, which represents the real tax burden relative to wealth, can then be compared to the "required" effort implied by the TISA local contribution formula. This comparison will reveal which communities are taxing themselves above and beyond their state-mandated share, providing a powerful counternarrative to any claims that funding disparities are due to a lack of local commitment.

6. Charter School Analysis: This final analytical step focuses on the charter sector. The total effective funding for charter schools will be calculated by summing the per-pupil amounts from the TISA base, applicable weights, and the specific direct allocation for charter schools. This total will be compared to the per-pupil funding for students in traditional public schools within the same geographic area (e.g., Memphis-Shelby County, Nashville). The analysis will control for student demographics to ensure an apples-to-apples comparison and will seek to quantify the "facility gap" identified in other reports by comparing the direct allocation amount to estimated facility costs.  

 

Anticipated Insights and Policy Implications for Tennessee

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7.1 Evaluating TISA's Promise of Equity

 

Executing this research framework is likely to yield critical insights into the real-world functioning of the TISA formula. While TISA's student-centered design and its inclusion of weights for disadvantaged students represent a significant conceptual advance over the previous BEP formula, the system is not immune to the deep-seated structural forces of wealth inequality. A primary hypothesis is that while the TISA weights are a step toward equity, their magnitude (e.g., 25% for economic disadvantage, 5% for concentrated poverty) may be insufficient to fully counteract the profound disparities generated by the local contribution formula, especially in counties with extremely low fiscal capacity.

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The analysis of the fiscal capacity index itself is poised to be particularly revealing. The investigation could expose the index as a potential new vector for perpetuating historical inequities. If the statistical models used to calculate fiscal capacity do not adequately account for the long-term effects of redlining, disinvestment, and industrial decline on the tax bases of urban and rural communities with high concentrations of minority and low-income residents, the formula could systematically overestimate their ability to pay. This would result in these communities being assigned a required local contribution that is disproportionately burdensome, forcing them to either levy regressive taxes at a very high rate or fail to meet their educational needs.

 

7.2 Policy Recommendations for a More Just System

 

The potential findings from this research framework would provide an empirical basis for a set of actionable policy recommendations aimed at refining the TISA formula to better fulfill its promise of equity. Drawing on the potential findings and the policy alternatives highlighted in the Michigan research, several recommendations could be advanced for Tennessee policymakers.

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First, the research could lead to a recommendation for a formal state review and recalibration of the Fiscal Capacity Model. If the analysis reveals a systematic bias against counties with historically suppressed property values, the state legislature could mandate that TACIR and CBER revise their models to include factors that account for historical economic disadvantage or the higher costs associated with concentrated poverty. Increased transparency in how the index is calculated would be a crucial first step.

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Second, if the analysis confirms that significant funding gaps persist even after TISA's implementation, it would provide strong evidence for adjusting the TISA weights. The legislature could consider increasing the weights for economically disadvantaged students and students in concentrated poverty to ensure that more resources are directed to the communities with the greatest need.

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Third, the framework's focus on charter schools could provide a clear quantification of the charter school "facility gap." This could lead to policy recommendations to address charter facility funding inequities, such as converting the direct charter allocation into a restricted fund specifically for facilities, increasing the per-pupil amount of the allocation to better reflect actual costs, or exploring state-backed financing assistance and revolving loan funds to help charters secure affordable capital.  

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Finally, the research would position Tennessee within a broader national conversation on school finance reform. The report could reintroduce the policy alternatives identified in the Michigan research as potential long-term models for Tennessee to consider if TISA, upon evaluation, proves to be insufficiently equitable. These models include Wyoming's evidence-based, cost-based model, which attempts to fund schools based on the actual cost of providing an adequate education rather than on relative wealth, and Wisconsin's three-tiered equalization aid formula, which uses a powerful tax base equalization mechanism to ensure that districts can support similar spending levels with similar tax effort, regardless of their underlying property wealth.  

 

Conclusion: From Analysis to Action - The Imperative of Equity-Centered Evaluation

 

The comprehensive body of research on Michigan's school finance system offers a powerful and sobering narrative of how structural racism, embedded in historical patterns of segregation and wealth disparity, continues to shape educational opportunity in the present day. Through a rigorous application of Critical Race Theory to quantitative data, the research moves beyond simplistic correlations to expose the precise mechanisms—continued reliance on local property taxes, a structurally underfunded charter sector, and the unexamined consequences of "colorblind" policy—that perpetuate a system of separate and unequal education. It is a model of policy analysis that is both theoretically grounded and empirically robust.

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The recent overhaul of Tennessee's school finance system with the Tennessee Investment in Student Achievement (TISA) Act marks a pivotal moment for the state. TISA's student-centered approach and its explicit weighting for students with greater needs represent a laudable and significant step toward a more equitable funding model. However, as the Michigan research makes clear, even well-intentioned reforms are not immune to the historical forces that continue to shape wealth and opportunity along racial and economic lines. New formulas, while promising, must be subjected to the same level of critical, evidence-based scrutiny.

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The research framework proposed in this report is therefore not merely an academic exercise. It is an essential tool for accountability. It provides a clear, actionable roadmap for Tennessee policymakers, researchers, and advocates to empirically test the promise of TISA against the reality of its outcomes. By systematically investigating the interplay of funding, wealth, race, and local effort, this framework can provide the evidence needed to identify and address any emergent inequities within the new system. It can determine whether the fiscal capacity model is a true equalizer or a new form of structural disadvantage, and whether the state's historic new investment in education is truly providing every student, regardless of their individual circumstances, with the resources they need to succeed. The ultimate goal is to move from analysis to action, ensuring that the promise of educational equity in Tennessee is not just a matter of policy rhetoric, but a lived reality for every child in every classroom.