Open enrollment funding is straightforward for states and schools

Open enrollment is on the rise across states, with Kansas, Arkansas, Nebraska, Oklahoma, and others adopting strong policies in recent years. This is a positive development for students.

Open enrollment allows public school students to transfer to schools with open seats. Research shows that families participate in open enrollment for a variety of reasons, including escaping bullying and accessing specialized curricula, instructional approaches, and other programs not available in their residentially-assigned school districts.

Studies from states like Florida, Colorado, Texas, California, and Wisconsin also show that students who use open enrollment tend to transfer to higher-performing school districts.

With numerous states across the country considering open enrollment proposals, some lawmakers are raising concerns about what this means for school districts’ budgets, especially since local funding typically doesn’t follow the child to their new school.

The good news is that funding concerns related to open enrollment are usually unfounded or easy to address.

How states handle funding for open enrollment students

In most states, open enrollment funding is straightforward. Transfer students are added to the receiving school district’s membership count, thereby increasing state aid that’s tied to enrollment. No special policy or mechanism is required, working the same as when students move into a school from another school district or state. This is why nearly all states with strong open enrollment laws don’t include funding provisions in their policies.

Generally, state aid is more than enough to cover the marginal costs of transfer students. That’s because public school district costs don’t rise or fall in direct proportion to enrollment. Schools with excess capacity can enroll additional students without hiring more teachers, renovating facilities, purchasing curriculum, or adding support staff.

Costs only spike when enrollment reaches a tipping point (e.g., when classrooms are full or buildings run out of space), which is why every state open enrollment policy has a capacity provision that allows receiving school districts to set caps on the transfers they accept based on factors such as programs, buildings, class sizes, and grade-level capacity. For instance, Florida allows school districts to define capacity using class size and building capacity.

Capacity provisions vary by state, but the result is the same: school districts aren’t required to accept transfer students if doing so requires costly new expenses. But, in most cases, state aid from transfer students offsets marginal costs. 

Local funding and other special circumstances

A common concern for state policymakers is that, under an open enrollment program, local education dollars don’t follow the child across school district boundaries, thereby shortchanging school districts.

“Many of the states that have this [open enrollment] are more reliant on state funding,” said Otto Fajen, a lobbyist for the National Education Association in Missouri.

While including local dollars would boost incentives for school districts to attract transfer students, which is a sound policy objective, these additional education dollars aren’t needed to make school districts financially whole under open enrollment policies.  

For instance, in Arizona, funding for transfer students works seamlessly with the state’s school finance formula. In the 2025-26 school year, school districts get $5,113 per transfer student, plus other supplements that increase with enrollment, such as weighted funding for students with disabilities. And because Arizona has a capacity provision in its open enrollment law, state aid alone is sufficient to cover costs.

But there are special circumstances in which an open enrollment funding provision might make sense, usually due to quirks in state funding formulas. For example, if Missouri adopted open enrollment, its hold-harmless provisions would be a problem for many school districts.

Exceptions like this can be easily addressed by applying a statewide per-student amount to each transfer student, as Wisconsin does. In 2024-25, the Badger State allotted $8,962 per transfer student and $13,814 per transfer student with disabilities. These funds were more than enough to cover the costs of the nearly 62,000 cross-district transfers that occurred that school year.

Conclusion

Lawmakers considering open enrollment can rest assured that funding concerns are usually unfounded. In most states, state aid follows students seamlessly across school district boundaries, providing receiving districts with sufficient funding to cover marginal costs from transfer students. And, even in states with funding quirks, like Missouri, these problems have a straightforward solution. Financial concerns need not be a barrier to adopting strong open enrollment policies that benefit students.

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Source: https://reason.org/commentary/open-enrollment-funding-is-straightforward-for-states-and-schools/