Modern costs.
Old formula.
Montana’s school funding formula was built for a world that no longer exists.
Costs have surged, expectations have grown, and student needs have changed, but the formula hasn’t kept up.
Public schools aren’t falling short because of mismanagement. They’re falling short because the system is outdated.
Montana school funding explained
Local taxes. State funding. Local schools. And how it all works
The Montana Constitution guarantees every child a "free, quality public education." In 2005, legislators passed a series of laws defining the elements of "quality education" -- and they built a state funding formula in law to pay for it. Montana schools have been funded in this method ever since - and every school in Montana is funded in the same way. Key elements of the formula include:
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Property taxes are levied locally for schools, but the dollars don't stay with local districts. They are sent to a dedicated state account in Helena and combined with other state tax dollars.
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Those dollars are sent back out to schools under a prescribed formula that covers 80 percent of the total cost of education.
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Local districts must levy the remaining 20 percent locally to fully pay for the cost of a quality education, as defined by law.
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Increases to overall school budgets are capped at 3 percent a year.
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Increases in local property taxes - even those levied for schools - does not increase the amount of dollars coming back to schools.
The formula does not include money for school building maintenance or construction. It does not include dollars for most educational needs not envisioned in 2005, like technology now considered necessary for career readiness. The formula means that property taxes can rise significantly, yet schools feel none of that increase - and will still be required to ask local taxpayers for more money every year just to fully fund local classrooms. Since 2005, school-district property taxes in Montana have increased by over 100%, while per-student school spending has grown by less than 40%. Montanans are paying more than ever in property taxes.
But because of the state’s outdated funding formula, schools only get a fraction of those increases — and often no increase at all. The spending cap also means that as local property taxes rise, state aid for schools decreases. The result: More of the burden of school support falls to local taxpayers, but schools see no more money.
But the law also requires lawmakers to revisit the formula every ten years to ensure it is working to fund a "quality education." That process is happening right now. The School Funding Interim Committee is studying the law and how it affects both local taxpayers and schools. This is a public process that Montanans can be part of it.
The outdated 3 percent cap
Montana's funding formula limits yearly school budget increases to 3%, no matter how much real costs rise. But over the past decade, actual costs have far outpaced that cap.
In Montana:
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Electricity rates rose 28% in a single year (2023) and continue climbing. NorthWestern Energy, which serves most of Montana, has been seeking additional increases since. (Montana PSC rate history (psc.mt.gov); MEIC rate case documentation)
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Employee health insurance has become districts' fastest-growing cost — one reason the Legislature created a statewide health insurance trust in 2023. (MT Legislative record on HB 332 (2023); Billings/MCPS superintendent testimony)
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School construction and repair costs are up more than 60% since 2015 nationally (BLS PPI NAICS 236222 (FRED St. Louis Fed); MT OPI Infrastructure Report 2024)
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Special education costs have more than doubled as a share of local district budgets since 1990, while state coverage has dropped from 82% to 33% (MT Legislative Fiscal Division Special Education Funding Report)
Every year the formula caps growth at 3%, schools fall further behind reality. You can't run a 2025 school system on a 2005 calculator.
Where the money actually goes
Schools are people powered by design
Public schools don’t run on bureaucracy. They run on people.
About 80% of school budgets go to salaries and benefits — the teachers and staff who educate students, keep them safe, and make learning possible. Staff includes:
● Teachers
● Paraeducators and aides
● Librarians
● Counselors, school psychs, and nurses
Montana ranks 50th in the nation for average teacher pay — even after the STARS Act. Nearly 33% of first-year teachers leave within their first year. More than half leave the state or profession within five years. Replacing a single teacher costs up to $20,000 — money that never reaches classrooms
When these positions disappear, programs disappear with them — and often, school days shorten, pushing childcare and supervision costs onto working families.
Facilities are a ticking clock —
and the funding doesn’t match reality
Montana’s public schools are responsible for buildings that must last generations — but there’s virtually no federal or state funding to maintain them. Montana is one of the only states where the state government pays near 0% of school construction, repairs, roofs, boilers, HVAC, and safety upgrades. Local taxpayers are expected to cover about 99% through bonds and levies — and 50–60% of those fail in many communities. At the same time, facilities costs don’t shrink.
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Heating a school costs the same whether it serves 100 students or 80
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Buses still run
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Safety systems still must function
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Special education services are still required
As buildings age, the pressure grows:
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Montana public schools face a $103 million annual shortfall in building maintenance and operations.
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Montana public schools face a $158 million annual shortfall in major facilities projects and construction.
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Roofs leak, boilers fail, HVAC systems break, and safety upgrades can’t wait another decade.
When emergencies hit, districts have no choice. They pay immediately — often by cutting staff or student programs just to keep buildings safe, or suffer in buildings without heat until a local levy is passed. This isn’t mismanagement. It’s a system that asks communities to fund 100-year buildings with one-year levies.
Special education
When SPED is underfunded, schools are forced into impossible tradeoffs. When it’s fully funded, everyone benefits:
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Students get the support they need earlier
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Teachers can focus on teaching
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Classrooms are more stable
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Resources are used more efficiently across the system
This isn’t about one group of students taking from another. It’s about aligning funding with reality — so schools can serve all kids well.
Special education services aren’t optional. Public schools are required by law to provide special education services. But funding hasn’t kept pace with student needs, which have risen by more than 20%.
Federal support has never reached promised levels. When federal
legislation passed requiring nationwide special education, lawmakers promised that federal funding would cover 40 percent of the cost of the new program. Today, federal funding covers just 13 percent of the costs. State support in Montana has fallen at the same time, down to aobout 33 percent of SPED costs, down from 82 percent in 1990. When funding gaps persist, schools face system-wide strain. That leaves districts struggling to meet legally required needs with an outdated funding model.
References
School-district property tax growth reflects Montana Department of Revenue analyses of education-related property taxes from the early 2000s through the early 2020s. Per-student spending comparisons use NCES current expenditures per pupil (FY2005 vs. FY2021, nominal dollars). Sources: Montana Department of Revenue (property tax trends); National Center for Education Statistics (per-pupil spending, FY2005–FY2021)