States have long used measures of student poverty to allocate additional funding to school districts. These measures typically reflect those used for free and reduced-price meals offered through the National School Lunch Program.

Over the past two decades, many states have replaced or supplemented free and reduced-price meal eligibility with direct certification, which automatically certifies students for free school meals if they participate in safety net programs such as the Supplemental Nutrition Assistance Program (SNAP) and Medicaid.

But federal changes to the social safety net under the One Big Beautiful Bill Act will not only tighten state budgets but decrease student eligibility for these safety net programs, thus lowering direct certification counts. Given the interdependence of free meal eligibility and student poverty measures, any reduction in direct certification will require students to fill out school meal applications or alternative income forms, something that is often associated with stigma, and will show up as lower rates of student need in state funding formulas, even when actual student need has not declined.

Why This Matters

Over time, added pressure on state budgets will force policymakers to make hard decisions. Some states may make additional reductions to SNAP or Medicaid enrollment, further decreasing children’s coverage. Others could increase spending on SNAP or Medicaid, but the added expenditure would mean that states with balanced budget requirements would have to raise revenue via new taxes, use reserve funds, or reduce state spending in other areas, such as public education.

What states choose to do will affect additional aid for districts with economically disadvantaged students differently because of the nature of their funding formulas. At least 36 states use a student-based formula, where districts receive a set amount of funding per student plus a weighted amount to support student need. Nine states use a resource-based formula, ensuring districts receive sufficient funding to pay for required resources. Other states rely on a mix of both formula types.

Generally, states with resource-based formulas are less vulnerable to changes in direct certification counts than states with student-based formulas, even though student-based formulas are known to be more transparent, flexible, and equitable. But how vulnerable states with student-based formulas are depends on their approach to weighting:

• Single weight: States supplement a per pupil base amount by multiplying by a percentage or adding a dollar amount for each student who meets the state’s poverty measure.
• Concentration weight: States allocate additional aid if a district’s concentration of poverty crosses a certain threshold.
• Tiered weight: States allocate additional aid by tiers that correspond to a district’s share of students in poverty.
• Multiple weight: States supplement a per pupil base amount by multiplying by multiple percentages or adding a set of dollar amounts for each student who meets the state’s poverty measure.

Key Takeaways

To understand which formula weight applications may be most affected by reductions in safety net eligibility and tightening state budgets, I modeled how a reduction in the poverty measure would affect additional funding for each type of weight. Assuming a 25 percent weight for students in poverty and a hypothetical 2 percentage-point reduction in student poverty shares, I find the following:

• Districts in states with a single-weight system are more vulnerable to changes in school poverty measures than districts in states with multiple weights.
• Districts in states that use direct certification as their single weight are even more vulnerable than districts that supplement traditional free meal data with direct certification.
• Districts in states with a concentration or tiered allocation system close to the thresholds are at greater risk than districts further from the thresholds.