Senate passes bill to change how the state funds education

April 10, 2025 – MONTGOMERY, AL – The Alabama Senate passed legislation to change how the state distributes funding to K-12 schools. In the current model, the state funds schools by taking a count of all the students and dividing the money between public schools based on the number of pupils in each system with the same per pupil amount per student, without regard as to whether a student is special needs, an English learner, or in poverty. The bill that passed in the Senate moves the state to a hybrid model where school systems get the same amount per pupil; but then there is a second much smaller amount of money that will be distributed to individual schools based on the number of special needs, poverty, English language learner, and gifted students in that individual school.

Senate Bill 305 (SB305) is sponsored by state Senator Arthur Orr (R-Decatur). It is the new funding model and is called the RAISE Act.

Senate Bill 111 is also sponsored by Senator Orr. It is the supplemental appropriation of moneys from the excess $375 million from the Education Opportunities Reserve Fund which is being used to pre-fund the new funding model for K-12 schools. That $375 million will fund

"The thinking is that we will put $375 million into the RAISE Fund and from that fund we will push that money out to the K-12 schools," based on the funding model in the RAISE Act.

Orr explained that $110 million would be paid out to the schools from the RAISE Fund in 2026, $115 million in FY2027, and then $150 million the third year (FY2028). It would be up to the state to add to or replenish the fund moving forward.

"Chairman Garrett and myself thought it important to make an initial investment," Orr said. "We don't want to pull the rug beneath our school systems, because they are going to go out and be making investments in more teachers," equipment, and materials based on the expectation that these moneys will be a recurring item."

Orr said the Legislature doesn't want to then take that money away in a future budget year due to changing priorities or economic conditions.

"That is not the plan and that is why we are making this initial investment," Orr explained.

Schools will continue to get the per pupil funds like they get now; but then they will also get a second appropriation based on the number of poverty students, the EL students, the special education students, and the gifted students at that school.

The Education Opportunities Reserve Fund is a rolling reserve fund that Republican legislators created over a decade ago to prevent proration of the schools budgets based on the ups and downs of the economy. If the Legislature missed their economic forecast by five percent then the Governor would have to order a five percent proration of the education budget. Since you did not know there was going to be a proration coming until after the tax returns started rolling in, that was often a 15% cut in the money paid out to the schools in the fourth quarter of the fiscal year. By appropriating money to a rolling reserve Legislators are able to prevent those prorations as there is a rolling reserve fund there. Since there was no proration in the 2025 budget – and there hasn't been in over a decade – the Legislature is able to spend the excess dollars in the Education Opportunities Reserve Fund in a supplemental appropriation that normally come to schools in the fourth quarter of the current fiscal year above and beyond what they were actually budgeted to receive.

"We are taking a little over 30% of that money and put it towards the RAISE Act fund," Orr explained.

"In the RAISE Act it is going automatically, you don't have to apply," for the extra funds Orr explained. "Your school is entitled to X amount of dollars based on the formula."

"We added more flexibility language," Orr said explaining changes to the formula.

Orr explained that is a school had 100 poverty students, ten special needs students, ten English Learners and five gifted students and you received $100,000 in funding because of that you don't have to spend that money exactly like that distribution among the groups.

"You have the flexibility to spend that $100,000 among those groups," said Orr. "You decide how you spend it within those groups."

"You don't have to stay in the bucket that drew down the money," said Orr. "What you can't do is decide because your EL students play soccer that you are going to spend it on upgrades to the soccer field."

Orr also explained that the money has to be spent at the school that drew it down. A school board can't take RAISE Act funds that were drew down by two high poverty schools and then spend it at a third school that has no poverty.

"It's got to stay within those groups that drew it down," Orr explained.

Senator Rodger Smitherman (D-Birmingham), "I really appreciate what you are doing here. I think is a very positive step."

Both SB305 and SB111 passed the Senate unanimously.

The package of bills traveling with the budget includes funding for Southern Preparatory Academy, Tuskegee University, and Talladega College.

SB305 is also sponsored by Orr RAISE Act

The Senate also passed a bill to change how K-12 public schools are funded in Alabama and approved $375 million from the Education Opportunities Reserve Fund to pre-fund the funding model for K-12 schools.

The legislation now moves to the Alabama House of Representatives for their consideration.

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