A new report from EdTrust Tennessee is raising fresh concerns about whether Tennessee’s school funding system is delivering on its promise of equity—particularly for Black students and other historically underserved communities.
Three years after Gov. Bill Lee introduced the state’s new education funding formula, researchers say a key flaw is now clear: the system is undercounting low-income students, leaving tens of thousands without the resources they need to succeed. And because poverty and race are deeply connected in Tennessee, advocates say the impact is falling disproportionately on African American students.
When the formula was rolled out in 2022, Democratic lawmakers warned that its reliance on public assistance programs to identify economically disadvantaged students would miss large numbers of children living in poverty. According to EdTrust Tennessee, that warning has now proven accurate.
At the heart of the issue is how the state defines which students qualify for additional funding. Tennessee currently uses a threshold set at 130% of the federal poverty level for ‘direct certification,’ a significant drop from the 185% threshold used for decades. Because Tennessee’s public assistance programs are among the most restrictive in the nation, many families who are struggling financially do not qualify (or are not enrolled) leaving their children uncounted in the funding formula.
The result, the report finds, is that tens of thousands of students living in poverty are effectively invisible in the system, and the schools that serve them are underfunded as a consequence.
Advocates say that impact is not evenly distributed.
“While the formula is written in economic terms, its consequences are deeply racial,” education equity leaders have noted in response to the findings. “The students most likely to be under-counted are disproportionately Black.”
Across Tennessee, Black students are more likely to attend schools in under-resourced districts and to come from households facing economic hardship due to longstanding disparities in income, housing, and access to opportunity. When those students are undercounted, schools lose critical funding for academic interventions, smaller class sizes, mental health supports, and enrichment programs.
In communities where resources are already stretched thin, even small funding gaps can have lasting consequences.
The EdTrust Tennessee report documents these disparities district by district, showing how the current formula fails to capture the true level of student need. For schools serving large populations of low-income and Black students (particularly in urban centers like Nashville and Memphis, as well as rural communities) the shortfall can mean fewer opportunities and widening achievement gaps.
Lawmakers are now considering a potential fix.
Senate Bill 2385, sponsored by Sen. Joey Hensley and co-sponsored by Sen. Raumesh Akbari, would expand the definition of economically disadvantaged students by including children enrolled in TennCare, the state’s Medicaid program. Advocates say this approach would provide a more accurate count of students living in poverty.
If passed, the bill would direct additional funding to an estimated 120,000 students currently overlooked by the system, with a projected $165 million increase in education funding for low-income students in the 2027–28 school year.
Supporters say the legislation represents a critical step toward correcting inequities that have long shaped educational outcomes in the state.
“Funding formulas shape opportunity,” EdTrust Tennessee emphasizes in its report. “When students are not counted, their needs are not met.”
For many educators, parents, and advocates, the conversation goes beyond dollars and cents. It is about whether Tennessee’s education system is prepared to meet the needs of all students, especially those who have historically been left behind.
As debate over SB 2385 continues, one thing is clear: how the state chooses to define and fund student need will play a major role in shaping the future of education and equity in Tennessee.
