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Cost-Based Funding Approach

Cost-based funding is one of the three most common state secondary Career Technical Education (CTE) funding approaches that fall under the categorical funding model. With this approach, states distribute funds by reimbursing Local Education Agencies (LEAs) based on CTE expenditures from the prior year.

Costs may be capped, meaning a state may reimburse an LEA up to only a certain percentage of the added cost. CTE programs may be reimbursed for salaries, transportation, equipment, contracted services and curriculum. Additionally, content areas or courses may be reimbursed at different percentage rates.

Eight states — Colorado, Maine, New Hampshire, New Jersey, North Dakota, Oklahoma, Rhode Island and Virginia — use a cost-based funding approach.

Advantages

  • More budget consistency and certainty for LEAs due to set guidelines on what they will receive from the state for reimbursement;
  • Dedicated capacity for full or partial reimbursement of expensive inputs such as equipment and building infrastructure, allowing programs to be responsive to changing industry needs;
  • The ability for states to set different reimbursement rates for content areas, which may be helpful for higher-cost CTE programs.

Limitations

  • Lag time in funding if the state reimbursement schedule does not align with LEA investment timelines
  • Variance in reimbursement policies and cost caps that can result in inconsistent program availability and access for learners (i.e. LEAs may receive reimbursement for content areas rather than CTE support needs)

Visit the Resources page for a national overview of state secondary CTE funding trends and a case study of North Dakota’s state application of the cost-based formula.

State Case Study
Student-Based Funding
Unit-Based Funding

*Advance CTE used the definition of cost-based funding found in State Strategies for Financing Career and Technical Education for this project. 

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