The short version: The state determines a base level of per-pupil funding each district needs, as well as how much a district ought to be able to fund from local taxes. The state then makes up any gap in funding. This base funding level is called the “foundation budget.”
The foundation budget is a floor, not a ceiling, however. Districts can raise more money locally with no penalty.
Here’s an example, courtesy of MassBudget:
The state estimates that Lynn’s student population needs more money (and therefore has a higher foundation budget), yet Newton spends more per pupil because its residents are willing and able to pay higher taxes. In other words, the state spends more on students in Lynn, but Newton schools spend more (per-student) overall.
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