Measuring (and funding) schools based on student outcome is fraught because a student's performance / preparedness for the "next level" is not entirely a function of the school. There are other significant parameters, including parental upbringing, home life stability, neighborhood safety, friends, hunger/nutrition, various trauma and abuse, the list goes on. I'm sure it's been studied, but I'd bet "school quality" is not even close to number 1 on the list of predictors of educational outcome.
I have many concerns with this kind of funding model, but I don't think the measurement problem is so serious. Performance incentives in education typically reward improvement of the student cohort relative to how it was performing the previous year, or even use value-added models that use multiple past years to predict the student trajectory.
It’s also fraught because schools will spend increasingly large fractions of the time preparing kids for tests instead of teaching them anything.
The number 1 predictor of educational outcome is IQ by a long shot, which is hardly affected by any of the factors you listed. Yes, high IQ kids usually have high IQ parents who are likely to prevent those things, partly because they are likely high income, but none of those are as important as how smart the child is.
This is true. There are safeguards (that are currently failing) that my program would engage:
- The state is legally required to provide those kids with an education.
- There is funding allocated to help those districts.
If "we will not pay you if the kids do not learn" means there are zero schools in those districts then (1) the state government will get sued for not doing its job (because closing 100% of the schools makes the failure objective and obvious) and (2) it will have to update those funding formulas so that it is possible for some school (state run, or private) to break even while providing an education in those areas.