SEEK funding in normal times
Usually, the SEEK formula provides matching dollars for matching student needs, by combining local and state funding. For example, here's the base funding two Kentucky districts would receive if there were no SEEK shortfall for 2011-12.
For both districts, the local portion comes from taxes that raise 30¢ for each $100 of taxable property. Jackson Independent has very little taxable property to support each student, so its local effort only raises a little money. Fayette has more property per pupil, so its local effort yields more money.
The state portion then adds the dollars needed to get them to almost equal funding. In the chart, Jackson Independent's base funding totals $5,058, while Fayette's is $5,009.
The amounts aren't identical, because the SEEK formula calls for added money for children with disabilities, limited English, low income families, and transportation needs. That is, SEEK ensures that similar students qualify for similar dollars. That's why I described the formula as about providing matching dollars for matching needs. (Doing it that way also meets the requirements of constitutional equal protection: the children aren't treated identically, but there's a rational basis--and even pretty substantial good sense--behind the variations.)
SEEK reductions in bad times
The current SEEK regulation, set by the Kentucky Board of Education, calls for any shortfall in state SEEK funding to be covered by a "pro rata reduction." Reducing each district's state funding by the same percent, though, means reducing each one's state funding by a different dollar amount. For example, a 1% cut to the district above would look like this:
I've simplified this example in two ways. First, I've used a simple 1% reduction, so readers can easily see the arithmetic. Second, I've only shown how base SEEK funding is equalized, but the total SEEK formula also includes dollars for facilities and for added equalization if districts voluntarily set higher tax rates.
The basic principle, though, is the same.
Because some districts have lower property wealth, they have lower local revenue.
Because they have lower local revenue, equalization gives them more state revenue.
Because they get more state revenue, cutting state funding by an equal percent means cutting them by unequal dollars.
Or, to take it back to basics, it means that students with matching needs do not receive matching reductions, and living in a poorer district means the students lose more state support.