Local schools are divided about whether replacing the established decile system with a Risk Index will make much difference.
Education Minister Nikki Kaye confirmed on Monday that the Government would implement more targeted funding to better support those students most at risk of not achieving due to disadvantages.
"For too long schools have been stigmatised and wrongly judged by their decile number. Children and young people deserve to take pride in their school and we need to better target funding to where the need is greatest to support all children to achieve," Ms Kay said.
The Government would also replace the equity index used to allocate disadvantage funding in early childhood education with the Risk Index.
Decile funding currently accounts for less than 3 per cent of a school's resources.
"Rather than allocating this funding on the basis of neighbourhood characteristics as the current decile system does, the Risk Index will instead provide fairer funding that better reflects the needs of children in our schools and services.
This will mean extra resources are better targeted to support schools to lift achievement."
The specific factors to be used in the index are subject to further analysis before being finalised but some being considered include ethnicity, mother's age at child's birth, father's offending and sentence history and the mother's and father's income in the previous five years.
Ms Kay said they will be the indicators that evidence had shown has had the greatest influence on student achievement.
Tamatea High School principal Robin Fabish said an equitable system was important and felt not just the input should be equal but also the output of programmes.
"There needs to be greater support for those that need it. If people's needs are met then it is good for society going forward."
Mr Fabish agreed that the decile system meant some schools were unfairly judged on quality.
"I think this is a positive movement for schools and we are grateful for their support."
However Flaxmere Primary School principal Robyn Isaacson wasn't so sure this formula was transparent for schools.
"When the Government allocates funding for children they don't say what kids it's going to and it would pay to know what the actual conditions are.
"I am not sure this new system will make much of a difference to us really."
Ms Kay said she was pleased to be able to confirm that no school, early learning service or nga kohanga reo would see a reduction in their funding as a direct result of this change.
This was the first major change announced as part of the Funding Review.
There will be further engagement before any changes are implemented, although it's likely the new model of funding will take effect from 2019 or 2020.
"Stripping out decile will change how schools are judged," Ms Kay said.
"We are working on a number of initiatives to make it easier for parents to find and assess information about the quality of schools."
This included a project with ERO that improved their reports and key information as well as making it more accessible to parents.
Further work on other aspects of education funding is also ongoing. The Ministry of Education is due to report back later this year on the other parts of the Funding Review.