Abstract: Since 2014, based on the tools created by the China Institute for Educational Finance Research, some counties have launched pilot reforms on the classifications of expenditures by function. In this paper, the author presents three aspects of work:a) compare the setting of the subjects in the United States and China, and put forward the balance of fineness, accuracy, and cost as the basic principles for future adjustment of subjects; b) taking the design of small-scale rural school funding mechanism as an example, explore the value of functional classification for the formulation of educational policies. At present, a school with 101-150 people is the most difficult to operate, and the public funding mechanism for small-scale schools needs to be adjusted accordingly; c) take education production research as an example to explore the value of classifications of expenditures by function for academic research. There is a positive statistical relationship between school-based curriculum expenditures, support service expenditures, and school academic performance. The effectiveness of unified teaching, school management, and education technology expenditures needs to be examined. The classifications of expenditures by function will provide a new paradigm for the related research on education production.

Key words: classifications of expenditures by function, classifications of expenditures by object, small-scale school, education production