The Democratic governor did not disclose proposed aid figures in his announcement Monday.
Malloy says his proposal would make education funding more fair by considering towns' ability to pay and including more accurate poverty and enrollment data. The state gives cities and towns about $2 billion a year for basic education and another $1 billion for school construction.
The proposal comes after a September 2016 ruling from a state court that the current Educational Cost Sharing (ECS) formula was unconstitutional because it skewed toward giving less money to the state's neediest school districts, and more toward wealthier ones.
"We are failing children in urban environments." said Malloy. "We are failing children because their parents are poor and it's not right."
Officials in some towns worry large property tax increases will be needed to make up for reduced aid and cost shifts in Malloy's budget plan.
Malloy is scheduled Wednesday to release his budget proposal for the two fiscal years that begin July 1.