It takes parents who care and kids who can be good influences out of schools that need them.
Even if a kid can be a good influence, I still think that they should at least have the option of transferring to a better school. A school with kids of mixed academic backgrounds has it merits, but I still think that high-performing kids should at least have the opportunity to choose the school that best allows them to meet their potential.
Their potential could be met even in local schools if we provided the necessary funding for programs that offer challenging curriculum for the smart kids.
What you advocate is just taking the cream off the top. Cream for you... skim milk for everybody else.
As for funding: it should be reformed. Here in Minnesota they first reformed the funding for public schools back in 1971 and subsequently in 2001 that allowed the state to take over the majority of funding. My local school district receives roughly 80% of its funding from the state with federal funds contributing around 10% and local funding making up the rest.
Basically the state provides funding on a per pupil basis. Federal funds are generally tied to specific programs. And while school districts do have some power to raise funds from property taxes... most of this funding must be approved by voters through a levy referendum which is based on a per pupil basis.
My local district has approved a $500 per student levy to pay for all day, every day Kindergarten (which the state will now fund beginning next year), to hire more teachers to lower class sizes, and to maintain and purchase school buses. Our school district is the size of Rhode Island with 5000 students so transportation costs (which are funded at the state level on a per student, rather than student-mile basis) are always sucking up general fund money that should be used in the classroom.
There is also open enrollment. If you want to attend a different school than your neighborhood school or even another district... you can. But transportation becomes an issue and they will only allow for non-resident students if the school has room.