Improving Title I funding equity across states, districts, and schools.

Publication: Iowa Law Review

Publication Date: 01-MAR-08

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ABSTRACT: For decades, the federal role in school finance has been guided by the simple principle that greater aid should flow to areas with higher poverty. However, this principle is largely violated in practice. Through a novel empirical analysis of federal allocations across states, districts, and schools, this Article demonstrates serious inequities in the allocation of funds under Title I of the Elementary and Secondary Education Act, the single largest stream of federal aid for disadvantaged children in public schools. The most severe inequity occurs in the allocation of Title I funds across states. By allocating aid to states in proportion to state per-pupil expenditures, Title I reinforces vast spending inequalities between states to the detriment of poor children in high-poverty jurisdictions. Across districts, aid per poor child generally increases with poverty concentration, but there are significant inequities among districts with comparable poverty based on their sizes of enrollment. In particular, small or mid-sized districts that serve half or more of all poor children in areas of high poverty receive less aid than larger districts with comparable poverty. Moreover, although Title I disproportionately benefits schools with higher poverty, equitable allocations across schools are nested within inequitable allocations across districts and across states. This Article proposes several reforms to Title I that policymakers should adopt as part of the reauthorization of the No Child Left Behind Act.



INTRODUCTION I. THE TITLE I FORMULAS II. EQUITY ACROSS STATES III. EQUITY ACROSS DISTRICTS IV. EQUITY ACROSS SCHOOLS V. POLICY IMPLICATIONS

INTRODUCTION

As Congress prepares to reauthorize the No Child Left Behind Act ("NCLB"), (1) policymakers and advocates have urged significant reforms of the federal role in education, including national standards, school vouchers, and growth models for measuring progress. (2) Although these ambitious proposals will garner headlines, it is worth recalling that the Elementary and Secondary Education Act of 1965, the original precursor to NCLB, had humbler origins not as an instrument for systemic education reform, but as a simple vehicle for directing federal aid to poor children living in concentrated poverty. (3) For four decades, this goal has been a prominent refrain in discussions of the federal role in school finance. However, measured against this goal, the federal role leaves much to be desired and, in the context of NCLB reauthorization, much for policymakers to improve.

This Article examines whether federal aid to public schools promotes equity, defined here to mean that greater resources flow to places with higher poverty. (4) This definition of equity goes beyond the notion that poor children should be given more resources than non-poor children. It requires that resources flow disproportionately to poor children in areas with more concentrated poverty. This principle is rooted in the well-documented finding that poor children in concentrated poverty face a "double disadvantage" arising from their own poverty and the poverty of their peers and local neighborhood. (5) Indeed, "[o]ne of the most consistent findings in research on education has been the powerful relationship between concentrated poverty and virtually every measure of school-level academic results." (6) Current federal policy recognizes that "the poverty of a child's family is much more likely to be associated with educational disadvantage if the family lives in an area with large concentrations of poor families" and aims to target resources to areas "where needs are greatest." (7) It is debatable how much resources should increase with every increment of poverty concentration, but it is enough for the present analysis to define the equity principle in general terms.

In evaluating federal policy against this principle, I will focus on Title I of the Elementary and Secondary Education Act (now NCLB). (8) Although the federal role in K-12 education encompasses more than Title I, (9) this focus is important for several reasons. Title I has long been the single largest federal investment in public schools, totaling $12.7 billion, or one-third of federal K-12 spending, in 2006. (10) Title I also dictates federal aid allocations under several other education programs totaling $1.6 billion in 2006. (11) While these amounts are small within a combined local, state, and federal education budget of $400 billion, Tide I provided 5% to 10% of total revenue in more than 1,200 school districts in 2003-2004. (12) Moreover, Title I will serve for the foreseeable future as the policy vehicle for expanding) federal aid to public schools. Congress has authorized almost twice the current level of spending for Title I, leaving ample room for appropriations to grow. (13) Finally, as a component of NCLB, Tide I is the principal federal program with the purpose of driving systemic education reform and narrowing achievement gaps by race and income. The allocation of Title I aid should bear a close relation to these policy goals.

This Article proceeds in five parts. Part I gives an overview of the four statutory formulas through which Tide I money flows from the federal government to states, then to school districts, and then to schools. After presenting this background, the heart of the Article provides a novel analysis of Title I funding equity at each level: across states (Part II), across districts (Part III), and across schools (Part IV). This multi-tiered inquiry reveals the complex ways in which equitable allocations are nested within inequitable allocations, and vice versa.

Part II shows that Title I allocates funds inequitably across states. By allocating aid to states in proportion to state per-pupil expenditures, Title I reinforces vast spending inequalities between states to the detriment of poor children in high-poverty jurisdictions. Next, Part III shows that, across districts, aid per poor child generally increases with poverty concentration, but there are significant inequities among districts with comparable poverty. The two Title I formulas designed to target high-poverty districts work not only to the advantage of districts with higher poverty but also to the significant advantage of districts with larger enrollments. As a result, small or mid-sized districts that serve half or more of all poor children in areas of high poverty receive less aid than larger districts with comparable poverty. Part IV explains that Title I disproportionately benefits schools with higher poverty, although equitable allocations across schools are nested within inequitable allocations across districts and across states. Finally, Part V proposes several reforms that Congress, the President, and other policymakers involved in NCLB reauthorization should consider.

At the outset, it is important to state one caveat. Although this Article examines Tide I in isolation from state and local funding, federal aid is part of an intergovernmental system of school finance. As such, federal funds are more equitably distributed than either state funds, which are only weakly compensatory toward high-poverty districts, or local funds, which generally disfavor high-poverty districts. (14) However, the net impact of federal aid on school resources depends on how other parts of the system behave. For example, Marguerite Roza and Paul Hill have shown that Title I, while targeting aid to high-poverty schools, often does not ensure that high-poverty schools have greater resources than low-poverty schools in a given district. (15) The reason is that, although Title I requires districts to provide "comparable" services in high- and low-poverty schools with state and local money as a condition of federal funding, Title I allows districts to use average salary data in demonstrating comparability across schools. (16) Because less experienced, lower salaried teachers tend to be concentrated in high-poverty schools, the use of average salary data masks large resource disparities between high- and low-poverty schools. Layering Title I funds on top of such disparities often serves to ensure at best equal, not greater, resources in high-versus low-poverty schools.

Similarly, Nora Gordon has shown that Title I does not achieve its goal of supplementing, not supplanting, state and local education funds. (17) Using district revenue data from 1991 to 1995, Gordon observed the one-, two-, and three-year effects of sharp increases in Title I aid between 1992 and 1993 that resulted from Census-reported changes in poverty counts. Although increases in Title I aid boosted district revenues dollar-for-dollar in the first year, by the third year school districts had reduced their local shares of education funding by an amount that fully offset the Title I increase. (18) Because Title I aid is typically less than 10% of the total district revenue, the reduction in local funding does not violate the 90% "maintenance of effort" requirement in the statute. (19)

This Article similarly asks to what extent Title I provides greater resources to high-poverty schools, districts, and states. Unless federal aid actually reaches its intended beneficiaries, there is little point to the perennial hand-wringing over Title I's efficacy in improving the achievement of children living in concentrated poverty. (20) As I show here, the reality of federal school finance policy does not fully match its stated ambitions.

I. THE TITLE I FORMULAS

Title I aid is allocated through four statutory formulas whose main features are summarized in Table 1. (21)

Each formula distributes money based on poverty, but each does so with a different emphasis. Basic grants serve districts with at least ten poor children who comprise at least 2% of enrollment, while Concentration grants serve districts that have more than 6,500 poor children or a poverty rate greater than 15%. Both formulas allocate funds based on the number of poor children in a given district. (22)

The Targeted formula also distributes aid based on poverty, but it uses poverty weights that are intended to direct greater aid to higher-poverty districts. The Education Finance Incentive Grant ("EFIG") formula has a two-step design. First, the formula allocates federal funds to states based on numbers of poor children as well as "equity" and "effort" factors intended to reward interdistrict-spending equity and high per-pupil spending relative to state fiscal capacity, respectively. Second, each state allocates its EFIG funds to districts using poverty weights similar to those in the Targeted formula, except that the weights vary with the degree of interdistrict equity in the state (i.e., less equity, heavier weights). Both the Targeted and EFIG formulas serve districts with at least ten poor children who comprise at least 5% of district enrollment.

All four formulas include statutory minimum allocations that benefit small states and hold-harmless provisions that limit the extent to which district allocations may be reduced from year to year. All four formulas also include a state expenditure factor, which I will discuss shortly.

As the variation in poverty factors suggests, the degree of equity achieved by Title I depends in part on how much money flows through each formula relative to the others. In 2006, Congress appropriated $6.81 billion for Basic grants, $1.37 billion for Concentration grants, $2.27 billion for Targeted grants, and $2.27 billion for Education Finance Incentive grants. (23) In this Article, I do not examine how permutations in formula appropriations might affect funding equity. (24) I focus instead on how the formulas themselves actually allocate the funds appropriated.

It bears mention, however, that the Targeted and EFIG formulas have acquired particular significance since the passage of NCLB in 2002. Although both formulas were added to Title I in 1994, (25) Congress did not fund either of them until NCLB introduced a requirement that any new Title I money above 2001 appropriations must be allocated through the Targeted formula. (26) Recent appropriations statutes have modulated this requirement by dividing new Title I money evenly between Targeted and Education Finance Incentive grants. (27) The two formulas accounted for 35% of Title I funds in 2006, (28) and this percentage is likely to grow as Congress considers significant increases in Title I funding. Although both formulas are intended to improve equity, until now there has been little if any inquiry into whether they actually further this goal. The analysis here includes a careful look at these formulas.

The data that follow come from three sources. The Budget Office of the U.S. Department of Education provided data on state and district Title I allocations by formula for fiscal year 2006. (29) Title I allocations are based on the most updated district enrollment and poverty data from the Census Bureau. Accordingly, the 2006 allocations are based on district enrollment and poverty data for 2003 from the Census Bureau's Small Area Income and Poverty Estimates. (30) Throughout this Article, Title I allocations are adjusted for geographic cost differences using state- or district-level values of the Comparable Wage Index ("CWI") for 2004, the most recent year available. (31)

II. EQUITY ACROSS STATES

If Title I dollars were targeted to areas of high poverty, one would expect to see a positive relationship between poverty concentration and aid per poor child. Across states, however, the reality is otherwise. Figure 1a plots each state's Title I aid per poor child in 2006 against the poverty rate among its public schoolchildren. Overall, Title I aid per poor child decreases as state poverty increases. Whereas the twenty-five states with the lowest poverty had an average poverty rate of 11.2% and received $1,609 per poor child, the twenty-five states with the highest poverty had an average poverty rate of 18.4% and received only $1,382 per poor child.

This interstate comparison is distorted by two factors, however. First, the statutory minimum allocations for small states result in high amounts of aid per poor child in states like Alaska, New Hampshire, North Dakota, Vermont, and Wyoming, all of which have low poverty. Second, the cost of delivering education varies significantly from state to state. A dollar in Massachusetts, a low-poverty state with high Title I aid per poor child, has less...

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