Introduction

Title I, Part A (herein referred to as Title I) of the Elementary and Secondary Education Act (ESEA), signed by President Lyndon B. Johnson on April 12, 1965, provides financial assistance to school districts for children from low-income families. Title I is designed to help students reach proficiency on challenging state academic achievement standards by allocating federal funds to be used for education programs and services. The majority of these Title I federal funds are currently allocated at the district level in all states, plus the District of Columbia and Puerto Rico, based on mathematical formulas involving the number of children eligible for Title I support and the state per pupil cost of education.¹ Districts distribute the Title I funds they receive to schools with the highest percentages of students from low-income families. Schools enrolling at least 40 percent of students from low-income families are eligible to use Title I funds for schoolwide programs designed to upgrade the entire school’s education program to improve achievement for all students, particularly the lowest-achieving students. Unless a participating school is operating a schoolwide program, the school must focus Title I services on students who are failing, or most at risk of failing, to meet state academic standards.

The allocation of Title I funds is based on complex mathematical formulas that use multiple distribution criteria and multiple thresholds to determine a funding allotment for each of the districts in the United States. The 1965 Title I ESEA formula specified that a state per pupil expenditure (SPPE) factor would be multiplied by the number of children from low-income families (i.e., the number of formula-eligible children) to determine an authorization amount for Title I. Title I is intended to be a supplemental program; thus, districts are authorized to receive 40 additional cents for each SPPE dollar to spend on education services provided to disadvantaged students. Thus, the SPPE is multiplied by 0.40 to arrive at an authorization amount. This authorization amount is adjusted by several other provisions, including the congressional appropriation, to arrive at a final allocation amount (see the Methodology for Allocating Federal Title I Funds section later in this chapter). When additional grants with new formulas were added to the Title I program, the initial program became known as Basic Grants. Although the formula for Basic Grants has changed slightly over the years,² Basic Grants remain the largest component of Title I funding.

Concentration Grants were added during the 1970s to provide additional help for districts with more than 6,500 formula-eligible children or where more than 15 percent of the 5- to 17-year-old population was formula eligible. The hold harmless provision was added to Basic Grants in the Education Amendments of 1974. This provision limits the reduction in the allocation to a district to 15 percent compared with the prior year. The Improving America’s Schools Act (IASA) of 1994 added the state minimum provision, which ensures that no state receives less than a minimum threshold of funding to maintain a program of sufficient size that makes the administrative effort worthwhile. IASA also added Targeted Grants and Education Finance Incentive Grants (EFIG) to more directly target funds to districts with high numbers or high percentages of formula-eligible children. However, funds were not appropriated for Targeted Grants and EFIG until the No Child Left Behind Act (NCLB) of 2002 was enacted. NCLB appropriated funding for the four current grants: Basic Grants, Concentration Grants, Targeted Grants, and EFIG. 

These four Title I grants vary with respect to how the funds are allocated to disadvantaged populations. It is important to keep in mind that there is no direct link between the formula-eligible children on whom the distribution of funds is based and the students who actually benefit from the funds. This is because most students served by Title I grants receive services through schoolwide programs that serve both eligible students and noneligible students in a school. Moreover, because each of the federal allocation formulas uses a series of provisions, there is not a direct link between the percentage of formula-eligible children and the percentage of federal funds allocated. Districts often receive funding from more than one grant, and many districts receive some funding from each of the four grants. Key facts about each of the four grants are summarized below (see also table 1.A and figure 1.1).

• Basic Grants are the largest component of Title I funding and serve the largest number of districts. Basic Grants accounted for approximately $6.4 billion of Title I funds distributed in fiscal year 2015 (FY 15), or about 45 percent of the $14.3 billion allocated. Basic Grants provide funds to districts in which the number of formula-eligible children is at least 10 and exceeds 2 percent of the district’s school-age (5- to 17-year-old) population.

• Concentration Grants provide additional funds to districts with relatively large populations of low-income and disadvantaged children. They accounted for approximately $1.3 billion (9 percent) of Title I funds in FY 15. Concentration Grants provide funds to districts in which the number of formula-eligible children exceeds 6,500 or 15 percent of the district’s school-age population. 

• Targeted Grants provide additional funds to districts according to a weighting system. Targeted Grants accounted for approximately $3.3 billion (23 percent) of Title I funds in FY 15. Targeted Grants are based on the same formula-eligible child counts used for Basic Grants and Concentration Grants, except the data are weighted so that districts with higher numbers or higher percentages of children from low-income families receive proportionately more funds. Targeted Grants provide funds to districts in which the number of formula-eligible children is at least 10 (without application of the formula weights) and at least 5 percent of the district’s school-age population.

• Education Finance Incentive Grants (EFIG) differ from the first three types of Title I grants in that they are allocated in two stages: first at the state level, then within each state at the district level. Their purpose is to provide districts with additional funding for low-income and disadvantaged children; the exact amount provided to each state varies depending on measures of state effort and equity in funding public education. These grants accounted for approximately $3.3 billion (23 percent) of Title I funds in FY 15. The state effort provision is based on states’ financial support for education (state per pupil expenditure) compared with their relative wealth as measured by their per capita incomes. The state equity provision is based on the degree to which education expenditures among districts within states are equalized. EFIG provide funds to districts in which the number of formula-eligible children is at least 10 and at least 5 percent of the district’s school-age population.

Top

Congressional Mandate

The Every Student Succeeds Act (ESSA), passed in December 2015, includes a mandate to study the Title I allocation funding formulas and the formulas’ impact on school districts (Section 9211).³ The congressional mandate specified that the report examine whether the four grant formulas that determine Title I allocations “are adequately delivering funds to local educational agencies with the highest districtwide poverty averages” (ESSA 2015). According to the legislation ordering the report, “minimal effort has been made by the Federal Government” to examine the alignment between the funding formulas and increasing funds for students in poverty. The legislation refers to a Congressional Research Service report that found that the four Title I formulas allocate shares of funds in a manner that differs from the shares of students by state or different types of school districts. The legislation directs the Institute of Education Sciences (IES) to respond to nine specific analytic tasks in a report (see the Analytic Tasks for Title I Formula Grant Report as Specified by the Every Student Succeeds Act [ESSA] textbox later in this chapter).

To address tasks A through G of the congressional mandate, this report analyzes the funding allocations for each of the four major Title I grants by various characteristics, such as by state, National Center for Education Statistics (NCES) geographic locale (see the NCES Geographic Locales textbox later in this chapter), poverty status, and district size. Chapters 1 and 2 analyze the distribution of Title I funds under the four formulas (Task A), by the 12 locales (Tasks B and C), poverty status (Task D), district size (Task E), and poverty status and district size (Task E). Chapters 3, 4, 5, 6, and 7 are designed to the show sensitivity of the Title I allocations with respect to different formula specifications. The impact of number weighting and percentage weighting of the formula-eligible population (Tasks F and G) also are analyzed in these chapters.

NCES assembled a panel of independent experts to come to a consensus on the analytic approaches needed to respond to the congressional mandate. The Title I Study Expert Panel (which was convened on three occasions) included experts with both academic research and operational experience on Title I. Panelists shared their Title I expertise and provided feedback on the development of the analytic approaches for the report and on preliminary findings. NCES also conducted a literature review to develop the analytical framework used for this report. Both the expert panel and the literature review respond to Task H, which requires a review of analytic reports or studies that examine Title I.

The specific guidance for the literature review was to focus on the distribution of funds for the four grant formulas. Peer-reviewed journal articles, policy briefs, and government studies have examined the alignment of the Title I formulas to the law’s intent from various perspectives. This brief literature review summarizes key points of this research on the alignment of the formulas to the law’s purpose of appropriately delivering funds to districts according to their levels of poverty. The analytical framework for this report was based both on this literature review and the recommendations of the expert panel. 

This report does not address Task I of the congressional mandate, which requests that IES make policy recommendations on “amending and consolidating” the Title I formulas. NCES is prohibited by legislation from providing such recommendations for changes to the formulas. This report is intended to provide a deeper understanding of how the four grant formulas currently work for different types of districts and how the current law affects districts with varying characteristics. The example formula analyses presented in later chapters of this report provide indicators of the sensitivity of the current formulas to various types of changes in the computations. To isolate the impact of various assumptions on the formulas as directed by the mandate, NCES conducted analyses that removed single and multiple provisions from each of the four grant formulas. These analyses are not presented as recommendations but rather as examples of how different formula provisions interact with the funding allocations on a per formula-eligible child basis.

There are two primary reasons why analyses of the federal allocations process alone may not fully address the congressional mandate to examine whether Title I allocations are adequately delivering funds to the most economically disadvantaged communities. First, Title I district allocations do not match the actual district receipts due to state adjustment provisions described later. Second, there is a mismatch between the number of children used to determine Title I eligibility (formula-eligible children) and the number of students who receive Title I services. The discrepancy between the number of eligible children and the number of student recipients is primarily due to (1) noneligible students participating in schoolwide Title I programs; (2) 5- to 17-year-olds who may be formula eligible but are not enrolled in school; (3) students enrolled in private schools; and (4) permitted exceptions for districts to allocate funds within their districts.

The differences in the child counts for funding recipients and formula-eligible populations are not systematically studied in this report. Since this report is designed to look at the allocation formulas and the resultant distributions of funds across states and districts, the focus is on formula-eligible children. It should be noted that many of the research studies on the Title I allocations also focus on funding and formula-eligible children, not on Title I receipts and Title I student recipients. Some important exceptions to this pattern are the U.S. Department of Education studies cited below that evaluate the impact of the Title I program. The following two sections briefly describe specific Title I financial alignment and participation alignment concerns that NCES considered when designing the analyses to respond to the congressional mandate. These analytic challenges may affect the interpretation of the findings of this report.

Top

Alignment of Title I Allocations and Revenue

The federal Title I funds allocated to districts under the four grant formulas generally do not exactly match the amount that the districts receive in a particular year for a number of reasons:

• States are required to adjust Title I allocations based on district boundaries and eligible charter schools, as well as other purposes, including reserving funds for school improvement and state activities, such as administrative costs (note that the reservation for school improvement may become a more significant factor with the requirement in ESSA that this reservation increases from 4 to 7 percent).
• Several states use alternative data approved by the U.S. Department of Education to redistribute allocations among districts with fewer than 20,000 residents.
• Districts have multiple years to use allocated funds.
• About 70 percent of Title I participating schools operate schoolwide programs and thus use funding to serve nonpoor students as well.⁴

Top

Alignment of Title I Formula-Eligible Population and Recipient Population

After states adjust the federal allocation of aid to their school districts, the districts are then responsible for allocating these designated funds to eligible schools, including private and charter schools. Districts complete this allocation process according to a set of guidelines in the Elementary and Secondary Education Act (ESEA). In general, a district must rank all its school attendance areas according to their poverty rate, and it must serve, in rank order, areas above 75 percent poverty. A school attendance area is the geographic area in which students who are normally assigned to a particular school live. After a district has served all its areas with a poverty rate above 75 percent, the district may serve schools with lower poverty rates. In short, not every formula-eligible child will be in a school that is allocated Title I funds. For further details about the district allocation of Title I funds to schools, see the Methodology for Allocating Federal Title I Funds section later in this chapter.

Many prior analyses of the Title I funding formulas have been based on counts of formula-eligible children used in the Title I federal allocations process. This count of formula-eligible children is the estimated number of 5- to 17-year-olds in poverty at the district level, along with counts (determined by administrative records) of Temporary Assistance for Needy Families (TANF) participants, foster children, and neglected and delinquent children. Schools enrolling at least 40 percent of students from low-income families can implement schoolwide programs, benefitting all students at the school, including those who are not poor.⁵  It is important to emphasize that this percentage of low-income students pertains to data on low-income students available to school authorities at the school level. It does not refer to the counts of formula-eligible children, which are available only at the district level and represent a very different statistic. In most cases, states use the percentage of children who are eligible for free or reduced-price lunch (FRPL) to determine distributions at the school level.

The use of FRPL data to allocate district funds to individual schools has raised some technical difficulties since FRPL data have been become less reliable proxies for student poverty rates. At the national level, the percentage of children who are eligible for FRPL is more than double the percentage of 5- to 17-year-olds who are formula eligible. In addition, FRPL participation may vary by school level. Riddle (2011) notes that districts often use FRPL data to determine student poverty rates, despite a disproportionate number of eligible high school students not being enrolled in the program. He found that districts disproportionately allocate Title I funds to elementary schools, at the expense of high school students who could also benefit from additional resources. Riddle explains that this is due to the allocation process for schools as well as districts’ autonomy to target the funds to particular school levels, generally favoring elementary schools. The National Assessment of Title I: Final Report also found that Title I funds disproportionately go to elementary schools, and nearly three-fourths (72 percent) of Title I participants in 2004–05 were in prekindergarten through grade 6.

In 2014, some 70 percent of Title I schools operated schoolwide programs. A letter from the U.S. Department of Education to chief state school officers on July 3, 2015, highlighted the advantages of and flexibilities in schoolwide programs and identified common misunderstandings about schoolwide programs.⁶ One of the less widely understood features of the Title I program is that for schoolwide programs, funds do not have to be used to serve only low-achieving students. The letter explained that, according to the law, “Title I funds may be used to upgrade an entire education program in a school and, in doing so, all students may benefit from the use of Title I funds. However, consistent with the purpose of Title I, the reason to upgrade the entire education program in a school is to improve the achievement of the lowest achieving students.” The scope of a schoolwide program substantially increases the number of Title I student recipients beyond those designated in the allocation legislation as the formula-eligible population.

The Title I formula-eligible population for FY 15 was 11.6 million (table 1.A). In contrast, the number of Title I student recipients, as reported by EDFacts, was more than twice that in school year (SY) 2014–15, at 25.0 million (table I.A). Nearly half of the nation’s 50.3 million public school students received assistance through Title I in SY 2014–15.⁷ This means that the amount of Title I funds allocated per formula-eligible child is typically more than double the amount of funds received per student recipient. The national average Title I allocation per formula-eligible child was $1,227 in FY 15 (table 1.A), compared with an average of $546 in Title I revenues per student recipient in SY 2014–15 (table I.A).

The differences in the Title I allocations per formula-eligible child and Title I revenues per student recipient varied by state. The differences ranged from $95 in Arizona (the Title I revenues per student recipient were $95 less than the allocation per formula-eligible child) to $2,008 in Vermont (the Title I revenues per student recipient were $2,008 less than the allocation per formula-eligible child (table I.A and table 1.A). Thus, the scope of the differences between the Title I allocations per formula-eligible child and Title I revenues per student recipient, and the asymmetric nature of these differences, affects the interpretation of the analyses in this report. Most students (95 percent) receiving Title I services do so through schoolwide programs (table I.A).

Top

Report Overview and Methods

The Executive Summary at the beginning of this report provides a summary of the study methodology, study limitations, and main findings of the study. The Introduction describes Title I allocations and the congressional mandate, and it includes a synopsis of the literature review and expert panel input that were used to develop an analytical framework for responding to the mandate. The Introduction also includes an overview of the four Title I grant formulas and a description of data sources used for the study.

The main body of the report is divided into seven chapters. Chapters 1 and 2 address the first five analytic tasks (tasks A through E) related to Title I allocations, as mandated by Congress (see the Analytic Tasks for Title I Formula Grant Report as Specified by the Every Student Succeeds Act [ESSA] textbox earlier in this chapter). Chapters 3 through 7 examine how provisions, such as number weighting and percentage weighting (tasks F and G), alone and in combination, impact the allocations per formula-eligible child. Since Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG) each have unique formulas, a separate series of tables was produced for each grant type to examine provisions unique to that formula: chapter 3 covers total Title I allocations; chapter 4 covers Basic Grant allocations; chapter 5 covers Concentration Grant allocations; chapter 6 covers Targeted Grant allocations; and chapter 7 covers EFIG allocations.

Formula provisions that are included in each grant’s mathematical formula, such as state per pupil expenditure (SPPE), hold harmless, and state minimum provisions, are analyzed separately in each of the chapters. Provisions that are unique to a grant, such as the 6,500 formula-eligible children or 15 percent formula-eligible children provisions (Concentration Grants), number and percentage weighting provisions (Targeted Grants and EFIG), and state effort and equity provisions (EFIG) are only analyzed in the relevant chapter(s). Since chapter 3 presents total Title I allocations, all provisions relevant to any of the four grants are included in the analysis.

Analyses presented throughout the text, figures, and tables of this report were computed based on unrounded data. Therefore, the reader may find that a calculation cited in the text or figure, such as a difference or a percentage change, may not be identical to the calculation obtained by using the rounded values shown in the accompanying tables. While the data labels on the figures have been rounded to whole numbers, the graphical presentation of these data is based on the unrounded estimates.

To understand the full impact of a formula computation using any of the specific provisions, it was necessary to also remove the hold harmless provision in combination with one or more of the other provisions. The hold harmless provision limits the amount of change a school district may have in its Title I allocation from one year to the next; thus, the hold harmless provision would mask the long-term impact of removing a provision by limiting the impact on some districts. For example, to determine the effect of number weighting and percentage weighting on the Targeted Grant and EFIG formulas (chapters 6 and 7), the hold harmless provision was removed in combination with both the number weighting and percentage weighting provisions (see exhibits A and B later in this chapter). Similarly, the state minimum provision may mask the effects of some provision removals on certain districts, particularly small rural districts. This provision was also removed in some formula analyses for illustrative purposes.

The appendixes of the report contain the list of the Title I expert panel members (appendix A), documentation for the American Community Survey-Comparable Wage Index (ACS-CWI) (appendix B), and the analytic tables (appendix C). In addition to the analytic tables included in appendix C, a district table is available online. The online district table contains 19 different allocation analyses (including the actual Title I FY 15 distribution) as shown in chapters 3 through 7. These analyses show the four Title I grant formulas existing under current law as well as a variety of formulas that may be of interest to different policymaking constituencies. The online district table also includes the locale-based ACS-CWI estimates associated with each district.

The variations on formulas analyzed in this report are based on recommendations from the Title I Study Expert Panel. It should be emphasized that there are many more formula analyses that could have been constructed from the array of potential options. Assuming only the presence or absence of existing formula provisions, there are 254 possible combinations. Moreover, different SPPE percentages (e.g., 50 percent instead of 40 percent or an 85 percent minimum instead of an 80 percent minimum) could have been considered. There are additional formula criteria, such as eligibility thresholds for Basic Grants, Targeted Grants, and EFIG, that were not explored as formula analyses in this report but could have been considered. In addition, there are other weights that could have been considered in both the Targeted Grant and EFIG formulas, and the minimums and maximums for the state effort provision in EFIG could have been adjusted. Thus, it is important to emphasize that the formulas analyzed in this report were intended to be illustrative rather than exhaustive. It is anticipated that the differences in allocations per formula-eligible child identified in this report will be further assessed by policymaking groups and research communities to determine the implications for education adequacy for economically disadvantaged children in large and small school districts in different areas of the country.

Top

Review of Studies on Title I Allocations

Much of the academic research on Title I has focused on how various features of the formulas affect an equitable distribution of funds. The literature on whether the federal funding formulas align with the law’s intent have focused on how (1) weighted eligibility favors large school districts; (2) state adjustments, primarily the state per pupil expenditure (SPPE) provision, favor wealthier states; and (3) various other adjustments, such as the state minimum and hold harmless provisions, diffuse the focus of the funding on children in poverty. Literature on the receipt of funds is more limited than literature on the allocations. To some extent, this may be because counts of Title I recipients at the school district level have only become available in national databases in recent years.

U.S. Department of Education (ED) studies on Title I have primarily focused on the implementation of Title I, such as evaluation studies of program effectiveness, rather than on the actual formulas. One of ED’s major Title I studies was the National Assessment of Title I: Final Report (2007), which was designed to evaluate the implementation and impact of the program. This report examined such topics as state implementation of accountability and teacher quality; private school student participation in federal programs; closing the reading gap for 3rd and 5th graders; reading comprehension of 5th graders; and early elementary mathematics curricula. The study found that most Title I funds were used for instruction (73 percent) and instructional support (16 percent) in 2004–05. Also, the study found that high-poverty schools received a higher percentage of Title I funds than other schools. For example, 38 percent of funding went to schools with over 75 percent of students living in poverty (as measured by free and reduced-price lunch data), and 76 percent went to schools with over 50 percent of students living in poverty. The study also found that the targeting of Title I funds to high-poverty districts changed little between 1997–98 and 2004–05, despite legislation to target more funds to high-poverty districts by increasing the share of the funds through Targeted Grants and Education Finance Incentive Grants (EFIG).⁸

Title I Accountability and School Improvement From 2001 to 2004 (2006) examined the implementation of accountability and school improvement requirements under Title I of the No Child Left Behind Act (NCLB) from 2001–02 through 2003–04. The report included findings on identification of schools for improvement, interventions implemented at schools identified for improvement, and public school choice and supplemental education services under Title I.⁹ A more recent study of implementation, State and Local Implementation of the No Child Left Behind Act, Volume IX—Accountability Under NCLB: Final Report (2010), provided information on state, district, and school implementation of the NCLB provisions concerning accountability and school improvement. This study was based on data collected in 2004–05 and 2006–07, with a specific focus on the implementation of these programs in Title I schools.¹⁰

The Congressional Research Service (CRS) prepares a regular series of reports on the Title I grants. Some of the reports primarily focus on highlights of the most recent state allocations, such as FY2016 State Grants Under Title I-A of the Elementary and Secondary Education Act (ESEA) (2017).¹¹ Other studies look at the formula provisions in a more detailed way, such as Allocation of Funds Under Title I-A of the Elementary and Secondary Education Act (2016).¹² This study also included a discussion of how districts allocate funds to their schools. Another recent CRS report, History of the ESEA Title I-A Formulas (2017), reviewed changes in the allocation formulas over time, with a detailed description of revisions to the formulas and some background on the legislative debate regarding formula changes.¹³

Some academic and private research studies have had a strong focus on the formula itself, frequently providing critical perspectives on the equity of the formula process. Most of the key Title I features, such as the SPPE, state minimum, number and percentage weighting, and state effort provisions have been subject to detailed analyses. All four grant formulas multiply the eligible child count by the adjusted SPPE. The initial intent of the SPPE provision was to provide an estimate of the cost of education in a state. However, some research has noted that rather than representing the cost of providing an education, the use of the SPPE provision tends to provide more money to states that are already wealthy (Miller 2009; Liu 2008; Roza, Miller, and Hill 2005), further exacerbating inequities (Hanna 2015).

The state effort provision in the EFIG formula is based on the ratio of a state’s relative share of national education expenditures to its relative share of national personal income. Some research on this provision has found that it rewarded states that already spend a larger percentage of income on education (Baker et al. 2013; Liu 2008). The EFIG formula does limit the state effort provision to a range of 10 percentage points (0.95 to 1.05) to constrain the potential impact. Based on the FY 15 data analyzed for this report, if this provision were unconstrained, the range would vary from 0.72 (in Utah) to 1.53 (in New York). However, Baker et al. (2013) found that after fully adjusting for regional differences, Title I funding patterns disproportionately favor rural school districts in low-cost-of-living states.

Both Targeted Grants and EFIG use weighted counts of eligible children (the number and percentage weighting provisions) to provide more money on a per child basis to districts with higher student poverty counts or rates. Riddle (2015) and Gordon (2016) have argued that these weights seem to favor large districts, since weighting is currently based on the maximum count obtained from both a number exceeding certain absolute counts and an eligibility percentage exceeding certain intervals. Thus, certain large districts get larger allocations per formula-eligible child due to their relatively large numbers of formula-eligible children, despite having district-level poverty rates that may be below the national average (Liu 2008). Meanwhile, districts with larger concentrations of poverty but lower counts of formula-eligible children may receive less funding per child (Liu 2008).

Certain features of the Title I formulas potentially affect the distribution of funds by focusing on factors not strictly related to eligible children. These features include the state minimum and hold harmless provisions and differences between total authorization and total allocations. The state minimum provision is designed to ensure that each state receives enough funding to maintain a program of sufficient size to make the administrative effort worthwhile. Some research has argued that the state minimum provision leads to misalignment of the law’s intent and the funding allocation (Miller 2009). Other research has noted that since smaller states have smaller concentrations of children in poverty, the state minimum provision reduces “targeting of funds to concentrations of children in poverty” (Miller 2009, p. 11). Another factor that affects the alignment of the funding to formula-eligible children is the hold harmless provision. This provision limits the reduction of funding levels from year to year and protects the status quo (Gordon 2016). The outcomes of both provisions of the formula may contribute to the disparities in allocations per formula-eligible child across both districts and states (Gordon 2016; Liu 2008). Also, Congress has not appropriated a level of funding that meets the authorization funding level, which would be the sum of all statutory formula allocations plus the state minimums and hold harmless amounts. The final allocation requires that these authorization amounts be reduced through the ratable reduction rules to meet the appropriated funds available.¹⁴ Minimums and hold harmless amounts are allocated first and then the ratable reduction rules apply to the remaining districts’ allocations.

Top

Integration of Expert Panel Recommendations Into Report Design

Although a review of the literature provided valuable input during the initial development of the report, it became apparent that more targeted advice was needed due to the complexities of the Title I funding formulas, the range of potential responses to the mandate, and the impact of state adjustments to school district and school allocations. To obtain external guidance on how to best respond to the congressional mandate, NCES convened a panel of recognized experts on school finances and Title I to review the framework of this study, including the datasets and analytic approaches (see the list of panelists in appendix A). The Title I expert panel met three times, which was supplemented by additional informal communications and written recommendations. After the final meeting, the panel was given the opportunity to review the proposed structure of the report and a draft of preliminary findings. Finally, the panel was asked to provide oral and written feedback on the main analytic points and the most effective way to communicate these findings.

The panel reached consensus that

• The Title I allocations data should be the primary focus of the report and the receipts data should be presented only as a comparison;
• The report should analyze the Title I formula based on the formula-eligible population;
• The four Title I grant formulas should be examined separately, showing the impact of key components of the formulas (e.g., state minimum and hold harmless provisions);
• Allocations using different specifications should be presented for each major aspect of the Title I formulas, such as the state per pupil expenditure (SPPE), state minimum, and hold harmless provisions;
• The American Community Survey-Comparable Wage Index (ACS-CWI) cost of living adjustment should be used to compare purchasing power of funding across states and geographic locales;
• The U.S. Census Bureau’s Supplemental Poverty Measure should be described in the report, but the current Official Poverty Measure should be used in the analysis;
• State-level data should be analyzed both within and across states;
• Select data on the largest districts should appear in the report; 
• Districts should be the lowest level of analysis;
• The report should demonstrate how districts of varying sizes, including the largest and smallest, are impacted by the formulas;
• A data file with all districts should be prepared as a web-based supplement;
• The report should include an executive summary; and
• Graphs should be used extensively in the report to emphasize the findings.

Among the key outcomes from the panel was a recommendation to review the potential analytic impact of adjusting the funding for differences in local costs of living. The panel recognized that a given level of funding would purchase less goods and services in a high-cost area than a low-cost area. Although this concept is not a part of the current formulas, the panel felt that this type of analysis could provide useful insight into the relative importance of Title I funds for districts in various parts of the country. After further analysis in conjunction with additional data development by the Census Bureau, the ACS-CWI was selected for use in this report, per the panel’s recommendation. The ACS-CWI is a measure of the systematic regional variations in the salaries of college graduates who are not educators. It can be used by researchers to adjust district-level finance data at different levels to make better comparisons across geographic areas. Appendix B of this report contains a more complete description of the ACS-CWI and how it is constructed. Analyses of the cost-adjusted allocations (using the ACS-CWI) are discussed in each of the chapters of the report.

The panel recognized the need to approach the congressional mandate by presenting a select number of models of the Title I allocations using a range of formula specifications. Because of the large number of possible formula computations, the panel agreed that certain key adjustments would best address the congressional mandate. The panel conducted detailed discussions and multiple rounds of review to select the formula specifications that would provide relevant information for policymakers. There was consensus on the selection of formula specifications presented in this report, including the removal of the hold harmless provision. Retaining the hold harmless provision mitigates reductions in the allocations for a particular year and thus makes the long-term results of the formula analyses difficult to interpret. The panel also made recommendations on the types of breakdowns to be featured throughout the report, including state, district locale, district poverty quarter, and district population size.

Several panel experts noted the importance of clarifying the lack of a specific connection between the formula-eligible child count and the students who actually receive funds. The experts stressed that, although the Title I allocation process is intended to target funds to high-poverty schools, not all poor students receive Title I funds. For example, high-achieving low-income students may not receive Title I services, or some schools with poor students may not receive funding at all. The panel noted the potential confusion over the fact that the Title I formula-eligible counts are a mechanism for distributing funds to high-need districts rather than a determination of individual eligibility. The panel also noted the importance of emphasizing that local discretion affects the receipt of funding at the school level. This information was incorporated into the report.

Several experts discussed the need for an economy of scale factor for adjusting expenditures per student, which is separate from a geographic cost adjustment. The economy of scale factor would adjust for the fact that districts with fewer students may be relatively more expensive to operate. One expert recommended utilizing a threshold of districts below a certain size to show different education costs. Although there was general acceptance of the relevance of the economy of scale issue, there was no consensus on how to assemble such an index within the context of this study. The economy of scale issue can be considered relevant to the interpretation of the results for small states and districts; however, such a factor was not analyzed in this report due to the lack of a suitable methodology. (See the Expenditures per Student by School District Locale and Size textbox later in this chapter for more information about education costs in smaller and larger districts.)

Top

Methodology for Allocating Federal Title I Funds

In contrast to competitive grant processes used to distribute funds in many federal education programs, each of the four Title I grants uses a formula grant process. In a formula grant process, the grants are calculated through a mathematical formula based on a set of criteria determined by legislation and regulation. This methodology section is designed to introduce the Title I allocation process so that the different formulas analyzed in this report may be better interpreted and evaluated. A more complete discussion beyond this overview is contained in Allocating Grants for Title I (2016).¹⁵ In addition, this methodology section contains a review of the data used in the allocations and a summary of the American Community Survey-Comparable Wage Index (ACS-CWI).

Overview of Title I funding formulas

The federal allocation of Title I funds for Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG) involves a series of distinct steps (figure I.1). First, the number of formula-eligible children must be computed to determine whether school districts are eligible for Title I funds. These child counts serve as a basis for subsequent computations. The next step of the process is to determine the authorization amounts for eligible districts, which are the amounts determined under each of the four grants by the formulas in the Title I legislation. Then, the authorization amounts for districts are adjusted proportionately to match the actual amount of funding appropriated by Congress. The result of this computation is the federal final allocation.

The federal government sums the amount of Title I funds allocated to each district within a state and provides this amount to the state education agency. States are given some latitude to adjust the district Title I allocations. Finally, districts allocate the funds to the schools within their district using guidance based on regulations. This report analyzes federal allocations to districts, not district receipts of Title I funds from their state. It is important to note that the amount of Title I funds used by a district in a given year will typically not match its allocation for that fiscal year (see the Alignment of Title I Allocations and Revenue section earlier in this chapter).

---

Figure I.1. The Title I Funding Process

Formula-Eligibility Count

A school district’s Title I allocation is based on the number of formula-eligible children living within the geographic boundary of the district. In 2015, there were 13,584 districts in the United States. For each district, the number of formula-eligible children is calculated as:

Adjustment by State per Pupil Expenditure (SPPE)

The cost of educating a child differs from state to state. This cost is reflected in the state per pupil expenditure (SPPE). An SPPE is calculated for each state as:

Congress has determined that school districts should receive no more than 40 additional cents on the dollar for the education services they provide to disadvantaged children. Therefore, each state’s SPPE is multiplied by 0.40.

Some states’ SPPEs vary substantially from the U.S. average. Districts in these states have disproportionately high or low SPPEs relative to the U.S. average. To compensate for this variation, Title I legislation bounds the SPPE value.

Adjustment of SPPEs is an iterative process and is not complete until all states have an SPPE that falls within the legislated bounds of the U.S. average.

Authorization Amount for Each Grant Type

Title I funds are distributed through four grant types. School districts are eligible to receive each grant type for which they meet the eligibility criteria:

• Basic Grant: must have at least 10 formula-eligible children, and that number must be at least 2 percent of the district’s 5- to 17-year-old population
• Concentration Grant: must meet the Basic Grant eligibility requirements and have more than 6,500 formula-eligible children or more than 15 percent of the district’s 5- to 17-year-old population must be formula eligible
• Targeted Grant: must have at least 10 formula-eligible children, and that number must be at least 5 percent of the district’s 5- to 17-year-old population
• Education Finance Incentive Grant (EFIG): must have at least 10 formula-eligible children, and that number must be at least 5 percent of the district’s 5- to 17-year-old population

For Basic and Concentration Grants, an authorization amount is calculated for each district as follows:

For Targeted Grants, the number of formula-eligible children is weighted by the number or percentage of formula-eligible children. The district receives the larger of these two computations.

EFIG allocations differ from the first three grant types in that they are allocated in two stages: first at the state level and then, within each state, at the district level. Funds are then distributed to schools in each state in proportion with the district’s weighted count of formula-eligible students. Additional adjustments are made through the effort and equity factors. The effort factor benefits districts in states that spend a greater percentage of per capita income on education. The equity factor benefits districts in states that have a low disparity between high-spending and low-spending districts.

Ratable Reduction to Determine Federal Allocation

Every year, Congress appropriates Title I funds. In 2015, the federal appropriation for the four Title I grants ($14.3 billion) was less than the sum of the authorization amounts for the four grants ($181.7 billion). Thus, as in previous years, districts’ authorization amounts were reduced in proportion to the federal appropriation.

The result of this process is an initial allocation amount for each school district.

Hold Harmless Provision

Congress has determined that each school district cannot incur a loss of more than 15 percent of the preceding year’s funds. This is referred to as the hold harmless provision. Each district’s allocations are adjusted using the following process until all districts meet the hold harmless provision.

The same process is used for Basic, Concentration, and Targeted Grants.

State Minimum Provision

The school district allocation amount for a specific grant type is summed at the state level.

If the total allocation for a state is less than the state minimum allocation, the state receives the state minimum allocation. The state minimum provision is applied separately for each of the four grant types. In 2015, 13 states received the state minimum allocation for some or all grant types.

Since EFIG allocations are done at the state level, allocations are adjusted until all states have an allocation amount that is above the state minimum allocation. In some cases, a state may not receive enough funds to satisfy the hold harmless provision for all districts.

---

Top

Formula-eligibility count

To qualify for a Title I grant, districts must meet a minimum Title I formula-eligible population count or percentage (i.e., a certain number or percentage of their 5- to 17-year-olds must be considered eligible for Title I grant funds). To determine the number of Title I formula-eligible children for a district, the U.S. Department of Education (ED) adds (1) the number of children ages 5–17 who live in families with incomes below the national poverty level; (2) the number of children who receive Temporary Assistance for Needy Families (TANF); (3) the number of neglected and delinquent children in locally funded institutions;¹⁷ and (4) the number of foster children. Although children may be included in more than one of these categories, the count of formula-eligible children for allocation purposes is the sum of these four categories (i.e., some children may be counted in more than one qualifying group).¹⁸

The count of children ages 5–17 in poverty is estimated at the district level through the Small Area Income and Poverty Estimates (SAIPE) program of the U.S. Census Bureau. These estimates combine data from administrative records, postcensal population estimates, and the decennial census with direct estimates from the American Community Survey to provide consistent single-year estimates.¹⁹ The official poverty definition is determined by the U.S. Census Bureau’s Official Poverty Measure, which is explained in the Official Poverty Measure and Supplemental Poverty Measure textbox later in this chapter.

Top

---

Figure I.2. Current and instruction expenditures per student in public elementary and secondary schools, by school district characteristics: 2014–15

¹ Population size is based on the number of 5- to 17-year-old children in a district.
SOURCE: U.S. Department of Education, Office of Elementary and Secondary Education, Title I Allocation File, 2015; National Center for Education Statistics, Common Core of Data (CCD), “Local Education Agency (School District) Finance Survey (F33),” 2014–15.

---

Top

Qualifying for specific Title I grants

Basic Grants
To qualify for a Basic Grant, a district must have at least 10 formula-eligible children ages 5–17 (each meeting at least one of the four eligibility criteria previously listed), and that number must exceed 2 percent of the district’s 5- to 17-year-old population.

Concentration Grants
To qualify for a Concentration Grant, a district must have more than 6,500 formula-eligible children ages 5–17 (each meeting at least one of the four eligibility criteria previously listed), or more than 15 percent of the district’s 5- to 17-year-old population must be formula eligible.

Targeted Grants
To qualify for a Targeted Grant, a district must have at least 10 formula-eligible children ages 5–17 (each meeting at least one of the four eligibility criteria previously listed), and that number must represent at least 5 percent of the district’s 5- to 17-year-old population. For a district that is qualified to receive a Targeted Grant, its formula-eligible child count is adjusted using weights that increase as the number or percentage of formula-eligible children increases. The formula-eligible child count is multiplied by the weight for the district based on either its number-based or percentage-based group. For example, to qualify for the largest proportion of funds under the Targeted Grant weighting system, a district must have at least 35,515 formula-eligible children, or at least 38.24 percent of its 5- to 17-year-old population must be formula eligible (see exhibits A and B later in this chapter). In this step, both the number weighting and the percentage weighting amounts for each eligible district are computed. The district receives the larger of these two computations. It is important to note that this weighting system is incremental—that is, a district with 35,515 formula-eligible children, for example, does not multiply each child by a weighting factor of 3.0. Rather, the number of formula-eligible children above 35,514 (the threshold for the fifth category) are weighted by 3.0, the number of formula-eligible children from 7,852 and 35,514 (the threshold for the fourth category) are weighted by 2.5, and so on.

Education Finance Incentive Grants (EFIG)
To qualify for an EFIG, a district must have at least 10 formula-eligible children ages 5–17 (each meeting at least one of the four eligibility criteria previously listed), and that number must represent at least 5 percent of the district’s 5- to 17-year-old population. Weighted eligibility for EFIG is calculated in the same manner as it is for Targeted Grants.

Note that Puerto Rico is treated as a state under all Title I grants.

Exhibit A. Number weighting Targeted Grant eligibility criteria

Weighting factor	Number of Targeted Grant formula-eligible children ages 5–17
1	10 to 691
1.5	692 to 2,262
2	2,263 to 7,851
2.5	7,852 to 35,514
3	> 35,514

Exhibit B. Percentage weighting Targeted Grant eligibility criteria

Weighting factor	Percentage of the 5- to 17-year-old population who are Targeted Grant formula eligible
1.00	5 percent to less than 15.58 percent
1.75	>= 15.58 percent to less than 22.11 percent
2.50	>=22.11 percent to less than 30.16 percent
3.25	>=30.16 percent to less than 38.24 percent
4.00	>=38.24 percent

Top

Adjusted state per pupil expenditure (SPPE)

The per pupil costs of education differ from state to state, so the federal government does not give every state the same amount of money per formula-eligible child. Instead, it provides a distribution of Title I funds based on the state’s average per pupil expenditure (SPPE), under the assumption that the SPPE is an appropriate measure of the cost of educating a child in that state. The SPPE for each district within a state is the state average. To refine the SPPE calculation to reflect only the state and local education costs, several federal revenue items from the current expenditure numerator are removed before calculating the SPPE. While not all federal revenues are removed, key large items such as Title I and the Department of Agriculture’s National School Lunch Program amounts are removed—that is, federal revenues that may have a substantive effect on current expenditures are removed. The denominator of the SPPE calculation is the number of public school students in attendance (average daily attendance) as defined by state law. Table I.C shows the SPPE by state overall and for each of the four grants.

Since Title I is a supplemental program, Congress specifies that districts should receive 40 additional cents on the dollar for the additional education services they provide to disadvantaged children. Thus, the SPPE is multiplied by 0.40 to determine the amount a district is entitled to receive per formula-eligible child. This amount is the adjusted SPPE for the district. However, some states’ SPPEs vary substantially from the U.S. average SPPE, resulting in districts in those states having disproportionately high or low adjusted SPPEs relative to the U.S. average SPPE. To compensate for this, Title I legislation provides the following rules for Basic Grants, Concentration Grants, and Targeted Grants:

• Minimum SPPE: A state’s adjusted SPPE cannot be less than 32 percent (i.e., 80 percent of 40 percent) of the U.S. average SPPE.
• Maximum SPPE: A state’s adjusted SPPE cannot be more than 48 percent (i.e., 120 percent of 40 percent) of the U.S. average SPPE.

For EFIG, the formula is the same except that 34 percent (i.e., 85 percent of 40 percent) of the U.S. average SPPE is used as the minimum and 46 percent (i.e., 115 percent of 40 percent) of the U.S. average SPPE is used as the maximum. Figure I.3 and table I.D show the states that receive the minimum and maximum SPPE values for allocations.

---

Figure I.3. States receiving various state per pupil expenditure (SPPE) values in Title I, Part A allocations, by grant type: 2015

NOTE: EFIG stands for Education Finance Incentive Grants.
SOURCE: U.S. Department of Education, Office of Elementary and Secondary Education, Title I Allocation File, 2015; National Center for Education Statistics, Common Core of Data (CCD), “Local Education Agency Universe Survey,” 2013–14, Provisional Version 1a.

---

Top

Calculating the authorization amount for grants

The authorization amount is the amount that a district (or state, for EFIG) is eligible to receive based on the formula for that grant. Each grant has a different formula for the authorization amount.

Basic Grant authorization
The authorization amount for a qualifying district is its Basic Grant eligibility count multiplied by the adjusted SPPE for the state in which the district is located.

Concentration Grant authorization
The authorization amount for a qualifying district is its Concentration Grant eligibility count multiplied by the adjusted SPPE for the state in which the district is located.

Targeted Grant authorization
The authorization amount for a qualifying district is its Targeted Grant weighted eligibility count multiplied by the adjusted SPPE for the state in which the district is located.

Weighted eligibility count
The weighted eligibility count is designed to provide larger proportions of Targeted Grant funding to districts with the greatest needs and costs—that is, districts with large numbers or large proportions of formula-eligible children. The weighting system segments a district’s “need” (as measured either by the number of formula-eligible children ages 5–17 or by the percentage of its 5- to 17-year-old population that is formula eligible) into five categories and assigns a different weighting factor to each segment (see exhibits A and B earlier in this chapter).

EFIG authorization
Authorization amounts for EFIG are calculated differently than for Basic, Concentration, and Targeted Grants. The authorization amount for an EFIG to a state is the sum of that state’s weighted count of formula-eligible children (see exhibits A and B earlier in this chapter) multiplied by its EFIG-adjusted SPPE, which is multiplied by its effort factor and its equity factor. Then, each district in a state receives a portion of its state’s EFIG allocation. The district amount is calculated based on the district’s weighted eligibility after the state’s allocation amount is determined.

Effort factor
EFIG are designed to benefit districts in states that spend a greater percentage of per capita income (PCI) on elementary and secondary education.²² This ratio is subsequently compared with the ratio of the SPPE to the national per pupil expenditure. Title I refers to this comparison as the effort factor by dividing SPPE by PCI. If a state has more income than the national average income but spends a smaller share of its money on education than the national average, its final effort factor will be smaller than 1. On the other hand, if a state has less income than the national average but spends a larger share of its money on education than the national average, its effort factor will be greater than 1. States that spend a larger percentage of their resources on education receive more EFIG funding than states that spend a smaller percentage (even if these states are spending larger amounts per student). According to legislation, the effort factor must be between 0.95 and 1.05.²³

Equity factor
EFIG funding is also designed to benefit districts in states that have less disparity between high-spending and low-spending districts. Instead of using the SPPE, the equity factor measures the average difference within a state between each district’s current expenditure per pupil (CEPP) and the state average CEPP. This district-level expenditure is based on a different survey with different definitions than those used for the SPPE. The CEPP includes all current expenditures, including instruction, support services, food services, and enterprise operations. In contrast to the SPPE, there are no exclusions for federal programs. For further information on the current expenditure definition used for this measure, see the U.S. Census Bureau’s 2013 Annual Survey of School System Finances [F-33]. The equity factor is based on a pupil-weighted coefficient of variation (CV)²⁴ between the state average CEPP and the CEPPs for all districts within the state that enroll more than 200 students. Prior to calculating the CEPP and CV, the denominator is increased by adding 40 percent of EFIG eligibility.

The formula is 1.3 minus the CV, which is designed to benefit states with low CVs (low disparity) of CEPP.²⁵ In FY 15, the state CVs ranged from a minimum of 0.06 to a maximum of 0.23. The CVs of 32 states are altered by excluding those school districts with less than or equal to 200 students from the CV computations, as determined by regulation.

Allocation and authorization amounts

The amount of funding that is allocated to a district for Basic, Concentration, and Targeted Grants, or allocated to a state for EFIG, is its allocation amount. This amount is different than the authorization amount (i.e., the amount that the district is authorized to receive) because Congress does not appropriate funds equal to the total of all local and state authorized amounts. The total congressional appropriation for each of the four grants has always been less than the total authorization amount.

The amount each state/district receives (or the final allocation) is based on the proportion of the total authorized Title I funds that are appropriated by Congress. This proportioning process, known as “ratable reduction,” guarantees each district will receive the same share of the appropriation as it has of the authorization; however, other provisions (hold harmless, state minimum, etc.) that provide for a larger allocation to some jurisdictions take precedence over ratable reduction rules.

Additional legislative provisions: State minimum and hold harmless²⁶

A district’s allocation amount is its share of the authorization amount multiplied by the appropriation amount, unless state minimum and/or hold harmless provisions apply.

State minimum provision
The state minimum provision specifies that no state should receive less than a minimum threshold of funding for each of the four grants. This provision is sometimes referred to as the small-state minimum provision, as smaller states typically receive the minimum allocation. Since there is no accepted way of determining the minimum threshold of funding to operate a Title I program, the state minimum allocation is based on legislatively determined factors (see figure I.4 and table I.1). The state minimum determination relates to population size rather than geographic size (e.g., Alaska receives the state minimum allocation for three of the four grant formulas, and Connecticut does not receive the state minimum allocation for any of the grant formulas).

---

Figure I.4. States receiving state minimum allocation under Title I, Part A, by grant type: 2015

State	Grant Type
	Basic Grant	Concentration Grant	Targeted Grant	Education Finance Incentive Grant (EFIG)
North Dakota	✓	✓	✓	✓
South Dakota	✓	✓	✓	✓
Vermont	✓	✓	✓	✓
Alaska	✓		✓	✓
District of Columbia	✓		✓	✓
New Hampshire	✓		✓	✓
Wyoming	✓		✓	✓
Delaware			✓	✓
Maine			✓	✓
Montana			✓	✓
Hawaii			✓
Idaho			✓
Rhode Island			✓

SOURCE: U.S. Department of Education, Office of Elementary and Secondary Education, Title I Allocation File, 2015; National Center for Education Statistics, Common Core of Data (CCD), “Local Education Agency Universe Survey,” 2013–14, Provisional Version 1a.

---

Table I.1. Calculation of the state minimum for Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants

Steps	Basic Grants	Concentration Grants	Targeted Grants	Education Finance Incentive Grants
Step 1	Calculate current year total U.S. appropriations (Year 2001) Calculate prior year total U.S. appropriations (Year Y)
Step 2	If Year 2001 < Year Y then Sum (0.25 percent of Year 2001) + (0.35 percent of Year 1 - Year Y). If Year 2001 >= Year Y then calculate 0.25 percent of Year 2001.		0.35 percent of Year Y
Step 3	Calculate 150 percent of the national per pupil payment (NAPP) in Year Y times the state total number of formula-eligible children (For Concentration Grants, 150% of NAPP cannot be less than $340,000)
Step 4	Average steps 2 and 3
Final state minimum	The state receives the lesser of either step 2 or 4

---

If the sum of district allocations for a state is less than the state minimum allocation for a specific grant, that state receives the state minimum allocation. When this occurs, the entire schedule of allocations for all districts must be recalculated, since the total allocation is fixed and some states are receiving more than their initial allotment. For this recalculation, the allocation amounts for districts in states qualifying for the state minimum allocation are calculated before the allocation amounts for districts in states not eligible for the state minimum allocation.

For Basic, Concentration, and Targeted Grants, the allocation amounts for districts in states not eligible for the state minimum allocation are determined by ratably reducing the total appropriation amounts to the amounts of funds remaining from the original appropriation after setting aside both (a) the amount required for state minimum allocations and (b) the amount to cover all district hold harmless entitlements. The process may be iterative when setting aside state minimum or hold harmless allocation amounts because other states may reach state minimums or other districts may fall below hold harmless amounts due to ratable reductions in each iteration. States that fall to minimum values during this process are calculated separately from further iterative computations.

All district allocations for EFIG, regardless of whether they are in states receiving the minimum allocation, are determined within states using a district ratable reduction process. After the Department of Education (ED) has reviewed the allocations, the allocation distributions are made available to the states for their use. Although states may choose to redistribute their small-district (i.e., districts with fewer than 20,000 total residents) allocations, they must use an ED-approved poverty-related measure (such as free and reduced-price lunch) for this redistribution. Many states do not choose to make such adjustments. States must use ED’s allocations for all districts with a resident population of more than 20,000.

Hold harmless provision
The hold harmless provision ensures that a district does not incur a loss of more than 15 percent of its Title I funds from the preceding fiscal year because of a decline in its count of formula-eligible children.

Top

Data description

The datasets used for this study are the actual data used to allocate federal funds for Title I in FY 15, the most recent fiscal year at the time of the congressional mandate. Similar to the process used in other years, the FY 15 Title I district allocations were based on several data files from various organizations:

• FY 13 school district finance data (U.S. Census Bureau, 2013 Annual Survey of School System Finances [F-33])
• FY 13 state per pupil expenditure data (National Center for Education Statistics [NCES], National Public Education Financial Survey)
• 2011, 2012, and 2013 per capita income data (Bureau of Economic Analysis)

In addition to these finance data, the allocation formulas use a count of the Title I formula-eligible children. This count of formula-eligible children is derived from a total of the following:
(1) estimates of district poverty counts (for children ages 5–17); (2) TANF participants; (3) foster child counts; and (4) neglected and delinquent child counts.

The district poverty counts are from the U.S. Census Bureau’s SAIPE program. The other child counts used in the formula-eligible population are collected at the district level by ED’s Office of Elementary and Secondary Education and based on data compiled by state education agencies. When possible, the counts at the district level were matched to the SAIPE data. However, for states where data cannot be matched to the SAIPE data, county-level datasets were compiled. When the TANF participant, foster child, and neglected or delinquent child counts were provided at the county level, NCES prorated the county counts to districts using percentage distributions from the SAIPE data.

The school district finance data (F-33) are only used for districts that are included in the SAIPE dataset. Title I legislation requires that New York City and Hawaii each receive funding as five separate counties rather than as one large school district. As a result, their five counties are summed to one subtotal and then merged with F-33. State CVs for current expenditures per pupil are then calculated.

Geographic cost index: American Community Survey-Comparable Wage Index (ACS-CWI)

In response to the recommendations of the expert panel, the analyses of the grant allocations per formula-eligible child were examined in the context of a local cost adjustment. The cost adjustment was intended to enable a comparison of the differences in the purchasing power of the federal allocations in relatively low- and high-cost areas. The geographic cost index adjusts for differences in the purchasing power of education funding among districts so that funding comparisons among districts can be based on real education resources. Even when allocations are similar, districts with high local costs are unable to purchase as many real resources for each expenditure dollar as districts where local costs are lower. The geographic cost index is designed to provide a cost adjustment that considers how much higher or lower the local costs are in one jurisdiction compared with another.

The American Community Survey-Comparable Wage Index (ACS-CWI) is the geographic cost index used in this report. The ACS-CWI is designed to identify geographic variation in wages for college-educated workers outside of the education field after controlling for job-related and demographic characteristics. The underlying concept of the ACS-CWI is that highly skilled workers demand higher wages in areas where the cost of living is high or where desirable local amenities are available. This methodology assumes that it is possible to measure most of the geographic variation in the cost of hiring teachers and other educators by observing systematic regional variations in the earnings of comparable workers who are not educators.²⁷

The ACS-CWI was developed based on a special tabulation of restricted-use data from the three most recent waves of the ACS. The ACS, which is compiled annually by the U.S. Census Bureau, has replaced the decennial census as the primary source of detailed demographic information about the U.S. population. For more information about the ACS-CWI, including the strengths and weaknesses, see appendix B.

Top

Key Concepts and Definitions

The allocated amount is the amount of funding that is allocated to a district for Basic, Concentration, and Targeted Grants or allocated to a state for Education Finance Incentive Grants.

The authorized amount is the amount that the district is authorized by Congress to receive. Congress does not appropriate funds equal to the total of all local and state authorized amounts. The total congressional appropriation for each of the four grants has always been less than the total authorization amount.

Basic Grants are the largest component of Title I funding ($6.4 billion in fiscal year 2015 [FY 15]) and serve the largest number of districts. Basic Grants provide funds to districts in which the number of formula-eligible children is at least 10 and exceeds 2 percent of the district’s 5- to 17-year-old population.

Concentration Grants are the smallest of the four grants ($1.3 billion in FY 15). They provide additional funds to districts with relatively large populations of low-income and disadvantaged children and are available to districts in which the number of formula-eligible children exceeds 6,500 or 15 percent of the district’s 5- to 17-year-old population.

Education Finance Incentive Grants (EFIG) ($3.3 billion in FY 15) are allocated to states to provide districts with additional funding for low-income and disadvantaged children. The EFIG formula includes both a state effort provision (the measure of state effort to provide financial support compared with its relative wealth) and a state equity provision (the degree to which education expenditures within a state are equalized). EFIG provide funds to districts in which the number of formula-eligible children is at least 10 and at least 5 percent of the district’s 5- to 17-year-old population.

The final allocation is the amount each state/district receives based on the proportion of the total authorized Title I funds that are appropriated by Congress in that year. This is the distribution of Title I funds based on the current formulas.

Formula-eligible children are 5- to 17-year-old children in families living in poverty, children who receive Temporary Assistance for Needy Families (TANF), neglected and delinquent children, and foster children.

Formula-eligibility criteria refer to legislative requirements that districts have a minimum number or minimum percentage of formula-eligible children within their district to be eligible for a specific grant. Note that districts can receive grants through the hold harmless provision even if they do not meet the formula-eligibility criteria. 

The hold harmless provision limits the size of a decrease that a district may have in its grant allocation from one year to the next. The hold harmless provision ensures that a district does not incur a loss of more than 15 percent of its Title I funds from the preceding fiscal year because of a decline in its count of formula-eligible children.

Ratable reduction is the proportioning process that guarantees each district will receive the same share of the congressional appropriation as it has of the authorized amount, unless some other provision (state minimum, hold harmless, etc.) provides a larger allocation.

The state minimum provision is applied to all four grants; it is designed to ensure that each state receives enough funding to maintain a program of sufficient size to make the administrative effort worthwhile. The state minimum provision provides that no state may receive less than a stipulated percentage of the national total allocation.

The state per pupil expenditure (SPPE) provision measures the cost of educating a child in a particular state. The range of SPPE values among states is bounded by minimum and maximum thresholds within the formula law.

Targeted Grants ($3.3 billion in FY 15) are based on the same formula-eligible child counts used for Basic Grants and Concentration Grants, except the counts are weighted so that districts with higher numbers or higher percentages of children from low-income families receive proportionately more funds. Targeted Grants provide funds to districts in which the number of formula-eligible children is at least 10 (without application of the formula weights) and at least 5 percent of the district’s 5- to 17-year-old population.

Top

---

¹ Federal Title I funds are allocated to districts but given to states who can reserve funds at the state level. Based on certain criteria, states are also able to make different allocations to their districts than the federal allocation. See https://www2.ed.gov/programs/titleiparta/index.html.
² The formula now includes children who qualify for Temporary Assistance for Needy Families (TANF).
³ The U.S. Department of Education (ED) made the decision to produce the report with the National Center for Education Statistics (NCES), drawing on input from the Institute of Education Sciences (IES) and other ED offices.
⁴ See https://www2.ed.gov/programs/titleiparta/legislation.html.
⁵ A state agency may also request a waiver for certain schools to operate a schoolwide program without meeting the 40 percent threshold through (1) the School Improvements Grants (SIG) program in a Tier I or Tier II school that receives SIG funds or (2) ESEA flexibility in a priority school or focus school that implements interventions designed to enhance the entire education program of the school. See https://www2.ed.gov/policy/elsec/guid/eseatitleiswguidance.pdf.
⁶ See www2.ed.gov/policy/elsec/guid/eseatitleiswguidance.pdf.
⁷ See https://nces.ed.gov/programs/digest/d16/tables/dt16_203.10.asp?current=yes.
⁸ See https://ies.ed.gov/ncee/pdf/20084012_rev.pdf.
⁹ See https://www2.ed.gov/rschstat/eval/disadv/tassie3/tassie3.pdf.
¹⁰ See https://www2.ed.gov/rschstat/eval/disadv/nclb-accountability/nclb-accountability-highlights.pdf.
¹¹ See https://fas.org/sgp/crs/misc/R44486.pdf.
¹² See https://www.everycrsreport.com/reports/R44461.html.
¹³ See https://www.everycrsreport.com/reports/R44898.html.
¹⁴ The amount each state/district receives (or the final allocation) is based on the proportion of the total authorized Title I funds that are appropriated by Congress. This proportioning process, known as “ratable reduction,” guarantees each district receives the same share of the appropriation as it has of the authorization, unless some other provision (state minimum, hold harmless, etc.) provides for a larger allocation to some jurisdictions, which take precedence over ratable reduction rules.
¹⁵ See https://nces.ed.gov/surveys/AnnualReports/pdf/titleI20160111.pdf.
¹⁶ U.S. Department of Education, National Center for Education Statistics, Digest of Education Statistics, 2017, table 208.10, https://nces.ed.gov/programs/digest/d16/tables/dt16_208.10.asp?current=yes.
¹⁷ Although the number of delinquent children is reported at the district level, for Title I purposes, these children are summed to a state total and receive a Title I allocation as a group, rather than in their respective districts.
¹⁸ Districts that do not meet the minimum threshold for eligibility may still receive a percentage of the prior year’s allocation due to the hold harmless provision.
¹⁹ See https://www.census.gov/programs-surveys/saipe.html.
²⁰ See https://www.census.gov/content/dam/Census/library/publications/2017/demo/p60-261.pdf.
²¹ See https://www.census.gov/content/dam/Census/library/publications/2017/demo/p60-261.pdf.
²² PCI at the state level comes from the Bureau of Economic Analysis of the U.S. Department of Commerce. EFIG use an average of the most recent 3 years of state PCI divided by the same 3-year average of the national PCI.
²³ For more details on the formula used for the effort factor in the EFIG formula, see https://nces.ed.gov/surveys/AnnualReports/pdf/titleI20160111.pdf.
²⁴ The coefficient of variation (CV) is the ratio of the standard deviation of a group of observations to the mean of the group. Thus, the CV can be used to describe the relative level of variation within a population. In the Title I allocations context, a state with a larger CV has greater variation in spending per student among its districts than a state with a lower CV.
²⁵ For more information on the formula used for the equity factor in the EFIG formula, see https://nces.ed.gov/surveys/AnnualReports/pdf/titleI20160111.pdf. The legislation specifies that the equity factor for the District of Columbia, Hawaii, and Puerto Rico—jurisdictions that have only one school district—is 1.3. The legislation further specifies that the equity factor for Alaska, Kansas, and New Mexico is 1.2.
²⁶ For more information on the formulas used for the state minimum and hold harmless provisions, see https://nces.ed.gov/surveys/AnnualReports/pdf/titleI20160111.pdf.
²⁷ See Rothstein and Smith (1997), Guthrie and Rothstein (1999), Goldhaber (1999), Alexander et al. (2000), Taylor et al. (2002), Stoddard (2005), Taylor (2006), and Taylor (2015).