Follow-up: Title I Funding DOES NOT Make Rich States Richer!

In one of my earliest posts, I took on a myth created and shared by many DC Think Tanks that the Title I funding formula inappropriately favors “rich states” and school districts in urban areas.

This myth has its origins in a handful of policy papers and poorly constructed analyses, some of which eventually made into print – albeit in law review journals that tend to be light on reviewing quantitative evidence.

Today, after many conversations over the years, Lori Taylor of Texas A&M, Jay Chambers, Jesse Levin and Charles Blankenship of the American Institutes for Research and I finally published our article in the journal Education Finance and Policy in which we critique the arguments that Title I is making rich states richer. In short, much of confusion boils down to the mis-measurement of income and poverty, an issue I’ve discussed extensively on this blog.

The assertion from prior reports is that the Title I aid formula includes a number of critical flaws that ultimately lead to providing disproportionate funding to states that are relatively high income and can spend more than other states to begin with, and to school districts in urban and suburban areas, shorting the rural districts which on their face may appear to have comparable or even higher poverty in some cases. We summarize this literature as follows:

Because Title I provides the largest share of direct federal education funding to states and local districts, Title I funds are a likely target for political tug-of-war during re-authorization. In recent years questions have been raised about whether Title I funding in particular is appropriately targeted to those districts, schools, and children that need it most. Deliberations have focused on perceived flaws in the design of the Title I funding formulas (Carey & Roza, 2008; Liu, 2007, 2008; Miller, 2009; Miller & Brown, 2010a,2010b). Critics argue that Title I funding favors wealthy states and larger urban districts, to the detriment of very poor states and rural areas, in part because parts of the formula described above are driven by state’s own spending levels and because rich states are able to spend more, thus gain more Title I funding (Liu, 2008, 2007; Miller, 2009; Miller & Brown, 2010a, 2010b).[1] Specifically, Liu (2007, 2008) provided analyses that suggest that lower poverty states and urban districts receive disproportionate share of Title I funding per poor child and asserted that (1) “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,” and (2) “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” (Liu, 2008, p. 973).

But, as I’ve discussed previously on this blog, there are two issues that need to be considered when comparing the distribution of Title I dollars across local public school districts. In this previous post, I was able to crudely tackle those issues. That is, first, one must consider how the Title I dollar varies in value from one state to another, one region to another, across rural and urban settings, and so on. Education being a labor intensive industry, accounting for variation in school labor costs is critical for determining the fairness of the distribution of funding. In this previous post, I used the Education Comparable Wage Index developed by Lori Taylor for the National Center for Education Statistics.  Lori has been kind enough to update this index on her own through 2011 and post it on the Texas A&M web site. The second step I took in my earlier post was to adjust poverty rates for each state by an index created by Trudi Renwick of the Census Bureau. After adjusting for both the value of the Title I dollar and for Renwick’s state level poverty adjustments, I found that the Title I distributions really weren’t that awful – and certainly didn’t systematically reward rich states.

Thanks to the brilliance of Lori, Jay, Jesse and Charles (and some others providing supporting roles) we are now able to take this analysis a step (or more) further and re-evaluate Title I distributions down to the school district level to determine not only at large scale whether rich states are rewarded over poor ones, but whether the formula also advantages urban versus rural areas, and so on. Let’s take a quick walk through the two adjustments.  First, we have Lori’s updated Education Comparable Wage Index, which uses Census Data to estimate how much the wages for non-educators vary across labor markets nationally. That variation looks something like this:

Figure 1. National ECWI


This index can be used to adjust the value of the Title I dollar.

Next, we have our poverty adjustment factor, which is arrived at through a few steps, also using Census Data. This process starts with a similar wage index (details in the full article) which is intended to capture differences in wages across locales and regions which are largely driven by differences in underlying costs of living…but in many cases tend to be less extreme than cost of living differences (because, in many cases, high costs are accompanied by desirable amenities).  We use this index to create an adjusted income threshold for poverty for each labor market nationwide. Then, we re-calculate the number of children in families below and above this adjusted income threshold, and compare our new poverty rate to the original poverty rate. This gives us a poverty adjustment factor- or a multiplier that lets us adjust the poverty rate in a given area from its original level to the poverty rate that would exist at the adjusted income threshold. Here’s what that poverty adjustment factor looks like nationally.

Figure 2. Poverty Adjustment Factor


So, taking into account regional wage/cost variation, poverty rates in urban and northeastern areas require an upward adjustment on the order of 25 to 55% in some cases, where in areas such as northwest Kansas, poverty rates actually require substantial downward adjustment.

We can probably see where this is headed at this point. But let’s go there anyway… since that is the main point here. Let’s start with this graph of Title I allocations per child in poverty by locale and by region, applying only the first adjustment for the value of the Title I dollar (updated ECWI). Metropolitan areas are areas around a core with population of at least 50k and micropolitan areas are areas around a core of 10k to 50k.

Figure 3. Applying the Dollar Value Adjustment Only (ECWI)


In the left half of the figure we have “unadjusted” allocations and in the right we have adjusted allocations. Northeastern metropolitan districts have, in unadjusted dollars, over $1,800 per poverty pupil. This would appear to be the highest of any group. But even after applying only the first adjustment, this figure drops to $1,500 and is lower than most micropolitan and rural districts. Even this first step sheds significant doubt on the original assertion (which in some cases, did use a regional cost adjustment).

Figure 4 takes the next step of applying adjustments to poverty rates, in order to better capture just how many children live in families below a more locally [labor market] reasonable income level. Here, we see that once we have made both adjustments, metropolitan districts generally are being significantly shortchanged relative to their micropolitan and rural peers. In fact, rural and micropolitan districts in central (plains) states are receiving in some cases twice as much (or more) per poverty pupil in Title I aid as are metropolitan residents.

Figure 4. Applying the Dollar Value and Poverty Adjustment


In short, Title I funding DOES NOT ADVANTAGE WEALTHY, NORTHEASTERN, METROPOLITAN AREAS!  That is, not when one more accurately measures both the value of the education dollar and the expected numbers of children in need.

Now, back to the Title I formula. We discuss in our article that the Title I formula does indeed include factors that are, on their face illogical and seemingly unfair. Why, after all, would policy drive more need-based funding to those who can and choose to spend more on their own (the Spending factor)? The formula also includes political giveaways like the small state minimum. But these political giveaways don’t amount to much (because small states, are, well, small…).  It would certainly make sense to replace the illogical factors that currently drive Title I funding with our more logical factors addressed herein. But, it is important to understand that doing so will drive MORE, not less funding to metropolitan areas and states with higher average income. Empirically, it’s the right thing to do.

A few closing points are in order. First, it’s also important to understand that Title I alone cannot resolve the persistent disparities in state school finance systems. The Title I effect on funding fairness remains relatively small. Here it is in 2010.

Figure 5. Title I Effect on Funding Fairness


So, no matter what we do, Title I will not solve our biggest funding equity issues. That remains largely a state problem.

Finally, it’s also worth considering how similar adjustments might apply across federal benefit programs.  Consider, for example, this interactive map of the current geographic distribution of federal benefits.

Selected References

Carey, K., & Roza, M. (2008). School funding’s tragic flaw. Seattle, WA: Center on Reinventing Public Education.

Liu, G. (2008). Improving Title I funding equity across states, districts and schools. Iowa Law Review, 93, 973-1014.

Miller, R. (2009). Secret recipes revealed: Demystifying the Title I, Part A funding formulas. Washington, DC: Center for American Progress.

Miller, R. T., & Brown, C. G. (2010a). Bitter pill, better formula: Toward a single, fair, and equitable formula for ESEA Title I, Part A. Washington, DC: Center for American Progress.

Miller, R. T., & Brown, C. G. (2010b). Spoonful of sugar: An equity fund to facilitate a single, fair, and equitable formula for ESEA Title I, Part A. Washington, DC: Center for American Progress.

Renwick, T. (2009). Alternative geographic adjustments of U.S. poverty thresholds: Impact on state poverty rates. Washington, DC: U.S. Census Bureau.

Renwick, T. (2011, January). Geographic adjustments of supplemental poverty measure thresholds: Using the American Community Survey five-year data on housing costs. Washington, DC: U.S. Census Bureau.

[1] Additional criticisms of Title I funding point to the fact that three of the four formulas used to allocate dollars do not take into account state fiscal effort (the level of state and local revenue dedicated to providing public education) and state-minimum provisions guarantee relatively large allocations to states with small populations (see Miller, 2009).