November 4, 2016

New Dept of Ed Rule Doesn’t Go Far Enough, Would Leave Large Funding Gaps Intact

By Max Marchitello and Chad Aldeman

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The U.S. Department is in the midst of a fight to send more money to poor schools. Centered around a complicated legal provision called “supplement not supplant,” they originally proposed a strong rule that would have meant significant new resources for low-income students. But due to pushback from an odd coalition of Republican congressmen and the two national teacher unions, they’re now proposing a weaker, clunkier version that could potentially leave large funding gaps intact. With the rule now out for public comment, the Department has an opportunity to go back to its original version, better protect low-income students, and more closely reflect the actual text of the law.
Before we get into the details of this specific regulation, it’s important to acknowledge that public education in America isn’t fair. The quality of a student’s education is too often determined by his or her zip code. Growing up in a low-income community often means crumbling schools, inexperienced teachers, weak curriculum, and few extracurricular or enrichment opportunities.Uphill climb
A big part of the problem is how states and districts fund their schools. While low-income students should receive more money to help offset the harmful consequences of growing up poor, that’s not what most states and districts do. In some states, the disparities between high- and low-poverty districts amount to over $1,000 per-student. This isn’t mere “bean counting” for schools—these differences can easily reach more than $1 million each year.
It doesn’t have to be this way.
Congress took steps to address this problem in last year’s Every Student Succeeds Act (ESSA), by updating a longstanding provision in federal called “supplement not supplant.” The rule is meant to ensure that schools with large percentages of low-income students (designated as “Title I schools”) receive as much in-state and local funds as they would if they were not designated as Title I. That is, federal dollars should “supplement” rather than “supplant” other funds.
Historically, districts could demonstrate compliance with the rule by showing that they were spending money on extra, supplemental programs or staff. But this became a compliance burden, as it required districts to be careful about what was actually “extra” and whether the “right” students were receiving the benefits. Even still, districts allocated funds through formulas that appeared neutral, on their face, but in application resulted in Title I schools receiving far less funding than they should have. In fact, this was and remains a common occurrence.  
ESSA changed the rules around supplement not supplant to more closely reflect the original intent. As the Department of Education has set about implementing the new law, it has proposed a new regulation to require districts to start looking at the results of their fiscal decisions and whether those decisions actually send more money to poor schools. The proposed rule would be a step forward for transparency, but our analysis suggests it wouldn’t reach most low-income students or send significant new resources to their schools. After analyzing the regulation’s potential effects, we found:

  • The regulation would have no effect on the 31 percent of low-income students who attend school in a district comprised entirely of Title I schools;
  • Another 43 percent of low-income students attend school in a district in which compliance with the regulation would not come close to closing gaps and result in only small increases in funding for Title I schools; and  
  • Only about 9 percent of low-income students attend a school that would see significant funding increases as a result of the draft regulation.

According to the proposed regulation, districts could comply with “supplement not supplant” in two ways. They could demonstrate that they already use a student funding formula that provides disadvantaged students with a greater amount of per-pupil funding than other students (in education parlance, this is called a “weighted student funding formula”). Or, they could demonstrate that each Title I school receives at least the district-wide average for personnel and non-personnel expenditures. Put more simply, Title I schools would receive at least the district average for teacher salaries, at least the average spent on books and other school supplies, and so on.
We anticipate that districts not already using a weighted student funding formula won’t start to do so because of the regulation, so we focused our analysis on the second option: bringing Title I schools to the district’s average expenditures in each category.  
The effect of this calculation varies by district, but the methodology would leave funding disparities intact, sometimes large ones. To illustrate the challenges with this methodology, we created four sample districts based on their concentration of Title I schools. Since teachers in high-poverty schools tend to be less experienced and have fewer academic credentials, our examples assume that average salaries in Title I schools are lower.
As the table below demonstrates, the net benefit of the regulation decreases as the concentration of Title I teachers increases. That is, Title I schools would have more to benefit in a scenario like District 1, where the district-wide average is far higher than the current average in Title I schools. In contrast, District 3, where Title I schools comprise more of the sample, would have less to change.

Teachers Title I Teachers Non-Title I Avg. Sal.
Title I
Avg. Sal. Non-Title I District spending District Avg. Salary Additional funds per-teacher in Title I Schools Remaining Gap per teacher
District Type 1 20 80 $50,000 $60,000 $5,800,000 $58,000 +$8,000 -$2,000
District Type 2 50 50 $50,000 $60,000 $5,500,000 $55,000 +$5,000 -$5,000
District Type 3 80 20 $50,000 $60,000 $5,200,000 $52,000 +$2,000 -$8,000
District Type 4 100 0 $50,000 N/A $5,000,000 $50,000 $0 $0

Note: Hypothetical example created by Bellwether authors. 
This is a rough, oversimplified example, but it nevertheless highlights the fundamental problem with the proposal: pushing Title I schools to the district average doesn’t move the needle very much for higher-poverty districts. Moreover, as the final column in the chart suggests, this approach can leave large gaps in place in high-poverty sample District 3, where its average is driven mainly by Title I schools even as wide disparities continue to persist between Title I and non-Title I schools.
The Department of Education estimated that, after allowing for annual fluctuations and applying a multi-year test, 90 percent of school districts would not have to make any change under their proposal. But even without applying those special rules, we found that at least half of all students, and almost one-third of all students eligible for free- and reduced-price lunch, go to school in a district that would see no change from the regulation. About 3 out of every 4 low-income student attends school in a district that could make no change or direct only a modest increase in funding for Title I schools (leaving large disparities intact) and still be in compliance. Districts like sample district #1 would face the biggest potential changes, and its students would stand to benefit the most from the regulation, but those districts educate only about 5 percent of the country’s low-income students.

Percent Title I Schools Student enrollment Percent of all students nationwide Low-income student enrollment Percent of all low-income students nationwide
District Type 1 0% – 33% 4,547,675 9.14% 1,327,931 5.16%
District Type 2 33%-66% 13,987,188 28.10% 5,305,065 20.62%
District Type 3 66%-99% 17,827,353 35.81% 11,178,130 43.45%
District Type 4 100% 24,863,177 49.94% 7,914,438 30.76%

Source: Bellwether analysis of U.S. Department of Education ELSI Table Generator, available at
Note: The count of low-income students is based on U.S. Department of Education data on the number of students eligible for free-and-reduced priced lunch.
All in all, the Department’s current proposal would fail to protect low-income students from inequitable district funding systems. In fact, it would sanction those disparities and allow districts to preserve funding gaps between high-and low-poverty schools indefinitely.
So what might a better rule look like?
The Department should adopt a rule more closely resembling its original proposal, with a few tweaks.
One, the regulation should include a provision for districts comprised entirely of Title I schools. This affects about one third of low-income students in the country. Often, schools with high concentrations of poverty receive less state and local funding. Instead, the regulation should require that these schools receive at least as much 95 percent of the per-pupil funding level of the non-Title I schools in the state. That would ensure states are playing a role in leveling the playing field and providing resources to under-funded communities.
Two, for districts with both Title I and non-Title I schools, the regulation should be redrafted to require that Title I schools receive not the district-wide average, but the average amount of funding of the non-Title I schools in the district. This simple fix would ensure that funding gaps between high-and low-poverty schools are actually closed.
Three, the rule should consider all spending in aggregate, rather than trying to separate out each individual item line-by-line. This would address fears about the forced transfer of more expensive teachers to higher-poverty schools. Instead, Title I schools could get their fair share of funding in aggregate even if their teacher salaries were lower. The extra money would give school leaders flexibility to invest in a variety of different strategies designed to improve achievement and close gaps.
Finally, districts should include benefits, such as retirement and health care, in the calculations. Teacher compensation is slowly shifting toward more expensive health care and pension plans, and those benefits are typically calculated as a percentage of teacher salaries. Any inequities in teacher salaries will also appear in benefit costs, so it would be a mistake to leave benefits out of the conversation.  
The push for fiscal equity began with the passage of the Elementary and Secondary Act (ESEA) in 1965. But the fight to protect low-income students from discrimination in state and district funding systems started in earnest in 1969 with the publication of Is it Helping Poor Children? Title I of ESEA. A Report. It showed clearly that states and districts across the country willfully and systematically underfunded schools serving low-income children. We’ve been fighting that same fight – largely unsuccessfully – ever since. Today, millions of economically disadvantaged students get less than their fair share of school funding. While some argue the Department’s proposed regulation is an “important step forward,” we think that step is too small to cover a gap this large.
School finance inequities have been around for decades. It’s high time we enacted rules that would finally make good on our shared belief that every student in America, regardless of circumstance, deserves a high-quality education. Federal dollars are supposed to be supplementing state and local investments, not replacing them, but we can’t be sure that’s happening without improving this regulation.

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