The blog of the Urban Institute
February 15, 2021

Policymakers Should Consider New Ways to Use Federal Dollars to Help K–12 Students

February 15, 2021

On the campaign trail, President Biden proposed increasing federal funding for K–12 education, in part by tripling Title I spending, and it is likely the new administration will want to act quickly to support students (and their schools) in recovering and rebuilding from the pandemic and the inequities it has exacerbated. But the existing Title I formula is a complex and somewhat inefficient way to distribute funds, and even relatively substantial increases in federal money targeted at the district level may have a limited impact on education funding progressivity. Federal policymakers who want to improve outcomes for low-income students may also want to consider supplementing Title I increases with investments in better measures of student need and educational context to spur local and state innovation to decrease inequities.

About $14 billion (PDF) is allocated to districts through Title I, Part A, aimed at helping low-income students. But the formula is complex, often inequitable, and the dollars make up a relatively small share of overall funding for schools.

Title I dollars are distributed through four grant formulas (PDF), each layered on top of the next. States with small populations receive more per eligible low-income student than states with larger populations and the formula may fail to adequately measure student poverty needs, relative the local cost of living. The Education Finance Incentive Grant is designed to incentivize interdistrict equity and effort, but this incentive is likely too small to be effective (PDF). And school district leaders may perceive Title I funding rules as overly restrictive (PDF), which can lead to investments that can be easily documented (such as professional development or technology) but may not yield substantial improvements in student achievement.

A much larger investment in federal funding for low-income students provides an opportunity to reform allocations (PDF) without pulling away dollars currently being sent to less-needy schools. Policymakers could retain most or all current Title I allocations to districts per eligible student but layer on substantially more progressive funding.

Assessing the effect of directing federal dollars to the neediest students

In 2017–18, 42 states (out of 49 with more than one school district) allocated total funding progressively, meaning the average student in poverty was enrolled in a district that got more cost-adjusted dollars than districts where the average nonpoverty student was. Across the nation, this cost-adjusted surplus for low-income students is about $128.

In addition, 29 states allocated funding such that the typical student of color (coded as students who identify as American Indian or Alaska Native, Asian, Black, Hispanic/Latino, Native Hawaiian or other Pacific Islander, as two or more races, or who do not specify) was enrolled in a district that receives more, in cost-adjusted dollars, than the average white student. However, across the nation, the average student of color is enrolled in a district that receives about $863 less than the average white student. This result is largely driven by lower overall education funding in states serving higher shares of students of color.

Progressivity gaps between states with funds for low-income students and students of color

How would an increase in federal funds change the overall allocation of district funding? If federal policymakers allocated an additional $2,500 for each student in poverty (roughly equivalent to tripling the average $1,227 received per Title 1 eligible child in 2015–16), national progressivity for both low-income students and students of color would be improved, but some gaps would still remain.

Forty-four states would have a progressive district funding allocation, and the typical low-income student would be enrolled in a district receiving $288 more than the typical higher-income student. Although two more states would also now have higher funding for the average student of color, these federal dollars would not even out differences in revenue among states. Thus, even with significant federal investment, the average allocation for students of color overall would still be lower than for the average white student.

Why would a large increase in federal dollars have a relatively muted effect? Aside from the fact that these investments are still lower than typical funds from states and localities, directing dollars to low-income students is easier in states with more economic segregation between districts. When districts are larger and more homogenous, the effect of additional dollars is diluted unless funds are funneled toward high-need schools. At this time, we can only model progressivity at the district level. If dollars are effectively aimed at schools serving large shares of high-need students, the amount of funding going to students in poverty may be larger.

Using federal dollars to promote improvements in education allocation and outcomes

In addition to increasing federal investments in districts, policymakers could consider building a set of robust federal methodologies for assessing student need and educational contexts. Policymakers could invest in building a national measure of student poverty at the school, rather than district, level. And as school-level funding measures become more robust, the US Department of Education (ED) could lead the way on deriving measures of funding equity by school.

The federal government could also build tools to assess broader school characteristics and district dynamics (such as schools’ levels of economic and racial segregation, relative to their local areas). Being able to better measure equity at the school level will allow ED to better target its investments and to incentivize change at the state or district level. To reduce the burden on states, these new measures could be based on data already available (such as from the American Community Survey and the ED’s Common Core of Data) or built from other available federal resources.

Policymakers could use these measures to target federal funds, such as through competitive grants aimed at ameliorating gaps. A proposal from the Center for American Progress suggests a similar approach, expanding targeted federal funding for education, combined with additional funds for states that improve the equity and level of state and local funding. But the implementation of any targeted strategy must be done carefully so policies do not inadvertently build in perverse incentives (such as rewarding the concentration of low-income students in Title I schools or forcing teacher placement).

Federal dollars make up a small share of K–12 education funding, at a time when some estimate that the United States is underfunding education by nearly $150 billion and when the COVID-19 pandemic has likely exacerbated existing inequities in student achievement. An influx of federal dollars, clearly aimed at assisting students from low-income families and combined with deeper investments in measuring disparities, could help.

Jose Luis Pelaez Inc / Getty Images


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