Low-Income Students

Earlier this week, Senator Tom Harkin (D-IA) released his proposal for reauthorizing the Elementary and Secondary Education Act (currently known as No Child Left Behind). Much has already been said about the various changes proposed in the bill, including a move to college and career ready standards, changes to accountability provisions, and changes to school improvement interventions. (For some good summaries and analyses see here and here.) But few have mentioned a reform clearly missing from the proposed legislation: Any discussion of funding formulas for Title I.

Back in August, Ed Money Watch wrote that Congress was gearing up for a formula fight as part of ESEA reauthorization. Formula fights – which involve congressional staff members negotiating funding formulas to distribute Title I funds among states and school districts that both provide support for the education of disadvantaged students benefit each of their states as much as possible – are notoriously long, heated, and tend to produce odd formulas (i.e. hold-harmless, set-asides, small state minimums, etc.) in the name of political compromise. So it’s no surprise that Harkin’s bi-partisan bill leaves the existing funding formulas untouched in the interest of maintaining the peace.

But there are many good reasons that lawmakers should take up the formula fight in earnest, even if it does further delay reauthorization.

Currently, Title I funding ($14.5 billion in fiscal year 2011) is distributed through four complicated funding formulas that each assess poverty slightly differently. The formulas are opaque and difficult to interpret – some state officials don’t even fully grasp the mechanisms by which the funds are distributed – but here is the gist of each:

• The Basic grant formula distributes funds based on the number of poor students in a state or district. The lion’s share of Title I funding - $6.6 billion out of $14.5 billion 2011 - is distributed through this un-nuanced formula that does little to ensure that districts with the most poverty receive the most support.
• The Concentration grant formula provides funds to districts with 15 percent or more students living in poverty. The smallest portion of funds - $1.4 billion out of $14.5 billion in 2011 – is distributed through this formula.
• The Targeted grant formula gives more funding per pupil to districts with higher concentrations of poor students, meaning those districts receive more funds per poor student as the percentage of students in poverty increases. However, it also favors large districts because it provides more funding to districts with higher numbers of poor students through weighting. This formula was written into the law in 1994 and received $3.3 billion of $14.5 billion in 2011.
• The Education Finance Incentive Grant formula rewards states with more equitable funding formulas by taking into account a state’s fiscal effort—the percentage of per capita income devoted to education—as well as how equitably the state’s school finance system distributes state and local funding for education. Within states, funding is distributed to school districts in a manner similar to the Targeted grant formula, except that it provides extra weight to poor students in districts in "bad school finance states." This formula was written into the law in 1994 and received $3.3 billion of $14.5 billion in 2011.

But ultimately, these formulas do not always distribute funds as they are intended to because they also take into account state size, per pupil expenditure, and even the degree to which a state equitably funds low- and high-income schools. In other words, the formulas are riddled with political agendas, logrolling and compromises.

While these nuances are supposed to guarantee states a certain level of funding, account for the cost of providing an education in a given state, or reward states with more equitable funding formulas, they often undermine the intent of the law. As a result, states like Wyoming receive far more support per poor pupil than much more impoverished states like Arkansas and New Mexico.

Changing the way these nuances factor into the funding formulas could ensure that districts with high concentrations of poverty receive more funding per poor pupil. Revising the Title I funding formulas would also give Congress a chance to make sure that rural and small school districts get their fair share of funds.  By eliminating provisions that give more funding to larger districts (called number weighting) and changing the way the formulas take state per pupil spending into account, Congress could bolster struggling small and rural districts that often take the largest hit during economic downturns.

It’s highly possible that the House lawmakers will introduce changes to the Title I funding formulas as negotiations continue on ESEA reauthorization. So far, the House has not released any legislative language regarding the formulas. Similarly, a Senator could choose to take on the task and offer an amendment to the Harkin bill that revises the formulas. Regardless of where it comes from, we hope that Congress includes a discussion of Title I funding formulas in its reauthorization process and ensures that Title I funds are able to do as they are intended – to provide additional services to the students that need them most.

Today, Senator Tom Harkin (D-IA) proposed a draft piece of legislation for reauthorizing the Elementary and Secondary Education Act (currently known as No Child Left Behind). The current law expired in 2007 (though it has been extended) and education stakeholders have been impatiently waiting for Congress to take up a real reauthorization attempt. While the bill is full of interesting new proposals for the law, we thought we would first take a look at how the law deals with teacher comparability, a hot button issue among teachers unions, civil rights groups, and researchers. The Harkin bill makes great strides in comparability, including some ideas that we have supported to eliminate many of the current problems with the rule.

As a refresher, teacher comparability refers to a current provision of Title I that requires school districts to provide equitable state and local resources to both their low-income (Title I schools) and their higher-income (non-Title I schools).  School districts currently demonstrate that they are meeting the comparability requirements under Title I by comparing state and local resources (i.e. per pupil expenditures) provided to their low-income Title I schools and their higher-income non-Title I schools. To meet the comparability requirement, resources provided to the Title I schools cannot be more than 10 percent below those provided to non-Title I schools.

Under the Harkin bill, starting in the 2015-16 school year, districts would be required to demonstrate comparability by showing that combined state and local expenditures per pupil – including actual expenditures on salaries and benefits – in their Title I schools (low-income) are not less than the average per-pupil expenditures in non-Title I schools. Districts where all of their schools are Title I would need to show that that the average per pupil expenditure in its higher-poverty schools is equal to that in its lower-poverty schools. Prior to the 2015-16 school year, districts would be held to the existing comparability rules to allow them to prepare for the transition.

These changes go a long way in fixing comparability as it currently stands. First, it eliminates the option for districts to demonstrate comparability through measures other than expenditures like teacher-student ratios. This means that comparability would truly become a measure of funds spent, rather than a comparison of easy to document but hard-to-quantify resources.

Second, it requires that expenditures in low- and high-income schools be equivalent – not within 10 percent. This would give districts far less leeway in variations in funding for their schools. While a 10 percent difference may seem small, it can mean the difference between several teaching positions in some schools or a faculty of less experienced teachers.

But most importantly, the Harkin bill closes what has come to be called the “comparability loophole” that allows districts to ignore variations in teacher compensation due to years of experience in their per pupil expenditure calculations for Title I and non-Title I schools. By allowing districts to overlook such variation in teacher pay, the current law perpetuates the uneven distribution of teachers. Because more experienced, and therefore higher paid teachers, tend to work in high-income schools, low-income Title I schools employ primarily less experienced, lower-paid teachers. As a result, high-income schools receive a greater share of state and local funds to pay for their teachers than low-income schools. Closing the loophole by requiring districts to use actual salary and benefits expenditures in schools will help ensure that low-income schools receive sufficient funds to either compensate more experienced teachers or implement other programs, like teacher incentives or additional after school support, to provide their students with the services and support they need. The bill also contains a provision that would require districts to make the comparability data publicly available.

While the Harkin bill does make great changes to comparability, it falls short in specifying how districts would be required to comply with this new, stricter version of the rule. Even for districts that are already using real measures of expenditures to demonstrate comparability, moving from a 10 percent comparability threshold to a complete equivalence will be a challenge. Past proposals for fixing comparability (like Congressman Chaka Fattah’s (D-PA) ESEA Fiscal Fairness Act) have either suggested phasing in the new threshold or requiring districts to submit plans for how they will reach the new threshold. The Harkin bill currently lacks such provisions. The Harkin bill also doesn't touch on the issue of teacher transfers as a means to meeting comparability - likely to be controversial with teachers unions and other groups.

Of course, the Harkin bill is the first draft of what is likely to be many in the process towards reauthorizing ESEA. Congress will have plenty of opportunities to tinker with the comparability provision, as well as the other major proposals in the bill. Check back with Ed Money Watch as this process continues.

Are colleges trying to kill the Pell Grant program? It sounds like an absurd question. But after reading the results of a recent survey that Inside Higher Ed conducted of nearly 500 college admissions directors, we think it's a fair one to ask.

As readers of Higher Ed Watch well know, the Pell Grant program is in the midst of a major budget crisis. The White House and Congress have struggled mightily over the last two years to try to keep the current $5,550 maximum Pell Grant in place. And the program’s funding problems are only going to get  more severe at the end of the 2013 fiscal year, when the supplemental Pell Grant funds that Congress provided in this summer’s budget ceiling legislation run out.

Obama administration officials and the program’s supporters in Congress have been willing to sacrifice many student benefits they have previously supported (with the latest victim expected to be the interest subsidy payments that the government makes on federally subsidized loans during the six-month period after students leave college) because they remain committed to the program’s core mission: eliminating the cost barriers that all too often keep low-income students from attending college.

But do the nation’s public and private four-year college leaders share this commitment? They certainly say they do. The results of the IHE survey, however, suggest that many of them are just paying it lip service.

In August, the U.S. Department of Justice (DOJ) joined a federal False Claims lawsuit against Education Management Corporation (EDMC), charging that the for-profit college company defrauded the government by defying a federal law prohibiting colleges from compensating recruiters based on their success in enrolling students. If the case is allowed to proceed, it could lead to embarrassing revelations not just about EDMC, but about the for-profit higher education industry writ large.

So it shouldn’t come as a surprise that career college leaders and lobbyists have mounted what appears to be a public relations campaign aimed at pressuring the Justice Department to either back down or enter into settlement talks with EDMC before any more of the industry’s dirty laundry is exposed.

Last week, the Obama administration released its American Jobs Act of 2011, a set of proposals it wants Congress to enact to spur more job creation. A big part of proposal is $25 billion in new federal grant aid to fund K-12 school construction, renovation, and modernization throughout the country. There’s little doubt that many school districts are in need of funding for construction and maintenance, but before Congress moves to enact the president’s $25 billion proposal, the Obama administration needs to show lawmakers (and the public) how schools are using $22 billion in federally subsidized school construction bonds issued under the American Recovery and Reinvestment Act (ARRA).

In fact, that program – the Qualified School Construction Bond program – is one the largest federal efforts to support school facilities to date. But hardly a shred of centralized information is available on how the program is working, which districts got funding, and what they are doing with it. All this despite the Obama administration’s claims that the American Recovery and Reinvestment Act would be the most transparent federal spending ever enacted.

Here is some background on how the program works.

The QSCB program allowed school districts to issue bonds to finance construction projects in 2009 and 2010, totaling $22 billion. Entities that purchased the bonds receive federal income tax credits in lieu of interest payments, which is a roundabout way of the federal government paying the school districts’ interest costs on loans they issue to build or renovate a schools. In 2010, Congress expanded the program under the Hiring Incentives to Restore Employment (HIRE) Act so that the federal government could make direct payments to school districts to cover most of interest on the bonds instead of giving the bond holder a tax credit.  

The law allocated sixty percent of the bonds to states according to federal Title I grant formulas while the remaining 40 percent were allocated to the 100 school districts with the largest impoverished populations. Each state conducted its own competitive application process to determine which schools and districts could issue the interest-free bonds.

So what do we know about how the program is working and what sort of projects it supports?

First, we know that the program got off to a slow start. Unfortunately, when the program first started in 2009, many districts had trouble finding bond buyers because the terms were not very attractive – mainly would-be bond investors didn’t think the tax-credit-in-lieu-of-interest was an appealing arrangement. However, the 2010 expansion of the program to include direct interest made the terms of the bonds more attractive to potential buyers and school districts had more success in financing projects. Of course, the 2010 expansion significantly increased the cost of the program for the federal government.

According to a table buried in the President’s fiscal year 2012 budget request (page 243), the federal government pays about $1.5 billion each year (in tax credits and direct payments) to cover the interest on the bonds issued by school districts.  About a third of the cost is in direct interest subsidies to school districts.

We also know that each state held its own competition to determine which school districts would get to issue the federally subsidized bonds and for how much, but  that information isn’t available from the federal government in any meaningful format. While it is possible to track down information issued by state governments on their bond allocations, this is a tedious process and doesn’t shed much light on the status of the school construction projects themselves. Similarly, the U.S. Treasury Department doesn’t make publicly available any information on how much a project financed with the bonds costs.

Sadly, it appears that the only source of such information on this massive federal education program is a trade publication for the municipal bond investment industry, called BondBuyer.com. The publication provides a spreadsheet on its website that shows the value of federally subsidized bonds issued by agency (district or state) in calendar years 2010 and 2011 through September 9, 2011. BondBuyer.com does not provide any information on the source of these data or what exactly they include. While these data do not include any bonds that may have been issued in the 2009 calendar year, it appears to be the most comprehensive source of information on bonds actually sold under the QSCB program. (We have reformatted the data for readability and aggregated it by state. Click here to download district level data and here to download state level data.)

According to the BondBuyer.com data, 727 QSCBs were issued in calendar years 2010 and 2011. The combined face value of these bonds is nearly $10.6 billion. The largest bond went to the Puerto Rico Public Buildings Authority for $756.4 million while the smallest bonds went to Cherry County (Valentine) Regional High School District No. 6 and Valley County (Arcadia) School District No. 21, both in Nebraska for $100,000. It is important to note that the BondBuyer.com data doesn’t include any information on the size or cost of the federal subsidy provided for these school construction projects.

When we aggregate the data by state, we see that several states are very close to issuing the entirety of their bond allocations. Delaware, Nevada, and Puerto Rico have all issued 100 percent or more of their allocations (percentages shown in the table over 100 are likely due to rounding). Connecticut has issued 97 percent of its $210.2 million in bonds. These states likely have a high need for school construction and renovation and the necessary political capital and infrastructure to get these projects started.

But many school districts have not been able to find investors for the bonds they were allocated. In fact, according to the data, 10 states have issued less than 25 percent of their total bond allocation. Four states – Hawaii, Mississippi, New Hampshire, and Wyoming – have not issued any of the bonds. This slow distribution of bonds can reflect many factors including a lack of interest in or need for new school construction projects in some states and localities, difficulty in finding investors, or bureaucratic red tape holding back the start of construction and renovation projects. But it also suggests that subsidized bonds, and perhaps school construction in general, may not be the most efficient way for federal lawmakers to support education.

Clearly, the Qualified School Construction Bond program hasn’t been any easy program for school districts to tap. Nor has it been easy for policymakers to track. In fact, it just might be the least transparent federal education program in existence.

As the Obama administration makes the case for another round of school construction funding, the president needs to make good on his promise from the first round – that it would be the most transparent federal spending ever enacted.

NPR recently ran a two part series about the racial wealth gap – the economic divide between white families and Black and Hispanic families that stems from disparities in wealth (income and assets minus any debts). Both pieces illustrate how assets make the difference between financial stability and perpetual economic insecurity. Assets provide a cushion to fall back on during difficult times as well as a vehicle of economic mobility.

According to a recent article in The Chronicle of Higher Education, the U.S. Department of Education is planning to crack down on “Pell runners.” A Pell runner is “a scam artist who bounces from college to college, staying just long enough to receive a Pell Grant refund,” the newspaper reports.

The Education Department is absolutely correct to go after these individuals. Their actions not only hurt the federal fisc, but, if left unchecked, could undermine public and political support for this vital program over the long run.

There is, however, another group of “Pell runners” who may be even doing greater damage to the program’s long-term viability, but are coming under far less scrutiny. We are talking about public and private four year colleges that receive large amounts of  Pell Grant funds but use their institutional aid dollars to attract the students they desire, rather than to meet the financial need of the low-income students they enroll.

As we’ve said before, colleges that engage in financial aid leveraging to buy the best and/or wealthiest students are undercutting the Pell Grant program’s mission of making college accessible and affordable for low-income students. These institutions are, in fact, adding extra hurdles for Pell recipients to succeed, by loading them up with heavy loads of debt, including high-cost private student loans.

Judging by several reports that have been released over the last month, this problem is only getting worse and worse.

The country is facing a serious debt crisis that threatens to undermine our economic recovery. No, not that one. American households are carrying around $11.4 trillion of debt.

States and local school districts have long called for more flexibility in the Elementary and Secondary Education Act (ESEA), whose latest rendition is No Child Left Behind. Last month the House Education and the Workforce Committee proposed a solution by advancing the “State and Local Funding Flexibility Act.”

Federal policymakers have long recognized the importance of raising the college aspirations and improving the academic preparation of students from low-income families so they can enroll in and succeed in college. However, the multiple college outreach and early intervention programs that the government currently supports suffer from significant overlap and redundancies.

To achieve this goal more effectively, policymakers need to develop a more coherent and coordinated strategy than what currently exists. But before they can start, they need a better understanding of the current programs to identify what is working and what is not. To help with this effort, we are taking  a closer look at the strengths and weakness of each of the programs.

Today, we will start by examining Talent Search, which aims to help disadvantaged middle-school and high-school students who have “college potential” pursue a higher education. Talent Search, which is part of the federal TRIO programs, has a long track record of helping highly-motivated low-income students prepare for and enroll in college and apply for federal financial aid. But by focusing on students who are already likely to attend college, the program provides little assistance to low-income students whose potential has not yet been recognized.

Congress established Talent Search in 1965 as part of the original Higher Education Act. Today, the program, which has an annual budget of around $142 million, serves nearly 360,000 students, three quarters of whom are both low-income and the first in their families to go to college. More than two-thirds of the participants are in high school, with most entering the program in the ninth or tenth grade.

The colleges and community agencies that run these projects recruit students based largely on recommendations from guidance counselors and teachers. As a result, the participants tend to be students who have clearly demonstrated that they have more academic potential and motivation than their peers.

The projects provide information and counseling to students, and help them fill out applications for college admissions and financial aid. Participating students go on trips to college campuses and get help preparing for college-admissions tests. In addition, many of the projects provide tutoring to participants struggling in core subject areas.

The program typically takes a “pull out” approach to delivering its services, meaning that project staff members generally pull students out of their classes to meet with them. A large-scale evaluation of the program that Mathematica Policy Research Inc. conducted for the Department of Education in 2004 said that this approach has proven to be “problematic,” and “by some accounts was becoming increasingly so.” With schools under pressure “to ensure students meet certain academic standards” and pass state exams, some teachers are reluctant “to release students for extracurricular activities such as Talent Search,” the evaluation stated.

Overall, Talent Search is considered to be a “light touch” program in that it offers a limited number of services to individual students, and participation in most of the activities is optional. The program spends on average $394 per student, which is by far the lowest of all the government’s college outreach programs. In contrast, the far-more intensive Upward Bound program, which is also part of TRIO, costs nearly $5,000 per participant in federal funds.

Some researchers who have studied Talent Search have questioned the effectiveness of its “low intensity” approach, noting that nearly half of the high schools students who participate receive less than 10 hours of service from the program each year. “Overall, the program still adheres to the original assumption that small amounts of service, delivered at crucial times, can make a difference in students’ decisions concerning college preparation and enrollment,” Mathematica’s 2004 evaluation states. “However, there is no solid evidence on which to judge whether the light touch program model is effective overall or for various subgroups.”

A more recent Mathematica evaluation of Talent Search projects in Florida, Indiana, and Texas produced more promising results. That study, which was published in 2006, found that students participating in the program were significantly more likely to complete high school, enroll in college, and apply for financial aid than non-participants in all three states. For example, in Texas, participants in Talent Search were 14 percent more likely to complete high school, 18 percent more likely to enroll in college, and 28 percent more likely to apply for federal financial aid than their peers. The study’s authors were uncertain, however, about how much credit to give the program for these achievements, especially in the area of high school completion. “If Talent Search staff targeted students with higher college aspirations than otherwise similar students, the analysis will overestimate the effects of participation on outcomes,” the evaluators wrote.

At Ed Money Watch, we have argued that if policymakers believe that raising the college aspirations and improving the academic preparation of disadvantaged students continues to be a valid public policy goal, they need to develop more effective strategy than what currently exists. To do so, it is important they understand the strengths and weaknesses of the existing programs.

Based on our research, here are what we believe to be Talent Search’s most promising aspects:

• A long track record of helping low-income students who have shown academic promise and have college aspirations achieve their goals

• A relatively low cost to the government

The program, however, has a number of significant drawbacks that limit its scope and reach:

• By serving students predominantly in high school, the program is missing an opportunity to have a greater impact. This is important because many higher education researchers agree the middle school years are a crucial time for students to develop college aspirations and to start taking the appropriate courses. Getting low-income students on the college track as early a possible appears to be critical in determining whether or not they pursue a higher education.

• By focusing on students with “college potential,” the program offers little help to disadvantaged students whose potential has not yet been recognized

• The program’s “light touch” may not be effective in helping students who are not already motivated to go to college.

• The program’s pull-out approach to delivering services can be disruptive for participants.

Stay tuned in the coming weeks as we take a closer look at the government’s other college outreach and early intervention programs.