• Bell Wilkins

K12 Finance Fundamentals: The Tricky Part of Title I

This post draws upon the research of Kevin Carey and Marguerite Roza.

In a previous post, we discussed how schools receive funding from local, state, and federal funds. This begs the question: with so many funding sources in the world’s wealthiest nation, how can K12 school finance be so inequitable? The answer requires more closely examining funding policies at all levels. In this post, we’ll start by taking a closer look at Uncle Sam (who we will refer to interchangeably with the federal government), and one of his best-known programs: Title I.


Title I Funds

To review, Title I funds are allocated to schools to support low-income students. Local education agencies (LEAs) receive Title I money based upon whether their total student population has a certain percentage (or number) of students who qualify for free or reduced-price lunch. The LEAs then distribute that money to schools based upon each school site’s demographics.


If the school has fewer than 40% economically-disadvantaged students, then Title I funds are required to be targeted, meaning they are only used to support students who are failing (or at risk of failing) to meet academic standards. If a school has a population that is 40% or greater economically-disadvantaged, the funds can be used to support that school’s entire student body. About half of public schools fall into each category, and though the $16 billion in Title I money distributed nationwide in 2019 may seem massive to anyone except Jeff Bezos, in reality, it’s about $640 per student served— just 5% more than the $12,600 the US spent per-pupil in 2020 regardless of their school’s Title I status. Title I funds are often used for teacher salaries, professional development, additional instructional staff, and summer programs to help prevent learning loss.


Note that these policies mean that the students who receive support through Title I funds are not necessarily low-income themselves. While the funding is dependent upon an LEA’s demographics, it has no ties to an individual student’s socio-economic status. In the fiscal year 2020, Title I funds supported 25 million (!) public school students— about 50 percent (!!) of all public school students in the United States. This was the case even though, according to the latest data, only 11.6 million students were counted as “formula-eligible” for Title I. Interestingly, while one may expect each student to elicit a standard dollar amount from the federal government, Uncle Sam actually decides how much money to allocate based on how much money these students already receive through state and local funds.


The rationale: if state and local governments spend more to educate students in certain areas, then students in these areas may be more expensive to educate due to higher costs—an index which takes into account educator salary differences, cost of living, pension costs, etc. So, to “level the playing field,” these areas with higher costs will need more federal money to educate their students appropriately.


Seems reasonable, right? Some states certainly have higher costs of living. Some students, such as English Learners and those with disabilities, certainly cost more to teach on average, and state funding formulas do take those additional costs into account. But here’s the catch: the money each state spends on students is influenced by the wealth of that state more than it is by the costs of educating a child in that state. As a result, large disparities in school funding aren’t necessarily remedied when Uncle Sam enters the picture through Title I.


This is pretty tricky, but fear not: Team Edstruments has created a brief example to clarify.

Imagine the country Melontopia has two states, Honeydewy and Cantaloupa. Assume that:


1. Both states use seeds as currency


2. Honeydewy has a per-capita-income 75% higher than Cantaloupa’s, and its costs are 30% higher than Cantaloupa’s


3. Melontopia ties the amount of federal funds schools receive to the amount of state and local funds those schools receive (just like the US does through Title I)

As you can see, even before the federal government of Melontopia distributes funds, Honeydewy can spend disproportionately more per student— it is allocating 80% more than Cantaloupa even though its costs are only 30% higher (based on our assumptions). This is possible because Honeydewy’s higher incomes generate greater state wealth.


After the federal Melontopian government distributes funds, that gap barely budges: Honeydewy spends 75% more than Cantaloupa on students, even though their costs-of-living are only 30% higher. Indeed, Honeydewy’s superior spending per-student is much more a reflection of its greater wealth than its higher costs of education inputs (teachers, buildings, etc.). Furthermore, while the percentage difference in spend decreases from 80% to 75%, the gap in total dollars spent per student grows larger after federal intervention.


The data in this fictional example may seem cherry-picked, but they actually mirror those of Connecticut (one of the wealthiest states) and Mississippi (one of the poorest). Connecticut’s costs of education are 32% higher than Mississippi’s, but its per-pupil spending is 120% higher. (The cost of hiring teachers and providing high-quality education can’t reasonably be considered over twice as high in the Nutmeg state as the Magnolia state, but that’s a post for another day.) As a result of these spending amounts, Title I widens the gap by allocating more money for low-income students in Connecticut than it does for low-income students in Mississippi— just as we saw in Melontopia.


Tellingly, Connecticut’s 2019 per-capita income was 102% higher than Mississippi’s—much closer to the 120% spending-disparity than the 32% cost-disparity between the states.


Coincidence? We (and expert scholars who have studied this for years) think not.


To recap, the federal government systematically disadvantages poor states by assuming the inputs in their education cost less, and then further assuming this means the poorer states need less money. Wondering if this is the logic Uncle Sam uses for all its anti-poverty programs? Spoiler alert: it is not. Look no further than Medicaid, which uses an approach the opposite of Title I’s; to promote health equity regardless of state wealth, relatively poor states (based on per-capita income) receive more funding than wealthy ones.


The authors of the original paper wrote it best: Only Title I penalizes states for being poor.

If the federal government wants to promote equity, it should revisit the cost-adjusted disparities between states, then use them to revise the Title I funding formulas to ensure poorer states don’t continue pulling the “short end of the stick.” Unfortunately, a notoriously divided congress and a catastrophic global pandemic make it hard to imagine Uncle Sam taking action in the foreseeable future. This means the best thing education leaders can do to promote equity through Title I funds is ensure effective allocation at the individual school level— something Edstruments makes possible through its flagship platform. Our journey to Melontopia is only a small piece of the tricky web of school funding. Be sure to subscribe so you don’t miss a beat as we further explore how schools are funded (or underfunded) both historically and in the age of COVID-19.

Edstruments exists to equip education leaders with the knowledge and tools to most effectively and equitably serve their students. To learn more about how we can help your school administrators make better financial decisions, email us at hello@edstruments.com or fill out the contact form on our main website.

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