Ed Money Watch

Early Ed Watch: Cost-Effectiveness and Trade-Offs in Early Education

Lindsey Luebchow — Fri, 16 May 2008 14:00:00 -0400

Over at our sister blog, Early Ed Watch, Sara Mead has a post on two new studies that try to estimate the cost of high-quality early education. She looks at the trade-offs that policymakers must make between different types of early childhood investments, as well as between quality and quantity for any given early childhood investment. Definitely worth a read:

Two new studies released this week aim to help policymakers make sound choices about early education investments.

In Meaningful Investments In Pre-k, researchers from the Institute for Women’s Policy Research estimate what it actually costs to provide quality pre-k programs. To estimate the costs of quality pre-k programs, the IWPR researchers identified the characteristics of high-quality pre-k programs—qualified teachers, small class sizes, appropriate educational materials, and so on—and arrived at research-based estimates of what it actually costs, on a per-child basis, to provide those things. They also estimated the cost of appropriate facilities and of state-level support and oversight infrastructure needed to ensure pre-k quality.

The researchers estimated the cost of pre-k at a variety of quality levels, varying quality in terms of both teacher qualifications/compensation and class size. They also estimated the difference in costs of half-, full-, and extended-day programs. Estimates ranged from a low of $3,214 dollars per child, per year for half-day pre-k programs taught by teachers with a CDA (a child development credential that is less than an associate’s degree) in classrooms of 20 students, to a high of $13,649 per child, per year for extended-day pre-k programs, taught by bachelor’s degree teachers paid under public school salaries, in classrooms of 15 students.

For more, click here.

Promising Proposals for Funding and Accountability in New Mexico

Lindsey Luebchow — Wed, 14 May 2008 14:00:00 -0400

The New Mexico legislature has been working to increase and better target K-12 education funding to school districts with high-need students. Governor Bill Richardson and the legislature appointed a Funding Formula Task Force in 2005. The Task Force commissioned a comprehensive study of New Mexico’s public school funding formula, including an estimate of how much it would cost the state to provide a "sufficient" education to all students.

The American Institutes of Research released the New Mexico funding study in January, and concluded that "sufficient" state funding for education would require an increase of $335 million ($1,034 per-pupil), or 14.5 percent above the current $2.5 billion in spending. When the legislative session ended in March, the legislature was in the middle of considering legislation to boost spending and overhaul the state funding formula. This week, the Legislative Education Study Committee is meeting to discuss the impact of the proposed formula.

New Mexico included a critical step in this process that other states have too often left out: accountability. Without accountability, there is no way to ensure that school districts use increased funds efficiently and effectively. Any sustainable argument for additional resources requires accountability.

New Mexico, in contrast, has embraced the need for accountability measures, as Michael Rebell noted on his blog EdFunding Matters. One of the funding study's recommendations was that the state require districts to align their spending plans with their current "Educational Plans for Student Success (EPSS)." An EPSS is a strategic plan developed by every school district and individual school in New Mexico that "sets clear goals, implementation strategies and evaluation measures" for student achievement and school improvement. They include achievement benchmarks for NCLB reading and math tests and specific strategies and interventions for reaching those benchmarks. The new legislation would expand the EPSS to include achievement in other areas, such as career and technical education and special education.

The EPSS system appears to be similar to the Contracts for Excellence in New York, an accountability program that was put in place after the New York legislature approved a significant increase in state education funding last year. 55 New York school districts—those that have schools in need of improvement and receive a certain amount of the new state aid—have filled out Contracts for Excellence. The Contracts require districts to target their new funds to at-risk students and proven programs, to set performance targets for improvement, and to publicly report the results.

In moving forward with any new state funding plan, New Mexico—and all other states—should wholeheartedly embrace and emphasize accountability in a fashion similar to New York. Individual district accountability plans give school districts the flexibility to define their own goals and to select the best route to achieve them. But the state retains the power of quality control, as it must approve and monitor how the district chooses to spend its funds. And there must be total transparency for the public about the spending choices and results.

Unfortunately, a few school officials in New Mexico have already started to express concerns that any revamped EPSS system would be too much of an administrative burden.

Here’s a warning to those officials: if you want more money on a consistent basis, year after year, it would be extremely wise to accept and support increased accountability measures. If schools don’t prove to the public and the state legislature that the new money is producing results, lawmakers will take it back much faster than they gave it up.

Investing in Children

Heather Rieman — Wed, 07 May 2008 14:00:00 -0400

We hear a lot of rhetoric from politicians about how America's future depends on investing in our children. But this rhetoric is not translating into spending realities. A new report from First Focus, "Children's Budget 2008," provides information on federal spending for children's programs. The report slices the data in a number of different ways, but the overall theme is that the federal government is not prioritizing children when it comes to allocating resources.

The report indicates that federal domestic discretionary spending on children in 2008 was only about 10% of all non-defense spending (a 23% decline since 1960). That's a pretty surprising number when you think about it—it means that as a nation we spend only 10 cents of every discretionary dollar on children.

Recent budget decisions have only exacerbated the downward trend. In the last five years, domestic spending on children's programs has decreased by 6.7%. While mandatory spending on children increased by 5.7% in that time period, overall federal spending was increasing at a much faster rate (almost 10%), meaning that other types of spending are outpacing spending on children. Of all the new real non-defense spending in the past five years, only one penny of every dollar has gone toward children's programs.

Lower Priority for Education Funding

For those who believe education is a sound investment in the nation's future, the news is not good. According to the report, spending on children's education has been relatively flat in real terms, and declined by 9.9% over the last 5 years when adjusted for inflation. (Although we'd be remiss if we did not point out that using a 5 year period doesn't capture increases in education funding from 2001-2004).

Over the long term, funding levels that do not keep up with inflation have real consequences for education programs and students. They can mean fewer teachers in the classroom, fewer early education services through programs like Head Start, and less money to provide the type of support that students with disabilities and from low-income backgrounds need to succeed.

Funding for children's education has also declined as a share of total federal spending. From 2004 to 2008, the share of federal spending on education fell from 2.2% to 1.8%. As a percent of the national Gross Domestic Product, federal spending on children's education dropped from 0.43% of GDP to 0.35%. Spending on children has not kept up with overall economic growth, raising the question: How much continued economic growth will the nation enjoy if we do not sufficiently invest in education and human capital, which drive that economic growth?

Where's the Money Going?

If children's issues are not the priority, what is? Where is the money going? Clearly, increased spending over the last couple of years has funded the war in Iraq. But that isn't the only answer—even with defense spending excluded, the share of federal spending on children's programs has decreased.

The report doesn't delve in to the government's spending priorities, but a larger and larger portion of federal spending is going to fund programs for the elderly. Social Security and Medicare are taking up an ever increasing share of federal funds. As baby boomers age, the number of elderly Americans will only increase, setting up a generational war over resources that is already starting to play out. With children lacking money and the ability to vote, it's not hard to foresee where this is headed...

There's more to come about this issue in future Ed Money Watch blog posts as we keep track of the generational funding wars and what they mean for education funding.

Clueless about Education Spending? You're Not Alone

Lindsey Luebchow — Thu, 01 May 2008 20:00:00 -0400

Most Americans do not know how much their local school districts are spending on education, according to a new national survey. This isn't a surprise to Ed Money Watch. Poor understanding of education expenditures spurred the creation of our Federal Education Budget Project. But what does surprise us is the size of the misinformation gap: Americans vastly underestimate per-pupil expenditures, by $6,122 on average.

Education Next and the Program on Education Policy and Governance at Harvard conducted a survey in 2007 of a nationally representative sample of 2,000 American adults. They asked the question: "Based on your best guess, what is the average amount of money spent each year for a child in the public schools in your school district?" Then they matched those answers to the actual per-pupil expenditures of the respondents' districts.

The average per-pupil expenditure of the districts in the sample was $10,353 (slightly higher than the actual national average of $9,435). The average estimate collected by the survey was $4,231, and the median estimate was only $2,000. More than 40 percent of the respondents guessed that their districts' per-pupil expenditures were $1,000 or less.

Then, in an attempt to make sure the respondents understood the full range of costs included in per-pupil expenditures, the survey gave a prompt to half of the respondents: "Individual student costs go toward teacher and administrator salaries, building construction and maintenance, extracurricular activities, transportation, etc." While the average estimate did increase by about $1,000 to $5,262, it was still off by $5,138. And the median remained at $2,000, and more than one-third of the respondents still guessed less than $1,000.

The survey also uncovered large underestimates for teacher salaries—actual salary spending was $47,424 per-teacher on average, while the respondents' average estimate was $33,054. Not quite as far off as the expenditure guesses, but still underestimated by 30 percent (vs. per-pupil expenditures underestimated by 59 percent without the prompt and 50 percent with the prompt).

We started our Federal Education Budget Project to dispel myths about education spending by distributing facts and data. A large part of this effort involved creating an interactive website that allows anyone to look up federal funding, achievement, and demographics data for every school district in the country. This new survey highlights the need to better inform parents and taxpayers about the realities of expenditures on schools.

Check out http://www.EdBudgetProject.org/ to look up your school district's per-pupil expenditures, including how much it receives from the federal government in Title I funding for low-income students and IDEA funding for students with disabilities. You can compare your district to others in your state, and you can compare your state to the nation. The results are often eye-opening.

Encouraging Spending on Parental Outreach for SES

Lindsey Luebchow — Mon, 28 Apr 2008 15:00:00 -0400

Many low-income parents with children in low-performing schools are not taking advantage of free tutoring available to them under No Child Left Behind. Under NCLB's "Supplemental Educational Services" (SES) provision, school districts that fail to meet academic benchmarks for three years must set aside part of their federal Title I grant to provide outside tutoring—but only a fraction of eligible students are using the program.

The Department of Education is trying to figure out how to increase take-up rates for the SES program. As part of a package of new NCLB regulations, the Department proposed this week that districts should be able to use part of their SES funding set-aside to conduct outreach activites to educate parents about the program (this currently isn't allowed). This is a logical, beneficial addition to the SES provision that hopefully will encourage districts to implement more intensive, effective ways to inform parents about SES.

Low Levels of SES Participation...

In the 2003-04 school year, 1,377,000 students were eligible for SES (eligible students are low-income students who are enrolled in schools that have failed to make Adequate Yearly Progress (AYP) for three consecutive years). But only 233,000 of those students—a mere 17 percent of eligible students nationwide—participated in SES, according to the most recent National Assessment of Title I.

Other studies of individual states and districts have found similarly low participation rates. While the overall number of students participating in SES has increased in recent years, this is a result of the rising number of failing schools and eligible students, not take-up (see graph to right).

...and Spending

NCLB requires school districts to set aside 20 percent of their Title I grants for SES and school choice (low-income students can also choose to transfer to another school after two years of AYP failure by their school). Administrative costs, such as parental outreach, cannot be included in the 20 percent. If a district does not spend the entire 20 percent set-aside—either because not enough students are eligible or because not enough students choose to participate—it can reallocate the remaining funds to other Title I activities.

A GAO report estimated that districts nationwide spent 42 percent of the total amount set aside for SES in 2004-05. Of course, spending on SES varies from district to district, and in some districts—primarily large, urban districts with significant numbers of failing schools and eligible students—the demand may exceed the funding available for SES. But this is not the norm (in this case, districts must prioritize the lowest-achieving students). In 2004-05, the GAO estimated that 16 percent of districts could not provide SES to all students who requested it with their 20 percent set-aside. In the majority of school districts, SES funds are under-utilized, allowing districts to redirect the unused SES money to other purposes.

Increasing Participation Takes Effort, and Money

Free tutoring should be an appealing option to most parents, so why does only one out of every five eligible students nationwide take advantage of the SES program? Most case studies find that the main obstacle is inadequate parental outreach and engagement.

NCLB requires districts to "promptly provide to a parent or parents (in an understandable and uniform format and, to the extent practicable, in a language the parents can understand) of each [eligible] student...an explanation of the parents' option to obtain SES." This typically means that districts send a letter to parents of eligible students at the beginning of the year.

These letters often fail to explain the SES option in a clear, understandable way. And in some cases they are lost because of high mobility rates for low-income families. In addition, parents can find the task of choosing a SES provider and filling out the requisite paperwork overwhelming. Because districts cannot include administrative costs in their 20 percent set-aside spending, many are discouraged from taking more extensive and effective, but also more expensive, actions to notify parents.

For example, some proactive districts have used a variety of strategies to increase SES take-up. They have: called, visited at home, or held meetings at school with parents; hosted informational events such as SES fairs at which parents can explore provider options; worked with outside community organizations or churches to raise awareness; bought advertisements on radio, television, or billboards, etc.

Given the widespread information problems, it's commonsense to allow districts to use a small portion of the 20 percent set-aside to figure out how to engage more parents and students. The Department proposes allowing districts to spend up to 0.2 percent of the overall Title I grant on parental outreach, or 1 percent of the 20 percent set-aside. In addition, districts that are under-utilizing their SES and school choice funds should be given other options to support low-income children in failing schools: for example, New America's Early Education Initiative, has proposed allowing districts to spend part of this money on high-quality pre-kindergarten for 3- and 4-year olds.

The Department recognizes that many low-income students in low-performing schools are not getting the additional academic support envisioned by NCLB. Encouraging districts to spend more money on parental outreach is a positive step toward reaching more of these students. Next up is accountability: the Department needs to show, conclusively, that this significant federal investment in SES is having a positive effect on student achievement. More to come on SES effectiveness from Ed Money Watch.

Tired of Waiting for Reauthorization, the Department of Education Regulates

Lindsey Luebchow — Thu, 24 Apr 2008 17:00:00 -0400

On Tuesday, the Department of Education unveiled a new set of proposed regulations on No Child Left Behind. The major announcement was details about the new, uniform graduation rate formula that all states will have to use for NCLB accountability purposes going forward. In addition, the Department outlined new requirements for district implementation of the Supplemental Educational Services (SES) provision.

In general, the proposed regulations focus on greater transparency for what's already happening in each state. At a briefing in Washington D.C., U.S. Deputy Secretary of Education Ray Simon said that the Department wants to make sure states and districts can justify what they are doing on assessment and accountability. He also raised concerns that districts are not adequately implementing NCLB's restructuring and SES requirements, and said that the Department wants to detail and reinforce what is already required by the law.

Here's a quick summary of the new proposed regulations, which were published today in the Federal Register and will be open for comment for 90 days:

Uniform Graduation Rates

By 2012-13, states, districts, and schools would have to use a "cohort graduation rate" formula, consistent with the National Governor's Association's formula.
Because it will take time for many states to collect the necessary data, they would have to use an "averaged freshman graduation rate" (AFGR) in the interim.

Adequate Yearly Progress (AYP): States currently require schools to show some improvement (generally only a minimal amount) in graduation rates in order to make AYP under NCLB. The Department wants to require that states set a specific goal and a timeline for improvement in graduation rates.

Disaggregation: By 2012-13, states would also have to report disaggregated graduation rates and use them in AYP calculations. In the meantime, disaggregated AFGR rates would have to be reported; however, because the AFGR is not accurate enough for small data groups, disaggregation would not be used for accountability purposes at the school level until the more accurate rate is available.
Transparency & Clarification
"N" Size: States are currently allowed to set their own minimum subgroup sizes ("N" sizes) for AYP reporting. The Department is concerned that too many students are being excluded in some states with large N sizes, and proposes requiring states to justify their N sizes and other technical AYP components in their accountability workbooks. These explanations would then undergo a peer review.

Restructuring: The Department wants to clarify school restructuring requirements, which it believes aren't being effectively implemented. Districts would have to show that schools in the restructuring phase are receiving much more comprehensive, tailored interventions than schools in earlier, corrective action phases.
Supplemental Education Services and School Choice
Parental Notification: Schools would have to notify parents of their school choice options at least 14 days before the start of the school year. When schools send out notices of SES eligibility, they would have to be "clearly distinguishable" from other NCLB information.

State Approval and Monitoring: The Department wants states to provide more information about how they approve and evaluate SES providers. In addition, the Department wants to expand the list of factors that a state must take into account when approving or monitoring the effectiveness of providers.

Title I Funds: Districts are not allowed to count the costs of parental outreach towards the 20 percent of their Title I grant that must go to SES and school choice. The Department proposes permitting districts to count those costs, up to 0.2 percent of the total Title I allocation. In addition, districts would have to prove that they have sufficiently exhausted SES and school choice opportunities before they could reallocate any remaining funds to other purposes.

Taming Maine's School Governance Hydra

Lindsey Luebchow — Wed, 23 Apr 2008 14:00:00 -0400

The Maine legislature passed a school district consolidation plan last week—but in a form dramatically watered down from Governor John Baldacci's original proposals. Maine has one of the most complicated, decentralized school governance systems in the country, and as a result spends far more than the national average on school administration.

By reorganizing the system into larger districts (while also maintaining a degree of local control), the consolidation legislation could lead to a much more efficient system that sends more education funds directly to Maine's classrooms—but only if Maine's school districts agree to participate. Ed Money Watch hopes that local communities will recognize the benefits of consolidation as they decide whether or not to adopt the legislation's reforms.

Maine is an Administrative Mess

Take a look at Maine's school districts in New America's Federal Education Budget Project database, and you'll get an idea of how confusing and inefficient the current system is. Maine's public education system encompasses a variety of different administrative units: municipalities, school administrative districts (SAD), community school districts (CSD), regional school unions. The SADs are groups of municipalities that pool their resources into a school; the CSDs are another type of group of municipalities that pool a different set of resources; the unions are groupings of school administrative districts that share only the costs of a superintendent and the superintendent's office, but maintain their own separate budgets for everything else. And they are all called "districts."

Confused? So are we. We ran into numerous difficulties attempting to figure out how federal funding is distributed to these various units for the EdBudgetProject.Org database (not to mention their demographics, student achievement, etc). One district (Monhegan Plt School Department) enrolls only seven students, and many others enroll between 10 and 20 students. To be sure, some Maine school districts are small because they are located in rural, geographically isolated areas where few people live. But other districts are simply smaller than is necessary or efficient. Because these districts spread fixed educational costs, such as administration and facilities, over so few students, they take money away from the classroom.

According to Education Week, there is one school district administrator for every 750 students on average nationally. In Maine, there is one district administrator for every 350 students. Maine spends $346 per student for administration—compared to the national average of $195 per student.

Cost-Saving Proposals

Numerous reports demonstrate that Maine's sprawling school administrative system needs reform, and that reorganization could produce substantial cost savings. When Governor Baldacci entered his second term, he made this reform a priority. His original consolidation proposal would have reduced Maine's school system from 290 administrative units to 26 regional districts, and put the savings back into schools.

This mandatory consolidation plan encountered great resistance across the state, because many residents feared losing local control of their schools. Over the past year Baldacci worked with legislature to alter the plan to make it politically viable. Many, many iterations later, the legislature finally passed a version last week. The legislation will eliminate financial barriers and disincentives that prevent small school districts from reorganizing and will create incentives for districts with fewer than 2,500 students to do so. In contrast to Baldacci's original plan, the legislation would make consolidation voluntary, rather than mandatory, and would not go as far in eliminating inefficient administration. Baldacci is not happy with the result, but he will likely sign it into law after the long battle.

Under the pending bill, local voters must approve any school district reorganization. Reorganization plans are developed locally by the participating districts, which can maintain some degree of local control over school governance. The participating districts negotiate the size and composition of the school board, and in addition to the board they can create "local school committees and specify their powers and duties." Districts that do not pursue consolidation must submit a plan to the state for reducing administrative costs. In addition, districts that don't reorganize will face financial penalties, specifically reductions in state funding and an increased chance of rejection for school construction projects.

Reorganization as a Positive Reform

Parents may be concerned about how reorganization into bigger schools may affect student achievement. One recent study found that there is no relationship between school district size and student outcomes in Maine. Moreover, parents should consider how the substantial cost savings will improve the academic opportunities at many schools, for example by freeing up funds to hire specialized teachers, buy advanced technology, etc.

Communities will have to approve reorganization plans by referendum by January 30, 2009. Ed Money Watch hopes that all local districts will develop plans for administrative reform, whether it be through reorganization or other economies of scale. Maine voters should set aside any knee-jerk responses to consolidation and seriously consider the benefits of reorganization.

Does Title I Funding Go Holy to Fund Private School Students?

Lindsey Luebchow — Thu, 17 Apr 2008 14:00:00 -0400

Pope Benedict XVI's first visit to the United States is spurring supporters of Catholic schools and the media to highlight the decline of and obstacles facing Catholic schools. Demographic changes, a reduced supply of priests and nuns to serve as teachers, and the aftermath of sex abuse scandals have acted to undermine Catholic schooling in many places. This attention to the crisis in Catholic education has also highlighted a little known fact: federal education programs provide support to educate low-income students not just in public schools, but also in private schools.

When spending federal money, school districts are required to provide equitable services to private school students and teachers. The Elementary and Secondary Education Act—Title IX, Part E, Subpart 1—enshrines this right to equitable services. Ed Money Watch will use the Pope's visit as an opportunity to clarify how federal funds are distributed to and spent on private school students and teachers (not private schools).

Title I Funds for Supplemental Instruction

NCLB requires school districts to evenly distribute their Title I funds among eligible, poor students in both public and private schools (those private schools that choose to participate). Districts do not distribute Title I funds directly to private schools (as they do for public schools), however, but rather use the per-pupil Title I allocation to pay for support services for private school students.

Typically, this means district provide supplementary instruction for private students, delived either by public school teachers or through a third-party contractor. For example, eligible students may receive targeted, pull-out sessions in school, in computer labs, or through outside counseling or tutoring. Districts have to consult with the private schools to design and implement a program that will meet the needs of the eligible students. Other Title I services and programs, such as professional development for teachers of Title I students, follow the same model, as does the Reading First program.

According to the most recent National Assessment of Title I, one percent of Title I funds in 2004-05 provided services for 188,000 private school students. Given that most of these students were likely in elementary school, this represents about five percent of the total 3.7 million K-8 private school population. In 2005-06, 16 percent of all private schools, and 37 percent of Catholic schools, reported participating in Title I (vs. 56 percent of all public schools in 2004-05).

Other Federal Money for Private School Students

Other federal elementary and secondary education programs are also subject to the same mandate of equitable services for private school students and teachers, because they are governed by the Uniform Provisions in Title IX, Part E of NCLB:

[The district] shall, after timely and meaningful consultation with appropriate private school officials provide to those children and their teachers or other educational personnel, on an equitable basis, special educational services or other benefits that address their needs under the program.

For example, when distributing its Title II teacher training funds, a district must provide the same professional development opportunities to public and private school teachers.

Private school students are also eligible to receive funding from the National School Lunch Program and Individuals with Disabilities Education Act (IDEA) grants. If students qualify for free or reduced price lunch (their family's income is below 185 percent of the poverty line), their private school can apply for cash reimbursements from the program for each meal served to an eligible student. Private schools approved by the Department of Education can receive federal IDEA funds from the district, proportionate to their share of special education students.

Under-Utilization of Federal Funds

While there is a fair amount of federal money available to private schools, particularly those serving low-income children, not all private schools take advantage of these federal funds. This means that the number of private school students eligible for federal support is higher than the number who actually receive federal services—and the amount of federal money going to private schools is lower than it could be.

There are several reasons why private schools do not make use of all available federal funding. First, federal money comes with a lot of federal requirements. For example, the School Lunch Program has nutritional requirements for its meals, and every school must adopt a wellness policy with nutrition goals. IDEA has specific "individualized education plan" (IEP) requirements for disabled students who receive federal funds.

In addition, some private schools choose not to expend the administrative effort necessary to obtain federal money. For example, for private school students to receive Title I services, their schools have to negotiate and set up arrangements with the district. And private schools must deal with state Departments of Education in order to receive school lunch reimbursements. Some private schools don't have the administrative capacity for this, and many conclude the money is worth the bother.

President Bush is convening a White House summit on inner city children and faith-based schools sometime this spring, at which these federal funding issues will likely be discussed. It's unlikely, however, that anything substantive will change with federal funding of private schools in the near future—unless John McCain decides to make increased federal support for private schools a part of his campaign agenda.

Navigating the Rocky Road of School Improvement Funding

Lindsey Luebchow — Tue, 15 Apr 2008 15:00:00 -0400

As the number of schools identified for school improvement, corrective action, and restructuring under the No Child Left Behind Act continues to increase, states are under increasing pressure to improve student performance in these schools. Yet a new report from the Government Accountability Office finds that a little-known funding provision in NCLB is undermining state efforts to turn around low-performing schools.

The 4% Set-Aside vs. the Hold Harmless Provision

Under NCLB, schools that fail to meet state achievement benchmarks—otherwise known as Adequate Yearly Progress or AYP—for two consecutive years enter "school improvement" status. NCLB requires states to set aside four percent of their Title I funds to support school improvement activities—such as professional development, new curriculum, extended learning time, or full-scale restructuring—in these schools.

Yet many states are not able to reserve the full four percent of their Title I funds for school improvement, because a separate provision of the law prevents them from doing so. NCLB includes a "hold-harmless" provision that prevents states from reducing a school district's Title I funding more than 5 to 15 percent below the previous year's level as a result of the set-aside. States have to fulfill this obligation before reserving any funding for school improvement.

Title I funds are allocated to school districts through a formula that is based primarily on the number of poor children they enroll. The hold-harmless provision protects school districts from Title I funding cuts if their proportionate share of poor children declines. In practice, that means giving more money to such districts than the Title I formulas would allocate otherwise. After meeting hold-harmless requirements, some states have less than four percent of Title I funds left over to support school improvement.

The Result: Less, Unpredictable School Improvement Funding

According to a new report by the Government Accountability Office, 22 states have not been able to spend the full four percent of their annual Title I allocations on improvement activities for at least one year since 2002. A separate, earlier report by the Center for Education Policy found that 29 states would be unable to meet the four percent set-aside in 2007-08.

In theory, states should spend four percent of their Title I funds—a total of about $500 million out of the $12.8 Title I appropriation for fiscal year 2007—on school improvement. But the Center for Education Policy estimates that $192 million of that $500 million will be lost because of the hold-harmless provision.

Moreover, the amount of money states have to spend to satisfy hold-harmless requirements is unpredictable from year to year, depending on the amount of money that Congress appropriates for Title I and demographic changes across and within states. This instability makes it difficult for low-performing schools to implement coherent, long-term school reforms, as the amount of money they receive to support these efforts often fluctuates each year. Some states have compensated by finding other funding sources for school improvement activities. For example, states have used federal funds from the Comprehensive School Reform program, Reading First, and Improving Teacher Quality State Grants to support school improvement efforts. In addition, 17 states have used their own funds to help sustain improvement activities in low-performing schools.

Eliminating the Hold Harmless Provision

The Department of Education has recognized these problems with the four percent set-aside. The administration's 2007 budget request proposed eliminating the hold-harmless provision so that federal school improvement funding would stabilize at four percent of overall Title I funding.

As the GAO report points out, there has been little analysis of how the hold harmless provision affects different types of school districts. The Department claims that the provision is keeping too much federal money in lower-poverty school districts, and harming high-poverty, low-performing districts by leaving less money for them and for school improvement activities.

But this is all hypothesis. For years hold harmless provisions in Title II of NCLB protected districts throughout Mississippi from experiencing dramatic funding declines, whereas low-poverty but high-growth districts in California were slated for increases. GAO recommends that the Department of Education "develop an analysis comparing the characteristics of districts that contribute to the set-aside with those protected by the hold-harmless provision." The Department agreed with this recommendation. Congress will need to address this issue when it resumes reauthorization of NCLB legislation—and the Department must ensure it has the facts and data to make informed decisions about these policies.

A Separate School Improvement Funding Stream

The fiscal year 2007 budget also provided funding to support "School Improvement Grants" to states to supplement the four percent set-aside. Although NCLB authorized these grants, the Bush administration did not request funding for them until fiscal year 2007. Congress funded the program in fiscal year 2007 at $125 million and increased funding to $491 million in the current fiscal year. In order to receive the grants, which are distributed in proportion to each state's Title I allocation, states must submit an application and meet some additional reporting and accountability requirements.

As the four percent set-aside shrinks in many states, School Improvement Grants are an important source of additional federal funding needed to sustain school improvement activities in low-performing schools. The Bush administration has requested level-funding for this program in fiscal year 2009—even as the number of schools in school improvement status rises (8,400 in 2004-05 to 10,700 in 2006-07). In the near term, Congress must continue to fund, and possibly even expand, the School Improvement Grants program. It must also make sustained funding to support school turnaround efforts a key priority in the NCLB reauthorization.

What's Behind Standardized Graduation Rates? Data System Investment

Lindsey Luebchow — Wed, 09 Apr 2008 17:00:00 -0400

Last week Secretary of Education Margaret Spellings announced that the Department of Education will begin requiring all states to use the same method to calculate high school graduation rates. NCLB already requires states and high schools to report graduation rates, but it allows states to craft their own formulas to do so. The result: states inevitably found ways to inflate graduation statistics. And the state-by-state patchwork of methods used makes it impossible to compare graduation rates across states.

Spellings' announcement is an important, smart move following years of pressure from education and civil rights organizations to improve graduation rate data. Without comparable, meaningful data to expose low graduation rates, states can continue to ignore the drop-out crisis that is plaguing low-income communities—especially in urban areas—around the country.

But Spellings' announcement also raises some important questions: Do states have in place the data systems they need to calculate new, standardized graduation rates? And, if not, how will they pay for new state data systems? So far, neither Spellings nor news articles covering the new regulations have addressed these issues in any detail.

Where State Data Systems Stand

The first step toward accurate graduation rates is a student unit record data system that can track individual students. These systems assign a unique identification number to each student in the state, so that the state can follow individual students from the time they enroll in ninth grade through high school graduation—even if they transfer between schools or school districts.

An accurate graduation rate formula (such the one adopted by the National Governor's Association, which appears below) measures the percent of students from an entering ninth grade cohort who graduate with a standard diploma in four years. This is commonly known as a "cohort" method of calculating graduation rates.

According to the results of a 2007 survey by the Data Quality Campaign, 36 states have the full data system capability to calculate this formula. Seven other states have student unit records in place, but lack a robust data audit system. Robust audit systems ensure that districts report valid dropout data, and they are necessary to remedy past documented problems with unreliable district reporting.

All 43 states that have already invested in data systems to track individual high school students should be prepared to comply with new federal graduation rate measures within the next four years. Some states that implemented these data systems only recently may need time to accumulate four years of student data (from the time the first ninth grade class enrolls until they complete 12th grade) to calculate a cohort graduation rate.

But seven states that don't have the necessary data infrastructure to calculate accurate graduate rates are going to have to play catch up—and that will likely be expensive.

Laggards Face Data System Costs

The exact costs of establishing a student unit record data system depend on the data infrastructure a state already has in place, but they are substantial. The Data Quality Campaign estimates that putting in place the structure for these systems costs between $1 million and $3 million annually over several years of development—not including ongoing maintenance costs after the system is in place or staff time at the district level.

These seven states may not be eager to spend money on K-12 data initiatives. One reason they don't have them already is that they've been unwilling to pony up the necessary funds in the past. But soon they may not have a choice—although if the history of NCLB and IASA implementation is any guide, they will likely drag their feet. And they may complain about more "unfunded mandates" from the federal government.

NCLB does provide funding to help states cover the costs of developing and administering state assessments and standards—$409 million in fiscal year 2008, distributed to states based on their share of students ages 5 to 17. Once a state meets all of NCLB's assessment requirements, it can use the grant money for "support for data reporting." But given the limited amount of money available in this pot (average state grant: $7.6 million), many states don’t have a lot left over after annual testing costs. The Bush Administration's 2009 budget request did not propose any increase in funding for state assessments. And Secretary Spellings hasn't indicated that the Department of Education will provide additional funding to help states implement new graduation rate standards.

A Worthwhile Investment

States that haven't already invested in student unit record data systems may not want to pay the costs to do so. But in the long run, student unit record data systems are an incredibly valuable investment that every state should make. If new, standardized graduation rate standards require lagging states to improve their data systems, that will be an additional benefit of these requirements.

Even states that already have the framework in place for graduation rates could do a lot to further develop their systems—for example, tracking all students from pre-kindergarten through higher education, or performing more extensive coding of student characteristics and outcomes. This type of data is invaluable in education research and accountability efforts.

That is, if states actually use it. According to the Editorial Projects in Education Research Center, only 16 states used a cohort formula for NCLB accountability purposes in 2006-07, while others preserved their old formulas even if they had accumulated the data to use a more accurate cohort formula. In many cases, the less accurate measures produce inflated graduation rates that make states look like they're doing better than they actually are. Standardizing graduation rate measures will result in more accurate data—and make sure state taxpayers are getting their money's worth from new data systems.