The U.S. Congress appropriates revenues for elementary and secondary education in the federal government’s annual budget. Most federal money for elementary and secondary schools is made available in the form of an appropriation to the U.S. Department of Education.[cliii] The department then sends the budgeted funds to the state departments of education, which distribute the funds to their states’ schools. While these federal monies are appropriated in Michigan as part of in the State School Aid Act (usually as estimates), the monies are actually disbursed through electronic grants and cash management systems.[cliv]
In fiscal 2007, the U.S. Department of Education sent $1.11 billion to the Michigan Department of Education, according to federal education statistics.[clv] About 60 percent, or $667.5 million, of the total federal monies appropriated for Michigan elementary and secondary schools were allocated to finance the federal No Child Left Behind Act.[clvi]
Of that NCLB money, 70 percent, or about $467 million, financed schools that enroll “Title I” students. Title I is part of the federal Elementary and Secondary Education Act, originally passed in 1965 (the act was reauthorized in 2002 as the No Child Left Behind Act of 2001). Title I provides money meant to improve the academic performance of students who face a variety of specific potential educational challenges. The law includes money for schools with children whose families are living below the poverty level,[clvii] children who are learning English as a second language, children who face cultural and linguistic barriers, children who are not meeting state education standards sanctioned by the federal government or children who are neglected or delinquent.
Title I money is to be distributed to districts by the state Department of Education in compliance with federal law. Although federal law concerning education is comprised of several parts, we will review the basics of the federal statutes governing the distribution of monies under Title I, Part A, since it is the largest single area of spending in Michigan under the federal No Child Left Behind Act.[clviii]
The Allocation of Grants Under Title I, Part A
Districts can receive Title I, Part A, money only if 10 or more of their students and more than 2 percent of their school-age population are eligible for the money under federal guidelines. In fiscal 2007 for example, the Novi Community Schools has 98 students meeting the poverty requirements for Title I, Part A, funding, but those 98 students comprise only 1.6 percent of the total student population from ages 5 to 17. Therefore Novi is receiving no Title I, Part A, money in 2007.
Title I, Part A, dollars are transferred in the form of four grants.[clix] The first grant, known as the “basic grant,” is the product of the number of children meeting federal criteria in a local school district multiplied by 40 percent of the average amount of overall operating expenditures per public school student[clx] in the state[clxi]. However, the basic grant cannot be less than 32 percent or more than 48 percent of the average amount of operating money spent per student in the country.
The second kind of Title I, Part A, grant is the “concentration grant.” Concentration grants are given to a local school district that has 6,500 students eligible for Title I, Part A, or has 15 percent of its total population ages 5 through 17 eligible for Title I, Part A. The Walled Lake Consolidated School District qualifies for a basic grant in fiscal 2007 because more than 10 students and more than 2 percent of the district’s total school-age population qualifies under the act as impoverished. However, Walled Lake does not qualify for a concentration grant, since only about 4.9 percent — less than 15 percent — of its students are eligible, and since the district’s 785 eligible students are fewer than the required 6,500. The dollar amount of the concentration grant to school districts is based on the number of students considered to be eligible under Title I, Part A, multiplied by 40 percent of Michigan’s average per-pupil operating expenditure. The amount of the concentration grant might be reduced for each district if congressional appropriations are insufficient to finance the grants for all of the districts that qualify.
A third type of grant is the “targeted grant.” A targeted grant is paid to a district if at least 10 children and at least 5 percent of the 5- to 17-year-olds in the district are eligible under Title I, Part A. In apportioning the grant, two multipliers — one by student number, and the other by student percentage — are determined, and the larger of the two multipliers is used (see Graphic 20). This figure is then multiplied by the number of students qualifying, and the product is in turn multiplied by 40 percent of the state’s average per-pupil operating expenditures to determine the grant’s size.
Graphic 20: Title I, Part A, Targeted Grant Multipliers
(Use the method yielding a larger total)
Under this weighted formula, districts with higher percentages of eligible students receive the highest levels of funding. Prior to 2001, targeted grants existed in law, but were unfunded. Currently, Congress does provide money for the grants, but does not ensure that the money appropriated is sufficient to provide all of the targeted grant monies for which districts might qualify under the act. As with the concentration grant, the amount of the targeted grant is reduced if Congress has not appropriated sufficient money. Congress does guarantee, however, that a certain percentage of the total appropriation for targeted grants will be spent in each state.
For each of these three grants, Congress does not permit states to rapidly decrease the amount of money any particular district receives. Instead, for each of the grants, Congress requires that a state provide each local school district with a “hold-harmless” amount, which is a certain percentage of the money the district received for the grant in the previous fiscal year. The hold-harmless amount is based on the percentage of total 5- to 17-year-olds in the district who are currently eligible for Title I, Part A, funding.[clxii]
Graphic 21: Title I, Part A, Hold-Harmless Formula
The Title I, Part A, hold-harmless percentages are important in the distribution of federal monies by state governments. When state education department officials receive the state’s total federal allocation for each of the three grants described above, they distribute the funds so that every district receives at least its hold-harmless amount. In 2007 for instance, Alpena received a total basic grant of $611,505. Since 15.3 percent of the district’s population of 5- to 17-year-olds is eligible in 2007, Alpena must receive in 2008 a hold-harmless amount of at least 90 percent of its 2007 grant amount — meaning at least
$611,505 x 90 percent = $611,505 x 0.90 = $550,354.50.
A fourth grant type distributed under Title I, Part A, is the “education finance incentive grant.” Incentive grants provide money to districts based on the number of students eligible for Title I, Part A, and on three other variables. The first of these variables is 40 percent of the average per-pupil operating expenditure in the state, though that amount cannot be less than 34 percent or greater than 46 percent of the U.S. average per-pupil operating expenditure. The second variable is called an “effort factor.” This effort factor is designed to go up for states that spend more than average or that have less income than average (and to go up particularly for states that do both). This factor is calculated as follows, but there is a floor of 0.95 and a ceiling of 1.05 on the state effort variable when it is used to calculate the incentive grant:
Effort = State 3 Year Average Per Pupil Expenditure x U.S. 3 Year Average Per Capita Income
U.S. 3 Year Average Per Pupil Expenditure x State 3 Year Average Per Capita Income
The third variable includes an “equity factor,” which is subtracted from 1.30 to arrive at the appropriate value. The equity factor consists of measuring the variation between local districts’ per-pupil operating expenditures[clxiii] and the average per-pupil operating expenditure in the state. Each district’s variation is weighted by the number of the district’s students who are eligible for Title I, Part A, basic grant funding multiplied by a factor of 1.4. In effect, the money provided under this equity calculation will tend to go up for districts that spend less than the state average and that have many children eligible for the Title I, Part A, basic grant. For the incentive grant as a whole, then, districts that spend less than the state average and that have many Title I, Part A, eligible students will tend to receive more money, particularly if the districts are located in lower-income states that spend more on education than might be expected.
IDEA Special Education Grants
The second largest category of federal funding is special education programming mandated by the Individuals With Disabilities Education Act.[clxiv] IDEA was re-enacted in December 2004. Among its many provisions, IDEA requires that grants be made to states “to assist them to provide special education and related services to children with disabilities. ...” IDEA stipulates that “a free appropriate public education[clxv] is available to all children with disabilities residing in the State between the ages of 3 and 21, inclusive, including children with disabilities who have been suspended or expelled from school.”
In 2006, the federal government distributed $394.9 million to Michigan for special education programs and services.[clxvi] For 2007, the maximum grant amount for a state is the number of students ages 3 through 21 who received special education and similar services in 2005 multiplied by 40 percent of the U.S. adjusted average per-pupil expenditure in public schools.
The Michigan Legislature mixes some federal special education money with state special education money in state appropriations, but the state Education Department distributes federal special education monies to school districts through federal funding formulas. (As noted above, such monies are disbursed through electronic grant and cash management systems.) Other federal special education money is not appropriated with state revenues, however, and is passed directly to “districts, intermediate districts and other eligible entities.”[clxvii]
Other Federal Education Money
Other federal monies are distributed by the state Department of Education through other parts of the NCLB and through other U.S. Department of Education initiatives. Totals for fiscal 2006 in each of those funding areas can be seen in “Appendix 1: U.S. Department of Education Spending in Michigan.” Much of the money for federal programs that have not been described above is passed through section 39a of the State School Aid Act.[clxviii]
[cliii] Some federal spending on education occurs outside the U.S. Department of Education or as a collaborative effort among federal departments. One example is the National Security Language Initiative; see “National Security Language Initiative,” Office of the Spokesman, U.S. Department of State, www.state.gov/r/pa/prs/ps/2006/58733.htm. For a table of federal outlays for education by department and program, see “Digest of Education Statistics 2005,” (Institute of Education Sciences, National Center for Education Statistics, U.S. Department of Education, 2006), http://nces.ed.gov/programs/digest/d05/ (accessed April 26, 2007).
[cliv] These electronic grant and cash management systems are accessed via the Web; see, for instance, www.michigan.gov/mde/0,1607,7-140-5236---,00.html.
[clv] See also “Federal Government.”
[clvi] For the formulas used to allocate Title I, Part A, funds to states, see 20 U.S.C. § 6332(a).
[clvii] The number of children living below the poverty level is based on data from the U.S. Department of Commerce (20 U.S.C. § 6333(c)(2), 6333(c)(3)(A)), while the poverty level is defined by the U.S. Bureau of Census (20 U.S.C. § 6333(c)(3)(C).
[clviii] Although federal special education money (like the state special education money described earlier) is appropriated by the Michigan Legislature in the State School Aid Act, federal monies for special education and other purposes are usually disbursed through electronic grant and cash management systems. For more information about such grants, see http://megs.mde.state.mi.us/megsweb/ AllocationSearch_Detail.asp?catID=78&sctID=16.
[clix] For an overview, see “Title I Funding: Poor Children Benefit Though Funding Per Poor Child Differs,” (United States General Accounting Office, 2002), 5-8, 59-60, www.gao.gov/new.items/d02242.pdf (accessed Feb. 17, 2007).
[clx] The figure used by the U.S. Department of Education is obtained from the National Center for Education Statistics’ most recently available Common Core of Data. According to the federal Education Department, the figure used for this calculation is current expenditures, which excludes capital expenditures. The average used in fiscal 2007 for Michigan is $9,577; 40 percent of this figure is $3,830.80.
[clxi] When a school district’s total resident population is less than 20,000 (20 U.S.C. § 6333(a)(2)(B)(vi)(II)), the state may appropriate funds to that district at its own discretion (20 U.S.C. § 6333(a)(2)(B)(iii)), and the district may appeal the department’s grant amount (20 U.S.C. § 6333(a)(2)(B)(v)).
[clxii] Note, however, that if a district no longer meets the requirements for a concentration grant, their hold-harmless percentage is used for four more years (20 U.S.C. § 6322(C)(2)).
[clxiii] Note that only districts that enroll more than 200 students are to be included in the calculation: 20 U.S.C. § 6337(b)(3)(A)(ii)(IV).
[clxiv] IDEA is a complex law, and this primer will not scratch its surface. For an overview, the reader may wish to access the U.S. Department of Education Web site dedicated to IDEA: http://idea.ed.gov/explore/home.
[clxv] This is often referred to as “FAPE” in technical literature on special education.
[clxvi] See “Appendix 1: U.S. Department of Education Spending in Michigan.”
[clxvii] MCL § 388.1651d(1). The federal programs described here are listed in MCL § 388.1651d(2).
[clxviii] MCL § 388.1639a. These include federal programs for drug and violence prevention, for improving the use of technology in instruction and for the Michigan charter school “subgrant” program. The programs are listed in MCL § 388.1639a(1) and MCL § 388.1639a(2).