Equalizing Education Dollars

August 2005

This article first appeared in the Washington Post, August 21, 2005.

The federal government's $13 billion Title I program has been controversial since its enactment in 1965, but almost everyone has agreed on one thing: It not only increased the money school districts had to educate disadvantaged children but also made sure that the extra money was spent on them.

That turns out to be wrong.

Old Title I hands remember the crisis early in the program's history when the NAACP showed that school districts were diverting Title I funds to buy band uniforms and swimming pools for nicer neighborhoods. The resulting uproar produced rules requiring school districts to spend as much on poor schools as on richer ones before Title I money was added on.

But our new research shows that abuses persist, despite the federal requirements. Now, however, the problems are driven by school districts' accounting practices and by demands from teachers unions—not from some parents group working the system for band uniforms.

Here is how it works. While the law is clear that districts should spread their state and local funds evenly among all schools before applying the federal dollars, the truth is that they don't. In four of the five large urban districts we studied, noncategorical funds—those intended for all students—disproportionately go to schools that have students from wealthier families. In Denver, the school district spends $365 more per student in the more upscale schools than on those who attend the schools serving families with the highest poverty levels. That adds up to a difference of nearly $200,000 for a school enrolling 500 students.

The higher spending occurs because districts place more expensive teachers in the schools serving children from higher-income families. With data showing that the more experienced, better educated teachers flock to the wealthier schools in their districts, it's no surprise that districts such as Austin shell out an average of $3,800 more per teacher in a wealthy school than for one in a high-poverty school. With labor contracts pushing salary scales that prohibit pay increases for those who take on the more challenging teaching assignments, districts can't lure their better teachers to their low-performing schools, which also tend to be the ones with children from low-income families.

Some districts hide the problem by using a fixed districtwide salary average in place of each teacher's real costs. Thus, a school whose teachers are paid less than the district average is charged more for salaries than its teachers actually earn. The school is charged in the budgeting process with having a certain number of teachers at the average salary; the extra funds go to better paid teachers in other schools.

This kind of salary averaging does more than distort district spending. It can also cause districts to misallocate federal funds by overcharging for teachers paid by Title I. If these teachers earn less than the average teacher salary—as large numbers of those working in high-poverty schools do—the district pockets the difference between salaries paid and the district-wide average, which is the amount Title I is charged for each teacher. Thus, despite the Title I language that specifically earmarks the money to help low-income students, the federal funds get mixed into school districts' general funds. A portion of Title I funds intended for students in schools with the highest poverty levels is diverted elsewhere.

School boards are key accomplices in this diversion. They adopt the salary-averaging policy that lets senior teachers cluster in nicer schools, thus creating unequal spending between rich and poor neighborhood schools and diverting federal funds for general district use. School boards often understand so little about their districts' budgets that they don't realize what inequities salary averaging creates.

Something can be done about this. The federal government has the power to fix the program by changing regulations that dictate the ways in which districts account for spending on teacher salaries. These regulations were quietly amended in the early 1980s to create loopholes requested by unions and school boards. They can be amended again to provide real, not phony, protection for the education of disadvantaged children.

The next opportunity to revise the funding rules could come in 2007, when the Title I program is due for reauthorization by Congress. In the meantime a proposal before the House Appropriations Committee would ask the Education Department to study how Title I and district funds are combined and suggest ways to make Title I dollars more effective.

Though the Education Department has ducked these issues in the past, the new study is an opportunity to show how the core principles of Title I can be rescued.

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