The Consequences of Distrust: Why the Fiscal Requirements of Federal Education Policy Hinder Effective School District Management and What to Do about It

By Fullerton, Jon; Hochman, Dalia | AEI Paper & Studies, March 2012 | Go to article overview

The Consequences of Distrust: Why the Fiscal Requirements of Federal Education Policy Hinder Effective School District Management and What to Do about It


Fullerton, Jon, Hochman, Dalia, AEI Paper & Studies


Contents  Introduction and summary The challenge of intergovernmental trust The consequences of intergovernmental distrust the management imperatives of Title I fiscal regulations Budgeting as Sudoku Improving intergovernmental trust Conclusion Appendix: Sample compliance activities Endnotes About the authors 

Introduction and summary

American education might be the least "locally controlled" local government function. The American people generally believe that their local school boards or mayors are directly responsible for school performance, yet other levels of government exert vast amounts of influence over schools through regulations and funding requirements. The federal government, for example, generally accounts for a relatively small share of the money available to primary and secondary schools and school districts--usually less than 10 percent--but federal regulations detailing how such funds are spent significantly impact the behavior of state and local school leaders.

One of the most visible federal grants to local school districts is Title I, Part A (Title I) of the Elementary and Secondary Education Act of 1965, which directs funding to school districts based on the number and concentration of students living in poverty within their borders. Allocation formulas to states and districts contained in Title I also take into account the concentration of poverty, statewide average per pupil expenditures, and local costs, among other factors. (1)

The original intent of ESEA was to provide "compensatory" educational funding in order to meet the additional needs of students living in poverty. Over time, Title I funding has become a critical funding stream for high-poverty schools and districts. Much of the current debate around the reauthorization of ESEA is focused on nonfinancial policies, such as how to hold schools and school districts accountable for better educating their students and how to ensure that districts provide all students with high quality teaching. Other provisions of the law under discussion are public school choice, which requires districts to provide parents with other school options when their zoned school fails to make progress, and supplemental education services, which requires districts to contract with external vendors to provide additional academic services for students in low-performing schools.

This report, however, examines a very different aspect of Title I--its fiscal requirements and the sometimes problematic impact such requirements have on the management of school districts. In the pages that follow we first describe the key fiscal requirements and guidelines governing the distribution of roughly $15 billion dollars in Title I appropriations and the reasoning behind each of these requirements. We focus, in particular, on the highest-impact requirements such as maintenance of effort, comparability, and supplement-not-supplant, as well as some of the intradistrict allocation rules. Next, we explore some of the unintended consequences the current fiscal requirements can have for the strategic use of resources at both the district and the school level.

We then examine the resulting budgeting and compliance regimes that have developed in many high-poverty districts as a result of Title I fiscal requirements and other categorical program requirements.

Our analysis leads us to a set of recommendations for changes to both the statutory and regulatory requirements of Title I. Overall, we suggest increased flexibility in the fiscal requirements coupled with strategic accountability for results. We also recommend that federal regulators invest in helping local districts and states with the infrastructure required for thoughtful, strategic management of funds. The goal of this paper is to help policymakers think through how Title I fiscal and reporting requirements could be modified to improve school district management functions and, ultimately, to better meet the original intent of the law--serving the needs of high-poverty students. …

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