Categorical Funds: The Intersection of School Finance and Governance

8/14/2019 Categorical Funds: The Intersection of School Finance and Governance

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1 Center for American Progress | Categorical Funds: The Intersection of School Finance and Governance

Categorical Funds

The Intersection of School Finance and Governance

By Joanna Smith, Hovanes Gasparian,

Nicholas Perry, and Fatima Capinpin November 18, 2013

How a sae chooses o design is sysem o unding schools is ulimaely a quesion

o educaion governance, deermining whosae policymakers, school disrics, or

school principalsges o make he decisions abou how and where unding is spen.

Saes have wo primary ways o unding schools: he oundaion, or base unding hais inended o cover he basic coss o educaion (eacher salaries, exbooks, maerials,

and more); and caegorical unding argeed o specificpurposes (reducing class sizes,

programs or English language learners, special educaion, and more).

Educaion researchers Amy M. Highower, Hajime Miani, and Chrisopher B. Swanson

define caegorical unding as sae aid inended o provide financial suppor or specific

educaional programs, operaional uncions, or financial aciviies.1Wih caegorical

unds, prioriies are se by he sae o enac wha sae officials view as he mos desir-

able programs. By is very naure, caegorical unding is narrowly direced, and as such,

disric flexibiliy is limied.

On he oher hand, i saesprovide unding jus as a base gran o disrics, disrics

hen have he flexibiliy o use heir budges o mee he specific needs o heir su-

dens as hey see fi. Tus, conrol over how money is spen ranslaes ino conrol over

policy decisions.

Saes have aken varying approaches o caegorical grans, some relying on hem heavily

and ohers rarely or no a all. Tis issue brie provides a naional landscape on he use

o caegorical unds by saes, he number o caegorical programs in each sae, how he

use o caegorical unding has changed since 2008 when saes were las surveyed on

heir use, and views on heir effeciveness rom sae finance personnel. In addiion, his

issue brie includes case sudies o our saes and heir use o caegorical unding. We

use a combinaion o prior research on sae educaion finance, exising daa rom sae

and naional organizaions, and newly colleced primary daaa sae-level survey and

disric-level inerviewso inorm our findings.


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Potential pitfalls of categorical funding

Like mos issues relaed o educaion, caegorical unding has is supporers and

opponens. Proponens argue ha allocaing money o special programsor example,

inervenions or sruggling sudens and programs or gifed and alened sudens

helps schools and disrics mee sae perormance goals and ensures he money is spen

on esablished policy goals. Bu opponens o caegorical unding argue ha i providesone-size-fis-all soluions o a saes complex and varied educaional needs, raher han

presening school disrics and/or schools wih an array o opions.

Tere are oher criicisms o caegorical unding. Despie a saed aim o use caegori-

cal grans o provide argeed suppor in order o creae a more equiable resource

allocaion sysem, he reverse has been ound a imes. In Caliornia, or example, he

heavy use o caegorical unding led disrics o offse he caegorical unds argeed or

high-need sudens by allocaing a larger porion o unresriced unds or sudens wih

lower needs, supplaning he purpose o he caegorical unds.2

In addiion, caegorical unding does no necessarily lead o improved suden ou-

comes.3Opponens argue ha caegorical unding limis local disrics flexibiliy and

sifles innovaive approaches o improve suden achievemen.4Criics also poin ou

ha decisions on how o use limied unds efficienly is deermined beter a he local

level raher han a he sae level.5

Caegorical programs may also inadverenly group sudens inappropriaely, reducing a

schools or disrics abiliy o caer o he unique needs o differen suden populaions.

In one sudy o English language learners, or ELLs, i was ound ha he ELL caegor-

ical-unding allocaion did no ake ino accoun he diversiy o suden needs wihinhe ELL populaion, which may require differen resources depending on acors such as

home language, number o years in he Unied Saes, and parenal background.6

In addiion o hese criicisms, caegorical programs are also no always a seady

source o unding. Te use o caegorical unding in sae educaion budges flucuaes

wih changes in governmen as well as changes in he economy. Consider he case o

Caliornia, where he economic downurn spurred he legislaure o loosen resricions

on 40 o he saes caegorical programs in 2009. Exising regulaions on how he unds

in hese programs could be spen were removed, hus enabling local disrics o make

decisions on how o bes uilize his newly esablished flexible unding wihin he con-

ex o significan sae budge cus o he general und.7


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Our methodology approach

Previous researchwhile limiedshaped our design and ramework. Mos o he

research on caegorical unding is ocused on Caliornia,8which a imes has had more

han 60 differen caegorical programs.9

Bu in one o he mos relevan sudies o caegorical undingSae Policies TaPay: A Survey o School Finance Policies and Oucomeseducaion researchers

Highower, Miani, and Swansons naional survey ound ha argeed caegorical unds

in fiscal year 2008 mosly wen oward he ollowing program areas: special educaion,

ransporaion, capial oulay/deb service, echnology, or gifed and alened pro-

grams.10Tey also ound ha percepions o caegorical unding varied sae by sae and

o some respondens; as a resul, ormula-based and/or suden-weighing mechanisms

and caegorical unding could no be easily disinguished.

More recenly, he Educaion Commission o he Saes, or ECS, a nonparisan organi-

zaion dedicaed o improving public educaion, repored ha he number o caegor-ical-unding programs per sae varied considerably, wih mos saes uilizing six o a

dozen such programs.11Te majoriy o unding in mos saes, ECS ound, is disbursed

hrough a ormula insead o hrough caegorical grans.

Given ha he recen economic downurn has likely changed he unding landscape or

educaion a he sae level, coupled wih growing ineres in having a more ransparen

finance sysem,12we waned o evaluae he role ha caegorical grans currenly play in

sae educaion unding sysems.

We conduced a wo-phase sudy. Firs, we adminisered a survey o chie financialofficers in each sae on he number and use o caegorical-unding programs in saes

K-12 educaion unding ormulas.13Te survey quesions also asked abou heir views

regarding he effeciveness o caegorical unding in helping saes o mee suden-

improvemen goals. Tireen saes did no respond and wo declined o be included,

resuling in a final sample size o 36 saes. o aciliae comparison across saes,

respondens were asked o selec which programs use caegorical unding rom a lis o

program caegories derived rom prior research.14We obained daa on he number o

caegorical-unding programs and he dollar amoun allocaed or caegorical programs

rom saes no responding o he survey hrough Inerne research and phone calls o

sae school boards associaions.

We supplemened our survey wih inerviews in our saesArkansas, Caliornia, Ohio,

and Wisconsino beter undersand he impac o caegorical unding on school and

disric effors o improve suden perormance and mee he requiremens o sae and

ederal accounabiliy policies. Te our saes were seleced o maximize variaion across

he ollowing crieria: suden demographics, geographic region, and poliical orienaion.

Tese our saes represen a reasonable sampling o naional rends across hese indica-

ors and all have aken differen approaches o caegorical unding in recen years.


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In hese saes, we conduced inerviews wih disric superinendens (n=6) and local

school board members (n=2) rom wo disrics in each o he our case sudy saes

o undersand heir percepions o caegorical unding. Inerviews covered he uses o

caegorical programs, sraegies or he effecive use o caegorical unds, and challenges

relaed o caegorical unding.

Our findings

While the use of categorical-funding programs varies considerably across all

states, the average number of categorical grants has dropped since FY 2008

Tere is currenly a wide range in he use o caegorical unding across saes. Saes

employed an average o 16 caegorical programs in he 2012-13 school year, a drop rom

25 in FY 2008. Hal o he saes used beween 1 o 10 programs. Te average dollar

amoun allocaed hrough caegorical unding was nearly $1 billion.

Souh Carolina repored allocaing he larges percenage o heir sae educaion bud-

ge o caegorical programs55 percen. Iowa had he greaes number o caegorical

programs64 (a noable increase rom FY 2008, when hey repored having only 37

programs).

TABLE 1

Categorical programs by state

StateNumber of

programsRanking

Percent of

budget

Dollars

allocated

Number of

programs

in 2008

20082013

Change

Alabama 30 10 7.6% $184,700,000 28 Increase

Alaska* 7 33 12.0% $176,000,000 2 Increase

Arizona 7 32 1.0% $36,100,000 12 Decrease

Arkansas 4 44 9.5% $256,600,000 86 Decrease

California* 60 2 14.0% $9,715,100,000 68 Decrease

Colorado 8 30 9.8% $414,300,000 8 Same

Connecticut 9 27 20.0% $500,000,000 19 Decrease

District of Columbia N/A N/A N/A N/A 5

Delaware N/A N/A N/A N/A 22

Florida 1 49 16.4% $2,983,800,000 16 Decrease

Georgia 14 19 1.6% $116,700,000 32 Decrease

Hawaii 16 17 6.6% $63,400,000 68 Decrease

Idaho 8 29 8.0% $103,100,000 23 Decrease

Illinois 9 26 26.0% $1,755,900,000 38 Decrease

Indiana 13 20 2.0% $184,600,000 18 Decrease


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StateNumber of

programsRanking

Percent of

budget

Dollars

allocated

Number of

programs

in 2008

20082013

Change

Iowa1 64 1 N/A N/A 37 Increase

Kansas 12 23 9.8% $491,000,000 9 Increase

Kentucky 7 31 12.1% $46,600,000 39 Decrease

Louisiana1 2 47 2.0% $80,000,000 16 Decrease

Maine 4 43 22.0% $464,300,000 4 Same

Maryland 2 46 6.0% re 19 Decrease

Massachusetts 39 4 10.7% $505,000,000 18 Increase

Michigan 50 3 19.0% $2,000,000,000 50 Same

Minnesota1 30 9 18.0% $1,273,000,000 58 Decrease

Mississippi2 5 40 N/A N/A 12 Decrease

Missouri 4 42 10.0% $309,500,000 4 Same

Montana 1 48 3.8% $37,100,000 14 Decrease

Nebraska1 11 24 N/A N/A 11 Same

Nevada 22 14 15.0% $205,500,000 19 Increase

New Hampshire 4 41 5.2% $147,000,000 10 Decrease

New Jersey 8 28 30.0% $2,560,600,000 10 Decrease

New Mexico 14 18 1.7% $41,600,000 9 Increase

New York 17 16 1.5% $292,700,000 60 Decrease

North Carolina 12 22 29.2% $2,388,000,000 14 Decrease

North Dakota 5 39 6.0% $84,000,000 2 Increase

Ohio 12 21 18.6% $1,350,000,000 105 Decrease

Oklahoma 26 13 20.0% $456,600,000 33 Decrease

Oregon1 19 15 12.0% $374,000,000 10 Increase

Pennsylvania 29 12 43.8% N/A 29 Same

Rhode Island 5 38 0.8% $7,500,000 10 Decrease

South Carolina 36 6 55.0% $1,215,000,000 68 Decrease

South Dakota* 2 45 14.0% $53,000,000 3 Decrease

Tennessee 10 25 N/A $4,100,000,000 0 Increase

Texas 5 37 0.0% $300,000 2 Increase

Utah* 31 7 28.4% $845,600,000 39 Decrease

Vermont 6 35 14.8% $206,200,000 10 Decrease

Virginia 30 8 20.0% $1,200,000,000 11 Increase

Washington 5 36 18.6% $1,169,300,000 11 Decrease

West Virginia 36 5 10.0% $1,493,300,000 35 Increase

Wisconsin 29 11 13.0% $653,900,000 36 Decrease

Wyoming 6 34 5.0% $40,600,000 2 Increase

National Summary

Statistics

Average 16.04 - 13.57% $909,900,000

Median 10.00 - 12.00% $365,200,000

Standard deviation 15.21 - 11.26% $1,619,500,000

Number of

programsRanking

Percent

of budgetDollars allocated

Notes: 1 Respondent estimated

2 Respondent unable to distinguish between categorical allotment and weighted

student formula; *Calculated by research team

N/A: Data not available


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FIGURE 1

Percentage of education budget allocated to categorical funding,

2012-13 school year

0.81%

1.02%

1.45%

1.63%

1.73%

2.0%

2.0%

3.76%

5.0%

5.22%

6.0%

6.0%

6.63%

7.60%

8.0%9.50%

9.80%

9.80%

10.0%

10.0%

10.70%

12.0%

12.0%

12.10%

13.0%

14.0%

14.0%

14.80%

15.0%

16.36%

18.00%

18.55%

18.60%

19.0%

20.0%

20.0%

20.0%

22.0%

26.0%

28.40%

29.24%

30.0%

43.75%

55.0%

Rhode Island

Arizona

New York

Georgia

New Mexico

Indiana

Louisiana

Montana

Wyoming

New Hampshire

Maryland

North Dakota

Hawaii

Alabama

IdahoArkansas

Colorado

Kansas

Missouri

West Virginia

Massachusetts

Alaska

Oregon

Kentucky

Wisconsin

California

South Dakota

Vermont

Nevada

Florida

Minnesota

Washington

Ohio

Michigan

Connecticut

Oklahoma

Virginia

Maine

Illinois

UtahNorth Carolina

New Jersey

Pennsylvania

South Carolina

50%

40%

30%

20%

10%

Texas 0%

Note: These data were not available for the District of Columbia, Delaware, Iowa, Mississippi, and Nebraska.


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Categorical funding is used to support

a range of priorities with the most

common being special education programs

and student transportation

We examined he differen programs or which

saes use caegorical unding. We were ineresedonly in sae programs, no ederal programs such

as he Individuals wih Disabiliies Educaion Ac,

or IDEA, or ile I, because ederal programs offer

uniorm unding across he naion. Based on our

review o he prior research,15we asked survey

respondens o ideniy he caegorical programs

in heir sae rom a lis provided. We broke pro-

grams ino five groups:

1. Schoolwide caegorical programs: class-sizereducion; paren involvemen; pupil reenion;

saey and violence prevenion; school nuriion;

suden assessmen; and echnology

2. Programs or argeed populaions: adul

educaion; Advanced Placemen, or AP, es ee

reimbursemen; aferschool programs; child care and developmen; English lan-

guage learners; oser youh services; gifed and alened programs; inervenions or

low-perorming sudens; inervenions or underperorming schools; menal healh

services; reugee children assisance; special educaion; suden appreniceships; andvocaional programs

3. eacher suppor and proessional developmen: mah and reading proessional

developmen; principal-raining programs; general proessional developmen grans;

eacher recruimen and reenion programs; and eacher reiremen/benefis

4. Faciliy-relaed programs: capial oulay/deb service; mainenance reimbursemen;

and school and library improvemen

5. Miscellaneous programs: charer school grans; pupil ransporaion; and regional

occupaional ceners (regional occupaional ceners provide argeed skill develop-

men o sudens based on he demands o he local labor marke; he goal is o acili-

ae successul school-o-career ransiion or sudens and provide local businesses

wih a producive pool o skilled employees)

Under each caegory, respondens had he opion o selecing oher and wriing in

he program.

FIGURE 2

Distribution in number of categorical programs,

FY 2008 and 201213 school year

Note: Since data for the District of Columbia and Delaware for the 2012-13 school year were not available, we did

not include them in the comparison with 2008 data, resulting in a total of 49 states compared.

0

5

10

15

20

25

0 1-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 Over

90

Numberofstates

Number of categorical programs

2008

2012-13


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Our survey updaes he earlier work done by Highower, Miani, and Swanson ha ound

ha he mos common caegorical programs in he 2008 fiscal year were special educa-

ion, ransporaion, capial and deb service, echnology, gifed and alened educaion,

bilingual educaion and English language learners, eacher reiremen and benefis, and

compensaory educaionprograms argeed specifically o low-income sudens, which

we broke ino several subcaegories in our survey. In he 2012-13 school year, he mos

common arges or caegorical unds naionwide were special educaion programs,suden ransporaion, inervenions or low-perorming sudens, school nuriion, adul

educaion, gifed and alened programs, and vocaional programs. (see Figure 3)


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Caegorical programs argeing schoolwide programs varied across he saes. Sixeen

saes repored ha hey employed a school nuriion caegorical program, while seven

repored caegorical unding going o class-size reducion, and eigh repored saey and

violence prevenion programs.

FIGURE 3

Areas targeted for categorical programs

6

3

21

7

10

7

6

12

6

6

6

13

3

7

22

14

4

25

2

2

10

17

14

2

10

9

6

9

14

6

11

6

16

8

6

7

7

Other

Regional occupational centers

Pupil transportation

Charter school grants

Other

School and library improvement

Maintenance reimbursement

Capital outlay/debt service

Other

Teacher retirement/benefits

Teacher recruitment/retention programs

General professioinal development grants

Principal training programs

Math/reading professional development

Others

Vocational programs

Student apprenticeships

Special education

Refugee children assistance

Mental health services

Interventions for underperforming schools

Interventions for low-performing students

Gifted and talented programs

Foster youth services

English-language learners

Child care and development

AP test-fee reimbursement

After school programs

Adult education

Other

Technology

Student assessmentSchool nutrition

Safety and violence prevention

Pupil retention

Parent involvement

Class-size reduction

Schoolwide categorical programs

Targeted populations categorical programs

Teacher support and professional development categorical programs

Facility-related categorical programs

Miscellaneous categorical programs


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Special educaion was he mos common sae caegorical unding program argeing

specific populaions.16Tis mirrors Highower, Miani, and Swansons fiscal year 2008

findings. Tere were a variey o programs lised under oher programs or argeed

populaions, including povery alleviaion, high-need special educaion, orphans, educa-

ional excellence, early inervenion, ACE remediaionsaewide iniiaives designed

o raise expecaions or suden achievemenreading sufficiency, Indian educaion,

desegregaion and inegraion, expelled and a-risk sudens, mah and reading inerven-ion, small schools, youh in cusody, and caasrophic aid.

Among caegorical programs relaed o eacher suppor and proessional develop-

men, general proessional developmen grans were he mos common caegorical

program or he suppor and proessional developmen o eachers, ollowed by mah

and reading proessional developmen, eacher recruimen and reenion programs,

and eacher reiremen and benefis programs. Principal-raining programs were he

leas common, repored by only hree saes. Some o he oher caegorical programs

writen in under eacher suppor and proessional developmen included eacher evalu-

aion, eacher salary supplemens, special educaion salary supplemens, and naionalboard cerificaion programs.

Faciliy-relaed caegorical programs included capial oulay/deb service programs,

used o acquire, build, remodel, or mainain school-disric aciliies and capial oulay

projecs (repored by 12 saes). Tey also included mainenance reimbursemen pro-

grams repored by six saes, and school and library improvemen programs repored by

seven saes.

Te wo mos common miscellaneous caegorical programs were pupil ransporaion,

repored by 21 o he 36 saes, and charer school grans, in seven o he 36 saes.Pupil ransporaion was he second-mos common caegorical program overall, afer

special educaion.

There has been a downward trend in states use

of categorical grant programs in recent years

We ook advanage o he ac ha a similar sudy o caegorical programs had been

done or fiscal year 2008 by Highower, Miani, and Swanson o provide a longiudinal

look a he use o caegorical unding. Te earlier sudy was also conduced as a survey

adminisered o sae educaion agencies and similarly asked how many caegorical-

unding programs he sae employed, he program caegories, and he dollars allocaed

o such programs. As such, we examined wheher he use o caegorical unding had

changed in he pas five years, he impac o he economic downurn on heir use, and

he locus o conrol in each sae.


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Comparing our findings wih Highower, Miani,

and Swansons findings or he 2008 fiscal year

suggess ha here has been a rend owards

decreased caegorical unding. Tis comparison

shows ha 29 saes had reduced he number

o caegorical-unding programs in use, 14 had

increased he number, and only 6 had reained hesame number. (see able 2)

O noe is ha he five saes ha used he highes

number o caegorical programs in FY 2008

Ohio, Arkansas, Caliornia, Souh Carolina, and

Hawaiiall reduced heir use in he 2012-13

school year, wih some large declines, such as in

Ohio ha wen rom 105 caegorical-unding pro-

grams in FY 2008 o only 12 such programs in he

2012-13 school year, and Arkansas ha wen rom86 programs o only 4.17Some o hese reducions

can be atribued o he consolidaion o programs,

such as in Uah where eigh caegorical programs

were consolidaed wih oher programs in FY

2012, reducing he number o caegorical-unding

programs in he sae rom 39 o 31.

A he oher end o he specrum, he change rom

FY 2008 o he 2012-13 school year was more

varied: All five saes wih he ewes number ocaegorical-unding programs increased heir use.

Te larges jump among his group o saes was in

ennessee, which wen rom being he only sae

wih no caegorical-unding programs in FY 2008

o having 10 in he 2012-13 school year.

Figure 4 shows ha here was also a airly even spli

beween saes ha repored ha he economic

downurn resuled in he decreased use o caegor-

ical-unding programs (n=14) and hose ha el

ha i had no impac on he number o programs

(n=13). A variey o conexual acors explained

hese differen reacions o he economic down-

urn. Caegorical allomens or saff developmen

and echnology were eliminaed due o he eco-

nomic downurn, repored he responden rom

Norh Carolina.

State

Number of

programs,

2012-13

Number of

programs,

2008

Alabama 30 28

Alaska* 7 2Arizona 7 12

Arkansas 4 86

California* 60 68

Colorado 8 8

Connecticut 9 19

District of Columbia N/A 5

Delaware N/A 22

Florida 1 16

Georgia 14 32

Hawaii 16 68

Idaho 8 23

Illinois 9 38

Indiana 13 18

Iowa1 64 37

Kansas 12 9

Kentucky 7 39

Louisiana1 2 16

Maine 4 4

Maryland 2 19

Massachusetts 39 18

Michigan 50 50

Minnesota1 30 58

Mississippi2 5 12

Missouri 4 4

Montana 1 14

Nebraska1 11 11

Nevada 22 19

New Hampshire 4 10

New Jersey 8 10

New Mexico 14 9

New York 17 60

North Carolina 12 14

North Dakota 5 2

Ohio 12 105

Oklahoma 26 33

Oregon1 19 10

Pennsylvania 29 29

Rhode Island 5 10

South Carolina 36 68

TABLE 2

Number of categorical programs, 2012-13

school year compared with FY 2008

continued on page 12


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In conras, a ew saes (n=4) repored increasing

he use o caegorical unding due o he economic

downurn. Because our larges caegorical pro-

gram is povery unding, he program required

increased unding wih he economic downurn

due o increase in povery, repored he respon-

den rom Arkansas.

State legislatures have the authority

to establish and terminate categorical

programs in most states

Decisions o sar or end caegorical programs

deermine, in par, policy prioriies or each sae.

For example, creaing a class-size reducion ca-

egorical program shows a saes belie in he ben-efis o a smaller suden-eacher raio. We waned

o know who held he decision-making power over

creaing or ending such programs.

Vesing such decision-making powers in he legis-

laure or governor migh resul in he adopion o

parisan policies, while he sae board o educaion

migh be assumed o adop nonparisan programs.

As shown in able 3, he legislaure in nearly every

sae included in he sudy (n=36) was reporedas having decision-making power o creae new

caegorical-unding programs and he power o end

or consolidae such programs. Te locus o conrol

included he governor in nearly hal o he sudy

saes (n=16).

In only one sae (Kenucky), he voers have he

power o creae a new caegorical program, bu no

o consolidae or end a program. Oher decision-

making bodies noed by saes included a saes

deparmen o educaion, sae board o educaion,

and commissioner o educaion.

State

Number of

programs,

2012-13

Number of

programs,

2008

South Dakota* 2 3

Tennessee 10 0

Texas 5 2

Utah* 31 39

Vermont 6 10

Virginia 30 11

Washington 5 11

West Virginia 36 35

Wisconsin 29 36

Wyoming 6 2

NOTE:

1Respondent estimated

2Respondent unable to distinguish between categorical allotment and weighted

student formula

*Calculated by research team

N/A: Data not available

FIGURE 4

Has the economic downturn had an impact

on the use of categorical funding in your state?

Source:

Yes, increased their use

11%

Other

14%

No impact

36%

Yes, decreased

their use

39%

continued from page 11


13/18


TABLE 3

Who determines the creation of a new categorical-funding program and whether to end,

or consolidate, an existing categorical-fund program in your state?

State Legislature GovernorState Board

of EducationVoters

Commissioner

of Education

Alabama

Alaska

Arkansas

California

Colorado

Georgia

Illinois

Iowa

Kansas

Kentucky* (Only determines

creation of programs)

Louisiana* (Only determines

creation of programs)

Maryland

Massachusetts

Michigan

Minnesota

Mississippi

Missouri

Montana

Nebraska

Nevada

New Jersey

North Carolina

North Dakota

Ohio

Oklahoma

Oregon

Rhode Island

South Carolina

South Dakota

Tennessee

Utah*

(Only determines

whether to end or

consolidate programs)

Vermont

Virginia

Washington

Wisconsin

Wyoming

*States for which decision-making bodies differ between creating categorical-funding programs and ending or consolidating programs


14/18


Many states believe categorical funding supports

student achievement without limiting flexibility

Prior researchas well as popular opinionwarns ha caegorical unding limis

local disrics abiliy o be flexible and innovae. For insance, Margare Weson argues

ha Caliornias caegorical program does no paricularly work well in a sae ha is so

diverse, saying ha caegorical resricions prohibi local adminisraors rom shifingunds o mee local needs.18

Wih his in mind, we assessed he exen o which sae officials agreed wih hese

concerns. We asked sae-level respondenschie financial officers o he deparmens

o educaion in each saewheher hey perceive caegorical unding as helping or

hindering effors o improve suden perormance and local innovaion and flexibiliy by

asking hem o indicae heir level o agreemen wih he ollowing saemens:

Caegorical unding helps schools and disrics mee suden improvemen arges.

Caegorical unding helps schools and disrics mee he requiremens o he No Child

Lef Behind Ac.

Caegorical unding limis local innovaion.

Caegorical unding limis flexibiliy o schools/disrics.

Caegorical unding impedes he efficien use o unds.

Te majoriy o sae respondens (54 percen) agreed or srongly agreed ha caegori-cal unding helps schools and disrics mee suden improvemen arges. (see Figure 5)

A large number o saes (13 ou o 35) were neural on he opic. Bu sae respondens

are more neural on wheher caegorical unding helped schools and disrics mee he

requiremens o he No Child Lef Behind Ac. Teir responses, however, veered oward

he affirmaive end o he specrum.

Slighly more varied responses were given regarding wheher caegorical unding limis

local innovaion, limis he flexibiliy o schools and disrics, and impedes he efficien

use o unds. While a pluraliy o he sae survey respondens remained neural on hese

opics, eelings were more mixed han on he quesions around caegorical unding help-

ing schools and disrics mee suden perormance arges and NCLB requiremens.

Fory-hree percen o sae-level respondens srongly disagreed or disagreed ha

caegorical unding limis local innovaion, and 46 percen indicaed ha hey srongly

disagreed or disagreed ha caegorical unding limis he flexibiliy o schools and dis-

rics or ha caegorical unding impedes he efficien use o unds.


15/18


I is worh noing ha some sae-

level respondens did acknowl-

edge negaives: Tree el ha

caegorical programs do no help

schools and disrics mee su-

den improvemen arges; five

el ha caegorical unding doesno help schools and disrics

mee he requiremens o he No

Child Lef BehindAc; seven el

ha hese programs limi local

innovaion and flexibiliy; and

eigh el ha hey impede he

efficien use o unds.

States opinions were mixedon whether categorical funds

supported broader state education goals

When asked heir percepion o wheher he

crieria or accessing caegorical unds are aligned

wih broader sae educaion goals, sae-level

respondens opinions varied, bu only wo saes

disagreed or srongly disagreed. (see Figure 6)

A few states allocate a larger share

of unrestricted state funding to offset

the categorical funding earmarked for

high-need students

As noed earlier, in heir sudy o educaion unding in Caliornia, Tomas B. imar

and Marguerie Roza ound ha disrics in he sae offse he resriced caegorical

unds earmarked or high-need sudens by direcing a larger share o unresriced unds

o lower-need sudens.19o es wheher Caliornia is a unique case, we asked on he

sae survey wheher sudens wih lower needs receive a larger share o unresriced

sae unding o offse he caegorical unding earmarked or high-need sudens. Six

o our sudy saes repored a similar pracice: Alabama, Wisconsin, Souh Carolina,

Mississippi, Massachusets, and Uah. (see Figure 7) Te accuracy o his response is

uncerain, as sae respondens may no know how disrics a he local level use general

und money. Indeed, Colorado responded ha i is likely o vary disric by disric.

FIGURE 5

State survey respondents views on the impacts

of categorical-funding programs

Source:

0

5

10

15

Categorical fundinghelps schools and

districts meet studentimprovement targets

Categorical fundinghelps schools anddistricts meet therequirements ofthe No Child Left

Behindact

Categorical fundinglimits localinnovation

Categorical fundinglimits the flexibilityof schools/districts

Categorical fundingimpedes the

efficient use of funds

Strongly disagree

Disagree

Neutral

Agree

Strongly Agree

FIGURE 6

The criteria for accessing categorical funds

are aligned with state goals

Source:

0

5

10

15

1 1

16

10

7

Stronglydisagree

Disagree Neutral Agree Stronglyagree


16/18


Superintendents and school board members highlighted the ways categorical

funding can support student achievement but also identified challenges

Alhough our sae survey respondens generally suppored he idea ha caegorical

unding helps schools and disrics mee sae improvemen arges and he require-

mens o NCLB, hese were he perspecives o sae finance officers. As noed earlier,

we supplemened our survey wih inerviews wih disric-level respondens in oursaesArkansas, Caliornia, Ohio, and Wisconsino beter undersand he impac

o caegorical unding on school and disric effors o improve suden perormance

and mee he requiremens o sae and ederal accounabiliy policies. Inerviews wih

disric leaders in our case sudy saes were also generally supporive o caegorical

programs, bu hey provided some conras wih he sae views.

Tere was a sense ha local acors are bes suied o make decisions abou how o spend

money o mee he needs o heir specific sudens. I hink he bulk o ha is bes lef a

he local level and I don have a problem wih being held accounable, said one disric

responden. Te main hing is an issue o ruscan we be rused o look a he charac-erisic o our sudens and spend he money wisely? I like o hink ha hose o us in he

business aren going o go ou and buy a swimming pool, said anoher responden. Tere

appears o be relucance on he par o disric leaders o do away wih caegorical unding

or ear ha he money would no be reallocaed o he general und, bu also a sense ha

saes should afford disrics greaer flexibiliy in exchange or greaer accounabiliy.

Disric-level inerviewees expressed a ear ha i unding was all provided in he orm o

unresriced base grans, he money would no be spen in ways o help hose who need

i mos: low-income sudens, English learners, and special educaion sudens. Tey el

ha mainaining caegorical programs or high-need sudens would alleviae his concern.

Disrics also noed ha overly sric resricions on caegorical programs prevened

hem rom using he money in ways hey deemed appropriae a imes. Some caegori-

cal unding, or example, can only be used or programs, no or people, which may no

be in line wih he need. I can be hard o use he money in he ways i was inended

and sill provide he services you wan. For example, money ha is designaed or a

program bu can be used or a person limis our abiliy o provide needed services o

sudens, said one inerviewee. Disrics would preer he flexibiliy o spend caegori-

cal unding on people, programs, or maerials and supplies o mee heir sudens

needs in ways hey deem mos effecive.

FIGURE 7

Do students with lower

needs receive a larger share

of unrestricted funding

to offset the categorical

funding earmarked for high

need students?

0

5

10

15

20

Yes No Other

21

9

6


17/18


Conclusion

Caegorical unding has is deracors and is supporers, a boh he sae and disric

levels. While sae-level survey respondens generally el ha caegorical unding helps

mee suden improvemen arges wihou limiing disrics flexibiliy or abiliy o

innovae, disric inerviewees noed he benefi o caegorical unding in seting aside

unds or he needies populaions who migh oherwise be overlooked. Boh groups,however, noed challenges o such unding programs, wih inerviewees ciing a number

o concerns including overly resricive requiremens on how he unds can be spen and

limiing local acors abiliy o caer programs o he unique needs o heir suden bodies.

Amid he coninued economic downurn, sae policymakers are aced wih making

difficul choices abou which programs o und, and disric personnel are increasingly

asked o do more wih less. Our hope is ha limied educaion budges are pu o he

very bes use or he greaes number o sudens so ha all sudens can perorm o

heir poenial.

About the authors

Joanna Smith is a lecturer in the Department of Educational Methodology, Policy, and

Leadership at the University of Oregons College of Education. Fatima Capinpin, Hovanes

Gasparian, and Nicholas Perry are research associates at the Rossier School of Educations

Center on Education Governance at the University of Southern California.

Acknowledgements

We would like o hank Xiuzhi Wang or her invaluable assisance wih his sudy. We

would also like o hank Dominic Brewer or his inpu on our survey design and Juliana

Herman, Melissa Lazarn, and Margare Weson or heir commens on earlier drafs o

his paper.

Te Cener or American Progress hanks he Eli and Edyhe Broad Foundaion or heir

ongoing suppor o our educaion programs and o his brie. Te views and opinions

expressed in his repor are hose o he auhors and do no reflec he posiion o he

oundaion. Tis brie is par o a muliyear projec on governance, conduced in par-

nership wih he Tomas B. Fordham Insiue, which evaluaes he governance arrange-

mens o our naions K-12 educaion sysem and how hey may be improved.

*Correction, November 18, 2013:In the original version of this issue brief, the state names

in Figure 1 did not correspond to the correct percentages. Te current version contains the

corrected figure.


18/18

Endnotes

1 Amy M. Hightower, Hajime Mitani, and Christopher B. Swan-son, State Policies That Pay: A Survey of Schoo l FinancePolicies and Outcomes (Bethesda, MD: Editorial Projects inEducation, 2010), p. 11.

2 Thomas B. Timar and Marguerite Roza, A False Dilemma:Should Decisions about Education Resource Use Be Made at

the State or Local Level?,American Journal of Education116(3) (2010): 397422.

3 Joshua H. Barne, Nathan C. Jensen, and Gary W. Rier,Dollars for Sense: Assessing Achievement Gaps in Arkansas

in the Context of Substanal Funding Increases, Journal of

the Associaon of Mexican American Educators4 (1) (2010):

3947;Timar and Roza, A False Dilemma.4 Policy Analysis for California Education, Getting Down to

Facts: Five Years Later (2012); Margaret Weston, Rethinkingthe State-Local Relationship: K-12 Education (San Francisco:Public Policy Institute of California, 2011).

5 Timar and Roza, A False Dilemma; Policy Analysis forCalifornia Education, Getting Down to Facts.

6 Oscar Jimenez-Castellanos and Amelia M. Topper, The Costof Providing an Adequate Education to English LanguageLearners: A Review of the Literature, Review of Educational

Research82 (2) (2012): 179232.

7 Bruce Fuller and others, Deregulating School Aid in Califor-nia: How 10 Districts Responded to Fiscal Flexibility, 2009-2010 (Stanford and Santa Monica, CA: Policy Analysis forCalifornia Education and RA ND Corporation, 2011); Weston,Rethinking the State-Local Relationship.

8 William Duncombe and John Yinger, Making Do: StateConstraints and Local Responses in Californias EducationFinance System, International Tax and Public Finance18 (3)(2011): 337368; Fuller and others, Deregulating School Aidin California; Policy Analysis for California Education, Get-ting Down to Facts; Jennifer Imazeki, Deregulating SchoolAid in California: Revenues and Expenditures in the SecondYear of Categorical Flexibility (Stanford and Santa Monica,CA: Policy Analysis for California Education and RAND Cor-poration, 2012); Katharine O. Strunk and Dara Zeehandelaar,Differentiated Compensation: How California School Dis-tricts Use Economic Incentives to Target Teachers,Journalof Education Finance36 (3) (2011): 268293; Heather Ro se,

Jon Sonstelie, and Margaret Weston, Pathways for SchoolFinance in California (San Francisco, CA: Public Policy I nsti-tute of California, 2010); Margaret Weston, Californias NewSchool Funding Flexibility (San Francisco, CA: Public PolicyInstitute of California, 2011).

9 Michael Griffith, Understanding State School Funding: TheFirst Step Toward Quality Reforms, The Progress of EducationReform13 (3) (2012).

10 Hightower, Mitani, and Swanson, State Policies That Pay.

11 Griffith, Understanding State School Funding.

12 See, for example, Michael J. Petrilli and Marguerite Roza,Stretching the School Dollar: A Brief for State Policymakers(Washington: Thomas B. Fordham Institute, 2011).

13 Data collection was conducted from December 2012through February 2013. We contacted the chief financialofficer (or similar position) in each state and gave respon-dents the option of self-administering the sur vey online oranswering it with a member of the research team over thephone.

14 Rose, Sonstelie, and Weston, Pathways for School Financein California; Hightower, Mitani, and Swanson, StatePolicies That Pay; EdSource, State Categorical Programs in2010-11 (2011).

15 Different prior research used different categories of possiblecategorical funding programs, so we used an amalgamationof ideas from prior research. See EdSource, State Categori-

cal Programs in 2010-11; Hightower, Mitani, and Swanson,State Policies That Pay; Rose, Sonstelie, and Weston,Pathways for School Finance in California.

16 While 26 states reported categorical funding for specialeducation, it is important to note that states have a legalcivil rights obligation to provide special education servicesto qualifying students.

17 For FY 2008 data, see Hightower, Mitani, and Swanson,State Policies That Pay.

18 Weston, Rethinking the State-Local Relationship.

19 Timar and Roza, A False Dilemma

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Categorical Funds: The Intersection of School Finance and Governance

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