How Proposed Title I Changes Impact School Funding and Edtech Vendors

Title I of the Elementary and Secondary Education Act, which Congress reauthorized in 2015 as the Every Student Succeeds Act (ESSA), is the federal government’s largest commitment to K-12 education. Congress provides nearly $15 billion in Title I funding every year and, since 1970, the law has been clear that these funds can only be used as a supplemental source of funding, meant to support the academic needs of students in schools with a high concentration of poverty. The funds cannot be used to replace, or off-set, state and local investments in education. This is the fiscal rule known as “supplement, not supplant.”

Enforcing the rule has always been a little Kafkaesque. To ensure compliance with the requirement, auditors would scrutinize each district or school purchase with a list of fact-specific inquiries. Did the investment benefit non-Title-I-eligible students? Was it used for a state or local requirement? Did the school use state or local funds to pay for the activity in prior years? If the answer was “yes,” then the assumption was that the funds were not being used only to supplement state and local investments.

For over 40 years, these inquisitions supported the proper use of Title I funds—but they also fostered a myopic view of how useful the funds could be. Title I could not, for example, be used to support a district-wide technology program if it served both Title I and non-Title I students. And if a district used Title I to purchase an intervention, that service ran the danger of always being classified as a supplemental service, never to be a core service for all students.

To help break down these barriers, Congress updated the “supplement, not supplant” requirement when they passed ESSA last December. Instead of an inquisition into the facts of every purchase, the new requirement looks to the distribution of state and local funds to Title I schools. The ESSA statute now requires each district to demonstrate how it distributes State and local funds to each Title I school, and to ensure that the school receives all of the State and local funds it would receive if there were no federal funds.

To clarify how this rule would work, ESSA required the Department of Education (ED) to host a negotiated rulemaking session this spring with experts in the field. The session was supposed to achieve consensus on the rules that ED would use to implement the new requirements, but that did not happen. The negotiators failed to agree on any particular rules, leaving ED with the authority and opportunity to propose its own rules—which it did on August 31.

These newly proposed “supplement, not supplant” rules are now the hot ESSA topic, and they are worth your attention. (Read them here). They have significant implications for schools and districts, as well as for vendors and private partners. And the politics are ridiculous. So let's break out three storylines that you should follow.

A Tangled Bureaucracy

The surface arguments around the proposed rules are technical but important to watch. The Department of Education’s proposed changes would direct how districts allocate state and local funds across their Title I schools that serve high percentages of children from low-income families. If passed, the new rule would require that each district ensure that its schools receive a certain baseline of state and local money, as prescribed by one of four state and local funding distribution rules. The rules include:

  • a student weighted funding formula,
  • a formula that allocates funds based on average salaries,
  • an alternative developed by the state and approved by ED, or
  • a methodology selected by the district that meets ED’s requirement.

These rules are well-intended, but they do not make things simpler, as Congress desired. Consider the possibility that, before making any purchase, school leaders would first have to verify that each purchase would not upset the distribution of school-level state and local spending across its schools, regardless of what the program does or who it benefits. It could created a compliance mind-set that would put the brakes on almost every purchasing decision. The potential for such a “balance test” is ugly but likely, if the proposed rules come to pass.

A Win for Edtech Vendors

There is an upside for vendors under the new statute. It used to be that Title I funding could only be used for “supplemental” purchases like extra reading or math support for students who are not performing well on the state exams, with some exceptions. This, in part, drove the growth of the supplemental intervention market over the last 20 years. The focus on “supplemental” investments also made it hard to combine Title I with state and local funds to make comprehensive technology purchases. What you bought with Title I for eligible at-risk students could not be also used for all students.

The new law (not the newly proposed rules, but the statute itself) changes all of that. The statute simply requires districts to show their methodology for distributing state and local funds to Title I schools. Districts are not required to identify particular costs or services, as was the case under the prior law. Simply put: Title I funds can now be used to make a comprehensive technology purchase without violating supplement-not-supplant rules. That was not possible under the old rules. Keep in mind that this is a nearly $15 billion program—per year. (Remember how everyone got excited about the one-time $5 billion Race to the Top program?) And because the new rule is written into ESSA itself, no matter what happens with ED's “ambitious” rules, this part is here to stay.

A Storm Is Brewing

The department’s proposed changes have stirred a firestorm in the halls of Congress. Senator Lamar Alexander (R-TN), the Chairman of the Senate Education Committee, former Secretary of Education, and author of ESSA, is beside himself over ED's proposed rules. Sen. Alexander sees supplement-not-supplant as a textbook example of overreach by the federal government. This is not what he had in mind when he drafted the law, and he is dead set on making sure that these proposed rules do not become final. Speaking to lawmakers in Kentucky recently, he said: “I'm going to do all I can to oppose it. I hope you will too.”

President Obama, meanwhile, is backing the Department of Education. Deputy Assistant to the President Roberto Rodrigues and Secretary King announced the rules August 31, framing ED efforts in the context of the Civil Rights Act. “This proposed rule is designed to mitigate clear discrepancies in educational resources and opportunities,” the Secretary said. This puts us a path to a Presidential veto showdown over what used to be a totally obscure Title I fiscal rule that few considered and fewer understood.

And the likely outcome? I would bet that the proposed rules do not survive in their current form, if at all. When schools begin to operate under the new fiscal rule, they will likely be operating without clear guidance—but they will have a new statute that clearly makes Title I a more accessible funding source for comprehensive technology solutions, which will be a big win for the edtech community.

David DeSchryver (@ddeschryver) is Senior Vice President and Co-Director of Research at Whiteboard Advisors

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