A Closer Look at Small State Minimums in Federal Education Formulas

At Ed Money Watch we talk a lot about funding formulas for various federal grant programs. We’ve written about proposed changes to the ESEA Title II funding formula in the House Students Success Act, the need for improvements to the Title I formula, and even idiosyncrasies in the Individuals with Disabilities Education Act formula. Congress has designed each of these formulas to account for factors such as population size and poverty rates or numbers when distributing federal funds to states and school districts. But another factor – something known as “small state minimums” – always seems to run roughshod over the intended target populations.

Small state minimums are intended to ensure that small states receive a basic level of funding under each federal grant. Often, the formula sets the minimum at a certain percentage of the total appropriation that Congress provides that year – like the 0.5 percent minimum in the Title II formula. The idea behind small state minimums has merit: just because some students live in small states doesn’t mean they are less deserving of equitable shares of federal funding. But do small state minimums always work as lawmakers intended? Or do they overcompensate and provide small states with disproportionate amounts of funding per student?

To answer this question, we compiled data on total student enrollment and total state Title I, IDEA, and Improving Teacher Quality State Grant allocations in 2010. We then computed the allocation per pupil for each state and ranked them. This analysis suggests that existing federal funding formulas for those programs do disproportionately benefit small states, though some formulas do so more than others.

The ten smallest states in the nation are the District of Columbia, Wyoming, Vermont, North Dakota, South Dakota, Delaware, Alaska, Montana, Rhode Island, and Hawaii, in that order. Their total enrollments range from a little over 69,000 to just over 180,000 in 2010. As expected, many of these states receive more in federal funding on a per pupil basis than their larger peers.

This is most consistently the case with Title II Improving Teacher Quality State Grants where the first nine smallest states receive nine largest allocations per pupil, in exact order of enrollment. This is because the formula ensures each state 0.5 percent of the total allocation, or just over $14 million in 2010. If the formula did not include small state minimums, each of these states would have received closer to $3 or $4 million under the program.  In fact, each of the small states receive dramatically more than the average allocation per pupil of $60. The District of Columbia received $202 per pupil, almost four times the national average.

Small states also fare well under the Title I formula, which should theoretically be driven by student poverty. DC, Wyoming, Vermont, North Dakota, South Dakota, and Rhode Island all rank in the top 10 in terms of Title I allocation per pupil. Of these states, only DC has a particularly high particularly high census poverty rate at 30.8 percent. The rest all fall in the bottom half of states in terms of poverty rates. These states received over $348 per pupil in Title I, and as much as $686, compared to the national average of $294.

IDEA Part B allocations are least influenced by the small state minimum provisions, but some effect is not all-together absent either. Wyoming, Vermont, North Dakota, Alaska, and Rhode Island each rank in the top 10 in allocations per pupil. Rhode Island has the highest rate of students participating in special education at 18.1 percent, so the high allocation it receives may be justifiable. But the rest of the states don’t fall among the top ten states with special education participants, even though they receive nearly $300 per pupil or more in IDEA funds compared to the national average of $233. Interestingly, DC, which is a small state and has a high percentage of special education students (16.3 percent) ranks only 21st in terms of IDEA Part B allocation.   

Clearly, small state minimums have a significant influence over how federal education funds are allocated to each state to the point where these small states are disproportionately benefiting from federal funds. This is not to say that Congress should eliminate the minimums entirely. But this analysis suggests that Congress should consider the implications of the minimums and perhaps readjust the formulas produce a more equitable distribution of funds. Just as students in small states deserve their fair share, so do students in large states.

Click here to view these data for all 50 states and the District of Columbia.