School funding formula takes complex path to simpler focus

If you followed the legislature’s recent school funding debate, you may have noticed that Indiana will be allocating money to schools based in part on the number of students who receive food stamps or welfare benefits or who are in foster case.

That’s the latest revision of the Complexity Index, the part of the school funding formula that gives more money to schools facing bigger challenges. It’s a change from the way Indiana has distributed the money in the past, but not as big a change as it might appear.

Here’s the story.

A complexity story

Indiana’s Complexity Index dates from 1993 – it was originally called the At-Risk Index – and it has unquestionably been a good thing. An attempt to level the playing field by offering more resources to needy schools, it’s the reason Indiana gets credit for a funding system that’s fairer than most.

The index has been revised several times, but in recent years it was based on the percentage of students who qualified for free or reduced-price school lunches. Students qualify for free lunches if their family income is no more than 130 percent of the federal poverty level; they qualify for reduced-price lunches if income is no more than 185 percent of the poverty level.

But some lawmakers grew uncomfortable with using the federal lunch program to calculate the index. They were concerned that families couldn’t be made to show proof of income to qualify. A U.S. Department of Agriculture study found significant error rates in the program.

“There’s very little verification of who is eligible,” Sen. Luke Kenley, the chief Senate budget writer, told Franklin College’s Statehouse File. “And in recent years the number of kids on free and reduced lunch have been going up dramatically.”

So the legislature initially voted to shift the basis of the Complexity Index to the number of students who participate in the state’s free textbook program, effective this year.

Hoosier students qualify for free textbooks if they meet the income guidelines for free or reduced-price school lunch. Unlike the lunch program, however, the state-funded textbook program could be subject to extensive audits. Families could be required to prove they qualified.

But an unexpected issue arose, thanks to a change in the federal lunch program.

Community Eligibility

Starting last fall, high-poverty schools in Indiana could participate in the lunch program through Community Eligibility, which means all students in the school get free lunch, regardless of family income. The idea is that it’s less costly, more efficient and fairer than tracking who qualifies and who doesn’t.

Indianapolis Public Schools implemented Community Eligibility in all of its schools, and 13 other districts adopted the approach in some schools. Nineteen charter schools also participate.

Families in Community Eligibility schools were still given the option of applying for free textbooks. But because they no longer had to apply for free or reduced-price lunches, many were apparently not aware they needed to apply for free textbooks.

The result was a large drop in the number of students reporting family income at the free-lunch level, a key factor for school funding in a formula considered earlier this legislative session. In IPS, the number dropped from 78.4 percent to 71.5 percent. That would have been enough to reduce the district’s Complexity Index funding by $12.7 million over two years.

Direct certification

Enter “direct certification,” an alternative way to determine who qualifies for free lunch. In a memo to lawmakers, IPS lobbyist Libby Cierzniak argued for using direct certification, in which students who participate in certain anti-poverty programs are automatically eligible for free school lunches.

“IPS believes that direct certification rates are the most accurate measurement of poverty in public schools and should be the basis for the Complexity Index,” Cierzniak wrote. “Further, we are concerned that the use of free textbook percentages will result in significant under-reporting of poverty in school districts that have recently adopted Community Eligibility.”

In Indiana, school districts upload data about their students to a secure application maintained by the Department of Education. The DOE matches the data against a Family and Social Services Administration database of children who participate in the Supplemental Nutrition Assistance Program (food stamps) or the Temporary Allowance for Needy Families program, or who are in foster care.

The state certifies to the school districts that those students are eligible for free lunches.

Nearly all students who are directly certified are in fact be receiving food stamps; vastly more Hoosiers get food stamps than receive TANF or are in foster care. And the income requirement is the same as the requirement to qualify for free school lunch: 130 percent of the poverty level.

So SNAP participation ends up being equivalent to being eligible for free lunch.

Furthermore, legislators are comfortable with direct certification in a way that they weren’t with simple participation in the lunch program. If you can satisfy the state social-service bureaucracy that you qualify for SNAP benefits, there’s little doubt that you’re truly poor.

Why this may be a good change

Back in 2007, researchers at the Indiana University Center for Evaluation and Education Research argued that the Complexity Index should focus on the free-lunch rate and not on other factors. The reason: It was the factor most closely correlated with students’ struggling in school.

Relying on free lunches, and not reduced-price lunches, also could better target at-risk funding to the schools that need it most. And that in turn might help offset some of the more damaging changes the legislature made to school funding – like reducing the overall complexity index funding by 20 percent.

Students who qualify for reduced-price school lunch aren’t necessarily poor by Indiana standards. For example, a family of five with an income of over $52,000 would qualify.

Why it might not be a good change

As the story about Community Eligibility for free lunches illustrates, changing the funding formula can produce unexpected consequences. Could that be the case here?

There may be school districts where significant numbers of students qualify for food stamps but, for whatever reason, aren’t enrolled in the program. That would mean the students aren’t directly certified and the districts would miss out on Complexity Index funding.

Also, free lunch is an entitlement for all children who attend school and whose families meet the income requirements; but children who are undocumented immigrants can’t receive food stamps and presumably aren’t directly certified for free lunch benefits. So might schools serving many migrant students will get less Complexity Index funding than they should?

The change in the index is being phased in over three years, so there’s not likely to be a huge impact on most schools districts. But it’s worth watching to see if the approach creates winners and losers. Indiana’s Complexity Index has been revised several times in its 22-year history. Future legislators are likely to find reasons to change it again.



3 thoughts on “School funding formula takes complex path to simpler focus

  1. Pingback: Message for legislators: School funding hasn’t kept pace | School Matters

  2. Pingback: State funding lags for high-poverty schools | School Matters

  3. Pingback: Indiana ‘at-risk’ funding has declined | School Matters

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