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Introduction

Estimates of income and poverty for states and smaller geographic areas are used by many federal and state agencies to allocate funds for a variety of programs, including the Community Development Block Grant Program (U.S. Department of Housing and Urban Development); the Job Training Partnership Act (U.S. Department of Labor); the Head Start Program (U.S. Department of Health and Human Services); the Community Investment Program (Federal Housing Finance Board); and the Rural Housing Program (Farmers Home Administration). In fiscal year 1994, $30 billion was allocated for all such programs by the federal government. Some allocations to states use estimates from the Annual Demographic Supplement to the Current Population Survey (CPS)—commonly known as the March Income Supplement to the CPS—or estimates from a combination of data from the decennial census, the March CPS, and administrative records. Other allocations, particularly for such small areas as counties and school districts, are based on estimates from the census.

The largest program that uses small-area estimates derives from Title I of the Elementary and Secondary Education Act; it accounts for about 20 percent of the total, more than $6 billion in fiscal 1993. Under the program, the U.S. Department of Education allocates funds for compensatory education programs to meet the needs of educationally disadvantaged children. The funds are allocated at the county level, and the states then distribute these funds among school districts within each county (see Moskowitz et al., 1993). The county allocations are based on the numbers of eligible children, who are predominantly children aged 5–17 in families with incomes below the poverty level,1 but also include children

1  

The poverty status of individuals is determined by comparing the before-tax money income of their family to the appropriate poverty threshold. The poverty thresholds vary by family size and are updated by the change in the Consumer Price Index each year. See Citro and Michael (1995) for an



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Small-Area Estimates of School-Age Children in Poverty: Interim Report I: Evaluation of 1993 County Estimates for Title I Allocations 1 Introduction Estimates of income and poverty for states and smaller geographic areas are used by many federal and state agencies to allocate funds for a variety of programs, including the Community Development Block Grant Program (U.S. Department of Housing and Urban Development); the Job Training Partnership Act (U.S. Department of Labor); the Head Start Program (U.S. Department of Health and Human Services); the Community Investment Program (Federal Housing Finance Board); and the Rural Housing Program (Farmers Home Administration). In fiscal year 1994, $30 billion was allocated for all such programs by the federal government. Some allocations to states use estimates from the Annual Demographic Supplement to the Current Population Survey (CPS)—commonly known as the March Income Supplement to the CPS—or estimates from a combination of data from the decennial census, the March CPS, and administrative records. Other allocations, particularly for such small areas as counties and school districts, are based on estimates from the census. The largest program that uses small-area estimates derives from Title I of the Elementary and Secondary Education Act; it accounts for about 20 percent of the total, more than $6 billion in fiscal 1993. Under the program, the U.S. Department of Education allocates funds for compensatory education programs to meet the needs of educationally disadvantaged children. The funds are allocated at the county level, and the states then distribute these funds among school districts within each county (see Moskowitz et al., 1993). The county allocations are based on the numbers of eligible children, who are predominantly children aged 5–17 in families with incomes below the poverty level,1 but also include children 1   The poverty status of individuals is determined by comparing the before-tax money income of their family to the appropriate poverty threshold. The poverty thresholds vary by family size and are updated by the change in the Consumer Price Index each year. See Citro and Michael (1995) for an

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Small-Area Estimates of School-Age Children in Poverty: Interim Report I: Evaluation of 1993 County Estimates for Title I Allocations in foster homes, children in families above the poverty level that receive Aid to Families with Dependent Children (AFDC), and children in local institutions for neglected and delinquent children. The allocations depend primarily on the numbers of eligible children, but they also depend on the proportions of school-age children who are eligible. The allocations also take into consideration the state's average per-pupil expenditure, and the formula includes a hold-harmless provision to cushion the impact of decreases in allocations. Details of the allocation process are provided in Appendix A. The poverty estimates for the Title I program used by the Department of Education are provided by the Bureau of the Census. The practice until recently had been to use poverty estimates based on decennial census data. Since the rates of poverty, as well as the actual number of children in poverty, change over time, however, Congress recently authorized the Bureau of the Census to provide updated estimates of poverty for the county allocations and, subsequently, for school districts (formally known as local educational agencies, LEAs). Having the most up-to-date estimates is important so that resources can be directed toward areas that are most in need. Congress also authorized a study—through the Department of Education—by the National Research Council's Committee on National Statistics to review the Census Bureau's program for small-area poverty estimates. The statute requires that the Department of Education use the updated estimates unless the Secretaries of Commerce and Education determine that they are ''inappropriate or unreliable" on the basis of the committee's study ("Improving America's Schools Act of 1994," P.L. 103-382, and 1996 continuing resolution). The Panel on Estimates of Poverty for Small Geographic Areas was set up under the committee to carry out the authorized study. The panel is charged with a broad review of the Census Bureau's postcensal poverty estimates for small geographic areas and their utility for Title I allocations, including: the methodology for producing and publishing those data; alternative methods of producing such data; the availability of alternative indicators of poverty that could be used for comparison; the reliability of the data, including comparisons with similar data; and the usefulness of the estimates for federal programs that allocate funds to state and substate areas. It was the intent of Congress that the panel study be conducted as the Census Bureau began its small-area estimates program, so that the program could benefit from the study. The legislation specifying the use of updated Census Bureau poverty estimates was signed into law on October 20, 1994. However, funding for the panel study was not provided to the Department of Education until the fiscal 1996 continuing funding resolution, and the Department signed a contract for the study on March 15, 1996. The panel to conduct the study began its work     evaluation of the current official poverty measure and a proposed alternative measure; the issue of how poverty should be defined is not considered in this report.

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Small-Area Estimates of School-Age Children in Poverty: Interim Report I: Evaluation of 1993 County Estimates for Title I Allocations in June 1996 and is scheduled to work through 1998, producing a final report at that time and such interim reports as are needed. The first task for the Census Bureau was to produce estimates for counties of the numbers of children aged 5–17 from families with incomes below the poverty level in 1993, to be used by the Department of Education for the 1997–1998 and 1998–1999 Title I allocations.2 Within 90 days of the release of those estimates by the Census Bureau, the panel is required to provide a report to Congress with an assessment of the reliability and utility of the estimates. This interim report of the panel responds to the legislative mandate for an assessment of updated poverty estimates. In order to ensure that the Department of Education would have appropriate information in time for the allocations to be made in the spring of 1997, it was originally assumed that the Census Bureau would release its estimates in the fall of 1996 and that the panel would provide its assessment shortly thereafter. However, because the Census Bureau had not formally released its estimates by the end of 1996 and had not set a firm date for doing so, this report assesses the preliminary estimates that were provided to the panel and the Department of Education on January 7, 1997, and some draft descriptions of the methodology for them that were provided earlier.3 The panel's work has been limited by the information made available to it and the time available for its analysis. We would have preferred to delay this report until the Bureau of the Census provided more evaluation materials about its estimation program and we had time to study those materials. However, the next Title I allocations must be made in the spring of 1997, and the panel believes that its initial assessment will be useful to the Department of Education in deciding what data to use for those allocations. Our report contains five other sections and six appendices. Section 2 assesses the advantages and disadvantages of using decennial census data and CPS data for small-area poverty estimates and looks at the differences between the census and the CPS as data sources for income and poverty. Section 3 describes the Census Bureau's methodology for producing updated small-area poverty estimates for 1993. Section 4 provides the panel's assessment of that methodology and the resulting estimates. Section 5 presents the panel's recommendation regarding the use of the estimates for the Title I fund allocations for 1997–1998. Section 6 summarizes the panel's suggestions of directions for future research. The appendices provide descriptive and technical information. 2   More precisely, the Census Bureau's estimates pertain to poor related children aged 5–17 (whom we refer to as "poor school-age children"). Related children include the following family members in a household: own children under 18 years of age (a never-married son or daughter by birth, a stepchild, or an adopted child of the householder) and all other persons under 18 years of age, regardless of marital status, who are related to the householder, except the spouse of the householder. Foster children are not included since they are not related to the householder (Bureau of the Census, 1993a). 3   The Bureau of the Census released the updated estimates on March 26, 1997.