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Executive Summary BACKGROUND The U.S. Department of Education uses estimates of school-age children in poverty to allocate federal funds under Title I of the Elementary and Secondary Education Act for education programs to aid disadvantaged children. Histori- cally, the allocations have been made by a two-stage process: the department's role has been to allocate Title I funds to counties; the states have then distributed these funds to school districts. Until recently, the department has based the county allocations on the numbers and proportions of poor school-age children in each county from the most recent decennial census. States have used several different data sources, such as the decennial census and the National School Lunch Program, to distribute the department's county allocations to districts. In 1994 Congress authorized the Bureau of the Census to provide updated estimates of poor school-age children every 2 years, to begin in 1996 with esti- mates for counties and in 1998 with estimates for school districts. The Depart- ment of Education is to use the school district estimates to allocate Title I basic and concentration grants directly to districts for the 1999-2000 and later school years, unless the Secretaries of Education and Commerce determine that they are "inappropriate or unreliable" on the basis of a study by the National Research Council. That study is being carried out by the Committee on National Statistics' Panel on Estimates of Poverty for Small Geographic Areas. Under a direct allocation procedure, there would be no allocations to coun- ties and, hence, no need for states to distribute them to school districts. However, a Provision in the 1994 legislation permits states to aggregate the department's

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2 SMAL L-ARE4 ESTIMATES OF SCHOOL-AGE CHILDREN IN POVERTY allocation amounts for all districts in a state that have fewer than 20,000 people and to redistribute the aggregate amount among those districts by using some other method that the department approves. UPDATED SCHOOL DISTRICT ESTIMATES The Census Bureau's procedure for producing updated school district esti- mates of poor school-age children is a basic synthetic shares approach, in which the proportions of poor school-age children in school districts within each county in 1989 (as measured by the 1990 census) are applied to updated estimates of numbers of poor school-age children from a statistical model for counties. The Census Bureau decided that the most recent school district estimates it could produce by the end of 1998 (for the Title I allocations in spring 1999) were for school-age children in 1996 who were living in and related to a family in poverty in 1995. Reasons for this decision included the time required to ascertain the changes in school district boundaries since the 1990 census and the 1-2 year lag in the availability of the data sources used in the county statistical model. The synthetic shares method assumes that the shares of poor school-age children among school districts in each county in 1995 are the same as they were in 1989. Consequently, the synthetic estimates reflect only the changes in school- age poverty from 1989 to 1995 that occurred in each county as a whole. The estimates do not capture any variation in school-age poverty among the districts within each county that occurred since the 1990 census. The synthetic shares method was used because no administrative records data are available for a model for school districts (which would be similar to the Census Bureau's county model) that could capture changes in poverty for school districts within counties. There are several reasons for the lack of data and the difficulties of developing estimates for school districts: most districts are small in size, many district boundaries do not coincide with the boundaries for counties or other governmental units, district boundaries can and often do change, and some districts do not serve all elementary and secondary grades. ASSESSMENT AND CONCLUSION In assessing the Census Bureau's 1995 school district estimates of the num- bers of poor school-age children for use in Title I allocations for the 1999-2000 school year, the panel first examined the 1995 county estimates that were pro- duced by the Census Bureau's statistical model. Although the Department of Education would not use the county estimates for Title I allocations if it were to make allocations directly to school districts, the county estimates are central to the synthetic shares method for district estimates. The model that was used to produce the 1995 county estimates is essentially the same model that was used to produce county estimates of poor school-age

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EXECUTIVE SUMMARY 3 children for 1993. On the basis of internal and external evaluations that were conducted of alternative 1993 county models, which resulted in some changes in the Census Bureau's original 1993 county model, the panel supported the use of revised 1993 county estimates for Title I allocations for the 1998-1999 school year (see National Research Council, 1998~. Additional evaluations of the 1995 county model, which focused on its behavior when estimated for several time periods, confirmed that the county model is performing well. A separate estima- tion procedure for Puerto Rico, which is treated as a single county and school district for Title I allocations, also appears to be reasonable, given the available data. Evaluations of the Census Bureau's synthetic procedure for school districts over the 1980-1990 period revealed large differences for many districts between the synthetic estimates of poor school-age children and the comparison estimates from the 1990 census; the large differences occur mainly for small districts. In contrast, the estimates for school districts with 40,000 or more people in 1990 are not markedly worse than the county model estimates. Also, a number of districts are coterminous with counties, so that their estimates come from the county model. Together, these two groups of districts comprise only 13 percent of the districts (as of 1990), but they contain 62 percent of all school-age children. Although the Census Bureau's 1995 estimates of poor school-age children have potentially large errors for many school districts, the panel nonetheless concludes that they are not inappropriate or unreliable to use for direct Title I allocations to districts as intended by the 1994 legislation. In reaching this conclusion, the panel interprets "inappropriate and unreliable" in a relative sense. Some set of estimates must be used to distribute Title I funds to school districts. The panel concludes that the Census Bureau's 1995 estimates are generally as good as-and, in some instances, better than-estimates that are currently being used. Also, while further research is needed, a limited evaluation suggests that school lunch data are not appreciably better than the 1990 census for constructing within-county school district shares of poor school-age children. A benefit of using the synthetic shares estimates is that the department would be able to determine eligibility of school districts for both basic and concentration Title I grants on the basis of a consistent set of estimates nationwide. Also, use of the synthetic shares estimates for direct allocation of concentration grants would respond to the intent of the 1994 legislation that eligible districts be able to receive concentration grants even when they are in counties that would not be eligible under the current two-stage allocation process. The Census Bureau's updated estimates of poor school-age children for counties are the only postcensal small-area estimates of poverty that have been thoroughly evaluated. It is important that they be considered in the direct alloca- tions to school districts, as is done when the allocations are based on the synthetic estimates. If a state chooses to reallocate the amounts for school districts with less than 20,000 population, the county estimates can be reflected in the alloca

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4 SMAL L-ARE4 ESTIMATES OF SCHOOL-AGE CHILDREN IN POVERTY lions by grouping the allocations for small size districts by county and redistrib- uting the county totals to those districts. RECOMMENDATIONS (1) The panel recommends to the Secretaries of Education and Com- merce that the Census Bureau's 1995 school district estimates of poor school-age children be used to make direct Title I allocations to school districts for the 1999-2000 school year. (2) The panel recommends that any state plan approved by the Depart- ment of Education for redistributing the sum of the department's allo- cations for school districts with under 20,000 population maintain the county total amounts for such districts to the extent possible. The Department of Education should undertake a thorough study of the direct allocation of Title I funds to school districts, which will be a new procedure for the 1999-2000 school year. The study should examine the allocation methods used and assess the results. FUTURE RESEARCH AND DEVELOPMENT It is important to continue an active program of research and development for methods of estimating poverty for school-age children at the county and school district levels. The county model is performing well, but, like other models, it can probably be improved. Work should also be pursued to improve the current synthetic shares method for school district estimates. Research on ways to produce the estimates with data that are closer in time to the year for which the allocations are to be made should also be pursued. Improving school district estimates so that they reflect within-county, as well as between-county, changes in school-age poverty over time will require a sub- stantial research and development effort. It is particularly important to obtain relevant administrative records data for districts, such as income tax return data coded to the district level. Such administrative data, together with data from the 2000 census and the planned American Community Survey, could provide the means to develop a much improved model-based approach for estimating school- age poverty at the district level. For its work in small-area poverty estimation, the Census Bureau needs to provide adequate staff and other resources on a continuing basis. Because small- area estimates of poverty support a range of important public policy needs for federal, state, and local governments, the Bureau's program should include not only data and model development and production, but also thorough evaluation and detailed documentation of each set of estimates produced.