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Chapter 109
Funding History
| Fiscal Year | Appropriation | Fiscal Year | Appropriation |
|---|---|---|---|
| 1951 | $28,700,000 | 1986 | 665,975,000 |
| 1965 | 332,000,000 | 1987 | 695,000,000 3/ |
| 1970 | 507,900,000 | 1988 | 685,498,000 |
| 1975 | 636,016,000 | 1989 | 708,396,000 |
| 1980 | 792,000,000 1/ | 1990 | 717,354,000 |
| 1981 | 706,750,000 | 1991 | 754,361,000 |
| 1982 | 437,000,000 | 1992 | 763,708,000 |
| 1983 | 460,200,000 | 1993 | 738,250,000 |
| 1984 | 580,300,000 2/ | 1994 | 786,304,000 |
| 1985 | 675,000,000 |
Section 2 provides aid to districts with significant amounts of federally-owned property, generally based on the Department of Education's estimate of the local revenue that the local education agency (LEA) would have received from the eligible Federal property if that property had remained on the tax rolls.
Section 3 provides aid to districts with federally-connected children; the amount varies with the classification of the children and is highest for "a" children, who presumably create the greatest burden on local resources. Higher payments are made for children living on Indian lands and for children with disabilities. Payments are also increased for districts with higher proportions of federally-connected children, i.e., 15 percent or more "a" children in the district or 20 percent or more "b" children. A minimum of 3 percent or 400 children in average daily attendance in a district must be federally-connected for a district to be eligible to receive aid.
In addition, Section 6 schools that primarily serve children of military families who reside on Federal property, although authorized by P.L. 81-874, are currently operated and funded by the Department of Defense (DoD).
Section 7(a) authorizes assistance to LEAs for increased current operating expenses and/or replacement of lost revenues that result from damage caused by disasters in areas that are eligible for Federal public assistance as designated in presidential declarations. The repair and replacement of physical facilities are the responsibility of the Federal Emergency Management Agency.
One of the most pressing problems in the Impact Aid program is inequity in the distribution of Section 3 payments. First, payments for "b" children, who generally do not impose a real burden on their school district, divert scarce Federal resources away from districts that are more truly burdened by Federal activities. Most "b" children have parents who work on Federal property but live on non-Federal property that is on the local tax rolls and generates property tax revenues for the district. For example, Fairfax County, Virginia receives Section 3 funds for many "b" children whose parents work at the Pentagon in Arlington County but live and pay taxes in Fairfax County; these children place no greater burden on Fairfax County than any other child whose parents commute to a private-sector job in a neighboring county. Because appropriations have historically been well below total entitlements and payments must be pro-rated, payments for "b" children divert scarce funds from districts with "a" children, who represent a far greater burden on their districts.
Further, several statutory provisions have the effect of providing substantially larger payments to districts with only slightly more Section 3 students. For example, districts that meet the eligibility threshold are compensated for all of their federally-connected students, while districts that fall just below the threshold receive nothing. Similarly, districts that have high concentrations of federally-connected students ("super a" and "sub-super a" districts) are currently entitled to a higher payment rate for all of their federally-connected students.
A 1988 analysis (III.1) examined the distribution of Impact Aid funds among school districts that differ in size, wealth, and spending, as measured by student enrollment, property valuation per pupil, and current operating expenditures per pupil. The study found that, in general, a larger than expected proportion of Impact Aid goes to districts that are small, low in property wealth, or high in per-pupil expenditures. For example, the highest-expenditure districts, with 25 percent of total enrollment, received over 37 percent of program funding, whereas the lowest-expenditure districts, with 24 percent of enrollment, received only about 15 percent of program funding. Because this study did not examine the distribution of Impact Aid relative to other district revenues, no conclusion was reached on whether high-expenditure districts would have high revenues without Impact Aid. Further study would be needed to determine whether Impact Aid recipients tend to be high-expenditure districts due to other Federal, State, and local resources, or whether their relative affluence is largely due to Impact Aid revenues.
In FY 1992, ED commissioned a set of papers (III.2) on topics related to the implementation of Section 5(d)(2), which allows States with school finance systems that ED has certified as "equalized" to reduce State aid to school districts that receive Impact Aid (under the rationale that in States with equalized funding systems, the State is assuring that districts are not unfairly burdened due to Federal activities). Under the current 5(d)(2) standards, States may be certified as equalized under one of three tests: 1) a disparity test, which considers differences in per-pupil funding among school districts in the State (to qualify, the difference between the 95th and 5th percentiles must be no greater than 25 percent), 2) a wealth neutrality test, which is based on the principle that the same level of tax effort should yield the same level of funding per pupil, and 3) an exceptional circumstances test.
For the commissioned papers, authors were asked to analyze and critique the current 5(d)(2) standards and develop alternative standards. In addition, authors were asked to consider how the 5(d)(2) standards could incorporate incentives for encouraging States to increase equalization, standards emerging from recent school finance litigation, alternative measures of school resources and inputs, cost-of-education adjustments to educational expenditures, and ways to address the problem of educational overburden in large, urban school districts. Authors all agreed that improvements in the current 5(d)(2) equalization standards should be made. Each paper noted that specific equalization standards would contain implicit value judgements, and each presented distinctly different approaches to the problems. Authors expressed concern about the appropriateness of the current "wealth neutrality" standard because it measures taxpayer equity; authors felt the Impact Aid program should focus more on student equity. Authors also advocated incorporating a vertical equity component to recognize that some students have greater needs.
To improve the timeliness of Impact Aid awards, the Department proposed to use prior year student counts and related data to calculate current year payments, and Congress included language in the FY 1993 appropriations bill to permit this change. Use of prior year data enables the program to award funds 6 to 8 months earlier than when the law required payments to be based on current year data.
[Impact Aid: Construction]