Chapter IV

Categorical Grants

In addition to the aid allocated to districts under the Educational Cost Sharing grant, the State Department of Education provides financial support for specific purposes through categorical grants. Categorical grant programs earmark funding for particular types of students or districts or special purposes and activities. The main reasons are to: remedy inequities; ensure equal opportunities; and support current legislative and executive priorities.

During FY 00, the education department administered 48 different categorical grant programs. The SDE grants vary in terms of:

• size -- from multimillion dollar programs to those involving under $100,000;
• scope -- from grants every town receives to those directed at a narrow range of districts;
• administration -- from simple pass-through methods to allocation by formula or competitive process; and
• purpose -- from adult education to youth service bureaus.

Most have been in place for a number of years although new grant programs are generally added, and existing ones discontinued, in each legislative session. A listing of the education department categorical grants active between FY 97 and FY 00 is contained in Appendix E.

Figure IV-1 shows the distribution of funding from all 48 SDE categorical grant programs active in FY 00 ($731.8 million) among major purposes. As the figure indicates:

• one program - the school construction grant -- accounted for 56 percent of total expenditures;
• three state special education grant programs made up 8 percent;
• two student transportation grant programs made up 6 percent; and
• the remaining 42 programs, which covered a wide array of educational purposes, comprised 30 percent of all categorical spending in FY 00.

The school construction program differs from the other grants in that its funding level is determined primarily by local district decisions to undertake building projects and apply for state aid. Due to its unique status, as well as its size and complexity, the school construction grant is excluded from the following analysis and discussed separately in the following chapter.

As Figure IV-2 shows, between FY 97 and FY 00 funding for all state categorical grants (excluding the school construction program) rose from about 10 to over 15 percent of total education aid administered by SDE. Over this time period, total categorical grant funding without construction increased nearly 100 percent.

The department's categorical grant programs primarily support local and regional school districts. However, annually since FY 97, about 14 to 18 percent of total SDE categorical funding (excluding the school construction grant), has been provided to other types of grantees such as regional education service enters, charter schools, and Head Start program operators.

Funding Trends and Patterns

Forty-two categorical grants distributed by SDE to school districts (single town and regional) during fiscal years 1997 through 2000 were analyzed in detail to determine trends and patterns in funding. Expenditures to districts from these grants programs in FY 00 totaled $266 million, about 13 percent of all state grant funds administered by the department.¹ The methodology for selecting and categorizing the SDE grants included in the program review committee analysis is described below.

Grant selection. The analysis was limited to categorical grants distributed by SDE to school districts (town and regional) during fiscal years 1997 through 2000. Using the department's online database a total of 69 grant programs were identified. Twenty-five grants were screened out because they were either inactive or not directed to school districts. This means for the four-year review period either no funding had been distributed from those grants or the entire grant was dispersed to agencies other than school districts. The ECS and school construction grants were removed because they are being analyzed separately, leaving a total of 42 active categorical grants in this analysis.

Grant classification. Each grant program was summarized by identifying important features such as: the year in which it started; purpose; target population; main factors for distribution of funds; annual expenditures from FY 97 through FY 01; procedures for distributing funding; major changes in criteria and procedures for distribution since 1990, and effect of those changes on the distribution requirements since 1990. Using this information, the grants were classified according to several key variables, including:

• the premise for the distribution of the grant (whether competitive, based on a formula, or both);
• to whom the grant was directed (either toward all school districts or selected school districts);
• whether the categorical grant is distributed based on factors related to student need, district wealth, and/or student performance; and
• which state education goal the grant is primarily intended to advance (i.e., reduce isolation, resource equity, improve achievement, or community involvement).

Results of the classification were entered in a database that additionally contained for all of the 42 grant programs the total amount of funding distributed, funding directed to school districts, total number of grantees, and number of school districts that received funding each year from FY 97 through FY 00.

Analysis results. Key findings resulting from the analysis concerning overall characteristics and funding relationships are highlighted below.

• For all towns, categorical grants are a small source of education revenue but fiscal impact varies considerably.

_ As a percentage of a town's net current expenditures for education, categorical grants accounted for 5.7 percent on average but ranged from 14.7 percent to 0.1 percent for FY 00.

_ On a per pupil basis, total revenues from categorical grants in FY 00 ranged from $1,616 to $5.

• While the number of grant programs is relatively large, most of the categorical funding is distributed through a few major grants. Many of the individual grant programs are relatively small in terms of funding level.
• Nine of the 42 grant programs (see Table IV-1) were funded at more than $10 million each and together accounted for 75 percent of total categorical funding to districts in FY 00.

• Almost one-third of the active grant programs in FY 00 had funding levels under $1 million each and together accounted for only 1.4 percent of total funding
• More grant programs are aimed primarily at promoting the state goal of student achievement, but more money is distributed under grants promoting resource equity.

_ Thirty-seven percent of all grant programs have improving student achievement as their primary state goal, followed by resource equity (29 percent).

_ The grant programs primarily promoting resource equity account for 49 percent of total categorical funding, followed by achievement (33 percent).

• Wealth is the predominant single factor in determining the distribution of categorical aid, but is only slightly ahead of student need, as Figure IV- 3 shows.
• Wealth is also the most predominant factor in combination with other factors, again followed closely by need.
• The towns receiving the majority of total SDE categorical grant funding in FY 00 were the poorest, had the highest remedial student counts, and largest proportions of need student.
• The bottom 10 percent of towns in terms of income adjusted property wealth received 51 percent of total aid (48 percent went to the middle 80 percent of towns; 2 percent to the top 10 percent of towns).
• The 10 percent of towns with the most students performing at or below the statewide standard for remedial assistance received 57 percent of total aid (41 percent went to the middle 80 percent of towns; 3 percent to the 10 percent of towns with lowest counts). (Percents do not add to 100 due to rounding).
• The 10 percent of towns with highest concentrations of need students received 66 percent of total aid (32 percent to the middle 80 percent of towns; 3 percent to the 10 percent of towns with lowest need student counts) (Percents do not add to 100 due to rounding).
• The 14 priority districts (designated in statute according to a formula based on a district's population, number of children on welfare, and poor performing students) are given preference in about one-third of the categorical grant programs; they received 61 % ($161 million) of total categorical funding in FY 00.

¹ Money received from SDE by organizations other than school districts under active categorical grants (e.g., $33 million in FY 00) was removed from the analysis.

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