Last updated 3 months ago. Our resources are updated regularly but please keep in mind that links, programs, policies, and contact information do change.
Federal formula grants serve as a vital mechanism through which the government invests in the nation’s schools and districts.
For educators, administrators, policymakers, and anyone committed to equitable funding in education, understanding these grants is essential. By providing resources based on predetermined formulas, the federal government addresses specific educational needs, promotes equity, and improves learning outcomes for students across the country.
Understanding the Basics: Definition, Purpose, and Types
Formula grant programs are noncompetitive, with funds allocated through pre-established formulas created by Congress. Often called state-administered programs, they involve significant oversight from state education agencies.
Unlike discretionary grants, which involve competitive applications where projects are evaluated and ranked, formula grants provide predictable funding to eligible entities based on specific criteria in legislation or regulations. This predictability allows state and local educational agencies to engage in more effective long-term planning.
Purpose of Federal Formula Grants
The main purpose of federal formula grants is to provide financial assistance to states and Local Educational Agencies (LEAs) to address clearly defined educational needs and improve outcomes for all students. These needs range from supporting students in rural areas to enhancing opportunities for underrepresented groups.
Formula grants also enable responses to unforeseen events such as natural disasters or health emergencies, ensuring educational services continue with minimal disruption. Within the U.S. Department of Education, administration of these grants focuses on increasing efficiency through consistent standards and guidelines.
Types of Formula Grants
The U.S. Department of Education administers several formula grant programs, each targeting specific areas:
- Rural and Insular Areas Grants: Provide technical assistance for students in geographically isolated rural areas
- School Improvement Grants: Help schools enhance operational efficiency
- Formula Grants for Special Populations: Focus on improving educational results for under-represented groups
- Response Formula Grants: Provide relief funds to address impacts of disasters and emergencies
- Impact Aid Grants: Offer assistance to districts that lost property tax revenue due to tax-exempt federal property
- IDEA Formula Grant Programs: Support students with disabilities through Grants to States (Part B), Preschool Grants (Part B), and the Program for Infants and Toddlers (Part C)
This diverse range of programs demonstrates the federal government’s commitment to addressing varied challenges in American education.
Formula Grants Under the Elementary and Secondary Education Act (ESEA)
The Elementary and Secondary Education Act (ESEA), first enacted in 1965, was reauthorized by the Every Student Succeeds Act (ESSA) in 2015. ESSA built upon ESEA’s foundation as a civil rights law, ensuring every child has equal opportunity to receive high-quality education.
Under ESEA as amended by ESSA, several key formula grant programs provide substantial financial support for K-12 education. Among the most prominent are:
- Title I, Part A (Improving Basic Programs Operated by State and Local Educational Agencies)
- Title II, Part A (Supporting Effective Instruction)
While other titles within ESEA also offer formula grant funding, such as Title IV, Part A (Student Support and Academic Enrichment), Title I and Title II are particularly significant due to their scale and direct impact nationwide.
Key Programs in Detail
Title I, Part A: Improving Basic Programs
Title I, Part A is the largest federal program dedicated to preK-12 education, with annual funding exceeding $18 billion and reaching most school districts across the United States.
The core objective is to provide financial assistance to LEAs and schools with high numbers or percentages of children from low-income families. The program aims to close the academic achievement gap for disadvantaged students.
Title I seeks to ensure all children have the opportunity to receive fair, equitable, and high-quality education, providing supplemental resources to students and schools facing the greatest challenges. Every LEA receiving Title I funding must reserve a portion to provide services to students experiencing homelessness.
Funding Mechanism
The U.S. Department of Education allocates funds to State Educational Agencies (SEAs) through four statutory formulas:
- Basic Grants
- Concentration Grants
- Targeted Grants
- Education Finance Incentive Grants (EFIG)
These formulas primarily rely on census poverty data at the LEA level. SEAs then distribute Title I funds to their LEAs based on specific requirements outlined in the legislation.
Several factors influence allocation:
- Census poverty data at the LEA level
- Student enrollment data (used to calculate percentage of low-income students)
- State average expenditures per pupil for public K-12 education
- Poverty definitions linked to eligibility for free or reduced-price meals under the National School Lunch Program
Title II, Part A: Supporting Effective Instruction
The Supporting Effective Instruction State Grants program aims to enhance the quality and effectiveness of teachers, principals, and other school leaders to increase student academic achievement.
The program works to improve skills and knowledge of current educators and increase the number of effective teachers and leaders who can improve student outcomes. A critical objective is ensuring low-income and minority students have greater access to high-quality educators.
Funding Mechanism
Formula grants are provided to SEAs, which then distribute funds as subgrants to LEAs. The program offers considerable flexibility in how funds are used to address educator quality challenges.
Allowable uses include:
- Recruiting and retaining effective teachers and principals
- Providing high-quality professional development
- Reducing class size
- Reforming teacher and principal certification programs
- Supporting new teachers through induction and mentoring
This flexibility allows states and districts to tailor investments to their specific needs and priorities.
How Formula Grants are Distributed
The allocation of Title I, Part A funds involves four distinct formulas, each with its own eligibility criteria and calculation methods.
Basic Grants
Basic Grants are allocated to LEAs that have at least 10 formula-eligible children (ages 5-17), where this number exceeds 2 percent of the LEA’s total school-age population.
The “formula child count” includes children from low-income families, those in institutions for neglected or delinquent children, children in foster homes, and children in families receiving Temporary Assistance for Needy Families (TANF) payments above the poverty level.
Grant amounts are calculated by multiplying the formula child count by a state expenditure factor based on average per-pupil expenditure. In Fiscal Year 2020, approximately 39.6% of all Title I funding was distributed through Basic Grants.
Concentration Grants
Concentration Grants target LEAs with high concentrations of poverty. To qualify, an LEA must have more than 6,500 formula children or a formula child rate exceeding 15 percent, while also meeting Basic Grants eligibility requirements.
These grants supplement any funding an LEA receives through Basic Grants. In FY 2020, about 8.4% of federal Title I funding was allocated through Concentration Grants.
Targeted Grants
Targeted Grants use the same underlying data as Basic and Concentration Grants but apply a weighting system providing more funding per child to LEAs with higher numbers or percentages of formula children.
To qualify, an LEA must have at least 10 formula children and a formula child rate of 5 percent or more. This formula more directly addresses increased needs associated with higher poverty levels. In FY 2020, approximately 26.0% of federal Title I funding was distributed through Targeted Grants.
Education Finance Incentive Grants (EFIG)
EFIG funds are first calculated for states based on:
- The state’s effort to provide financial support for education compared to its relative wealth
- The degree to which education expenditures among LEAs within the state are equalized
Once a state’s allocation is determined, funds are distributed to LEAs within the state that have at least 10 formula children comprising at least 5 percent of their school-age population. Like Targeted Grants, EFIG accounted for approximately 26.0% of federal Title I funding in FY 2020.
Allocation Factors
The allocation of Title I funds relies heavily on:
- Census poverty data
- Student enrollment figures
- Number of “formula children” aged 5-17
- Formula child rate (percentage of formula children relative to total children)
- Federal poverty level (FPL) thresholds
Once the Department of Education determines initial allocations, SEAs distribute funds to LEAs, ensuring that schools with the highest percentages of children from low-income families receive priority.
Impact and Effectiveness of Formula Grants
Formula grants aim to improve academic outcomes for students, particularly those from disadvantaged backgrounds, and narrow achievement gaps between different student groups.
Title I, Part A promotes resource equity by channeling additional funding to schools and districts serving high concentrations of poverty. Title II, Part A enhances educator quality with the expectation that better instruction and leadership will improve learning results.
Research on effectiveness shows mixed results. Some studies suggest Title I has positively impacted student achievement, particularly following legislative changes emphasizing accountability and challenging academic standards. Other research indicates more limited overall effects on student performance.
Evaluations of Title II, Part A show a significant portion of funding directed toward professional development for educators. Broader research suggests sustained increases in financial resources can lead to lasting positive effects on student achievement, especially for low-income students.
Program Examples
Formula grants enable schools and districts to implement various educational programs:
- Additional instruction in reading and mathematics
- Special preschool, after-school, and summer programs
- Schoolwide programs in high-poverty schools (40% or more low-income students)
- New teacher induction and mentoring programs
- Professional development in areas like STEM education
- Incentives to attract and retain effective teachers in challenging schools
Applying for and Managing Formula Grant Funding
Eligibility Requirements
Eligibility varies by program:
- Title I, Part A: Based on number and percentage of children from low-income families within district attendance areas
- Title II, Part A: Allocated to SEAs through a formula considering student population and children living in poverty
Schools with at least 40% low-income students can use Title I funds for comprehensive schoolwide programs.
Application Process
Formula grants are generally state-administered. LEAs typically apply through their State Educational Agency, with specific procedures varying by state and program.
LEAs usually submit detailed plans outlining how they’ll use funds to achieve program objectives based on local needs assessment. For specialized programs, like those from the Office of Indian Education, applications may go directly to the U.S. Department of Education through systems like the Electronic Application System for Indian Education (EASIE).
Effective Management
Managing formula grants requires understanding federal and state regulations, including:
- Education Department General Administrative Regulations (EDGAR)
- Uniform Grant Guidance
Federal funds must supplement, not supplant, existing state and local funding. Grantees need clear internal policies to ensure compliance and maintain accountability.
Regular monitoring of student progress and program effectiveness is critical. Engaging stakeholders—teachers, parents, community members—in planning and implementation helps maximize impact and align with local needs.
Reporting Requirements
Recipients must follow reporting guidelines established by both the Department of Education and their SEA, including:
- Regular submission of reports detailing fund usage
- Documentation of supported activities
- Academic progress data for participating students
SEAs conduct periodic assessments of grant administration at the LEA level to ensure requirements are met. Grantees are subject to audit requirements to verify proper use of federal funds.
Challenges and Areas for Improvement
Common Implementation Challenges
Schools and districts face several challenges when using federal formula grants:
- Navigating complex federal regulations and administrative requirements
- Ensuring funds supplement rather than replace existing funding
- Making strategic decisions about resource allocation
- Managing instability from potential funding reductions
- Building administrative capacity to effectively manage grant programs
Funding Equity Debates
Despite formula grants’ aim to promote equity, debates persist:
- Significant disparities in school funding often exist at state and local levels
- High-poverty districts frequently receive less state and local revenue than wealthier counterparts
- Some argue federal efforts to counteract inequities remain insufficient
- Broad distribution of some Title I funds may dilute impact on highest-need schools
- Complex formulas may not accurately reflect diverse community needs
Administrative Burden
Managing federal formula grants creates administrative challenges:
- Application processes, regulatory compliance, and reporting requirements consume time and resources
- Administrative overhead can divert resources from direct student services
- Calls continue for streamlined grant management processes and reduced requirements
Flexibility vs. Oversight
The balance between federal oversight and local autonomy remains debated:
- Some grants offer considerable latitude in spending decisions
- Others have more specific stipulations
- Some argue greater flexibility would better address unique local needs
- Others worry loosening restrictions could lead to inequities and undermine support for disadvantaged students
Resources for Further Information
For detailed information on formula grants, visit:
- Formula Grants Overview
- Elementary and Secondary Education Act (ESEA)
- Every Student Succeeds Act (ESSA)
- Title I, Part A
- Title II, Part A
- Apply For a Grant
- Manage Your Grant
- Education Department General Administrative Regulations (EDGAR)
- Uniform Grant Guidance
Additional resources include:
- Congressional Research Service Reports
- National Center for Education Statistics
- Learning Policy Institute
- The Education Trust
- Bellwether Education Partners
- Schoolhouse Connection
Our articles make government information more accessible. Please consult a qualified professional for financial, legal, or health advice specific to your circumstances.
