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Seeing Beyond Silos

How State Education Agencies Spend Federal Education Dollars and Why

States typically keep federal education funds in silos—separating staff into different offices for each federal fund. But as Texas illustrates, state education leaders can do much more to build collaborative agencies and meet comprehensive education reform goals.

Faced with audits related to the large volume of federal requirements, some states have responded by siloing different federal funds and their associated activities. (iStock)
Faced with audits related to the large volume of federal requirements, some states have responded by siloing different federal funds and their associated activities. (iStock)

This report contains corrections.

Historically, state departments of education, or SEAs, have—for the most part—been compliance-focused organizations that managed federal education policy. Over the past several decades, these agencies have been education policy implementation entities. Today, while their compliance responsibilities have remained, they are taking on more responsibility for education and academic outcomes than ever before, substantially increasing the scope of their work. State leaders and their staffs must distribute federal education dollars and monitor the districts’ use of these funds in accordance to regulations set by federal policymakers. There is nothing controversial about attaching strings to funding sources, but these different compliance requirements have driven many agencies to respond in predictable ways. To make compliance easier, state leaders have traditionally separated agency staff into different areas responsible for each federal fund. Once an approach has passed external audits, they then have maintained the status quo of SEA staffs’ work.

To support this work, the U.S. Department of Education, or DOE, allows states to set aside certain amounts of federal funds to cover SEA administrative costs. Indeed, tensions between states and the federal government are inherent to the enterprise of co-governance, but state education leaders can point to specific federal regulations that have a direct impact on their work decisions and that make it difficult for them to meet the demands of federal policymakers.

Through legislation and regulation, federal policymakers have set numerous conditions for state education leaders to drive, manage, support, and monitor school improvement at scale. States receive dollars through a set of distinct federal funds that they must use only for federally allowed activities. At first appearance, it is an approach that make sense, particularly when it is much easier—for example—to have Elementary and Secondary Education Act, or ESEA, Title I staff working on Title I activities serving economically disadvantaged students and alternatively to have Perkins Act staff working on Perkins Act activities that support career and technical education.* But moving forward, what if our approaches to improving outcomes for economically disadvantaged students require attention to career and technical training or to improved special education services? Are the federal conditions optimal for helping states meet federal demands while at the same time carrying out their educational mandate? This report contributes to the discussion of these and other questions related to the distribution of federal education funds.

This paper explores states’ uses of federal education dollars and how federal policy conditions might lead states to use funds in the ways that they do, which are not always the most productive ways. Our analysis of SEA spending of federal funds is based on financial and staffing data from 11 state departments of education from the fiscal year 2012–2013. Eight states in our analysis—Arkansas, Illinois, Kentucky, Missouri, Nebraska, North Carolina, Oklahoma, and Texas—provided staffing and contact data that identified specific federal funds and their uses. Three states—Washington, Iowa, and Delaware—did not meet our requirements for use in this report: Iowa and Washington did not provide data that we could use to identify staff responsibilities, and Delaware provided information on federally funded positions and contracts but did not designate which specific funds were used. Furthermore, this study focuses on how the eight study SEAs use federal dollars for their own activities, rather than on how school districts—another major recipient of federal education support—use federal resources. Our goal was to learn more about state leaders’ use of federal dollars to administer these programs and what implications that had for how they organized their own agencies.

In gathering the data for this report, the Center for American Progress sent questionnaires to state education officials from all 50 states during the last quarter of 2013. In some cases, we made this request under the auspices of state freedom of information laws. No state in this study had the information we sought related to state spending of federal funds readily available or easily accessible to the public. Specifically, we asked states to report how much they spent from each federal education fund on compensating state staff and external contractors. In this report, our analysis of SEA staffing is based on the information we collected directly from these states, unless otherwise noted.

In general, research on the organization and management of state education agencies is limited. Our analysis, however, reaffirms existing research showing the strings attached to federal funds hinder state leaders from building education agency capacity. Specifically, we describe how states in this study silo their use of federal education funds, establishing separate offices based on which federal dollars fund them. For example, states commonly have a special education office that is funded primarily through federal special education funding through the Individuals with Disabilities Education Act, or IDEA. Other analysts have described how this practice matters because siloing undermines comprehensive education reform by limiting collaboration and communication.

However, not every state in our study struggled with this challenge. For instance, the practices of the Texas Education Agency, detailed in this report, illustrates how Texas state leaders’ used federal funds more comprehensively. However, for the most part—Texas and a handful of other examples notwithstanding—state education agencies are hard pressed to get the biggest bang from their federal dollars because of structural constraints.

Based on our findings, we recommend that federal policymakers and state education leaders re-examine federal regulations with an eye toward improving the conditions in which state agency leaders work. Both must ensure that state education leaders can take comprehensive approaches to critical new education reforms rather than relying on the silos in which they have operated in the past. State leaders must ensure that they are doing everything within their power to improve the performance of their agencies through careful re-examination of federal regulations. Federal policymakers should provide the optimal conditions to make this a reality by eliminating unnecessary and burdensome regulations or providing flexibility in areas that do not support federal education priorities. Specifically, we recommend the following:

  • Congress and the U.S. Department of Education should strategically reduce compliance and reporting requirements for state education agencies.
  • DOE should highlight federal compliance flexibilities that exist and ensure state education agencies will not be incentivized to use staff in ways that foster silos.
  • State education leaders should take another look at their regulatory environment and find new ways to improve how they organize their agencies.

In the effort to achieve better outcomes for today’s students, education leaders and policymakers must achieve a new equilibrium where the conditions set by federal policymakers meet the intents of federal education policy itself. Too often, the hands state education leaders are tied by federal regulations that prevent them from effectively spending federal funding sources to best of their advantage. Faced with audits related to the large volume of federal requirements, some states have responded by siloing different federal funds and their associated activities. Yet, other state education agencies have found ways around regulatory obstacles and have been able to implement more comprehensive and collaborative approaches to agency work.

Clearly, there are lessons to be learned from innovative SEAs. However, to get a better understanding of the decisions that today’s state education leaders make, more SEAs should make basic information about the use of federal education dollars available to the public.

In many ways, the success of U.S. educational policy depends greatly on the success of state education agencies. To meet the current demands placed on them, it is imperative that the federal government removes any obstacles that undermine SEA performance.

How state education agencies spend federal funds

During the 2012–13 school year, state education leaders spent federal dollars in different ways, yet these expenditures shared common features. Consider the two largest noncompetitive funds that states receive from the federal government: ESEA and IDEA. ESEA Title I, Part A allows states to reserve a small portion of dollars to support the administration of activities serving disadvantaged students in the state. In the special education services funding from IDEA, states can reserve a portion of their funding to support state activities through the Title I, Part B section of the act.

State leaders use these federal funds to support staff that work on monitoring, reporting, and compliance management, just as the law intends. For example, Illinois uses Title I, Part A dollars to support nine positions in the Federal and State Monitoring Division and IDEA dollars to support eight positions in the Funding and Disbursements Division. Missouri use IDEA funding to support staff in the Office of Special Education and its Office of Data Systems Management. However, Missouri’s data do not allow us to identify state staff members’ areas of work or their specific responsibilities.

States varied in how much they spend on staff using ESEA Title I, Part A money, and these amounts are generally proportional to how many primary and secondary schools were located in said states. In Table 1 below, we present these statistics for the 10 states for which we had these data. In Nebraska, for example, the state education agency paid staff a total of around $670,000 dollars in the 2012–13 school year, an amount equivalent to about $600 per public school. In Texas on the other hand, with more than 8,000 schools, the state agency paid staff around $8 million dollars total, about $900 per public school. Illinois spent more than $7 million IDEA dollars to compensate staff, about $1,600 per school.


Some states have relied on outside contractors for training or consulting services. Missouri’s Department of Elementary and Secondary Education, using ESEA Title 1, Part A funding, pays more than $2 million a year to the National Institute for School Leadership—an organization that provides leadership training.  Washington state’s Department of Education pays almost $1 million annually from its ESEA Title I, Part A funding to the BERC Group, a consulting firm.10 Similar to above, these data do not allow us to identify the exact nature of these contracts.

State leaders in study states also support school-improvement staff—not only to hold schools accountable but also to intervene when necessary. For example, North Carolina pays for what are termed “district and school transformation” coaches in the District and School Transformation division and “instructional review coaches” on the needs assessment team. The Arkansas Department of Education funds six “public school program advisors” through ESEA Title I, Part A funds.

States also use special education—IDEA Title I, Part B—dollars to pay for a variety of services, sometimes relying on private partners and at other times relying on state institutions of higher education. For example, the state of Washington pays about $600,000 a year from IDEA funds to Measured Progress Inc., a company that develops student assessments.11 In Kentucky, the state agency pays Eastern Kentucky University and University of Kentucky around $500,000 a year to train interpreters, as well as for services related to deaf, blind, or visually impaired students.

Moving away from these two funds, we find that states differ in their use of other federal funding, such as Title II, Part A of ESEA, which requires states receiving ESEA dollars to support programs focused on improving the quality of teachers or principals. Missouri uses these dollars to fund director-level positions in its Office of College and Career Readiness. Kentucky spends its ESEA Title II, Part A dollars on professional development and technical assistance through external partners, such as the New Teacher Center and the Kentucky Association of School Administrators. Illinois and Missouri have contracts with their institutions of higher education that are paid for with ESEA Title II, Part A dollars, suggesting that those contracts are focused on teacher quality, but this study did not collect such programmatic information. Other states, such as Washington and Texas, rely on other organizations such as the American Institutes for Research for teacher quality improvements. Meanwhile, North Carolina uses ESEA Title II, Part A funds to support positions responsible for educator recruitment and development.

Through the Perkins Act, states have to provide programming in both career and technical education. In 2012–13, Illinois and Missouri funded positions in offices overseeing college- and career-readiness programs. North Carolina funded many positions in career- and technical-education offices, and Texas supported a range of state staff members in information technology and federal compliance offices using Perkins funds.

States also spend a great deal of federal money on assessing student learning. Some of the states in this report have multimillion dollar contracts with outside vendors for student assessment. Illinois, North Carolina, and Texas, for example, have contracts with NCS Pearson Inc. paid in part through ESEA state assessment grants. Similarly, Nebraska has assessment contracts with the Data Recognition Corporation, which supports the development of their statewide student assessments.

Three study states report using federal funds in a consolidated or combined fashion. Likewise, Missouri supports more than 30 positions through a similar ESEA funds pool. In Texas, the state education agency pays for more than 100 positions using more than 10 separate federal funding sources. This paper considers the Texas example in more detail.

Robert Hanna is a Senior Education Policy Analyst at the Center for American Progress.

* Correction, June 19, 2014: This report incorrectly identified one of the types of funding streams used to support career and technical education. The correct funding stream is the Perkins Act.

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Robert Hanna

Senior Policy Analyst