Innovation

Highlights

Innovative testing pilot program. Seven states may participate in a five-year pilot program to develop innovative tests, which may be used in only a few districts at the beginning of the program. The innovative assessments may be non-standardized and managed locally, so that not all students in the state take the same tests.

Weighted funding pilot program. Fifty school districts nationwide may include federal funds in a weighted funding system that directs more money to schools with higher numbers of disadvantaged students. Federal funds from several areas of Every Student Succeeds, including Title I, Title II, and Title III, may be allotted toward the weighted funding system.

Pay for success funding. Funding from Title I, Part D and Title IV, Part A may be used in pay for success programs. Pay for success programs allow private investors to contribute money to public projects – however, the investors are only repaid if the projects are successful.

Innovative Testing Pilot Program

Seven states may participate in a pilot program to develop innovative assessments. States may start using the new testing system in only a few school districts, but must aim toward statewide use. The new tests must align with state standards, and report the same information as current state tests, including separate reporting of results by student subgroup (e.g., special education or low-income status). ¹ In New Hampshire, the only state currently operating an innovative testing pilot, the participating districts are not required to give the same standardized assessments as the rest of the state. Instead, all pilot program districts must base their tests on the same state-approved guidelines of what students should know. As long as these baselines are met, however, districts have freedom to develop and manage the new tests at the local level. ²

Similarly, the federal pilot in Every Student Succeeds waives the requirement that all students in the state take the same tests. Additionally, the innovative assessments do not need to follow the standard testing schedule and may be administered less frequently than every year. ³

The innovative assessment system may use competency-based assessments, where students progress at their own pace. ⁴ Or, tests may be embedded into the curriculum and students’ day-to-day work, a concept known as “instructionally embedded assessments,” so that students are measured throughout the year. The new system may also use performance assessments, which encourage practical application of skills. ^5, 6 For an English class, for example, students might write a research paper and correctly analyze sources to demonstrate reading comprehension.

ESSA’s initial pilot program may last up to five years, with a possible two-year extension. If states demonstrate the programs are successful once the pilot period expires, states may use the innovative assessment systems for accountability purposes in lieu of the state standardized tests.

Following the initial pilot program, the remaining states may apply to try innovative testing. ⁷

Innovative Testing:
New Hampshire

Prior to ESSA, in March 2015 the state of New Hampshire received a waiver from the U.S. Department of Education to try an innovative assessment system. The Performance Assessment for Competency Education (PACE) pilot was implemented in four of New Hampshire’s school districts.

Under PACE, students take the statewide test (equivalent to Tennessee’s TCAPs) once in elementary school, once in middle school, and once in high school. In the other years, districts use their own locally-developed tests based on state-designed competencies and approved by the state.

_{Source:
Deborah S. Delisle, Assistant U.S. Secretary of Education, “Performance Assessment of Competency Education (PACE) Pilot,” letter, addressed to New Hampshire Department of Education, March 5, 2015, http://blogs.edweek.org/edweek/campaign-k-12/NH_PACE_3.5.15.pdf (accessed Jan. 13, 2016);
New Hampshire Department of Education, New Hampshire Accountability 3.0 Model Overview, July 18, 2014, pp.6-8, http://www.education.nh.gov/assessment-systems/documents/faq.doc (accessed Feb. 24, 2016).}

Weighted Funding

Up to 50 school districts nationwide may include federal funds in a weighted funding system that directs more money to schools with higher numbers of disadvantaged students. ⁸

Most school districts consolidate state and local funds at the district level before distributing money to schools. Federal funding, however, is allotted to schools separately from state and local funds, depending on federal guidelines for each program (i.e., Title I, Title II). For convenience, allocations to schools are often expressed in terms of per-pupil expenditures.

Depending on enrollment, demographics, and schools’ needs, districts may set different funding policies – for example, large urban districts may distribute money to schools differently than rural districts.

Under Every Student Succeeds’ weighted funding pilot program, participating districts may combine eligible federal funds with state and local money for the first time. Eligible ESSA funds include Title I, Title II, Title III, Part A of Title IV, and Part B of Title V.

After consolidating all eligible state, local, and federal funds, districts assign “weights” to certain groups of students. Under the pilot program requirements, for example, districts must give schools “substantially more funding” per student for low-income students and English learners. While economically disadvantaged students and English learners are the only groups explicitly mentioned in federal law, the district may choose other subgroups to weight more heavily.

Thus, under a weighted system, funds are distributed to schools based on student demographics, not just attendance – that is, schools with more low-income children and English learners receive more money, even if they have similar enrollment as other schools in the district.

Pay For Success Funding

Several sections of Every Student Succeeds allow states and school districts to use federal funds for “pay for success” programs.

Pay for success funding – also known as a social impact bond – is a way to funnel private money into the public sector. ¹⁰ Tennessee currently has limited options for private investment in government. Four entities issue debt:

• The Tennessee State Funding Board issues general obligation bonds authorized by the General Assembly for public projects;
• The Tennessee Housing Development Agency uses bond proceeds to finance low- and moderate-income home loan programs;
• The Tennessee Local Development Authority uses bond proceeds to make loans to local governments and other entities for specific purposes, such as water and sewer recovery facilities or capital projects; and
• The Tennessee State School Bond Authority issues bonds to finance capital projects for public colleges and universities. ¹¹

In addition to purchasing bonds, citizens and organizations may donate private money to the state, with no return on investment. Gifts over $5,000 must be accepted by the Governor, and may be used for a specific purpose. ¹² Currently, however, there is usually no way for bond investors to direct their funds to a specific purpose or project. ¹³

Pay for success programs allow private investors to contribute to a specific public project. Prior to investing money, investors and a public entity, such as a state or school district, agree on a proposed outcome – for example, reducing dropout rates in high school. Then, investors pay up front for the public project in the form of a grant, contract, or other agreement. At the project’s completion, the state or district pays the investors back only if the outcome is achieved. ¹⁴ In this way, private investors bear the primary risk of a public project until its completion; if the project is not successful, taxpayer money has not been lost. ¹⁵

If the project is successful, however, the state or district may realize long-term savings that cover the cost of repayment. For example, by reducing high school dropout rates, more students may go on to higher education and gainful employment – theoretically, fewer former students will receive unemployment benefits and other government services.

Throughout the project, the public entity releases yearly progress reports. Additionally, as a condition of the agreement, a third party evaluates the program to determine its success. ¹⁶

Under ESSA, states may put Title I, Part D funds toward pay for success programs. ¹⁷ Title I, Part D intends to prevent neglected, delinquent, and at-risk children from dropping out of school. States may also provide assistance to dropouts and children returning from correctional institutes to help them continue their education. ¹⁸

School districts may also use Title IV, Part A funding for pay for success initiatives. The programs focus on creating safe and healthy schools through drug and violence prevention, mental health services, and encouraging active lifestyles. ¹⁹

Currently, states are not restricted from using their own funds for pay for success programs; however, these two sections of ESSA mark the first time states may use federal education money in such programs.

Pay For Success Funding:
New York

While pay for success funding is relatively new in the education world, several states have used it in other areas. In 2013, the state of New York began a pay for success initiative to reduce recidivism and provide work for former inmates. The project planned to reduce recidivism by 8 percent and/or increase employment by 5 percent.

Private sector investors and foundations raised $13.5 million in six weeks for the project – Bank of America investors alone contributed $13.2 million. However, these contributions will only be refunded if the project achieves its goals. If the project exceeds its targets, investors may receive additional returns.

An independent organization, Chesapeake Research Associates, will determine if the goals have been met. The program will last four years, with services provided by the nonprofit organization Center for Employment Opportunities.

If the program meets its objectives, New York estimates it will save $7.8 million in public money from reduced prison costs.

_{Source:
New York State, “Governor Cuomo Announces New York the First State in the Nation to Launch Pay for Success Project in Initiative to Reduce Recidivism,” December 30, 2013,http://www.governor.ny.gov/news/governor-cuomo-announces-new-york-first-state-nation-launch-pay-success-project-initiative(accessed Dec. 22, 2015).}

¹ Elementary and Secondary Education Act of 1965, Public Law 114-95, § 1204, 2015.

² New Hampshire Department of Education, New Hampshire Accountability 3.0 Model Overview, July 18, 2014, education.nh.gov/assessment-systems/documents/faq.doc
(accessed Feb. 24, 2016).

³ Elementary and Secondary Education Act of 1965, Public Law 114-95, § 1204, 2015.

⁴ Office of Research and Education Accountability, Competency-based Education in Grades K-12, Tennessee Comptroller of the Treasury, January 2016, http://www.comptroller.tn.gov/Repository/RE/Competency%20Based%20Education.pdf (accessed Jan. 16, 2016).

⁵ Elementary and Secondary Education Act of 1965, Public Law 114-95, § 1204(a), 2015.

⁶ New Hampshire Department of Education, “Governor Hassan, Department of Education Announce Federal Approval of New Hampshire’s Pilot Competency-Based Assessment Program,” March 5, 2015, http://education.nh.gov/news/pace.htm (accessed Dec. 22, 2015).

⁷ Elementary and Secondary Education Act of 1965, Public Law 114-95, § 1204, 2015.

⁸ Elementary and Secondary Education Act of 1965, Public Law 114-95, § 1501, 2015.

⁹ Elementary and Secondary Education Act of 1965, Public Law 114-95, § 1501, 2015.

¹⁰ The White House, Office of Management and Budget, Paying for Success, https://www.whitehouse.gov/omb/factsheet/paying-for-success (accessed Dec. 22, 2015).

¹¹ Tennessee Comptroller of the Treasury, Quarterly Fiscal Affairs Report, December 2014, http://www.comptroller.tn.gov/repository/ms/20141210Q3FiscalReport.pdf (accessed Mar. 2, 2016).

¹² Tennessee Code Annotated, § 12-1-101.

¹³ Ann Butterworth, Assistant to the Comptroller for Public Finance and Open Records Counsel, Division of Administration, Tennessee Comptroller of the Treasury, e-mail, March 14, 2016.

¹⁴ Elementary and Secondary Education Act of 1965, Public Law 114-95, § 8002(40), 2015.

¹⁵ The White House, Office of Management and Budget, Paying for Success, https://www.whitehouse.gov/omb/factsheet/paying-for-success (accessed Dec. 22, 2015).

¹⁶ Elementary and Secondary Education Act of 1965, Public Law 114-95, § 8002(40), 2015.

¹⁷ Elementary and Secondary Education Act of 1965, Public Law 114-95, §§ 1401(4)(A)(ii), 1401(7), 2015.

¹⁸ Elementary and Secondary Education Act of 1965, USC 20 (2012), § 6421.

¹⁹ Elementary and Secondary Education Act of 1965, Public Law 114-95, § 4108, 2015.