Decoding Literacy Incentive Aid
By Madie Spartz
After the passage of the Read Act in 2023, literacy in Minnesota is receiving renewed attention, as it should. Reading scores on the MCA have been declining or stagnant for years, and Minnesota has some of the worst reading disparities in the country. The Read Act invested a significant amount of one-time dollars in teacher training and new curriculum, but many are identifying a need for ongoing investment above and beyond this upfront infusion. Improving Minnesota’s existing Literacy Incentive Aid program, one component of Minnesota’s complex school funding formula, could be a piece of the puzzle.
What is Literacy Incentive Aid?
Introduced in 2013, Literacy Incentive Aid (LIA) is a narrow funding stream that offers money to district and charter schools based on their students’ MCA reading scores. There are two components of LIA, proficiency aid and growth aid:
- Proficiency aid is allocated based on the percentage of students who meet or exceed standards on the 3rd grade reading MCA.
- Growth aid is allocated based on the percentage of 4th grade students who make medium or high growth on the MCA.
While the actual formula is a bit more complicated, the basic premise is:
Literacy incentive aid = proficiency aid + growth aid
In fiscal year 2022, Minnesota distributed around $45 million in literacy incentive aid, with with district allocations ranging from $586 in Aurora Waasakone Community to $1.9 million in Anoka-Hennepin. (For an in-depth overview of school finance in Minnesota, check out this resource, designed for state legislators but useful for all. Literacy incentive aid is on page 101.)
LIA was designed to reward schools whose students perform well on standardized tests and incentivize lower-performing schools to improve. While there is some logic to incentive-based funding, there are also pitfalls that can prevent such programs from meeting their goals, which can even exacerbate inequities. Given that academic performance is highly correlated to family income, funding streams like LIA funnel more funding to high-wealth areas and less to schools serving large concentrations of students in poverty. More on that below.
What is Literacy Incentive Aid Used For?
Up until the passage of the Read Act, there were no restrictions on how schools could use LIA funding. That means despite being an ostensible reward for teaching literacy effectively, schools and districts were not required to use LIA to continue or improve upon those practices. Starting this year, the Read Act more clearly enumerated allowable LIA uses to focus it on teacher training and instructional materials specifically for literacy.
How is Literacy Incentive Aid Distributed?
Some school districts receive little to no dollars in LIA; others receive millions. Using data collected by the legislature, we examined the relationship between LIA amounts and school district poverty rates, as measured by the percentage of students receiving free and reduced price lunch. Relying on proficiency and growth aid results in economically disadvantaged students and struggling readers receiving LESS funding for evidence-based reading support.
The chart below shows that the higher the percentage of students in poverty, the less per-pupil funding in total LIA districts receive. An equitable funding stream would show the opposite trend.
Total Per-Pupil LIA Funding, By District Poverty Rate
The next two charts break down each portion of the formula: proficiency aid and growth aid. The first chart, looking at proficiency aid, shows that higher-poverty schools receive significantly less funding per pupil from this component of the formula—in other words, a significant inequity that reflects the link between poverty and student test scores.
But what about growth aid? Rather than making up for the inequity, the last chart shows growth aid being relatively flat across districts. Generally speaking, that means literacy incentive aid is not driving the kind of growth from 3rd to 4th grade reading that we want to see, regardless of student demographics.
Proficiency Aid By District Poverty Rate
Growth Aid By District Poverty Rate
How Can Literacy Incentive Aid Be Improved?
If we want to support struggling readers, why would we choose a funding mechanism that gives those students fewer resources? Shouldn’t we choose a path to tilt the scales fairly so that struggling readers are resourced equitably? There are a few ways that LIA can be improved.
Some options worth considering: LIA is currently based on 3rd and 4th grade MCA scores. We could add or change that calculation to include other factors like student demographics or screener data that indicates how many students need enhanced literacy support. We could also rebuild the formula itself so the overall amount of LIA doesn’t change, but the way it’s distributed is more equitable. Or, going further, we could increase the total amount of LIA that’s available. $45 million may sound like a lot, but in the grand scheme of the state budget, it’s a drop in the bucket. Most districts receive around $50 per pupil in LIA. Is that enough to drive the growth and changes we all want to see?
We may not have the answers yet, but it’s time we got the conversation started. Even folks who are embedded in education policy are surprised to learn how LIA works. They’re baffled that Minnesota would have a literacy funding structure that gives fewer resources to struggling readers. The good news is that it doesn’t need to stay this way.