Limited English Proficiency (LEP) rates among students in public schools grew by nearly 50% between 1991 and 2005. Much of this increase is driven by a similar increase in the percentage of school-enrolled, school-aged children who spoke a foreign language at home over that time period. However, school districts also receive increased funding when they identify a student as LEP and there is no one definition of what makes a student LEP. Thus, schools may overidentify students to maximize their funding. Previous researchers have found that fiscal incentives lead to higher rates of special education identification, but there is no prior evidence on LEP identification. In this study, to determine if overidentification occurs, I use variation across states and within states over time in the discretion that schools have to identify LEP students. I control for Census-based measures of the percentage of students who speak a foreign language at home, state fixed effects, and time fixed effects. My estimates suggest that schools with discretion overidentify students by as much as 2 percent.

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