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States Grapple With Changes Wrought by Block-Grant Law

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Reporting for this story and related block-grants stories was contributed by Peggy Caldwell, Susan G. Foster, Alex Heard, Constance Kurz, Tom Mirga, Thomas Toch, Susan Walton, Margaret L. Weeks, and Eileen White.

Block grants may represent less than 10 percent of all federal spending on education during the next school year, as federal officials point out, but they are already having a profound impact on the way state education agencies operate.

And, interviews with state block-grant administrators indicate, the new program will result in a large-scale redistribution of funds--from urban, desegregating districts to sparsely populated areas; from public schools to private; from systems accomplished in the art of grantsmanship to districts that have never received any federal funds.

Chapter II of the Education Consolidation and Improvement Act, passed last summer, repealed 27 federal categorical programs and folded them into a single block grant to each of the states, based on the school-age population as measured in the 1980 census. At the same time, federal support for these programs was cut from $733 million in 1980 and $510 million this school year to $442 million for the fiscal year beginning in July.

The legislation specifies that 80 percent of a state's allotment be passed on to local school districts and private schools to use for any one or all of the purposes now covered by categorical grants--uses ranging from metric education to guidance counseling. State education agencies may keep up to 20 percent for administration or special projects.

Now that the U.S. Department of Education has issued long-delayed regulations governing the program, states are beginning to analyze the combined effects of the budget cuts and the new mechanism for distribution.

And some are more pleased than others with what they have found.

"The block grant is peanuts--it's almost insignificant--when you think in terms of the complexities local boards face in terms of the much bigger programs," said William N. Kirby, deputy commissioner of the Texas Education Agency.

Bud Grossner, block-grants administrator for the Illinois Board of Education, however, summed up the remarks of many of his counterparts this way: "I think in due time the public leaders are going to appreciate the flexibility. The paranoia comes from consolidation with less funds."

Redistribution of Funds

Because instructional-materials funds under Title IV-B of the Elementary and Secondary Education Act, the largest of the categorical programs folded into Chapter II, were always distributed fairly evenly among states and districts, the biggest losers are states that received grants for special needs--primarily desegregation--and special innovative projects.

Twenty-five states and the District of Columbia will lose more than 5 percent of their funds under the block grants--on top of the cuts they suffered this year in categorical programs. The biggest loser is Delaware, where the four school districts in New Castle County received large desegregation grants.

And virtually all state administrators said emphatically that their legislatures are not likely to make up for the cuts from state funds. ''I've not even heard it discussed," said Kennith S. Blankenship of Alabama's department of education.

The Eastern and Midwestern industrial states--many of which are experiencing severe financial problems at the state and local levels because of high unemployment--will tend to lose the most under the block-grants program for two reasons: large losses of population in the past decade and large numbers of children in schools that are undergoing desegregation.

For example, Ohio, one of the most urbanized of all the states, received $49 million in the 29 federal categorical programs last year and is receiving about $25 million this year, including $10 million in desegregation aid under the Emergency School Aid Act, the second-largest of the categorical programs folded into Chapter II. The state's total block grant, under the continuing resolution, will amount to slightly over $20 million.

"The cities are really going to have to regroup," said Irene Bandy, the state department of education's executive director for administration.

In addition, public schools must now share the entire "pot" of federal money with private institutions that want to participate--not just Title IV-B funds, as in the past.

Another 12 states will receive approximately the same amount--within 5 percent--under the block grant as they did under categorical programs this year. Within many of those states, however, the money will be distributed in a radically different way.

Arizona's situation appears to be a typical illustration of this shift: "The larger districts ... had federal-programs writers, and their full-time job was to get as much money as they could," said William L. Hunter of the state department of education. "Generally, the smaller and medium-sized districts have come out a little bit better under block grants, even though the amount of money has dwindled to almost nothing."

Thirteen states, most of them predominantly rural, will receive increases of more than 5 percent. Spokesmen in several of these states noted that their districts have found federal programs unwieldy to admin-ister in the past, so they never bothered to apply.

"This could very well mean that many schools that never received a dime will finally get some federal money," said Joe Crawford, North Dakota's state superintendent. "That has been perhaps the biggest gripe of small states like North Dakota. Most of our school districts just never participated before.

"I think this is the greatest thing since fried eggs."

Bernarr S. Furse, administrative assistant in the Utah education department, said that state's school systems "applaud the new law, so long as the funding level holds up."

The state as a whole will only be receiving 2 percent more funds next year than it is currently receiving, but most school systems "had not been as successful in getting competitive grants as urban states," Mr. Furse said.

And in Nevada, where the block-grants program will provide a 28-percent increase in funds over the current level, "the school districts are coming out of this like burglars," said James P. Costa, associate state superintendent of education.

Mr. Costa said that although the state department of education would be losing its Title V-B funds (for state education agency management) because that program was consolidated into the block grants, state officials "are just tickled to death to help out the school districts."

Advisory Committees

Governors in most of the states have appointed the broadly representative advisory committees that are to develop distribution formulas, but not all the committees have met or selected their chairmen. Several state officials mentioned that action on block grants has been deferred because of legislative sessions and pressing state financial problems.

State officials' attitudes toward the process have been mixed. One state block-grants administrator, who asked that he not be named, said advisory-committee members incorrectly believe that the block-grants funds are "new money."

"Unless Uncle Sam can double the amount of money, there is nothing to advise on," he said. "There's a lot of misunderstanding. I think that's unfortunate."

But in other states, the committee members have seemed to understand the law and to relish their responsibilities. "We've had some really good meetings, a very free give-and-take," said R. Douglas Dopp of the Connecticut department of education. Added Utah's Mr. Furse: "It's been a rather interesting process. The committee members have not been pushovers, they haven't let the state staff push them around--a rather wholesome experience, I think."

The legislatures of some 20 states, by statute, must reappropriate all federal funds. In most cases, state education officials predicted this would be pro forma, and that legislators would leave development of the formula to the education agencies.

In at least two states, however, legislators appear to be taking more than a passing interest in the distribution of block grants. A group of Indiana Democrats has proposed--so far, without success--that the legislature be given full authority to allocate federal funds. And in Connecticut, Mr. Dopp said, "The legislature wants to have their finger on federal appropriations. We have a new partner."

Conservative Approach Likely

Interviews with state block-grants officers suggest that school districts--at least next year--are likely to take the conservative approach, spending most of their federal money on instructional materials and basic-skills projects, as they have in the past.

"There's not much time for planning teacher services," one state official observed.

Weighting Differences

And while all the states that have developed formulas report that they will take high-cost programs into account, there are considerable differences in the weightings. Texas, for instance, is giving double weight for disadvantaged, handicapped, and limited-English-proficient students; Maine is setting aside 40 percent of the money for the disadvantaged.

At least one state, New York, has taken steps to cushion somewhat the sudden loss of funds. Next year, under the state's formula, each district will be guaranteed at least 20 percent of the federal funds it received in the 1980-81 school year.

At the other extreme are states, such as Colorado and Oklahoma, that are allotting 80 percent or more of the districts' share according to enrollment alone.

"Some people felt the money should not have a weighted formula, that there are already programs that take care of the disadvantaged," reported Arizona's Mr. Hunter. "Some districts said we shouldn't have a formula at all but should divide it up equally."

Most state education agencies apparently will keep all or most of the 20 percent of the block grant allotted to them, in most cases to replace funds lost under the old federal program for strengthening state-agency management. Few state officials reported pressure to turn that money over to the districts.

A few states are considering using part of their 20-percent share for special projects--such as desegregation or experimental projects--or competitive grants. Only one, California, appears likely to relinquish its total state allotment for use by local districts.

School officials in large cities--whether they have received federal desegregation aid or not--appear particularly suspicious of the shift of authority to the states. Legislatures and state administrative officers, they argue, have never been particularly sympathetic to the problems and high costs of running big-city schools.

"I suspect the states will take this opportunity to spread the wealth even more," said Michael Casserly, legislative specialist for the Council of Great City Schools, a coalition of 28 urban school districts.

"From a political standpoint, you can understand it," he said. "They will develop formulas that accommodate the greatest number of school districts, just like Congress does. I expect the same dynamic to be played out in each of the states. The interests of cities and the concerns they represent are going to be diluted. It's going to be difficult to garner support."

The same sentiments are echoed in Federal School Funding: Does New York Stand a Chance?, a report by the Educational Priorities Panel, a foundation-supported coalition of citizens' groups in New York City.

"There are no assurances, particularly in the absence of strong and clear federal guidelines, that state and local government recipients of block-grant monies will apply them to the areas of greatest need," the panel's report said. "Whereas special-purpose programs tend to target the needy, many state governments will favor their own agendas which serve narrowly, if at all, the 'broad national purpose' or else respond to local majority political pressures.... Moreover, examination of other block-grant programs reveals little innovation resulting from the greater latitude afforded local recipients."

Reductions in Force

Coupled with the states' own financial problems, block grants appear likely to result in reductions in force and reorganizations of state education agencies--particularly those that are structured according to federal-program functions, with separate directors for each of the categorical programs.

"You're talking about people who have tied up their whole careersaround those funds," said Marshall Frinks, director of state-federal relations for the Florida department of education. "That's the trauma we have here--the adjustment of those people who have administered those funds."

In most cases, states apparently will continue to offer technical assistance and will monitor districts to ensure that the funds are spent for the intended purposes and accounted for properly, but even those functions are expected to decrease somewhat.

"As you cut back," observed William F. Miller, Indiana's assistant superintendent for federal affairs, "you can also see some state-funded areas you can cut back in, such as accounting--simply because you don't have as much to account for."

Furthermore, maintained Joseph Reynard of the District of Columbia school system, state and local administrators must adjust their way of managing. Educators, he argued, have grown "so dependent on the Education Department to make decisions and to enforce regulations" that their own managerial skills have atrophied. Now, as responsibilities are shifted--and state and local staffs cut--the pressure has intensified, at least for the time being, he said.

The proposed block-grant regulations, published by the U.S. Educa-tion Department last month, appear to have cleared up some of the confusion, if not the frustration, of state and local officials. "The proposed rules are written in understandable English," said Randall L. Broyles, assistant state superintendent in Delaware. "Even members of the committee said that for the first time they can understand them."

Commitment Questioned

While some state officials said they welcomed the "no-strings-attached" nature of the program, many expressed skepticism about the government's continuing commitment to deregulation.

"We want to have some sort of assurance that if decisions are to be made at the state level ... we will not in the future be audited on some set of standards different from what we developed," said Weaver B. Rogers, director of education consolidation for the North Carolina department of public instruction. "What we want to know up front is, particularly, the fiscal requirements. We are trying to get guidance on the fiscal matters. We may not get anything, and we'll just have to do the best we can."

Added Jack Seurynck, director of federal programs for the South Carolina department of education: "I'm one of these ones who's been in education since 1965. There are no regulations, and then a few years later, the feds come with their audits and tell you haven't been doing it right. I'm not convinced that that won't happen again."

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