U.S. Impact Aid Years Overdue, Districts Charge

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Washington--The Education Department has fallen in some cases as far as four years behind in making impact-aid payments totaling millions of dollars to nearly 3,000 school districts nationwide.

In an unusual display of candor, department officials responsible for the program acknowledge that budget cuts, staff reductions, a lack of regulations, and a host of other problems have combined to prevent them from making timely payments to the districts, which are entitled under a 1950 law to compensation for tax revenues lost due to the presence of large federal installations.

Those explanations, however, have not satisfied districts that have been forced to tighten their belts in order to make up for long-delayed funds. School systems in Colorado, for example, have turned to their Congressional delegation in frustration in an effort to speed up their payments.

"I know [the department] is irritated because we are stirring fire under them to get moving," said Gordon Griffin, executive director of fiscal services for the Adams County, Colo., school district, half of whose land is occupied by the Rocky Mountain Arsenal. The federal government owes the district more than $2 million in impact-aid payments dating back to 1984.

"This is an imposition to the kids in our district," Mr. Griffin continued. "It is hindering their education."

"We have a situation in which the children don't get all the benefits they should," added Clarence Ham, superintendent of the Killeen Independent School District in Texas, which serves children from the Fort Hood military base.

Mr. Ham, who noted that about 65 percent of the students in his district are from families associated with the base, said inconsistent impact-aid payment practices had made it difficult to prepare the district's budget.

"You're not sure how much the payments will be and when you will get the money," he said.

Budget Reductions

Since taking office in 1981, President Reagan has consistently called for drastic reductions in impact aid.

And although the Congress has rejected his recommendations, it has not significantly increased funding for the program.

The relatively low levels of funding have forced the Education Department to cut its impact-aid staff, thus slowing down the payment process.

In fiscal 1981, the program received $631 million. That level dropped to $427 million in fiscal41982, rose to $637 million by fiscal 1986, and stood at $695 million in fiscal 1987.

A proposal now being considered by the Senate would end funding for the estimated 1,800 districts that receive less than $30,000 in impact aid per year, provided that amount reppresents less than 5 percent of their total budgets.

If approved, the provision would set fiscal 1988 funding for the program at $677 million--only $46 million more than its 1981 level.

Because appropriations have not kept pace with increases in the inflation rate, districts have not received all the money they are entitled to under the law.

"People have been paid a fraction of what the statute says they should be paid," said Stanley Kruger, director of the department's impact-aid office.

"During that same time," he added, "expenses per child and the cost of instruction have gone up."

Forward Funding

Another factor delaying payments to districts for the current and preceding fiscal years is the fact that impact aid is one of only a handful of federal education programs not "forward-funded," or earmarked for the following fiscal year.

The Congress's frequent inability to approve a federal budget by the start of the fiscal year on Oct. 1--as was the case again this year--has therefore helped stall the payment process, federal education officials say.

To compensate for budget uncer8tainties, the department provides districts with an "early" impact-aid payment of up to 75 percent of their allocation the prior year. Those payments are supposed to be made no later than 30 days after the start of the district's fiscal year, usually July 1.

The "final" payment is made after field reviews of the district's finances have been conducted. That process is now years behind in some cases, Mr. Kruger said.

A department memorandum dated Sept. 11 notified more than 2,500 districts of the disbursement of final payments for fiscal years 1981 to 1983. But final payments for 1984 through 1987 are still pending.

As in past years, this year's delay in the completion of the fiscal 1988 federal budget has prohibited the release of money from the Treasury Department to the Education Department to fund "early" payments. Education Department officials now estimate that the early payments will not be made until after Dec. 1.

Staff Reductions

The program's shrinking budget is the principal cause of the long payment delays, Mr. Kruger said. The department has absorbed much of the effect of the tight budgets by cutting staff, he explained, particularly among field reviewers.

In 1978, the department employed 38 field reviewers to verify information filed in applications for impact aid. With more than 3,000 applications coming in annually, the department now has only 14 field reviewers.

"We have enough to do about 40 percent of the workload, and that's if we also get a sufficient travel budget," Mr. Kruger said. In fiscal 1986, he said, that budget was so low that only 25 percent of the necessary field reviews were actually completed.

The shortage of field auditors compels the department to operate on a priority system, he said. Applicants for disaster aid, also handled by the division, are reviewed first. Then Section 2 districts--those in which federal installations occupy more than 10 percent the property--are second in line.

In the case of Section 2 districts, reviewers must make a site visit and work with the county assessor in determining the value of the federal land that has been taken off local tax rolls. Once the assessed value of the property is determined, the district should receive a payment in lieu of taxes from the federal government.

There are 273 districts that receive Section 2 impact aid. Because the law requires that payments be based on actual data, each district must be visited by a field reviewer every year before final payments can be made.

Ideally, all Section 3 districts should be visited each year as well, Mr. Kruger said. Section 3 districts are those in which students' parents live or work on federal property.

This year, there are 2,661 Section 3 districts.

Because there are too few field reviewers to meet the demand, some Section 3 districts get a field review only once every three or four years, Mr. Kruger said.

1987 Reviews Not Begun

The department has not started any of its field reviews for fiscal 1987. And many of the districts expecting payments have not yet had their fiscal 1986 reviews, Mr. Kruger said.

Because the field-review process is so slow, most districts must make ends meet on their "early" impact-aid allotments.

But there is a danger in the early-payment system, noted Thomas R. Shipley, executive director of the National Association of Federally Impacted Schools. When the department finally conducts its field review, he said, it may determine that a district received more impact aid that it was entitled to under the law.

"Then you have the federal government asking you to repay money you have already spent," Mr. Shipley said.

Inconsistent auditing practices, caused by a lack of federal regulations, are another problem the department has struggled with in the last few years. Such inconsistencies ultimately affect the payments districts receive.

Since its inception in 1950, the program has operated without full printed regulations, Mr. Kruger said.

Mr. Kruger said that since he became director of the impact-aid program in 1984, he has implemented four sets of regulations for various sections of the program. A fifth set of regulations for the Section 2 payments is now being completed.

Field auditors have interpreted the law in different ways, and in consequence some districts have received more money than they should and others less.

As auditing processes become uniform, Mr. Shipley of the impact-aid association said, there will be "some winners and some losers."

'Antiquated Computers'

Even after an application has been cleared for processing, it is likely to be delayed again by the program's complicated computer system, according to Mr. Kruger.

The impact-aid office uses the services of two computer contractors and the department's mainframe computer, which he described as "rickety."

"Our computer system is the second most antiquated system in the federal government, next to Social Security," he claimed.

In addition, he said, there are periods of "down time"--such as the end of September, when year-end fiscal data must be processed--during which the computer cannot be used for processing payments.

One Simple Solution

Mr. Kruger and Mr. Shipley agreed that there is a single solution to the problems of the impact-aid program: full funding at the law's entitlement level.

Mr. Kruger estimated that amount at about $1 billion, nearly two times the current funding level. But given the continuing pressure to reduce the federal budget deficit, both he and Mr. Shipley acknowledged, full funding is unlikely.

"The spirit of the law cannot be carried out and the federal government cannot live up to its responsibility to these districts until full funding is granted," Mr. Shipley said.

Vol. 07, Issue 09

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