Impact-Aid Districts Feeling the Pinch of Budget Impasse

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With cash reserves running low, Barry L. McCombs, the superintendent of the Omak public schools in Washington state, was preparing last week to borrow $407,000 to replace federal impact aid that is being held hostage by the federal budget stalemate.

But he was bailed out by the U.S. Department of Education, which has sent $40 million to 80 of the nation's neediest impact-aid districts.

"At least it will get us by for a couple more months," said Mr. McCombs, who received $293,000 of the $550,000 he expected to get by Dec. 1 for educating 500 students from the Coleville Indian Reservation.

The failure of President Clinton and Congress to agree on a new stopgap spending plan for fiscal 1996, which began Oct. 1, and the partial shutdown of the federal government have begun to affect schools nationwide.(See story, page 13.)

But districts dependent on impact aid--which compensates them for taxes theoretically lost due to the presence of federal property or workers--have been hit particularly hard.

Unlike other education programs, impact aid is not "forward funded," in the jargon of federal budget writers, and thus the money is spent in the same year it is appropriated. While funding for most education programs goes to states late in the fiscal year, impact aid is released soon after a new fiscal year begins.

Nearly 2,000 districts received $728 million in impact aid last year, most of which helps to educate students living on military bases and American Indian reservations.

Last year, most of that amount was allocated to districts by Dec. 31. In contrast, department officials expect to send out only $65 million by the end of this calendar year, the amount the department received for impact aid in a six-week federal spending bill that expired Nov. 13.

Fiscal Triage

To best use the limited funding, the department solicited applications in October from districts that would run out of cash by Jan. 1 without the federal help.

That means that the Omak district, for example, will be able to meet payroll and other operating expenses through March, Mr. McCombs said, instead of hitting the bottom of the well this month.

"I feel like it was the only thing we could do," said Catherine Shagh, the director of the impact-aid program. "If they expected severe problems, we wanted to know."

Under this policy of fiscal triage, 80 of the 85 districts that applied for the emergency funds had received a total of some $40 million as of Nov. 13, Ms. Shagh said.

These cash-strapped districts did not get all of the aid they expected to receive this fall, but did receive enough to avert cash shortfalls, she added.

"But the further this [budget impasse] goes on into the year, the more districts will be affected," Ms. Shagh said.

The problem may have been compounded with last week's partial government shutdown, which included most Education Department activities--including the distribution of impact aid.

"Obviously, this brings everything to a halt," said John B. Forkenbrock, the executive director of the National Association of Federally Impacted Schools.

'Real Money'

If the standoff over temporary spending is not settled by this week, Mr. Forkenbrock predicted, districts will begin looking to state governments for emergency payments.

"This is real money that affects real people," he said.

In the Fort Leavenworth school district in Kansas, where all 1,800 students are from military families, about 65 percent of the district budget, or nearly $4 million, comes from impact aid.

"I live on what I receive from impact aid on a regular basis," said Tom Devlin, the superintendent of the district, which received one of the early payments.

Without the payment, he said, his district's cash flow "would have dried up" by Dec. 1.

Still, maintenance projects are on hold and Mr. Devlin expects to lose at least $100,000 in interest that would have been earned had the district received a full allocation.

"We're talking about a quality-of-life issue for students who live on bases," Mr. Devlin said. "Somewhere, someone needs to figure out that what goes on in Washington affects the little people."

And the budget impasse is not the first bad news this year for the impact-aid community, which is bracing for a significant funding cut in fiscal 1996.

A spending bill passed by the House would drop impact-aid spending in this fiscal year to $645 million. A pending Senate bill would appropriate $678 million.

Vol. 15, Issue 12

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