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States Anxious to Get Details About Stimulus

By David J. Hoff — January 27, 2009 7 min read
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As Congress began debate last week over the size and scope of more than $120 billion in proposed emergency education aid, state leaders were anxiously awaiting the details so they could make specific plans to spend the economic-stimulus money.

Governors, state legislators, and state schools chiefs have yet to learn what rules Congress will attach to any such influx of federal money, which proponents say would help offset losses in state revenues, supplement existing programs, and start a short-term construction program aimed at fighting the recession.

Last week, the U.S. House Appropriations Committee approved a version of the stimulus bill that would provide an unprecedented infusion of federal money into public schools. Meanwhile, Senate appropriators were preparing a proposal with similar amounts, a source close to the process said. (“Stimulus Bill Advanced by House Panel,” this issue.)

The figures may not be final for two weeks or more, and state officials can’t nail down their own plans until they know the final dollar amounts and the conditions placed on their use.

“They’re just standing there waiting,” said Michael P. Griffith, a school finance expert for the Education Commission of the States, a Denver-based group for state officials who oversee education. “I don’t think they’ll be able to do anything until this is close to being signed.”

At the district level, school officials are focusing more intently on their own states’ budget processes at a time when state deficits are mounting and local revenues are being forecast for the 2009-10 school year.

“They only have the vaguest sense of what is going on in Washington,” said Robert N. Lowry Jr., the deputy director of the New York Council of School Superintendents, based in Albany, N.Y.

Patchwork of Programs

Congressional leaders and President Barack Obama are working on a $825 billion spending bill with the goal of revitalizing the economy, which has been in a recession for more than a year. The bill would offer short-term funding intended to help states deal with their worst fiscal crisis since the early 1980s.

The more than $120 billion available for education in the House bill would come in various grants, each with its own distribution formula and often with different timing and accounting rules for how the states and districts could spend the money.

To generate jobs quickly, the bill would allocate $20 billion for school construction in the current fiscal year to help districts pay for existing projects or start new ones. School officials would need to sign contracts committing to spend half of their allocations within a year of the bill’s enactment, and to spend the balance in the second year of implementation.

Other education money in the House bill would be distributed over this fiscal year, which began Oct. 1, and fiscal 2010. Although the law intends to provide immediate fiscal relief, money for such programs would not be available until July—the day the fiscal year begins in most states.

The bill would create a $79 billion “state fiscal-stabilization fund” to help states solve their immediate budget problems. Of that, $39 billion would be reserved for K-12 and higher education.

Grants would be distributed to states based on their populations. Sixty-one percent of a state’s grant would be reserved for shoring up the state’s K-12 funding formula. Any money remaining after a state reached current funding levels would be distributed across the state using the formula for the federal Title I program for disadvantaged students.

Another $15 billion would be for competitive “incentive grants” for K-12 education that would be awarded to states by U.S. Secretary of Education Arne Duncan. The secretary would have to select states based on their success in creating longitudinal-data systems, enhancing assessments for students in special education and English-language learners, and ensuring equitable assignment of teachers, among other requirements. States would need to pass along at least half of the incentive-grant money to local districts.

States could choose to spend the remaining $25 billion in the stabilization fund on education or on other needs, such as public safety.

Separately, the House bill would appropriate $13 billion each for the Title I program for disadvantaged students and for special education students served under the Individuals with Disabilities Education Act. That money would be spread over two fiscal years, starting July 1 and ending Sept. 30, 2010—the last day of the federal government’s 2010 fiscal year.

All of the idea money would be in the form of grants to districts, using the regular funding formula. But $2 billion of the Title I money—$1 billion in each fiscal year—would be given to states to allocate to schools that are in the restructuring process under the No Child Left Behind Act.

Following the Money

House members are distributing state-by-state lists of preliminary grant amounts for every district, showing how much money each school district would receive from Title I, the idea, and the school construction program.

That information gives local officials a general idea of how much money they can expect if the House plan is adopted. But with several pots of money, each with its own funding formula, state and local officials are having a hard time projecting how much the House bill would provide them.

“The first thing they’ll have to do is figure out how the formulas will work,” said Nicholas Johnson, the director of the state fiscal project for the Center on Budget and Policy Priorities, a Washington-based group that tracks government funding.

Next, state officials would have to “cost out” complying with the law’s requirements, Mr. Johnson added.

“Then, they’ll have a general sense of what they’re getting,” he said.

With the stimulus package still in the early phase of the federal legislative process, many of the dollar figures and spending requirements could change.

Meanwhile, most state legislatures are in session and will be writing their own budgets for the next year or biennium, said Mr. Griffith of the ECS. If Congress doesn’t complete work on the stimulus bill by the time a particular state’s session is finished, its legislators would need to return for a special session to determine how to allocate the federal money.

Accounting Rules

The House version of the stimulus package would also set accounting rules that could have dramatic effects on the way that states and districts spend the money.

The House bill’s stabilization fund includes a “maintenance of effort” clause that would require states to keep their own contributions to K-12 schools at or above the levels of fiscal 2006—a recognition that revenues in many states have fallen since then.

Representatives for local education officials are lobbying to force states to keep K-12 spending at current levels—which are higher than three years ago in almost all states—to qualify for grants from the proposed stabilization fund.

“In a way, [the current proposal] encourages them to cut education,” said Mary Kusler, the assistant director of government relations for the American Association of School Administrators, based in Arlington, Va.

On the local level, districts would need to document that they would use the bill’s Title I and idea money to supplement their own efforts for disadvantaged and special education students. Although districts must comply with that rule with their current programs, it might be difficult for them to do the same with the stimulus money at a time when state and local revenues may be declining.

“Schools” will need to dot all the I’s and cross all the T’s,” said Robert Manwaring, a senior policy analyst for Education Sector, a Washington think tank.

State and local officials would also need to budget carefully for the future. Because the special education and Title I funds under the House stimulus plan would be available for only two years, those officials wouldn’t want to expand their payrolls for the short term in case Congress doesn’t increase annual appropriations for special education and Title I to replace the stimulus money.

Districts may need to seek creative ways of using the money, such as contracting with private companies to provide Title I and special education services, Mr. Manwaring said.

“There’s a lot of question about how sustainable [the funding levels are] for the long term,” he said.

A version of this article appeared in the January 28, 2009 edition of Education Week as States Anxious To Get Details About Stimulus

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