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Federal Economic Stimulus Package Update

Although not without controvesry, the $787 billion American Recovery and Reinvestment Act (ARRA) will allow most school districts to receive addtional federal aid over the next two years. Because this additional funding is unlikely to be sustained, the U.S. Department of Education is advising districts to direct these funds toward one-time expenditures such as data systems and professional development. The one-time ARRA funding poses challenges for school districts, but it also holds potential. The following is intended to help school board members address those challenges and unlock this potential. Brief Questions and Answers About the Economic Stimulus Package

Q: How is the ARRA funding coming to Wisconsin being used to assist K-12 public education?

A: The bulk of the federal ARRA funding to Wisconsin will come from the State Fiscal Stablization Fund, which is intended to preserve teaching jobs and prevent cuts to education. The 2009-11 budget proposed by Gov. Doyle uses $789 million of the $877 million available to Wisconsin for general school aids. Although nearly every program in Wisconsin government is expected to take a 1 percent cut under the governor's budget proposal in order to offset the state's $5.9 billion deficit, general school aids are slated to be held harmless in 2009-10 and get a $22 million increase in 2010-11. Filling the hole in the subsequent state budget for 2001-13 will be challenging for lawmakers unless the economy rebounds dramatically.

Many school districts were hoping to receive ARRA dollars specifically for school construction and maintenance. Unfortuately, those dollars didn't survive the congressional debates. The ARRA does, however, provide funding directly to districts through a number of existing programs--mainly Title I and the Individuals with Disabilities Education Act (IDEA). (See individual descriptions of these programs below.)

Q: What effect will the federal stimulus funding have on revenue limits?

A: Federal revenues (fiscal stabilization dollars) distributed by the governor as general schools aids will fall under revenue limits. These federal dollars are replacing (offsetting) state GPR dollars. Revenue caps limit the combined amount of state general aid and property taxes that a school district may receive.

However, federal funding provided for specific purposes, such as IDEA and Title I dollars, does not fall under revenue limits.

Q: How much IDEA money will be provided by the stimulus?

A: The Individuals with Disabilities Education Act (IDEA) will get a $11.3 billion boost in funding over the next two years for students aged 6-21. This funding is in addition to the annual appropriation of $11.5 billion. For Wisconsin districts, the ARRA will mean an additional $208.4 million in IDEA funding.

Half of the IDEA stimulus allocation and half of the Title I stimulus allocation was released in early April with relatively few strings attached other than the rules and regulations that normally accompany these programs. However, the U.S. Education Department is asking states to submit much more detailed information on how the plan to improve student learning before they can access their second round of funding, which is scheduled to be released in the fall. States must explain how they will comply with transparency and accounting requirements, including:

improving teacher effectiveness and quality;
establishing longitudinal data systems that track progress and foster continuous improvement;
enhancing the quality of academic standards and assessments; and
providing targeted, intensive support and effective interventions for the lowest performing schools.

Q: How much Title I money will be provided by the stimulus?

A: ARRA appropriates $6.5 billion in fiscal 2009 and again in 2010 for the No Child Left Behind's Title I program, which provides assistance to schools with high numbers or percentages of economically disavantaged students to support supplemental educational services. In each fiscal year, $1.5 billion is reserved for the so-called "school improvement program" under Title I.

These appropriations will be in addition to the $14.5 billion to be spent in the current budget year, fiscal 2009. For Wisconsin districts, this will mean an extra $147 million. The U.S. Education Department recommends that the additional Title I funds be used to expand pre-kindergarten programs, bolster online learning, or offer new opportunities for teacher professional development.

It should be noted that, for the the ARRA Title I funds only, the federal government raised the threshold for receiving Title I funding from two percent of students eligible to receive free- and reduced-price lunch to five percent. As a result, it is estimated that 55 Wisconsin school districts will not receive any additional Title I funding through the ARRA.

Q: What conditions are attached to the Title I and IDEA funding under the ARRA?

A: Half of the IDEA stimulus allocation and half of the Title I stimulus allocation was released in early April with relatively few strings attached other than the rules and regulations that normally accompany these programs. However, the U.S. Education Department is asking states to submit much more detailed information on how the plan to improve student learning before they can access their second round of funding, which is scheduled to be released in the fall. States must explain how they will comply with transparency and accounting requirements, including:

improving teacher effectiveness and quality;
establishing longitudinal data systems that track progress and foster continuous improvement;
enhancing the quality of academic standards and assessments; and
providing targeted, intensive support and effective interventions for the lowest performing schools.

Existing "supplement, not supplant" requirements under IDEA and NCLB (Title I) remain in place for the stimulus dollars.

IDEA allows for some flexibility in spending additional federal aid. While every federal special education dollar received must be spent on special education, the law allows districts to reduce their local contribution to special education by up to 50 percent of any increase in federal special education (IDEA) funds received in a fiscal year, as long as the local funds are used for any purpose under NCLB. However, guidance issued by the U.S. Department of Education on April 1 appears to restrict the ability of certain districts to supplant state special education funds with federal special education funds. Districts found to have identifed disporportionate numbers of minority pupils as students with disabilities may not be able to utilize the flexibility generally available under current law.

Q: If the schools are getting an infusion of federal stimulus money, why are school boards talking about raising property taxes and cutting programs?

A: While there is more federal funding for public edcuation, state government is cutting back. In fact, most of the federal stimulus dollars coming to Wisconsin will be used by the state to fill holes in the state education budget.

Despite this federal funding, the state not only cannot afford to increase state aid to local schools, but is actually cutting state general school aid by 3.1 percent.

In recent years, school costs have been rising by about 4 percent per year. If the state doesn't help local district cover these increases with state aid, local property taxpayers may be asked to cover them, up to the allowable revenue limit.

Under state imposed revenue limits, most districts have not been able to collect enough revenue each year to meet the rise in their costs. The gap forces school boards to cut programs and staff or seek referendum approval to raise property taxes.

Typically, 75 to 80 percent of school costs go for staff compensation. Therefore, districts must be able to control these costs to manage within revenue limits. The proposed 2009-11 state budget, however, repeals the qualified economic offer (QEO) and elimminates the requirement that arbitrators give greatest weight to revenue limits and local econimc conditions when deciding school contract cases.

Q: School districts are also getting stimulus money directly from the federal government; can't they just use that money to lower property taxes?

A: Stimulus money directed to districts is mainly designed for two specific purposes: Title I funds are for programs and services for low-income students and Individuals with Disabilities Education Act (IDEA) funds are for special education services for studnets with disabilities.

Districts must spend Title I and IDEA stimulus funds according to existing federal program guidelines to "supplement, not supplant" state and local funding. Districts must also meet federal year-to-year "maintenance of effort" (MOE) requirements by maintaining a constant level of state and local funding for each program.

Title I provides relatively little flexibility; however, IDEA provides some flexibility. Under limited circumstances, at least some special education services currently funded with state and local dollars can be funded with federal IDEA funding (i.e., shifted to federal funding) without violating "supplement, not supplant"requirements. This is true so long as the district does not reduce special education services or the amount it spends on these services in comparison to the previous year.

If a district receives more IDEA funding than it received in the previous year, the district may be allowed to reduce its state and local spending on special education services by up to 50 percent of the increase in IDEA funds received. Districts, however, must spend all the state and local funds that have been "freed up" by this shift to federal funding on activities (i.e., programs and services) eligible to be supported with federal funds under the Elementary and Secondary Education Act (also known as the "No Child Left Behind Act").

Using "freed up" funds to pay for other activities currently funded by other state and local funds could help reduce property taxes. If, say, a district shifted the cost of providing appropriate assistive technology for students with disabilities from state and local funds to IDEA funds, the district could potentially use the "freed up" state and local funds to sustain the property tax level.

However, the net impact of this shifting of costs from state and local funds to federal funds might not be very noticeable to an individual property taxpayer. IDEA stimulus funding totals $218 million. Thus up to $109 million of this increased IDEA funding could potentially be used to offset property taxes. $109 million represents 2.6 percent of the school property taxes collected statewide last year.

School boards must use caution, however. The stimulus money is one-time funding. The U.S. Department of Education recomends that stimulus fund be invested in ways that do not result in unsustainable continuing commitments after the stimulus funding expires.

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More information from the U.S. Department of Education on the use of Title I and IDEA funds is available on the department's Web site. (See under "Related Links below.)

Federal Economic Stimulus Package Update

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