NSBA's Letter to Secretary Duncan: April 27, 2009

The Honorable Arne Duncan
Secretary
U.S. Department of Education
400 Maryland Avenue SW
Washington, D.C. 20202

Dear Secretary Duncan:

On behalf of the 95,000 local school board members, 49 million public school students and state school boards associations represented by the National School Boards Association (NSBA), I am writing to thank you for your leadership to champion key investments for student achievement in the American Recovery & Reinvestment Act (ARRA), and to request a solution to a number of issues regarding ARRA implementation efforts affecting school districts and states. NSBA and our state association executives would greatly appreciate an opportunity to speak with you and your staff via conference call to discuss these issues and seek your guidance.

As local education agencies (LEAs) and states work to ensure the most effective use of ARRA education funding, several issues are being raised, specifically about special education funding and the State Fiscal Stabilization Fund (SFSF). Also, as school districts work to utilize these funds expeditiously to improve both education and the economy, they are subjected to conflicting goals and requirements that affect implementation. A number of these concerns is outlined below.

Individuals With Disabilities Education Act (IDEA), Part B
A key concern is the Department’s April 13th Modification to Guidance on the Individuals With Disabilities Education Act, Part B, regarding maintenance of fiscal effort (MOE) flexibility for LEAs to reduce state and local effort by up to 50 percent of the increase in its subgrant allocation.

Imposing the restrictions cited in the April 13th modification on maintenance of fiscal effort is not consistent with the intended purpose of the ARRA and the Department’s statement from April 1st that, “SEAs should encourage LEAs that can and do take advantage of this flexibility to focus the freed-up local funds on one-time expenditures that will help the state make progress on the goals in the SFSF program, such as improving the equitable distribution of effective teachers and the quality and use of assessments to enhance instruction for students most in need.”

Districts that are unable to reduce fiscal effort may not be able to preserve jobs and will miss this opportunity to rebalance the relative federal/state/local financial support of special education. Further, several LEAs in a number of states are in the category of “Needs Assistance” under IDEA for the first time. This first-time determination provides no opportunity for the district to correct a problem before the imposition of the sanction on maintenance of fiscal effort. For example, this restriction affects approximately one-third of the IDEA stimulus funds allocated for Montana’s schools. The funds will likely remain unspent because about 62 school districts that are in the status of “Needs Assistance” could be prevented from using MOE flexibility to displace existing expenditures.

County/Municipal Authority to Reduce Local MOE
School districts in approximately 15 states that have budget oversight by their respective county or municipal governments are learning about proposals to displace local education funding because of the estimated subgrants from states through the State Fiscal Stabilization Fund (SFSF) and other ARRA funding sources. Because these districts do not have local revenue/budget authority, their ability to utilize ARRA funding to address teacher retention and ARRA goals for reform is limited; and, their budgets are further impacted by declining local revenues and now imposed cuts that were not projected.

In Virginia, for example, many school districts are not receiving all their state allocated economic stimulus funds. It is our understanding that, in some cases, local authorities are planning to reduce local education funding as an offset to ARRA funding increases. Although states are required to report what tax increases are averted because of SFSF grants, the ARRA does not imply efforts to reduce taxes, especially for schools and communities that need existing revenues to meet basic operational needs.

Application of SFSF Grants to a Specific Fiscal Year
The timing and state administration of SFSF allocations has been raised regarding a state’s proposed subgrants to LEAs and the fiscal year in which funds can be applied. In Georgia, for example, state school boards association officials are concerned about efforts to limit SFSF subgrants to FY 2010, rather than allow expeditious use of funds for the existing fiscal year to help address budget shortfalls and teacher retention for districts.

Use of SFSF Grants to Indirectly Support Non-Public Tuition Tax Credits
The concern has been raised about a state’s authority to issue tuition tax credits for non-public schools after receipt of ARRA funding that would help create an offset within the total state budget to allow the tax credit. This is a grave concern for South Carolina districts, especially because of the ARRA’s prohibition against the use of resources for non-public institutions.

NSBA appreciates your attention to these issues and looks forward to speaking with you soon to discuss a resolution(s). Please contact Deborah Rigsby, director of federal legislation, to discuss an appropriate time for a conference call or meeting at (703) 838-6208, or drigsby@nsba.org.  

Again, we sincerely appreciate your efforts to maximize these key investments to improve student achievement and school performance, and look forward to working closely with you to achieve this goal.

Best regards,

Michael A. Resnick
Associate Executive Director