COUNCIL OF CHIEF STATE SCHOOL OFFICERS
One Massachusetts Avenue NW • Suite 700 • Washington, DC 20001-1431
Phone (202) 336-7000 • Fax (202) 408-8072
TO: Chief State School Officers
FROM: Gene Wilhoit, Executive Director
DATE: February 18, 2009
RE: Maintenance of Effort and Supplement Not Supplant Issues under the American
Recovery and Reinvestment Act (H.R.1, P.L.111-__)
Questions have been raised by a number of states about maintenance of effort and supplement not supplant requirements that would apply to funding for elementary and secondary education in the American Recovery and Reinvestment Act ("Recovery Act"), as signed by President Obama on February 17, 2009. This memorandum provides general, preliminary guidance on the effects of these provisions. We expect the U.S. Department of Education (USED) to provide guidance interpreting these provisions and we will review and update this memorandum, as appropriate, in light of any such guidance.
The Recovery Act includes two overarching sources of funds for elementary and secondary education: (1) a new State Fiscal Stabilization Fund; and (2) funding for existing education programs such as Title I-A of the Elementary and Secondary Education Act (ESEA) and Parts B and C of the Individuals with Disabilities Education Act (IDEA). Maintenance of effort and supplement not supplant provisions apply differently to these funding sources, as explained below.
I. State Fiscal Stabilization Fund (Recovery Act Title XIV)
The State Fiscal Stabilization Fund includes a maintenance of effort provision that may be waived or modified under certain conditions. There is no supplement not supplant provision applicable to fiscal stability funds.
The State Fiscal Stabilization Fund established by Title XIV of the Recovery Act provides funds to the Governors for education and other government services for FY's 2009-2011. To receive these funds, a Governor must submit an application to the Secretary of Education (Secretary). Among other things, the application must provide an assurance that the state will, in each of FYs 2009, 2010, and 2011, maintain support for elementary and secondary education at least at the level of that support in FY 2006. (There is
a parallel assurance relating to state support for public institutions of postsecondary education.) This provision applies only to state support, not to local support or state and local expenditures aggregated.
Under Section 14012 of the Recovery Act, this maintenance of effort requirement may be waived or modified by the Secretary to relieve fiscal burdens on states and local educational agencies (LEAs) that have experienced a precipitous decline in financial resources for any of FYs 2009, 2010, or 2011, but only if the Secretary determines that the state or LEA will not provide for elementary and secondary education
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a smaller percentage of total available revenues for the fiscal year under consideration than the amount provided for that purpose in the prior fiscal year.
The Recovery Act does not include a supplement not supplant provision applicable to the state fiscal stability funds.
II. Stimulus Funding for Existing Education Programs (Recovery Act Title VIII)
Funding for existing education programs is generally governed by relevant maintenance of effort and
supplement not supplant rules in existing law. Some waiver processes within these laws continue in effect.
In addition, upon specified conditions, recipients of state stabilization funds may treat those funds as
non-federal funds for the purposes of relevant, program-specific maintenance of effort requirements.
A. In General
Title VIII of the Recovery Act provides funding for existing elementary and secondary education programs, including Title I-A, ESEA, Parts B and C of IDEA, and other elementary and secondary education programs. The Recovery Act does not include separate maintenance of effort or supplement not supplant requirements applicable to funding for these programs, but several of these programs, including Title I-A, ESEA and IDEA-B & C, have their own maintenance of effort and/or supplement not supplant provisions.
The Recovery Act does not provide for waiving or modifying maintenance of effort and supplement not supplant provisions under these other laws, although, as discussed below, waiver provisions for maintenance of effort (but not generally for supplement not supplant) are included in several of these laws. Thus, maintenance of effort and supplement not supplant requirements would continue in effect, both with regard to funds provided to these programs under the Recovery Act and with regard to regular annual appropriations for these programs.
However, the Recovery Act provides in section 14012(d) that, with the prior approval of the Secretary,
a state or LEA that receives funds under the State Stabilization Fund may treat any portion of these funds used for elementary, secondary, or postsecondary education as non-federal funds for the purpose of maintenance of effort requirements under any other program (such as Title I-A, ESEA and IDEA). (Thus, to receive State Stabilization funds, absent a waiver or modification by the Secretary, a state must meet a maintenance of effort requirement tied to the level of state support for elementary and secondary education in FY 2006, but the state may, with the prior approval of the Secretary, use State Stabilization funds to help it meet maintenance of effort requirements under other programs.) The Governor's application for funding under the State Stabilization Fund needs to indicate whether and what amount of such funds the state proposes to use to meet maintenance of effort requirements under the ESEA and IDEA. Section 14012(d) also provides that the level of effort required by a state or LEA shall not be reduced for the following year. This provision is ambiguous and may be the subject of guidance from USED, but it would seem to mean that in years subsequent to funding under the Stabilization Fund, states would need to meet applicable maintenance of effort requirements in other programs without regard to the Stabilization funds, either in the base year or the subsequent year.
These provisions – permitting treatment of State Stabilization funds as state funds for purposes of maintenance of effort requirements under other programs – do not appear generally to apply to
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supplement not supplant requirements in other programs or to affect the issue of compliance with supplement not supplant requirements in programs such as Title I-A, ESEA and IDEA-B. However, although the law is unclear on this point, and further clarification on this point may be provided by USED, they would appear to apply to those supplement not supplant provisions that have been interpreted by USED to require maintenance of state fiscal effort for specified purposes, such as those under IDEA-C. (Section 14012(d) expressly refers to IDEA-C, and IDEA-C does not have a separate maintenance of effort provision, but includes a supplement not supplant provision that has been interpreted as a maintenance of effort requirement by USED.)
B. Specific Maintenance of Effort and Supplement Not Supplant Requirements Under Existing Programs
Maintenance of effort and supplement not supplant provisions under current elementary and secondary programs vary somewhat in their applicability, scope, and rigidity:
Maintenance of Effort
Title I and related. The maintenance of effort provision applicable to Title I-A and other ESEA programs applies to LEAs, not to states, and requires that the combined fiscal effort per student or the aggregate expenditures of the LEA and state with respect to the provision of free public education by the local agency for the preceding fiscal year was not less than 90% of the combined fiscal effort or aggregate expenditures for the second preceding fiscal year. The law permits the Secretary to waive this
requirement if the Secretary determines that doing so would be equitable due to exceptional or uncontrollable circumstances such as a natural disaster or due to a precipitous decline in the financial resources of the LEA. A waiver based on significant reductions in state revenues due to the recession would come within this authority, and there is nothing in the law that would preclude the Secretary from providing a consolidated waiver for all LEAs in a state, assuming the budget information supports the waiver for all districts. Of course, in considering a request for waiver, the Secretary would be expected to consider the availability of state stabilization funds for treatment as non-federal funds for purposes of the maintenance of effort requirement, as provided in section 14012 of the Recovery Act.
IDEA. Part B of IDEA includes similar maintenance of effort provisions applicable separately at the state and local levels. It prohibits a state from reducing state financial support for special education and related services for, or the excess costs of educating, children with disabilities below the amount of that support for the preceding fiscal year. It also authorizes the Secretary to waive this requirement on grounds similar to those in ESEA, including "a precipitous and unforeseen decline in the financial resources of the state." Other Part B provisions prohibit using Part B funds to reduce the level of expenditures for the education of children with disabilities made by an LEA from local funds below the level of those expenditures for the preceding fiscal year. The law provides for exceptions to this local prohibition related, among other things, to enrollment decreases of children with disabilities, or to cases where the LEA's Part B allocation increases from the prior year and the LEA elects to use these funds to carry out activities under the ESEA. However, there is no provision authorizing waiver of the local maintenance of effort requirement based on economic conditions or loss of local revenue.
Supplement Not Supplant
Title I. Title I-A, ESEA includes a supplement not supplant provision that applies both to state and local educational agencies. It provides that the agency shall use Title I-A funds only to supplement, and not supplant, the funds that would, in the absence of the Title I-A funds, be made available from non-federal sources for the education of pupils participating in Title I-A programs. Section 9401 of ESEA bars
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waiving these provisions or similar supplement not supplant provisions for other ESEA programs under the Secretary's general waiver authority.
These provisions are often difficult to apply, and there has been little guidance on them from USED. The issue is what would have been spent (generally from state and local sources) for these students if there had been no Title I-A funds. Under federal compliance standards for state auditors published by OMB, a violation is presumed if federal funds replace state and local funds; if federal funds are used to meet a legal requirement to spend funds on these children or purposes; or if the state educational agency or LEA uses Title I-A funds to provide services for participating children that it provides with non-Title I-A funds for other children (the latter test is the clearest case of a supplement not supplant violation under Title I-A). However, these presumptions may be rebutted with evidence that funds would not have been spent for these purposes absent the federal funds; for example, due to program cuts caused by a state budgetary crisis.
IDEA. Supplement not supplant provisions under IDEA are generally more restrictive. At the state level, they provide that funds paid to the state under Part B must be used to supplement, and not to supplant, the level of federal, state, and local funds expended for special education and related services for children with disabilities. The only ground for waiver is if the state provides clear and convincing evidence that all children with disabilities in the state have available to them a free appropriate public education. USED has never granted a waiver on this basis. Unlike Title I, the fact that reductions in expenditures for special education may be caused by factors unrelated to the availability of federal funds is not a defense. IDEA-B also includes a separate supplement not supplant clause applicable at the LEA level, which USED generally has interpreted to mean that the local agency must maintain overall fiscal effort for special education and related services for children with disabilities. Similarly, IDEA-C includes a supplement not supplant clause that has been interpreted by USED to require state and local funds budgeted for early intervention services for infants and toddlers with disabilities to be maintained at least at the same level as the prior fiscal year.
The applicability of maintenance of effort and supplement not supplant provisions to funding under the Recovery Act is somewhat complex. The Recovery Act provides some flexibility and relief regarding maintenance of effort requirements under the Act and under existing programs funded through the Act. That flexibility will need to be promptly implemented by the Secretary. The Act appears to provide no flexibility regarding most supplement not supplant provisions under current law. Those provisions as written in ESEA programs provide appropriate latitude for states and LEAs to make decisions on expenditure levels devoted to program purposes based on budgetary constraints – not based on the
availability of federal funds – but that latitude is generally absent for IDEA-B provisions.
EducationCounsel LLC is available to provide guidance on these provisions. Please contact Steve Winnick at email@example.com or (202)545-2913 if you have questions.
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