Avoid pandemic penalties by knowing your special ed spending levels

Special education administrators should understand current and anticipated funding levels, be aware of how the coronavirus outbreak impacts their budget, and collaborate with other local and state leaders to form plans to address revenue challenges.
By: | June 5, 2020
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Right now, special education programs across the country have too much money. Next school year, they will likely have not enough.

This anticipated fiscal whiplash is concerning to special education directors because districts must demonstrate their maintenance of effort (MOE), which is the level of local—or state and local—funding for special education that is supposed to stay consistent year to year. If districts don’t meet their MOE obligation, they could suffer financial penalties, or what some are now calling “pandemic penalties.”

This is why it’s vital special education administrators understand current and anticipated funding levels, are aware of how the coronavirus outbreak will impact their budget, and collaborate with other local and state leaders to form plans to address revenue challenges, say special education funding experts.

School systems are facing two distinct but related challenges:

· Lack of expenditures. For this school year, the concern is that extended school closures may have limited districts’ abilities to spend the specific special education allocations scheduled for March through the end of SY 2019-20. For example, school districts may have been unable to complete special education evaluations or use paraprofessionals to deliver one-to-one special education student supports.

· Lack of revenue. Expected drops in state and local revenue due to the downturn in the economy caused by the coronavirus outbreak concern special education stakeholders for future years. Some predict there just won’t be enough revenue to meet the year-to-year MOE spending obligations. Furthermore, budget cuts could hurt districts’ ability to provide FAPE, some fear.

If a district fails to meet its MOE obligation, the state educational agency is required to pay the U.S. Education Department the lower of these two calculations: the amount in nonfederal funds equal to the shortfall; or the amount of the local educational agency’s Part B subgrant. In turn, a state can demand reimbursement from the noncompliant district.

“If school districts spend less due to school closures in the area of special education and are required to send funds back to the states, it will create a massive MOE problem across the country,” says Erin Maguire, president of the Council of Administrators of Special Education and the director of Student Support Service for the Essex Westford (Vt.) School District. “That in turn results in less money to spend on students with disabilities. I will need not less, but more to help repair what’s happened to kids.”

MOE is based on what a district should have spent the previous year, not on what it actually spent. There are exceptions to local MOE obligations but none quite fit the current pandemic situation. Several education administrative organizations have asked Congress for flexibility because ED does not have the authority to waive local MOE requirements and neither do SEAs.

ED can waive state MOE, known as maintenance of state financial support, when there are “exceptional or uncontrollable circumstances.” In fact, eight states asked for waivers between 2009-2011 due to declining revenues at the state level during the Great Recession.

Under normal circumstances, if a state does not maintain its level of effort and does not receive a waiver, its grant allocation for the following year will be reduced by the same amount by which the state fell short of meeting its requirement.

Here’s what local and state special education officials can do now to prepare to comply with MOE:

• Know your expenditures, future needs, and MOE requirements: Staying knowledgeable about revenue levels and expenses will be critical at this time, said attorney Tiffany Kesslar, a partner at Brustein & Manasevit PLLC. Consider making a recalculation about halfway through the reporting timeline, which would be around December, to help you stay compliant, she said. Additionally, having familiarity with MOE rules and how they apply to stimulus funding will also be important, Kesslar said. The Center for IDEA Fiscal Reporting, an Office of Special Education Programs technical assistance center, has several tools to help states and districts organize, calculate, and report MOE.

• Share concerns with local and state leaders: MOE is underdiscussed and not well understood, said Maguire. “You should be having conversations about how to handle the lack of revenue that may result in our current economic climate with a particular focus on the equity of its impact,” Maguire said. The list of who should be alerted includes local superintendents, school boards, and state education offices and boards, as well as state legislators.
District leadership should also make their school boards and state legislatures aware that districts can’t waive special education MOE requirements as there’s no authority for it, unlike the state MOE waiver under IDEA, the state waiver in the Coronavirus Aid, Relief, and Economic Security Act, and local MOE waivers for the Every Student Succeeds Act, Kesslar says.

• Estimate expenses for compensatory services: Local directors say it’s difficult to know at this point which students may be entitled to compensatory services when schools resume in-person lessons since those decisions are made on an individual basis. Still, Kesslar suggests it’s important to prepare, if possible, for the potential costs. “Special educators should voice pretty loudly even rough estimates of what they’ll need now,” Kesslar says.

• Request stimulus funding: The CARES Act, which was signed by President Trump into law on March 27, includes new funding opportunities for SEAs and LEAs to respond to the COVID-19 pandemic. Even though special education-specific funding was not included in the law, allowable uses of CARES Act funds are broad and permit activities that address the unique needs of students with disabilities.

ED has not released specific guidance on CARES Act funding as it relates to IDEA MOE. When states received funding from the American Recovery and Reinvestment Act in 2009, districts were allowed to use ARRA Part B funds to address budget shortfalls. That did not violate special education funding rules because OSEP said the stimulus money supplemented, not supplanted state regular Part B IDEA grants.

Kara Arundel covers special education for  Special Ed Connection, a DA sister publication.