Stimulus Money: Issues and Confusion

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There is a story in the Wisconsin State Journal on the stimulus money and education that covers some of the key issues but also perpetuates  the confusion surrounding how states and schools may and may not use this money.

To be fair, some of this confusion is understandable.  The stimulus package was put together quickly, portions of it are not very clear and much of the education portion reflects contradictory thinking.

However, much of the confusion is inexcusable, especially the omission of any explanation of the structural gap between costs and allowed revenues that is an essential part of the broken “three legged stool” of Wisconsin education funding.  Reporter Mark Pitsch should have read his former colleague Andy Hall’s “Squeezing Schools,” and incorporated some of that material.

Also difficult to understand is the repeated confusion about different aspects of the stimulus school funding and how they relate to the revenue caps.  More below, with clarifications

Before looking at the State Journal article and related issues, I want to make one basic truth clear (and get on my soapbox a little):  The money in the stimulus, for Title I (targeted for schools with high poverty concentrations), IDEA (money for special education) and even the general purpose money flowing through the states only temporarily makes underfunded mandates less underfunded.

The WSJ got this right with their headline: “Stimulus can’t solve schools’ shortfalls.”

School “shortfalls” are structural.  The continued underfunded mandates from the Federal and State governments, in Wisconsin a broken system that requires districts to cut programs and services by between 1% and 2% annually are structural faults.  Structural failures require structural solutions.  Sign on with the Wisconsin Alliance for Excellent Schools and the School Finance Network to work to fix this in Wisconsin.  Let your Senators and Representative know that educational opportunity should be a civil right and educational mandates need to be fully funded.

The stimulus money creates a “funding cliff.” Once the money is gone — absent Federal and State initiatives to fully fund education — schools are in danger of falling off the cliff.  This would mean massive program cuts and layoffs in a couple of years.  Like a nonrecurring referendum, this sort of education funding is not good policy.

Robert Manwaring at the Quick and Ed has a very good discussion of the complexities of deciding what to do with this one time funding.

Interestingly, the guidance goes out of its way to emphasize that this is short-term money, and that districts and states should use it for shorter-term investments, so there isn’t a “funding cliff”. But on the flip side, the guidance makes clear that the stimulus funds’ goals are to help create or maintain jobs. (Those two priorities seem in conflict, since hiring or keeping a teacher is more of a long-term investment.)

The guidance McNeil refers to was released by the Department of Education on March 7.  That is the same day the Pitsch’s State Journal story was published.  However, this time line does not explain the confusion in that story.

In discussing Title I funding, Pitsch writes:

The stimulus addition should allow the district to divert general fund money to other programs.

Both the Title I and IDEA funding continue the “supplement not supplant” policies in place for those programs, meaning that the funding cannot, except under very special cirumstances be used to replace general fund money.  Here is what the Department of Education says about the Title I Part A funds:

Fiscal Issues

  • Maintenance of effort: With prior approval from the secretary of education, a state or LEA may count expenditures of SFSF used for elementary or secondary education as non-federal funds for purposes of determining whether the state or LEA has met the Title I, Part A maintenance of effort requirement. This may reduce the incidence of LEAs failing to maintain fiscal effort and the need to seek a waiver from the Department.
  • Supplement, not supplant: the Department may not waive the Title I, Part A “supplement, not supplant” requirement. Note, however, that in certain circumstances, including cases of severe budget shortfalls, an LEA may be able to establish compliance with the “supplement, not supplant” requirement, even if it uses Title I, Part A funds to pay for allowable costs that were previously paid for with state or local funds. (For additional information, see Title I Fiscal Issues Non-Regulatory Guidance, available at: [PDF, 256K].)

On related issues with IDEA, EdWeek’s Christina Samuels, who blogs  at On Special Education wrote

The maintenance of effort provisions that currently exist within the Individuals with Disabilities Education Act will apply to stimulus funds. That means that you can’t take all of your stimulus money and use that to pay for your current special education programs. There is SOME flexibility in the 2004 reauthorization of the IDEA to “supplement, not supplant” provisions, though. If the federal government allocates more money to a district from one year to the next, the district is allowed to take the difference between the two allocations, halve it, and use that figure to reduce their own funding requirements.

So some stimulus Title I  and IDEA money may be used to supplement, possibly allowing general fund money preciously used for Title I purposes (to make up for the underfunding) to be used elsewhere. This is very different than what Pitsch wrote.

Pitsch’s section on Governor Doyle is also full of misinformation and confusion:

Doyle said in an interview that most of the federal stimulus money wouldn’t be subject to state revenue caps for school districts. But he urged them to remain under the caps even as they spend the federal dollars. If they don’t, they’ll face big budget holes in future years and possibly anger homeowners if property taxes go up too much.

“School districts would be very, very well advised to take that money and keep their spending under the revenue caps,” said Doyle (emphasis added).

Doyle appears to be referring to the Title I, IDEA and other special purpose funds, which do not count against revenue caps (he also appears to be telling them to violate or take advantage of the loopholes in the “supplant not supplement” provisions).  However, most of the stimulus money schools will receive comes not from these funds, but from the State Fiscal Stabilization Fund.  This is the flow through money that Doyle used to supplant state money in his budget.  To the Governor’s credit, he went beyond the 81.8% required by the law to limit property tax increases and district budget cuts to more -or-less the usual, unacceptable levels.

Here is a chart from the Wisconsin Association of School Boards:

Federal Program

2008 Actual Allocation

American Recovery & Reinvestment Act (estimated amounts as of 2/19/09)

State Fiscal Stabilization Fund



Title I Grants to Local Educational Agencies


$147,696,280 Individual District Estimates

Technology Grants



IDEA, Part B:
Grants to States



IDEA, Part B:
Pre-school Grants



IDEA, Part C:
Grants for Infants & Families



The non revenue cap monies total about $381 million; of the $876 million in flow through, Doyle has called for $291 million to be spent on general aids in 2008-9, $277 million in 2009-10 and $221 million in 2010-11, for a total of $789 million.  $789 million is more than twice $381 million; more than twice as much stimulus money is under the caps than is not.

School finance can be confusing, but misrepresentations of simple facts and omissions of key contexts like those in the Wisconsin State Journal article render what is challenging almost impossible.  How is the public supposed to develop informed opinions when our reporters fail in their duties?  In the coming months, Boards of Education around Wisconsin will face difficult choices regarding the use of the non capped stimulus funds.  The public needs to be part of this process and in order that to happen in any productive way, the media needs to do much better in explaining the issues.

Thomas J. Mertz

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