Schools need flexibility in coronavirus stabilization funds

With the introduction of the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act on May 12, Congress showed continued interest in providing much-needed relief for schools. Congress should aim to replace missing state funding so that schools can best serve students in whatever format makes sense under highly variable and changing local conditions, with special care to protect the most vulnerable students. Sending most federal aid to states and school districts through a fiscal stabilization fund, rather than through expansions to existing federal programs, is the best way to meet these goals. As with all federal funds, Congress needs to account for how they are ultimately spent. But to get the most out of school relief, stabilization funds need to come with clear, straightforward conditions for states and districts.

Congress should make it impossible for states and districts to mistake stabilization funds for existing federal programs like Title I

Using any pre-existing program allocations or formulas to distribute the funds will come with unintended baggage. State and local administrators are well aware that established federal program funds, like Title I under the Every Student Succeeds Act (ESSA), come with a raft of compliance requirements. The Coronavirus Aid, Relief, and Economic Security (CARES) Act used state and district shares of Title I allocations to allocate Elementary and Secondary School Emergency Relief (ESSER) funds. Even though ESSER funds are not subject to Title I restrictions, the use of Title I formulas prompted questions about the differences between ESSER and Title I.

Congress should steer clear of Title I in the formulas for school stabilization funds if it wants to grant districts the flexibility that they need to use funds most effectively–but it can still craft a relief program with formulas and conditions that promote Title I’s mission of protecting disadvantaged students.

In this post, we discuss what should be required of states and districts before they receive funds, and afterwards, to show they used funds as intended. In future posts, we’ll consider what formulas Congress should use to send funds to the states and how they should direct states to distribute funds to their school districts.

What should states and districts have to do to qualify for stabilization funds?

States need to receive federal funds and send aid to school districts quickly and flexibly if they are to meet the needs of students in the current crisis. This means the federal application process for states, as well as state application processes for school districts, need to be straightforward and streamlined, being judicious in what actions and reporting are required to qualify for funds.

Historically, attaching policy strings to formula aid has been a powerful—if politically unpopular—tool for persuading states and districts to pursue policies that Congress wants, but that states and districts would otherwise resist. The idea is simple: The formula of the program (like Title I) determines the amount of the allocation, and whether or not states or districts receive this allocation depends on if they adopt the policy. Congress has used this approach to promote the desegregation of schools, state adoption of standards-based testing, and public reporting of test results and resource allocation. These types of strings are powerful only if Congress is prepared to withhold funds from states or districts that don’t meet the terms—which is inconsistent with the goals of stabilization funds.

Another model for federally determined strings is a competition, like the Race to the Top (RTT) program in the American Recovery and Reinvestment Act (ARRA). RTT invited states to participate in a tournament where the states that adopted the most policies from the Department of Education’s list “won” RTT funds, and others did not. Secretary of Education Betsy DeVos has copied this model by devoting $180 million of CARES Act funding to competitive grants for states proposing non-traditional approaches, including micro-grants to families for purchasing private educational services, statewide virtual schools, and “models for providing remote education not yet imagined.”

Stabilization aid should reach schools, not be dangled as a carrot—whether through conditions on formula aid or discretionary grants—to promote the preferred policies of Congress or the administration. This is especially true when the best approach for different communities is so variable, and we have sparse evidence on how to best meet the unique demands of the moment; it’s not clear what the “right” strings would be, and a one-size-fits-all approach will likely fail. ARRA’s State Fiscal Stabilization Fund (SFSF), which had minimal strings attached, is a more promising model.

How should Congress ensure that federal aid is used as intended?

Congress has long grappled with how to make sure that schools spend federal education funds distributed through programs like Title I and the Individuals with Disabilities Education Act (IDEA) as intended. Lawmakers want to ensure that these funds are used for permissible expenditures and for the benefit of targeted students. They must also address concerns that state and local governments will simply cut taxes and substitute federal funds in place of their own. These are thorny problems that rules in programs such as Title I and IDEA attempt to address. These rules often prevent federal money from being put to its best use in the best of times, and are particularly ill-suited to the current circumstances. Not only would restrictions reduce much-needed flexibility, but they are unlikely to achieve their intended goals.

On the revenue side, maintenance of effort (MOE) provisions require state and local governments to maintain their own support for education when they receive federal funds. But a fiscal stabilization fund is needed precisely because states will not have the tax base to maintain support for education at existing levels. Setting MOE requirements at the right level requires knowing what state and local support would have been in the absence of federal aid, a task that is normally difficult and now impossible in light of massive disruption to state and local revenue. Congress would need to include an MOE waiver process, as in the CARES Act, but this would add administrative burden. Instead, Congress should eschew MOE requirements in the next round of stabilization funds.

On the spending side, fiscal stabilization funds should be flexible so that districts can meet new and changing needs. Congress should promote this in two key ways:

1. Congress should use a new formula for directing stabilization funds to states, and have states run these funds through their primary school finance formulas to reach districts. (This is the subject of the next posts in this series.) This will remove any perceived relationship between Title I and the new funding. Historically, permissible uses of Title I were highly restricted; though flexibility is greater now, the law and guidance are still confusing.
2. Future legislation should use concise, plain language to communicate this flexibility. The CARES Act, and the newly proposed HEROES Act, include long lists of permissible uses for funds. The final item on the list for CARES ESSER is: “Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency.” This is why recent guidance from the U.S. Department of Education for the CARES ESSER funds characterizes the law as providing a “broad, permissive list of allowable … activities.” But because the list is so long, it reads as confusingly exhaustive, leaving districts unsure what is allowed. Future legislation should communicate this flexibility with a short statement rather than listing out many examples of permissible activities. (Like all federal funds, stabilization funds still would be subject to basic reporting and monitoring requirements.)

A driving force behind many of the rules governing use of federal funds is the desire to ensure that federal funding supports our most vulnerable students. Title I, for example, is meant to provide additional resources above some minimum basic education provided from state and local resources. The purpose of stabilization aid, in contrast, is to help states maintain that basic minimum, so worrying about what qualifies as “extra” makes little sense for stabilization aid. As we’ll discuss in future installments in this series, Congress can use funding formulas, rather than spending rules, to design a progressive relief package.

Districts need to be able to spend stabilization funds flexibly, and they need to know they can spend flexibly. Confusion about federal rules often shapes how school districts spend federal funds, limiting their effectiveness even when programs are well established. The CARES Act was neither an expansion of Title I nor a clean break from it. For example:

• The CARES Act does not contain a supplement-not-supplant provision, as in Title I, but many districts are unsure about this because they know that the funds are being awarded based on Title I allocations.
• Though CARES is not a Title I expansion, it did include a modified version of Title I’s equitable services requirement to its funds—which different states have interpreted in different ways. While CARES sends relief funds to private schools based on their total enrollment, the Title I version of equitable services directs funds to private schools based on their enrollment of poor students.

Recent U.S. Department of Education guidance attempts to address confusion over equitable services and supplement-not-supplant provisions, but history suggests federal guidance often fails to change state and local perceptions. These rules may seem like in-the-weeds details to federal lawmakers, but they are front and center for state and local fiscal officers. Congress has the opportunity to reduce confusion associated with existing programs by structuring further education recovery aid as flexible fiscal stabilization funds—and using an original formula to remove any perceived relationship with Title I.

The authors did not receive financial support from any firm or person for this article or from any firm or person with a financial or political interest in this article. The authors are not currently officers, directors, or board members of any organization with a financial or political interest in this article.