Legislature(2023 - 2024)BELTZ 105 (TSBldg)
04/03/2024 03:30 PM Senate EDUCATION
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| Audio | Topic |
|---|---|
| Start | |
| Presentation: Summary of the Implementation of the Federal "maintenance of Equity" Provision | |
| Adjourn |
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
+ teleconferenced
= bill was previously heard/scheduled
ALASKA STATE LEGISLATURE
SENATE EDUCATION STANDING COMMITTEE
April 3, 2024
3:30 p.m.
MEMBERS PRESENT
Senator Löki Tobin, Chair
Senator Gary Stevens, Vice Chair
Senator Jesse Bjorkman
Senator Jesse Kiehl
Senator Elvi Gray-Jackson
MEMBERS ABSENT
All members present
OTHER LEGISLATORS PRESENT
Representative Rebecca Himschoot
Representative Andi Story
COMMITTEE CALENDAR
PRESENTATION: SUMMARY OF THE IMPLEMENTATION OF THE FEDERAL
"MAINTENANCE OF EQUITY" PROVISION
- HEARD
PREVIOUS COMMITTEE ACTION
No previous action to record
WITNESS REGISTER
AUSTIN REID, Federal Affairs Advisor
National Conference of State Legislatures
Washington, D.C.
POSITION STATEMENT: Provided the presentation Summary of the
Implementation of the Federal "Maintenance of Equity" Provision.
CONOR BELL, Fiscal Analyst
Legislative Finance
Legislative Affairs Agency
Juneau, Alaska
POSITION STATEMENT: Answered questions on Maintenance of Equity.
ACTION NARRATIVE
3:30:42 PM
CHAIR LÖKI TOBIN called the Senate Education Standing Committee
meeting to order at 3:30 p.m. Present at the call to order were
Senators Kiehl, Gray-Jackson, Stevens, and Chair Tobin. Senator
Bjorkman arrived shortly thereafter.
3:31:56 PM
CHAIR TOBIN announced Senator Bjorkman arrived.
^PRESENTATION: SUMMARY OF THE IMPLEMENTATION OF THE FEDERAL
"MAINTENANCE OF EQUITY" PROVISION
PRESENTATION: SUMMARY OF THE IMPLEMENTATION OF THE FEDERAL
"MAINTENANCE OF EQUITY" PROVISION
3:32:01 PM
CHAIR TOBIN announced the consideration of the implementation
provision in federal law called "Maintenance of Equity." She
stated Alaska is currently out of compliance with Maintenance of
Equity and has been sanctioned by the U.S. Department of
Education.
3:33:35 PM
AUSTIN REID, Federal Affairs Advisor, National Conference of
State Legislatures, Washington, D.C., provided the following
testimony with his Summary of the Implementation of the Federal
"Maintenance of Equity" Provision presentation:
[Original punctuation provided.]
Thank you for the invitation to testify before the
committee today. My name is Austin Reid and I am a
Federal Affairs Advisor at the National Conference of
State Legislatures (NSCL). NCSL is a nonpartisan
organization working in a bipartisan manner to serve
and strengthen the legislatures in all the state and
territories.
In this role, I serve as both NCSL's lead analyst of
federal education policy and serve as its primary
representative on education matters before Congress
and the administration, including, primarily, the U.S.
Department of Education.
3:34:08 PM
MR. REID continued:
I am testifying today to provide a "Summary of the
Implementation of the Federal 'Maintenance of Equity'
Provision" that was included in the American Rescue
Plan Act of 2021 (ARPA).
I have been monitoring this provision closely for the
entirety of its existence. I had conversations with
the congressional staffers who wrote the provision
during the bill drafting process and have been in
regular communication with the U.S. Department of
Education about its implementation since the spring of
2021.
My testimony today reflects my understanding of the
complete timeline of the conception and implementation
of this provision. I hope that a thorough summary
provides the legislature with the background and
information it needs to inform any action it wishes to
take.
NCSL does not recommend policy to the legislatures on
issues that are internal to the states, including this
issue.
3:34:52 PM
MR. REID continued:
However, NCSL does lobby the Congress, the White House
and federal agencies for the benefit of state
legislatures in accord with the policy directives and
resolutions recommended by the Standing Committees and
adopted at the NCSL Annual Business Meeting. All
policy directives and resolutions must be approved by
three-quarters of states present at the business
meetings.
As part of my duties in representing NCSL before the
federal government, I staff the NCSL Standing
Committee on Education, a body of legislators and
legislative staff that are selected by their
legislature's leadership to develop positions on
state-federal issues to guide NCSL's lobbying efforts.
The NCSL Standing Committee on Education has adopted
policy pertaining to the Maintenance of Equity
provision, urging the federal government to provide
states with full waivers and maximum flexibility. NCSL
believes that state education finance decisions are
solely a matter of the states, owing to the plenary
power they have in education.
3:35:40 PM
MR. REID moved to slide 2 displaying ARPA Maintenance of Equity
State Provision 1 and continued:
[Original punctuation provided.]
NCSL's position should in no way be construed to
direct how the Alaska legislature should respond to
the matter at hand.
Much of the information I will provide in today's
testimony has been gleaned by direct conversations I
have had with key federal stakeholders in the process
of representing NCSL's interests.
For my testimony, I will first offer a full timeline
of the implementation of the Maintenance of Equity
provision and conclude my testimony with a summary of
critical observations that are worth consideration by
legislatures when seeking to understand this
provision.
3:36:21 PM
MR. REID on slide 2, continued his testimony:
[Original punctuation provided.]
In February 2021, I was made aware of a proposed
provision known as "Maintenance of Equity" that was
being drafted by congressional committee staff in the
Senate Health, Education, Labor and Pensions
Committee's majority office.
I participated in conversations with the staff who
wrote the provisions and will relay what I believe are
the intentions that undergird the policy.
Historically, Congress includes a Maintenance of
Effort provision as a fiscal condition states must
agree to in order to receive stimulus funds for
education. This typically requires states to maintain
aggregate levels of education funding.
In early 2021, there was a common view that states
were expected to experience precipitous revenue
declines and would likely have to cut funds to
education.
Congress incorporated this view into its Maintenance
of Effort provision for the second tranche of stimulus
funds for education through the Elementary and
Secondary Education Relief Fund (ESSER), as passed
through the Coronavirus Response and Relief
Supplemental Appropriations Act of 2021 (CRRSAA).
This Maintenance of Effort provision allowed states to
cut funding to education, so long as they only reduced
funds in proportion to the overall reduction in the
state budget. This same Maintenance of Effort
provision was included again in the eventual ARPA.
However, congressional staff and others with input on
the drafting process, feared repeating a dynamic that
occurred during the Great Recession when 29 states
made across-the-board budget cuts to education in the
face of revenue declines.
While this action may have been fair in the context of
funding between various agencies, enacting an across-
the-board funding cut to K-12 education has a
disproportionate impact on school districts that are
more reliant on state funding due to having a lower
property tax base and thus less ability to raise local
funds to support their schools.
In other words, these districts see a greater share of
their budget cut without the ability to compensate
through increased local fund contributions. These
districts typically, but not always, serve relatively
higher populations of low-income students compared to
other districts.
3:38:13 PM
MR. REID on slide 2, continued his testimony:
[Original punctuation provided.]
To prevent this dynamic, while also allowing states to
make overall funding cuts without needing to seek a
Maintenance of Effort waiver, congressional staff
wanted to create a backstop to provide additional
protections to education funding in districts that
serve relatively larger populations of low-income
students.
This was, I believe, the primary motivation behind the
drafting of a new, first-of-its-kind "Maintenance of
Equity" provision.
The American Rescue Plan Act (ARPA) was enacted on
March 9, 2021, and included an additional $122 billion
in funding for education in states through the ESSER
fund.
While there were some doubts as to whether a
"Maintenance of Equity" provision would ultimately
make it into the final bill, it was indeed included.
The Maintenance of Equity provision includes four
prongs, two for states and two for local school
districts.
According to the statute, states could not:
• "Reduce State funding (as calculated on a per-pupil
basis) for any high-need local educational agency in
the State by an amount that exceeds the overall per-
pupil reduction in State funds, if any, across all
local educational agencies in such State in such
fiscal year."
3:39:31 PM
MR. REID moved to slide 3 displaying ARPA Maintenance of Equity
State Provision 2 and continued his testimony:
[Original punctuation provided.]
• "Reduce State funding (as calculated on a per-
pupil basis) for any highest poverty local
educational agency below the level of funding (as
calculated on a per-pupil basis) provided to each
such local educational agency in fiscal year
2019.
And school districts could not:
• "Reduce per-pupil funding (from combined State
and local funding) for any high-poverty school
served by such local educational agency by an
amount that exceeds the total reduction in local
educational agency funding for all schools
served?"
• "Reduce per-pupil, full-time equivalent staff in
any high-poverty school by an amount that exceeds
the total reduction in full-time equivalent staff
in all schools served?"
3:40:03 PM
MR. REID on slide 3 continued his testimony:
[Original punctuation provided.]
While guidance for the ARPA Maintenance of Effort
provision was released in April 2021, the initial
guidance for the Maintenance of Equity was not
released until June 9, 2021.
I believe the guidance interpreted the statute in two
key ways that have had considerable implications for
the implementation of Maintenance of Equity over the
past three years.
First, the guidance asserted that states must
calculate compliance with the state Maintenance of
Equity provision even if they did not enact a
statewide spending cut to education.
This was a major update. To my eyes, and some others,
a plain language reading of the law supported the
interpretation that Maintenance of Equity only applied
in instances where state education budgets were cut.
This interpretation also seemed to align with what I
believed to be the Congressional intent behind the
proposalthat in the event that a state must cut
education funding, it must spare districts with higher
populations of low-income students from the
disproportionate impact of those cuts.
Even the Department's own guidance acknowledges this
intent: "Accordingly, if State or local funds are cut,
the maintenance of equity provisions ensure that LEAs
and schools serving a large share of students from
low-income backgrounds do not experience a
disproportionate share of such cuts."
One immediate implication of this interpretation, that
Maintenance of Equity applied in the absence of
overall spending cuts to education, was that it became
very difficult, if not impossible, for legislatures to
know during the budget process whether they would
ultimately be in compliance with the Maintenance of
Equity provision and take appropriate action to ensure
compliance.
3:41:34 PM
MR. REID on slide 3 continued his testimony:
[Original punctuation provided.]
Compliance would ultimately become a retrospective
assessment that could only be made after a state
funded its education budget, distributed funds to
districts via its state education funding formula and
then compared the state's data with the federal
Maintenance of Equity compliance calculations. These
federal compliance calculations could not be
administered until after states passed their budgets
and sent requested initial funding data to the
Department.
The fact this guidance was issued in mid-June, towards
the end of the FY 2022 budget process, did not make
matters of compliance any easier from the state
legislative perspective, especially for those states
who had already concluded their legislative session.
In this sense, the conditions of compliance were not
all clearly known to legislatures when they agreed to
accept these federal funds and then make timely fiscal
decisions for FY 2022.
3:42:35 PM
SENATOR KIEHL agreed that the timeline describing the release of
guidance was frustrating. He asked if Mr. Reid could provide
context by elaborating what else was happening in the federal
government at that time.
3:42:55 PM
MR. REID replied that from the U.S. Department of Education's
perspective, the initial burden of passing the funds was
figuring out distribution to states and schools. The pandemic
was at its peak, and the federal government was also focused on
schools reopening. He stated his belief that April 2021 was when
the first vaccine became widely available. From the federal
perspective, several competing priorities likely delayed the
timeline for supporting education. He said another probable
reason for the delay was that it was a novel state education
finance provision that the federal government had never handled
before. There was a sense that the provision might not make it
into the final package due to a specific test applied to the
process by which Congress passed the bill. Preparation and
communication between Congress and the administration may have
been lacking. He added that it took several months, amid other
priorities, to issue guidance, emphasizing that guidance does
not have the same force and effect as regulation.
3:44:40 PM
SENATOR KIEHL recalled that when the Elementary and Secondary
School Emergency Relief (ESSER) Fund passed, 4.3 million
Americans were out of the workforce, and over half a million had
died from the virus. Congress was trying to prevent economic
collapse by printing money. He noted that the Alaska legislature
relied on guidance documents at that time because federal
regulations take years to implement. He asked if the timeframe
from ESSER's passage to the release of guidance was 13 to 14
weeks.
3:45:26 PM
MR. REID replied about three months. He mentioned the
department's guidance acknowledges that it comes out towards the
end of the budget process for the fiscal year in which the
provisions apply and that complications from the timing of this
guidance exist. He noted that the complications are in part due
to the American rescue plan passing mid-budget process for many
states. He said the way it was interpreted makes it very
difficult for states to know how they're going to ultimately
comply with this provision while they were making budget
decisions.
3:46:11 PM
MR. REID on slide 3 continued his testimony:
[Original punctuation provided.]
Second, the guidance clarified that the Department did
not believe it had the ability to offer waivers from
the state and local Maintenance of Equity provisions,
as it did it for the Maintenance of Effort provision.
However, the U.S. Department of Education would later
issue updated guidance in December 2021 which
effectively waived the two prongs of the local
Maintenance of Equity provision for all school
districts in the country.
The ARPA statute did grant exemptions under the local
Maintenance of Equity provisions for districts in
certain circumstances, including those experiencing
"an exceptional or uncontrollable circumstance, such
as unpredictable changes in student enrollment or a
precipitous decline in the financial resources of the
LEA, as determined by the Secretary."
In the updated December 2021 guidance, the Department
reasoned that all districts faced "fluctuating school
enrollments and uncertain revenue collection as a
result of the pandemic" and thus could qualify under
the exemption.
So long as a district certified it did not and would
not "implement an aggregate reduction in combined
State and local per-pupil funding" for FY22 and FY23,
the Department agreed to waive the local Maintenance
of Equity provision for school districts.
3:47:33 PM
MR. REID on slide 3 continued his testimony:
[Original punctuation provided.]
I will note that this very broad flexibility was not
applied to the state Maintenance of Equity provisions.
The lack of a waiver process would have considerable
implications as it did not allow states with
exceptional circumstances to receive appropriate
exemptions and instead set up a prolonged and often
confusing compliance process that lacked transparency.
3:47:53 PM
MR. REID moved to slide 4 a table showing examples of compliance
calculations with State Maintenance of Equity Provision 1.
[Original punctuation provided.]
The U.S. Department of Education continued to update
the Maintenance of Equity guidance through 2021 and
into 2022. Updates were made in August, October and
December of 2021.
Over this time, NCSL became aware of at least three
states that identified early signs of discrepancies
between their state funding formula determinations and
the Maintenance of Equity compliance calculations.
Despite these cases, concerns that states would face
widespread difficulties with Maintenance of Equity
seemed to wane.
This view was seemingly supported by the stronger-
than-expected fiscal position of states. Despite fears
of revenue declines, the NASBO Fall 2021 Survey
indicated that 45 states were on pace to maintain or
increase funding for K-12 education in FY 2022,
including 41 states that indicated funding increases.1
Final expenditure data from NASBO showed 41 states had
enacted funding increases for K-12 education, with a
median increase of 4.6 percent.
3:48:53 PM
CHAIR TOBIN said the state of Alaska, did increase student
funding, as seen on the slide 4. It was increased by $30 due to
the Alaska Reads Act in 2023. She said she wanted to ensure it
is known publicly that the increase was not a significant
increase, unless the information on slide 4 is also including
debt relief and major maintenance. She asked Mr. Reid to expound
on what is included in "state spending changes."
3:49:32 PM
MR. REID said he doesn't know the full details that the National
Budget Officers Association (NBOA) uses to calculate numbers,
but people in the Education Finance Field consider it a very
reliable document for budget information. It may not always be
correct, but they note a 6.1 percent increase between FY 2021 -
2022 in Alaska. This is in the final expenditure report. He
recalled that the survey done in the initial expenditure report
of states in fall 2021 initially indicated that Alaska would see
a decrease in education funding. However, final data suggests a
6.1 percent increase. For FY 2022 - 2023 they indicate an 8.9
percent increase.
3:50:10 PM
CHAIR TOBIN said the committee knows there was not a Base
Student Allocation (BSA) increase in either of those years and
therefore assumes on the increase is from debt relief and major
maintenance spending. and not money that went to per pupil
spending.
3:50:50 PM
MR. REID said he does not see any additional notes of
discrepancies by the NBOA for Alaska, so he can't offer any
additional context. Regardless, the data generally provides
evidence to the idea that fiscal conditions in states were
really strong, and the NCSL would have expected on the
widespread strength of fiscal conditions and widespread
increases for funding in education among states, that there
wouldn't have been near as many compliance issues with the
maintenance of equity as was ultimately revealed.
3:51:29 PM
MR. REID on slide 5 continued his testimony:
[Original punctuation provided.]
However, on July 5, 2022, days after the close of FY
2022, the U.S. Department of Education sent a form
letter to 39 states explaining that the Department had
identified instances of noncompliance with the
Maintenance of Equity provision. Ultimately, I believe
41 to 42 states received this initial letter.
The same form letter was sent to each state and was
not made public. The Department, when asked during a
follow up conversation, would not identify the states
that had received this letter.
The letter also did not provide any information about
the scope of the compliance issues in each state. The
letter merely said "The initial FY 2022 data you
submitted indicates that your State is not maintaining
equity in one or more high-need or highest-poverty
LEAs."
3:52:17 PM
MR. REID moved to slide 6 and continued his testimony:
[Original punctuation provided.]
These letters were based on initial data submitted by
states during the summer and fall of 2021 rather than
the final FY 2022 data that was tentatively due days
before on June 30, 2022.
Given the encouraging data about widespread state-by-
state funding increases for education, I recall there
being quite a bit of surprise and confusion among the
small group of us who have followed this provision
closely from its inception.
As you can imagine, there was quite a bit of confusion
in states, especially when there was no indication in
the letter of the scope and scale of the compliance
issues that had been identified.
NCSL, along with representatives from groups
representing state education agencies and governors'
offices, sought more details from the Department in a
private meeting in early August 2022.
We learned that the Department was sharing details
about compliance issues with state agency staff. It
was unclear how those details were being shared and at
what level of agency staff those details were being
shared with.
3:53:11 PM
MR. REID continued:
Anecdotally, I understand details were often shared
through phone calls with state agency staff who could
vary from mid-level to more senior staff.
The Department would not share any specific state
details with us. The Department did provide a high-
level summary of compliance issues. They said there
were some states with only a handful of districts with
compliance issues, while other states had districts
with cumulative funding gaps in the hundreds of
millions of dollars.
Given the implications that compliance issues with
these provisions have for state legislatures, I asked
the Department to include key legislative stakeholders
in compliance conversations. While I don't believe
this request was granted often, if at all, the
Department did include me on periodic update calls and
later passed along finalized compliance
correspondence.
While I was not made privy to any specific compliance
conversations, I have gleaned over time a sense of the
issues that were causing states to be out of
compliance.
3:54:12 PM
MR. REID moved to slide 7 a table Determining "Highest-Poverty"
and "High-Need" LEA's and continued his testimony:
[Original punctuation provided.]
As you recall, there are two state prongs to the
Maintenance of Equity provision.
One requires that the "highest-poverty" local
education agencies (LEAs) receive funding above the
Fiscal Year 2019 level.
According to federal guidance, these districts are
defined as those serving the highest proportion of
low-income students and collectively account for 20%
of the state's student population.
From my understanding, states have had fewer
compliance challenges with this provision given the
widespread increases for education funding.
The other prong requires that low-income districts, or
"high-need" LEAs, do not receive less funding year-
over-year, on a per pupil basis, compared to more
high-income districts.
According to federal guidance, these districts are
defined as those serving the highest proportion of
low-income students and collectively account for 50%
of the state's student population.
This provision is most likely responsible for
compliance issues, which frequently occur even when
states have increased overall per pupil spending on
education.
Even when state funding increases, the manner in which
the funding is distributed can result in schools
receiving less funding than they had received in the
prior year.
As I will detail, many of the school finance
strategies that are responsible for variable year-
over-year funding are most often meant to target
resources to certain student populations that require
more resources to support their education or to find
the appropriate balance between the state share of
funding and a local school community's fiscal
capacity.
While there are many and varied definitions of equity,
these strategies are commonly understood in the
education finance world to be tools of equity in
school funding.
3:56:12 PM
MR. REID continued:
As you will see, the various and complex strategies
that states use to distribute funding for education
does not neatly align with the federal Maintenance of
Equity test, which is fairly simple and based on a
single and static variable- a student's income status.
There are at least three key state education finance
strategies that may cause non-compliance with
Maintenance of Equity.
It's worth noting that many states have incorporated
these education finance strategies in response to
court settlements that directed the state to more
effectively fund and equitably finance education in
the state.
These strategies can individually cause compliance
issues with Maintenance of Equity calculations, but
the interaction among these mechanisms may cause even
more complicated compliance issues.
3:56:49 PM
MR. REID moved to slide 8 a sample compliance letter from U.S.
Department of Education and continued his testimony:
1. States with foundation funding formulas
Thirty-seven states use foundation funding formulas.
The simple concept behind this education finance
strategy is to target education funding based on
student characteristics to ensure student populations
that may need extra education support receive more
resources. This is the prevailing trend in state
education finance to provide more equitable education
funding. While every student gets a base amount,
states provide additional funding "weights" for
certain student populations. These can vary by state,
but common populations for targeted funding are low-
income students, students with disabilities and
English learners. Funding is then distributed to
districts based on student enrollment and attendance
patterns.
Many states with foundation funding formulas likely
experienced compliance issues with Maintenance of
Equity. This is likely due to enrollment pattern
changes across districts. As you know, enrollment and
attendance fluctuated substantially in school
districts across the country 8 during School Years
2021-2022 and 2022-2023, especially among vulnerable
populations of students, which usually receive
additional weighted funding. A school district that
sees enrollment declines in populations that received
additional funding weights could see an overall per
pupil funding decline even if the state provided a
base per pupil increase through the funding formula.
3:58:49 PM
MR. REID on slide 8 continued his testimony:
[Original punctuation provided.]
3. States with "hold harmless" provisions
States that have districts with rapidly declining
enrollment will sometimes enact "hold harmless"
provisions on top of a weighted student funding
formula in order to stabilize a district's finances
and provide a fiscal "soft landing" as the district
makes plans to downsize. This is common for districts
in rural areas where communities are reliant on one
school district. Over time, the state will slowly
phase out this hold harmless provision, which results
in reductions in state aid, even though those
reductions are less drastic than would have occurred
if an enrollment-based formula completely drove the
levels of state funding.
NCSL is aware of at least one state which had
districts that were initially deemed noncompliant due
to the presence of these hold harmless provisions.
As I alluded to before, the interaction of these
strategies could result in noncompliance and make
matters of demonstrating compliance very complicated.
NCSL is aware of one state that was in the middle of
carrying out a seven-year funding equalization plan,
coupled with a revised weighted student funding
formula, that was disrupted by the prospect of
noncompliance with the Maintenance of Equity
provision. In that plan, the state had identified
districts that were relatively overfunded and
districts that were relatively underfunded. Over the
course of the seven-year plan, the state was slowly
transferring additional money to the underfunded
districts by reducing state funding in the overfunded
districts, while allowing those districts to enact
local tax levies above a statutory cap to replace the
loss of state funding.
In contrast to the wide array of state education
finance strategies, it's worth noting the Maintenance
of Equity test is based on a single variable- a
student's income status.
4:00:22 PM
MR. REID on slide 8 continued his testimony:
[Original punctuation provided.]
While this is an important factor to consider, and a
variable that is accounted for in many foundation
funding formulas, there are many other important
measures that states take into account when
distributing education funding, including student
factors such as instructional needs related to
disability or English learner status, or the local tax
capacity to fund education.
While some districts may have experienced reductions
in funding, it was often not the result of state
spending cuts, but rather a passive reduction in
funding after the application of state funding
formulas, which are often calibrated to direct
resources towards the students who benefit the most
from equity efforts.
Indeed, in private conversations, the Department
indicated to me that we have not seen states
deliberately cut funding to low-income schools.
4:01:03 PM
SENATOR KIEHL asked if the state that was in the middle of a
long-term shift in its education funding made an adjustment to
be compliant with the maintenance of equity rules.
4:01:24 PM
MR. REID replied yes, the state ultimately made supplemental
appropriations to comply.
4:01:32 PM
SENATOR KIEHL asked for the timeframe of the state's adjustment
process.
MR. REID clarified that the discussion was about New Jersey,
which began conversations about compliance as early as fall
2021. He noted that the state likely realized early on that its
funding reform wouldn't align with federal definitions of
compliance. While New Jersey ultimately became compliant after
making supplemental appropriations, he was unsure if those funds
came from state resources or if flexible federal funding was
used to meet compliance.
4:02:52 PM
MR. REID on slide 8 continued his testimony:
[Original punctuation provided.]
Over the last year and a half, the U.S. Department of
Education has been working with state education
agencies to resolve widespread compliance issues for
fiscal year 2022 and I believe proactively address
issues in fiscal year 2023.
As I mentioned earlier, the Department conducted
"technical assistance" calls with state agency staff
or engaged in formal, but often private correspondence
to work towards resolution.
As I understand the compliance process, state agency
staff would attempt to demonstrate compliance by
recalculating state data in ways that would better
match the requirements of the Maintenance of Equity
compliance tests.
In cases where new data runs did not sufficiently
resolve discrepancies between the state funding
formula and the federal calculations, the Department
would invite states to submit "small Local Education
Agency tolerance" proposals.
These proposals were invited in cases where enrollment
changes in small districts could have significant
impact on per-pupil state funding. According to
federal guidance, a state agency, "may propose to the
Department a written plan for a reasonable level of
tolerance when calculating whether it has maintained
equity for these LEAs."
The Department began sending out batches of compliance
notification letters during the fall of 2022. While
the letters did not directly affirm compliance, they
typically recognized a state's "ongoing commitment to
the maintenance of effort requirements."
Many letters did not include any background details as
to how compliance was ultimately determined, although
a few state letters contained specific details,
typically if a state had submitted a "small Local
Education Agency tolerance proposal.
4:04:36 PM
MR. REID on slide 8 continued his testimony:
[Original punctuation provided.]
As I mentioned before, the lack of formal waiver
process made it difficult for state representatives,
such as myself, to understand the true scope of state
issues and assess how consistently the Department was
applying the same rationale across states when
signaling compliance.
From the initial count of 41 to 42 states with
compliance issues, the Department later revealed that
at least six states were found compliant once the
Department calculated its final FY22 data instead of
the initial FY22 data it relied on when first
communicating noncompliance to states.
By late November 2022, I understand that a total of 13
states had demonstrated sufficient compliance with the
provision.
Over the course of the next year, from late 2022 into
fall 2023, the Department communicated batches of
final compliance letters to states on a month-to-month
basis, usually at a pace between two to four states a
month.
4:05:27 PM
MR. REID continued:
By the end October 2023, the Department communicated
to me that nine states had still not demonstrated
sufficient compliance.
By the end of 2023, four states remained, including
Alaska. Each of these states were considered by the
Department to have exhausted attempts to come into
compliance through their previously offered tolerance
proposals.
The Department sent letters requesting these states
make supplemental appropriations as remedy for the
funding discrepancies identified by the Maintenance of
Equity provision.
As I understand, by this point, at least five other
states had agreed to make supplemental appropriations
after being unable to resolve outstanding compliance
issues.
Some states made supplemental appropriations through
legislative action. Others were able to use funds
through the federal Coronavirus Relief Fund (CRF) or
State and Local Fiscal Relief Fund (SLFRF) after the
Department issued guidance in January 2023 that
permitted this.
4:06:27 PM
MR. REID on slide 8 continued his testimony:
[Original punctuation provided.]
In the December 2023 letter, Alaska was asked by the
Department to make supplemental appropriations of
nearly $8 million to three districts for FY 2022 in
order to comply with Maintenance of Equity.
However, that number changed when the Department sent
its most recent letter in March. The letter now asks
for over $22 million for two districts for FY 2022.
One of these districts was identified in the previous
letter, another was newly identified, and two other
districts included in the previous letter were dropped
entirely.
The total request for additional state appropriations
for FY 2022 and FY 2023 totals nearly $30 million.
To my knowledge, the Maintenance of Equity provision
is the first time the federal government has been
given a direct interest in state education finance
decisions.
The decision by the U.S. Department of Education to
apply this provision in the absence of overall state
funding cuts, without providing an opportunity for
states to seek waivers, has led to considerable
complications for states, and given the federal
government unprecedented influence over state
education finance decisions. Given the states' plenary
authority in education, this is an unusual and, in
some ways, extraordinary federal authority.
4:07:59 PM
MR. REID moved to slide 2 and continued his testimony:
[Original punctuation provided.]
To sum up, the Department's interpretation of the
Maintenance of Equity provision, as communicated in
guidance and understood though its compliance
processes, has been consequential in three key ways:
1. States were unable to make proactive decisions to
demonstrate
compliance with the provision. Compliance could only
be assessed after state education budgets were
allocated through state education finance formulas and
compared to federal calculations.
2. States experienced widespread compliance issues
that were not
the result of enacting spending cuts to education, but
rather were based in technical discrepancies between
state education finance formulas and the Maintenance
of Equity provision. The Maintenance of Equity does
not account for the variety of strategies that states
use to target funding to critical student populations.
3. States had limited or opaque pathways to seek full
relief from the provision.
While many states were able to demonstrate compliance
over multiple attempts, the compliance process often
lacked transparency and required considerable effort
by both state education agency staff and staff at the
U.S. Department of Education. To comply, some states
have been asked to make significant supplemental
appropriations that circumvented their state education
finance formula, even when they had already increased
overall spending on education.
I thank you for the opportunity to testify before this
committee and look forward to answering any questions
you may have.
4:09:14 PM
SENATOR GRAY-JACKSON acknowledged the complexity of the subject
matter and asked for clarification regarding flexibility and
waivers. She referenced the National Conference of State
Legislatures' (NCSL) position urging the federal government for
full waivers related to the maintenance of equity provision. She
requested specific examples where increased flexibility or
waivers could have mitigated compliance issues without
compromising the goals of the provision.
4:09:59 PM
MR. REID provided an example highlighting compliance challenges
with the maintenance of effort provision. He explained that the
provision required states to maintain education funding as the
same proportion of their budget as the previous year, allowing
for cuts without waivers. However, many states increased
education funding but not at the same proportion as their
overall budget increase in FY 2022-2023. This led to states
being considered out of compliance despite raising education
funding. He noted that Congress included specific instructions
for a waiver process, and the Department of Education granted
waivers favorably to states that increased education funding but
did not meet the proportional requirement. States continued
without consequences after receiving these waivers.
4:11:40 PM
MR. REID expressed the hope that the Department of Education
would provide wholesale exemptions for states that maintain or
increase education funding and promote equity, even if their
funding formulas differ from federal interpretations. He noted
that such states should not need to go through extensive
compliance reviews but instead receive exemptions from the
provision. He highlighted that a broad exemption was already
provided for the local maintenance of equity provision due to
its complexity, which was recognized after stakeholder feedback.
He suggested that if the same flexibility offered for the local
maintenance of equity and maintenance of effort waiver process
could be applied to the state portion, states distributing
funding equitably could be exempt from full compliance
calculations.
4:13:07 PM
CHAIR TOBIN asked for clarification, specifically inquiring if
the federal government had offered a waiver process to any state
regarding compliance with the maintenance of equity provision.
MR. REID replied that the federal government has been clear in
both guidance and private conversations that it does not believe
it has the authority to offer waivers for the maintenance of
equity provision. He referenced a July 2022 letter sent to 39
states, which explicitly stated there was no opportunity for
waiver flexibility. He offered to provide the letter to the
committee and emphasized that, due to the lack of waiver
authority, the department's compliance processes have been
complicated and prolonged as they seek flexibility without
offering exemptions.
CHAIR TOBIN asked if Alaska is the only state that has not moved
to comply for FY 2022.
MR. REID replied that is his understanding.
4:14:17 PM
SENATOR KIEHL acknowledged that his previous statement was
unclear and asked if the National Conference of State
Legislatures (NCSL) considered the tolerance plans for the
smallest districts to be laudable or problematic.
4:14:38 PM
MR. REID stated that the general hope is for the Department of
Education to provide states with maximum flexibility. The
National Conference of State Legislatures (NCSL) supports any
federal options allowing states to demonstrate that their
finance formulas align with the spirit of the provision,
particularly when funding for four states was increased. He
acknowledged that while the department has attempted to provide
flexibilities, there is a lack of transparency around what those
efforts always entail. However, NCSL did receive guidance
indicating some flexibility through small tolerance proposals,
which provided some transparency and flexibility for several
states.
4:15:28 PM
SENATOR KIEHL expressed concern, noting that Alaska's plan
appears to disregard some of the poorest and most struggling
school districts, which have a history of discrimination and
issues the maintenance of equity provision aims to address. He
specifically mentioned districts like Lake and Peninsula,
Kashunamiut, and Chathamsmall, remote, predominantly Alaska
Native, and low-income areas. He asked how this approach aligns
with the intent of the maintenance of equity provision.
4:16:15 PM
MR. REID suggested that the final numbers communicated by the
department may reflect outcomes from various tolerance proposals
that have already been offered and accepted for certain
districts. He speculated that over the past year or so,
compliance discussions may have led to certain flexibilities
already being factored in. However, there may be aspects of
Alaska's funding distribution that cannot accommodate further
flexibility, leading to the request for supplemental
appropriations. He explained that the department has provided
two main flexibilities: the small tolerance proposal and
recalculating data to see if it aligns with the provision. When
these options are exhausted, the department typically requests
supplemental appropriations. He noted that while there could be
other flexibilities at play, he was not aware of them.
4:17:59 PM
SENATOR KIEHL remarked that the situation sounded like a
colossal level of flexibility, approaching a waiver of the
provision's intent. He then asked whether it was typical for the
federal government to allow a state to use federal COVID relief
funds to meet the maintenance of equity requirements, as was
allowed in Alaska in January 2023. He questioned whether this
practiceusing federal funds to satisfy a requirement for
receiving additional federal fundswas a common or flexible
approach.
4:18:45 PM
MR. REID explained that in this case, it was not unusual for the
department to offer flexibility. He noted that the department
allowed states to draw from two funding sources for flexibility.
The first was the Coronavirus Relief Fund (CRF), part of the
CARES Act passed in March 2020, which provided fiscal relief for
states. While CRF funds could be used for pandemic response
efforts, they were explicitly prohibited from being used for
revenue replacement.
MR. REID noted that under the American Rescue Plan, Congress
passed a $350 billion State and Local Fiscal Relief Fund, with
approximately $195 billion allocated to states. While intended
for pandemic response and a wide variety of efforts, the
Department of Treasury later ruled that states could use the
funds for revenue replacement. He stated his belief that this
was inconsistent with the original congressional intent behind
the creation of the fund. This ruling provided states with
significant flexibility in using these funds.
4:20:05 PM
MR. REID noted that under the American Rescue Plan, Congress
passed a $350 billion State and Local Fiscal Relief Fund, with
approximately $195 billion allocated to states. While intended
for pandemic response and a wide variety of efforts, the
Department of Treasury later ruled that the funds could be used
by states for revenue replacement, which MR. REID believed was
inconsistent with the original congressional intent behind the
creation of the fund. This ruling provided states with
significant flexibility in using these funds.
4:21:22 PM
MR. REID noted that the timing of the January 2023 guidance was
significant, as it came after the state obligation date for the
first Coronavirus Relief Funds, but still within the obligation
period for the State and Local Fiscal Relief Funds. He stated
his belief that the obligation deadline is September 30, 2024,
and can be spent through 2026. He pointed out that most states
had already appropriated these funds in previous budget
processes, meaning that while adjustments could be made, many of
the funds were likely already accounted for. He acknowledged
that it was somewhat unusual for federal funds to be used to
comply with other federal policies, but NCSL believes this was
the congressional intent. He also noted that the Department of
Treasury's interpretation allowed these funds to be used to
offset state revenue reductions or as now interpreted, to comply
with other federal policies.
4:22:35 PM
CHAIR TOBIN stated her intent to ask Mr. Bell about whether
there are remaining federal funds to help Alaska move into
compliance.
4:22:52 PM
SENATOR GRAY-JACKSON asked for assistance in brainstorming
different approaches for Alaska to address its current
noncompliance with the maintenance of equity provision. She
highlighted the complex interaction between Alaska's state
education finance strategy and federal calculations and sought
suggestions that would respect Alaska's unique challenges while
maintaining equitable funding.
4:23:34 PM
MR. REID stated that he does not know Alaska's finance system
well enough to provide specific advice but emphasized the
importance of understanding the federal calculations behind the
noncompliance. He suggested that the federal government is
essentially overlaying its own policy on top of Alaska's funding
formula, creating gaps. He encouraged Alaska to seek out the
data and details of what the federal government is identifying,
and recommended investigating whether the differences are
arbitrary or a priority of important to Alaska.
SENATOR GRAY-JACKSON replied the response was "good enough."
4:25:06 PM
CHAIR TOBIN explained that for transparency, the committee has
requested all communications between the Alaska Department of
Education and Early Development and the federal government to
review the documents thoroughly. She also mentioned that the
U.S. Department of Education committed to providing its
communications with the state. Comparing the documents will
determine the best path forward. She acknowledged concerns and a
letter from the U.S. Department of Education highlighting Alaska
is the only state not in compliance. She emphasized the
importance of meeting Alaska's constitutional obligation and
expressed worries about straining the state's relationship with
federal partners.
4:26:33 PM
MR. REID expressed his willingness to provide background
information on the [U.S.] Department of Education's enforcement
mechanisms, including details on what "high risk" status might
entail. He thanked the committee for inviting him, acknowledged
the complexity of the topic, and hoped to assist in ongoing
discussions.
4:27:08 PM
CHAIR TOBIN invited Mr. Bell to the dais.
4:27:27 PM
CONOR BELL, Fiscal Analyst, Legislative Finance, Legislative
Affairs Agency, Juneau, Alaska, introduced himself.
4:27:39 PM
CHAIR TOBIN referenced Mr. Reid's statement about a provision in
the guidance allowing the use of remaining federal relief funds
to meet compliance. She inquired whether Alaska still had those
funds available and what the state's options are to address the
situation.
4:27:56 PM
MR. BELL stated that Alaska currently has roughly $3 million in
unallocated Coronavirus State and Local Recovery Funds, which
falls far short of the $29 to $30 million needed to meet
compliance. He mentioned that the $3 million is included in the
governor's budget, with a proposal to reappropriate it for the
Department of Corrections. However, as it stands, that $3
million remains available from the relief funds.
4:28:31 PM
CHAIR TOBIN expressed hope that further clarity could be
provided on how Alaska's hold harmless provision may have
impacted the state's maintenance of equity compliance. She noted
that this was a point raised by Mr. Reid and sought to
understand how the provision might have influenced the federal
calculations.
4:28:48 PM
MR. BELL explained that Alaska's hold harmless provision is
designed to protect school districts from significant funding
losses due to large drops in enrollment. During the pandemic,
many students in districts like Anchorage shifted from in-person
learning to correspondence programs, causing drops in
enrollment. Over time, through a series of step-downs, the hold
harmless provision limited how much funding could decrease. By
FY 2022, enough reduction occurred to affect funding levels.
Additionally, even though students moved to correspondence
programs, they were still funded at the regular correspondence
rate, adding to the hold harmless provision's impact.
4:30:05 PM
SENATOR STEVENS asked what options were available to resolve the
conflict between Alaska's stance and the federal Department of
Education. He noted that the state believes it has acted
correctly and is not required to return any funds, while the
federal department insists that Alaska owes money. He sought
clarity on possible pathways to resolve the disagreement.
4:30:33 PM
MR. BELL stated that resolving the issue involves policy
decisions beyond his purview but outlined three main options:
the legislature could choose to appropriate additional funds,
regardless of the federal requirement; the governor's office
might decide to request supplemental funding; or the Alaska
Department of Education and the U.S. Department of Education
could reach a new agreement different from the current stance.
He did not comment on the likelihood of any specific option.
SENATOR STEVENS acknowledged the challenging situation,
expressing that the state would likely need to fund the
requirement one way or another, despite the already difficult
budget circumstances. He noted that the outcome remained to be
seen.
4:31:35 PM
SENATOR KIEHL asked for clarification on the federal
government's compliance requirement, questioning whether it
involved returning the funds to the federal government or
directing the money to school districts.
MR. BELL clarified that the $30 million in question would be
distributed to specific school districts. While the U.S.
Department of Education has the authority to revoke around $200
million in ESSER (Elementary and Secondary School Emergency
Relief) funding as a potential consequence, it has not yet
indicated that it would take this step. The additional
appropriation being requested is intended for school districts,
not as a payment to the federal government.
4:32:30 PM
SENATOR KIEHL opined that the legislature would likely aim to
avoid any scenario where $200 million could be clawed back from
school districts. He asked for information on the updates and
guidance that the nonpartisan legislative finance division had
received from the executive branch regarding the state's
obligations and options. He referenced Mr. Reid's mention of
guidance from January 2023 about compliance opportunities and
inquired when the legislature first became aware of these issues
to allow for budget planning.
4:33:06 PM
MR. BELL stated his belief that it was perhaps late last summer.
SENATOR KIEHL asked if it was after the last legislative
session.
4:33:27 PM
MR. BELL replied someone else in the [Legislative Finance]
office may have had information, but he was not aware of it.
SENATOR KIEHL asked whether there was any indication at that
time of the scope of the noncompliance, including ballpark
figures, order of magnitude, or timeframes related to the issue.
4:34:03 PM
MR. BELL explained that the initial estimate for noncompliance
was much lower, around $9 million, based on the department's
early calculations. This estimate increased significantly to $30
million after the U.S. Department of Education advised the state
to include the hold harmless provision in its calculations.
4:34:34 PM
SENATOR KIEHL whether the December letter from the U.S.
Department of Education, indicating an amount just under $8
million, aligned with the earlier $9 million estimate or if it
raised concerns about the figure.
4:34:57 PM
MR. BELL asked Senator Kiehl to repeat the question.
SENATOR KIEHL stated his belief that the first letter from the
U.S. Department of Education was in January, with three school
districts, at a total first year cost of about $7.8 million.
4:35:19 PM
MR. BELL replied that amount seemed correct, and he stated his
belief there was possibly around a million dollars in FY 23.
4:35:29 PM
CHAIR TOBIN noted that, according to Mr. Reid's testimony, he
and others in his agency had requested that the U.S. Department
of Education and local agencies communicate with additional
education stakeholders. She pointed out that this communication
did not occur, leaving many involved in education policy unaware
of the issue until the December 2022 letter. She also mentioned
that Mr. Reid had indicated there was a letter sent to districts
in July 2022, which the department had previously believed to be
erroneous. She stated that the department would be present at a
future meeting to help clarify the timeline of communications.
4:36:26 PM
SENATOR GRAY-JACKSON stated that the department has until
Saturday to respond to the federal government and plans to send
a letter on Friday. The department suggested delaying any
discussion of an appropriation until after the letter is sent.
She asked for an opinion on whether this approach was advisable
and the best way to handle the situation.
4:36:53 PM
MR. BELL apologized and stated that he could not advise on
whether delaying an appropriation discussion was advisable,
noting that the amount in question was still under dispute. He
indicated that he could not provide a definitive answer either
way.
4:37:10 PM
SENATOR STEVENS asked for clarification on the compliance issues
for 2022 and 2023, noting that the state seemed to be out of
compliance in different ways for each year. He requested a
breakdown of the differences, and the respective dollar amounts
for those two years to better understand the situation.
4:37:33 PM
MR. BELL explained that the amounts owed for FY 2022 are
significantly larger than for FY 2023. For FY 2022, Anchorage
School District owes approximately $15 million, and Kenai
Peninsula District owes $7.2 million. For FY 2023, the total
amount is around $6-7 million, with the largest amounts being $3
million for Fairbanks, $2.5 million for Kenai, $1.4 million for
Anchorage, and $200,000 for Juneau School District. He noted
that the FY 2022 amounts are more urgent, as nearly all other
states have already addressed their obligations, while the FY
2023 amounts will become due relatively soon.
4:38:57 PM
SENATOR STEVENS asked whether the reasons for noncompliance
differed between FY 2022 and FY 2023.
4:39:03 PM
MR. BELL indicated that the reasons for noncompliance in FY 2023
are likely similar to those in FY 2022, primarily related to the
step-down of the hold harmless provision. He explained that for
most districts in FY 2023, the comparison is between FY 2022 and
FY 2023 funding levels, while for high-poverty districts, the
comparison is between FY 2019 and FY 2023. Although the
calculation method is the same, using different base years
results in varying amounts owed for FY 2023.
4:39:41 PM
SENATOR KIEHL asked for an estimate of how much more the state
would have owed if the U.S. Department of Education had not
allowed the exclusion of 15 poor rural school districts in year
one and more than 20 school districts in year two from the
compliance calculations.
4:40:01 PM
MR. BELL stated that he did not have the exact number available
but offered to make a best guest estimate and provide it to the
committee if needed.
CHAIR TOBIN expressed appreciation and requested he send the
estimate to her office for distribution to the committee.
4:40:16 PM
SENATOR BJORKMAN noted that DEED recently stated that if the
hold harmless provision were removed, the shortfall for
maintenance of equity would be around $400,000 to $500,000.
However, it was previously mentioned that the figure was closer
to $9 million. He asked if there was any information about the
discrepancy between the calculations from legislative finance
and the Department of Education's figures.
4:41:09 PM
MR. BELL clarified that other changes contributed to the shift
from the initial $9 million estimate to the current $30 million
estimate. These changes included adjustments to the calculation
for high-poverty and high-need school districts, such as
changing the base year. Additionally, Juneau School District was
no longer classified as a high-need or high-poverty district,
leading to a significant reduction in the amounts owed. While
the hold harmless provision was the main factor driving the
increase, these recalculations also impacted the estimates by
reducing the amounts in some areas.
4:42:05 PM
SENATOR BJORKMAN asked for the total dollar amount the state
would need to disburse to school districts to achieve compliance
if the hold harmless provision were excluded from the base year
calculation.
4:42:29 PM
MR. BELL restated the question and said he did not have the
exact amount available. However, he offered to provide a best
guess estimate for the committee.
4:42:55 PM
SENATOR BJORKMAN asked whether he believed the state would
succeed in its effort to remove the hold harmless provision from
being considered as an additional funding amount in the base
year calculation.
4:43:21 PM
MR. BELL stated that he could not directly comment on the
likelihood of the state prevailing in its effort to remove the
hold harmless provision. However, he noted that, according to
the U.S. Department of Education, no other states have been
granted an exemption, and all have included hold harmless
funding in their calculations.
MR. REID said he could not speak to the question.
4:43:51 PM
CHAIR TOBIN informed committee members that they could submit
written questions to the U.S. Department of Education, which
will provide written responses that can be made public. She
encouraged members to send questions to the office if answers
could not be obtained from Mr. Reid or Mr. Bell. She mentioned
that she had questions regarding proposed tolerance levels,
noting that one state had chosen to eliminate all tolerance
levels and increase funding for all districts to ensure
equitable allocation. She emphasized that various options exist
for achieving compliance, including the possibility of providing
resources to every school district, not just selected ones.
4:44:50 PM
CHAIR TOBIN emphasized that Alaska remains the only state not in
compliance with the maintenance of equity requirement and is
facing unique stipulations from the federal government. She
reaffirmed the committee's commitment to ensuring that every
student in Alaska receives a quality education every day.
4:47:03 PM
There being no further business to come before the committee,
Chair Tobin adjourned the Senate Education Standing Committee
meeting at 4:47 p.m.
| Document Name | Date/Time | Subjects |
|---|---|---|
| Maintenance of Equity Austin Reid Presentation 04.3.2024.pdf |
SEDC 4/3/2024 3:30:00 PM |
Education |
| Maintenance of Equity Austin Reid Testimony 04.03.2024.pdf |
SEDC 4/3/2024 3:30:00 PM |
Education |
| DEED Maintenance of Equity Letter to the Alaska State Legislature 04.01.2024.pdf |
SEDC 4/3/2024 3:30:00 PM |
Education |
| DOE Maintenane of Equity Letter to DEED 03.27.2024.pdf |
SEDC 4/3/2024 3:30:00 PM |
Education |
| DEED Maintenance of Equity Letter to USDOE 03.22.2024.pdf |
SEDC 4/3/2024 3:30:00 PM |
Education |
| DOE Maintenance of Equity Letter to DEED 03.18.2024.pdf |
SEDC 4/3/2024 3:30:00 PM |
Education |
| DOE Maintenance of Equity Letter to DEED 12.22.2023.pdf |
SEDC 4/3/2024 3:30:00 PM |
Education |
| DOE Maintenance of Equity FAQs 01.23.2024.pdf |
SEDC 4/3/2024 3:30:00 PM |
Education |
| DOE Maintenance of Equity response to DEED - Alaska small LEA tolerance proposal 10.04.2023.pdf |
SEDC 4/3/2024 3:30:00 PM |
Education |