NCD urged to support recission of OSEP LEA MOE guidance

Public comment to the National Council on Disability

December 8, 2011

Submitted by Candace Cortiella, Director, The Advocacy Institute and
Kathleen B. Boundy, Co-director of the Center for Law and Education

How IDEA Federal Funding Anomalies and Policy Shifts
Threaten FAPE for Students with Disabilities

The delivery of a free appropriate public education (FAPE) to the nation’s 5.8 million school-age students with disabilities is being seriously threatened by a series of unrelated events about to converge. Specifically, these are (1) the long-term consequences of the unprecedented one-time spike in IDEA federal appropriations caused by the American Recovery and Reinvestment Act (ARRA), (2) the sequestration triggered by the failure of the Joint Select Committee on Deficit Reduction to develop a plan for deficit reduction requiring  $1.2 trillion in automatic across-the-board budget cuts to go into effect starting in January 2013, and (3) a new and legally flawed interpretation  of the IDEA requirement governing local maintenance of effort (MOE)  reflected in informal guidance issued by the Office of Special Education Programs (OSEP) at the U.S. Department of Education in June 2011.

1. Long-term consequences of the unprecedented one-time spike in IDEA federal appropriations caused by the American Recovery and Reinvestment Act (ARRA)

Despite continued advocacy for additional federal funding for local educational agencies (LEAs) in the annual federal budget process, appropriations for the Individuals with Disabilities Education Act remain at about half of the authorized amount (i.e., 40% of the annual per pupil expenditure or APPE)(see chart below). However, the amount of annual federal appropriations for IDEA has never decreased from one year to the next.

However, the ARRA infused $11.3 billion in additional IDEA federal funding in 2009, essentially doubling that year’s federal funds to LEAs. While well-intended, this one-time spike in IDEA federal funding has important long-term consequences. Among them:

  • The increase in IDEA funding in 2009 triggered a little-used provision in IDEA that allows LEAs to reduce their local and state funds spent on special education by up to 50% of the amount of any increase in federal funds from one year to the next. According to data submitted to the U.S. Dept. of Education in response to a new data collection instituted after ARRA, LEAs reduced local spending on special education under this IDEA provision by $1.5 billion (see state-by-state summary). LEAs that reduced their level of expenditure on special education under this exception to the local ‘maintenance of effort’ rule, can legally remain at the reduced level in subsequent years  so long as they are able to provide FAPE to their eligible children with disabilities.   As illustrated in “Understanding the Impact of Recovery Act Funds, Annual Federal Funds and IDEA Provisions Over Time”  an LEA that took full advantage of the IDEA 50% rule in 2009 will end up spending less on special education in subsequent years than it had in the fiscal year prior to the ARRA-IDEA windfall.
  • Even for LEAs that did not reduce local spending in 2009 (either by choice or because they were not eligible to do so), the drop in available Federal funds (and in some cases State funds, if waivers have been granted by ED) is being felt. Some LEAs used ARRA funds to hire extra staff, that now must be let go. This “funding cliff” will be felt more severely than anticipated when ARRA was enacted since IDEA funding has not increased in subsequent years (2010, 2011), and will most likely remain level or decline slightly in 2012.

2. Sequestration triggered by the failure of the Joint Select Committee on Deficit Reduction to develop a plan for deficit reduction requiring  $1.2 trillion in automatic across-the-board budget cuts to go into effect starting in January 2013.

Cuts to the federal budget required by sequestration will have a dramatic impact on education funding. The NEA has estimated that the reduction to IDEA in 2013 will be approximately $900 million. (Funding for Title I will be cut by $1.1 billion. Some 2.5 million IDEA-eligible students also receive services under Title I programs.) (See NEA’s impact projections here.)

The sharp decline in IDEA federal funding anticipated to be brought about by sequestration will force LEAs to either reduce services beyond what is needed to provide FAPE to students with disabilities or supplement the shortfall with local funds—something unlikely to happen given continuing effects of the recession and the “lag time” between economic recovery in general and the effects, particularly in revenue, felt by state and local governments.

Already LEAs are feeling the pinch of reductions to state funding for education, as evidenced by a December 1, 2011 letter to OSEP by the Survival Coalition of Wisconsin Disability Organizations.

3. Potentially untenable consequences from legally flawed interpretation of  the local maintenance of effort (MOE) provisions of IDEA  in informal guidance issued by the Office of Special Education Programs (OSEP).

Under IDEA’s local maintenance of effort (MOE) requirement each LEA must spend at least as much from local and state funds in the current year as it spent on special education costs in the preceding year unless the LEA can demonstrate that the reduction is spending is attributable to  one of  two types of circumstances specified in the law.  One type includes, e.g., when a senior, highly paid special educator retires and is replaced by a qualified but younger, lower salaried teacher; the other type is as in the case of the ARRA funds, when an increase in federal funding  triggers the ‘up to 50% rule’(described above.  Only when a school district can demonstrate that its reduced level of local expenditures is attributable to either of these two types of exceptions may the LEA lawfully reduce its local MOE. When an LEA reduces it local level of MOE per one of the limited exceptions, its MOE level remains at the reduced level in subsequent years (unless it is voluntarily increased by the LEA). State educational agencies (SEAs) are required to monitor annually their LEAs’ MOE. An LEA that fails to maintain MOE consistent with IDEA puts in jeopardy its eligibility for future IDEA federal funding. (See MOE Basics for more information.)

However, in a June 16, 2011, response to an inquiry from the National Association of State Directors of Special Education (NASDSE), the Office of Special Education Programs (OSEP), U.S. Department of Education (USED), issued a policy interpretation purportedly about the local MOE of an LEA that failed to maintain its level of special education expenditures from local and state funds and could not justify a reduction attributable to either type of exception expressly set forth in IDEA, i.e., an LEA that as described, was in violation of its local MOE mandate and should rightfully be subject to review by the SEA for failing to meet the critieria for eligibility for Part B funds under IDEA.

USED in its response notes the IDEA does not contain a specific provision addressing this circumstance and states “…the Department must rely on the plain language of the statute and regulation…which provide that an LEA may not reduce its level of expenditures…below the level of those expenditures for the preceding fiscal year.” The letter continues, “It [the LEA] is not obligated to expend at least the amount it expended in the last fiscal year for which it met the maintenance of effort requirement. In other words, each year’s LEA maintenance of effort obligation is based on the amount expended in the immediate prior fiscal year.”

An LEA that fails to meet the MOE requirement is only required to expend from local and state funds the amount it expended in the immediate prior fiscal year. For example, if an LEA expended $650,000 from local and state funds in FY 2009 and only $600,000 in FY 2010 (without meeting any of the provisions for an allowable reduction) it failed the MOE requirement by $50,000.

In a detailed letter-memorandum, the Center for Law and Education concludes the USED guidance is “inconsistent with the legislative history of P.L. 94-142 and the local MOE statutory provision, and is contrary to basic tenets of statutory construction and contract law,” adding that “Given the current economic burden on school districts, OSEP’s flawed interpretation is especially inopportune; it can be anticipated that LEAs will transgress the statutory prohibition against reducing their local MOE outside of the expressly authorized exceptions (§613(a)(2)(A)(iii)) as a means of lowering their MOE in subsequent fiscal years resulting in further harm to the education of the nation’s 5.8 million children with disabilities in need of special education.”

The June 16, 2011 informal guidance from USED has spawned an avalanche of letters to both OSEP and members of Congress. A compilation of these communications is available here.

Taken individually, any one of these events poses a serious threat to LEAs providing meaningful FAPE for our nation’s special education students. Taken together, they seem destined to converge to form the single most important issue facing special education today.

However, one of these issues is certainly within all our capacity to rectify.

We ask the National Council on Disability to use its proven leadership to seek USED’s recission of the flawed interpretation of the  informal guidance.  We ask you to join us in communicating our shared concerns to USED and taking such additional steps as NCD is prepared to take, to resolve this serious matter.

We appreciate the opportunity to provide NCD with these comments.

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