1. 1 FEDERAL STIMULUS BILL General Overview Impact of Specific Provisions Minnesota Department of Education February 18, 2009

2. 2 State Fiscal Stabilization Fund General Overview: $53.6 billion available to states Approximately $821.4 million available to the state of Minnesota (this is an estimate only). Distribution to states: 61% is based on a state’s relative population of individuals aged 5-24 and 39% is based on the relative total population. Governor must allocate 81.8% of the state’s allocation for the support of “elementary, secondary, and postsecondary education and, as applicable, early childhood education programs and services.”

3. 3 State Fiscal Stabilization Fund Governor must use the funds first to: 1. Restore in FY 2009, 2010 and 2011 the level of state support to K-12 education to the greater of FY 2008 or FY 2009. 2. Allow existing State funding increases to support elementary and secondary education for FY 2010 and FY 2011 to be implemented if such funding increases were enacted pursuant to state law prior to October 1, 2008. 3. Provide in FY 2009, 2010, 2011, the amount of funds to public institutions of higher education in the State that is needed to restore State support for higher education to the greater of FY 2008 or FY 2009 level. (This excludes tuition and fees paid by students.)

4. 4 State Fiscal Stabilization Fund If the Governor determines that amount of funds to cover #1-3 is insufficient, the allocation of #1-3 is proportionate to the relative shortfall in State support as described in #1-3. After carrying out #1-3, remaining funds (if any) are provided to Local Educational Agencies (LEAs) based on their relative shares of funding under Title I, part A of the Elementary and Secondary Education Act.

5. 5 State Fiscal Stabilization Fund Allowable Uses by Local Education Agencies include any activities under: –Elementary and Secondary Education Act –Individuals with Disabilities Education Act –Carl D. Perkins Career and Technical Education Act –Modernization, renovation or repair of public school facilities, including modernization, renovation, and repairs that are consistent with a recognized green building rating system.

6. 6 State Fiscal Stabilization Fund Prohibitions on Funding for K-12 Education: –Payment of maintenance costs –Stadiums or other facilities primarily used for athletic contests or exhibitions or other events for which admission is charged to the general public –Purchase or upgrade of vehicles; or –Improvement of stand-alone facilities whose purpose is not the education of children, including central office administration or operations or logistical support facilities.

7. 7 State Fiscal Stabilization Fund The Governor must submit an application to the Secretary of Education. In the application, the Governor must assure: –Maintain effort for elementary and secondary education in FY 2009, 2010 and 2011 at least at such level as FY 2006. –Maintain effort for higher education in FY 2009, 2010 and 2011 for public institutions of higher education at least at such level as FY 2006. –Improve achieving equity in teacher distribution under ESEA section 1111(b)(8)(C). –Improve collections and use of data under America COMPETES Act section 6401(e)(2)(D).

8. 8 State Fiscal Stabilization Fund In the application, the Governor must assure (continued): –Enhance the quality of statewide assessments and comply with rules related to inclusion of children with disabilities and limited English proficient students in statewide assessments and provide necessary accommodations. –Improve State academic content standards and student academic achievement standards consistent with section 6401(e)(1)(9)(A)(ii) of the America COMPETES Act. –Ensure compliance with section 1116(a)(7)(C)(iv) and 1116(a)(8)(B) of ESEA and support schools in need of improvement.

9. 9 State Fiscal Stabilization Fund Clarification is needed on definition of “State Support” for MOE calculation: If calculations are done using aid entitlements or appropriations excluding shifts, MN exceeds MOE requirement each year by over $500 million If calculations are done using appropriations including shifts, MN exceeds MOE requirement by only $23 million in FY 2010 under current law, and falls short of MOE by $1.176 billion under current Governor’s recommendation –FY 2006 base inflated by $607 million for shift paybacks –FY 2010 Governor’s recommendation based on November forecast reflects $1.252 billion shift reduction

10. 10 State Fiscal Stabilization Fund Maintenance of Effort Waiver Eligibility Criteria: State or local educational agency must have experienced a precipitous decline in financial resources. State maintains education spending as a percentage of state budget from the preceding fiscal year. Waiver: If eligible, a state or local education agency may treat any funds received under the State Fiscal Stabilization Fund as non-federal funds for MOE requirements for one year only.

11. 11 State Fiscal Stabilization Fund State Incentive Grants $4.350 billion available for states (Secretary of Education may reserve 1% for administration). Governor submits application to the Secretary of Education Each state receiving a state incentive grant must use at least 50 percent of the funding to provide LEAs with sub-grants based on the Title I, part A formula

12. 12 State Fiscal Stabilization Fund State Incentive Grants Secretary of Education will distribute grants to states that have made significant progress in meeting: –Improve achieving equity in teacher distribution under ESEA section 1111(b)(8)(C). –Improve collections and use of data under America COMPETES Act section 6401(e)(2)(D). –Enhance the quality of statewide assessments and comply with rules related to inclusion of children with disabilities and limited English proficient students in statewide assessments and provide necessary accommodations. –Improve State academic content standards and student academic achievement standards consistent with section 6401(e)(1)(9)(A)(ii) of the America COMPETES Act. –Ensure compliance with section 1116(a)(7)(C)(iv) and 1116(a)(8)(B) of ESEA and support schools in need of improvement.

13. 13 State Fiscal Stabilization Fund Innovative Fund Secretary of Education may reserve up to $650 million to establish an Innovative Fund to recognize eligible entities. Eligible entities: –Local education agency or –Partnership between a nonprofit organization and either one or more local education agencies or a consortium of schools.

14. 14 State Fiscal Stabilization Fund Innovative Fund The Secretary must award entities that have: –made significant gains in closing the achievement gap; –exceeded the State’s annual measureable objectives for two or more years or have demonstrated success in significantly increasing academic achievement for all groups of students; –made significant improvement in other areas, such as graduation rates or increased recruitment and placement of high quality teachers and school leaders as demonstrated by meaningful data; and –demonstrated that they have established partnerships with the private sector and the private sector will provide matching funds in order to bring initiatives to scale.

15. 15 State Fiscal Stabilization Fund The work from the Innovation Fund must: –Allow eligible entities to expand their work and serve as models for best practices –Allow eligible entities to work in partnership with the private sector and the philanthropic community –Identify and document best practices that can be shared and taken to scale

16. 16 Elementary and Secondary Education Act Funding Title I, Part A funding: $87 million (est.) –Formula based on census data Title II, part D funding: $5.8 million (est.) –Competitive to local school districts and used to enhance technology in schools McKinney Vento funding: $612,000 (est.) –Competitive to local school districts and based on number of homeless students in 2007-08 School Improvement funding: $27.2 (est.) –Competitive to local school districts and assists schools in need of improvement

17. 17 Federal Special Education Funding Education for All Handicapped Children Act of 1975 (P.L. 94-142) –FAPE a legal right for all children with a disability –Authorized federal funding for up to 40% of national average excess cost of special ed Reauthorized in 1991,1997 and 2004 as IDEA

18. 18 Federal Special Education Funding FY 2009 Allocations to Minnesota: –Part B, Section 611 (3-21) $180.4 Million –Part B, Section 619 (3-5) $ 7.3 Million –Part C (Birth – 2) $ 7.0 Million

19. 19 Federal Special Education Funding New Allocations under Economic Stimulus Bill Two-Year Total - FY 10 + FY 11 ($ millions): U.S.Total MN (Est) –Part B, Sec 611 $ 11.3 Billion $189.8 million –Part B, Sec 619 $ 400 Million $ 3.2 million? –Part C $ 500 Million $ 5.8 million

20. 20 Federal Special Education Funding Standard Rules for Use of IDEA Funds Apply To Increase in IDEA Funding Under Economic Stimulus Bill Funds Must be Used for Excess Cost of Special Education Maintenance of Effort (50% rule) Tydings Amendment (27 months to Obligate)

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22. 22 Federal Special Education Funding Part B, Section 611 3 part formula for allocating funds to LEAs: Base Funding – –$55.1 million (FFY 99 funding level) – allocated based on 1998 child count –for districts with newly opened, closed or significantly expanded charter schools, dollars are reallocated within district based on current year child count

23. 23 Federal Special Education Funding Part B, Section 611 Increase over Base ($108.8 million) is allocated: 85% on Total PK-12 enrollment –(October 1 MARSS + nonpublic enroll) –$92.5 million 15% on Poverty (Free and Reduced lunch count) –$16.3 million

24. 24 Federal Special Education Funding New Part B, Section 611 Funding $94.5 million per year for 2 years The portion allocated to LEAs would be distributed 85% based on total PK-12 enrollment, and 15% based on poverty

25. 25 Uses of Federal Funds Can only be used to pay the excess costs of providing special education Must be used to supplement not supplant state and local funds

26. 26 Uses of Federal Funds Staff Contracted Services Staff Development Supplies Equipment Early Intervening Services (15%) Cannot be used to cover unreimbursed cost for staff funded with state categorical funds

27. 27 Requirements for Federal Funds Maintenance of Effort: State-level maintenance of effort –Additional Federal $ do not reduce State’s obligation to maintain effort –State-level special education spending cannot be reduced below prior year level to offset increase in federal special education funding –MDE calculates based on: 100% of State Aid Entitlement + Direct SP Ed Expenditures by state agencies (e.g., Academies) LEA maintenance of effort –50% rule Applies

28. 28 Requirements for Federal Funds LEA Maintenance of Effort Exceptions: 50% Rule – LEAS may treat up to 50% of the increase in IDEA Part B funds over the previous year as local funds – This reduces MOE requirement for one year only – Interconnected with 15% for EIS provision

29. 29 Requirements for Federal Funds 50% Rule Example: FY 09 FY 10 FY 11 FY 12 Federal funds: 200 300 300 200 50% of Incr in Fed 50 -- -- State & local funds (min. for MOE) 1,000 950 1,000 1,000 LEA can treat $50 as local (e.g., supplant state $ with federal $) in FY 10 only

30. 30 Requirements for Federal Funds Early Intervening Services - 15% Rule – LEAs may use up to 15% of IDEA Part B funds, less any amount used for 50% rule, for EIS. – For students in K-12 not identified as needing special education services but who need additional academic and behavioral support to succeed in a general education environment

31. 31 Requirements for Federal Funds LEA Maintenance of Effort Exceptions: Decrease in enrollment of children with disabilities Change in status of a high-cost student Elimination of one-time expense (e.g., major equipment purchase) Voluntary departure or departure for just cause of staff while maintaining FAPE

32. 32 Requirements for Federal Funds Under the Tydings Amendment: funds must be obligated within 27 months and expended within 30 months –Example: funds becoming available in SFY 2010 must be obligated by Sept. 30, 2011, and expended by December 31, 2011.

33. 33 Other Funding Head Start: $20.6 million (est) to Minnesota –Funding flows directly to local providers Impact Aid: $100 million to states –Eligible entities apply for funding

34. 34 New Reporting Requirements New reporting requirements include: –Use and distribution of funds –Number of jobs saved or created –Tax increases averted because of funds –Progress in reducing inequity in the distribution of highly qualified teachers, implementing state longitudinal data system, developing valid and reliable assessments for ELL students and students with disabilities –Tuition and fee increases imposed and any actions taken to limit increases to students

35. 35 New Reporting Requirements Continued New reporting requirements continued: –Extent to which public institutions of higher education maintained, increased or decreased enrollment of in-state students including students eligible for financial aid –Description of each modernization, renovation and repair project funded, which must include amounts awarded project costs

36. 36 Department Staff Lisa Mueller Program Finance 651-582-8225 or lisa.mueller@state.mn.uslisa.mueller@state.mn.us Chas Anderson Deputy Commissioner 651-582-8207 or chas.anderson@state.mn.us Tom Melcher Director, Division of Program Finance 651-582-8828 or tom.melcher@state.mn.us