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Sequestration Goes into Effect

The following information was sent from the Texas Education Agency to the Grants Listserv:

 

News from the Office of Grants and Federal Fiscal Compliance

Sequestration Goes into Effect

On Friday, March 1, 2013, President Obama signed an order putting into effect the automatic across-the-board cuts to the federal budget known as the sequester.

The following text is taken from testimony provided to the House Subcommittee on Budget Transparency and Reform on February 25, 2013. That testimony is also available online, from a link in the Chief Grants Administrator section of the Grants page of the TEA website.  (http://www.tea.state.tx.us/index2.aspx?id=25769803789)

Mostly No Retroactive Cuts

Most federal education programs are forward- or advance-funded, meaning the state receives the majority of the federal fiscal year funding on July 1, at the end of the federal fiscal year for use primarily in the following fiscal year. USDE has reported that forward-funded programs will not be retroactively cut back to the October 1 beginning of the federal fiscal year, but will take the full reduction from the July 1 allocation. What this means for LEAs is that their school year (SY) 2012-2013 entitlements will not be reduced mid-year, but rather the full reduction will be taken from their SY 2013-2014 entitlement amounts.

However, some local educational agencies (LEAs) receiving direct grants from USDE, such as Impact Aid programs, will start seeing federal reductions as quickly as USDE is able to calculate the reductions to grantees.

Projected Amount of Reductions

Many education groups following the sequestration process are calculating the estimated potential impact of the reductions. USDE has used an estimated impact of 5% while other groups have calculated reductions of 5.1% to 5.3%, which due to the two month postponement of the sequester is less than prior estimates of 8.2% reductions.

Since Congress has not yet completed work on appropriations for fiscal year 2013, TEA can only model data based on federal fiscal year 2012 data. Actual reductions will differ slightly once federal fiscal year 2013 appropriations are finalized. The Office of Management and Budget (OMB), which has responsibility at the federal level for determining the actual percentage of the reductions, will release the amount and percentage of reductions required by the Budget Control Act. This process is expected to take at least 30 days.

Potential Impact

For discussion purposes, the state’s largest federal programs demonstrate the potential impact on LEAs.

·         ESEA, Title I allocation could be reduced by $67-71 million depending on a 5.0% or 5.1% reduction.

Based on a 5.1% reduction,

·         The Individuals with Disabilities Education Act (IDEA, Part B) allocation is expected to be reduced by approximately $50 million.

·         The ESEA, Title III, Part A—English Language Acquisition allocation is expected to be reduced by approximately $5.2.

·         The Perkins Career and Technical Education allocation is expected to be reduced by approximately $4.5 million.

Planning for Next Year

One of the largest concerns for LEAs (school districts and open-enrollment charter schools) is the need for more information to be able to plan for next year’s staffing, services, and program budgets. Also of concern to states and LEAs are the impact on the sequestration reductions on federal maintenance of effort (MOE) and supplement, not supplant requirements at both the state and/or local levels.

Currently, TEA has only modeled a 10% reduction (based on earlier projected reductions). However, for some programs with hold-harmless provisions, such as Title I, Part A, in the statutory formula this 10% model suggests the “worst case” scenario. In Title I, Part A statute, the hold-harmless provision applies to state appropriations as well as LEA entitlement calculations. The LEAs that by the data are at or below the hold-harmless amounts must be guaranteed the hold-harmless amount while the LEAs above their hold-harmless amount actually have the sequester reductions taken from their allocations. All LEA hold-harmless calculations are aggregated up to the state level; meaning Texas’ overall state allocation could be reduced more than the estimated 5-5.3% by the statutory formula.

The Texas Education Agency (TEA) has not yet received guidance from the US Department of Education (USDE) regarding the amount of cuts to federal education spending. Once the state receives more detailed information, TEA Grants Administration staff will model the reductions and make planning amounts available to LEAs. It is estimated that the entitlement/planning amount calculations will take three weeks to complete once data are received.

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