Big money, big questions

Members of the House Appropriations Committee and Senate Finance Committee have begun asking questions about federal funds that have been approved for public education in recent COVID-19 relief packages: Where are those dollars, and why aren’t we including them in the state budget?

The questions have been prompted, at least in part, by calls and emails from school district trustees and administrators who are concerned that districts won’t get their fair share of the funds or that they won’t retain control over how the funds are spent. Also, as districts enter the budget planning stage, they need information on any incoming funds.

First, some basics. The actual laws and regulations involved are extremely complex, but the following information should help provide a foundation for a general understanding of the situation.

NAMES

The first coronavirus relief package was passed in April 2020. It was referred to as the CARES (Coronavirus Aid, Relief, and Economic Security) Act. Among its provisions was establishment of the ESSER (Elementary and Secondary School Emergency Relief) Fund, with money specifically designated for public schools. Texas received about $1.2 billion in ESSER funds. This is now sometimes referred to as ESSER I.

The second package passed in December 2020. The CRRSA (Coronavirus Response and Relief Supplemental Appropriations) ACT included more money for schools — $5.5 billion for Texas — known as ESSER II funding.

The most recent package passed in February of 2021 and was signed last month. It is called the American Rescue Plan, and Texas is slated to receive more than $12 billion in ESSER III funds.

ESSER I

The $1.2 billion in ESSER I funding did not benefit Texas school districts, but was used to “backfill” state budget holes. The funds sent to districts simply replaced state money that was already expected. That has led the education community and its supporters to be especially watchful over the decisions being made on the much larger amount of money available through ESSER II and III — a total of more than $17 billion.

ESSER II and III

State leaders apparently do not yet know when these more recently-approved federal funds will be distributed, or how. Federal restrictions on some of the funds are complex, and have an impact on how Texas develops its budget for the upcoming biennium.

One sticking point for Texas in the federal legislation appears to be a “maintenance of effort” requirement. States must show that their education budgets for the upcoming fiscal years represent at least the same percentage of the state’s overall spending as in an average of the three preceding years. (For example, if in the past three years Texas spent 30% of the budget on education, it must continue to spend at least 30% in the upcoming biennium. Legislators are working on the budget for that biennium now — it begins Sept. 1, 2021, and runs through Aug. 31, 2023.)

Here’s where it gets (more) complicated. It is not yet clear whether the maintenance of effort provisions include both public and higher education, either combined or separately. This is a key point, because the significant influx of funds for public education in 2019 through HB 3 also increased the overall Texas budget, but higher education did not receive a similar boost, so its percentage of the state budget dropped. If it is determined that Texas must raise higher education spending to meet the maintenance of effort requirement in order to receive the ESSER funds, staff have estimated the budget would have to include an additional $1.2 billion for higher education.

State leaders are in communication with the US Department of Education regarding this issue and others, but have not yet received clarification.

TIMING

It seems likely that, whether accidentally or by design, these issues will not be resolved in time for the Legislature to act. (The current legislative session ends on May 31.) So among the questions lawmakers are asking is whether the Legislature will be able to have input on how ESSER II and III funds are distributed and spent.

At least one bill has been filed to give that authority to a newly-created “board on administration of federal funds,” comprising the lieutenant governor, House speaker, chairs and vice-chairs of the Senate Finance and House Appropriations Committees. The bill has not yet been scheduled for a hearing and could change significantly before it reaches the governor’s desk.

OTHER ISSUES

Resolution of the “maintenance of effort” question still leaves many unknowns. When will the funds be distributed? Could Texas reject the federal education dollars? Might the newly authorized board further delegate decisions to a single individual – the commissioner of education? What kinds of strings can the state attach to how local school districts use the funds?

For a deeper dive, the US Department of Education fact sheet below may be of interest (page 5, in particular, includes information on how funds can and cannot be spent). TCTA will continue monitoring actions at the state and federal levels and will keep our members updated.

ESSER Fact Sheet