COMMONWEALTH of VIRGINIA
Department of Education

November 5, 2010

TO: Division Superintendents

FROM: Patricia I. Wright, Superintendent of Public Instruction

SUBJECT: Maintenance of Effort Requirements & Review Process for Title I, Part A and Individuals with Disabilities Education Act

In an effort to improve school divisions' knowledge of federal maintenance of effort (MOE) requirements for Title I, Part A and the Individuals with Disabilities Education Act (IDEA), and to streamline the collection of the required data used in the MOE calculations, the Virginia Department of Education (VDOE) modified the 2009-2010 Annual School Report (ASR) to incorporate the initial MOE calculations for these two federal programs. Since the ASR was posted in late-July, VDOE has received questions regarding the MOE requirements. To help address these questions, this memorandum provides additional guidance on the MOE requirements for Title I, Part A and IDEA. In addition, this memorandum reviews the process VDOE will use to determine school division compliance with the MOE requirements for Title I, Part A, and IDEA and the consequences of not meeting MOE.

Title I, Part A

All school divisions must meet the Title I, Part A, MOE requirement as specified in sections 1120(a) and 9521 of the Elementary and Secondary Education Act (ESEA). School divisions must expend at least 90 percent of the preceding year's effort from local and state expenditures, including sales tax, either on a total expenditure basis or per pupil expenditure basis. As reduced levels of state and local funding have occurred in fiscal year 2011 and potentially beyond, school divisions on the margin of not meeting the 90 percent expenditure target should closely monitor their division's level of effort necessary to meet the MOE requirement. Failure to meet MOE under this provision not only affects Title I, Part A, funding but also funding for several other programs under ESEA as described later in this memorandum.

VDOE has received inquiries from school divisions about including expended State Fiscal Stabilization Funds (SFSF) toward meeting the MOE requirement. Section 14012(d) of the American Recovery and Reinvestment Act (ARRA) provides that, with prior approval from the U.S. Secretary of Education, a State or LEA may treat State Fiscal Stabilization Funds that are used for elementary, secondary, or postsecondary education as non-Federal funds for the purpose of any requirements to maintain fiscal effort under any other program that the U.S. Department of Education (USED) administers. USED's latest guidance document titled 'Funds under Title I, Part A, of the Elementary and Secondary Education Act of 1965 Made Available Under the American Recovery and Reinvestment Act of 2009,' dated March 2010, prescribed the criteria states had to meet to qualify for this provision. This document is provided as Attachment A to this memorandum.

In order to receive approval from USED for school divisions to count expenditures from the SFSF towards meeting the Title I, Part A, MOE Virginia was required to meet the following two criteria:

1. The State maintains auditable data to demonstrate that it is complying with the State Fiscal Stabilization Fund program's maintenance of effort requirements in section 14005(d)(1) of the ARRA, unless the Secretary has granted a waiver of those requirements pursuant to the criterion in section 14012(c) of the ARRA. To maintain effort under this program, a State must maintain, for fiscal years 2009, 2010, and 2011, at least the level of State support for elementary and secondary education that the State provided in fiscal year 2006. The same requirement applies to State support for public institutions of higher education (not including support for capital projects or for research and development or tuition and fees paid by students). The Secretary may waive the program's maintenance of effort requirements if a State demonstrates that it has provided for elementary, secondary, and public higher education, for the fiscal year under consideration, a percentage of the total revenues available to the State that is equal to or greater than the percentage provided for that purpose in the preceding fiscal year; and
2. The State maintains auditable data to demonstrate that the percentage of total State revenues that was available to support elementary, secondary, and public higher education, combined, in the most recently completed fiscal year (2010) did not decrease from the previous fiscal year (2009).

While Virginia meets criterion 1. above, based on guidance from the Virginia Department of Planning and Budget, Virginia does not meet criterion 2. above and, consequently, school divisions will not be allowed to count SFSF funds they expended toward meeting their Title I, Part A maintenance of effort.

VDOE will review data submitted by school divisions on the 2009-2010 ASR to determine which divisions met the MOE requirement for fiscal year 2010. School divisions with an MOE of 89.5 percent or higher will be considered as meeting the MOE requirement, while those with an MOE of 89.4 percent or lower will be considered as not meeting the MOE requirement. Following the submission of necessary data from school divisions, VDOE will send USED a waiver request on behalf of those school divisions that are considered as not meeting the MOE requirement. USED's latest guidance document titled "Non-Regulatory Guidance on Title I, Part A Waivers," dated July 2009, includes additional waiver guidance and is provided as Attachment B to this memorandum. VDOE will notify school divisions when: 1) the waiver request is sent to USED; and 2) USED responds to the waiver request.

If a school division fails to meet MOE and a waiver is being requested on their behalf, then the state will retain the funds that the school division is being reduced until a determination has been reached by USED concerning the waiver request. Once VDOE receives notice from USED that a waiver is granted, the funds retained by the state will be distributed to the school division.

If USED denies VDOE's request for a waiver for MOE on behalf of a school division, the state must reduce the school division's amount of the allocation of funds under each of the covered programs (identified below) in any fiscal year as required by Section 9521 of ESEA.  Funds would be reduced in the proportional amount by which a school division failed to meet the MOE requirement and the funds retained by the state would be redistributed to those school divisions that met MOE for that award. Section 9101(13) of ESEA defines covered programs as including all of the following:

• Title I, Part A, Improving the Academic Achievement of the Disadvantaged;
• Title I, Part B, Subpart 3, Even Start Family Literacy;
• Title I, Part D, Prevention and Intervention Programs for Children and Youth who are Neglected, Delinquent, or At-Risk;
• Title I, Part F, Comprehensive School Reform (no longer funded);
• Title II, Part A, Teacher and Principal Training and Recruiting;
• Title II, Part D, Enhancing Education through Technology;
• Title III, Part A, English Language Acquisition, Language Enhancement, and Academic Achievement;
• Title IV, Part A, Safe and Drug-Free Schools and Communities (no longer funded);
• Title IV, Part B, 21st Century Learning Centers; and
• Title VI, Part B, Subpart 2, Rural Education.

The Department will notify each school division in writing to indicate that the division either: 1) met the MOE requirement; or 2) did not meet the MOE requirement and the VDOE included the school division in the waiver request to USED. Those school divisions included in the waiver request will be notified of USED's decision to grant or not grant the waiver.

Questions regarding the Title I, Part A, MOE requirement or MOE waiver request to USED should be directed to Becky Marable, Title I coordinator, at (804) 371-0044 or rebecca.marable@doe.virginia.gov.

Individuals with Disabilities Education Act (IDEA) Regulations

The Individuals with Disabilities Education Act (IDEA) regulations, §300.203, requires the VDOE to determine that a school division complies with the MOE requirement to spend at least the same total or per capita (i.e., pupil) amount for the education of children with disabilities from either local or state and local funds as the school division spent from the same source for that purpose in the previous year.

The IDEA regulations provide several exceptions that should be considered when determining MOE, which include:

1. §300.205 – a school division may reduce the level of expenditures required by not more than 50 percent of an increase in its IDEA allocation;
2. §300.204 – a school division may reduce the level of expenditures below the previous year’s spending if the reduction is attributable to any of the following:
   1. The voluntary departure, by retirement or otherwise, or departure for just cause, of special education or related service personnel;
   2. A decrease in the enrollment of children with disabilities;
   3. The termination of the obligation of the agency to provide a program of special education to a particular child with a disability that is an exceptionally costly program, as determined by the state's education agency; or,
   4. The termination of costly expenditures for long-term purchases.

There are extenuating circumstances that may prohibit a school division from utilizing one or more of the exceptions described above.

In addition to the exceptions provided in IDEA, there are potential adjustments to a division's local expenditures as reported in Schedule A of the ASR that may be applied to the MOE determination. These include adding expenditures for special education made with SFSF funds, adding the local match for Comprehensive Services Act (CSA) expenditures, and adding capital expenditures for special education, when such expenditures are not already reflected in Schedule A.

Following the preliminary determination that a school division has not met the IDEA MOE as calculated in the 2009-2010 ASR, the VDOE Division of Special Education and Student Services (SESS) will conduct a secondary analysis to determine if the school division is eligible to reduce the level of expenditures below those of the prior year based on one or more of the exceptions described above. SESS will begin the secondary analysis of school division data by contacting the school division's finance director by phone or e-mail to schedule a phone conference. The purpose of this phone conference will be to review the status of the school division with respect to the exception allowable under §300.205. At the conclusion of this phone conference, one of the following will occur:

1. If the school division is eligible for reduction to its spending under §300.205 and the actual level of expenditures is within the allowable reduction, the finance director will be notified that no further analysis is needed and written confirmation will be provided to the division superintendent that the school division has met IDEA MOE.
2. If the school division is not eligible for reduction to its spending under §300.205 and/or if the actual reduction to expenditures exceeds the allowable reduction, the finance director and SESS staff will discuss the potential for reductions allowable under §300.204 and develop a plan for analysis of additional data. Following this analysis, written confirmation will be provided to the division superintendent that the school division has or has not met IDEA MOE given consideration of all allowable exceptions.

A school division that fails to meet IDEA MOE given consideration of all allowable exceptions will be required to make a payment to VDOE from local funds equal to the amount by which it fell short of its required spending. VDOE is responsible for paying these funds back to USED. Instructions for the timeline and process for such payments, if necessary, will be issued at a later date.

USED's latest guidance document titled "Guidance:  Funds for Part B of the Individuals with Disabilities Education Act Made Available Under The American Recovery and Reinvestment Act of 2009," revised July 1, 2009, is provided as Attachment C to this memorandum.

Questions regarding the IDEA MOE requirement or potential IDEA exceptions should be directed to Susan Clare, Office of Financial and Data Services, at (804) 371-2725 or susan.clare@doe.virginia.gov.

PIW/bkl

Attachments:

1. USED's Revised Title I Guidance (March 2010) (PDF)
2. USED's Non-Regulatory Guidance on Title I, Part A Waivers, July 2009 (PDF)
3. USED's Guidance on Funds for Part B IDEA provided under ARRA, Revised July 1, 2009 (PDF)