Education Department accuses states of not using $6 billion in federal funds

States say almost no federal dollars left behind

Since states began implementing the No Child Left Behind Act (NCLB), many officials have complained that the act constitutes an unfunded mandate that leaves them with insufficient funds to comply with the act’s accountability provisions. The U.S. Department of Education has responded by accusing states of sitting on nearly $6 billion in unspent federal funds.

The Department of Education reported that states currently have nearly $6 billion in unspent federal education funds that were acquired between 2000 and 2002. Around $2 billion of this is Title I money designated for the most disadvantaged students.

In response to this claim, many states have reviewed their books and are accusing the federal government of spreading inaccurate and misleading information. The National Conference of State Legislatures (NCSL) disputed the federal government’s claims in an eight-point memo, noting that federal appropriations are “forward funded,” that is, that states have more than two years to spend the funds, and that they obligate these funds far in advance. The NCSL stated that the money is already budgeted, consistent with federal rules.

The NCSL noted that Congress is often late in passing spending bills, as it was this year by nearly three months. The NCSL memo further stated, “In the most recent closeout of funds, the U.S. Department of Education reports about one-half of 1 percent (0.5 percent) of K-12 funds available that fiscal year was returned to the U.S. Treasury ($150 million of $30 billion on federal K-12 appropriations).”

The Iowa Department of Education sent a letter to Secretary of Education Rod Paige disputing the claim that Iowa has $39 million in unused education funds. Listing the millions Iowa has obligated to various programs such as Title I and IDEA (the federal special education program), Iowa’s DOE says its records indicate an unspent balance of just $600,000 — not $39 million. The letter goes on to point out that funding already obligated to schools is not legally available to cover additional NCLB costs.

Ted Stilwill, director of Iowa’s Department of Education, wrote, “In light of your knowledge of these facts, your accusations regarding states’ use of federal funds are unwarranted and misleading, and surely will erode the progress you have made to date in partnering with states to improve student achievement.”

The Michigan Department of Education disputed federal government claims that it had returned almost $225 million in unused funds. “We haven’t been able to get an answer from the federal government yet as to how and why it used the figures it did, but it certainly doesn’t reflect what we do here in Michigan,” the state’s education budget director, Rick Floria, stated in a press release. Checking its own numbers and using the programs cited by the U.S. Department of Education, Michigan claims that it spent fully 99.22 percent of its federal school dollars.

The department’s budget office said the federal statement that Michigan has returned nearly $225 million for the funding years 2000 through 2002 includes funds the state still is allowed to allocate. The budget office points out that most of these federally funded programs allow states to spend grant money over multiple years.

The state of Michigan says its analysis used the same programs the U.S. Department of Education chose to use in its report. This analysis showed that Michigan returned $13.4 million — or less than 1 percent of funding that can no longer be allocated to future uses.

Of those federal education funds that still can be allocated, Michigan says it has not used $53 million — or 2.13 percent. Many of those program dollars can be expended through 2005, Floria stated.

The Department of Education disagreed, stating “On September 30, 2003, the federal government ‘cancelled’ the outstanding funds made available to all Michigan agencies for U.S. Department of Education funds originally made available in 1998 and 1999. On that date, Michigan lost $5,093,607 in formula funds, not $225 million,” said C. Todd Jones, Associate Deputy Secretary for Budget and Strategic Accountability.

Jones said that the $5 million in lost formula funds was exceeded only by three states and Puerto Rico, and that as of June 4, 2004, Michigan agencies currently had available $132,346,070 in fiscal year 2000-2002 funds, over 5% of the original appropriations.

Michigan’s 2003 money has been available for nearly eleven months, yet $560,867,923 remains (52% of the originally available funds), including $247 million (52%) for educating disadvantaged students, $145 million (45%) for special education, $137 million (69%) for teacher training and school improvement programs, $28 million (46%) vocational and adult education, and $4.6 million (72%) for educating English language learners.

Although states can access funds any time during the 27-month period in which they can be used, every dollar not drawn down from federal accounts is potentially one that is being offset by local or state tax dollars in the meantime.

“There may be perfectly legitimate reasons for this,” said Jones, “but all taxpayers have a right to know whether their state is accessing funds quickly or not, and the reasons why. Sitting on uncashed federal checks is a fair matter for public discussion.”

Jones advised that while the Michigan Department of Education disputes some of these figures, the funds data can be reviewed at any time using GAPS, the U.S. Department of Education’s federal grant payment system, the same system states use to access the funds every week.