On March 31, 2020 Governor Lamont signed Executive Order No. 7R, three of the five provisions of which could have an effect on local education budgets throughout Connecticut. The Governor’s Order enacted the following provisions, and local boards of education and city and town governments should take time to assess the impact that could occur as a result.
The Order requires the Connecticut State Department of Education to continue processing appropriated state grant funds intended to support boards of education through the fiscal year ending June 30, 2020, including ECS grants, payments for special education excess costs, and Choice programming. It also requires municipalities to continue providing funding to local boards of education as set forth in the approved annual school budgets.
The Order requires school districts to continue to employ, or restore to employment if already laid off, and pay school staff who are directly employed by the local or regional boards of education—including but not limited to teachers, paraprofessionals and other support staff, cafeteria staff, clerical staff and custodial workers—to the greatest extent practicable.
The Order requires local boards of education and municipalities to negotiate amendments to contracts related to student transportation and special education services—with the goal of continuing to make payments to transportation and special education providers so they may compensate their active employees, sustain the continuity of service when school resumes, and require the contracted company to attest and provide reasonable documentation of the fact that it is charging only the actual and reasonable cost of sustaining wage and health insurance payments for active employees and fleet.
As a result, there are number of considerations that local school districts need to make.
The provisions raise the question of what constitutes an allowable cost under these circumstances. The provisions identify state grant funds that include grant programs that are also funded by federal grant dollars (special education in particular). Many school districts have furloughed non-essential employees, including teacher aids and paraprofessionals whose salaries are often funded fully or partially by these grants. A major question to be resolved is will the Federal Department of Education allow charges to grant programs for salaries of individuals who are not providing services associated with the grant program due to being furloughed.
This may have been addressed prior to Governor Lamont’s signing of this order through U.S. Office of Management and Budget (OMB) memorandums M-20-11 and M-20-17 that were released March 12, 2020 and March 19, 2020. These memos provide relief and flexibility in multiple areas, one of which addresses the ability of an entity to continue to charge salaries and benefits to currently active federal awards consistent with the recipients’ policy of paying salaries (under unexpected or extraordinary circumstances) from all funding sources, federal and non-federal. A greater understanding as to what constitutes a policy “under unexpected or extraordinary circumstances” will have to be determined in order to fully understand the potential impact on the local budget of the district.
This risk relates to all three of these provisions. In the case of grant expenditures, if grant expenditures were to be considered unallowable costs by the federal awarding agency, those costs will have to be absorbed by the local education budget.
The provision dealing with the continuation of payment of public-school staff will certainly have an impact on the local education budget, in particular when applied to revenue-based programs such as school lunch programs and after-school programs. Due to school closures, the revenue streams supporting or sustaining these programs have stopped; however, with this provision the district will have to continue to pay school lunch staff and after-school staff. This will create a burden on the local education budget as the funds to pay the salaries and benefits will have to come from the local education budget.
Finally, the provision dealing with the preservation of student transportation services and special education providers will have to be evaluated in order to determine which contracts would be subject to renegotiation. It is possible the costs of these services would decline since the renegotiation would likely reduce the contract payments for the remainder of the school year. However, school districts with a significant amount of outsourced services for special education will likely incur additional time and cost renegotiating and monitoring the contracts in question.
Executive Order 7R provides significant benefit and peace of mind to local boards of education, particularly with the assurance that ECS and perhaps other formula grants will continue through the remainder of the fiscal year. However, it will also reach to costs and programs that are typically covered by other sources of revenue, such as federal grant revenue and program fees and charges. It will be important for local boards of education to gain an understanding of the impact these provisions may and likely will have on their local budgets.