West Virginia is ahead of a deadline this week to provide supporting documentation to the U.S. Department of Education over the state’s pledge to maintain proportional levels of support for education as a condition of federal covid relief funds.
State officials took note of an obligation to the federal government characterized as $465 million while a general revenue budget was taking shape during the final weeks of the regular legislative session.
West Virginia sought a waiver for the second year in a row, pointing toward education spending such as pay raises for teachers and investment in school building construction and maintenance.
“We feel very confident. We’ve had discussions. We had discussions over the weekend with U.S. Department of Education. Again, we’ve kept them apprised of the situation over the last month,” said West Virginia’s acting Revenue Secretary Larry Pack, speaking on MetroNews’ “Talkline.”
“So it was always a very remote possibility that we’d have a one-time spend for this, but at this point we expect to receive a waiver any day from the U.S. Department of Education. The governor’s budget was put together in anticipation for that.”
What’s the timeline?
Officials with the U.S. Department of Education, in calls late last week with West Virginia reporters, acknowledged that West Virginia provided materials in advance of a March 15 deadline to provide supporting material for a waiver.
Five states, including West Virginia, had already put in waiver requests for fiscal 2023.
“States have known for a long time that that deadline was coming and that subsequent analysis was coming. That’s why in, in some respects, West Virginia is ahead of the game compared to other states because they have worked to update their data and their waiver prior to the March 15th deadline, which was sooner than some other states,” federal officials said on background.
An answer should be coming soon.
“As soon as we have final data from a state and a waiver request, we work as expeditiously as we can to give them an answer,” said a federal official.
“To be clear, with West Virginia, the ball is in our court so they are just waiting on an official written response from us.”
What did West Virginia need to do?
The question is whether school systems fell short on an obligation to maintain financial support for education at levels in line with overall spending.
West Virginia, like other states, drew down millions of dollars in covid relief from the federal government. One of those sources was the Elementary and Secondary School Emergency Relief fund.
That fund has a requirement known as maintenance of effort, a standard introduced on April 21, 2021 requiring the state to keep the same proportional level of funding for schools as it had before the pandemic. That was measured in comparison to the state’s spending in other areas.
West Virginia’s submissions to the U.S. Department of Education show pre-pandemic spending on K-12 education of $2.007 billion in 2017, $2.023 billion in 2018 and $2.095 billion in 2019.
The post-pandemic spending dipped to $2.009 billion in 2022 before going up to $2.062 billion in 2023.
That occurred as West Virginia’s state budgets, more generally, were growing — from $4.82 billion overall spending in 2017 to $5.3 billion in 2022 before dropping back to $5.07 billion in 2023.
West Virginia’s legislative session concluded last week with millions of dollars allocated toward pay raises for educators along with $150 million dedicated toward School Building Authority projects.
“We have said in granting a waiver we would consider whatever the size of the gap was if they spend an amount equal to or greater than that in the future fiscal year then we would look favorably upon the waiver,” said a federal Department of Education official on the call with reporters.
How likely is a ‘clawback?’
Gov. Jim Justice, in a statement issued earlier this month, said “Let me be very clear on this issue: there is no $465 million ‘clawback’ on the table.”
Guidance released in April, 2021, specifies that if a state fails to meet requirements, then federal officials could seek recovery of funds, commonly described as a “clawback.”
In practice, restrictions placed on a state would be incremental — and even at the highest level would result more in a distribution of money to school systems rather than a clawback to the federal government.
The first step would be to make a determination on the waiver request. If that were denied, federal officials could apply a grant condition for the state to take particular actions by a specific date. A step beyond that would be to designate the state as “high risk” — which could affect the state’s ability to apply for discretionary grant programs.
A “clawback” would be a major escalation up to recovering federal funds, but that would be considered a last resort. Typically, that money wouldn’t actually go back to the federal government but instead would be required to go to schools in the form of additional money.
“Our position is never to jump to collection of funds as a first enforcement action. We would always take steps up the ladder, and it would be commensurate with whatever the violation is,” a federal official said.
Recent assurances
Officials with the U.S. Department of Education praised West Virginia’s diligence last October, according to documents obtained through a Freedom of Information Act request to the state.
“Knowing the numerous, competing priorities facing States, State educational agencies, and local educational agencies, West Virginia’s work to implement these new, critically important resource equity requirements is appreciated,” wrote a deputy with the U.S. Office of Elementary and Secondary Education in a memorandum.
“We note that West Virginia’s action is a result of cooperative efforts involving Governor Justice, appropriators in your State legislature, and State educational agency leadership and staff.”
Documents on file with the federal Office of Elementary and Secondary Education and signed by Governor Justice this past Feb. 21 show West Virginia making its case to receive a waiver.
The request from the state made a case that “when looking at total education spending, the state continues to increase its total spending on education despite the declining enrollment trends.
“So not only did the state maintain it’s funding formula on a per-pupil-basis, it continued to increase funding to education over and above the state required formula as can be seen with the increasing education funding trend compared to the decreasing enrollment trend.”
What’s the big picture?
Up against all this, lawmakers passed a $4.96 billion budget on the final night of the regular legislative session, describing uncertainty about the federal obligation. Some West Virginia spending matters still could be sorted out during a prominently-discussed special session in May.
Another potential, upcoming financial pressure is am economic trigger that, in August, could lower personal income tax collections below a major cut instituted last year.
Just a couple of months ago, Governor Justice proposed a significantly higher general revenue spending, $5.2 billion.
“Now that it’s clear that a clawback of federal ESSER funds is extremely unlikely, the legislature’s response to pass a budget $225 million below the governor’s request seems all the more unwarranted,” said Kelly Allen, executive director of the progressive West Virginia Center on Budget & Policy think tank.
“It’s more likely their ‘skinny budget’ was a response to the uncertainty that has been created by automatic tax triggers than the education funding issue. This will be an annual budgeting issue so long as the triggers are in law.”
Allen said the situation also highlights the challenges of perennial flat budgets “and only allowing spending growth on ‘back-of-the-budget’ surplus items. Programs that need certainty and ongoing commitments to keep up with inflation — like public education and health care —will fall further and further behind as we prioritize things like economic development instead.”
