The Status of ARRA Education Funds

It’s been a while since we last looked at the status of the education funds allocated through the American Recovery and Reinvestment Act (ARRA). As we have discussed before, the ARRA allocated nearly $100 billion for education programs such as Title I, Individuals with Disabilities Education Act (IDEA) State Grants, and a new program called the State Fiscal Stabilization Fund. Last we looked at U.S. Department of Education data on the obligation and disbursement of these funds in September, things were moving a bit slow. Six months later, it appears that while some funds have gone out quickly, others continue to lag.

As of March 5, 2010, the Department of Education had made nearly 73 percent of the $98.2 billion in ARRA education funds available for states to spend (aka obligated). Of that obligated money, the Department had disbursed 50.8 percent, or $36.3 billion, to states. This means that less than 40 percent of total allocated education ARRA funds have actually left federal coffers for expenditure.

Almost all of the currently available Pell Grant funds (about half of the total obligation) have been disbursed to the states for use. This is not surprising because Pell Grants are automatically distributed via a formula to students that qualify for the grants. States do not need to apply for the funds and the disbursement process is relatively streamlined and familiar. Pell Grants are also disbursed at the beginning of each semester, meaning that all grants for the current school year should have been made by early 2010. The remaining half of the allocated funds is likely to go out to states just as smoothly as soon as the 2010-2011 school year begins.

In contrast, the Department of Education has been disbursing both Title I and IDEA funds relatively slowly. Back in September, only 12.2 percent of Title I and 9.4 percent of IDEA funds had been disbursed. Six months later, those disbursement rates have increased to 22.8 percent and 24.0 percent, respectively (while the amount of obligated funds has doubled). As we’ve mentioned before, this slow rate of disbursement could be attributed to onerous application processes at the state and local level for funds and the monthly process by which schools and school districts pay for employees and other services. This is troubling because summer break is fast approaching, meaning that stimulus spending for the 2009-2010 school year will soon begin to wind down. Similarly, the ARRA funds are set to expire on September 30^th, 2011, giving schools and school districts a year and a half to spend more than three-quarters of the total Title I or IDEA ARRA funds.

State Fiscal Stabilization Funds (SFSF), on the other hand, appear to have been disbursed at a sensible speed. As of March 5^th, 59.9 percent of Education Stabilization Funds and 47.5 percent of Government Services funds had been disbursed to states. The relatively high rate of disbursement can primarily be attributed to the high need for these additional funds at the state and local level to fill budget gaps and the fact that the funds were disbursed through existing state funding formulas. Is it expected that states will spend the vast majority of their SFSF monies by the end of fiscal year 2010 with only a few states allocating remaining funds directly to school districts through Title I formulas in fiscal year 2011.

Of course, the Department of Education has yet to disburse any ARRA funds for some programs. These include Teacher Quality Enhancement grants, State Longitudinal Data Systems grants, and Investing In Innovation grants. Additionally, the only funds that have been disbursed for Race to the Top grants are likely for honoraria for reviewers and other administrative costs. These programs are all competitively awarded based on state and local grant proposals. However, they make up a relatively small portion of the total ARRA education funds.

Clearly, the life-span of the ARRA is far from over. More than half of the total funds allocated for education programs still need to be disbursed to states and spent at the local level. At the same time, school systems around the country appear to be in desperate fiscal straits as state education budgets continue to take drastic hits. Will the current ARRA funds be enough to fill these gaps? Or will the Congress need to pass another stimulus bill to keep schools afloat? Ed Money Watch will be following this process every step of the way.