Consequences are mounting for Alaska as a dispute continues between the state’s education officials and their federal counterparts over whether the state spent pandemic relief equitably.
The U.S. Department of Education has said it will withhold $17.5 million in federal grant funds from the state until it comes into compliance with federal guidelines for equity for the state’s lowest-income school districts.
The state’s education department disputes the assertion that it has not equitably funded schools and is appealing the decision.
On Friday, Adam Schott, the principal deputy assistant secretary of the U.S. Department of Education’s Office of Elementary and Secondary Education, alerted Alaska Education Commissioner Deena Bishop that he would withhold another $5.56 million in federal relief funds from the state. That brings the total forfeit of federal grant money to roughly $17.5 million after a first withholding of $11.89 million at the end of June. The sum equals the amount the federal government says the state owes certain school districts.
Now the state must choose to either see the American Rescue Plan Act funds return to the federal government or distribute them to certain school districts.
In a Tuesday email, Bishop said the state would continue with appeals it has been pursuing.
“Alaska distributed the ARP Act funding according to the federal guidelines. The challenge of the… program is not about how much the State of Alaska spends on education, but how it disperses its own money,” she said. “I stand behind our bi-partisan legislatively approved education funding formula, and will continue to do so in the best interest of our students.”
The announcement of lost federal dollars for the two fiscal years stretching from July 2021 to July 2023 comes in the same week as the Anchorage Daily News reported the state lost out on $52 million in federal transportation dollars due to an error-filled application.
Schott noted that the federal education department has made technical assistance available to the state for nearly two years to help it meet its obligations.
“Alaska is the only State that has not complied with these statutory, non-waivable requirements for FY 2022 and one of just two States to have not met the corresponding FY 2023 requirements,” Schott wrote.
His letter reminded state officials that they agreed to meet those requirements when they accepted nearly $359 million in federal education funds.
Bishop said the state department could not determine how the federal government came to its conclusions and sent a letter in August that asked for an explanation.
She said “the ability to determine program guidelines is minimal” and pointed out that the requirements are not codified in law and only available on a government website.
“Other states facing the same circumstance, and having been frustrated with this process, have settled with the US DOE simply to halt the endless circles of appeals and unresponsiveness,” her email said.
This penalty comes after Alaska incurred a federal “high risk” designation in March that could cost the state grant funding and a federal restriction placed on roughly $1 million in grant funds in May.
The dispute
Alaska officials have resisted a federal warning that said the state underfunded certain school districts and failed to fully comply with requirements for spending $359 million in pandemic relief grants. The grant funds are from the American Recovery Plan Act, which was intended to stabilize schools after pandemic closures.
When the federal government awarded those grants, it required that states not reduce the amount of funding per student to certain school districts below the amount they received in 2019, the year directly preceding the pandemic. The covered districts include schools that serve high-poverty areas or high-needs students. That is called “maintenance of equity.”
This is where federal officials say Alaska has run afoul of their guidance; some districts got less state money in 2022 than they did in 2019.
They say the state owes the Kenai Peninsula Borough School District $5.48 million and Anchorage School District $6.4 million for the 2022 fiscal year. To make up for 2023 shortfalls, federal officials say the Juneau, Anchorage, Kenai Peninsula and Fairbanks districts are owed a total of $5.56 million by the state. The latest penalty reflects the total amount the federal government says the state government owes for the 2023 fiscal year.
Schott’s letter says the state must make the required supplemental payments now, or enter a formal written agreement for payment at a future date.
At a June Board of Education and Early Development meeting, Bishop sought to assure board members the federal dollars meant for school districts had “already been dispersed and are already used, and there’s not a problem with them.”
These are the grants from which the federal government is now withholding millions of dollars.
State education officials have said that they believe the state did follow federal law, and that a decline in some districts’ aid was due to the state applying a federally approved formula for per-student funding. In June, a national education funding expert said many states struggled to comply with the federal requirements. However, all other states have reached an agreement with the federal department.
Legislature and administration at odds
Commissioner Bishop maintained the state did no wrong in a May letter to Schott, but offered federal officials $327,015, an amount less than 2% of what the feds say all districts are owed. That offer was not accepted; Schott said the federal government may not waive the equity requirement.
The Legislature included $11.89 million in the operating budget for this fiscal year for the state to come into compliance with the federal government’s grant requirements and recover its good standing for the 2022 fiscal year. The budget amount equals the total 2022 funding for Kenai Peninsula and Anchorage schools cited by the federal government.
Gov. Mike Dunleavy vetoed it.
Schott’s letter pointed to that action as part of the reason for his decision to withhold funding.
Sen. Löki Tobin, D-Anchorage, is chair of the Senate Education Committee and has pushed for the state to comply with federal guidelines. She said that it is ultimately students who lose if the state does not get reimbursed for the $17.5 million.
“It’s not imaginary money, it’s real money that has already been spent to help move us through and pass the pandemic,” she said. “And there will be budget gaps and holes that need to be filled, or, as we’ve seen over the last few years, program closures, less educators in the classroom, higher class sizes.”
She criticized the Department of Education and Early Development for not updating lawmakers on the issue. “The communication that we received is that until the issue is settled, the department will not be providing additional information. We’ve primarily been working with the U.S. Department of Education to receive information,” she said.
Tobin said she is looking for direction from DEED, but that she anticipates it will be an issue the Legislature will have to take up in the next session in January.
Letters from the federal government to the state say the $11.89 million may not be obligated by the state, which means the state may not enter into an agreement to spend them. Letters from the federal government show that the state has not yet spent $64 million in federal grant money, from which that sum would be withheld.
What’s next
Letters from the federal government indicate that the state was unsuccessful in an appeal of the June decision to withhold $11.89 million. The federal government will lift the withholding if the state comes into compliance by paying the Anchorage and Kenai Peninsula Borough School Districts the $11.89 million.
The state may appeal the federal government’s most recent decision to withhold the additional $5.56 million by Oct. 15. The federal government will lift the withholding if the state comes into compliance by paying the school districts the $5.56 million.
It looks as though the state will either lose $17.5 million in education dollars or distribute that money to certain districts as the federal government has directed — if its appeals are unsuccessful.