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s May Comply with IDEA s MFS MOE and SNS Requirements Tiffany R Winters Esq twintersbrumancom Bonnie Graham Esq Bgrahambrumancom Brustein amp Manasevit PLLC Fall Forum 2015 ID: 461182

pllc 2015 manasevit brustein 2015 pllc brustein manasevit amp rights reserved lea state year funds moe level 300 local

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Slide1

How SEAs May Comply with IDEA’s MFS, MOE, and SNS Requirements

Tiffany R. Winters, Esq.

twinters@bruman.com

Bonnie Graham, Esq.

Bgraham@bruman.com

Brustein & Manasevit, PLLC

Fall Forum 2015Slide2

TopicsState MFSThe South Carolina StoryLEA MOENew RegulationsSNSIndirect Costs

2Slide3

3Slide4

Maintenance of State Financial Support (MFS) 300.163(a)A State must not reduce the amount of State financial support for special education and related services for children with disabilities, or otherwise made available because of the excess costs of educating those children, below the amount of that support for the preceding fiscal year.

Includes ALL State funds!!

4Slide5

Failure to Meet State MFS300.163(b)Consequences for failure to maintain support:ED reduces allocation for any

FY following the FY in which the State fails to comply

Reduction is the same amount by which the State fails to meet the requirement.

5Slide6

Failure to Meet State MFS: Subsequent Years300.163(d)Consequences for failure to maintain support (or if a waiver is received):The following year MFS required

shall be the amount that would have been required

in the absence of that failure and not the reduced level of the State’s support.

6Slide7

State MFS Waivers300.163(c)The Secretary may waive the MFS requirement for one fiscal year at a time if:Granting a waiver would be equitable due to exceptional or uncontrollable circumstances such as natural disaster or precipitous and unforeseen decline in the financial resources of the State; or

The State meets the SNS standard under 300.164.

ust provide clear and convincing evidence that all children with disabilities have been provided a FAPE).

7Slide8

State MFS Reduction 300.230SEAs may reduce MFS:For any fiscal year for which the IDEA allotment received by a State exceeds the amount the State received for the previous fiscal year; and

The State pays

reimburses all LEAs within the State from State revenue 100% of the non-Federal share of the costs of special education and related services; then

The SEA may reduce the level of expenditures from State sources for education of children with disabilities by not more than 50% of the amount of such access

Subject to certain restrictions (200.230(b)-(e))

8Slide9

State MFS Reduction (cont.)300.230This reduction, however, does not alter the MFS standard for future years. When a State exercises flexibility to reduce its expenditures in a given year under 20 U.S.C. §

1413,

this does not reduce the State's required level of financial support made available through appropriations for special education

for

the following fiscal

year

Flexibility

permits a reduction in actual expenditures, but not in budgeted

amounts

Secretary Decision (Oct. 8, 2015):

http://

oha.ed.gov/secretarycases/2013-41-O-S.pdf

9Slide10

In other words, states can increase, but never decrease their mfs standardMay get a single-year waiver, but revert to previous MFS standard in subsequent year.May reduce MFS under State Flexibility provision, but again, revert to previous MFS standard in subsequent year.

10Slide11

The South Carolina MFS Story

11Slide12

SCDE’s MFS Waiver RequestFebruary 26, 2010: SCDE requested a waiver of its MFS for FY 10 (2009-2010)May 9, 2011: Final waiver requests were submitted (after working with OSEP):FY 09 ($20,312,122)

FY 10

($67,402,525

)

FY 11

($75,343,070)

Total request: $

163,057,717

USDE DecisionJune 17, 2011 SCDE Received OSERS’s Proposed Determination:FY 09 ($20,312,122) - GrantedFY 10 ($67,402,525) -

Granted in Part,

36,202,909

Denied

FY 11

($75,343,070

) - Denied

SCDE requested

that the SC General Assembly (SCGA) allocate $75,343,070 to school districts. His request was granted,

and

funds were allocated to school districts on the last day of the fiscal year

Thereafter, USDE

deemed the SCDE met MSFS for the 2010

–

11 fiscal year

Appeal Of Proposed Determination SCDE was told by USDE’s attorney that there was no right to appeal this decision under the IDEA.August 1, 2011: SCDE filed an appeal with the Office of Hearings and

Appeals

September

28, 2011: SCDE filed request for reconsideration

December 15,

2011:

Deputy Secretary upheld waiver and advised no right to hearing

May

22, 2012: Secretary Duncan decided no right to appeal

Decision:

http://oha.ed.gov/secretarycases/2012-South_Carolina.pdf

SCDE

then filed a petition for review with the Fourth

Circuit

4th Circuit Ruling“[W]e do agree that in this case, the partial denial of the maintenance-of-effort waiver not only provides us with jurisdiction under Section 1416(e)(8) but also amounts to a ‘determination that a State is not eligible’ for funding under Section 1412(d)(2), albeit only to the extent of $36.2 million.”“Thus, under Section 1412(d)(2), South Carolina was entitled to notice and an opportunity to be heard before a final

determination on its waiver request was made.”

South

Carolina Dep’t of Education v. Duncan

, 714 F.3d

249, 257 (4

Cir. 2013

)

IDEA MFS Hearing Rights34 CFR § 300.179 Notice and hearing before determining that a State is not eligible to receive a grant.(a) General.

(1) The Secretary does

not make

a final determination that a

State is

not eligible to receive a grant

under Part

B of the Act until providing

the State

—

(i) With reasonable notice; and

(ii) With an opportunity for a hearing.

(2) In implementing

paragraph (

a)(1)(i) of this section, the

Secretary sends

a written notice to the SEA

by certified

mail with return

receipt requested

17Slide18

Impact Of Funding Reductions34 CFR § 300.163(b) states:Reduction of funds for failure to maintain support. The Secretary reduces

the allocation of funds

under section

611 of the Act

for

any

fiscal

year following

the fiscal year in which

the State

fails to comply

with

the requirement

paragraph

(a) of

this section

by the same amount by

which the

State fails to meet the requirement.

Impact Of Funding Reductions (cont.) The USED interpreted this language to mean that the funding reduction would be in perpetuity. The SCDE did not have a chance to challenge this interpretation because Congress acted to limit the reduction in funds to one year, in the Consolidated and further Continuing Appropriations Act, 2013

. (H.R. 933)

Where Are We Now?June 17, 2013: pursuant to the 4th Circuit’s decision, OSERS issued a notice of proposed determination to reduce the amount of SCDE’s Section 611 allocation by $36,202,909 for FY 2010.

July

16,

2013:

SCDE

again requested

hearing.

Before OHA under IDEA regulations.

September 17, 2015: OSERS withdraws its proposed determination.

Where Are We Now? (Cont.)September 17, 2015: OSERS provides SC with an amended proposed determination. Now finds SCDE failed to meet MFS by $51,336,578.September 28, 2015: OSERS files motion to dismiss appeal of the June 17, 2013 proposed determination.

October 1, 2015: ALJ dismisses case with prejudice.

October 15, 2015: SCDE requests hearing on September 17, 205 proposed determination but states case should be moot given motion to dismiss.

Case is currently stayed pending appeal.

Local Maintenance of Effort (MOE) Requirements and New Regulations

22Slide23

Local-level Maintenance of Effort (MOE)The general rule:An LEA may not reduce the amount of local, or state and local, funds that it spend for the education of CWDs below the amount it spent for the preceding fiscal year. Two components:Eligibility standardCompliance standard

23Slide24

Local-level MOE (cont.)300.203(a)Eligibility standard:For purposes of eligibility, the SEA must determine that the LEA has budgeted for the education of CWDs at least the same total or per capita amount from either local funds only or state and local funds as the LEA spent for that purpose from the same source for the most recent prior year for which information is available

24Slide25

Local-level MOE (cont.)300.203(b)Compliance standard:An LEA must not reduce the level of expenditures for the education of CWDs made by the LEA below the level of those expenditures from the same source for the preceding fiscal year.Four calculation options:

(1) Local funds only

(2) State and local funds

(3) Local funds only on per capita basis

(4) State and local funds on per capita basis

25Slide26

Local-level MOE (cont.)300.203(c)Subsequent years rule:If LEA fails to meet MOE requirements, the level of expenditures required of the LEA for the fiscal year subsequent to the year of the failure is the amount that would have been required in the absence of that failure, not the LEA’s reduced level of expenditures.

26Slide27

Local-level MOE (cont.)300.203(d)Consequences of failure to maintain effort:If an LEA fails to maintain its level of expenditures for the education of CWDs under the compliance standard, the SEA is liable in a recovery action under GEPA section 452.Must return to ED, using nonfederal funds, amount equal to the amount by which the LEA failed to maintain its level of expenditures, or the amount of the LEA’s Part B subgrant, whichever is lower.

27Slide28

OSEP FAQsMay an LEA meet the compliance and/or eligibility standards using local funds only if it spent zero local dollars in the comparison year?Yes, but….Very few instances where LEAs have expended $0Don’t forget about FAPENo accounting tricks; must account for local funds separately from State funds

28Slide29

OSEP FAQsMay LEAs use their local, or State and local, funds to meet both LEA MOE requirements and a matching or MOE requirement for a separate federal program (e.g., Medicaid or Voc Rehab)?Yes!In fact, LEAs must include these funds when calculating the IDEA MOE eligibility and compliance standards.

29Slide30

OSEP faqsWhat is the comparison year?It depends. Different for the eligibility standard and the compliance standard. Also, is impacted by the subsequent years rule.

30Slide31

Comparison year: eligibility standard“The most recent fiscal year for which information is available” Subject to the subsequent year ruleFor example:LEA met the compliance standard under all 4 methods in 2014-2015. Final info for 2015-2016 is not available at time of budgeting for 2016-2017. Eligibility standard for 2016-2017 uses 2014-2015 as the comparison year. Because LEA met all 4 methods in 14-15, the subsequent years rule is not applicable.

31Slide32

Comparison year: compliance standard“The preceding fiscal year”Due to the Subsequent Years rule, the Department effectively defines “preceding fiscal year” to mean the last fiscal year in which the LEA met MOE under each method.For example, if the LEA last met MOE using aggregate local funds only in 12-13, and the LEA wants to use aggregate local funds only to meet the standard in 16-17, the comparison year is 12-13.

32Slide33

Comparison year: compliance standard

Fiscal Year

Actual level of effort

Required level of effort

Met/Failed

12-13

$100

Met

13-14

$90

$100

Failed

14-15

$90

$100

Failed

15-16

$110

$100

Met

16-17

$100

$110

Failed

33Slide34

OSEP FAQsMust the LEA use the same method to meet the eligibility standard and compliance standard? No, the LEA may use any of the 4 methods available to meet either standard.Can the LEA switch methods from year to year to meet MOE standards?Yes, as long as it uses the correct comparison year and has auditable data to document that it met the standard under the relied-on method in that year.

34Slide35

Consequence of the moving comparison year…LEAs may need to keep “auditable data” on MOE indefinitelyE.g. Must use the last year in which the LEA met the standard under a particular method as the comparison year – even if that was 10 + years ago!

35Slide36

Now its your turn…LEA MOE Worksheet

36Slide37

Failing the eligibility standardIf the SEA determines an LEA fails to meet MOE eligibility standard using any of the 4 methods, the SEA must provide notice and opportunity for a hearing.If, after the hearing, the LEA is not eligible, the SEA retains the Part B subgrant and is required to provide SPED and related services directly to CWDs in the LEA.

37Slide38

Failing the compliance standardSEA payback to ED with nonfederal funds:Lesser of the amount of the failure, or the LEA’s entire Part B subgrant for that fiscal yearCan use most favorable methodSEA can use State procedures to recover funds from LEA

38Slide39

Osep FaqsHave the revised LEA MOE regulations modified ED’s position on the consequences of an LEA’s failure to maintain effort?“No.” Added “to highlight the importance of the LEA MOE requirement and the significance of the remedies for a failure to comply.”But…Recently, OSEP has been aggressively pursuing State recoveries for failing MFS – will we see similar actions taken re: LEA MOE failures?

39Slide40

The good news: Gao reportAccording to State survey, nearly all LEAs are meeting MOE requirement.Only 5 States reported less than 98% of the districts met MOE in 12-13; The lowest percentage reported was 89.8%However, most States reported that some or many of their districts face challenges in meeting MOE.

40Slide41

Allowable exceptions to lea moe300.204(1) voluntary departure or departure for just cause, of special education or related services personnel(2) decrease in the enrollment of CWDs(3) CWD with an exceptionally costly program (as determined by SEA) left the LEA, aged out, or no longer needs the program(4) termination of costly expenditures for long-term purchases (equipment, construction, etc.)

(5) assumption of cost by the high cost fund operated by the SEA

41Slide42

Osep faqsMay an LEA reduce its required level of expenditures by taking more than one exception in the same fiscal year?Yes

42Slide43

Osep faqsHow does taking an exception in 300.204 affect the required amount of expenditures that an LEA must make in a subsequent year?LEA can use the reduced level to meet MOE in subsequent years! Assumes LEA spent the minimum required. Brustein & Manasevit, PLLC © 2015. All rights reserved.

43Slide44

LEA flexibility adjustment to Moe300.205For any fiscal year in which the LEA’s allocation exceeds the amount the LEA received in the previous year, the LEA may reduce the level of expenditures required by MOE by not more than 50% of the amount of that excess.LEA must use the amount of local funds equal to the reduction for allowable ESEA activitiesThe amount of funds spent on CEIS counts toward the maximum amount of expenditures the LEA may reduce under this flexibility

44Slide45

LEA flexibility adjustment to Moe300.205For example:LEA’s 2015-2016 Part B allocation is $100,000 greater than its 2014-2015 allocation. LEA spent $0 on CEIS.LEA may reduce its required level of MOE by up to $50,000.

45Slide46

LEA flexibility adjustment to Moe300.205BUT….If the LEA had spent $15,000 of its Part B allocation on CEIS, then the maximum the LEA could reduce its effort would be $35,000If the LEA had spent more than $50,000 of its Part B allocation on CEIS, then it could not reduce its level of effort

46Slide47

Osep faqs May an LEA use both allowable exceptions (300.204) and the local flexibility (300.205) to reduce its level of effort in the same fiscal year?Yes.Brustein & Manasevit, PLLC © 2015. All rights reserved.

47Slide48

OSEP FaqsMay an LEA apply the exceptions and local flexibility for both the eligibility and compliance standards?YesFor the eligibility standard, the LEA may take into consideration the exceptions and adjustment that the LEA: (1) took in the intervening year or years between the most recent fiscal year for which info is available and the fiscal year for which the LEA is budgeting; and (2) reasonably expects to take in the fiscal year for which the LEA is budgeting

48Slide49

Supplement not supplant

49Slide50

State level supplement not supplant300.162(c)Part B state-level funds must supplement federal, State and local funds expended for special education and related services to CWDsSecretary may waive SNS requirement if all CWDs have FAPE available to them34 CFR 300.164

50Slide51

state admin and state-level set-asides300.704(d)A State may use funds the State reserves under 300.704(a) (State administration) and 300.704(b) (State-level set-aside) without regard to the prohibition on supplanting other funds in 300.162

51Slide52

Which means…SEAs can use an “unrestricted” indirect cost rate for expenditures under IDEA State admin and State-level set-asideApplication of New York State Education Dept., Dkt. No. 91-81-RSEA was able to use unrecovered indirect costs as an equitable offset to disallowed funds

52Slide53

LEA-level Supplement not supplant300.202Amounts provided to LEAs under Part B must be used to supplement State, local and other federal funds, and not to supplant those funds.Brustein & Manasevit, PLLC © 2015. All rights reserved.

53Slide54

LEA-level Supplement not supplant300.202OSEP issued guidance in 2009 stating that if LEA meets its MOE requirement, then the LEA also meets the supplement not supplant requirement; there is no specific cost test.What happens if the LEA does not meet MOE?Brustein & Manasevit, PLLC © 2015. All rights reserved.

54Slide55

LEA Supplement Not Supplant (cont.)300.208Notwithstanding 300.202 (SNS), 300.203 (MOE), and 300.162 (Commingling), funds provided to an LEA may be used for:Services and aids that also benefit nondisabled children

Early intervening services

High cost special education and related services

OSEP Policy letterMN DOE, January 30, 2013“The district would be required to demonstrate that the Federal IDEA, Part B funds they are requesting to be used for CEIS supplement and do not supplant existing State, local and other federal funds, including ESEA funds, the district is using for [its program].”Citing 34 CFR 300.202.

56Slide57

CEIS and Supplement Not Supplant300.226CEIS must supplement any ESEA activities or services. Model example:

CEIS and local funds serve total population – CEIS for eligible CEIS students

Title I provides

Response to Intervention

to Title I students and CEIS supplements

Schoolwide programs300.206Part B funds consolidated in a schoolwide program are exempt from IDEA supplement not supplant requirements (as well as excess cost and MOE).

58Slide59

Exceptions to SNS

State Administrative Set-Aside

IDEA Regs § 300.704(d)

Other State-Level Activities Set-Aside

IDEA Regs § 300.704(d)

Equitable Services (reverse supplement not supplant)

IDEA Regs § 300.133(d)

Services and aids that also benefit nondisabled children

IDEA Regs § 300.208(a)(1)

Early Intervening Services

IDEA Regs § 300.208(a)(2)

High Cost Fund

IDEA Regs § 300.208(a)(3)

Administrative Case Management

IDEA Regs § 300.208(b)

Schoolwide Funds (only amount consolidated)

IDEA Regs § 300.206(a)

59Slide60

questions

60Slide61

61 This presentation is intended solely to provide general information and does not constitute legal advice or a legal service. This presentation does not create a lawyer-client relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct. Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein & Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.

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