An In-Depth Look at the Education Stabilization Fund

April 7, 2020
Elizabeth C. White, Esq.

To Our School Board Community:

We have been receiving several questions regarding the Education Stabilization Fund (“ESF”) established under the Coronavirus Aid, Relief and Economic Security (“CARES”) Act and the requisite payment of contractors, namely transportation contractors. Below, we have attempted to break down the relevant portions of the Act along with our initial preliminary analysis of same. In an ever changing world, this is of course, subject to a more specific breakdown and is only based on what has been provided to date.

Under the ESF,  the federal government has made $30,750,000,000 available to prevent, prepare for, and respond to coronavirus. Of this amount, one (1) percent will be allocated to grants to States with the highest coronavirus burden to support activities under the ESF. At this time,  it appears that New Jersey may qualify as one of the States with the highest coronavirus burden. Within thirty (30) days of the enactment of this Act, the State will need to submit an application to receive funds under this portion of the ESF.

Of the remaining ESF resources, 9.8% will be given to the Governors of each State, with an approved application, for “emergency education relief” and 43.9% will be allocated towards elementary and secondary schools. The 9.8% will be used to:

(1) provide emergency support through grants to local educational agencies that the State educational agency deems have been most significantly impacted by coronavirus to support the ability of such local educational agencies to continue to provide educational services to their students and to support the on-going functionality of the local educational agency;

(2) provide emergency support through grants to institutions of higher education serving students within the State that the Governor determines have been most significantly impacted by coronavirus to support the ability of such institutions to continue to provide educational services and support the on-going functionality of the institution; and

(3) provide support to any other institution of higher education, local educational agency, or education related entity within the State that the Governor deems essential for carrying out emergency educational services to students for authorized activities described in section 18003(d)(1) of this title or the Higher Education Act, the provision of child care and early childhood education, social and emotional support, and the protection of education-related jobs.

It appears as if local education agencies will not need to apply to receive funds for emergency education relief under this section of the Act. The language, as set forth above, indicates that either the State educational agency or the Governor will determine who has been most significantly impacted and/or who is essential for carrying out emergency educational services.

Additionally, the 43.9% for elementary and secondary school relief will be distributed as follows:

Sec. 18003. (a) Grants.—From funds reserved under section 18001(b)(2) of this title, the Secretary shall make elementary and secondary school emergency relief grants to each State educational agency with an approved application. The Secretary shall issue a notice inviting applications not later than 30 days of enactment of this Act and approve or deny applications not later than 30 days after receipt.

(b) Allocations to states.—The amount of each grant under subsection (a) shall be allocated by the Secretary to each State in the same proportion as each State received under part A of title I of the ESEA of 1965 in the most recent fiscal year.

(c) Subgrants to local educational agencies.—Each State shall allocate not less than 90 percent of the grant funds awarded to the State under this section as subgrants to local educational agencies (including charter schools that are local educational agencies) in the State in proportion to the amount of funds such local educational agencies and charter schools that are local educational agencies received under part A of title I of the ESEA of 1965 in the most recent fiscal year.

As you may be aware, the Elementary and Secondary Education Act of 1965 (“ESEA”) sets forth an application process for local education agencies who wish to receive State funding under ESEA. Unlike the ESEA, the CARES Act does not set forth an application process for local educational agencies for subgrants nor does it  reference any requisite “application” for subgrants as it does for State grants. For example:

  • For the 1% allocated to States with the highest coronavirus burden, the Act states that “the Secretary shall issue a notice inviting applications not later than 30 of enactment of this Act and approve or deny applications not later than 30 days after receipt.”

 

  • For the 43.9% allocated to States for elementary and secondary education relief, the Secretary shall make these grants to each State educational agency “with an approved application.”

The application language that is attached to the State grants is entirely absent from the language dealing with subgrants to local educational agencies. That said, the language addressing ESF subgrants to local educational agencies seems to indicate that the State will unilaterally and perhaps automatically distribute these funds to in an amount proportionate to that which the local educational agency received under part A of Title I of the ESEA in the most recent fiscal year.

To summarize the ESF allocation and application process appears to be as follows:

  1. The State will apply for the following grants:
  • A grant for resources from 1% of the ESF to go to States with the highest coronavirus burden;
  • A grant for resources from 8% of the remaining ESF funds for emergency education relief; and
  • A grant for resources from 43.9% of the remaining ESF funds for elementary and secondary education relief.
  1. The Secretary will respond to the State’s application(s) within thirty (30) days of receipt.
  2. If the State’s application is approved by the Secretary, the State will receive resources from the ESF.
  3. Of the resources the State receives from the 9.8% dedicated to emergency education relief, the State educational agency and/or the Governor will determine what local educational agencies will receive funds.
  4. Of the resources the State receives from the 43.9% dedicated to elementary and secondary education relief, the State will distribute these funds to local education agencies in an amount proportionate to that which the local education agency received under the ESEA in the most recent fiscal year.

We encourage all school districts that are considering applying for subgrants under the ESF to review how much they under the ESEA in the most recent fiscal year. This should give each district an idea of how much of a proportionate share of the above amounts they could expect to receive under the ESF. This money is intended to be spent on:

  1. Any activity authorized by the Elementary and Secondary Education Act of 1965;
  2. Coordination of preparedness and response efforts of local educational agencies with State and local public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus;
  3. Providing principals and others school leaders with the resources necessary to address the needs of their individual schools;
  4. Activities to address the unique needs of low-income children or students, children with disabilities, English learners, racial and ethnic minorities, students experiencing homelessness, and foster care youth, including how outreach and service delivery will meet the needs of each population;
  5. Developing and implementing procedures and systems to improve the preparedness and response efforts of local educational agencies;
  6. Training and professional development for staff of the local educational agency on sanitation and minimizing the spread of infectious diseases;
  7. Purchasing supplies to sanitize and clean the facilities of a local educational agency, including buildings operated by such agency;
  8. Planning for and coordinating during long-term closures, including for how to provide meals to eligible students, how to provide technology for online learning to all students, how to provide guidance for carrying out requirements under the Individuals with Disabilities Education Act and how to ensure other educational services can continue to be provided consistent with all Federal, State, and local requirements;
  9. Purchasing educational technology (including hardware, software, and connectivity) for students who are served by the local educational agency that aids in regular and substantive educational interaction between students and their classroom instructors, including low-income students and students with disabilities, which may include assistive technology or adaptive equipment;
  10. Providing mental health services and supports;
  11. Planning and implementing activities related to summer learning and supplemental afterschool programs, including providing classroom instruction or online learning during the summer months and addressing the needs of low-income students, students with disabilities, English learners, migrant students, students experiencing homelessness, and children in foster care;
  12. Other activities that are necessary to maintain the operation of and continuity of services in local educational agencies and continuing to employ existing staff of the local educational agency.

Each district should also be aware of the payment requirement set forth in the CARES Act:

A local education agency, State, institution of higher education, or other entity that receives funds under “Education Stabilization Fund”, shall to the greatest extent practicable, continue to pay its employees and contractors during the period of any disruptions or closures related to coronavirus.

This caveat only seems to apply to districts that receive funds under the ESF. As stated above, it appears as if the State will unilaterally distribute funds to local educational agencies proportionate to the amount each local educational agency received under the ESEA in the most recent fiscal year. It also appears that prior to releasing funds to a local educational agency, the State may ask each district to verify that it has been paying employees and possibly contractors prior to releasing any funds. ESF money may be used to pay certain contractors, particularly contractors who might be performing services that the ESF monies are available for. We note, however, that the list of intended uses of ESF resources for local educational agencies does not specifically list transportation services. We also note that the caveat says local educational agencies should pay employees and contractors “to the greatest extent practicable.”

Based on the foregoing, we urge you to consider all of the factors that may be applicable to your particular district and determine the best individual course of action. In your decision-making process, we also urge you to take a look at your relevant contracts and consider the following:

  • Are the contracts per diem or on a monthly basis?
  • Can payment be broken into fixed costs or variable costs that a contractor may incur in the provision of services?
  • Does the contractor qualify for any loans or grants under State or Federal emergency relief funds?
  • Does the contractor have business interruption insurance?
  • Can you suspend the contract so the contractor does not incur additional expenses during closure?
  • Is the contractor paying their employees? If so, how much? Can you verify that the contractor is actually making payments to the employees?

This message is not intended to substitute for our legal advice to our clients based on their specific needs or requests.  In addition, our guidance is subject to and can be superseded by new laws, rules, regulations, or orders.  Moreover, some directives from the Federal and State authorities can appear, and can be, contradictory or in conflict so please contact us for assistance.

If you have any questions regarding the CARES Act, please do not hesitate to contact us.

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