Education Department Releases Guidance Specifics on Impact Aid Stimulus Funds

The Department of Education (ED) released a second round of guidance documents for the major programs funded in the American Recovery and Reinvestment Act (ARRA) on April 10th. Each document specifies how funds for each program will be distributed, how funds will be disbursed, and how states and local education agencies (LEAs) will be able to use them. Previously, we discussed the guidance for the State Fiscal Stabilization Fund, Title I Part A, and IDEA Part B.

Today we will take you through the guidance document for Impact Aid funds provided in the stimulus. ARRA provided $39.6 million for Impact Aid formula grants and $59.4 million in competitive discretionary grants, $100 million total.

The Impact Aid Program is designed to directly compensate local school districts for: (1) local revenue lost due to the presence of federally owned, and therefore tax-exempt, property and (2) costs incurred due to “federally connected” students, such as the children of armed services personnel working at a nearby military base. The money is provided directly to local school districts rather than through state agencies.

The guidance states that formula grants will be distributed to LEAs that have already submitted applications for funds for fiscal year 2009. Those dollars (approximately $300 per student) were distributed in early April based on the number of eligible students in each LEA. Discretionary grants, on the other hand, will be awarded to LEAs for specific projects based on a competitive process that will begin in July of 2009. These LEAs must submit separate applications for each construction project.

In general, Impact Aid funds can be used for K-12 school construction including preparation of plans, actual construction, repair, remodeling, or expansion, and supervision. Formula grants can be used for any of these efforts while discretionary grants can only be used for proposed and approved activities. Funds cannot be used for repairs to school grounds (like landscaping), repairs or construction of athletic facilities that are used primarily for events with admission costs, the purchase of property when no immediate construction on that property is planned, and maintenance costs.

Impact Aid funds cannot be collected and saved – they must be obligated by September 30, 2011. Preference is given to projects that can be started quickly and will result in job creation. In cases where Impact Aid funds are not enough to fund a project completely, the funds can be combined with other sources including State Fiscal Stabilization Funds.

Impact Aid fund usage must also comply with the Davis-Bacon wage requirement rules, provide preference to Indian-owned enterprises when projects are on Indian lands, and observe federal civil rights laws.

The stimulus Impact Aid funds are also subject to additional requirements tied to the ARRA. In addition to stricter reporting requirements including fiscal accountability and preservation data, LEAs using Impact Aid funds are required to “buy American.” This means that grantees must use American-made iron, steel, and other manufactured goods for construction unless it increases the cost of the project by more than 25 percent.

So far, formula grants have been distributed to 179 LEAs at a rate of $309 per eligible student. The average grants size is $220,928 with a range of $5,096,920 to $2,296. Unsurprisingly, districts in western states like Alaska, Montana, and Arizona receive the majority of funds because they have the largest American Indian populations. These funds, and the funds distributed through the discretionary grants, will hopefully be put to work providing improved facilities for these traditionally underserved populations.