Please see attached an official letter from the U.S. Department of Education (USED) addressed to governors and chief state school officers reiterating that the debt ceiling law that was recently passed, the Fiscal Responsibility Act of 2023, does not impact ESSER funds. In the letter, USED says, "these funds are not rescinded and States and subgrantees should continue to spend down these resources urgently and wisely in accordance with approved State and local plans and statutory timelines for spending." Original Message:
Sent: 06-02-2023 11:52
From: ASBO USA
Subject: Debt Ceiling and FY24 Funding Update
This week, Congress passed a bipartisan bill to address the debt ceiling and avoid a default, the "Fiscal Responsibility Act of 2023," which is now on its way to the President's desk for final signature. The bipartisan budget agreement suspends the debt ceiling until January 2025, and sets spending caps for federal fiscal years 2024 and 2025 for defense and non-defense programs. It also includes provisions to rescind some unobligated COVID-relief funds, reform eligibility requirements for SNAP and TANF (but makes no changes to Medicaid), and codify an end to the pause on student loan payments so that borrowers will be required to resume paying their bills 60 days after June 30 (i.e., August 30).
Regarding COVID-funding rescissions, the bill would rescind federally unobligated funds from several COVID-relief accounts (but not any state/local funding that SEAs and LEAs received and/or have yet to obligate). $391.93 million would be rescinded from federal administrative accounts under the Education Stabilization Fund (ESF), which covers ESSER, GEER, EANS, and HEER. The federal government considers ESSER funds already obligated since these funds have already been disbursed to states (as the grantees) and districts (as the sub-grantees). This bill does not affect any ESSER funding that has already been distributed to states and districts; school business officials do not need to worry about any clawbacks in ESSER funding under this legislation.
Regarding spending caps on FY24 and FY25, restrictions on overall non-defense spending will mean future federal education funding will also be limited for school years 2024-25 and 2025-26. The total amount for non-defense program spending for the next fiscal year (FY 2024) is almost identical to current spending (FY 2023); in other words, essentially flat funding. However, if Congress doesn't pass an appropriations package for FY 2024 by January 1, 2024, any continuing resolution (CR) that extends federal funding will be reduced by 1%. (This provision intends to encourage lawmakers to pass their appropriations bills on time). Meanwhile, for FY 2025, total non-defense spending will only increase by 1% from the FY24 level.
With tight spending limits on overall non-defense spending for FY24 and FY25, it is likely that we will also see a very challenging fiscal environment for federal education funding for the next two FYs as well. This means it will be even more crucial for school business officials to advocate for education programs like Title I and IDEA, to protect these programs from cuts and secure the highest funding possible in FY24 and FY25. If you are interested in advocating on this issue, join ASBO International and AASA at the 2023 Legislative Advocacy Conference, July 11-13, in Washington, D.C. Attendees will have an opportunity to meet with their elected officials during our Hill Day on July 12 to ensure their voices are heard.
Sent: 05-22-2023 14:31
From: ASBO USA
Subject: Debt Ceiling and FY24 Funding Update
We have received several questions from members about the potential impact of a U.S. default on the economy and what it means for school districts. A lot of this depends on how long a default would last before federal lawmakers agree on legislation to cure the debt ceiling issue, but we wanted to ensure school business officials were aware of how these policy conversations could impact K-12 budgets.
- Here is a link to an article from Education Week that discusses some of the short and long-term economic implications, including how a national default could trigger a recession, affect district pension investment portfolios and obligations, the cost of borrowing to finance capital projects, and possible delays in disbursement of federal funding for ESSA Title and IDEA grants (among other programs).
In addition, the Government Finance Officers Association (GFOA) shared the alert below with us, which explains what LEAs and other government entities will want to do to prepare in the meantime.
If the federal debt ceiling agreement is not resolved by June 1, the United States federal government could miss or delay payment on their obligations. This would constitute a technical default which means that debts (including interest and principal on U.S. Treasuries, as well as other payments) will likely be paid, however the timing of the payments could be delayed.
GFOA recommends that governments should regularly review their investment portfolios (see best practices: Investment Policy and Investment Program for Public Funds.)
Due to the nature and timing of this circumstance, GFOA recommends specific immediate action:
- Governments should review their investment portfolio, and confirm investment holdings in US Treasuries, including other products that may be invested in Treasuries, such as LGIPs, and the date these investments mature.
- Governments should also know if those investments are needed for certain obligations (such as a debt service payment).
- Governments should be positioned to have cash on hand to meet obligations in the event that their entity does not receive principal or interest payments from their treasury investments as scheduled.
Governments should also be aware that if they have escrows coming due for refunded bonds and those funds are backed by US Treasuries and/or SLGS they should discuss this situation with their escrow agent, municipal advisor and financing team. Governments should be aware that the SLGS window is closed and will remain so until the debt ceiling debate is resolved.
For more information and advocacy on the "unobligated" clawback provision, see this previously released GFOA Alert. Please stay tuned for any updates on the debt ceiling debate from GFOA's Federal Liaison Team.
If you have any questions, please don't hesitate to contact ASBO International's Director of Advocacy, Elleka Yost, at email@example.com.
Sent: 04-26-2023 09:21
From: ASBO USA
Subject: Debt Ceiling and FY24 Funding Update
The alert below was provided by the Committee for Education Funding (CEF), a national coalition of education organizations that ASBO International is also a member of. (Learn more about CEF at cef.org.)
On Wednesday, April 19th, House Speaker Kevin McCarthy (R-CA) released a bill to raise the debt limit for a year and cut federal spending. The plan would increase the debt ceiling by $1.5 trillion, enough to avoid a default until March 2024 or later and bring discretionary spending to FY 2022 levels with future increases capped at 1% annually for a decade. It also includes a rescission of some unspent Covid-19 funds, tougher work requirements for anti-poverty benefits, and easing of regulations on energy projects. The bill is designed to save $4.5 trillion and cut federal spending by potentially $130 billion.
The full text of the bill can be found here.
The conservative proposal is a non-starter with congressional Democrats and the White House. If passed, Speaker McCarthy hopes that President Joe Biden will engage in talks to resolve the ongoing stalemate over raising the $31.4 trillion debt limit. The bill's future remains uncertain as Speaker McCarthy needs the support of 218 Republicans, and all Democrats are expected to oppose it.
The bill would end hundreds of billions of dollars in tax breaks for clean-energy projects and the purchase of qualifying electric vehicles. The GOP plan also targets elements of President Biden's Inflation Reduction Act, like eliminating additional funding to the IRS, but it does not repeal popular drug price cuts, sparing House moderates a difficult vote. Additionally, the bill would block President Biden's forthcoming program to cancel thousands of dollars in student debt.
House Appropriations Ranking Member Rosa DeLauro (D-CT) has argued that the Republican bill does not protect defense, veterans, and homeland security funding. In a press release, Ranking Member DeLauro stated, "For weeks, I have heard my colleagues claim defense, Veterans health care, and border security funding would not be subject to their caps. This reckless bill does not give that assurance. It either puts defense or Veterans funding on the chopping block or cuts other critical government programs by more than 22 percent-a cut far lower than the 2022 level."
President Biden has released his $7 trillion budget proposal to reduce deficits by $3 trillion over a decade through tax increases. However, the GOP has been unable to agree on any budget proposal, and instead, they have focused on formulating the debt-ceiling bill with the deadline for a default looming. Analysts at Goldman Sachs warned that the date for a U.S. default could be closer to June, and the Treasury Department is expected to offer an update on the timeline for when it will exhaust special measures to keep within the current debt ceiling and avoid a default.
House Budget Chair Jodey Arrington (R-TX) is expected to lead the push on the Republican debt limit bill, and House Majority Whip Tom Emmer's (R-MN) team is expected to lobby members for support now that the text is finalized. Meanwhile, Senate Minority Leader Mitch McConnell (R-KY) is being pressured by both parties to help negotiate a deal to avert a crisis over raising the nation's borrowing authority. Although President Biden and House Speaker McCarthy are publicly staking out stark political positions on the debt ceiling, Minority Leader McConnell is expected to work behind the scenes.
Republican leaders are looking to pass their debt limit proposal through the House soon, but it may be challenging as no Republicans want to vote to lift the debt limit or slash agency budgets without some assurances of the final outcome. However, if they can pass something, even if it is not the perfect plan, it will strengthen Speaker McCarthy's hand in any upcoming talks with President Biden and have a significant impact on the future of the debt limit and agency budgets. The bill's passage could also provide an opportunity to start negotiations with the White House. If Speaker McCarthy cannot push the House Republican debt limit proposal through, it would significantly strengthen the White House and Senate Democrats' hand.
The White House issued a statement in response to the Speaker's proposal: "Every House Republican who votes for this bill is voting to cut education, veterans medical care, cancer research, Meals on Wheels, food safety and law enforcement."
What does this all mean for education programs?
On Tuesday, April 25th, CEF shared several resources outlining what the proposed debt ceiling bill, HR 2811, the "Limit, Save, Grow Act of 2023," would mean for education programs (below). The bill would increase the debt ceiling, cut discretionary spending for FY24, and then cap discretionary growth at 1% per year for the following nine years; meanwhile, other provisions would cut mandatory spending and end some of the Administration's key initiatives, including its student debt relief plan. House Republicans plan to pass the bill this week if they have sufficient votes, but it is not expected to pass the Democrat-controlled Senate.
- Department of Education fact sheet - provides some impacts of cutting education by 22% in FY 2024 (the size of the required cut if defense, veterans' health care, and homeland security funding are protected from cuts), including 100,000 fewer teachers and classroom providers, slashing mental health supports, and making college more expensive for students. The link includes fact sheets for each state with examples of required education cuts.
- Biden Administration statement promising to veto the bill highlights that the bill "would force severe cuts to education (including for students with disabilities)," among other provisions.
- Center for American Progress analysis - describes the size of discretionary spending cuts the proposal would implement over time and its impact on a wide range of programs, including the Special Supplemental Nutrition Assistance Program for Women, Infants, and Children (WIC), the Child Care and Development Block Grant, and Head Start.
While the bill is still a proposal (and even if it made it to the President's desk, it would be vetoed) -- depending on whether it passes the GOP-led House or not will determine who has more leverage in funding negotiations for FY24 moving forward (either House Republicans, who are advocating to cut and reign in spending, or the White House and Senate Democrats, who are advocating for a clean raise of the debt ceiling and increased investments in federal programs). Depending on how this plays out, if any budget caps or cuts are implemented on federal spending, then no programs (including education) are considered safe from the chopping block. For instance, if federal education programs were forced to return to FY22 spending levels, this would amount to a $850 million reduction in Title I funding from its current funding level. Remember that whatever the final debt ceiling agreement looks like, it will affect Congress' appropriations work later this year. Final FY24 appropriations bills, specifically the Labor-Health and Human Services-Education (L-HHS-ED) appropriations bill for FY24, will affect education funding for districts during the 2024-2025 school year.
Stay tuned for more updates as we learn more about debt ceiling negotiations and FY24 funding. In the meantime, if you're interested in advocating for education funding for FY24, join ASBO International and AASA on Capitol Hill during our joint 2023 Legislative Advocacy Conference, July 11-13, in Washington D.C. Learn more about the event and register here.