Federal Education policy: legislative & administrative Outlook October 2014

1. Federal Education policy: legislative & administrative OutlookOctober 2014 Steven Spillan, Esq. Brustein & Manasevit, PLLC sspillan@bruman.com www.bruman.com

2. Agenda • Legislative Outlook • Appropriations • Status of Reauthorizations • Expectations • Administrative Priorities • Policy Initiatives • Uniform Grants Guidance • Major Changes

3. Legislative Updates

4. Congressional Approval Ratings

5. Sequestration: It’s Alive! • Triggered by the 2011 Budget Control Act (BCA) after failure of Congressional debt “supercommittee” to balance budget • Modified in the American Taxpayer Relief Act of 2012 • Beginning in March 2013, cuts were carried out as automatic, across-the-board reductions to actual spending levels for all non-exempt programs, projects, and activities

6. Sequestration: It’s Alive! • Cuts were approximately 5% • Second 2013 CR made additional 0.2% across-the-board spending cut • Allocations at State and district level vary due to: • New Census/population data • “Hold harmless” and “Small State Minimum” requirements in laws • For single-allocation programs, like Head Start, cuts began with programs which receive annual funding on April 1 • For competitive grant programs, cuts began with first competition using FY 2013 funds • For bifurcated funding programs, the first allocation of FY 2013 budget year (October 2012) went out in full; sequester cuts were deducted from the second allocation (July 2013)

7. Sequestration: To Infinity and Beyond! (or just 2023) • In FY 2014 through FY 2021, additional cuts to be implemented through reductions to Congressional “spending caps” • Congress must pass individualized spending bills in all 12 accounts that, as a whole, comply with two basic requirements of sequestration: • Make equal cuts to defense and non-defense spending • Meet BCA requirements for reductions to spending caps (additional $109 billion in new cuts annually)

8. Sequestration: To Infinity and Beyond! (or just 2023) • Bipartisan Budget Conference Committee (created by bill that ended October government shutdown) • set spending targets (budget caps) for FY 2014 and FY 2015 that represented an INCREASE over FY 2013 • Extended end date of sequester from 2021 to 2023 • Cleared the way for Omnibus spending bill which brings funding for non-defense discretionary federal programs nearly – but not quite – back to pre-sequestration FY 2013 levels

9. (in millions of dollars)

10. FY 2015: The Good, the Bad, and the Ugly • The Good: Congressional spending caps continue to be above FY 2013 post-sequestration levels • The Bad: Total lack of progress on individual appropriations bills • Especially Labor-HHS-Education • The Ugly: continued partisan conflict threatens to derail budget process (again)

11. FY 2015 Budget Conflicts • Surge in unaccompanied alien children (UACs) along southern border leads to request for additional $2 billion for HHS, DHS • Put additional pressure on Labor-HHS-ED budget • Waiver of school nutrition standards • Included in report accompanying FY 2014 omnibus • USDA said that since it was report language, couldn’t overule requirements of law

12. FY 2015 Budget Conflicts • Waiver of school nutrition standards, cont. • House FY 2015 Agriculture appropriations bill included waiver • Requires USDA to come up with a waiver process through which • States can give waivers to districts • Who can show 6 months of net loss in food service operations since July 2013 • Extends to all new HHFKA regulations) • Senate Democrats, White House condemn bill (President threatens veto) • New questions about industry advocates (SNA)

13. FY 2015 – Likely Outcome • Partisan conflict + lack of progress on 12 needed appropriations bill + short timeline before start of FY 2015 = very likely to have a short-term Continuing Resolution (CR) to carry through election (substantive budget debate after election)

14. reauthorizations

15. Overall Legislative Picture Fiscal issues Everything else No time/energy for substantive policy debate

16. Why Isn’t Education a Priority? • Limited opportunities to move legislation • Limited time left on legislative calendar • High degree of partisanship • High number of “must-act” issues and priorities • Constant crisis situation • Significant possibility of primary challenges, electoral turnover • Education not a deciding issue for most voters • Bottom line: need to take significant, fast action on issues that have maximum press and electoral impact

17. Why Isn’t Education a Priority? Most Frequently Listed Occupational Categories by Members, 113th Congress

18. WIA: The Rare Success • Workforce Innovation and Opportunity Act (H.R. 803) passed Congress on July 9th, 2014 • Product of “pre-conference” discussion among bipartisan group of lawmakers • “Streamlines” WIA by eliminating some programs (but maintains major targeted programs) • Makes some changes to makeup of State, local WIBs (to increase role of businesses/employers) • Expands scope of AEFLA program • Sets new performance metrics for all programs

19. WIA: Things to Look For • “Breaking Down Silos” • Greater inter-agency collaboration • Greater integration at State and local level • Common Set of Performance Indicators • Indicators Set by law • Levels of performance set by State • Applies to all “core programs” • Greater authority for Governor

20. Early Education • Administration plan announced in President’s State of the Union address • $77 billion in subsidized universal pre-K for low/middle-income families over next decade • Federal share paid for through increase in tobacco taxes (maybe) • States receive funding for adopting certainquality standards • Including class size, education level and pay of instructors, State-level inspections and audits, etc. • Federal share drops from 90% to 25% over 10-year period

21. Early Education • Strong Start for America’s Children Act (S. 1697) • Focus on universal, voluntary pre-K for low-income three and four-year-olds • Funds would be disbursed based on a state’s share of four-year olds living at or below 200% of the poverty line. • Requires set staff qualifications, class size requirements, salaries, early learning and development standards, longitudinal data systems • No action to date • Questions remain about federal role, how to offset cost

22. Child Care and Development Block Grant • Bipartisan bill (S. 1086) passed in Senate on March 13, 2014 would: • Require States to conduct background checks of employees, including checking state criminal and sex-offender registries and state-based abuse and neglect registries • Require States to set aside more money to boost program quality (increasing from 4 percent of total now to 10 percent by 2018) • Ensure that program staff are trained in basic safety measures like CPR • Increased State monitoring and oversight responsibilities • Require States to check family eligibility for subsidies no more than once a year (focus on continuity of child care) • No action to date in House • Opposition from some organizations • Increased costs to States/providers with no additional federal funding

23. IDEA • No action to date • Focus is on “full funding” of existing federal obligation • “Full funding” = 40% of excess cost of educating students with disabilities • Letters in House and Senate to appropriations Committees asking for increased IDEA formula funding • Wide support from Democrats • Some support from moderate Republicans • Unlikely to move before ESEA

24. Charter Schools • Success and Opportunity through Quality Charter Schools Act (H.R. 10) • Would combine two existing federal programs (Charter School Grant Program and Charter School Credit Enhancement Program) • 15% can be reserved by ED for charter school financing • 10% can be reserved by ED for “national activities” • Priority to States with more open charter laws • Changes to lotteries: • Would allow grants to go to schools that use weighted lotteries that “give slightly better chances for admission to …educationally disadvantaged students” (if permitted by State) • Permits students to go from one charter to another without having to re-enter lottery • Authorizes an additional $50 million annually for the Charter Schools Program (CSP) • Passed House in May 2014 (awaiting action in Senate)

25. ESEA Reauthorization: Senate • Strengthening America’s Schools Act of 2013 (S. 1094) passed out of Committee on party line vote June 12th • Based largely on waivers, October 2011 ESEA legislation • Requires States to adopt standards, assessments, performance targets • Sets “n-size” at 15 students • Increased data/reporting requirements (cross-tabulation) • Interventions in priority/focus schools • Adds personnel expenditures to comparability calculation • States must implement teacher/principal evaluations • Committee Chairman Tom Harkin (D-IA) says he hopes to get it to the floor, but prospects still murky

26. ESEA Reauthorization: House • Student Success Act in (H.R. 5) passed House of Representatives on July 19th • Similar to bills passed in 112thCongress • Eliminates AYP, HQT requirements • States would get to set own performance targets, little federal guidance • Teacher/principal evaluations required (with student achievement as a significant factor) • Overall smaller federal role

27. ESEA Reauthorization: Overall • Few similarities between bills mean conference/agreement unlikely • Consensus: reauthorization will wait until 2015 or later • This means starting from scratch in January 2015 • Impact of ESEA waivers still TBD • give relieve to some districts/States (unless don’t qualify/waiver revoked) • causes conflict with Congress (and States, as compliance issues, high-risk, revocations continue) • promotes administration priorities (but Common Core, testing coming under fire)

28. Administrative priorities

29. ESEA Waivers • 41 States, the District of Columbia and Puerto Rico are approved for ESEA flexibility • Was 43 before Washington and Oklahoma waivers revoked • Common Criticism: Inconsistent Enforcement • Washington and Oklahoma Have Waivers Revoked, Other States Get Extensions • Recent Development: • Former Obama Official Claims President Overstepped Constitutional Authority

30. New SIG Guidance • New SIG Guidance (September 2014) • SIG States could create their own improvement plans • Must still mirror administration policies • Craft strategies partnership with an organization that has a strong track record of turning around low-performing schools.  • Rural schools could “opt out” of at least one requirement under each strategy option. 

31. E-Rate • President Obama’s “ConnectED” initiative • Supported in FY 2015 budget proposal • Accompanied by new financial/in-kind contributions from private companies • Announced in State of the Union • FCC passed resolution in July 2014 to: • Add $2 billion (in FCC cash on hand) to program • Encourage consortium applications, transparency • Re-work formula (based on student population) in two-year field test • Focus on wi-fi and phase out other services (voice/paging) • Some room for additional input on funding distribution, consortium-based purchasing

32. Teacher Distribution Equity • Suggested additional waiver renewal priority: • Progress toward equity in teacher distribution • Pulled when clear States not making progress toward original priorities • July 2014 announcement said ED would ask all States to file new equity plans by April 2015 • Also: will release State equity data • Develop new technical assistance system

33. Community Eligibility • Provision in Healthy, Hunger-Free Kids Act of 2010 • Field tested in some States, openly available in 2014-15 school year • Allows qualifying school to certify whole school as eligible for free meals without collecting forms/information • Pros: • Universal qualification for free meals for students • Paperwork reduction for SFAs, school meal personnel • Cons: • No FRL data!

34. Looking ahead

35. Looking Ahead to 2015 • Electoral battles will define control of Congress • Expect continued partisan fights between President and Congressional Republicans • Education likely continues to take a backseat • But conflict continues over Common Core, testing, ESEA waivers, and other executive actions

36. House of Representatives • House Membership: • 435 Members • 5 Delegates • 1 Resident Commissioner • Party Divisions • 233 Republicans • 199 Democrats • 0 Independents • 3 Vacancies

37. U.S. Senate • Party Divisions • 53 Democrats • 45 Republicans • 2 Independents • 2014 Elections • 36 seats up for reelection • 21 of those are Democrats • 7 of those 21 were carried by Romney in 2012 • Safe: 15 GOP (including Texas), 9 Dem • Tilt: 2 GOP, 4 Dem • Toss Up: 6

38. Fiscal Concerns Still Rule

39. Uniform Grants guidance

40. The OMNI Circular: What is covered? • A-102: Administrative Rules State and Local Govts • Part 80 – EDGAR • A-110: Administrative Rules IHEs and Nonprofits • Part 74 – EDGAR • A-87: Cost Principals – State and Local Govts • A-21: Cost Principals – IHEs • A-122: Cost Principals – Nonprofit Orgs • A-133: Audit Rules

41. Reasons for the Change? • Simplicity • Consistency • Obama Executive Order on Regulatory Review • Increase Efficiency • Strengthen Oversight

42. Who crafted the changes? • “COFAR” • Council on Financial Assistance Reform, and Key Stakeholders • www.cfo.gov/cofar

43. Who is covered? • All “nonfederal entities” expending federal awards

44. Key Dates: • Feb 1, 2013 Notice of Proposed Rulemaking • Dec 19, 2013 Final Rule Released • Dec 26, 2013 Federal Register Published Rule • April 2014 New OMB ComplianceSupplement • June 26, 2014 ED Draft EDGAR Changes • Dec 26, 2014 Final EDGAR Published

45. Inconsistency Between Program Statute and Circular • If federal program statute or regulation differs from Omni Circular, then statute / regulation governs.

46. Date of Applicability of Revised Rules • All awards made on or after 12/26/2014 will be made with terms and conditions subject to the Uniform Guidance.

47. Most Significant Changes • Shift from focus on Compliance to focus on PERFORMANCE!!! • Auditors (A-133 + Federal OIG) and Monitors (Federal and State Pass Through) must look more to “outcomes” than to “process” • The Omni Circular adds significant flexibility to way grantees / subgrantees can adopt their own processes

48. Most Significant Changes (Cont.) • The Omni Circular has a MAJOR emphasis on “strengthening accountability” by improving policies that protect against waste, fraud and abuse

49. NEW: Required certifications 200.415 • NEW: Official authorized to legally bind the non-federal entity must certify on annual and final fiscal reports or vouchers requesting payment: • “By signing this report, I certify to the best of my knowledge and belief that the report is true, complete and accurate and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the federal award. I am aware that any false, fictitious, or fraudulent information or the omission of any material fact, may subject me to criminal civil or administrative penalties for fraud, false statements, false claims, or otherwise.”

50. NEW: Mandatory Disclosures 200.113 • Non federal entity must disclose in writing in timely manner to federal agency or pass-through all violations of federal criminal law involving fraud, bribery or gratuity violations potentially affecting federal award