The Game Changer NACTEI Pre-Conference Michael Brustein, Esq. Brustein & Manasevit

1. The Game ChangerNACTEI Pre-ConferenceMichael Brustein, Esq.Brustein & Manasevit May 15, 2012

2. THE TEST!

3. 2. Perkins Funding and Sequestration • Perkins Funding – July 1, 2012 June 30, 2013 $1,123,659 (.189 % cut) • Constant with Allocation for July 1, 2011 June 30, 2012 (13% cut from prior year) • Administration 2013 Request: July 1, 2013 June 30, 2014 $1,123,030

4. Budget Control Act • August 2011 • Raised the debt ceiling temporarily • Reduced spending caps by $891 billion over the next ten years • Created Congressional debt Supercommittee

5. The Supercommittee: Not So Super • Tasked with cutting $1.5 trillion in spending over next decade by Thanksgiving 2011 • If at least $1.2 trillion in cuts were not agreed to by November 23, automatic cuts triggered in that same amount • Total failure to come to an agreement • Blamed on lack of agreement generally, and on issue of taxes vs. cuts • Failure of Supercommittee means automatic cuts through “sequestration”

6. Sequestration: a Big Hairy Mess • Failure of Supercommittee means automatic cuts through “sequestration” • Cuts take effect January 2, 2013 • Cuts to some programs may take effect immediately (mid-year) • Cuts to education of up to $4.1 billion this coming year • Never really intended to happen?

7. Sequestration Step-by-Step • Adjust total for interest to reflect lesser debt principal • $1.2 trillion  $984 billion • Divide by year from 2013 through 2021 • Split by function between defense and non-defense spending (about $54.5 billion each per year) • Take exempt programs out of the equation • Spread cuts equally among remaining programs in 2013(accomplished by reducing spending caps for 2014 and beyond) • Estimates on final cuts range from 5.5% - 9.1%

8. Sequestration • What’s exempt? • Some low income assistance programs: • Social Security • Medicaid • TANF • SNAP • Many child nutrition and commodity food programs • Veterans benefits • Pell grants, in first year • What’s not exempt? • Defense spending, among other items

9. Impact of Sequestration

10. How to Avoid Sequestration? • Must be rescinded by an act of Congress through: • Regular- year appropriations legislation passed by House and Senate with specific rescission language; • An alternate spending plan with rescission language; or • Special legislation rescinding automatic cuts • All options must be approved by House, Senate, and President

11. See Tab A

12. The Search for Plan B • Alternative to sequestration is to pass a budget bill that undoes automatic cuts • Potential alternatives • President’s budget proposal • The Ryan budget • Other input

13. The President’s Proposal • Overall, 2.5% increase in education spending ($1.72 billion) • New Race to the Top proposals for college affordability and completion, improving matriculation and reducing remediation ($1.55 billion) • Increases to Promise Neighborhoods, IDEA Part C • Legislative proposal would provide: • $30 billion to modernize schools • $25 billion to help hire and retain teachers • $1 billion for career academies • Other programs frozen at FY 12 levels (no cuts) • Includes: CTE, Title I, SIG, 21st CCLC, IDEA Part B

14. The Ryan Budget • Proposed by House Budget Committee Chairman Paul Ryan (R-WI), resolution passed House in March • Lowers spending caps by 5% in FY 2013; by 19% in FY 2014 • Huge cuts in almost all areas except defense • Education could lose $115 billion in the next decade • Restructuring of tax code, entitlements • Balances budget by 2040? • Negative reaction from Democrats, advocates, some moderate Republicans • “Thinly veiled social darwinism” (President Obama) • Goes against debt ceiling agreements on spending

15. Other input • Defense industry: Don’t subject us to cuts • Chairman Kline (R-MN): Don’t cut IDEA • States: State and local revenues are dropping, can’t take more cuts at federal level • Leadership: need accountability for Supercommittee failure • Presidential and Congressional Elections a factor

16. What’s Next for the Budget • House and Senate Appropriations Committees will draft spending bills • Debate on spending will be part of election • Most Likely: • Another Continuing Resolution (CR) and long budget battle • Continuing signs of schism within Republican party • Final action on sequestration and budget will come during lame duck session

17. Sequestration Impact on CTE • $158 million cut! In first year alone…

18. Suggestions to Minimize Impact 9% vs. 2% Sequestration CMIA

19. 3. Maintenance of Effort • Section 311(b) of Perkins • Most Restrictive • Only One Waiver-Idaho 2002

20. OVAE Comments on MOE (5/3/12) • Violations not readily apparent from FSR, CAR, or A-133 • Spectrum runs from solely State Administration $ to broad matrix • Focus on $ appropriated vs. $ expended for CTE

21. OVAE Recommends • Handle problems informally • More formal, OGC involvement • Identify target number and OVAE will work to find solution • May shift from “aggregate” to “per student,” but be consistent (e.g. participant vs. concentrator)

22. If MOE violation determined by either monitoring or A-133 Audit, state given 35 days to respond.

23. See Appeal of Pennsylvania and Legislative ReliefAppendix B

24. 4. Monitoring

25. OIG Report on Monitoring

26. ED Monitoring • OIG Report # I13K0002 • http://www2.ed.gov/about/offices/list/oig/aireports/i13k0002.pdf

27. ED identified Grantees as – • “High Risk” • “At Risk”

28. New ED Policy: • Discontinue “At Risk’ • Formula Grantees: “Active Engagement” • Discretionary Grantees: “Evidence of Risk”

29. “Active Engagement” and “Evidence of Risk” not High Risk but requires ED action

30. Of the 50 SEAs and 10 Territories: • 4 are High Risk • 20 are Active Engagement

31. SEAs only formally notified if High Risk not active engagement

32. High Risk: DC Guam VIDE American Samoa

33. Active Engagement: CA BIE Marianas FL GA HI IL LA MI MS NJ NY PA PR TN TX

34. Risk Mitigation for Discretionary Grants • More Frequent Reviews • On-site Visits • Special Conditions • High Risk Designation

35. OVAE Comments (See Appendix B) • OVAE uses “Risk Analysis” Assign Risk Levels • Audits • Program Findings • Timing of Last Visit • Larger States

36. LEAs and Postsecondary Institutions selected based on “program of study” analysis • but primary focus at SEA

37. Considerable scrutiny on • Local application • Performance accountability • Validity and reliability of data

38. Are all locals using same definitions as state? • Are multiple systems in state corrupting the data? • Is state providing T/A to locals?

39. Due to reduction in OVAE personnel and resources, now shifting to “virtual monitoring.” • Kentucky is up first!

40. 5. Shift of Focus

41. Compliance Versus ResultsAudit Versus Monitoring Shift of Focus?

42. Beltway “Noise”Program Success Trumps All

43. March 2, 2012 OSEP Announcement: • Monitoring will shift from compliance focus to one driven by results change in mission? *OSEP will not conduct verification visits in 2012-2013

44. Will OESE/OPE/OVAE follow?

45. What about OIG? • Philadelphia • Detroit • Los Angeles • Camden • Houston • Kiryas Joel

46. Camden, NJ Audit March 2012(A02K0014) • Designate Camden as High Risk • Impose Special Conditions • Appoint 3rd Party Servicer • Rescind Camden “Flexibilities” on Schoolwide

47. What about Single Audit? • Keep an eye on “Compliance Supplement”

48. Reshaping Policies

49. Is Congress on board?“We Can’t Wait” Crusade!

50. Obama taking advantage of dysfunction in Congress to reshape policies