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Update on QEIA Funding Situation:
Reduced Revenue Limits Do Not Eliminate Program Requirements

By Brett McFadden and Tahir Ahad - August 14, 2009

As reported in EdBrief last week, the recently adopted State Budget included a significant budget hit for the 135 school districts participating in the Quality Education Investment Act (QEIA).  This is a hit on top of the huge reductions they have taken alongside other districts in 2008-09 and 2009-10.

In a nutshell, these districts and their participating schools have had their QEIA funding completely erased for the 2009-10 school year.  And this occurs at the time when many school districts have already begun the school year, while other districts are within a couple of weeks of starting.

Under this new and previously unannounced budget scheme, the 2009-10 revised budget deleted all of the $402 million dedicated to QEIA districts/schools for the 2009-10 fiscal year.  The reduction was implemented in a complex series of cuts and shifts, but the bottom line is that QEIA districts will have their revenue limits reduced in an amount equivalent to their corresponding QEIA allocation this year.

But all program requirements remain in place.  QEIA schools and districts are still required to meet strict program guidelines, but with a potentially huge (and unanticipated) hole in their general purpose funding.  For Santa Ana Unified, for example, this action will leave a potential $11 million hole in the general fund budget on top of the $65 million in cuts to restricted and unrestricted programs they have already implemented.

The Association of California School Administrators (ACSA) and Total School Solutions (TSS) representatives continue to meet with various legislative and Governor’s office staff to assess how Sacramento policy makers intend to make these QEIA districts whole in 2009-10.   Policy staff has stated that their intent is to make all QEIA districts “whole again” in 2009-10.  The plan is to backfill this reduction in unrestricted general fund by utilizing Title I School Improvement Grant funding, as well as 2009 Title I carryover and set-aside funds.  In addition, the budget bill extended the QEIA program for one more year until 2014-15.

Although we appreciate the untenable situation that the Governor and his staff was facing, this action nonetheless raises a number of significant fiscal and management challenges for QEIA districts and schools.  Those issues include, but are not limited to, the following:

  1. Supplanting federal funds – This plan is clearly supplanting federal funds for a state obligation.  Unless Sacramento policy makers provide some sort of waiver, or take responsibility for this funding shift, QEIA districts are on the hook when the federal government audits these districts in one to two years.
  2. Eligibility for federal Title I – Not all QEIA districts will be eligible for Title I dollars to offset this hit.  Special legislation and/or regulations will be needed to make them eligible.  Even then, the federal government may not ultimately approve of it.
  3. Opportunity Costs – Increases in the federal school improvement grant funds could have been more appropriately used for program enhancements to a full range of districts instead of backfilling for a loss of state QEIA funding to only 135 districts. 
  4. Loss of unrestricted funding – The funding from the federal grants is likely to be restricted at least to some extent, making it a poor substitute for unrestricted general fund monies and reducing options for the targeted districts.
  5. Policy Impact – Regardless of the final outcome, the act of the Governor unilaterally reducing Revenue Limit funding for a class of school districts itself sets a wrong and potentially dangerous precedence.

ACSA and TSS are working closely with the Sacramento education lobbying firm of Strategic Education Services and other stakeholders to develop appropriate fiscal solutions and legislative advocacy strategies.  Although this issue initially impact QEIA districts, it will end up impacting all districts indirectly when available federal funding is shifted away from Local Education Agencies (LEAs) in order to cover the state’s obligation to these districts.

We will provide further information and advocacy suggestions within the next week.  In the meantime, we continue to monitor and advocate for a complete restoration of this vital funding.  Please contact us for additional assistance:

Brett McFadden, ACSA – bmcfadden@acsa.org and Tahir Ahad, TSS – tahad@totalschoolsolutions.net.

Editor's Note: Tahir Ahad is President of educational consulting firm Total School Solutions (TSS), and Brett McFadden is Management Services Executive at Association of California School Administrators (ACSA).