CARES Act and Private School Funding Update (as of 6/25/2020)
New U.S. Department of Education Rule
On June 25, the US Department of Education issue an Interim Final Rule (IFR) as an explanation of how the prior CARES Act guidance document must be interpreted by local education agencies (LEAs) when calculating the funds available for providing equitable services to students and teachers in private schools. The ruling is effective immediately.
The IFR now gives LEAs a choice of two options for serving students:
- Count and serve all students in all schools equally; LEAs must calculate the funds reserved to provide equitable services to private school students and teachers under the CARES Act programs based on enrollment data in a district. So, if private-school students represented 8% of enrollment, the funds for equitable services would be set at 8% of the total funds the LEA received under a CARES Act program.
- If the LEA decides to serve only Title I students in private schools, then it may serve only Title I students in public schools.
What should the private school do?
- Ask the LEA in which the school is located which option they will use. If all students are to be served, begin the consultation process.
- If they are using the Title I option then provide the poverty counts needed to determine the proportional share—use data from the 2019-2020 school year.
- If there are students from multiple LEAs in the school, private school officials must consult with each of the separate LEAs.
- If problems occur, consult the state Ombudsman and, if not satisfied, contact the Office of Non-Public Education.
Note: There is a strong possibility that many who disagree with the IFR will file an injunction to restrain its implementation. They disagree with the new interpretation that if the LEA wants to consider it a Title I program for private schools then it must do so for public schools. They want to be able to use CARES funds for all of their schools while limiting private school participation to only Title I students. Unfortunately, an injunction may cause further delay in the release of funds to serve students in private schools.
Applying for CARES Act Funding
At the present time there is a controversy over how the CARES Act references to the Title I Section 1117 should be interpreted. While the intent of Congress was to create an emergency relief program in response to the declaration of a national emergency, some public school organizations are insisting it is a Title I program and equitable services should be limited to only those private school students who participate in that program.
While the controversy is not yet settled, it is time for schools to contact the LEAs regarding the consultation process for receiving equitable services under the CARES Act. The services that are allowable under the bill may be found here.
In order to plan for the use of funds, schools must know how much funding will be available and need to request that data from the LEA. A sample letter requesting that information as well as some dates for the consultation meeting is available here.
The private school community is relying on the precedent set in all other past emergency relief programs, such as were enacted after disasters such as hurricanes Katrina, Rita, Harvey, Maria and recent wildfires, which included all children equitably.
The Council of Chief State School Officers, the association representing the public officials who head departments of elementary and secondary education in the states, instructed all LEAs to disregard the U.S. Department of Education guidance and serve only the Title I students in private schools. In reply, the Secretary of Education instructed SEAs to hold the private school funding in escrow pending a further ruling from the department.
NCEA is advising private school officials to participate in the consultation process but not sign the consultation form. They should indicate on the form that they do not agree that proper consultation has occurred because the LEA has not followed the U.S. Department of Education guidance regarding provision of equitable services and, while participating in the current process, the school is not relinquishing its right to receive a lawfully determined equitable share of CARES Act funds as resolved in any final ruling issued by the U.S. Department of Education.
The U.S. Department of Education will be issuing an “interim final rule” in the Federal Register that will be open for public comment for a minimum of 30 days and generally becomes effective immediately. Details are not available at this time—watch here for further updates.
NB: Several superintendents and State Catholic Conference Directors have filed a formal complaint with their state education department to protest the noncompliance with the guidance instructing inclusion of all private school students. This is a process that others are considering as well.
Carry-Over Funds for ESSA Programs
Many schools were not able to expend all of the funds allotted for the various Title programs due to the school closures. While ESSA now requires that funds be used in the year in which they were allocated, there are circumstances in which they may be carried over into the next year. Section N-7 of the U.S. Department of Education guidance is available online.
There is now more flexibility in use of the ESSA funds due to waivers under the COVID crisis. Title IV has no limit on funding use for technology so schools might consider requesting that these funds be allocated to acquire devices to provide students with tools they need if they do not have home access to engage in virtual learning. Title II-A funds might also be used to provide teachers with additional training and materials to ensure more effective digital instruction. Think ahead—not just about reopening school but about what might be needed if the country experiences another shutdown during the next year.
On April 30, 2020, the U.S. Department of Education released the new guidance pertaining to the CARES Act and how equitable services are to be provided to students and teachers in private and religious schools.
The link to the full guidance document of Q&As is provided here.
Summary of Important New Information
This is an emergency aid program – it is not a Title I or ESSA program. While the federal funding formula is used to determine and distribute the money to the states and local public school districts, the allocation of funds to serve students does NOT follow the Title I model.
The CARES Act references Title I for two purposes only: 1) to determine the distribution of funds to SEAs and LEAs and 2) to focus on all the required consultation provisions for determining how the private school share of the funds will be expended.
Allocation of Funding:
Use of funds:
- All non-public school students and teachers in a private school located in the LEA jurisdiction are eligible to receive equitable services.
- There is no residency, poverty or academically at-risk need requirement.
- The LEA is to use student enrollment data only for non-public schools whose students and teachers will participate under the CARES Act programs and calculate the proportionate share to be expended on the private school.
- A school need not have been participating in any Title programs prior to this to be eligible to participate in CARES.
- A list of acceptable uses of funds is available here.
- Available uses of funds for equitable services under the CARES ARE broader than under the ESSA Title programs in that the CARES Act does allow the wider use of funds that may benefit the school directly—such as purchasing supplies and equipment to prepare the school for a clean, safe and healthy environment and ongoing monitoring of the environment with appropriate safety materials and protocols.
Prepare now: The LEAs will soon begin the consultation.
- Proactively reach out to your LEAs and let them know you want to participate in all CARES Education Stabilization Fund programs and ask when and how timely and meaningful consultation process will take place regarding the to assure equitable participation for your students and teachers.
- Inform the LEA of the number of students enrolled in your school as of March 13, 2020.
- Begin to prepare a needs assessment that describes what you will be seeking support for to assist teachers and students to consist virtual learning as well as what needs to be done to prepare your school for all to return to a safe environment.
- The Q&As document pertaining to equitable services is provided here. Study it as well as the text of the bill, starting on p.143 (which is provided here) and have a copy available for the consultation, whether virtual or in person.
NCEA will offer a webinar to review the CARES Act and its benefits for Catholic schools on May 7, 2020. Sr. Dale McDonald and Jennifer Daniel will be the presenters, and an opportunity will be provided for participants to submit questions in live-time. Watch for the announcement and registration link on the NCEA website.
Relevant portions of the CARES Act for K-12 Schools
The CARES Act authorized the Education Stabilization Fund (ESF), which is a new appropriation of approximately $30.75 billion that creates funding streams for several distinct education programs that address the impact of the Novel Coronavirus Disease 2019 (COVID-19) on educational services across the Nation.
Under these programs, the U.S. Department of Education will make awards to Governors, State educational agencies (SEAs), and institutions of higher education (IHEs) to help States to prevent, prepare for, and respond to the devastating effects of COVID-19.
The Education Stabilization Fund in the CARES Act provides $30.75 billion that includes:
- $13.50 for K-12 schools: The Elementary and Secondary School Emergency Relief Fund (ESSER)
- $3.0 B for the Governor's Emergency Fund (GEER)
- $14.2 B for higher education
All non-profit private schools are eligible for the ESSER fund. They are also eligible for the GEER fund if the public-school district receives a grant under this program.
Governors’ Emergency Relief Fund (GEER): $3.0 billion
This is a direct grant to the governor of a state to “support to any other institution of higher education, local educational agency, or education-related entity within the State that the Governor deems essential for carrying out emergency educational services to students...the provision of child care and early childhood education, social and emotional support, and the protection of education-related jobs.” The governor has discretion in using the funds, but if money goes to a K-12 district in which the private school is located, equitable services must be provided to the private school.
The Elementary and Secondary School Emergency Relief Fund (ESSER) : $13.5 billion
Elementary and Secondary Education: $13.5 billion in formula funding directly to states, to help schools respond to coronavirus and related school closures, meet the immediate needs of students and teachers, improve the use of education technology, and support distance education.
Funding for the K-12 portions will be allocated to the states and then to the districts using the current formula for Title I. The process for distribution to the individual schools is on a per-capita basis—not the ordinary LEA Title I formula.
The law states a number of acceptable uses of the funding as in Every Student Succeeds Act, including “other activities that are necessary to maintain the operation of and continuity of services” that could include aspects of the general operations the school.
Funds for private school participation will follow the ESSA provision of services process: the district controls the funds and consults with the private school officials regarding the goods and services the school needs.
The LEAs will soon begin the consult.
- Uses of the Educational Stabilization Fund
The legislation lists twelve categories of permissible uses of the Schools funds which include any activity as part of the programs authorized under ESEA and IDEA, supplies to sanitize and clean facilities, planning for closures, purchasing educational technology, mental health support, etc. The complete list may be found here. These funds are available through September 30, 2021.
School leaders should begin to prepare a needs assessment that describes what you will be seeking support for to assist teachers and students with virtual learning and what needs to be done to prepare your school for all to return to a safe environment. Proactively reach out to your LEAs and let them know you want to participate and ask when and how timely and meaningful consultation process will take place regarding the Education Stabilization Fund to assure equitable participation for your students and teachers.
The Q&As document pertaining to equitable services is provided here
. Study it as well as the text of the bill, starting on p.143 (which is provided here
) and have a copy available for the consultation, whether virtual or in person.
Financial Issues and Employee Compensation Provisions
Small Business Loans (SBA)
Under this new law, non-profit organizations, including religious, are eligible to apply for some of the $350 billion in Small Business Administration (SBA) loans in the CARES Act.
These loans are 100% forgivable if used to keep workers on payroll during the “covered period” of Feb. 15 – June 30, 2020.
These loans are limited to nonprofits with 500 employees or fewer. The “affiliated” entity SBA rule will apply to nonprofits in determining whether they and their affiliates have 500 or fewer employees. There is no information as yet as how the number of employees will be counted for schools (i.e., is a small Catholic school counted alone or is the entire diocese and its employees counted in total?).
The SBA is required to promulgate new rules within 15 days of passage on these loans. This is still being worked out and more detail will be provided as it becomes available.
Cash Payments to Individuals
Sections 2202 - 2020 of the law provide recovery rebates for individuals. Everyone with an adjusted gross income (AGI) under $75,000 ($150,000 married) who is not a dependent and has a work eligible SSN gets $1,200, as well as $500 per child. Phase out starts at an AGI over $75,000 and rebate is zeroed out when AGI exceeds $99,000 for individuals, $146,500 for head of household, and $198,000 for joint filers without children. IRS will be providing information as to how these payments will be made.
Employer assistance credit
Section 2301 of the law provides employee assistance for employers subject to closure due to COVID-19 in the form of a refundable payroll tax credit for 50% of wages paid by employers to employees when workplace is fully or partially closed due to COVID-19 or gross receipts declined by more than 50% when compared to same quarter as last year.
Section 2302 of the law allows employers to defer payment of employer contribution to the SS tax over next two years (first half due Dec 31, 2021; second half Dec 31, 2022). However, this cannot be combined with forgiveness of an SBA 7(a) loan.
There are several provisions in the law that apply to those who are eligible for unemployment compensation because their employers have paid into the fund. There is an additional provision regarding those whose employers do not pay into the system. These matters are all subject to individual state employment laws.
Catholic school superintendents, pastors and principals and other employers should consult with their diocesan attorney or other designated person to determine how they are to deal with these provisions.
Notice: This article is designed to provide information regarding the subject matter covered. It has been provided to NCEA members with the understanding NCEA is not engaged in rendering legal, accounting, tax, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. Laws vary by jurisdiction, and the specific application of laws to particular facts requires the advice of an attorney.