Maintenance of Effort, Part 2

by Tom Yamachika, President, Tax Foundation Hawaii

A little more than a month ago, we ranted on about Senate Bill 815, the “maintenance of effort” bill, that would ensure funding for the Department of Education (DOE).

After some refinement after going through several legislative committees, it now works like this. The bill creates a “public education stabilization trust fund.” If the appropriations to DOE in any legislative session are lower than the appropriations to DOE in the preceding legislative session, then the difference is scooped out of general excise tax collections and dropped into the fund. DOE can then spend the money in the fund to make up for the funding shortfall. (Which means the fund is not really a trust fund, but a special fund, under criteria being applied by the State Auditor.)

DOE, which is strongly supporting the bill, argues that there are many federal acts and grant programs, including the CARES Act, which themselves have maintenance of effort requirements. In other words, if the State does not maintain a consistent funding level for education, the federal government will reduce or eliminate its funding. “This measure would safeguard the Department's ability to fulfill these obligations,” DOE testified.

The maintenance of effort requirements in the CARES Act are imposed by section 18008 of the Act, which apply to both Governor’s Emergency Education Relief (GEER) grants and Elementary and Secondary School Emergency Relief (ESSER) grants authorized by the Act. The U.S. Department of Education stated that a State can demonstrate support of education in different ways. USDOE said that it is purposely leaving he statutory term “support for higher education” undefined by regulations so that States have flexibility in determining how it is satisfied.

Other federal education statutes have maintenance of effort requirements, such as the Individuals with Disabilities Education Act (IDEA) for the support of individuals with disabilities. Even there, the law and regulations have flexibility in the way States can satisfy the requirements and have a mechanism by which the State can apply for waiver of the requirements for reasonable cause, such as a precipitous decline in resources following a natural disaster.[1]

The maintenance of effort provisions of IDEA were enacted at the end of 2004.[2] In other words, those provisions have been around for more than 16 years and it does not seem that Hawaii has had a problem following them. No budgetary trickery like the gimmick proposed in SB 815 was needed to comply with the maintenance of effort requirements in IDEA. The USDOE’s guidance shows that no gimmick is required to satisfy the CARES Act either.

The HSTA, however, in its testimony in support of the bill, argues that the budget gimmick is not only necessary, but doesn’t go far enough. It notes that part of the bill would allow the Governor to suspend the maintenance of effort requirements if we have a sudden and severe decline in revenue; exceptional circumstances like a natural disaster; or a sharp decline in student enrollment. HSTA wants the suspension provisions out of the bill, arguing that the only time the bill would be needed is when there is an economic downturn. (Although the underlying message seems to be that they want everyone except them to suffer during economic calamity.)

The reality is that future legislatures are not, and cannot be, bound to the budgeting decisions of today. If a future legislature really wants to lower the budget of the Department of Education, perhaps in a year like this one where there simply is not enough money to go around, it can repeal the provisions introduced by this bill. The mechanisms in this bill are not necessary, and they complicate and obfuscate the budgeting process. And if we do enact them, we create a precedent for other departments to follow. Perhaps the Department of Health would be sponsoring a similar bill next year, the University of Hawaii in the following year, and the Department of Human Services in the year after that.

With that said, do we need to make budgeting more difficult by enacting a bill like this?

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[1] See, for example, 20 USC section 1412(a)(18); 34 CFR section 300.163.

[2] Pub. L. No. 108-446, 118 Stat. 2647, 2688.