State faces potential loss of $232.1 million in federal funds, less than feared but still worrisome
The good news is that the state's schools are not going to lose $418 million in federal funding they feared was lost last month when federal officials abruptly announced they were clawing back unspent pandemic recovery funds.
The bad news is that the state could still be out $232.1 million, the Maryland Board of Education was told Tuesday.
The confusion came after school officials received a letter last month from the U.S. Department of Education, informing states that the Trump administration would cancel Biden administration extensions that would have given schools until next year to spend down any remaining COVID-19 recovery funds.
That letter, from U.S. Education Secretary Linda McMahon, came in an email on Friday, March 28, at 5 p.m., which said the cancellation would take effect immediately. It said the federal department would consider reimbursing states, but only under narrow provisions.
'This took us off guard, needless to say at five o'clock on a Friday,' said Maryland State Superintendent Carey Wright. In the confusion, state officials estimated that as much as $418 million could be at stake for state schools.
Now, they say, the number is closer to $232.1 million.
Krishna Tullar, deputy state superintendent for the department's Office of Finance and Operations, summarized from a chart that more than half of that amount, $144.9 million, comes from the third, and final, iteration of the American Rescue Plan's Elementary and Secondary School Emergency Relief, or ARP ESSER, program.
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The remaining $87.2 million came from earlier versions of ESSER and from other pandemic-response funds. It was slated for uses such as mental health services, professional development for teachers and for students experiencing homelessness, like residing in transitional housing.
Donna Gunning, assistant superintendent in the department's division of financial planning, operations and strategy, said the federal government has not reimbursed the state for at least $127.5 million that has already been allocated. Another $104.6 million is money not reimbursed to the state's local school systems.
Gunning said about $56.7 million of the school system money has been designated as 'encumbered' and not spent by the school systems also called local education agencies, also known as LEAs.
Board President Joshua Michael summarized how local school districts will be affected if they are not reimbursed by the federal government for the millions they have spent.
'That could mean salaries for 2,000 teachers next year. It could mean 12,000 students in our pre-K program. We will have to come up with this money,' he said. 'These are real dollars.'
Without schools being reimbursed, certain projects or educational programs must immediately stop. Board Vice President Monica Goldson said many local school systems 'were counting on receiving that reimbursement in their FY '26 budget.'
'And now they've been informed that they're not. Then those cuts at the local level could be even more extreme than they are right now,' said Goldson, former CEO of Prince George's County public schools. 'I just want everybody to understand that we are falling off of the cliff quickly.'
Gunning said the state asked the federal department to reconsider its funding, but the only response received so far is that the reimbursement request for ESSER funding had to be resubmitted in another format.
Board member Rachel McCusker asked if there's any indication when federal officials will inform the state of a decision.
'We are not aware of any state having received an approval since this decision,' Tullar said.
Because of the federal government's decision, Attorney General Anthony Brown (D) joined other attorneys general in a lawsuit earlier this month against the federal agency to prevent it from arbitrarily changing its position so the states can continue to access the money that 'provides essential support' for students.
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