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COVID relief discrepancy pushes budget session to May

CHARLESTON — West Virginia has a $465 million question with the federal government based not on any allegations of misspending — but instead over whether school systems fell short on an obligation to maintain financial support for education at levels in line with overall spending.

A revelation of the hundreds of millions of dollars at issue has introduced uncertainty into the legislative budgeting process, with a special session already being planned for May when the situation could be more clear.

Meanwhile, officials are working to resolve concerns of federal authorities, potentially by demonstrating an emphasis on better pay for educators and greater investment in school facilities.

“The issue is, did the state of West Virginia raise its educational spending in proportion to its overall spending,” Brian Abraham, chief of staff for the Justice administration, said on MetroNews’ “Talkline.”

West Virginia, like other states, drew down millions of dollars in COVID relief from the federal government. One of those sources was the Elementary and Secondary School Emergency Relief fund.

That fund has a requirement known as maintenance of effort, a standard introduced April 21, 2021, requiring the state to keep the same proportional level of funding for schools as it had before the pandemic. That was measured in comparison to the state’s spending in other areas.

Abraham said that standard was a challenge for West Virginia because of its formulas in state law for education funding. For example, under West Virginia’s school funding system, the state funds a certain number of teachers and other educational positions for each school district based on the district’s student enrollment.

“So there’s not really ways you can direct money into educational spending except for things like pay raises, school building authority, et cetera,” Abraham said.

On June 21, 2022, West Virginia recognized its jam and asked for a federal waiver. That request contended, “West Virginia has continued to make consistent investments in K-12 and higher education based on the state’s codified school funding laws, which are incompatible with the parameters” of the maintenance of effort standard.

An attachment with more detail about the state’s reasons, signed by Gov. Jim Justice, described declining enrollment in the school system. But the document made a case that West Virginia had increased its per-pupil spending.

And the document contended that comparisons of education spending to overall spending got out of whack because of new, increased spending in the state healthcare system, prompted by the COVID-19 pandemic.

On June 12, 2023 — about a year after West Virginia made its waiver request — the federal Office of Elementary and Secondary Education approved it. The federal authorities noted that West Virginia had underperformed the maintenance of effort standards for fiscal year 2022 by
$23.7 million.

The federal authorities observed that “West Virginia demonstrated a commitment to State support for elementary and secondary education in future fiscal years by increasing State aid for elementary and secondary education in the State FY 2024 budget.” That included pay raises for educators and
increased funding for school construction and maintenance.

So the federal authorities gave West Virginia a pass for its fiscal 2022 spending — but that correspondence included a note that it was premature at the time to make a determination on West Virginia’s request for a waiver on 2023 maintenance of effort requirements.

That 2023 spending is the issue that broke into the wild this week.

Documents on file with the federal Office of Elementary and Secondary Education and signed by Justice this past Feb. 21 show West Virginia making its case to receive a waiver for that fiscal 2023 spending requirement.

The request made a case that “when looking at total education spending, the state continues to increase its total spending on education despite the declining enrollment trends.

“So not only did the state maintain it’s funding formula on a per-pupil-basis, it continued to increase funding to education over and above the state required formula as can be seen with the increasing education funding trend compared to the decreasing enrollment trend.”

The waiver requests were publicly available on the federal education website, but flew under the radar until last week when lawmakers started discussing specific allocations in the state budget. Some allocations that would have been routine were being held in abeyance until the multi-million dollar federal problem could become clearer.

Internally, the Department of Revenue had been collecting information “for months,” Abraham said, gathering financial information from various state agencies to submit to the federal education authorities. Abraham expressed confidence the matter can be resolved.

“We were kind of taken aback yesterday (earlier this week) when it came out in the Finance hearing as if we’re in some kind of crisis mode,” he said. “There’s not a likelihood the department would ask us to pay back the money to Washington. Rather, what they’re asking us to do is spend money on education in West Virginia to match our overall spending.”

That could be accomplished, Abraham said, by increased spending on educator salaries and improvements to school maintenance and construction.

The governor proposed and the House of Delegates has passed a bill representing average 5% pay raises for educators. A fiscal note estimates that’s a $77.5 million outlay. The House Finance Committee last week advanced a $150 million supplemental appropriation for School Building Authority projects all around the state.

Senate Finance Chairman Eric Tarr, R-Putnam, expressed skepticism about whether the state can afford the ongoing cost of the pay raises. The Senate’s budget, passed last week, does not include the raises.
“It gives me heartburn to go into a perpetual spend in that base, not knowing exactly where we stand with fiscal impact,” Tarr said last week on “Talkline.”

The progressive-leaning West Virginia Center on Budget & Policy had this advice: “To comply with the feds, West Virginia must pass a strong budget.”

“Rather than facing clawbacks to federal money, the legislature should pass a budget that increases funding for and adequately supports our public education and health care systems — not only to be in compliance with federal requirements but also because it’s the right thing to do for our people and our economy,” wrote Kelly Allen, executive director of the center.

Joshua Weishart, a West Virginia lawyer with expertise in education rights, said the real misstep by the state has been to not maintain appropriate investment in the education system overall.

“The story here is that the state flagrantly and unconstitutionally disinvested in public education even when it had an excess in federal funding to make those investments,’ Weishart said.

“The state chose instead to be excused from federal law because of declining enrollment, deliberately oblivious to the reality that, though perhaps fewer in number, our students have greater, unprecedented educational needs, which the unprecedented cash from the feds was supposed to meet.”