Copyright © 2021 Albuquerque Journal
The New Mexico Public Education Department is weighing its options after learning its failure to meet a deadline to submit school funding data to the federal government could cost the state millions of dollars.
The PED’s submission was three days late, federal officials say, and now the agency has asked the state treasurer to transfer more than $37.5 million from a state reserve fund by the end of the month to make distributions to local education agencies.
The shortfall at the state agency comes after the PED in March 2020 missed a deadline by which to submit a full application seeking U.S. Department of Education approval to take credit for federal Impact Aid in the state’s formula for funding public schools.
As first reported by the Gallup Sun newspaper, federal education officials informed the state on April 15 that the late submission meant the PED can’t consider the federal aid already made to local school districts in offsetting their state funding for the current fiscal year.
The federal Impact Aid Program had approved the PED request, but that decision was “revoked” when the federal agency discovered the missed deadline, wrote Faatimah Muhammad, director program at the U.S. Department of Education, in the April 15 letter.
PED Cabinet Secretary Ryan Stewart wasn’t available for a Journal interview, said an agency spokeswoman.
Instead, he said in a statement that when PED submitted its impact aid calculations in the spring of 2020, “we were told by then director (of the federal program) that our submission was timely and that we were authorized to take credit.”
“We are shocked by this reversal a year later,” Stewart stated. “In short, we dispute (the federal education department’s) assertion and are exploring legal options and next steps.”
Stewart added that PED officials “were working in good faith and in regular communication with the impact aid office throughout the process and with the full knowledge of that former director.”
That director, Marilyn Hall, retired last spring, and Muhammad was named impact aid director in May 2020.
The state’s loss could be a gain for certain local school districts.
The $37.5 million would supplement the current year’s state appropriation to include additional payments to districts and charter schools that receive Impact Aid, said PED spokeswoman Judy Robinson in an email on Wednesday.
But it wasn’t clear this week when the school districts, which weren’t identified, might get the money.
State Deputy Treasurer Sam Collins Jr. told The Journal on Tuesday that his agency received a recommendation from the Legislative Finance Committee to wait to see whether PED appeals the federal decision before releasing the money.
Congress has provided financial assistance to local school districts through the Impact Aid program since 1950.
The federal aid was designed to provide financial support to school districts for lost local revenue from property taxes due to the presence of tax-exempt property, such as tribal trust lands or military installations.
Such payments “have always been made directly to Local Educational Agencies (districts and charter schools),” Robinson stated.
But in some cases, the federal government allows states to take credit for a portion of the federal aid received by the local districts, thus reducing a state’s contribution to the schools’ operating budgets.
To qualify, states must provide documentation they have programs for state aid that equalize expenditures for free public education among local educational agencies.
In his statement to the Journal, Stewart, who asked the state Treasurer in a May 12 letter for the money transfer, didn’t address how the PED missed the deadline.
New Mexico PED’s application and supporting documents should have been received at least 120 days prior to the state fiscal year on July 1, 2020, according to federal education officials. That would have been March 3, 2020.
But the PED documentation wasn’t received until March 6, 2020, according to a report from Muhammad’s office.
Due to an “inadvertent error,” the report states, the Impact Aid office didn’t catch the late submission before issuing a determination on Dec. 7, 2020, certifying PED as approved. Credits for impact aid were projected at $56 million in the current fiscal year, Robinson stated.
The missed deadline came to light on Jan. 15 of this year as a footnote in a written decision from a federal administrative law judge, the Impact Aid Office report stated.
At the time, the judge had ruled against PED’s method of crediting federal Impact Aid for the 2019-2020 fiscal year and ordered nearly $60 million to be returned to districts.
This year, new methodology proposed by the state appeared to pass federal muster, but the late submission killed the PED application.
In recent years, considering federal Impact Aid in the state’s school funding formula has become controversial, criticized by some state legislators and some school superintendents as unfair to students who live in New Mexico’s poorest communities.
At least one New Mexico school superintendent wants PED to forgo an appeal over the missed deadline.
“If they appeal, it just shows that the state isn’t treating students equitably,” said Mike Hyatt, superintendent of Gallup-McKinley Schools. His school district would receive more than $20 million, he said.
“They are under obligation to return that to us. We rightfully deserve that money back.”