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PED request for $35M from state fund is approved

Education Secretary Ryan Stewart

Copyright © 2021 Albuquerque Journal

The state Public Education Department won approval Tuesday to transfer $35 million from a state reserve fund to resolve an unexpected budgetary gap created when the U.S. Department of Education ruled against the state for missing a deadline to take credit for federal impact aid.

PED Secretary Ryan Stewart in a statement Tuesday criticized the U.S. Department of Education decision, but said the state had decided not to appeal it. He told the Journal last week the “silver lining” was the fact that the $35 million would go directly to New Mexico school districts.

“There’s not one fewer dollar going to New Mexico students because of this. It’s not a loss to the state in the ultimate outcome of this,” Stewart told the Journal last week. There were no federal dollars at stake. The money that now has to come from state government coffers will end up helping certain school districts.

Substantial beneficiaries will be Gallup and Zuni school districts, said Adán Delgado, deputy secretary of finance and operations for the PED, who presented the transfer request to the state Board of Finance on Tuesday.

Since 1975, the state has adjusted its annual appropriations to school districts through a now-controversial funding formula that considered the amount of federal impact aid districts received.

The aid is designed to assist local districts that lose property tax revenue each year because of tax-exempt federal property within their boundaries.

But the federal government allowed exceptions for states that proved they had equalized educational expenditures.

New Mexico had applied annually to take the credit, which reduced the state’s contribution to certain school districts that received the federal aid. But, in April, the PED learned that its request sent more than a year earlier had been received three days after the mandated deadline.

By that time, the state appropriations to local school districts had already been budgeted to reflect the initial decision last December by the federal Office of Impact Aid approving New Mexico’s application.

In revoking the earlier approval, the director of the federal agency apologized, saying the missed deadline in March 2020 came to light only this year.

In a statement Tuesday, Stewart said the federal “flip-flop” was “completely unprofessional and a major error.”

But he told the Journal last week that he took responsibility “for not having systems in place” to ensure New Mexico didn’t miss the deadline.

Delgado told the Board of Finance, which unanimously approved the request, that PED officials had been under the impression that the deadline had been waived because the state had submitted a revised application.

A legal analysis by the PED showed New Mexico would likely lose if it appealed.

An appeal was not “a good use of our time or resources,” Stewart stated.

The outcome means the state will accelerate its plan, approved by the Legislature this year, to eliminate the federal impact tax credit altogether in building its school budgets.

Gov. Michelle Lujan Grisham signed the legislation in April, saying the long-standing practice was “fundamentally unfair, disadvantaging too many Native American students and communities.” The change would give certain school districts access to more than $60 million, the governor’s office said at the time.

“In effect, the work we did to end the Impact Aid credit in this past legislative session will effectively take place immediately,” Stewart said in the statement issued Tuesday.

The $35 million transfer will leave about $4 million in the state support reserve fund, Delgado said.

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