FISCAL BRIEF CARES ACT EDUCATION-RELATED ALLOCATIONS Jacqueline Mullen, Fiscal Analyst Perry Zielak, Senior Fiscal Analyst Samuel Christensen, Senior Fiscal Analyst November 25, 2020 INTRODUCTION FAST FACTS The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed March 27, 2020, is the third of four federal relief packages enacted in response to the COVID- 19 pandemic. The CARES Act establishes two funds that are authorized for • The CARES Act expenditure for education-related purposes: provides federal funds to states in response • $30.8 billion Education Stabilization Fund (Michigan: $866.9 million, all of to the COVID-19 which is allocated for education-related purposes), allocated in four categories: pandemic. In o $14.0 billion Higher Education Emergency Relief Fund (Michigan: $369.8 Michigan, $1.6 billion million). is allocated for o $13.2 billion Elementary and Secondary School Emergency Relief Fund education-related (Michigan: $389.8 million). purposes. o $3.0 billion Governor’s Emergency Education Relief Fund (Michigan: $89.4 million). • $978.2 million is o $307.5 million for grants to states with the highest coronavirus burden allocated to K-12 (Michigan: $17.8 million). districts. o $307.5 million reserved for allocations to territories and programs operated • $593.8 million is by the Bureau of Indian Education. allocated to • $150.0 billion Coronavirus Relief Fund (Michigan: $3.9 billion, $730.0 million of institutions of higher which is allocated for education-related purposes). education. This fiscal brief describes the education-related allocations for Michigan from funds • $24.8 million is established under the CARES Act. allocated to LEO, MDE, and other entities related to FUND AUTHORIZATIONS education. CARES Act funds related to education are allocated in Michigan through the following means:1 • 2020 PA 67 authorized the expenditure of any federal funds received for the COVID-19 crisis within 90 days of March 25, 2020 (i.e., by June 23, 2020). Under this authorization, the State Budget Office (SBO) appropriated $479.2 million Education Stabilization Fund. 1 2020 PA 144 authorized $53.0 million CRF for hazard pay of up to $500 per K-12 teacher; however, 2020 PA 166 revised the fund source for this appropriation to General Fund/General Purpose (GF/GP). House Fiscal Agency Phone: (517) 373-8080 • Website: www.house.mi.gov/hfa 1 • $369.8 million Education Stabilization Fund is appropriated directly to institutions of higher education (IHEs). • The remaining $17.8 million Education Stabilization Fund is allocated as a high coronavirus burden grant directly to the Michigan Department of Labor and Economic Opportunity (LEO). • 2020 PA 123 authorized $18.0 million Coronavirus Relief Fund (CRF) to districts for instructional recovery programming, benchmark assessments, or health and safety expenditures necessary to provide instruction safely. • 2020 PA 146 authorized $512.0 million CRF to districts in an amount equal to $350 per pupil and $200.0 million CRF to public universities and community colleges2 in an amount equal to each entity’s School Aid Fund (SAF) reduction under the same public act. FUND DISTRIBUTIONS The education-related funds described above are allocated to K-12 districts, IHEs, and other entities. Table 1 groups each allocation by recipient type. Allocations are described in further detail in the following sections. Table 1: Allocations by Recipient Type Amount Allocations (in millions) Page K-12 Districts ESSER: Subgrants to LEAs $350.8 4 ESSER: Education Equity Fund $37.4 5 GEER: Formula Funding to LEAs $60.0 6 CRF: Additional K-12 Grants $18.0 8 CRF: Districts ($350 Per Pupil) $512.0 8 Subtotal $978.2 Institutions of Higher Education HEER: Emergency Student Aid and Institutional Coronavirus Related Costs $354.8 3 HEER: Awards to HBCUs and Minority-Serving Institutions $9.1 3 HEER: Supplemental Emergency Funding $5.9 4 GEER: Futures for Frontliners $24.0 6 CRF: Community Colleges $163.7 8 CRF: Public Universities $36.3 8 Subtotal $593.8 Other Entities ESSER: MDE Administration $1.6 5 ESF: MiLEAP $17.8 7 GEER: Other Education-Related Entities $5.4 6 Subtotal $24.8 TOTAL $1,596.8 2 IHEs include public universities and community colleges, but also include private colleges, cosmetology schools, seminaries, and other private postsecondary institutions. While the HEER Fund allocates funds to all IHEs, 2020 PA 146 only includes public universities and community colleges. House Fiscal Agency Phone: (517) 373-8080 • Website: www.house.mi.gov/hfa 2 HIGHER EDUCATION EMERGENCY RELIEF FUND: $14.0 BILLION (MICHIGAN: $369.8 MILLION) The Higher Education Emergency Relief (HEER) Fund is allocated in the following three categories. Emergency Student Aid and Institutional Coronavirus Related Costs 90% ($12.6 billion; Michigan: $354.8 million) is allocated to each IHE using the following formula: • 75% is distributed according to the calculated measure of full-time equivalent (FTE) enrollment of federal Pell Grant recipients who are not exclusively enrolled in distance education courses. • 25% is distributed according to the calculated measure of FTE enrollment of students who are not federal Pell Grant recipients and who are not exclusively enrolled in distance education courses. The institutions may use funds to cover costs associated with significant changes to the delivery of instruction due to the coronavirus. However, at least 50% of the funds must be used to provide emergency financial aid grants directly to students for expenses related to the disruption of campus operations due to the coronavirus, such as food, housing, technology, or health care expenses. Institutions are prohibited from using HEER Fund appropriations for the following costs: • Payment to contractors for the provision of pre-enrollment recruitment activities. • Endowments. • Capital outlays associated with facilities related to athletics, sectarian instruction, or religious worship. The U.S. Department of Education (U.S. ED) has issued a ruling that funds may go only to students who are eligible to participate in programs under Title IV of the Higher Education Act (i.e., U.S. citizens and permanent residents).3 Out of the $354.8 million allocation for Michigan IHEs, public community colleges received $93.9 million and public universities received $189.9 million. See Appendix A for allocations to Michigan IHEs. Awards to Historically Black Colleges and Universities (HBCUs) and Minority-Serving Institutions 7.5% ($1.1 billion; Michigan: $9.1 million) is allocated for additional awards to IHEs under Parts A (Strengthening Institutions Program) and B (Strengthening Historically Black Colleges and Universities Program) of Title III, Parts A (Developing Hispanic-Serving Institutions Program) and B (Promoting Postbaccalaureate Opportunities for Hispanic Americans) of Title V, and Subpart 4 of Part A of Title VII (Master’s Programs at HBCUs and Predominantly Black Institutions) of the Higher Education Act. These funds are allocated in proportion to the funding of such programs in the 2020 Further Consolidated Appropriations Act. Awards may be used for: • Defraying expenses, including lost revenue, reimbursement for expenses already incurred, technology costs associated with a transition to distance education, faculty and staff trainings, and payroll. • Grants to students for any component of the student’s cost of attendance, including food, housing, course materials, technology, health care, and child care. Michigan public community colleges received $3.2 million, and public universities received $2.1 million. See Appendix A for allocations to eligible Michigan IHEs. 3 U.S. ED's interim final rule: https://www.federalregister.gov/documents/2020/06/17/2020-12965/eligibility-of-students-at- institutions-of-higher-education-for-funds-under-the-coronavirus-aid. Due to court cases, IHEs in Washington and Massachusetts and community colleges in California are prohibited from limiting aid under the rule. House Fiscal Agency Phone: (517) 373-8080 • Website: www.house.mi.gov/hfa 3 Supplemental Emergency Funding 2.5% ($348.8 million; Michigan: $5.9 million) is allocated to IHEs that the U.S. ED determines have the greatest unmet needs related to the coronavirus. Funds may be used for the same purposes described under the HBCU 7.5% allocation. Priority must be given to any institution that is not otherwise eligible for at least $500,000 under the 90% formula-based allocation and that demonstrates significant unmet needs related to expenses associated with the coronavirus. In Michigan, the supplemental funding effectively increased 19 IHEs’ total HEER Fund allocations to $500,000, although no Michigan public community colleges or universities received funding from this category. See Appendix A for allocations to eligible Michigan IHEs. ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ESSER) FUND: $13.2 BILLION (MICHIGAN: $389.8 MILLION) ESSER funds are allocated to each state in the same proportion as the state’s FY 2019-20 Title I, Part A allocation under the Elementary and Secondary Education Act (ESEA). Subgrants to Local Educational Agencies (LEAs) 90% (Michigan: $350.8 million) of a state’s grant is allocated for formula subgrants to LEAs in proportion to Title I, Part A allocations. Appendix B details the subgrant amount available for each eligible district in Michigan. The application process for subgrants in Michigan began on May 8, 2020, and ended September 30, 2020. An LEA may use funds for any of the following allowable expenses incurred on or after March 13, 2020: 1. Any activity authorized by the ESEA, including the Native Hawaiian Education Act and the Alaska Native Educational Equity, Support, and Assistance Act; the Individuals with Disabilities Education Act (IDEA); the Adult Education and Family Literacy Act; the Carl D. Perkins Career and Technical Education Act; or Title VII- B of the McKinney-Vento Homeless Assistance Act. 2. Coordination of preparedness and response efforts of LEAs with state, local, tribal, and territorial public health departments, and other relevant agencies, to improve coordinated responses among such entities to prevent, prepare for, and respond to coronavirus.