HELENA — Over the next two months, school districts across Montana will be submitting plans to the state Office of Public Instruction specifying how they intend to use federal COVID-19 relief funds from the American Rescue Plan Act. But Superintendent Elsie Arntzen has recently expressed concern that some districts may fail to meet federal standards governing ARPA funds, and informed the U.S. Department of Education last month that OPI cannot distribute the money until the issues are resolved.

The situation stems from a provision in ARPA designed to protect school districts from state budget reductions and ensure that state funding for high-poverty districts doesn’t dip below pre-pandemic levels. In June, the Department of Education clarified that the “maintenance of equity” provision would be based on current per-pupil spending — a calculation OPI argues conflicts with Montana’s school funding formula, which is tied to the prior year’s enrollment numbers. As a result of that conflict, OPI estimates that 105 of Montana’s 400 school districts will fail to meet the requirements necessary to receive ARPA funding.

Arntzen told Montana Free Press that she sent letters to the Department of Education expressing her concerns in March and in June, and spoke by phone last week with an acting assistant secretary at the agency but has not heard back since. If some Montana school districts do fail to meet the federal standards, Arntzen said she believes all $382 million in ARPA education funding to the state would be at risk.

“We’re seeking common ground here to make sure that there is not any repercussion to our school districts,” Arntzen said. “These dollars are not the state’s dollars. These dollars, 90% of them are going out to our schools, and we want to make sure that that local control model still holds.”

 “Even if it costs $20 million to ensure distribution of that money, that’s a cheap date.”

Lance Melton, executive director, Montana School Boards Association

During a Legislative Finance Committee meeting last week, state Budget Director Kurt Alme said he shared Arntzen’s concern that the federal requirements could be burdensome for the state, requiring additional funds to be distributed to districts in a “haphazard” way to avoid losing the federal funding. He added that the requirement could set a precedent for other federal funding aimed at schools.

“If this maintenance of equity standard is put on other bills, like the infrastructure bill that’s coming or the budget reconciliation act that’s coming, and we’re going to have this rigid per-pupil framework for funding, there’s going to be pressure on [legislators] and other states to move our funding formula toward a per-pupil per-year funding mechanism so we don’t get penalized when these federal bills roll out,” Alme said.

Alme said his office will support OPI in pressing the Department of Education to alter its requirements.

Finance Committee member Rep. Llew Jones, R-Conrad, also weighed in on the issue during last week’s meeting. Jones has been one of the primary architects of Montana’s school funding formula, which he noted is the result of years of legislative fine-tuning and judicial review. Some portions of that funding are driven by student enrollment numbers, but numerous smaller components including quality-educator and at-risk-student payments are not. Jones said the federal government’s application of a funding formula not specifically designed to serve a rural state “doesn’t make sense.”

“We need to defend the integrity of what we have put together, because at this point it works,” he said. “Can it be made better? Yes. But not by some haphazard, top-down federal designation.”

The issue comes as no surprise to Lance Melton, executive director of the Montana School Boards Association. He anticipated that ARPA’s maintenance of equity requirement would likely be based on current per-pupil spending, and took that potential outcome into account when working on House Bill 632, the state law allocating ARPA funds. HB 632 includes language allowing Arntzen to distribute additional funds from the main education budget to individual districts that would otherwise fail to meet the federal standards.

Arntzen told MTFP the estimated cost of helping districts meet the standards would be between $1 million and $6 million. Regardless of the amount, Arntzen said giving more state money to some schools in order to receive federal funds threatens to undermine Montana’s existing formula.

“If this is distributed in a manner that some get more and some get less, then that right off the bat says that Montana’s funding formula for schools is not equitable,” Arntzen said. “And I think there’s danger in that.”

Melton wasn’t sure whether the state is seeking relief from the standards in order to avoid those payments. But he said that until schools conduct their usual fall enrollment counts in October, there’s no way to know for sure how many districts won’t meet the standards, and subsequently how much money it will take to ensure compliance.

“If the worst-case scenario happens and the federal government decides we are in violation, there’s $382 million at play here,” Melton said. “Even if it costs $20 million to ensure distribution of that money, that’s a cheap date.”

This story was updated July 8, 2021 to correct the bill number of the state law allocating ARPA funds. It is House Bill 632.

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Staff reporter Alex Sakariassen covers the education beat and the state Legislature for Montana Free Press. Alex spent the past decade writing long-form narrative stories that spotlight the people, the politics, and the wilds of Montana. A North Dakota native, he splits his free time between Missoula’s ski slopes and the quiet trout water of the Rocky Mountain Front. Contact Alex by email at asakariassen@montanafreepress.org.