Senator Eliot Shapleigh - El Paso, Texas

Texas officials will know soon whether an application they submitted this week for $4 billion in federal stimulus funds passes muster with the Education Department, despite nervousness from school districts on how the money is to be spent.

Education experts and legislators predicted this week that federal officials will find that the stimulus money is being spent in accordance with the American Recovery and Reinvestment Act. Almost $1.9 billion of the money is being spent on an education funding increase that requires teacher raises of $800 or more.

"I don’t have any reason to believe [the application] doesn’t" meet the requirements, said Richard Kouri, director of public affairs for the Texas State Teachers Association.

"It’s $1.9 billion that, if this grant wasn’t funded, school districts wouldn’t get, and it’s basically $1.9 billion more than they had the last biennium."

Gov. Rick Perry submitted the application for money from the federal stimulus package’s State Fiscal Stabilization Fund on Wednesday, just before the deadline. State officials expect to receive almost $4 billion from that fund starting in September.

Many states had already submitted their paperwork and, by Thursday morning, 42 had been approved to receive the bulk of their stimulus education funds.

Application concerns

But officials at some school districts in Texas have worried that Education Secretary Arne Duncan could balk at state legislators’ use of stimulus money. Their concerns center on $1.9 billion that is being used to back a funding increase that requires the teacher raises. Less controversial is $1.38 billion to compensate for a decline in the value of the state’s Permanent School Fund, and $723 million from a separate discretionary fund.

Duncan has warned at least one other state against using stimulus money as a way to decrease state funding while leaving its rainy day fund untouched. Texas has a rainy day fund of about $9 billion.

This spring, several members of the state Senate, Texas’ congressional delegation and some superintendents sent letters to Duncan urging him to clarify for Texas how the stimulus money should be spent. An April 16 letter signed by state Sen. Wendy Davis, D-Fort Worth, and others accuses the state of supplanting state dollars with money from the State Fiscal Stabilization Fund.

"Our concern lies with the fact that the SFSF was used to supplant general revenue in the Senate budget, swapping out — dollar for dollar — state funds for federal funds," the letter said. It also contains a chart showing how stimulus dollars would have flowed to local districts.

Fort Worth would have gotten about $94 million and Arlington would have gotten about $41.5 million, the letter said.

In Texas, public school funding is accomplished through a combination of state money and local property tax revenue. In his application, Perry says that the state portion of funding would have dropped in the coming fiscal years because of increases in local property tax revenues. So the $1.9 billion in stimulus money is restoring state funds to 2008 levels and allowing an overall increase, the application said.

"State leaders are confident that the allocation of SFSF is consistent with the American Recovery and Reinvestment Act," Perry’s letter said.

Safety net language

Leslie James, assistant superintendent of policy, planning and governmental relations for Fort Worth schools, believes that federal officials will approve Texas’ overall plan.

Doubts remain, however, about whether they will let the state require the $800 minimum raises for teachers, counselors, librarians and speech pathologists, James said.

Schools are being encouraged not to use stimulus money to establish new expenses that would continue after two years. That’s something the salary increases would do, James said.

Fort Worth, which recently approved some layoffs to cut $15.4 million from next year’s budget, expects to receive $18 million in increased state funding next year, and $6.5 million of that must be spent on teacher raises, according to the new law.

"It really kind of becomes a burden for the districts down the line," he said. "We have to maintain those same levels of salaries even though the stimulus money is not there to maintain it."

State Rep. Scott Hochberg, D-Houston, wrote HB 3646, the funding increase bill. He said it contains "safety net language" to take out the raise requirement if federal officials deem it unacceptable. Then the $1.9 billion could still go to school districts under the new legislation’s other guidelines, he said

But Hochberg said he doubts the language will be needed.

"They’ve given us no indication that it would not be a permissible use," Hochberg said of the salary increase.

State Sen. Florence Shapiro, R-Plano, chairwoman of the Senate Education Committee, said she expects legislators to continue funding the raises in HB 3646 even after stimulus money runs out. She expressed confidence about the application submitted Wednesday.

"I can’t tell you what the federal government will do, but I can tell you we used the money exactly the way we read the rules," she said.