Maintenance of Effort (MOE) Reduction

April 15, 2010

TO THE ADMINISTRATOR ADDRESSED:

SUBJECT:Clarification on Use of Individuals with Disabilities Education Act (IDEA),
Part-B Funds

The implementation of the American Recovery and Reinvestment Act of 2009 (ARRA) has resulted in much more attention and transparency to fiscal matters which has lead to evolving guidance and clarification for both ARRA funds and the regular IDEA-B funds. The United States Department of Education (USDE), the Office of Special Education Programs (OSEP), and the State Auditor’s Office have provided guidance to States related to several topics, including maintenance of effort reduction, unused proportionate share funds, construction, and capital outlay. The purpose of this letter is to furnish guidance and resources to administrators on the use of IDEA-B funds to assist districts in maintaining compliance with federal regulations. For more information on any of the topics listed below, please refer to the guidance located at

Maintenance of Effort (MOE) Reduction:

In any fiscal year that a local education agency’s (LEAs) federal IDEA allocation exceeds the amount that the LEA received in the previous year, that LEA may reduce the level of local, or state and local, expenditures otherwise required by the LEA MOE requirements by up to 50% of the increase in the LEA’s allocation if the LEA has a determination level of Meets Requirements. However, if an LEA is required to use 15 percent of its IDEA-B allocation on coordinated early intervening services due to the identification of significant disproportionality, that LEA will not be able to reduce its local MOE.

With the increase in funding due to the allocation of ARRA funds, eligible LEAs may reduce their MOE up to 50% of the total increase in their combined IDEA-B Formula, IDEA-B Preschool, IDEA-B ARRA Formula and IDEA-B ARRA Preschool funds. This reduction due to ARRA funds may occur one time only and the reduction is to occur during the 2009-2010 school year.

Unused IDEA-B Proportionate Share Funds:

As you know, LEAs must set-aside a proportionate share of their federal IDEA-B funds to provide services for students with a disability whose parents place them in a private school located in the LEA’s boundaries. Before the reauthorization of IDEA 2004, the law allowed for the proportional share set-aside amount unexpended in one year to carry-over to the next year and be spent on any allowable IDEA activity. With the reauthorization of IDEA 2004, language was added to the implementing federal regulations in 2006 stating that any proportionate share set-aside funds unexpended in the current year must be budgeted and expended for that same purpose during the carry-over year. In December 2009, the Texas Education Agency (Agency) sought guidance from OSEP related to the use of any earmarked funds that remain at the end of the second year. In February 2010, it was determined if an LEA’s IDEA-B proportionate share funds are not expended by the end of the carryover year (funds have not been obligated within 27 months), the funds may be used for other allowable IDEA-B expenses that were obligated during this same time period. However, every effort must first be made to expend the funds on students with disabilities who are parentally-placed in private schools.

IDEA-B ARRA Funds Allowable for Construction:

IDEA-B ARRA funds may be used for construction of new facilities or alteration of existing facilities for the purpose of meeting the needs of students with disabilities if the Agency determines that the special education program would be improved by allowing funds to be used for those purposes. Use of funds for construction or alteration of facilities must not violate the least restrictive environment (LRE) requirements of IDEA 2004. Regular IDEA-B funds may not be used for construction or alterations.

Capital Outlay New Interpretations:

In accordance with new guidance from the USDE, a group of like items that will be housed in the same location (i.e., computers and accessories for a computer lab) are considered one unit and the aggregated cost of the items will determine if the capitalization threshold has been met. Software that is web-based is considered one unit regardless of the number of licensees who may use the software. The total cost of the software will determine if the capitalization threshold has been met.

If you have questions, please contact the Division of IDEA Coordination at (512) 463-9414 or via electronic mail at , attention Funding Team.

Sincerely,

Ann Smisko

Associate Commissioner

School Improvement and Support

GL/dd