In June, the U.S. Department of Education made important clarifications for charter schools in its final guidance on what is known as the “Supplement, not Supplant” requirement. The intent is to ensure that Title I funds aren’t used to replace state and local funding and potentially backfill or compensate for inequitable allocations of state and local funds.
This requirement was revised in 2016 during the reauthorization of the Elementary and Secondary Education Act (ESEA) to provide states with more flexibility in how they demonstrate that their funding systems are fair to Title I schools. The requirement is more flexible by eliminating the cost-by-cost analysis that ESEA previously required—for Title I “targeted assistance” schools—and replacing it with a new test intended to simplify and reduce burden and, most importantly, eliminate compliance-driven decisions that were not in the best interest of students.
Under the old cost-by-cost analysis, a school would have to demonstrate that each of its expenditures charged to Title I would not have been otherwise funded by state and local dollars. Any cost a school district or school would have paid for in the absence of Title I was not considered to be extra and could be considered “supplanting.” Because of the difficulty of proving that Title I was only funding supplemental activities, many schools and districts were hesitant to redirect funding to more effective programs or to take full advantage of federal flexibility available through Title I.
Many advocates—and the Obama Administration—tried without success to make significant changes to Title I fiscal requirements to address funding inequities. Nevertheless, the changes that were made are significant and have important implications for charter schools.
For charter schools, the application of the supplement not supplant requirement is different depending on whether or not a school is a district-authorized charter school or its own local education agency (LEA):
District-authorized charter schools
Charter schools that are not their own LEAs and receive their Title I allocations through a school district do not need to demonstrate compliance with "Supplement, not Supplant" because the requirement only applies at the district level. Instead, charter schools should receive their state and local funding in a manner that is not impacted by the amount they receive under Title I. ESEA does not require LEAs, however, to use the same method of allocating funds to charter and district-run schools.
Question 16 of the guidance clarifies that districts may use different methodologies for charter schools, so long as they are neutral with respect to Title I. For example, a district may allocate extra funds to charter schools for their facilities that they would not allocate to district-run schools.
Single-school charter school LEAs
For single-school charter school LEAs, there isn’t any distribution mechanism among a set of schools, so such a school shouldn’t have to demonstrate compliance with this requirement. What some charter schools have found though is that their auditors were sometimes not familiar with the nuances of this requirement and would subject them to the cost-by-cost analysis described above.
Question 26 in the guidance provides written clarification that single-school LEAs—which are about a half of all charter schools—do not need to demonstrate that they are in compliance with the Title I requirements in Sec. 1118(b)(2). The previous administration provided this clarification in its regulations on supplement not supplant, but they were repealed by Congress.
The release of this guidance is significant: thus far the U.S. Department of Education has been reluctant to issue clarifying guidance on key programs in the Every Student Succeeds Act. More can be done, however, to ensure that all schools are able to take full advantage of the funding flexibility within the law.
In the National Alliance's comments over the years on this particular issue, we have also called on the U.S. Department of Education to provide this guidance to auditors in the annual Compliance Supplement issued by the Office of Management and Budget. In addition, we would support additional fiscal guidance from the Department that addresses the full range of issues that can stymie school efforts to redirect funds towards more innovative practices and break out of silos. Such guidance can help schools take advantage of Title I authorities, such as flexibility to consolidate all federal funds for high poverty schools, and cut down on audit findings that only decrease schools’ willingness to align their federal funds with innovative educational missions.
Christy Wolfe is the vice president of policy and planning for the National Alliance for Public Charter Schools.