Impact Aid’s 60 Years: 1970 – 1990

As NAFIS prepares to celebrate the 60th Anniversary of the passage of the Impact Aid Program, IMPACT has prepared a three-part series on the history of the program. This issue will highlight the second installment – the years between 1970 and 1990.

Tiers, Tears and More Tiers

During the 20 years between 1970 and 1990, the program faced changes suggested by both the Nixon and Reagan Administration that were designed to refocus the program. Sandwiched between Nixon and Reagan, the Carter Administration saw the need for an outside review to determine whether the program needed change. Although the findings of the review provided a strong rationale for the program, they came at the very end of the Carter years and were never really given serious consideration. The Reagan Administration looked to eliminate all but the federal property, military and Indian land portions of the program. The period also saw competition become even more an issue, not only a competition with other social programs, but also between federally connected districts.

Faced with the competition for dollars among other social discretionary programs, the Impact Aid community looked to expand the program to secure a larger political base. Their opportunity opened with the 1970 reauthorization.Under the 1970 amendments (P.L. 91-230), beginning in FY’71, the definition of federal property was amended to include any low-rent housing (whether or not federally owned) that was a part of a lowrent housing project assisted under the United States Housing Act of 1949 or part of Title III of the Economic Opportunity Act of 1964. There was a catch – the legislation stated funds would not be paid on behalf of those children residing in housing projects or who have parents employed in a project until other requirements of the act were funded.

The provision would, in theory, help gain support from key Members of Congress representing urban areas. In effect, the language placed the appropriation committees in a “do or die” situation. The payment proration language included in the 1970 amendments stated that unless appropriations for the program were sufficient to fund all other entitlements first, OR unless there was an appropriation specifically for the purpose of funding low-rent public housing payments, the low-rent housing provision would not be funded. The authorization language was ignored by the appropriation committees. Four years later, this provision was amended (P.L. 93-380) to fund public housing payments at minimal levels.

Realizing the strain for money, the 1970 amendments attempted to recognize the differences in the impact that (a) category students and (b) category students had on a school district, as well as to the percentage of impaction. A payment process (the first of many that would be placed into law) was outlined as follows:

• Districts were to be paid at 90% of their (a) category claim if their (a) category of students represented 25% or less of their prior year’s average daily attendance (ADA).
• Districts would be paid 100% of their (a) category claim if their eligible students represented 25% or more of their prior year’s total ADA; the first look at a “super (a)” group of school districts.
• Payments for (b) category children would be computed as usual, which is the number of (b) category children multiplied by one-half the local contribution rate. Funding levels were not guaranteed meaning that category (b) claims would be prorated for the amount of available funding that remained.

The 1974 Amendments – “Cost Containment”

The 1974 amendments were played out against the backdrop of Watergate along with congressional mood directed at getting a better handle on federal fiscal policy. Although the 1974 amendments extended the Impact Aid Program through FY’78, the amendments were also geared to reducing the cost of the program. Cost reduction was accomplished by revising both category (a) and category (b) students into subcategories. The subcategories were then tied individually to a specific percentage of the Local Contribution Rate (LCR).

The three Category (a) subcategories along with their LCR calculations as written into
the 1974 amendments included:

• Category 1: Children who live on federal property and have a military parent or children who reside with a parent living on Indian land were computed at 100% of the LCR. The 1974 amendments said a child residing on Indian land (no matter where the parent was employed) would be considered a category (a) child. Prior to the ‘74 amendments, most Indian land children were considered category (b) students.
• Category 2: Children who live on federal property with a parent employed on federal property located in the same county as the school district were computed at 90% of the LCR.
• Category 3: Children who live on federal property with a parent employed on federal property located in another county (but in the same state) as the school district were computed at 90% of the LCR.
• School districts with enrollments of more than 25 percent of eligible federal students were classified as Super (a) districts and were given special recognition by stipulating that 100% of their LCR would be used for computing the payment for all category (a) children in their schools. Because of the recognition of Indian land children as category (a) students, many districts with Indian land enrollments were classified as Super (a) districts.

The four Category (b) subcategories along with their LCR calculations included:

• Category 1: Children residing with a military parent who lived off of federal property were computed at 50 percent of their LCR.
• Category 2: Children who live on federal property (low-rent housing fell into this category), but whose parents did not work on federal property were computed at 45 percent of the LCR.
• Category 3: Children who live with a parent employed on federal property located in the same county as the school district were computed at 45 percent of the LCR.
• Category 4: Children who live with a parent employed on federal property in another county (but in the same state) as the school district, their claim was computed at 40 percent of the LCR.

The 1974 amendments also added to the purpose of Impact Aid. Founded as a general fund program, the ‘74 amendments gave Impact Aid a supplemental look. Indian land children and military dependents students that were federally connected handicapped students received a 50 percent add-on to their claim in recognition of the additional cost these students carried to a school district.

The 1974 Amendment – “The Advent of the Tiers”

In addition to determining the amount of payment claims, by sliding down the LCR percentages based on student categories and by the creation of a Super (a) category of school districts, the ‘74 Amendments also created a new payment approach in recognition of the need to identify a district’s dependence on Impact Aid funding. The new approach required payments to be made in three steps or “tiers.”

• Tier 1: a uniform 25 percent of all claims were paid.
• Tier 2: Varying percentages of claims were to be paid above the 25 percent paid out in Tier 1. The percentages ranged from 75 percent of a claim in the case of a Super (a) district to 28 percent in the case of claims for out-of-county category (b) children. Payments for low-rent housing projects were excluded from payments under Tier 2. Low rent housing allocations under Tier 3 would be doubled as low-rent housing payments amounted to 45 percent of any money paid out under Tier III. The theory was that a large city Member of Congress would work hard to seek large enough appropriations to get to the third tier.

No payments could be made under Tier 2, unless all payments under Tier 1 were made. Likewise, no payments could be made under Tier 3, unless all payments under Tier 2 were made. The rigid system of payments made almost mandatory appropriations at a level necessary to fund Tier 2.

The 1974 Amendments – Equalization

A state with a valid equalization plan could count Impact Aid payments as local resources in assessing local needs. Four states were the first to qualify under the equalization provision; New Mexico, Kansas, North Dakota and Maine.

The 1974 Amendments – The Net Result

The 1974 revision of the program was the most extensive modification since its inception in 1950. Districts were confused by the “tiers” and the Office of Education’s Impact Aid  staff was now stuck with an administrative nightmare in their attempts to allocate payments under the new structure.

Appropriations continued to be a problem. Even though the total amount of claims for the Basic Support Program (Note there were no change to the Federal Land provision) was reduced by approximately $100 million, the mandatory funding level required under the new tier system was $200 million more than the appropriations of the previous year. Even though the appropriation committees did provide sufficient funding to fund Tier 2, the committees on both the House and Senate side were unhappy about the system’s straitjacket approach. Some members of the committees felt forced to fund low-rent housing claims for the first time in a year when they had hoped to fund no new programs. Tensions increased in the appropriations process during the next two years.

The 1978 Amendments – “Need Dilemma Continues”

The mandatory funding requirements spelled out in the 1974 Amendments came to a head on the Senate floor as the 1978 ESEA Amendments were being crafted. The chairman of the Senate Committee on Appropriations and some of the members of the Senate Budget Committee succeeded in amending the Senate bill to lean toward eliminating the mandatory nature of the tier system.

The ‘78 Amendments brought up changes in the payment allotment process and added a second supplemental to the formula (the first being the add-on for special education children in the ‘74 Amendments) by adding a .25 weight to students residing on Indian Land.

The 1978 Amendments – “The Net Result”

The final result of these amendments was a 35-percent reduction in the amounts paid
under Tier 2 and the creation of a corresponding payment authority which allowed
appropriations flexibility in determining funding levels. Changes included:

• Super (a) district eligibility was lowered to 20 percent – down from 25 percent.
• Changing the system of funding military category (b) student claims in the same
  manner as funding category (a) children claims.
• Inserting a .25 weight add-on for Indian districts claiming children residing on
  Indian Land – to include a district requirement to ensure Indian students were receiving
  an education equal to that of non-Indian children (Indian Policies and Procedures)
• Establishment of a commission on the review of the federal Impact Aid Program.

A 10-member commission; members of interest to the Impact Aid community included:
Charlie Akins, Superintendent of the Hardin County Schools, Kentucky; Robert L.
Chisholm, Superintendent of the Clover Park School District, Washington; Anselm G.
Davis, Jr., Assistant Superintendent of the Window Rock Unified School District,
Arizona; Frank J. Macchiarola, Chancellor of the New York City Public Schools;
Virginia Allred Stacy, teacher in the Lackland Independent School District, Texas.
Although the report was favorable to the program, it was completed at the Carter
Administration’s end and presented at the beginning of the Reagan Administration where
it fell on deaf ears.

1980 – 1990 – “You ain’t seen nothing yet”

If the 1970 to 1980 period was a period best described as 10 years of confrontation between the authorizing committees and the appropriation committees, the 10 years between 1980 and 1990 was a period when the Impact Aid Program was saved by appropriators.

The early Reagan years 1981-1984 can best be described as “Let’s reduce federal spending at whatever the cost” – at least that is how the Impact Aid community would have described it. Using the budget process as the vehicle (Reconciliation) Congress originally produced an Omnibus Reconciliation Bill designed to block grant money discretionary programs to the states, and for Impact Aid the intent was to rid the program of the category (b) student and reduce funding by nearly 50 percent. The Omnibus Reconciliation Bill that passed included a three-year phase out of all category (b) funding. The LCR calculations for the years ’82-’84 were to be based on a percentage of the amount paid to a school district in FY ’81.

At this time the appropriations process funded separately the category (a) and category (b) line item. Because of the category (b) three-year phase out, category (b) payments dropped from $231 million in FY ’81 to $73 million in FY ’82. The overall program dropped to $418 million from $772 million in FY ’80. Although few realized it at the time, the stage had already been set for the resurrection of Impact Aid in FY ‘85.

The ESEA was set to expire at the end of FY ‘84, and while the authorizing committees began working on the reauthorization, Senator Jim Abdnor (R-SD) began to roll back the stone on what had been an Impact Aid Program near-death experience. Using his position on the Senate Appropriations Committee, Abdnor offered an amendment that added $110 million to the FY ’85 Labor, HHS and Education Appropriations Bill for Impact Aid. The amendment also reauthorized category (b) students through FY ’88 and attempted to bring the LCR to the level at which it was supposed to be – as rates remained at the ’81 rate. Abdnor’s amendment required that the LCR be increased by the percentage increase, if any, in the national average per-pupil expenditure for FY ‘84 from FY ‘83. Super (a) payments would be paid at 100 percent of their entitlement as they were in FY ’84. Even a year earlier, Abdnor amended the Department of Defense Appropriation Bill to add over $100 million to Impact Aid and ensure that Super (a) districts were to be funded at 100 percent of entitlement.

Although Abdnor’s heroics without doubt turned the program around, subsequent legislation impacting the budget process put an end to the Abdnor tactics of using whatever vehicle seemed appropriate and timely to add money to the program. The Budget Committee and the Congressional Budget Resolution became the vehicle through which the Reagan Administration looked to reduce federal spending. The FY’86 Budget  Resolution was put together by Senator Robert Dole (R-KS) and Committee Chairman, Senator Pete Domenici (R-NM). Included in the FY’86 budget resolution was a reduction in category (a) funding and the total elimination of category (b) funding. If a first you don’t succeed – going after Impact Aid – then lets try-try again. This represented a savings of $100 million. Once again Senator Abdnor rose to the occasion. What Senator Abdnor did can best be described by the Director of the Office of Management and Budget, David Stockman, who was the architect of the Reagan cost-cutting revolution. In his book, The Triumph of Politics, Stockman writes, “We had killed Impact Aid in February 1981 in the cutting room, but it has been resurrected repeatedly in the interim until the Dole-Domenici budget abolished it again. Now, along came Senator Jim Abdnor of South Dakota, who stood to lose $300,000 at a single Air Force base school district out yonder in the badlands. In the end, his vote went in the yes column and $100 million in Impact Aid went back into the budget.”

Although funding did take a small hit due to across-the-board funding cuts in FY’86, the program began to steadily climb due in large part to the support of Representative Bill Natcher (D-KY) the chairman of the House Appropriations Subcommittee for Labor, HHS and Education. The problems for the program did not end and the task now before the Impact Aid community was to prepare for the next reauthorization – 1988.

The 1988 Amendments – “The Wheels Have Fallen Off the Wagon”

Although NAFIS and the Impact Aid community worked with good intentions toward the development of a reauthorization package, some major changes in the allocation formula were in order which became clear after the FY’85 appropriations process.

Senator Abdnor’s victories in bringing Impact Aid back from the dead were made possible by a coalition of Senators from states west of the Mississippi and eastern states. As the 1988 reauthorization process got underway, the Impact Aid Program remained saddled with problems:

• The rate of payment was not based on a pure calculated claim (entitlement) as defined in statute. Instead payments were still based on the rate of payment school districts used in FY ’81. Yes, there were inflation add-ons, but districts were not using payment rates commensurate with what their payment claims (entitlement) should be based on the statute.
• The Appropriation Committees during the lean years of ’84 and ’85 felt they should allocate limited resources (Impact Aid dollars) to where they felt they were needed the most – both the House and Senate Appropriation Committees defined “need” as resting solely with the Super (a) districts. As a result –
• Super (a) districts (20% and above) were to be funded first at 100 percent of their claim (based on the FY ’81 rate);
• Districts below 20 percent would see their payments drop from 90 percent in FY’83 to 40 percent in FY’84 and FY’86, and 42 percent in FY’85.

Those senators who had joined with Senator Abdnor to fight off the Reagan attacks became concerned that despite their support for increased funding, their states were not  seeing any of the benefits. The dollars were going to the Super (a) districts – districts located primarily west of the Mississippi. Their message to the Impact Aid community in late 1985 and 1986 was, “you better change the formula to reflect a more equitable distribution of the money or you will lose our support.” Senator Daniel Moynihan (DNY) led the charge.

The result of the dissatisfaction over where things stood was again addressed via the appropriations process. The FY’87 appropriation bill created a new category of category (a) districts, the Subsuper (a) category. Districts were now defined as:

• Super (a) – 20 percent or more category (a) children
• Subsuper (a) – 15 to 20 percent category (a) children
• Regular (a) – under 15 percent category (a) children

The effect of this change: a district that would have fallen from Super (a) to Regular (a) status would as a Subsuper (a) district realize an increase in the FY’87 payment by about 70 percent.

Although this helped eliminate some concerns, there were still others who felt additional changes were needed. Unfortunately NAFIS could not find consensus among its members as to the direction a new formula should take during the time the House was set to move its version of the 1988 ESEA Amendments. Representative William Ford (DMI) chastised NAFIS on the House floor during consideration of the 1988 amendments, when he said to his House colleagues “…but I say that as an association, the wheels have come off the buggy, and it is about time somebody told them that.”

The House bill reflected the Education and Labor Committee’s frustration over the  inability of NAFIS to get its act together and simply reauthorized the program per current law. NAFIS and the Impact Aid community then looked to the Senate once again to move the program forward.

The Senate did make changes including a provision that directed payments for the 50% add-on for special education eligible children be paid for off the top (before any payments could be paid out). The Senate language also was to guarantee off-the-top funding for Federal Property and Heavily Impacted payments. Following the off-the-top payments, remaining funds would be divided – 80 percent for category (a) payments and 20 percent for category (b). The appropriation committees totally ignored both payments.

The 1988 Amendments – The Net Result

The program received an appropriation far below the amount needed to fund the off-the-top programs and the funds necessary to fund the WAVE payments within each category (Super A) (Subsuper (A) and Regular (A) and Super (B) and Regular (B). Realizing the formula might not be funded adequately, the Senate bill stated:

• Payments for districts were capped to the aggregate sum of Impact Aid dollars received in FY’87, excluding the 50 percent special education add-on and
• A hold harmless providing school districts with a level of funding no less than what they received in FY’87 would be added – a payment based on a FY’81 LCR calculation.
• All category (b) claims were to be based on 25 percent of the category (a) claim.

1989 Technical Amendments – Removal of the cap

At the urging of NAFIS, technical amendments were passed that removed the cap but only for category (a) payments, and only after payments for Heavily Impacted School Districts were also capped at $20 million.