Are Federal Aid Requirements Hurting Wisconsin School Districts?

The Badger Institute has found that Wisconsin school districts are facing a unique spending problem as money they are saving following Act 10 is being used to meet federal spending regulations in order to satisfy requirements that qualify the districts for federal funding. This problem creates a situation in where the money that districts are saving is being forced to be used in order to meet the federal requirements. Communication Director Jerry Bader spoke with Mike Nichols of the Badger Institute on just how much these federal requirements are hurting Wisconsin school districts and the larger implications this has on the state.

The federal requirement that is in question is called the “maintenance of effort (MOE)” requirement, where school districts are eligible for federal funding if they their funding remains relatively consistent year to year. This can affect programs like a school district’s special education program since it is funded by both federal and local tax dollars. The guide on the MOE states that it:

“Refers to the requirement placed upon many federally funded grant programs that the State Education Agency (SEA) and Local Education Agencies (LEA) demonstrate that the level of state and local funding remains relatively constant from year to year. Failure to meet MOE requirements may result in the LEA losing eligibility to receive IDEA entitlement funding and requiring an LEA to repay funds, using a non-federal source, to the SEA, who is required to send funds to the US Department of Education.”


The Badger Institute wrote an article concerning the federal funding requirements and pointed out an example of the MOE’s limitations as they reported that the Oostburg school district spent 60,000$ on an elevator in order to avoid losing federal funding, even though there aren’t any students in the school that use a wheelchair. In the article Kristin DeBruine, the district’s business manager said of the situation:

“We would not have put it in without the required use of the money, as it is only used for after-school activities, and the cost would not have allowed us to do it otherwise. That simply just doesn’t make sense at all.”


Media Trackers spoke with Mike Nichols of the Badger institute who elaborated on how the MOE requirements are hurting school districts, and how the requirement works:

“The federal government supplies a lot of grant money, some of it 800 million or 900 million dollars, flows through DPI and to local districts, but a lot of federal money also flows directly to local school districts. Most of the time we don’t know if that money is being spent well because there aren’t any metrics. They don’t really care about outcomes, all they care about is the amount of money that is being spent, and so the federal government forces the local districts to keep spending the amount of money they previously spent…”

“…It’s actually kind of infuriating, it means that all these local school districts have to maintain their spending, well over a billion dollars, they can’t cut it because the feds won’t let them.”


Nichols also stressed that while Act 10 gave local districts more flexibility it’s being limited by the federal governments requirements, and while some may believe that the MOE holds districts accountable in how they spend the federal aid, a survey done by the Badger Institute says otherwise:

“The big picture here is that we think we need more flexibility at the local level to spend our local dollars and even the federal dollars that we do get, we need more flexibility.”

He continued: “We have found in our survey of hundreds and hundreds of local school administrators is that they don’t think that all these requirements actually increase accountability, these goofy requirements that make us continue to spend and spend and spend, don’t make us spend more efficiently or with greater accountability.”

As well as in education, Nichols told Media Trackers that they are looking at other areas of state and local spending such as transportation, workforce development, and the department of children and families, to see exactly how that federal money is working in the state:

We’re trying to make real the fact not just about how much federal money flows through the state, but on how much of that is spent on the administration and bureaucracy. Really how much of that is spent on things that are purely local, we have thousands and thousands of people in state and local government here who are funded with federal money who are doing things that I think all of us can agree on are purely local function.


Looking to the future on this issue, Nichols spoke about spreading the information they gather and looking for a fundamental change in the way federal dollars are spent:

Next summer we’re going to put all this together into a small book, that we’re going to be disseminating in this state but also in D.C to try and make real to people what is often just theoretical and that is that federal money is not free, there are always strings attached and often costs us more money. It is sometimes spent effectively but not as often as it should be, so we’re looking for a fundamental change in the way that federal dollars are spent and really a devolution of power and authority from the federal government back to the state. It’s a federalism project that we do believe that you only have accountability when you have local people who are looking at local decisions and not when there is control from centralized authority out in D.C, that’s the end game.


The interview with Michael Nichols can be found here: