Federal Programs – “Impact Aid”

Glen Dawursk, Jr. -- June 28, 2007

Benjamin Franklin once said that “Our Constitution is in actual operation; everything appears to promise that it will last; but in this world nothing is certain but death and taxes.” While he was offering hope for our new nation, his reference to taxes is apropos as we consider the predominate funding for public schools in America. In the traditional school district, the money to fund schools comes from three main sources: state aid, local taxes on homes [property tax], and local taxes on businesses. (SSO, 2007) Within increased government requirements, especially since the re-vision of the Elementary and Secondary Education Act of 1965 [now retitled the No Child Left Behind Act], districts are compelled to offer a quality education to all children within their districts. Note the words: quality education to all children. This requirement does not allow districts to exempt any child. This has long been an issue as state aid, and business and property taxes are exempt for many families in America. Where will money come from to accommodate the children from these families if there is no tax money to pay for their required quality education? This requires a greater tax burden upon school disricts throughout our country as they must increase taxes to compensate for the additional students. This issue is not new and goes back to the 1930’s when the US government stepped in. Through a federal program called Impact Aid, school districts are subsidised for children whose families are “outside’” of the standard taxation system. In this report, I will explain who and why families are exempt from taxation, the pupose and history of the Impact Aid program, and the impact it has had on education in America.

Throughout our short history, US military installations have benefited communities with increased local employment and through local off-base commerce. These both have a positive impact upon the local economy. However, that is where the benefits end. When the businesses are located within the federal compound or on any federal land, these businesses no longer help the local economy as they are exempt from paying any local property and commercial taxes. Additionally, military personnel by virtue of the Soldiers and Sailors Relief Act are also exempt from all local property and state income taxes including (SSO, 2007) military personnel who own homes within federally owned land and even vehicle license fees. Without these tax dollars, significant revenues are lost for state and municipal projects. However, the greatest impact is upon the local school district budgets. For by law, each school district is still required to offer a quality public school education to the children of all military personnel. This applies also to American Indian families who reside on federally exempt reservations but are within school district boundaries.

In 1934, “Congress passed the Johnson-O’Malley Act providing funding to states for the purpose of educating Native American children – a permanent legislation unless repealed by Congress. This represents one of the first federal commitments to public schools education of American Indian students.” (US Congress General Provisions Act, 2007) This subsidy was the predecessor to the Impact Aid Act of the 1950’s and continues as a separate grant to tribes today.

In the late 1940’s, America saw a significant growth in military bases through the country in anticipation of the Korean War. Because of these increases “congress concluded that activities on federal property placed an unfair burden on local school districts by bringing in additional children without increasing the local tax base.” (Senate Report 83-714, 1953; Buddin, 5) To equalize this issue, President Harry S. Truman signed the Impact Aid into law in 1950. The purpose of this law was “to provide financial assistance to local educational agencies in order to fulfill the Federal responsibility to assist with the provision of educational services to federally connected children, because certain activities of the Federal Government place a financial burden on the local educational agencies” (P.L. 103-382 Section 8001, US Congress Title VIII) and to “provide technical assistance and support services to staff and other interested parties.” (OESE, 2007)

Impact Aid continues today with a number of refinements. During the last 60 years, the program has been expanded to include “children who reside on Indian lands [added in 1958], low-rent housing properties [added in 1976], and other Federal properties, or who have parents in the uniformed services or employed on eligible Federal properties [Civil service added in 1953].” (MISA, 2007; NAFIS Funding History, 2007) In 2002, the program was amended to allow money for construction and repair of school properties predominately in American Indian communities. This aid is paid directly to the school districts without any other bureaucratic requirements. The aid can be used for school supplies, text books, utilities, and even salaries. The exception to this direct aid is the program’s additional compensation for disabled children. This is over-and-above any funding from the Disabilities Education Act - IDEA; however, these specific Impact Aid funds are restricted for use as assistance to disabled students. (US Congress, Title VIII, 2004)

While the program’s primary focus was to “to defray the local share of expenses for educating federally connected students” (Burden, 19) some of our recent US presidents did not agree with the program. President Reagan tried to end the program completely, and President Clinton recommended removing civil servant children as they do not usually reside on any federal land. (Buddin, 15) Prior to 1970, the program was 100% funded by congress. “Since then the program has faced severe cuts and is currently only funded at 60%” (MISA, 2007) and this is comparable to funding during the 1980’s. (Buddin, 20)

Regardless, congress has approved funding for Impact Aid through fiscal year 2007. School districts take a survey of their students and then make application by January 31st each year to the U.S. Department of Education. The department uses a system of Weighted Federal Student Units [WFSU] to determine a district’s compensation. These units are not equal. For instance, a student living on an American Indian property is given a 1.25 WFSU, while a student living in federally funded low-rent housing project is given a .10 WFSU. A military or non-military student living on a federal property while the parent works on federal property are both weighted at a 1.00 WFSU; however a military student not living on federal property is a .20 and a civilian student whose parent works on federal property [civil servant] is just .05. Through a calculation of the WFSU’s, the Average Daily Attendance [ADA], and the Local Contribution Rate [LCR is the financial burden the district takes on in order to teach these children], the program determines a Basic Support Payment [BSP] for a the Local Education Agency [LEA]. The BSP does not include additional money for disabled a child, that is extra.

The main categories of the Impact Aid Act are as follows:

v Section 8003 (b) (1) - Basic support payment

v Section 8003 (b) (2) - Heavily impacted districts (affects about 20 districts)

v Section 8003 (d) - Disability payments

v Section 8007 (a) ( b) - Construction payments

The 8003-B-2 section is for districts who have over 400 qualified students and have a “higher than average tax rate” or “a below average spending rate per pupil when compared to similar districts.” (NAFIS Brief, 6/6/06)

The impact upon the US school system is immense. “Nationwide, 1.2 million federally connected children are eligible for funding under the program. These students affect more than 1,400 school districts with a total enrollment of more than 15 million, according to 1996 Department of Education figures.” (SSO, 2007) Almost 40% goes to districts educating the 416,000 military children and it provides over $900 million per year in subsidies (NMFA, 1/2006; Buddin 19)

However, recent studies are questioning the further need of the program. In 2001, a revealing study was presented based upon the RAND Corporation’s Nation Defense Research Institute. The study was sponsored by the Office of the Secretary of Defense and was titled Impact Aid And The Education Of Military Children. According to study, “the proportion of public school funding derived from local sources dropped from 83 percent in 1930 to 43 percent in 1980 and local funds accounted for 57 percent of total K–12 expenditures compared with 45 percent today” (20) Combined with state-level equalization of education funding and additional grant sources which were not available in the 1950’s, the authors came to the conclusion that “local school districts may be less financially burdened by federally connected students today than they were in the past.” (20) While this report did not end Impact Aid it did bring into question the need for such an extensive program.

The problem is the story does not end with this significant report. At the time of the research study, base closings were prevalent and our military enlistment was declining. Soldiers and sailors were not in need of school district services; therefore, districts again relied predominately on their state and local tax base. However, since the 2001 report, towers fell and terrorism hit our country. When 911 happened; the world changed. Since that date, America’s military needs have greatly increased across the world. Military bases are again at capacity throughout the country, armed forces and civil service families are again encumbering upon local districts for educational services, and budgets across the country grow tighter as we put additional funds into the war effort. School districts again are in need of assistance as the military “impacts” their communities. Already we are seeing this impact as we see the dramatic increase in the ADA’s, a rise in WFSU’s; higher BSP’s at the district LEA’s; and a desperate cry from school board CFO’s asking the congress to “send more money ASAP.” In layman’s terms, it just means that taxes will be going up again somewhere. Benjamin Franklin would not be surprised.

Resources Consulted

Buddin, Richard, Brian Gill, Ron Zimmer. Impact Aid And The Education Of Military Children. Santa Monica, CA: RAND Corporation’s National Defense Research Institute, 2001. Taken on June 24, 2007 from <http://www.rand.org/pubs/monograph_reports/2007/MR1272.pdf >.

Department of Education, US Government. “School Construction Regulations” taken on June 25, 2007 from <http://www.nafisdc.org/Section%208007.htm>.

Encarta Online. “Impact Aid: Definition.” Microsoft Corporation. Taken on June 24, 2007 from <http://encarta.msn.com/impact+aid.html>.

MISA: Military Impacted Schools Association. “What Is Impact Aid.” MISA Website. Taken on June 25, 2007 from <http://www.militaryimpactedschoolsassociation.org/whatisimpactaid.html>.

NAFIS: National Association of Federally Impacted Schools. “Impact Aid Funding History.” Washington DC: NAFIS Website, June 6, 2006. Taken on June 25, 2007 from < http://www.nafisdc.org/impact_aid_funding_history.htm>.

NAFIS: National Association of Federally Impacted Schools. “Impact Aid in Brief.” Washington, DC: NAFIS Website, June 6, 2006. Taken on June 25, 2007 from <http://www.nafisdc.org/impact.htm>.

NMFA: National Military Family Association. “Impact Aid Fact Sheet.” Alexandria, VA: NMFA Website, January, 2006. Taken on June 25, 2007 from < http://www.nmfa.org/site/DocServer/Impact_Aid1-06.pdf?docID=6121>.

OESE: Office of Elementary and Secondary Education. “Impact Aid Mission.” U.S. Department of Education Website. Taken on June 26, 2007 from <http://www.ed.gov/about/offices/list/oese/impactaid/index.html>.

OESE: Office of Elementary and Secondary Education. “Impact Aid Overview”, U.S. Department of Education Website. Taken on June 26, 2007 from <http://www.ed.gov/about/offices/list/oese/impactaid/whatisia.html>.

SSO: State Services Organization. “Impact Aid in Brief.” Washington, DC: SSO Website, November 27, 2004. Taken on June 24, 2007 from <http://www.sso.org/nafis/impact.htm>.

US Congress. General Provisions Act, P.L. 81-874 AND P.L. 81-815 (Orig. Johnson-O’Malley Act). Taken on June 25, 2007 from <http://www.nafisdc.org/IA%20Reauth%20History.htm >.

US Congress. Title VIII - Impact Aid Act. November 1, 2004. Taken on June 23, 2007 from: <http://www.sso.org/nafis/ia%20law2001.htm>.