[nfbmi-talk] open letter w ta and pass it on to geno too

Wed May 19 00:08:47 UTC 2010

May 18, 2010

Open Letter to MCB Commissioners Here:

Just wondering if you are privy to these sorts of things and the findings and action steps of the RSA monitoring of MCB? Sure seems to me that this might just be a part of the role and responsibilities of commissioners of this vital federally funded program?

I mean if MCB and the other designated state unit (MRS) doesn’t meet these requirements then Michigan gets less money and the programs we all wish for from transitional services to rehabilitation training (personal adjustment services) to independent living programs for the elderly blind and so on and so forth will get short changed to the point where they might just not exist in any recognizable fashion. 

My goodness people MRS is already talking about order of selection (do you in MCB even know what that means) and having $8 million in projected federal funding lost in the near term.

I think it is your legal and fiduciary responsibilities to at very least be informed about these things and that sure in the heck includes all the information related to our state plan, budget, and the rsa monitoring (107 B) reports and rebuttals.

You have oversight over a program with more than $15 million in it.

I hope you don’t think you have the need to hold a closed meeting over this and other information you should have to do your job and that you should be demanding from the commission Director and staff.

I’ve frankly seen more curiosity over the fiscal and operational affairs of a Boy Scout Troop than you commissioners have displayed over the years.

Sincerely,

Paul Joseph Harcz, Jr.

Rehabilitation Services Administration

Vocational Rehabilitation Program: 
Maintenance of Effort 

CSAVR Spring Conference

April  2010

Topics
Introduction
Legal Requirements
RSA’s Past Approach to MOE Waiver Requests
RSA’s History of Granting Waivers or Modifications of VR MOE Requirement
RSA’s Current Thinking on MOE
Process for Requesting a MOE Waiver
Questions and Answers

Introduction
In anticipation of increased state requests for MOE waivers, the Department of Education is currently undertaking a department-wide review of MOE requirements and programs’ policies to ensure consistency and proper administration of each program’s  requirement.

Legal Requirements
The Rehabilitation Act requires States to maintain a level of non-Federal expenditures, from all allowable non-Federal  sources, for the VR program that is at least equal to non-Federal expenditures for the VR program from two years prior. 

Example:

State’s non-Federal FY 2007 VR program expenditures = $25 million

State’s non-Federal  FY 2009 VR program expenditures = $20 million

State’s FY 2009 MOE deficit = $5 million

Legal Requirements (cont’d)
MOE determination is made on a statewide basis for states that have two VR agencies.

This means that one VR agency’s non-Federal expenditures potentially could compensate for the reduction in non-Federal expenditures from the other VR agency and avoid a MOE deficit for the State.

Legal Requirements (cont’d)

If a State fails to satisfy its MOE requirement, the Secretary reduces the State’s VR grant by the amount of the MOE deficit  in the subsequent fiscal year (section 111(a)(2)(B) of the Rehabilitation Act and 34 CFR 361.62(a)). 

Legal Requirements (cont’d)
Example of Determining MOE Penalty:

State’s non-Federal FY 2007 VR program expenditures = $25 million

State’s non-Federal  FY 2009 VR program expenditures = $20 million

State’s FY 2009 MOE deficit = $5 million

State’s FY 2010 grant award is reduced by $5 million (MOE penalty)

If there are two VR agencies in a State, the MOE penalty is applied in direct proportion to the amount each agency contributed to the MOE deficit (34 CFR 361.62(c)(2)).

Note:  The $5 million MOE penalty withheld by RSA  is added to funds that are available for reallotment in FY 2010. 

Legal Requirements (cont’d)
A State that fails to satisfy the MOE requirement may request a waiver. 

 The Secretary may waive or modify the VR MOE requirement if such action is necessary for the State to respond to exceptional or uncontrollable circumstances, such as a major natural disaster or a serious economic downturn, that:

cause significant unanticipated expenditures or reductions in revenue that result in a general reduction of programs within the State; or

require the State to make substantial expenditures in the VR program for long-term purposes due to the one-time costs associated with the construction or establishment of a facility for community rehabilitation purposes, or the acquisition of equipment (section 111(a)(2)(C) of the Rehabilitation Act and 34 CFR 361.62(d)).

Legal Requirements (cont’d)
Match and MOE

In addition to the MOE requirement, State VR agencies also must satisfy a match requirement each year of 21.3 percent in allowable non-Federal expenditures (section 111(a)(1) of the Rehabilitation Act and 34 CFR 361.60). 

 States that put more non-Federal funds into the VR program than required to satisfy match could be more likely to suffer a MOE deficit when there are significant State budget cuts.  

Legal Requirements (cont’d)
In the last five years, approximately 50 percent of the states provided more non-Federal funds than required to satisfy match. 

However, in periods of prolonged economic downturn, states that have historically only provided the required match amount could also face MOE deficits if the State’s budget has been cut to the point where the State cannot provide match for the entire VR grant.   

RSA’s Past Approach to MOE Waiver Requests 
If the basis for the MOE waiver request is reductions in revenue  that result in a general reduction of programs within the State:

Calculate the percentage of overall Statewide budget cuts and State VR program cuts for each of the two years that span the MOE period.

Compare the percentage of VR program cuts with the percentage of overall Statewide budget cuts for each of the two years.

RSA’s Past Approach to MOE Waiver Requests (cont’d)

The VR program funding reduction determination is based only on state appropriation for the VR program and does not include other authorized sources of match  that may be used to satisfy the MOE requirement.

RSA’s Past Approach to MOE Waiver Requests (cont’d)
Example 1
If the percentage of VR program cuts was less than or equal to the percentage of the overall Statewide cut for the two-year period, grant full waiver.

State’s FY 2009 MOE Deficit = $5 million

FY 2008:  State budget cuts              = 10%
         VR program budget cuts = 10%

FY 2009:  State budget cuts              = 10%
         VR program budget cuts =   9%

Full waiver of $5 million granted since the VR program cut in each of the two years was equal to or less than the overall State budget cut for each of those years. 

RSA’s Past Approach to MOE Waiver Requests (cont’d)
Example 2
If the percentage of VR program cuts was greater than  the percentage of the overall Statewide cut during the two-year period:

Example 2

State’s FY 2009 MOE Deficit = $5 million

FY 2008:  State budget cuts              = 10%
         VR program budget cuts  =  5%

FY 2009:  State budget cuts              = 10%
         VR program budget cuts = 15%
RSA’s Past Approach to MOE Waiver Requests (cont’d)
Example 2 (cont’d)
Example 2:

Use the percentage of the overall Statewide budget cut to determine how much of the VR program’s budget should have been cut had the VR program been cut by the same percentage as the overall Statewide budget.

Add the maximum amounts that could be waived for each of the two years had the VR budget been cut by the same percentage as the overall State budget.

If the State’s MOE deficit is more than the total amount that could be waived for the two years, grant a waiver of that lesser amount so that the waiver equals the same percentage as the overall State budget cut.

RSA’s Past Approach to MOE Waiver Requests  
Example 2 (cont’d)
FY 2007 total State budget =   $200 million 
FY 2008 total State budget =  - 180 million
                                                           20 million = 10% overall State budget cut

FY 2007 State VR program funding =  $20 million 
FY 2008 State VR program funding = - 19  million
                                                              1  million = 5% VR program budget cut

FY 2008:  State budget cut               = 10% 
                  VR program budget cut  =   5% 

FY 2008:  State is entitled to MOE waiver of $1 million because the VR program reduction was less than the percentage of the overall State budget cut.

RSA’s Past Approach to MOE Waiver Requests 
Example 2 (cont’d)
FY 2008 total State budget =   $180 million 
FY 2009 total State budget =  -  162 million
                                                            18 million = 10% overall State budget cut

FY 2008 State VR program funding =  $19 million 
FY 2009 State VR program funding = - 16.15 million
                                                                           2.85 m = 15% VR program budget cut

FY 2009:  State budget cut               = 10% 
                  VR program budget cut  = 15% 

FY 2009:  State is entitled to MOE waiver =  10% of FY 2008 VR appropriation
                                                                             = $1.9 million
RSA’s Past Approach to MOE Waiver Requests 
Example 2 (cont’d)
Calculating Total Waiver Amounts for FY 2009

Maximum allowed for FY 2008 = $ 1.0 million
Maximum allowed for FY 2009 = + 1.9 million
       Total MOE Waiver                        = $2.9 million

FY 2009 MOE deficit =  $5.0  million
Total MOE Waiver         - 2.9   million
FY 2009 MOE penalty   $2.1 million

RSA’s History of Granting Waivers or Modifications of VR MOE Requirement
Since FY 2001, RSA has received five MOE waiver requests and granted all of them as follows, beginning with the most recent:

FY 2004:  MOE deficit = $3,866,112 
Cause:  Serious economic downturn that resulted in multiple-year Statewide budget cuts.
ED Action:  granted partial waiver of $2,018,326 granted, which represented an amount equal to the percentage of the overall Statewide budget cuts over a two-year period.

FY 2003:  MOE deficit = $801,830 
Causes:  1) Statewide budget cut in FY 2003; and 2) one-time increase in non-Federal expenditures for the purchase of new computer equipment in FY 2001.
ED Action:  Full waiver granted because MOE deficit was less than the percentage of the overall Statewide budget cut plus the total outlay for the computer equipment.   

FY 2003: MOE deficit = $2,280,722 
Cause:   Serious economic downturn resulted in multiple-year Statewide budget cuts.
ED Action:  Full waiver granted because the MOE deficit was less than the percentage of the overall Statewide budget cut over a two-year period.

FY 2003:  MOE deficit = $4,044,859 
Cause:  Serious economic downturn that resulted in multiple-year Statewide budget cuts.
ED Action:  Partial waiver of $3,568,974 granted, which represented an amount equal to the percentage of the overall Statewide budget cuts over a two-year period. 

FY 2001:  MOE deficit = $60,326 
Cause:  Serious economic downturn resulted in an unexpected mid-year State-wide budget cut.
ED Action:  Full waiver granted because MOE deficit was less than the percentage of the overall State-wide budget cut.

RSA’s Current Thinking On the MOE Requirement
The MOE requirement can protect the VR program from disproportionate State budget cuts when  State budgets are flat or increasing.

The MOE requirement can penalize States – especially those with a history of providing more than the required match amount – when State budgets are reduced during periods of serious, prolonged economic downturns.  

In such cases, the MOE requirement can function as a disincentive for States to provide additional funds to the VR program during periods when state budgets are increasing.

VR Program Overmatch Data FY 2005-2009
Fiscal Year    Required Match      Overmatch     % Overmatch    # Overmatched States

2009               $358,880,088        $ 88,904,201           24.77%                       28

2008               $375,775.348          $105,257,144           28.01%                       31

2007                $405,432,165         $ 78,923,563            19.47%                       31

2006                $246,761,178         $ 86,339,624           34.99%                      24

2005                $274,485,146        $  78,163,333           28.48%                       28

Total            $ 1,661,333,926        $437,587,865           26.34%                        

RSA’s Current Thinking On the Moe Requirement (cont’d) 
RSA’s MOE waiver calculation should maintain States’ obligation to the VR program, while also providing as much relief as possible during prolonged periods of State revenue decreases, thus minimizing the disincentive to increase State funding for the VR program.

Although the RSA MOE waiver calculation accomplishes these two goals, it is overly complicated, and could provide more relief without compromising the protections provided by the MOE requirements.

New RSA Approach:  Two-Year Average State Budget Cuts Equal to or Greater than Two-Year Average VR Program  Budget Cuts
Calculate the difference between the average percentage of total overall Statewide budget cuts for the past two years and the average percentage of State cuts to the VR program.

If the average percentage of the VR program cuts is less than or equal to the percentage of the overall Statewide budget cuts, then grant full waiver of MOE deficit.  State will not be penalized by having VR grant reduced.

Example of New RSA Approach:  Two Year Average State Budget Cuts Equal to or Greater than Two Year VR Program Budget Cuts
Example (#2 earlier)
State’s FY 2009 MOE Deficit = $5 million

FY 2008:  overall State budget cuts  = 10%
          VR program budget cuts  =   5%

FY 2009:  overall State budget cuts   = 10%
          VR program budget cuts   = 15%

Average overall State budget cut  for 08 and 09  = 10%

Average VR program budget cut for 08 and 09     = 10% 

Full waiver granted because the average cut to the VR program over two years was equal to the overall statewide budget cuts.

Comparison of Past RSA approach to MOE Waivers with New Approach with Same Facts
State’s FY 2009 MOE Deficit = $5 million

FY 2008: overall State budget cuts = 10%
        VR program budget cuts =   5%

FY 2009:  overall State budget cuts =10%
         VR program budget cuts  =15%

Past Approach: $2.1 million MOE penalty/2.9 million MOE waiver

New Approach:  $0 MOE penalty/ full $5 million waiver
New RSA Approach Two-Year Average VR Program  Budget Cuts Greater than Two-Year Average Overall State Budget Cuts 
If the two year average of the percentage of VR program cuts is more than two year average of the percentage of Statewide budget cuts, then:

MOE penalty =(% VR program cuts  - % of State budget cuts)  x MOE Deficit 
                                      % of the  Statewide budget cuts

Example of New RSA Approach: Average VR Program  Budget Cuts Greater than State Budget Cuts 
Example 3
State A’s FY 2009 MOE Deficit = $5 million

FY 2008:  overall State budget cuts  = 10%
          VR program budget cuts =    5%

FY 2009:  overall State budget cuts  = 10%
         VR program budget cuts   = 20%

Average overall State budget cut  for 08 and 09 = 10%

Average VR program budget cut for 08 and 09   = 12.5% 

Example of New RSA Approach: Average VR Program  Budget Cuts Greater than State Budget Cuts (cont’d)
MOE penalty = % VR program cuts  - % of State budget cuts   X   MOE Deficit 
                                    % of the  Statewide budget cuts

= 12.5% - 10%  X $5 million
                                                                           10%

=  2.5%    X  $5 million
                                                                  10%

= 25% X $5 million

MOE penalty = $1.25 million

MOE waiver = MOE deficit – MOE penalty
= $5 million - $1.25 million
= 3.75 million

Process for Requesting a MOE Waiver
RSA-PD-92-06

A request for a waiver must be submitted in writing to the Commissioner of RSA, along with supporting documentation.

 The request should specify the amount of required non-Federal expenditures that the State wishes to have waived and should include an explanation of the reasons for the request.

Process for Requesting a MOE Waiver (cont’d)
A waiver request ordinarily should be submitted as soon as it has become evident that a major natural disaster, serious economic downturn, or other exceptional or uncontrollable circumstance, has occurred that will make it necessary to reduce general expenditures, including rehabilitation services, or as soon as a State determines it has been unable to meet its MOE level because one-time capital expenditures had created a higher than normal required MOE level.

Process for Requesting a MOE Waiver (cont’d)
A MOE waiver request should be submitted on the basis of actual reduced non-Federal expenditures, not on the basis of projected reduced non-Federal expenditures.

In no case should a waiver request be submitted later than six months following the close of the fiscal year for which the waiver is being requested. 