Stimulus Funds Spent on Insurance, Utility Bills

Wisconsin School District Justifies Unusual Stimulus Spending –

A $416,219.32 payment to WEA Trust for health insurance and $237,861.68 to utility companies from the New Holstein School District raises questions about how school districts across the country were allowed to spend federal stimulus money.

The MacIver Institute has been reviewing how stimulus funds  have been spent in Wisconsin. The disbursement of American Recovery and Reinvestment Act (ARRA) funds to WEA Trust, the health insurance and financial services company operated by the state’s teachers’ union, piqued our interests and prompted us to do some further digging.

The only other school district to spend stimulus money for health insurance was Frederic, and that amount was $97,527.  Other districts, including Green Bay and Madison, told the MacIver Institute that stimulus money could not be spent on employee benefits or utility costs.

The general guidance districts followed was stimulus money should “supplement, not supplant”  funding for educational expenses.  In other words, it couldn’t be spent on anything previously paid with other funds.

The logic behind that guidance is that the stimulus money won’t be flowing in forever.  In April 2009, the U.S. Department of Education advised award recipients “The ARRA is expected to be a one-time infusion of substantial new resources.  These funds should be invested in ways that do not result in unsustainable continuing commitments after the funding expires.”

The department warned again in September 2009, “Invest the one-time ARRA funds thoughtfully to minimize the ‘funding cliff.’”

However, despite the Department of Education’s general guidance, districts received stimulus funds in the form of various grants, and not all the grants were held to the same requirements.

“Title 1, Part A” grants were strictly intended to “Improve teaching and learning for students most at risk of failing to meet State academic achievement standards,” according to  Those grants were held to the “supplement, not supplant” standard.

However, New Holstein paid for its employee benefits and utilities out of the “State Stabilization Fund-Education Fund,” monies.  That grant was meant to fill the gap in aid school districts would ordinarily receive from their states.  The US Department of Education stated in June 2009, because school districts “may consider Education Stabilization funds to be available for any activity authorized under the Impact Aid program, the funds may be used to support both current expenditures and other expenses such as capital expenditures.”

In other words, school districts could spend it on practically anything, including benefits and utilities.  In reality, school districts had already spent that money before they even realized it would be coming from the stimulus.

The $416,219.32 New Holstein paid to WEA Trust was for cost incurred during the 2008-2009 school year.  As usual, the district was expecting an aid check from the state in June, reimbursing it for the expense.  However, this year the district’s aid from the state included $741,608 of stimulus money, which the state used to fill a gap in school aid funding.

It was up to the districts to go back and try to figure out what items that money could be attributed to and how it retroactively contributed to job creation/retention.  Rebecca Hansen, New Holstein’s business manager, decided to attribute it to benefits and utilities.

“I decided to go this route, because this money was money that was guaranteed to us by the State through Equalized Aid payments.” Hansen said. “It was not the School District’s choice that our aid payment was supplemented by ARRA funds.  Therefore, I could have put any expenditure that we would normally use state aid money for, which would be things like salaries, benefits, utilities, transportation, etc.  We use both state aid money and money levied by our local municipalities under the revenue limit to pay all of these expenses.  I just chose two of our larger expenses which are expenses that won’t go away to report as part of the survey that was sent.”

Under the requirements for all stimulus awards, recipients that spent more than $25 thousand in stimulus monies with one vendor had to file separate vendor reports.  That’s what made New Holstein’s expenditures with WEA Trust, New Holstein Utilities, and Wisconsin Public Service stand out.

No other school district in the state spent more than half its stimulus funds on benefits and utilities.  Although it was an unorthodox use of the funds, it was not illegal according to the patchwork of regulations governing the use of ARRA funds.

Senator Alberta Darling (R-River Hills) doesn’t blame New Holstein for how it spent its grants, but points out that was not what the stimulus was intended for.

“It appears we have here just the latest example of so-called ‘stimulus’ funds being spent on something other than creating jobs,” said Darling. “Democrats in Wisconsin used this one-time federal funding to bail out their budget and vastly expand government spending.”

Hansen recognizes using ARRA funds in this way puts the district in danger of facing that “funding cliff,” the US Department of Education warned about.

“It is a constant battle to make ends meet when we are looking at cuts in funding from all areas,” said Hansen. “Unfortunately, benefits and utilities are two constants the school district often does not completely control as far as the increases in costs through the years, and we will need to find other ways to make ends meet unfortunately possibly through cutting programs or laying off staff.  It will be an uphill battle in the years to come and the school district is working hard to cut costs without hurting the education of our children.”

That challenge will become all the more apparent after September 30, 2011, when school districts will no longer have stimulus funds to lean on.

“Their (Democrats’) irresponsibility has set up state and local governments, school districts and taxpayers for real disasters in the next budget,” said Darling.

By Bill Osmulski
MacIver News Service