The purpose of Impact Aid is to provide formula grants to school districts burdened by the presence of nontaxable federal land and installations to make up for the lost revenues and additional costs associated with the federal presence. It is one of the few formula programs where Local Educational Agencies (LEA's) receive funds directly from the US Department of Education (ED) rather than through their states.
Impact Aid was first signed into law by President Harry S. Truman in 1950 and has been amended many times since then. Originally, the program consisted of two separate laws - one for operating costs and one for construction - but the two laws were consolidated into Title VIII of the Elementary and Secondary Education Act (ESEA) in 1994.
There are five main categories of aid. Traditionally, these categories were identified by reference to their section numbers as they existed under the 1950 law.
The five categories consist of LEA's that:
- Experience a substantial and continuing financial burden due to the acquisition of real property by the United States - Section 8002;
- Educate children who reside on federal property and whose parents are employed on federal property - Section 8003;
- Educate children whose parents are in the military services; children who reside on Indian tryst/treaty land or land conveyed at any time under the Alaska Native Claims Settlement Act; live in federally subsidized low-rent housing projects (not Section 8 housing) - Section 8003;
- Educate heavy concentrations of children whose parents are civilian employees of the federal government and do not reside on federal property - Section 8003; or
- Need special assistance with capital expenditures for construction activities because the enrollments of substantial numbers of children who reside on federal land - Section 8007.
I. ELIGIBILITY REQUIREMENTS
Local educational agencies (LEA's) receive formula grants based on the amount of federal property in their jurisdictions and/or the number of "federally connected" children in average daily attendance (ADA) at their schools. LEA's must have a certain minimum amount of property or children to qualify for the program.
For the purposes of this program, "federal property" includes not only military bases and similar federal installations, but also Indian reservation (Trust) and/or "Treaty" lands, Alaskan village lands, land used for federally subsidized low-rent housing projects (not including the Section 8 housing programs administered by HUD) and land used to provide housing for homeless children at a closed military base as long as the land remains under federal ownership.
"Federally connected" children include not only children of military personnel, but also children residing on Indian or Alaskan Native lands; children residing in federally subsidized housing projects (exclusive of Section 8 housing) or homeless housing on a military base, children of foreign diplomatic or military personnel, and children of parents who live or work on federal property.
Roughly 1,350 LEA's nationwide receive some kind of Impact Aid payment that enroll over 950,000 federally connected children, but with a total combined student enrollment ov over 12 million children.
II. USES OF FUNDS
This program provides a payment in lieu of local taxes otherwise collected for LEA's that are burdened by the presence of nontaxable federal land and installations but are nonetheless responsible for educating children of federal personnel who live and/or work on these properties. Except for money earmarked specifically for children with disabilities, the aid becomes part of the LEA's regular budget, and no specific restrictions are placed on the use of the funds.
A separate component of the program provides aid for construction and repair of school facilities in especially "impacted" areas.
- Impact Aid is the second oldest elementary-secondary federal education program administered by the Department of Education currently in law, and was first passed in 1950 under President Harry Truman.
- The program was formed to help make up the lost local tax base to school districts imposed upon by federal property. In other words, people living on federal property do not pay local property tax. People who work on federal property in turn, work for companies that do not pay local property tax. Also, people who work for the military have the ability to shop for food and other items at a PX that does not charge sales tax. Therefore, school districts lose not only property tax revenue, but also sales tax and licensing fees. The program was also designed to provide payments in lieu of taxes to school districts that have had large parcels of land taken off the tax roles after 1938 as a result of a federal action.
- There are basically four areas of federal impaction: Indian trust or treaty lands, low rent housing projects, and military bases, and other federal ownership of land such as national parks, federal prisons, VA hospitals, and other federally owned parcels of land.
- The Impact Aid Statute was originally referred to as PL. 81-874. In 1965 it was used by Congress as the vehicle to build the Elementary and Secondary Education Act. In 1994 Impact Aid was folded into ESEA as Title VIII (PL 81-874 was repealed).
- It is the only education program that is not forward funded. When Congress appropriates dollars annually in the fall, the money is immediately wired to school district's bank accounts. Other programs' dollars are designated for the following school year, placing them unless of a financial bind in the case of a continuing resolution (CR).
- The 8003 (b) Basic Support part of the program is currently (FY 2008) funded at about 60% of need, while the 8002 Federal Property part of the program is funded at 3.5% of need OR Section 8003 has a 40% unfunded need while Section 8002 has a 96.5% unfunded need.
- The money is appropriated through the Labor - HHS - Education Appropriation Bill.
- The Impact Aid program is the most efficient of all education programs, as the money is wired directly from the Department of Education to the school's bank accounts, avoiding administrative costs at the state level. In some cases the funds are wired to a county administrative unit for disbursement to the school district or in the case of a dependent school district (doesn't possess the authority to tax directly) to the city or county treasurer.
- There are no "strings attached" to the money and districts can use it in the areas they need it most as determined by the locally elected school board. It can be used for construction, salaries, supplies, unless otherwise prohibited by state law.