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Fiscal Cliff Cheat Sheet: 10 Frequently Asked Questions

Almost as soon as President Barack Obama was re-elected, the coming fiscal cliff took center stage. Lawmakers and the Obama administration are supposed to solve the problem in a planned "lame-duck" session of Congress, which starts today.

That means we can expect to hear the words "entitlements", "revenue", "loopholes", and "sequestration" a whole lot for the next couple months. What does it all mean for you, as a teacher/principal/superintendent/policy person?

Here's a breakdown of frequently asked questions:

What exactly is the fiscal cliff? Basically, it's a perfect storm of federal tax and spending legislation that has to be dealt with really quickly. A whole package of tax cuts, including the so-called Bush tax cuts, put in place under the previous president, are set to expire soon. Congress will have to figure out whether to extend them, and if so, which ones to extend. And, perhaps more important when it comes to education, a set of across-the-board cuts are set to be triggered for just about every federal agency, including the U.S. Department of Education and the Pentagon, on Jan. 2. They will go into effect unless Congress acts to stop them.

Sequestration? What's that? And how did it come about? The sequestration trigger-cuts were put in place as part of a deal to raise the debt ceiling last summer. Lawmakers and the administration tried—and failed—to come up with some sort of long-term solution for the nation's debt problem. Instead of coming up with a deal, they set the clock ticking on those automatic cuts—which virtually no one likes—essentially to force themselves to act. And they gave it a wonky, budgety name: sequestration. (If you're curious about where that term comes from, here's a great explanation.) The idea was that neither Republicans nor Democrats would be happy with the cuts since they would hit both military programs (which Republicans especially favor) and domestic spending (which is typically supported by Democrats). Even though the cuts were never supposed to actually happen, lawmakers so far haven't been able to come up with a long-term deal to head them off.

How would school districts be affected? Most programs in the U.S. Department of Education would be cut by 8.2 percent, according to the White House Office of Management and Budget. That means federal money for disadvantaged students, now financed at $15.75 billion would be cut by almost $1.3 billion. And special education programs, funded at $12.64 billion, would be cut by about $1.03 billion. More here. It's important to note, of course, that the feds make up less than 10 percent of all K-12 financing—the vast majority of funds come from state and local governments. Still, many districts say they're already squeezed at the local level and really can't afford to cope with federal cuts on top of state and local reductions.

So ... wait—my school district is going to lose 8.2 percent of its federal funding on Jan. 2 if Congress doesn't figure something out? Actually, no. Even if there is a stalemate and no action on Capitol Hill, your district probably won't lose money right away (unless you rely on the Impact Aid program—more on that below). The big formula grants that school districts depend on most (Title I grants for disadvantaged students, special education, grants for teacher quality) are forward-funded. That means the cuts wouldn't kick in until the start of the 2013-14 school year, giving districts a planning window.

Which districts should be really worried? There are some districts that would be affected right away, some of them very dramatically. Those districts are the ones that are in the Impact Aid program, which services some 1,200 districts nationwide. Most impact aid districts have a lot of Native American students, students whose parents work on military bases, or federal land near their district. They would see their funding cut on Jan. 2. Some districts expect this will mean layoffs or programmatic cuts.

Are any programs exempt? And what about other programs that aren't funded through the Education Department? Some programs are exempt, including federal student loans, some Pell Grant money, most child nutrition programs, and the Children's Health Insurance Program. However, the Head Start program, which is funded through the U.S. Department of Health and Human Services, doesn't appear to be exempt.

So if sequestration actually goes through, what about maintenance of effort, where it applies? Good question. Advocates are still trying to get to the bottom of that one.

What does President Obama say? What have leaders in Congress said? Not very much so far, and virtually nothing about education specifically. Obama said during one of the presidential campaign debates that sequestration "won't happen." And U.S. Rep. John Boehner, R-Ohio, the Speaker of the House, has said he would be okay with some revenue increases, although he'd like them to come from closing tax loopholes, not raising taxes on the highest-earners, which is what Obama wants to do. U.S. Sen. Tom Harkin, D-Iowa, who oversees the Senate panel that deals with education spending, has been outspoken about the potential cuts to K-12. He is really worried about their impact.

What happens from here? Lawmakers will try to work out a compromise. Most advocates and analysts expect that they will be able to reach some sort of temporary deal before the end of the year, but it's far from a sure thing.

How can I get more information? There are a lot of great sources out there. Harkin's staff put together this analysis of what the cuts would mean. The American Association of School Administrators has a sequestration tool kit. Edweek coverage here and here.

Did I miss anything? Anything I can clear up? Email me at aklein@epe.org, or hit up the comments section.

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