POLICY LETTER: November 23, 2015 to Michael Lovato
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Maintenance of effort (MOE)
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Maintenance of effort (MOE)
November 23, 2015
Michael Lovato
Director of Special Education
New Mexico Public Education Department
120 South Federal Place
Santa Fe, New Mexico 87501
Dear Mr. Lovato:
This is in response to the electronic mail (email) communication to me dated August 27, 2014,
from Gabriel C. Baca, New Mexico’s former special education director,
in which he posed
several questions seeking written guidance regarding the application of the exception to
maintenance of effort (MOE) in 34 CFR §300.204(a).
Under that provision , a local educational
agency (LEA) may reduce the level of expenditures by the LEA
for the education of children
with disabilities
under Part B of the Individuals with Disabilities Education Act (IDEA) below
the level of those expenditures for the preceding fiscal year if the reduction is attributable to “the
voluntary departure, by retirement or otherwise, or departure for just cause, of special education
or related services personnel.”
His questions and the Office of Special Education Programs ’
(OSEP)
responses are below.
Question 1:
“ Is an LEA able to take the deduction pursuant to 34 CFR §300.204(a) if the services were
provided in the prior year by a special education and related service provider or contractor, and
that contractor leaves his or her position by voluntary departure, retirement, or for cause, and
now employees of the LEA are providing the same services?
Example 1
In 2010-2011 an LEA pays [$]100,000.00 for the fiscal year to a contractor to provide
occupational therapist services.
Then that contractor decides to leave the position voluntarily to
pursue other personal interests or just decides not to renew the contract. In 2011-2012, instead of
contracting for the services the LEA hires an occupational therapist as a full time employee with
an annual salary of $
50,000.00. Example 2
In 2010-2011, an LEA paid a total of $100,000 for the fiscal year, to a contractor to provide
occupational therapist services. In 2011
-2012, instead of contracting for the services, the LEA
decides to save money on travel and other costs that do not directly relate to a student’s services,
and in order to improve the quality of the services being provided to students in the LEA, the
LEA hires an occupational therapist as a full time employee with an annual salary of $50,000.00.
In both cases, may the LEA take the $50,000.00 difference as a qualified reduction in MOE
pursuant to §300.204(a)? ”
Page 2 – Mr. Michael Lovato
OSEP’s Response:
In Example 1 above, the LEA may take the $50,000 reduction in MOE because of the voluntary
departure of the relat ed service provider. On the other hand, in Example 2, the LEA may not take
the reduction in MOE because the related service provider did not depart voluntarily , or for just
cause , but rather departed because the LEA decided to terminate the contract with the related
service provider as a cost -saving measure.
Question 2:
“Is an LEA able to take the deduction pursuant to [34 CFR §] 300.204(a) , if the services
provided in the prior year were being provided by a full -time employee who leaves his/her
position by voluntary departure, retirement, or for just cause, and then the same services are
provided by an independent contractor in the following year at a lower cost? ”
OSEP’s Response:
In the situation provided in your question , the employee departed “his/her position by voluntary
departure, retirement, or for just cause .” Therefore , based on the information you provided, the
LEA may take a n MOE reduction based on the difference between the salary paid to the full -time
employee and the amount paid to the inde pendent contractor . For example, if the salary paid to
the full -time employee was $100,000 and the amount paid to the independent contractor was
$50,000, the LEA may take a $50,000 reduction in its MOE obligation .
Question 3:
“Is an LEA able to take the d eduction pursuant to [34 CFR § ] 300.204(a) , if the services
provided in the prior year were being provided by a contractor and then a less costly contractor
provides the same services the following year?
Example 3
In 2010 -2011 an LEA pays $50,000.00 for th e fiscal year to a contractor to provide occupational
therapist services. Then that contractor decides to leave the position voluntarily to pursue other
personal interests or just decides not to renew the contract. In 2011 -2012 the LEA finds another
cont ractor to cover the services but the expenditures for the new contractor are $40,000.00.
May the LEA take the $10,000.00 difference as a qualified reduction in MOE pursuant to
34 CFR §300.204(a)? ”
OSEP’s Response:
In Example 3, the contractor “voluntarily ” departed the position ; therefore , the LEA may take the
$10,000 reduction in MOE. (Your general question immediately preceding Example 3 does not
indicate whether the contractor in the prior year voluntarily departed the position. If the
contractor in t hat situation voluntarily departed the position, the LEA may take an MOE
reduction.)
Page 3 – Mr. Michael Lovato
Question 4:
On page 2 of the OSEP Letter to Albert V. Gonzales, dated September 7, 2012 , each of the
examples provided “references a replacement of a ‘departing special ed ucation teacher ’ but there
is no context as to whether the teacher was paid as an employee of the LEA or as a contractor of
the LEA. How does OSEP apply the exceptions in 34 CFR §300.204(a) to questions 1 -3 above,
in light of the guidance in the Letter to Gonzales?” You also ask “[i]n the context of the
questions above, what is the definition of ‘personnel ’ in [34 CFR §] 300.204(a)?”
OSEP’s Response:
As noted above, the provision in 34 CFR §300.204(a) refers to the voluntary departure , or
departure for just cause of special education and related services personnel. Neither Part B of the
IDEA, nor its implementing regulations , define special education or related services personnel .
An LEA may take the reduction under 34 CFR §300.204(a) for the voluntar y departure , or
departure for just cause of a special education teacher or related service provider, regardless of
whether the special education teacher or related services p rovider is an employee of the public
agency or an independent contractor .
Questi on 5:
Lastly, you ask for clarification of “just cause” in 34 CFR § 300.204(a). Specifically, “How
would ‘just cause ’ be defined in the case of a breach or material breach of contract of a
contractor? And also, “How would ‘just cause ’ be defined in the ca se of an occurrence of a
violation of a contract by a contractor?”
OSEP’s Response:
Neither Part B of the IDEA, nor its implementing regulations , define “just cause .” In prior
guidance, the Department has stated that departure “for just cause” is usually related to some
kind of disciplinary dismissal. 1 “Just cause” is a legal term that must be defined consistent with
State law. With respect to an employee of a public agency, a termination for “just cause” would
generally occur whe n an employer makes a fa ctual determination that the employee’s
performance or conduct warranted the termination of the employee. With respect to a n
independent contractor, a termination for “just cause” would generally occur when the contractor
fails to meet the terms of the co ntract.
1 Please see the 2009 Integrated Fiscal Accountability presentation on LEA MOE on the GRADS website at
https://osep.grads360.org/#communiti es/pdc/documents/9437 . On April 28, 2015, the Department published final
regulations on LEA MOE, which took effect on July 1, 2015. 80 Fed. Reg. 23644 (Apr. 28, 2015). In the final
regulations, the eligibility standard precedes the compliance standard in order to provide clarity. Therefore, the
eligibility standard is set out in 34 CFR §300.203(a), and the compliance standard is set out in 34 CFR §300.203(b).
In addition, in order to clarify that LEAs may meet the eligibility standard and the complian ce standard using any of
the four methods ((i) local funds only, (ii) the combination of State and local funds, (iii) local funds only on a per
capita basis, or (iv) the combination of State and local funds on a per capita basis), the final regulations lis t the four
methods individually in both the eligibility standard in §300.203(a)(1) and the compliance standard in 34 CFR
§300.203(b)(2). The ability to use any of the four methods is not a change in the final LEA MOE regulations, as the
prior LEA MOE regu lation also provided for the use of the four methods.
Page 4 – Mr. Michael Lovato
Based on section 607(e) of the IDEA, we are informing you that our response is provided as
informal guidance and is not legally binding, but represents an interpretation by the U.S.
Department of Education of the IDEA in the context of specific fac ts presented.
If you have any further questions, please do not hesitate to contact Jennifer Finch, of my staff, at
202 -245 -6610 or by email at Jennifer.Finch@ed.gov .
Sincerely,
/s/
Melody Musgrove, Ed.D.
Direc tor
Office of Special Education Programs
TOPIC: Maintenance of effort (MOE)
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Last modified on April 19, 2017