• Introduction
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  Contents

• Introduction
Overview of Impact Aid Section 80037003(b) Payments
• Program Activities
• Current Funding Approach
• Alternative Funding Approaches for Section 80037003(b) Payments: Advance Appropriations and Forward  Funding
• Advance Appropriations
• Forward Funding
• Budget Enforcement Considerations
• Potential Implementation and Transition Options for Advance Appropriations and Forward Funding
• Forward Funding
• Transition Year
• Advance Appropriations
• Transition Year
• Combination A Combined Approach: Forward Funding/ and Advance Appropriations Approach
• Transition Year
• Illustration of Alternative Funding Approach Transitions

Summary

Administered by the U.S. Department of Education (ED), the Impact Aid program is one of the oldest federal education programs, dating from 1950. Impact Aid, authorized under Title VIIIVII of the Elementary and Secondary Education Act (ESEA, P.L. 89-10, as amended), compensates local educational agencies (LEAs) for "substantial and continuingthe financial burden" resulting from certain federal activities carried out in their areas. These activities include federal ownership of certain lands, as well as the enrollments in LEAs of children of parents who work or live on federal land (e.g., children of parents in the militaryuniformed services and children living on Indian lands). The federal government provides compensation because these activities deprive LEAs of the ability to collect property or other taxes from these individuals (e.g., members of the Armed Forcesuniformed services living on military bases) or their employers, even though the LEAs are obligated to provide free public education to their children. Thus, Impact Aid is intended to compensate LEAs for the resulting loss of tax revenue.

Impact Aid also provides support for certain students with disabilities and for school construction. The largest Impact Aid paymentcomponent, Section 80037003(b) payments (also known as Basic Support Payments or BSPs), compensates LEAs for enrolling "federally connected" children. For FY2014FY2026, Section 80037003(b) accounted for $1.151477 billion, approximately 89.390.6% of all funds appropriated for the Impact Aid program. As Section 80037003(b) payments account for the majority of all Impact Aid funding, this report primarily focuses on these payments.

All Impact Aid payments are funded through the Labor, Health and Human Services, Education, and Related Agencies (L-HHS-ED) annual appropriations billact. Funds are provided through "budget year appropriations," meaning the funds would be available for the budget year beginning on the first day of the next fiscal year (e.g., October 1, 20132025, for FY2014the FY2026 L-HHS-ED appropriations act), unless otherwise specified. This availability may be retroactivegenerally is retroactive to October 1 if annual appropriations are not enacted untilenacted after the fiscal year has begun. The Impact Aid program is also authorized to receive appropriations through advance appropriations and forward funding. AdvanceIn current practice, advance appropriations become available one or more fiscal yearsyear after the budget year covered by a given appropriations act (e.g., for FY2015 and an FY2014appropriations provided for FY2027 in an FY2026 appropriations act). Forward funding becomes available during the last quarter of the budget year (e.g., starting July 1),, 2026, for the FY2026 appropriations act) but remains available through at least the following fiscal year (e.g., available from July 1, 2026July 1, 2014, through September 30, 2015).

Under the current mechanism for funding Section 8003(b) payments and the use of continuing resolutions rather than enacting regular appropriations acts prior to the start of the fiscal2027). Without advance appropriations or forward funding, when full-year appropriations are not provided prior to the beginning of the budget year, LEAs are generally unable to receive their full Section 80037003(b) payments until sometime after October 1, because of delays in when regular appropriations or a full-year continuing resolution is enacted. This can create financial difficulties for LEAs, particularly those that are heavily dependent on Impact Aid funding. Providing funds for Section 80037003(b) payments through advance appropriations or forward funding has the potential to ease some of these difficulties, but either change has budget enforcement implications that may complicate any attempt to transition to an alternative funding schedule.

This report considers three different appropriations scenarios for Impact Aid Section 80037003(b) payments that are an alternative to budget year appropriations: (1) providing forward funding for Section 80037003(b) payments, (2) providing advance appropriations for Section 80037003(b) payments, or (3) using both forward funding and advance appropriations to provide Section 80037003(b) payments, as is done for other federal education programs such as Title I-A Grants to Local Educational Agencies authorized by the ESEA or Grants to States authorized under Part B of the Individuals with Disabilities Education Act (IDEA). Each of these scenarios has budget implications that may require at least a one-time increase in discretionary appropriations, a change in the limit set on advance appropriations (if applicable), or some combination of both.

Introduction

Administered by the U.S. Department of Education (ED), the Impact Aid program is one of the oldest federal education programs, dating from 1950. Impact Aid, authorized under Title VIIIVII of the Elementary and Secondary Education Act (ESEA, P.L. 89-10, as amended), compensates local educational agencies (LEAs) for "substantial and continuingthe financial burden" resulting from certain federal activities. carried out in their areas.¹ These activities include federal ownership of certain lands, as well as the enrollments in LEAs of children of parents who work or live on federal land (e.g., children of parents in the militaryuniformed services and children living on Indian lands). The federal government provides compensation because these activities deprive LEAs of the ability to collect property or other taxes from these individuals (e.g., members of the Armed Forcesuniformed services living on military bases) or their employers, even though the LEAs are obligated to provide free public education to their children. Thus Impact Aid is intended to compensate LEAs for the resulting loss of tax revenue.

Impact Aid also provides support for certain students with disabilities and for school construction. The largest Impact Aid paymentcomponent, Section 80037003(b) payments (also known as Basic Support Payments or BSPs), compensates LEAs for enrolling "federally connected" children. These are children who reside with a parent who is a member of the Armed Forcesuniformed services living on or off federal property; reside with a parent who is an accredited foreign military officer living on federal property; reside on Indian lands; reside in low-rent public housing; or reside with a parent who is a civilian working or living on federal land. For FY2014FY2026, Section 80037003(b) payments accounted for $1.151477 billion, approximately 89.390.6% of all funds appropriated for the Impact Aid program. As Section 80037003(b) payments account for the majority of all Impact Aid funding, this report primarily focuses on them. The Appendix provides a brief description of other payments made under the Impact Aid program.

The purpose of this report is to describe options for adjusting the timing of when Impact Aid appropriations become available for obligation to carry out Section 80037003(b).² The Section 7003(b) payments represent the largest federal elementary and secondary education program administered by ED that is funded in annual appropriations acts using "budget year appropriations," meaning funding for a school year does not become available until the first day of the fiscal year (October 1), which occurs after the school year has begun. The use of budget year appropriations to fund Section 7003(b) payments can create some complexities for the LEAs that receive these funds. For example, the current timing of enactment and availability of federal funds provided through Impact Aid may make it difficult for LEAs to include these funds in their budget planning process. In addition, the allocation of funds to LEAs is delayed in instances where the federal government is operating under a temporary continuing resolution (CR) at the beginning of the fiscal year until regular appropriations bills or a full-year CR is enacted. Thus, LEAs may experience delays in receiving their funds. Other funding approaches used in annual appropriations acts could be applied to the Section 7003(b) payments to address these issues. (b).¹ At present, appropriations are often not available at the beginning of the school year. This report begins by explaining how Section 80037003(b) activities are currently funded through "budget year appropriations" and the effect that period of availability has on those activities. It then discusses alternatives to providing funding through budget year appropriations, including forward funding and advance appropriations. The final section analyzes the way in which adopting an alternative period of availability such as forward funding, advance appropriations, or a combination approach (forward funding/ and advance appropriations) would affect the appropriations process once it was fully implemented. It also. More specifically, it discusses the appropriations actions required to make these changes and the ways in which this would affect the annual appropriations process, both once the alternative period of availability was fully implemented, and also during and in the transition fiscal year.²

3 Overview of Impact Aid Section 80037003(b) Payments

Program Activities

Section 80037003(b) of the ESEA authorizes payments (often referred to as Basic Support Payments) to LEAs to compensate them for the cost of serving certain groups of federally connected children. As previously mentioned, federallyFederally connected children include

• children living on Indian lands;
• children who live on federal land and whose parents are employed on federal land, are members of the Armed Forcesuniformed services, or are accredited foreign military officers;
• children with a parent in the Armed Forcesuniformed services living off the base;
• children living in low-rent public housing; and
• children whose parents otherwise work on federal land but do not live on federal land.

The presence of these children can increase the number of children thean LEA must serve without a commensurate increase in the taxes that otherwise could be collected to support public education. To be eligible for Section 80037003(b) payments, an LEA must have at least 400 federally connected children, or such children must represent at least 3% of an LEA's average daily attendance (ADA). Of the more than 1517,000 LEAs nationwide, 1,151 LEAs meet one of these eligibility criteria.³4 932 LEAs were eligible for a Basic Support Payment in FY2025.⁵ Thus, fewer than 10% of all public school districtsLEAs qualify for Section 80037003(b) payments.

For FY2014, $1.151FY2026, $1.477 billion was appropriated for Section 80037003(b) payments. These payments accounted for 89.390.6% of the $1.289630 billion provided overall for the Impact Aid program. Section 80037003(b) payments differ from funds provided by most other federal elementary and secondary education programs in that they are not limited to specified uses (such as improving the educational achievement of disadvantaged students). While Section 8003(b) funds are generally used for current local education expenditures,⁴ they may also be used for capital expenditures.⁵7003(b) payments are considered general aid to the recipient LEA. The funds may be used for any purpose selected by the LEA in accordance with state and local requirements. Funds are often used for current expenditures (e.g., teacher salaries, purchasing instructional materials, tutoring) but may also be used for other purposes such as capital expenditures.⁶ In addition, funds need not be spent only on federally connected children. Finally, because Impact Aid payments are not aimed at specific educational goals, accountability requirements for the use of funds or for specific outcomes are minimal.

Current Funding Approach

The federal government's fiscal year starts on October 1 and ends the following September 30. Funding for federal programs that is provided through the annual appropriations process is typically available at the start of the fiscal year, unless otherwise specified. In general, this period of availability most often begins on the first day of the fiscal year of the appropriations act, also referred to as the "of one calendar year and ends on September 30 of the following calendar year.⁷ A federal fiscal year is identified by the calendar year in which it ends.⁸ For example, FY2025 began on October 1, 2024, and ended on September 30, 2025. Funding for federal programs provided through the annual appropriations process typically becomes available for obligation by a federal agency on the first day of the fiscal year for which the act makes appropriations, unless otherwise specified. For example, acts making appropriations for FY2026 typically provided funds that first became available to federal agencies for obligation on the first day of FY2026, October 1, 2025.⁹ This period of availability is also referred to as the budget year.." For the purposes of this report, such periods of availability are referred to as "budget year appropriations." The Impact Aid program is funded using budget year appropriations provided in the Labor, Health and Human Services, Education, and Related Agencies (L-HHS-ED) appropriations bill. It should be noted that ofact. Since school years typically begin in the months preceding the October start of a new fiscal year, this means that funds become available for use during a school year after that school year has started. Of the elementary and secondary education programs administered by ED that receivereceived $1 billion or more in annual appropriations, in FY2026, only Impact Aid Section 8003(b) is the only program that receives7003(b) received budget year appropriations.⁶

Under the current mechanism for funding Section 8003(b) payments and the use of continuing resolutions rather than enacting budget year appropriations acts prior to the start of the fiscal year, LEAs are generally unable to receive their full Section 8003(b) payments until sometime after October 1. Some observers have suggested that providing funding for these payments on a regular appropriations schedule has caused issues for program operations.⁷ Because10 The use of budget year appropriations to fund Section 7003(b) payments can create some complexities for the LEAs that receive these funds. For example, because of the timing of the school year, significantsubstantial planning and preparation for the upcoming year by LEAs tends to occur during the spring and summer months. However, the current timing of enactment and availability of federal funds provided through Impact Aid makesmay make it difficult for LEAs to include themthese funds in their budget planning process. In addition, the full allocation of funds to LEAs is delayed in instances where the federal government is operating under a short-term continuing resolutiontemporary CR at the beginning of the fiscal year until regular appropriations bills or a full-year continuing resolution is enacted. LEAs dependent on Impact Aid funding are also affected more quickly by any decreaseCR is enacted. In the case of a CR, LEAs that must have an initial Basic Support Payment in the first quarter of the fiscal year to meet current operating costs are able to request an early payment from ED.¹¹ However, payments provided by ED in such instances are partial Basic Support Payments. LEAs dependent on Impact Aid funding also are affected more quickly by any decrease (or increase) in funding than LEAs receiving funds under other federal elementary and secondary education formula grant programs. For example, as a result of the FY2013 sequester, Impact Aid funding was reduced immediately during the 2012-2013 school year, while the decrease in funding for federal education programs receiving forward funding or advance appropriations did not affect LEAs until the following school year (2013-2014).⁸ The uncertainty that results from each of these funding scenariosrelated to the provision of budget year appropriations due to CRs or other situations such as sequestration or government shutdowns can create financial difficulties for LEAs, particularly those that are heavily dependent on Impact Aid funding.⁹

12 Alternative Funding Approaches for Section 80037003(b) Payments: Advance Appropriations and Forward  Funding Rather than providingFunding

In contrast to regular budget year appropriations for Impact Aid that fundafter a school year that is alreadyis underway, program funding could be provided in the appropriations act for the fiscal year that precedes the school year for which they will be usedprior to the start of the school year, as is done with several other education grant programs. In general, this alternative approach would provide appropriations a number of months in advance of when they would become available with budget year appropriations (i.e., prior to the start of the school year in which they would be used). Such a process would presumably allow LEAs to incorporate funding with more certainty in their planning process for the upcoming school year. In addition, because of the lag in availability, if appropriations acts were delayed in any given fiscal year, LEAs presumably would notbe less likely to be adversely affected for the purposes of the upcoming school year.

While appropriations could be made available at any time, as specified in the appropriations act in which they are enacted, two such conventions have been used for certain other ED programs to accommodate the disconnect between the federal fiscal year and the school year—"advance appropriations" and "forward funding." The Impact Aid Section 8003(b) payment is the only K-12 program administered by ED that receives $1 billion or more through the annual appropriations process that is not providedforward funding.¹³ For example, programs administered by ED that received total annual appropriations for a fiscal year of at least $1 billion in FY2026 and received both advance appropriations and forward funding include the following: (1) Title I-Grants to Local Educational Agencies (ESEA Title I-A), (2) Improving Teacher Quality (ESEA Title II-A), (3) Individuals with Disabilities Education Act (IDEA) Part B Grants to States, and (4) Career and Technical Education State Grants (Carl. D. Perkins Career and Technical Education Act of 2006, Title I). Additionally, the following programs received appropriations in excess of $1 billion through forward funding only: the Student Support and Academic Enrichment (SSAE) program (ESEA Title IV-A) and the 21^st Century Community Learning Centers program (ESEA Title IV-B). Impact Aid Section 7003(b) is the only ED-administered elementary and secondary education program receiving at least $1 billion annually that is not funded through advance appropriations, forward funding, or a combination of the two. advance appropriations, forward funding, or a combination of the two. Although the Impact Aid programs have generally been authorized to receive funding in appropriations acts on either of these bases since 1968, through Title IV, Section 420 (a), of the General Education Provisions Act (see below), no such appropriations are currently being provided with such timing:

To the end of affording the responsible Federal, State, and local officers adequate notice of available Federal financial assistance for carrying out ongoing education activities and projects, appropriations for grants, contracts, or other payments under any applicable program are authorized to be included in the appropriations Act for the fiscal year preceding the fiscal year during which such activities and projects shall be carried out.¹⁰

While14 While funding for any or all of the Impact Aid payments could be provided through forward funding or advance appropriations (as discussed below), for the purposes of this report it is assumed that any change in appropriations would affect only the Section 80037003(b) payments.

Advance Appropriations

Advance appropriations are enacted one or more fiscal years prior to when they become available.¹¹15 For example, in an appropriations act for FY2015FY2027, funds would generally become available for obligation at the start of the fiscal year—October 1, 20142026. Advance appropriations included in this FY2015FY2027 act, however, would not become available until the start of FY2016FY2028—October 1, 20152027—or later.¹⁶

Advance appropriations have been provided for a variety of programs besides the education programs mentioned above, particularly those that provide payments or services directly to individuals or states, such as the Veteran'sVeterans Health Administration (Department of Veterans' Affairs) and the Tenant-Based and Project-Based Rental Assistance Programs (Department of Housing and Urban Development). The reasons such appropriations have been advocated include avoiding funding gaps or relying on continuing resolutionsCRs for funding at the beginning of the fiscal year, as well as the belief that such appropriations enable better advanced planning for those programs because they are typically enacted many months prior to the beginning of the fiscal year in which they become available. Others have argued, however, that the ability to make such commitments may be limited by the extent to which programmatic needs can be forecasted in advance, and that providing alternative periods of availability for some programs makes their budgetary levels difficult to compare to programs that receive budget year appropriations.¹²

17 Forward Funding

Forward funds are also enacted in advance, but become available during the last quarter of the budget year as opposed to a future fiscal year.¹³18 For example, in an appropriations act for FY2015FY2027, budget authority that is forward funded would not become available during FY2015, but not until July 1, 2015, or later,until the last quarter of FY2027 (i.e., July 1, 2027, or later) and would remain available through at least part of the following fiscal year.¹⁹

Forward funding is provided for many elementary and secondary education programs to allow additional time for school officials to develop budgets in advance of the beginning of the school year and to better align federal appropriations with the fiscal year used by many school districts, which runs from July 1 to June 30.²⁰ Forward funding is similar to advance appropriations, in that it is enacted in advance of the school year for which it is provided. In the context of education, the distinction between the two is that forward funding becomes available during the summer months to provide for program costs that largely occur during the following fiscal year, whereas advance appropriations first become available in the fall, during that following fiscal year.

At the program level, there is For example, in an FY2027 appropriations act, forward funding for the 2027-2028 school year would become available on July 1, 2027, whereas advance appropriations for that same school year would become available on October 1, 2027. At the program level, there may be little difference between providing funds in July or October, as most expenditures for a standard school year occur after October 1(e.g., for salaries and expenses) occur throughout the year. Using forward funding or advance appropriations, however, may have budget enforcement implications, and the choice of one approach over the other may be determined, to some extent, by those implications.

Budget Enforcement Considerations

Budget enforcement rules generally provide limits on the amount provided in appropriations acts for each fiscal year through both statutory and procedural mechanisms.¹⁴ For statutory enforcement, the Budget Control Act of 2011 imposed limits on discretionary spending¹⁵ that apply each fiscal year between FY2012 and FY2021.¹⁶ For procedural enforcement, the Congressional Budget Act of 1974¹⁷ provides for allocations of budget authority under the jurisdiction of the Appropriations Committee Congress has historically used various methods to set total discretionary funding levels for a fiscal year, as well as the discretionary funding that is to be allocated for the L-HHS-ED appropriations bill. These methods have included statutory limits on the applicable spending and procedural limits on such spending.²¹ Statutory limits on defense and nondefense discretionary spending have not been in effect since FY2025, although they were intermittently in effect for many years prior to that time pursuant to the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA; P.L. 99-177, as amended).²² When in effect, statutory spending limits are enforceable through sequestration (i.e., largely across-the-board reductions to eliminate excess spending), as well as points of order during floor consideration.²³ For procedural enforcement, the Congressional Budget Act of 1974²⁴ provides for allocations of budget authority under the jurisdiction of the House and Senate Appropriations Committees, referred to as a "302(a) allocation," as well as the suballocation of that spending to each of the 12 Appropriationsappropriations subcommittees, referred to as a "302(b) allocation."¹⁸25 Both the 302(a) and 302(b) allocations, as well as the statutory discretionary spending limits, are enforceable during floor consideration through points of order that may be raised against any measure, including amendments, that would cause these limits to be exceeded.¹⁹ In addition, the statutory limits are enforceable after enactment through sequestration.²⁰

26 The amount provided in an appropriations act for a given fiscal year, for budget enforcement purposes, is determined by its period of availability. That is, the amount provided is "scored" in the fiscal year in which it first becomes available for obligation.²¹27 Forward funding becomes available during the latter part of the budget year, and so is scored against the budget year of the bill in which it is enacted. In contrast, advance appropriations are scored against the limits on appropriations that apply the first fiscal year that they are available for obligation (typically the following fiscal year), and not the budget year of the bill in which they are enacted.²²28 Consequently, budget enforcement for advance appropriations would typically occur that following fiscal year in combination with the new discretionary appropriations for that year. That is, in the following fiscal year, the appropriations process begins with a "charge" against the appropriations limits for the budget year, even before the appropriations acts for that fiscal year have been drafted.

Given that budget enforcement rules generally limit discretionary spending to a single fiscal year at a time, providing appropriations in advance may allow them to be considered outside the context of the spending decisions for the upcoming year. In response to concerns about the potential to avoid the budget year limits when considering advance appropriations, various House and Senate procedural limits on the amount of advance appropriations that may be provided have been imposed through the congressional budget resolution and other associated procedural mechanisms for most fiscal years since FY2001. These limits have typically specified the accounts for which advance appropriations may be provided, and have capped the amounts for certain advance appropriations. For FY2015, for example, the Senate limits established in the Bipartisan Budget Act of 2013 (P.L. 113-67, §112) restricted advance appropriations enacted in FY2015 appropriations acts to a total of $28.582 billion for the following accounts:

and have capped the amounts for certain advance appropriations.²⁹ Potential Implementation and Transition Options for Advance Appropriations and Forward Funding

This section considers three different appropriations scenarios for Impact Aid Section 80037003(b) payments that are an alternative to regular budget year appropriations: (1) providing forward funding for Section 80037003(b) payments, (2) providing advance appropriations for Section 80037003(b) payments, or (3) using both forward funding and advance appropriations to provide Section 80037003(b) funding, as is done for other federal education programs such as Title I-A Grants to Local Educational Agencies authorized by the ESEA or Grants to States authorized under Part B of the Individuals with Disabilities Education Act (IDEA)IDEA. This section considers each of these scenarios in terms of how eachthey might affect the annual appropriations process once itthey were fully implemented, the appropriations actions required in the transition fiscal year, and various potential budget process issues that might arise during that transition.²⁴ Please note that for discussion purposes, it is assumed that budget year appropriations would be provided on30 For discussion purposes, it is assumed under each scenario that appropriations will be enacted in an FY2027 appropriations act (as well as in an FY2028 appropriations act, in some discussion) and that the Section 7003(b) program will remain level funded at its FY2026 appropriations level of $1.477 billion. For the sake of this illustrative example, it is also assumed that budget year appropriations in the FY2027 appropriations act would be enacted by October 1 of the fiscal year corresponding to the appropriations bill,³¹ forward funding would be providedavailable on July 1 of the year corresponding to the appropriations bill, and advance appropriations would be providedavailable on the first day of the succeeding fiscal year. As previously discussed, the ESEA would not have to be amended to permit the Section 80037003(b) payments to receive forward funding or advance appropriations, as both funding mechanisms are already authorized for the Impact Aid account.

Forward Funding

As wasnoted previously stated, Impact Aid is currently funded using regular budget year appropriations that first become available about one month after the start of the school year (i.e., October 1). If Section 80037003(b) payments were to be forward funded, however, funds would shift from being available in October to support the current school year to being available in July to support the upcoming school year. For example, if Section 80037003(b) continued to be funded through budget year appropriations for FY2015FY2027, the funds would becomebe available onas of October 1, 20142026, and be used to support activities during the 2014-20152026-2027 school year. If appropriations for Section 80037003(b) were forwarded funded in FY2015FY2027, funds would become available on July 1, 20152027, and be used to support school activities during the 2015-20162027-2028 school year. More specifically, such funds would typically be made available for the next 15 months, through September 30, 20162028. Likewise, the following fiscal year, if all Section 80037003(b) appropriations were forward funded, funds to support activities during the 2016-20172028-2029 school year would be provided throughby the FY2016FY2028 appropriations act to become available on July 1, 2016.

2028. Transition Year

To change the Impact Aid program to be solely forward funded starting in FY2015FY2027 without reducing the funding available each fiscal year would essentially require double- funding the program in the transition year through the following appropriations actions. First, the FY2015FY2027 appropriations would need to include the regular budget year appropriation that the program has historically received to fund activities in the 2014-20152026-2027 school year. These would be available for obligation as of October 1, 20142026. Otherwise, under the switch to forward funding, the program would be without an appropriation until July 1, 20152027, leaving little to no funding for the 2014-20152026-2027 school year. Second, funds for the 2015-20162027-2028 school year would need to be forward funded to become available in the final months of FY2015FY2027. If the intent is to completely forward fund the Section 80037003(b) payment, then the full amount required to level fund the payment would need to be appropriated using a forward funding period of availability. That is, for the FY2015FY2027 appropriations process, the Section 80037003(b) payment would need to be funded through both regular budget year appropriations and forward funding appropriations, a scenario that was arguably contemplated in Title IV, Section 420(b) of Thethe General Education Provisions Act:

In order to effect a transition to the timing of appropriation action authorized by subsection (a) of this section, the application of this section may result in the enactment, in a fiscal year, of separate appropriations for an applicable program (whether in the same appropriations Act or otherwise) for two consecutive fiscal years.

The following scenario illustrates this potential transition. For FY2014FY2026, the Section 80037003(b) payments were funded at $1.151477 billion, so $2.302. Assuming the program continues to be funded at this level, $2.954 billion would need to be provided for the program in FY2015FY2027 under this funding scenario ($1.151477 for regular budget year appropriations and $1.151477 billion for forward funding). In subsequent fiscal years, however, assuming the program remained forward funded (and level-funded), the annual appropriation provided solely through forward funding would be $1.151477 billion. The increase in discretionary appropriations required to forward fund the Section 80037003(b) payments in FY2015FY2027 would be counted against any statutory or procedural limits on discretionary spending applicable to that fiscal year. In effect, this might require that the additional appropriations to forward fund the Section 80037003(b) payments during this transition period be offset by reductions to another discretionary program. Alternatively, this transition period could be addressed by enacting a provision specifying that a certain amount, such as the doubleadditional funding technically needed to effectuate a switch to the forward funding schedule for future years, is not to be counted for the purposes of budget enforcement.

Advance Appropriations

In contrast to the regular budget year appropriations that are enacted to fund education activities for a school year that is already underway, advance appropriations are enacted prior to when that school year starts. For example, budget year appropriations to fund the 2015-20162026-2027 school year would be enacted in the FY2016FY2027 appropriations act and become available as of October 1, 20152026. Advance appropriations to fund the 2015-20162027-2028 school year, however, would be enacted one year in advance—in the appropriations act for the fiscal year starting October 1, 2014 (FY20152026 (FY2027)—but not become available until October 1, 20152027, one full fiscal year after the budget year. The following fiscal year, advance appropriations for the 2016-20172028-2029 school year would be enacted in the FY2016FY2028 appropriations act but not become available until October 1, 2016.

2028. Transition Year

Changing appropriations for payments for federally connected children from regular budget year appropriations to advance appropriations without reducing the funding available each fiscal year requires a different set of appropriations actions, with a different set of costs, for a given fiscal year. First, to change the Section 80037003(b) payment to receive advance appropriations during the FY2015FY2027 appropriations process, the FY2015FY2027 L-HHS-ED appropriations billact would need to include the budget year appropriation that the program has historically received to cover program needs for the 2014-20152026-2027 school year. That is, fundsFunds for the 2014-20152026-2027 school year would be available for obligation as of October 1, 20142026, once enacted. A switch to advance appropriations without also providing these budget year appropriations would leave the program without an appropriation until October 1, 20152027, resulting in little to no funding for thatthe 2026-2027 school year. Second, advance appropriations for the 2015-20162027-2028 school year would also need to be provided in the FY2015FY2027 L-HHS-ED appropriations act, to become available on October 1, 20152027. If the intent is to completely fund needs for the 2015-20162027-2028 school year through advance appropriations, then the full appropriation for that program year would need to be provided in this way.

The budget process implications for a switch to advance appropriations also differ from those for forward funding. The funding for advance appropriations for FY2016FY2028 included in the FY2015FY2027 appropriations bill would not count against any limits on FY2015FY2027 discretionary spending and would not require any doubleadditional funding of Section 80037003(b) payments in a single fiscal year. Such spending would count against the FY2016FY2028 limits, however, if provided on the schedule considered in this scenario. It would also require that any procedural limit on advance appropriations, which is generally determined each year during the consideration of the congressional budget resolutionif in effect would generally be imposed via a congressional budget resolution adopted prior to that fiscal year, allows such appropriations for the Impact Aid account and be set at a level sufficient to accommodate appropriations for the Section 80037003(b) payments.

Combination A Combined Approach: Forward Funding/ and Advance Appropriations Approach

Appropriations for Section 80037003(b) payments could also be made using a combination of forward funding and advance appropriations, as has been the practice for other federal education programs such as ESEA, Title I-A and IDEA, Part B. Under this approach, only the portion of funding needed during the summer months would be forward funded, while the rest would be advance appropriated to become available after the start of the following fiscal year. For example, for the 2015-20162027-2028 school year, in the FY2015FY2027 appropriations act, a portion (e.g., 25%) of the Section 80037003(b) payments would be forward funded and become available on July 1, 20152027, while the rest (e.g., 75%) would be advance appropriated and become available three months later, on October 1, 20152027. This combination of advance appropriations and forward funding would be appropriated each fiscal year to fund payments for the upcoming school year.

Transition Year

If this change were made during the FY2015FY2027 appropriations process without reducing the funding available each fiscal year, appropriations subject to the applicable FY2015FY2027 limits would be needed to fund both the 2014-20152026-2027 school year through budget year appropriations, as well as whatever percentage of the 2015-20162027-2028 school year was determined to be necessary through forward funding. The amount provided through forward funding could be set at any appropriate percentage of the total payment (e.g., 25%, 50%, 75%), with the remainder for the 2015-20162027-2028 school year being provided through advance appropriations. For example, if 25% of the funds were provided through forward funding and 75% were provided through advance appropriations, for FY2015 $1.439$1.846 billion would need to be provided in discretionarytotal appropriations for FY2027—$1.477—$1.151 billion in budget year appropriations to support activities during the 2014-20152026-2027 school year and $288369 million (25% of the budget year appropriations amount) for forward funding—and $863 millionan additional $1.108 billion would need to be included inas advance appropriations for FY2016.

FY2028 to support activities during the 2027-2028 school year. This combination approach involves, to a lesser degree, the same budget process implications that apply to forward funding and advance appropriations. While aA combination approach would avoid the need for double funding in that transition year, a lesser entail a one-time increase over the typical amount appropriated subject to the applicable limits would still occur. Because the portion that is forward fundedbut only for the portion of the funding for Section 7003(b) payments that was forward funded. Because that forward funded portion would be counted against any statutory or procedural limits on discretionary spending, the additional appropriations to forward fund the Section 8003(b) payments in the budget year, those additional appropriations during this transition period might need to be effectively offset by reductions in another discretionary programelsewhere. In subsequent fiscal years, only the forward funding amount would need to be appropriated in the budget year, and the remainder could be advance appropriated. At the same time, any limits on advance appropriations established through thea budget resolution would need to be altered to accommodate advance appropriations for the portion of Section 80037003(b) payments funded in this way. As was previously mentioned, this transition period could also be addressed by enacting a provision specifying that a certain amount, such as the double fundingadditional funding to effectuate that transition, is not to be counted for the purposes of budget enforcement.

Illustration of Alternative Funding Approach Transitions

Table 1 summarizes the key elements of current law and transitions to each of the three approaches discussed above. It is assumed that the alternative funding approaches would be applied in the FY2015an annual FY2027 appropriations act. The table details how much discretionary funding would be needed in FY2015FY2027 and the level of advance appropriations for FY2016FY2028 that would need to be included in the FY2015FY2027 appropriations act, assuming the Section 80037003(b) payment remains level funded at the FY2026 level. It is also assumed that regardless of the approach taken, the FY2015FY2027 appropriations act would provide level funding for Section 80037003(b) payments for the 2014-20152026-2027 school year, as well as the 2015-20162027-2028 school year. For the combination approach, it assumes a distribution of 25% forward funding and 75% advance appropriations.

Appendix. Impact Aid Payment Descriptions

Title VIII Transition year funding refers to budget year funding included in the FY2027 appropriations act to provide funding for the 2026-2027 school year, as forward funding or advance appropriations included in the FY2027 appropriations act would provide support for the 2027-2028 school year. Appendix. Impact Aid Payment Descriptions Title VII of the Elementary and Secondary Education Act (ESEA, P.L. 89-10, as amended) authorizes several types of Impact Aid payments. These include payments made under Section 80027002, Section 80037003, Section 80077007, and Section 80087008. Each of these types of payments is discussed briefly below.

Section 8002 compensates LEAs In FY2026, a total of $1.630 billion was appropriated for Impact Aid.

Section 7002

Section 8003 compensates LEAs for enrolling "federally connected" children. These are children who reside with a parent who is a member of the Armed Forcesuniformed services living on or off federal property; reside with a parent who is an accredited foreign military officer living on federal property; reside on Indian lands; reside in low-rent public housing; or reside with a parent who is a civilian working or living on federal land.

Two payments are made under Section 80037003. Section 80037003(b) authorizes "basic support paymentsBasic Support Payments" for federally connected children.²⁸34 In FY2014, 1,151 LEAs are eligible to receive payments under Section 8003(b). These LEAs serve about 930FY2025, $1.474 billion was appropriated for Section 7003(b). These funds were awarded to 932 LEAs, serving about 598,000 federally connected students.²⁹ In FY2014, $1.15135 Payments ranged from $365 to $67.3 million. In FY2026, $1.477 billion was appropriated for Section 8003(b) payments, and LEA payments are expected to range from $66 to $53.9 million. Section 80037003(b) payments. Section 7003(d) authorizes additional payments to LEAs based on the number of certain federally connected children with disabilities who are eligible to receive services under the Individuals with Disabilities Education Act (IDEA). More specifically, payments are limited to certain IDEA-eligible children, most notably —those whose parents are members of the Armed Forcesuniformed services (residing on or off military basesfederal property) and those residing on Indian lands. In FY2014FY2025, $48.3 million was appropriated for Section 8003(d) payments from which about 888 LEAs are expected to receive payments, ranging from $512 to $1.2 million.³⁰

Section 80077003(d) payments. Grants were made to 766 LEAs to serve about 49,000 eligible children. Grant amounts ranged from $567 to $1.3 million.³⁶ Appropriations for FY2026 were $49.3 million.

Section 7007

Section 8008FY2025, $19.0 million was provided for Section 7007 formula grant payments to 166 LEAs. Grant amounts ranged from $1,314 to $1.8 million.³⁸ In FY2026, $19.0 million was provided for Section 7007 and, per provisions included in the Consolidated Appropriations Act, 2026 (P.L. 119-75), grants will be awarded only by competition.

Section 7008