Sequestration: Preparing for a Possible Reduction in Federal Funds

Word Version

May 29, 2012


SUBJECT:      Sequestration: Preparing for a Possible Reduction in Federal Funds

The purpose of this letter is to inform Texas local educational agencies (LEAs) of the possibility that all federal grants administered by the Texas Education Agency (TEA) may be reduced for the 2012–2013 school and grant year by an amount ranging from 8–14%.  The process by which this reduction may take place, known as sequestration, is a provision of the Budget Control Act of 2011.  The US Congress may act to avoid sequestration; however, if Congress fails to take action by January 2, 2013, federal education spending will be cut for the 2012–2013 school and grant year by approximately $4.1 billion nationally.  To prepare for the possibility of sequestration, TEA has elected to reduce planning amounts for federal formula grants and to calculate maximum entitlements later than usual, in January 2013, by which time the issue of funding cuts will be settled at the federal level.  See the attached description for more detail.

Customary Calculation of Planning Amounts

TEA calculates initial planning amounts for federal grants based on the hold-harmless amount of an LEA’s prior-year maximum entitlements or, where there is no hold-harmless requirement, on a percentage of the LEA’s prior-year entitlement.  When formula data becomes available from the US Department of Education, then initial planning amounts are revised to withhold a certain amount of grant funds (either 2.5% of the grant total or $250,000, whichever is less), to prepare for the possibility that the LEA’s entitlement may have been decreased for the coming school year. In December, after the school year has begun, actual maximum entitlements are calculated.

Initial Planning Amounts to Be Decreased by 10%

In light of the possible sequestration, TEA will withhold 10% of the state’s expected appropriations from the LEA’s planning amount calculations.  Once any legislation rescinding sequestration is passed and signed into law, or once the Office of Management and Budget (OMB) makes its determination of how the sequester is to be accounted for across the federal agencies, maximum entitlements will be calculated and made available to LEAs based on the actions taken by federal agencies.  Please note that if this 10% were not withheld, and the sequestration did occur, LEAs’ federal education program budgets would be reduced in the middle of the school year

Further Information on Sequestration

The following TETNs are scheduled for discussion of sequestration and its possible effects on Texas LEAs:

  • 3:15–4:15 p.m., Thursday, May 31, 2012
  • 1:00–2:00 p.m., Friday, June 1, 2012

LEAs should contact their regional education service center to register.

A brief presentation will also be posted in the Grant Management Guidance section of Division of Grants Administration Grant Management Resources page in early June 2012.

If you have any questions, email the Division of Grants Administration at


Cory Green, Chief Grants Administrator
Office for Grants and Fiscal Compliance