Maryland education officials say federal ESSER liquidation change could cost state about $232 million

Maryland State Department of Education staff told the Education Transformation and Finance Committee that a change by the U.S. Department of Education ending the late liquidation period for ESSER funds has an estimated $232,100,000 impact on the state and local education agencies.

The estimate, presented by MSDE staff during the committee’s virtual meeting, reflects the department’s review of revenues, expenditures and reimbursements after the department received notice on March 28 that the late liquidation period for certain ESSER funds had ended. MSDE officials said the decision affected CRRSA (ESSER II) and ARP (ESSER III) funding streams; the department previously received ESSER I funds under CARES that are already closed.

MSDE staff said Maryland received over $2.9 billion in ESSER funding across three rounds, plus about $534 million through the Governor’s Emergency Education Relief (GEER) Fund and other fiscal relief dollars, serving roughly 860,000 students. "We estimate that the total impact to the state of Maryland as a result of this decision is $232,100,000," an MSDE presenter said. The department said that figure is roughly 7% of the ESSER funding Maryland received.

MSDE described three categories of exposure: (1) funds the department has paid out to local education agencies (LEAs) and not yet been reimbursed by the U.S. Department of Education (USED); (2) funds LEAs have spent but not yet submitted to MSDE for reimbursement; and (3) obligated funds LEAs have not yet spent because projects were ongoing. MSDE staff provided itemized figures during the presentation, including $79,900,000 tied to CRRSA/ESSER II spending and roughly $46,200,000 tied to ARP/ESSER III spending that MSDE has reimbursed to LEAs but has not yet been reimbursed by USED.

MSDE said it submitted timely late-liquidation requests under USED guidance from February 2024 and has resubmitted late-liquidation requests totaling $98,700,000. The department reported it submitted a draw request for $79,900,000 (CRRSA) and planned to submit an updated draw for roughly $46,200,000 and an additional request of about $1,800,000 for homeless children and youth funding within days of the presentation. "As of today, we have resubmitted late liquidation request to USED totaling $98,700,000," an MSDE official said.

Committee members pressed MSDE staff on reconciliations between slides showing the $232.1 million control number and slide-level breakdowns. MSDE staff acknowledged presentation formatting caused confusion and said they would make slide 5 the control number and reconcile breakout slides for the board presentation next week. The department also warned that some of the amounts are based on LEA estimates and final totals will depend on LEA invoice submissions and USED determinations.

MSDE said USED has established a weekly review process to consider late-liquidation requests and that state requests must show, project by project, why an extension is necessary to mitigate COVID-related learning loss and why USED should exercise discretion to approve. MSDE reported participating in CCSSO (Council of Chief State School Officers) webinars with USED and said no state had yet been informed that its request had been approved in whole or in part. MSDE also said it was coordinating with the Maryland Attorney General’s Office on possible legal options and had joined other states in filing an injunction related to the USED decision.

Committee members raised concerns about contract and vendor risk if LEAs stop vendors or withhold payment because of uncertainty over federal reimbursement. MSDE advised LEAs to consult local board attorneys on contract questions and acknowledged vendor liability could become a local LEA liability if contractors pursue unpaid claims.

MSDE staff emphasized the department split the resubmitted packet into "academic initiatives" and "capital projects" for submission and clarified that split is for organizational purposes — not an assumption about which projects USED will prioritize. The department said USED invited submissions for both academic and capital requests so long as the state demonstrates how each project mitigates learning loss and warrants discretionary relief.

MSDE staff said they had notified the governor’s office, Department of Budget and Management, legislative leaders, and LEA superintendents and CFOs and conducted technical assistance sessions for LEAs to collect the information needed for late-liquidation packets. The presenters asked the committee and public to treat the $232.1 million as the working control total while MSDE reconciles LEA-level details.

Ending: MSDE said the department will update the committee and the public as USED completes its weekly reviews and as MSDE files additional draw requests and documentation. The department warned the final outcome depends on USED’s discretionary reviews and on LEA invoice reconciliation.