Pursuant to s. 118.38 (4) (a) 1., Stats., the department was given the authority to waive the requirement that any PPP loans received under the CARES Act that are forgiven on or before June 30, 2020, be included as offsetting revenue in the 2019-20 financial audit. However, the forgiveness for some of the participating schools’ loans will not be included in the school’s financial audit until after the 2019-20 school year. Further, the federal government has made additional PPP loans available. These loans would also be forgiven at a later date. In analyzing the economic impact of this rule, PPP loans that are forgiven will not result in a reduction in each participating private school’s net eligible education expenses in the financial audit supplemental schedule. Additionally, private schools participating in the Special Needs Scholarship Program will not receive less than then the standard payment rate for a pupil included in a statement of actual costs due to costs that are subsequently forgiven. More specific information on the impact of the proposed rule on small businesses are provided below. Effect on small business (initial regulatory flexibility analysis):
An analysis conducted by the department indicates that the proposed rule may impact small businesses in the state. Pursuant to s. 227.114, Stats., a small business means a business entity, including its affiliates, which is independently owned and operated and not dominant in its field, and which employs 25 or fewer full-time employees or which has gross annual sales of less than $5,000,000. The department finds that some participating private schools in the state’s Parental Choice Programs or the Special Needs Scholarship are independently owned and operated, not dominant in its field, and employ fewer than 25 full-time employees, which meet the criteria listed under s. 227.114, Stats. Many participating private schools received loans under the PPP, which may be forgiven after the 2019-20 school year. Sections 1, 2, and 4 of the proposed rule provide that the forgiven portion of loans under the PPP are not included as offsetting revenues in the financial audit supplemental schedule for schools participating in any of the state’s Parental Choice Programs and the Special Needs Scholarship Program. It is the department’s understanding that most schools participating in the Parental Choice Programs or the Special Needs Scholarship had a PPP loan. The effect on small businesses as a result of this rule is indeterminate because the department does not have: 1) the PPP loan amounts; 2) the amounts forgiven; and 3) when the amounts will be forgiven for each private school participating in the Parental Choice Programs or Special Needs Scholarship Program. According to the Small Business Administration, First Draw PPP loans made to eligible borrowers qualify for full loan forgiveness if during the 8- to 24-week covered period following loan disbursement:
Employee and compensation levels are maintained;
The loan proceeds are spent on payroll costs and other eligible expenses; and
At least 60% of the proceeds are spent on payroll costs.The department anticipates that schools participating in the Parental Choice Programs or Special Needs Scholarship Program will meet the above criteria and have their PPP loan forgiven in whole or part. Without this rule, the forgiven portion of a PPP loan that was used for eligible education expenses would be included in offsetting revenue and decrease a school’s eligible education expenses, resulting in an increase in the school’s Parental Choice Programs and/or Special Needs Scholarship reserve balance. The reserve balance is the remaining balance of Parental Choice Programs or Special Needs Scholarship revenue that hasn’t been spent on eligible education expenses. Private schools participating in the Parental Choice Programs or Special Needs Scholarship Program are required to have a cash and investment balance that is at least as much as the reserve balances with certain adjustments. As a result, the increase in the reserve balances would result in schools being required to have a higher cash and investment balance.
Additionally, sections 3 and 5 of the proposed rule specify that any amount forgiven for a PPP loan until October 15th in the following school year reduces the costs in the Special Needs Scholarship Program statement of actual cost. The proposed rule provides if an amount is forgiven between the due date of the statement of actual costs and October 15th, the change in the per pupil payment will be made through the Enrollment Audit certification process. Finally, this rule change ensures that schools will not receive less than the standard payment rate for a pupil included in a statement of actual costs due to changes in the actual cost, such as costs that are subsequently forgiven.
Forgiven PPP loans will not be counted as government assistance revenue and will therefore not increase the cash and investment balance required for participating in a Parental Choice Program or the Special Needs Scholarship Program as a result of this rule. There are no anticipated compliance costs associated with the proposed rule or anticipated additional costs to small businesses. The proposed rule helps small businesses by ensuring a private school does not receive a payment for a pupil below the standard payment rate due to costs in the statement of actual cost that are subsequently forgiven. The effect on small businesses as a result of the rule is indeterminate.
Agency contact person:
Carl Bryan
Administrative Rules Coordinator
Wisconsin Department of Public Instruction
(608) 266-3275
Place where comments are to be submitted and deadline for submission:
Comments should be submitted to Carl Bryan, Department of Public Instruction, 125 S. Webster Street, P.O. Box 7841, Madison, WI 53707-7841 or at adminrules@dpi.wi.gov. The Department will publish a hearing notice in the Administrative Register which will provide information on the deadline for the submission of comments. RULE TEXT
SECTION 1. PI 35.10 (3m) is created to read:
PI 35.10 (3m) Paycheck Protection Program loans. Notwithstanding sub. (3) (a) 2., the forgiven portion of Paycheck Protection Program loans administered by the U.S. small business administration under 15 USC 636 may not be included as offsetting government assistance revenue in the supplemental schedule. SECTION 2. PI 48.10 (3m) is created to read:
PI 48.10 (3m) Paycheck Protection Program loans. Notwithstanding sub. (3) (a) 2., the forgiven portion of Paycheck Protection Program loans administered by the U.S. small business administration under 15 USC 636 may not be included as offsetting government assistance revenue in the supplemental schedule. SECTION 3. PI 49.07 (4) (a) is amended to read:
PI 49.07 (4) (a) Upon review of the enrollment audits, the department shall certify an amount due from a school or an amount due to the school. The certifications shall include any adjustments identified in the financial auditaudits submitted under ss. PI 49.08 and 49.09 to the actual costs incurredfor a pupil or government assistance revenue received for educational programming for a pupil in the reports submitted under s. PI 49.13 (7). If, based on the financial audit, the payment amount calculated under s. 115.7915 (4m) (cm), Stats., for a pupil in a report submitted under s. PI 49.13 (7) is less than the payment amount calculated under s. 115.7915 (4m) (a) 2. b., Stats., the payment for the pupil shall be calculated as specified under s. 115.7915 (4m) (a) 2. b., Stats. If a school fails to file an enrollment audit with the department, the department may determine that all special needs scholarship program pupils are ineligible. SECTION 4. PI 49.09 (3m) is created to read:
PI 49.09 (3m) Paycheck Protection Program loans. Notwithstanding sub. (3) (a) 2., (b) 2., and (c) 4., the forgiven portion of Paycheck Protection Program loans administered by the U.S. small business administration under 15 USC 636 may not be included as offsetting government assistance revenue in the supplemental schedule. SECTION 5. PI 49.13 (7) (a) is amended to read:
PI 49.13 (7) (a) By the third Friday in July, a school may submit a statement of actual costs on a form provided by the department for a special needs scholarship program pupil. The statement of actual costs shall calculate the actual costs for the pupil as the costs for the pupil under par. (b) less any government assistance revenue received for educational programming for the pupil. Government assistance revenue under this paragraph shall include the forgiven portion of Paycheck Protection Program loans administered by the U.S. small business administration under 15 USC 636 if the amount is forgiven by October 15 following the school year the expenses were incurred. If the payment amount for the pupil based on the statement of actual costs is less than the payment amount calculated under s. 115.7915 (4m) (a) 2. b., Stats., the payment for the pupil shall be calculated as specified under s. 115.7915 (4m) (a) 2. b., Stats. SECTION 6. EFFECTIVE DATE:
The proposed rules contained in this order shall take effect on the first day of the month commencing after the date of publication in the Wisconsin Administrative Register, as provided in s. 227.22 (2) (intro.), Stats. Dated this _____ day of ____________, 2021
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Jill K. Underly, PhD
State Superintendent
