For education, “maintenance of effort” requirements differ from matching requirements in that the former do not require a minimum amount of local funds in exchange for receipt of state or federal funds, but rather prohibit reductions in local funding from one year to the next. The maintenance of effort test is a supplanting test that ensures local governments do not use state dollars in place of local dollars. This is governed by T.C.A. § 49-2-203 and § 49-3-314.
The MOE is not a one-time pass/fail test. Once the budget has been approved, the only way the MOE can be affected is through budget amendment.
There are two different comparisons in the MOE test. First is the comparison between the new budget and the amended/original budget. This is used to see if MOE has been met for the current year. This is a bottom line total test and does not compare each line item as a means of passing the test. MOE Example; refer to column 1 vs. 2 or 3
The second comparison is the prior year's budget to the annual financial report. If there is a negative difference between the two, then the school must set up a BEP reserve. Once a reserve has been established it can only be spent on non-recurring items. This money comes from the school’s general fund. MOE example; column 5
In the second comparison, if the school system receives less than has been budgeted the county government is not responsible in making up the shortfall.
There are several possible scenarios that will allow the county to reduce its MOE, which are discussed under School Budget - Maintenance of Effort under the Education topic in this library.
In cases where the MOE is not met in the current budget year, the state has the option of withholding funds until the test is met. During the budget process the school MOE should be reviewed prior to passage of local budget.