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Finance Update Back To School MSBA Conference

Finance Update Back To School MSBA Conference. Minnesota Department of Education August 13, 2009. Topics for Discussion. Recent School Finance Trends Enrollments, Staffing, Expenditures, Financial Condition, Revenues, State & Local Shares of Funding 2009 Changes: Legislative Actions

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Finance Update Back To School MSBA Conference

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  1. Finance UpdateBack To School MSBA Conference Minnesota Department of Education August 13, 2009

  2. Topics for Discussion • Recent School Finance Trends • Enrollments, Staffing, Expenditures, Financial Condition, Revenues, State & Local Shares of Funding • 2009 Changes: • Legislative Actions • Executive Actions • Outlook for the Future

  3. Percent Change in Enrollment, FY 2003 – FY 2009 School Districts and Charter Schools

  4. Demographic Trends, FY 2003 – FY 2009 School Districts and Charter Schools

  5. General Fund Expenditures by Program FY 2004 FY 2008 Change Regular Instruction 47.1% 46.2% -0.9% Career & Tech Instruction 1.5% 1.5% 0.0% Special Education 16.7% 17.4% 0.7% Subtotal, Instruction 65.4% 65.1% -0.3% Administration 8.5% 8.3% -0.2% Instr Support Services 4.4% 4.7% 0.3% Pupil Support Services 3.0% 2.7% -0.3% Operation, Maint & Other 8.2% 8.3% 0.1% Student Transportation 5.4% 5.8% 0.4% Capital Expenditures 5.2% 5.1% -0.1%

  6. Referendum Election Trends • Year # Quest. $ Request $ Approved $ % • 2000 71 107M 68M 63% • 2001 207 279 110 39 • 2002 111 185 134 72 • 2003 117 115 76 66 • 2004 89 54 20 37 • 2005 106 84 67 80 • 2006 86 136 64 48 • 2007 132 250 167 67 • 2008 68 129 78 61

  7. 2009 E-12 Education Act K-12 SPENDING SUMMARYFY 10 – 11 Biennium FY 2010 State General Educ Aid Reduction ($500,000,000) Federal Fiscal Stabilization Funds Replacing State Aid 500,000,000 Reduction to MDE Agency Budget (3.7%) (1,500,000) Minnesota Reading Corps 750,000 Math & Science Teacher Academy 750,000 Total Change $ 0

  8. GENERAL EDUCATION REVENUE FY 2009 vs FY 2010 and Later Districts & Charter Schools Lose: • One-Time Additional General Educ Aid of $51 / PU and • One-Time Technology & Operating Capital Aid of $55 / PU Districts Gain: $27 million (about $33 / resident ADM) from elimination of endowment subtraction enacted in 2008

  9. BUDGET FLEXIBILITYFY 2010 and FY 2011 • Requirement to reserve 2% of Basic Revenue for staff development is waived for FY 2010 and FY 2011 • District & site staff development committees are still required to complete a staff development plan and submit an annual report on staff development activities & expenditures • Allows districts to transfer up to $51 per pupil unit from operating capital account to unreserved general fund in FY 2009 and in FY 2010 (previously authorized for FY 2008 only)

  10. MOE Requirement for Licensed Support Staff Under existing law: • Beginning in FY 2010, districts required to maintain effort at FY 2009 level for licensed school support staff, including guidance counselors, nurses, social workers, psychologists, and alcohol/chemical dependency counselors from all funding sources other than safe schools levy New legislation: • Modifies maintenance of effort requirement by allowing districts to calculate MOE using either (1) expenditures or (2) number of FTE licensed school support staff • In determining the number of full-time equivalent employees, do not include contracted services. Contracted services would only be included in total spending.

  11. Other Post Employment Benefits (OPEB) Bonding and Levy • OPEB Bonds sold after October 1, 2009, must be approved by voters • Creates new levy for school districts to fund annual costs associated with OPEB, limited to $9 million for taxes payable 2010, and $30 million for taxes payable 2011, with an increase of $14 million in the limit each year thereafter (Commissioner must prorate levy if requests exceed cap) • Requirements: • Create an actuarial liability to pay OPEB • Sunset clause in effect for current collective bargaining period • Apply for levy authority to commissioner

  12. Charter Schools Multiple changes to sponsorship, school formation, and governance • Clarification of “conflict of interest” related to board and leases • Clarification of charter contract requirements • Clarification regarding exemption from statute and rule • Allows state aid reduction for violation of law • Changes allowed sponsor fees and requires a sponsor report regarding sponsor activities • Provides for payments of an equal amount for all charter schools on 24 payment dates rather than 23 • Establishes procedure for state aid payment close-out of closed or closing charter schools • Allows the commissioner to withhold state aid for federal or state funds not returned upon request, or for unpaid amounts due to another state agency, a school district, or educational cooperative

  13. Superintendent’s Report on Expenditures and Passage Rates • Repealed effective the day following final enactment

  14. Integration Revenue • Adds Mpls, St Paul & Duluth to requirement to submit integration budget to MDE for approval • Modifies uses of integration revenue to include sustained interracial contacts, and improved educational opportunities designed to close the achievement gap • Requires MDE to study districts’ use of and need for integration revenue, with report to legislature by Feb 1, 2011

  15. Review and Comment on Facilities Construction Prohibits the Commissioner of Education from issuing an unfavorable or negative review & comment based solely on: • Too little acreage, or • The ratio of renovation costs to replacement costs • Increases the threshold for review & comment from $500,000 to $1.4 million, except for districts with an outstanding capital loan • Increases the threshold for consultation from $250,000 to $500,000 • Expands info required for R&C to include: • a description of pedestrian, bicycle and transit connections • information on how the proposal maximizes cooperative use of existing park recreation and other public facilities, and • Any existing info from the local unit of government on cumulative costs to proved infrastructure to serve the school such as utilities, sewer, roads & sidewalks

  16. Accounting for Separation and Retirement Benefits • Clarifies accounting requirements for designated separation and retirement benefits • Designated for separation & retirement benefit account (BAL 418) includes compensated absences, termination benefits, pension benefits and OPEB not accounted for elsewhere • BAL 418 will no longer be limited to 50% of the amount necessary to meet obligations for the portion of severance pay that constitutes compensation for accumulated sick leave • MDE will eliminate BAL 411 (Reserve for Severance) beginning with FY 2010 reporting

  17. Separation and Retirement Benefits • UFARS Balance Sheet Account 418 • Designated account • No longer limited to 50% • Will continue to be used as unreserved/undesignated for Statutory Operating Debt (SOD) calculation • UFARS Balance Sheet Account 411 • Reserve account • Not used in SOD calculation • Does not have statutory authority • Does not comply with the applicable Governmental Accounting Standards Board (GASB) Statements. • Account will be eliminated in FY 2010

  18. Transportation • Modifies bill passed in 2008 that established regulations for drivers of Type 3 vehicles • All type 3 drivers must undergo background check, have license verified annually by employer, notify employer if convicted of certain DWI and traffic offenses • Clarifies exemption from physical exam and drug test for district employees not employed for the sole purpose of operating a type 3 vehicle • Note: Same language passed in separate bill and signed into law – Chapter 24

  19. Tax Policy ActTruth in Taxation Districts no longer required to hold separate TNT meeting • Instead discuss at regularly scheduled board meeting • Announce meeting date when proposed levy is adopted • Meeting date also noted on TNT notices • Must discuss levy and budget

  20. UFARS Changes • Major UFARS changes in FY 2010: • New finance codes to track the American Recovery and Reinvestment Act • New finance codes to track federal competitive awards in SERVS • New finance and object codes to track special education activity that once was collected in EDRS (no longer available in SERVS) • New course codes to track AYP set-asides for Title programs • New course codes to track the award year of all federal awards • New course code to track the special education maintenance of effort provision

  21. Executive Actions to Balance State Budget • State Aid Payment Deferral • Property Tax Revenue Recognition Change • One-Time Aid Adjustment for Property Tax Revenue Recognition Change

  22. State Aid Payment Deferral For FY 2010 and FY 2011 only: • All state aids normally paid on a 90 -10 schedule will be changed to a 73 - 27 schedule • Reduction in current aid payments is spread fairly evenly throughout the fiscal year • Final payments will be increased to offset the reduction in current payments

  23. State Aid Payment Deferral – SOD • For districts and charter schools in Statutory Operating Debt as of 6/30 of the previous fiscal year, the amount of the deferral will be reduced by the lesser of: • 17% of general education aid (the difference between 90% and 73%), or • The amount of the district or school’s SOD. • For a district or charter school where the amount of SOD exceeds 17% of general education aid, the payment schedule for general education aid will remain at 90 -10 • Other state aids will be paid at 73-27

  24. State Aid Payment Deferral – SOD • SOD status will be determined based on audited UFARS data after the November 30 deadline for data submission • Districts / charter schools in SOD as of 6/30/09 eligible for FY 2010 adjustment • Districts / charter schools in SOD as of 6/30/10 eligible for FY 2011 adjustment • The general education aid adjustment for affected districts and charter schools will be made on June 20

  25. State Aid Payment Deferral • Final payments will be paid according to statutory schedule: • Property tax credits paid on August 15 • Other final payments: • 30% August 30, • 40% September 30, • 30% October 30 • Cash Flow Simulation and annual aid entitlement estimates used for simulation for FY 2010 and FY 2011 are available on MDE Web site under Program Finance / MFR • For additional Information, please refer to July 10 memo from Commissioner Seagren to Superintendents & Charter School Directors (copies sent to business managers & auditors)

  26. Property Tax Revenue Recognition Change • Beginning in FY 2011, school districts will recognize the May, June and July tax settlement revenue received during the calendar year in Funds 1 and 4, and not recognized early under MS 123B.75, subd. 5, paragraph (b), in June of the calendar year in which it is received, instead of July. • In the absence of new legislation, this change will be permanent, and will be reflected in the UFARS manual

  27. Property Tax Revenue Recognition Change • The change in levy recognition policy will create a large increase in the amount of property taxes recognized by school districts as revenue during FY 2011. • For FY 2012 and later, the impact of this change will be smaller, but still significant: • Districts with growing operating levies (e.g., new operating referendum) will recognize the increase in May/June/July tax settlements earlier (50% of net levy proceeds) • Districts with declining operating levies (e.g., expiring operating referendum) will recognize the decrease in May/June/July tax settlements earlier (50% of net levy proceeds)

  28. One-Time Aid Adjustment for Property Tax Revenue Recognition Change • State aid payments during FY 2011 will be reduced by the difference between the amount each district is estimated to recognize in FY 2011 under the new property tax revenue recognition policy, compared with the amount the district would have recognized in FY 2011 under the old property tax revenue recognition policy. • This is a one-time adjustment to state aids for FY 2011 only, which will occur as late in FY 2011 as possible, to align with the receipt of the levy revenue

  29. One-Time Aid Adjustment for Property Tax Revenue Recognition Change • Barring a change in law, or an additional unallotment by the Governor during the next biennium, there will be no adjustment to state aids for the change in property tax levy revenue recognition during FY 2012 or later. • While state policy makers may elect to reverse the property tax levy recognition change and pay back the amount of the FY 2011 aid reduction when the state’s budget outlook improves, without new legislation there will be no payback in FY 2012 or later.

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