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Piecing Together a New Plan 2011-2012 Board Budget Study Session #1 May 16, 2011

Piecing Together a New Plan 2011-2012 Board Budget Study Session #1 May 16, 2011. Agenda. 3. 2. Legislative Update Budget Bills Fund Formula Bills. Annual Benchmarking Update. Preliminary General Fund Budget Expenditure Increases and Reductions Education Jobs Funding. 1.

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Piecing Together a New Plan 2011-2012 Board Budget Study Session #1 May 16, 2011

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  1. Piecing Together a New Plan2011-2012 Board Budget Study Session #1May 16, 2011

  2. Agenda 3 2 Legislative Update • Budget Bills • Fund Formula Bills Annual Benchmarking Update Preliminary General Fund Budget Expenditure Increases and Reductions Education Jobs Funding 1

  3. State Budget Bill Update

  4. House & Senate Budgets Overall, the Senate’s version of the 2012-2013 biennial budget provides $4.6B more in education funding than the House’s budget. Although it does not provide funds for enrollment growth or additional hold-harmless for declining property value, it provides nearly as much total funding as is estimated for the 2010-2011 biennium.

  5. House & Senate Budgets Difference from Minimum Need The Texas Education Agency requested nearly $55B for the biennium. If the only changes made to the 2010-2011 budget were minimal increases for new enrollment and hold-harmless for property value decline, the minimum need for the 2012-2013 biennium would be $52.9B. The House and Senate versions of the budget fall $7.5B and $2.9B short of that mark, respectively.

  6. Formula Funding BillsHouse Version

  7. 2010-2011 Revenue vs. 2011-2012 Difference from Current Law Revenue Estimate Under current law, increases to Weighted Average Daily Attendance would increase State Funding by $7.7M. Decreases in property tax revenue would trigger an increase to State funding (via hold-harmless) of approximately $5M.

  8. 2010-2011 Revenue vs. 2011-2012 Based on House Bill 2485 Under House Bill 2485’s funding formula, NEISD will see a decline in revenue of $43.4M in 2012 compared to 2011. Revenue would drop another $3M in 2013 and $2M in 2014.

  9. 2011-2012 Effective Revenue Loss House Bill 2485 -- Difference from Current Law Compared to the current funding formula law, NEISD will lose nearly $50M in 2012, all in State revenue. The State’s share of total General Fund revenue would fall from 39% to 33%.

  10. Formula Funding BillsSenate Version

  11. 2010-2011 Revenue vs. 2011-2012 Based on Senate Bill 22 Under Senate Bill 22’s funding formula, NEISD will see a decline in revenue of $30.5M in 2012 compared to 2011. Revenue would remain relatively flat thereafter.

  12. 2011-2012 Effective Revenue Loss SB 22 -- Difference from Current Law Compared to the current funding formula law, NEISD will lose nearly $37M in 2012, all in State revenue. The State’s share of total General Fund revenue would fall from 39% to 35%.

  13. Formula Funding BillsWhat if None Passes?

  14. Budget Bill but No Funding Bill? If the Legislature passes an appropriations bill but does not change the Foundation School Program’s funding formulas to distribute only the amount appropriated, the Commissioner of Education could: • Fully fund 2011-2012, and prorate 2012-2013 • Needs approval by the Governor • Legislative Budget Board would propose to the next Legislature (January 2013) to take shortage from Rainy-Day to finish out 2012-2013 Commissioner’s Proration Toolkit Sources: Legislative Budget Board; Moak, Casey & Associates

  15. Budget Bill but No Funding Bill? • If the 83rd Legislature denies the January 2013 Rainy-Day request, Commissioner stops payments to districts in May 2013 • From an total allocation perspective, this hurts property-rich districts since proration is based on available property tax base • From a cash perspective, however, this disproportionally hurts property-poor districts that have their State aid payments spread evenly throughout the year • Property-wealthy districts receive more State funds in September & October, and live off property tax revenue beginning in January • Proration is a delay, not a reduction • Statute mandate any cut in 2013 would have to be added to the 2014-2015 biennium budget Sources: Legislative Budget Board; Moak, Casey & Associates

  16. Budget Bill but No Funding Bill? The Commissioner of Education has the authority to change the “compressed tax rate.” From Texas Education Code §42.2516 “The commissioner shall determine the state compression percentage for each school year based on the percentage by which a district is able to reduce the district's maintenance and operations tax rate for that year, as compared to the district's adopted maintenance and operations tax rate for the 2005 tax year, as a result of state funds appropriated for distribution under this section for that year from the property tax relief fund established under Section 403.109, Government Code, or from another funding source available for school district property tax relief.” Quote from Robert Scott: “Please don’t put me in that spot.” Source: TASA Capital Watch Alert

  17. Tax Rate Compression • When the 79th Legislature lowered property taxes, they did not lower local property tax rates to $1.00. • The Legislature lowered each district’s rate to 66.67% of it’s 2005 rate. Almost every district in the state taxed @ $1.50 at the time, so 66.67% compression = $1.00. • If the State fails to provide adequate funding to districts, such that the total available revenue (local & state) per Weighted Average Daily Attendance is not comparable to pre-2006 amounts, then the commissioner must adjust the compression rate. Sources: Legislative Budget Board; Moak, Casey & Associates

  18. Tax Rate Compression • HYPOTHETICAL SITUATION • Commissioner changes NEISD’s compression from 66.67% to 68% • 68% X $1.50 = new $1.02 compression rate • NEISD’s current tax rate is $1.04 ($1.00 compression + $0.04 enrichment pennies) • If NEISD does raise it’s taxes by $0.02, the State will penalize NEISD by taking away approximately $4 million of Tier II State funding. • Only 2¢ of our tax rate would be “golden pennies” instead of the 4¢ we now have (local tax rate only 2¢ above compressed rate).

  19. General Fund Forecast

  20. General Fund Forecast • Reflects house version of budget and formula funding bills • These reflect current “near-worst-case” scenario • Situation more grim if either (a) law to use Rainy-Day fund to cover 10-11 biennial deficit or (b) law to delay August FSP payment do not pass. • Does not yet reflect Education Jobs Fund • This will be addressed later in the presentation • Significant Assumptions • Approximately 1,050 new students • Start-up costs for two new schools opening in August 2012 • General Fund absorbs significant costs from State-killed programs, such as Technology Allotment, Student Success Initiative, Adult Ed and shared service arrangement for Regional Day School for the Deaf

  21. Based on HB 2485 General Fund Forecast The revenue reductions based on HB2485 continue past the next biennium (into at least 2013-2014). Almost $27M in fund balance will be eroded over 2 years, and dramatically more in 2014 if the 2013 Legislature doesn’t increase funding.

  22. Expenditure Increases for 2011-2012

  23. Expenditure Reductions for 2011-2012

  24. Reductions to Teacher Staffing Levels

  25. Cost Avoidances for 2011-2012 An earlier example showed that HB2485 revenue compared to current law revenue for 2012 was nearly $50M lower. Similarly, in addition to expenditure reductions of $28.5M resulting from this legislation, NEISD is planning $15.3M in cost avoidances. This represents planned expenditure growth that will no longer occur. The total change to NEISD’s anticipated cost structure due to the under-funding of education is $43.9M.

  26. Education Jobs Bill

  27. Education Jobs Bill • North East ISD was allocated $10,594,000 • Funds must be used for compensation and benefits of school-level employees for the following allowable purposes: • To retain, recall, or rehire employees • To restore reductions in salaries, including furlough days • Funds were intended to be distributed for use in 2010-2011 • All Federal guidance refers to 2010-2011 • Currently reviewing TEA guidance for proper use in 2011-2012 • Update will be provided to Board of Trustees on May 23, 2011

  28. Benchmarking Update

  29. NEISD vs. 100 Largest Texas ISDsGeneral Fund Expenditures per Student North East ISD ranked 75th out of the 100 largest Texas ISDs for per Student spending for 2009-2010. (25 districts spent more per student)NEISD spent $250 per student more than the weighted average of the group, a difference of 3.5%.

  30. State Peer Group 2009-2010 Selected Demographics

  31. NEISD vs. State Peer GroupGeneral Fund Expenditures per Student North East ISD spent $414 more than the average of our peer group, mainly in the areas Instruction, Staff Development, School Leadership and Maintenance. $202 $414

  32. NEISD vs. State Peer GroupGeneral Fund Expenditures per Student Although North East ISD spent $202 more for instruction than our peer group average, that represents only a 5% difference. Alternatively, NEISD spent 209% more than our peer average on Social Work Services, but that represents only $27 per student. 209%

  33. NEISD vs. State Peer Group Function 11 - Instruction Compared to our peers, NEISD has similar student-to-staff ratios, and similar costs for instructional assistants. NEISD pays 4.7% higher salaries for professional instructional staff.

  34. NEISD vs. State Peer Group Function 13 – Curriculum & Staff Development Compared to our peers, NEISD has significantly lower ratios for staff devoted to curriculum and staff development. TEA data reporting standards do not allow for a comparison of what positions each district codes to this function. For NEISD, it comprises mostly deans.

  35. NEISD vs. State Peer Group Function 23 – School Leadership Compared to our peers, NEISD has similar student-to-staff ratios in school administrative positions. NEISD pays 8.7% higher salaries for professional administrative staff and 7.3% more in paraprofessional staff.

  36. NEISD vs. State Peer Group Function 33 – Health Services Compared to our peers, NEISD has a similar student-to-staff ratio for professional health staff (i.e., nurses). NEISD has a significantly lower ratio for paraprofessional health staff. TEA reporting standards do not allow for detail of the types of paraprofessional positions at our peers; for NEISD this is mainly clinic assistants.

  37. NEISD vs. State Peer Group Function 51 – Facilities Maintenance & Operations Compared to our peers, NEISD has a lower student-to-staff ratio in custodial and maintenance positions. NEISD pays 6.0% higher salaries for auxiliary staff. NEISD has a significant savings in utilities compared to our peers.

  38. State Peer Group Spending vs. Target Revenue

  39. Upcoming Meetings 1 2 June 13 – Call for Public Hearing May 23 June 27 – Public Hearing 3

  40. Questions?

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