82 nd Legislature and School Finance: Trying to Put the Pieces Together

1. 82nd Legislature and School Finance: Trying to Put the Pieces Together Texas Association of School Business Officials Business Managers Academy 2011 Day Two

2. Agenda • Budget news • Senate Bill 1 • Maintenance of effort • Prekindergarten • Foundation School Program (FSP) news • Chapter 41 • Dual credit • Goods-in-transit • Changes at the Texas Education Agency (TEA)

3. Budget news • Senate Bill 2 (SB 2) - FSP appropriations • Strategy A.1.1 - FSP Equalized Operations • Assumes passage of SB 1 and 66.67% compression rate • Does not include money for: • New Instructional Facility Allotment • Technology allotment • Declining property values • Declining enrollment • Disciplinary alternative education programs

4. Budget news • SB 2 – cont’d • Strategy A.1.2 – FSP Equalized Facilities • Assumes: • Automatic roll-forward of Existing Debt Allotment • No new awards for Instructional Facilities Allotment • No change in yield of $35/penny/student in average daily attendance (ADA)

5. Budget news • SB 2 - cont’d • Value assumptions • Tax year 2011 = –0.97 (Comptroller = –2.23) • Tax year 2012 = +0.52 (same as Comptroller) • March update of pupil projections • Reflects enrollment growth, if applicable • Uses our projections if your district did not submit any revisions in the fall of 2010 • Note: Next opportunity to submit pupil projections is October 2012

6. Budget news • SB 2 – cont’d • Provides for FSP funding that is $2 billion/year less than House Bill 3646 formulas • Reduces appropriation by $2.3 billion based on an August 2013 deferral • Bill language makes the deferral effective for August 2012, but • Legislative Budget Board has approved the payment of the August 2012 payment in August 2012 • August 2013 will be first deferral of August payment

7. Budget news • Instructional Materials Allotment (House Bill/Senate Bill 6) • Establishes Instructional Materials Fund (IMF) • Creates Instructional Materials Allotment (IMA) • Allows districts to select materials from a variety of sources and pay for them with IMA

8. Budget news • Instructional Materials Allotment • Allotments in Educational Materials online system (EMAT) reflect a 70%/30% split across the biennium. NOTE: This is a biennial rather than annual allotment • Contact: John Lopez (512) 475-3600 or John.Lopez@tea.state.tx.us

9. Senate Bill 1 (SB 1) • School finance provisions = hybrid of the hybrid • Regular program adjustment factor (RPAF) • If districts receive Additional State Aid for Tax Reduction (ASATR), RPAFs are: • 2011–2012 = 0.9239 (7.61% reduction) • 2012–2013 = 0.98 (2% reduction)

10. SB 1 • RPAF - continued • If districts do not receive ASATR in 2011–2012: • RPAF is 0.95195 for both years • RPAF may be adjusted under certain circumstances • RPAF expires on September 1, 2015

11. SB 1 • Percent of target revenue retained • 2011–2012 = 100% (0% reduction)* • 2012–2013 = 92.35% (7.65% reduction) *Note: First-year funding reductions are achieved through reductions in students in weighted average daily attendance (WADA) caused by RPAF • ASATR • Repeals ASATR effective September 1, 2017 • Includes statement of intent to reduce ASATR between FY 2014 and FY 2018

12. WADA formula

13. SB 1 • Revises proration provisions • Effective September 1, 2011: • Applies equal percentage reduction to all school districts, including Chapter 41 districts and charter schools • Restores lost funds to following year

14. SB 1 • Special program allotments • Directs State Board of Education (SBOE) to increase indirect cost allotments in proportion to the average reduction in state and local funding to apply beginning in 2011–2012 • Rates proposed to SBOE • Career and technology education (CTE) allotment • Currently = 40% indirect/60% direct • Proposed = 42% indirect/58% direct • All other special program allotments • Currently = 45% indirect/55% direct • Proposed = 48% indirect/52% direct

15. SB 1 • SBOE action • CTE allotment – 42% indirect/58% direct • All other special program allotments (except gifted and talented [GT]) - 48% indirect/52% direct • GT direct costs to remain at 55% (45% indirect) • Beginning in 2012–2013, a district may choose a greater indirect cost rate if the district receives less money per WADA than it received in 2011–2012 • Commissioner must develop methodology • Commissioner may require information necessary to implement this provision

16. SB 1 • Compensatory education • Permits the use of compensatory education funds for disciplinary alternative education programs (DAEPs) and juvenile justice alternative education programs (JJAEPs) • Repeals the current limitation on use of funds for DAEPs

17. SB 1 • Extension of time for repayment of FSP funds to five years for hardship cases • Bond guarantee program for charter schools • Permits districts to charge a fee for transportation of students if: • They do not receive transportation allotment funds • They do not participate in a county transportation system

18. Maintenance of effort (MOE) • SB 1 • Reduces regular program allotment • Does not reduce special program allotments • Ensures that the State meets MOE requirements • May jeopardize the ability of districts and charter schools to meet local MOE requirements because of reduction in funds that count as local effort

19. Prekindergarten (pre-K) • Grant funds for pre-K have been entirely eliminated • FSP funds for pre-K are still in place • Tuition-supported pre-K • Serves eligible students for a half day in addition to a half day of FSP funding • Serves ineligible students for a half-day or full-day program • Eligible students may not be charged, regardless of their age

20. Pre-K • Tuition-supported pre-K – cont’d • Maximum tuition is limited to rates posted on the TEA website • Districts must request permission to charge tuition • Sample letter and tuition rates are posted at Prekindergarten Tuition website: http://www.tea.state.tx.us/index2.aspx?id=7515

21. FSP news • The 2010–2011 near-final settle-up is based on: • Summer submission of attendance to the Public Education Information Management System (PEIMS) • Summer tax collection survey: If a district did not complete the survey, fall PEIMS budget data will be used • Settle-up does not include updates for staff salary allotment

22. FSP news • FSP online system • Every district must have someone in roles of: • User admin (in User Administration + system) – requires telephone contact with superintendent • District approver (in FSP System) • Superintendent must approve all other roles or designate someone to approve roles • For more information, see the Foundation School Program webpage: http://www.tea.state.tx.us/index2.aspx?id=8085&menu_id=645&menu_id2=789

23. FSP news • FSP online system • Review users routinely – especially at the beginning of the year • Most data submissions must be approved before TEA can use them in the Summary of Finances calculations

24. FSP news • Staff salary allotment • Problems with data reporting postponed settle-up on this allotment • Do not report staff subject to minimum salary schedule (teachers, nurses, librarians, and counselors) • Doreport other full- and part-time staff • Advanced career and technology education allotments are being calculated and will be paid in near future

25. FSP news • Transportation • Operations report – for prior fiscal year • Opens October 1, 2011 • Closes December 1, 2011 • Route services reports are delinquent, if they have not been submitted • Chapter 41 • Deadline for contracts: January 13, 2012 • Must receive authorization before maintenance and operations (M&O) rate adoption • Efficiency credits no longer available

26. Chapter 41 • Districts with wealth per student greater than $319,500/WADA: • Received notice of Chapter 41 status in July • If wealth less than $476,500/WADA, may or may not pay recapture, depending on tax effort • Regardless of need to pay recapture, must comply with provisions for wealth reduction in order to be authorized to adopt M&O tax rate

27. Chapter 41 • All districts that received a notice in July must: • Choose an option for reducing wealth via FSP online system (unless their status as a Chapter 41 district changes upon reporting transfers) • Submit appropriate documentation to support the option selected • Receive permission to levy M&O tax rate • Districts may not adopt a tax rate until a letter authorizing adoption is received • Failure to act may jeopardize the ability to issue bonds

28. Dual credit • Senate Bill 1619 authorized districts to charge students for tuition, books, and fees for dual credit programs • Exercise caution when participating in dual credit programs; note that districts and charter schools: • Must ensure that all attendance is properly documented • Must deliver special services, if needed • Retain accountability for student performance

29. Goods-in-transit • Provision in SB 1 • Requires school boards to take affirmative action if they wish to tax goods-in-transit • Board must act on or after October 1, 2011, and before January 1, 2012 • If district plans to tax goods-in-transit, then it must conduct a public hearing • District may continue to tax until board rescinds or repeals previous action

30. Changes at the TEA • The agency administrative budget cannot sustain the 795 full-time equivalent positions (FTEs) indicated in Article III • Reduction in force • January 2011 = 1,060 FTEs • July 2011 = 717 FTEs • Reduction = 32% • Reorganization • Security

35. Questions? • Lisa Dawn-Fisher • lisa.dawn-fisher@tea.state.tx.us • 512.463.9179 (phone) • 512.305.9165 (fax) • School Finance home page: http://www.tea.state.tx.us/index2.aspx?id=6957&menu_id=645&menu_id2=789