TASBO School Finance 101 – November 17, 2010 1

1. SCHOOL FINANCE SCHOOL BUDGET TASBO School Finance 101 – November 17, 2010 1

2. School District Total Revenue Sources (state-wide average for 2008-2009 per State Report Card) State =48.5% Local =40.2% Federal =11.3% TASBO School Finance 101 – November 17, 2010 2

3. State Funding Where does it come from? • Sales Tax • Mixed Drink Tax • Cigarette Tax(beginning July 1, 2007) TASBO School Finance 101 – November 17, 2010 3

4. State Funding How is it determined? Basic Education Program (BEP) Formula that determines the funding level required for each school system to provide a common, basic level of service for all students. TASBO School Finance 101 – November 17, 2010 4

5. BEP Funding Formula History • Adopted by the Legislature in 1992 as part of the Education Improvement Act (EIA) • Developed in response to Small Schools I lawsuit, where TN Supreme Court ruled State’s previous school funding scheme unconstitutional • “Funding formula, not a spending plan” TASBO School Finance 101 – November 17, 2010 5

6. BEP Funding Formula Highlights Comprehensive (45 components) Attempts to equalize state and local funding (fiscal capacity;cost differential factor) Provides flexibility Attempts to keep up with increased costs TASBO School Finance 101 – November 17, 2010 6

7. BEP Funding Formula Comprehensive Formula contains a number of components (45 Total)that the legislature has deemed necessary for schools to succeed. TASBO School Finance 101 – November 17, 2010 7

8. BEP Funding Formula Equalization Formula determines actual state share of education funding by each county’s relative ability to pay or its “FISCAL CAPACITY” TASBO School Finance 101 – November 17, 2010 8

9. FISCAL CAPACITY • County’s “ability to pay” based on (pre-BEP 2.0): • Tax base (sales, property) • Per capita income • Resident tax burden • Students relative to total population • Expressed as an index measure, which is a proportion of the total fiscal capacity for all counties TASBO School Finance 101 – November 17, 2010 9

10. BEP Funding Formula Flexibility • School boards have broad flexibility in determining how to allocate state funds. TASBO School Finance 101 – November 17, 2010 10

11. BEP Funding Formula Cost evaluation • BEP component costs are recalculated and updated for inflation each year. TASBO School Finance 101 – November 17, 2010 11

12. BEP Funding Formula Inadequacies • Not enough positions funded to meet class-size mandates • High cost of educating at-risk students and English Language Learners (ELL) not recognized adequately • Capital costs under-funded, especially for growing systems TASBO School Finance 101 – November 17, 2010 12

13. BEP Funding Formula Inadequacies (continued) • Teacher salaries still not adequately addressed • School nurse ratio inadequate • Professional development for teachers not included • Technology not adequately funded TASBO School Finance 101 – November 17, 2010 13

14. BEP 2.0 Reforms (2007-08) Overall Concepts (phased-in) • New Fiscal Capacity model (county) • Assessed property values • Sales taxes • Eliminate Cost Differential Factor (CDF) • Affects 17 systems • Not replaced to measure cost-of-living • differences TASBO School Finance 101 – November 17, 2010 14

15. BEP 2.0 Reforms Overall Concepts (phased-in) • State returns to 75% share of teacher pay • Currently 70% • Also increases teacher salaries (in the formula) TASBO School Finance 101 – November 17, 2010 15

16. BEP 2.0 Reforms Structural Changes • 100% funding for at-risk students • 1:20 ELL ratio (phased-in, currently 1:30) • $40,000 teacher salary unit cost (phased-in, currently $38,000) • 100% student enrollment growth (current year enrollment) TASBO School Finance 101 – November 17, 2010 16

17. BEP 2.0 Reforms Accountability • Ties planning to budgets and spending • Gives State Department of Education more authority over High Priority schools • Requires Principal performance contracts TASBO School Finance 101 – November 17, 2010 17

18. BEP 2.0 Reforms Accountability • Requires Differentiated pay plan for teachers (hard to staff schools / hard to fill subject areas) • More frequent teacher evaluations/assessments • 1 formal evaluation every 5 years • 2 assessments every 5 years TASBO School Finance 101 – November 17, 2010 18

19. Local Funding Where does it come from? • Property Taxes • Assessed property values (Assessor of Property) • Tax rate allocated for Schools • Collection rate • Value of penny on property tax rate TASBO School Finance 101 – November 17, 2010 19

20. Local Funding Where does it come from? • Local Option Sales Tax • Half of revenue must be appropriated to education • Other sources • (wheel tax, hotel / motel tax, etc.) TASBO School Finance 101 – November 17, 2010 20

21. Local Funding • Maintenance of Effort No local government can reduce its share of local funding for schools as a direct result of increased state funding. TASBO School Finance 101 – November 17, 2010 21

22. Local Funding • Fund Balance Any accumulated fund balance in excess of 3% of budgeted operating expenditures may be budgeted and expended for any purpose, but must be recommended by the Board of Education. TASBO School Finance 101 – November 17, 2010 22

23. Budget Process Planning Approach Calendar TASBO School Finance 101 – November 17, 2010 23

24. Planning Strategic Plan Expenditure Plan • Strategic Plan • District goals & objectives (TCSPP) • Individual schools’ SIP • Revenue Plan • Expenditure Plan Revenue Plan BUDGET TRIANGLE TASBO School Finance 101 – November 17, 2010 24

25. Approach SCHOOL BUDGET 2010-11 Two Methods: Plan Budget the Figure out how much revenue will be available and divide it up TASBO School Finance 101 – November 17, 2010 25

26. Approach SCHOOL BUDGET 2010-11 Two Methods: Budget Plan the • Identify what needs to be done and how much it will cost to do it • Comprehensive needs assessment • “Zero-based” budgeting TASBO School Finance 101 – November 17, 2010 26

27. Required Additional Expenditures • Labor (salaries & benefits) = 85% - 90% of operating budget • Health insurance • Pension • Salary steps • Required state teacher raise TASBO School Finance 101 – November 17, 2010 27

28. Required Additional Expenditures • Opening New Schools • Staff • Utilities • Materials & Equipment TASBO School Finance 101 – November 17, 2010 28

29. Required Additional Expenditures • Inflation • Fuel • Utilities • Materials & Supplies • Multi-Year Contracts TASBO School Finance 101 – November 17, 2010 29

30. Calendar • Develop/review goals, objectives and needs assessment (Jan, Feb) • Develop draft budget, allow public input (March, April) – post on district website • Make any necessary revisions (May) • Vote on revised budget, present to governing body (June, July) • Send final certified copy of budget to State by August 1 TASBO School Finance 101 – November 17, 201030

31. Statistical Data • District data (size of operation) • # Employees (certificated / classified) • # Years experience (25 yrs / 30 yrs) • # Buildings (square footage / acreage / number of portables) • # Buses (regular ed / special ed) • # Students (ADM / ADA) TASBO School Finance 101 – November 17, 201031

32. Statistical Data • State Report Card • District • Individual schools • State Data • Expenditure per pupil calculation • Other data (Annual Statistical Report) TASBO School Finance 101 – November 17, 201032

33. SCHOOL FINANCE THANK YOU! TASBO School Finance 101 - November 17, 2010 33