Issues in Finance

1. Issues in Finance GAEL Secretary and Support Personnel Conference September, 2007

2. Taxes and the Budget Over 75% of the state budget is spent on education, healthcare, and criminal justice. These three areas drive the state budget and are increasing both in cost and population faster than overall inflation and population growth.

3. Existing and Emerging Needs • Georgia is the 9th largest and 5th fastest growing state. • Populations served by state government programs are growing faster than overall population. • Overall population growth 1990-2005 = 39% • Medicaid population growth 1990-2005 = 126% • Prison population growth 1990-2005 = 153% • There are existing education, healthcare, transportation, and other service demands, as well as the emerging needs of our growing population.

4. Linking Taxes and the Budget Georgia needs a tax system that fairly raises sufficient revenues to meet the education, healthcare, criminal justice, environmental, and transportation needs of a modern, growing 21st century state.

5. Adequacy of Funds • Georgians are paying less in state taxes as a percent of income.

6. Fairness of Tax System • Georgia has a regressive tax system.

7. Budget Outlook FY 2008 and Beyond • Continued Federal Budget Cuts • Continued Population Growth and Demographic Changes • Education • Healthcare • Transportation • School Funding Lawsuit

8. Tax Cut Culture But at What Cost? • Potential tax cuts • Property tax caps • Eliminate ad valorem tax on cars • Eliminate or further reduce corporate income tax • Eliminate income tax on seniors • Additional sales tax exemptions • TABOR – Limits on growth of state and local revenue growth • House and Senate Study committees

9. Policy Solutions • Comprehensive Tax Reform and Modernization • Solidify tax base (Relevant to 21st century economy) • Raise sufficient revenues • Withstand downturns • Fair and equitable state tax system • Targeted tax cuts

10. Contact Info Alan Essig 100 Edgewood Ave Suite 1040 Atlanta, GA 30303 404-420-1324 www.GBPI.org

11. How are Public School Systems Funded?Federal Funds = 7.40%State Funds = 51.26%Local Funds = 41.34%*According to the Georgia Department of Education website.

12. State Funding State Funds • QBE = Quality Basic Education Act - includes the “formula” used to earn funds through a partnership involving state and local revenues • Some state revenue for public education is allocated through a set called “categorical grants” - for example, that’s how transportation is funded. • The state pays each system an amount of money for each student based on a QBE “foundation formula.”

13. What is added to the QBE “foundation formula”? State Funds • The QBE foundation formula is “weighted” to allow for differences in cost between grade levels, classes and/or students with different needs. • The QBE foundation formula for FY05 = $2,362, which is the revenue earned from the state for one regular high school student. This amount is then added to or “weighted.”

14. Qualifying for QBE Funds State Funds • Districts are required to levy the equivalent of at least five mills in property taxes as a basic local commitment. • All districts then have revenues equal to the “local five mill share” (LFMS) deducted from their total QBE earnings, and the state pays the balance of the earnings.

15. Local Funding Local Funds • Property taxes make up the primary source of revenue for local school systems. These funds are used for the operating budget. • Special Purpose Local Option Sales Tax (SPLOST) funds can be used for capital expenditures like buildings and technology, but NOT salaries and other operating expenses.

16. What Did Georgia School Systems Spend on Instruction in 2004?The average that Georgia’s local school systems spent per FTE* in 2004 = $7,261.37Of that amount, $5,031.41 went directly to instruction*Per FTE or Full Time Equivalent student ** According to Georgia Department of Education website.

17. Funding Challengesin Georgia • Underfunded Mandates Three of many examples: - Textbooks - State does not pay the full cost of a textbook - Instructional equipment and supplies used by teachers in the classroom - Sick leave - funds used to pay for substitute teachers

18. Funding Challengesin Georgia • Salaries - State does not pay the cost of many benefits associated with teacher salaries (e.g. Social Security costs) • Increasing enrollments - means increased need for teachers (salaries/ benefits), classrooms, textbooks, etc.

19. Funding Challengesin Georgia • Recruitment and retention of highly qualified teachers • Need to educate an increasingly diverse student population • Competition for funding at the state level - Medicaid, Public Safety, etc.

20. Funding Challengesin Georgia • Limited sources of revenue - School systems have little flexibility in using state or federal funding • Use of SPLOST or bond revenues has limited flexibility • Wide variance among systems in wealth limits ability to raise revenue

21. Current IssuesChallenging Boards of Education • State Funding • Adequacy in Funding Court Case • SPLOST and Bond Referendums • Accountability for Student Achievement • NCLB • Promotion and Retention • Changing Demographics • Class Size • Highly Qualified Teachers • Charter Schools/Vouchers • SACS and BOE Governance • Fluctuating Economy

22. Local revenues are the only place the local Board has any discretion….Local Revenues usually makes up 25% to 45% of the Total General Fund Revenues….85% to 90% of the total General Fund Expenditures is in salaries, most of which are mandated Key Points

23. State Budget – Revenue $20,230,620,936 FY 2008 Proposed

24. State ExpendituresFY 2008 Proposed

25. General Information • 180 School Systems (159 County/21 City) Plus Others • Approximately 2,159 Schools • Elementary - 1,284 • Middle - 450 • High - 415 • K-12 - 10 • Full-Time Equivalent Students = 1,607,836 • Certificated Personnel = 123,638+ • Other: • Pending Lawsuit (Adequacy) • Governor’s Education Finance Task Force (Weights Task Force) • Adequacy vs. Equity

26. Full-Time Equivalent Students

27. QBE Austerity Reductions By Year