School Finance Update

Transcription

1 School Finance Update Tom Melcher Jon VanOeveren School Finance Division Superintendents Conference August 9, 2016

2 Education Funding Principles: Criteria for designing and evaluating state school funding systems How are we doing? Key school finance legislation, 2016 School funding trends, statewide and by district type Trends on indicators of school funding adequacy and equity What is the outlook for the future? State Budget Status Topics for Discussion Selected school finance issues for 2017 legislative session Questions and Answers 2

3 Education Funding Principles Adequacy and Equity for Students: Ensure that all local education agencies have the resources needed to provide an adequate basic education for all students, regardless of geographic location: Basic formula covers the cost of providing an adequate basic education for students without special needs. Additional funding for excess costs: high-need students unique district characteristics 3

4 Source: MDE 4

5 Education Funding Principles Equity for Taxpayers: Tax burden to provide adequate basic funding is uniform throughout the state, regardless of local tax base. This can be accomplished with either: full state funding or A mix of state funding and a uniform local property tax levy. Additional revenue to supplement basic programs is equally available to all districts, regardless of geographic location (state aid or equalized levy). Equalizing factors are indexed to state average tax base / student to maintain stable state share of funding. 5

6 AVERAGE SCHOOL PROPERTY TAX RATES BY DISTRICT TYPE Taxes Payable in 2016 RMV Levy as % of RMV NTC levy as % of ANTC Approximate average school tax on $200,000 home* (rough est.) $ Average School Tax on $200,000 home as % of State Average STATE TOTAL 0.22% 15% 715 MPLS & ST PAUL 0.22% 18% $ % OTHER METRO, INNER 0.25% 21% $ % OTHER METRO, OUTER 0.26% 21% $ % NONMET>=2K 0.17% 13% $ % NONMET 1K-2K 0.16% 8% $ % NONMET < 1K 0.21% 6% $ % * (RMV rate * $200,000 value) + (NTC rate * taxable value after MV Exclusion * 1% class rate) 6

7 Education Funding Principles Ensure that the education funding system: Provides stable, predictable and sustainable revenues over time; Allocates resources through understandable statewide formulas that are rationally related to educational need and minimize burdensome paperwork; Provides incentives and flexibility for local education agencies to increase achievement for all and close achievement gaps in an efficient and effective manner. 7

8 HOW ARE WE DOING? 2016 SCHOOL FINANCE LEGISLATION Voluntary Prekindergarten Student Eligibility: All children who are four years old on Sept. 1 of the school year in which they enroll. Funding Model: Formula Driven with Cap on State Total Aid Entitlement Students at participating sites generate up to 0.6 pupil unit all pupil-driven formulas apply Program Requirements: At least 350 hours of instruction for the school year; Staff-to-child ratios of one-to-ten with a maximum class size of 20; Instruction through play-based learning to foster social, emotional, cognitive and physical/motor development, and language and literacy skills; Instructional staff with salaries comparable to those of local K-12 staff; 8

9 Voluntary Prekindergarten - 2 Program Requirements (continued): comprehensive program content, with curriculum, assessment and instructional strategies aligned with state early learning standards; Formative measurement of child cognitive and social skills; Coordination with relevant community-based services and district programs, including parent engagement strategies; High-quality professional development provided; Policies and practices aligned for prekindergarten through third grade. Teachers knowledgeable in early childhood curriculum content, assessment, native and English language programs, and instruction 9

10 Voluntary Prekindergarten - 3 Funding: $25 million aid appropriation for FY 2017 covers the following: $27,092,000 in aid entitlements for school districts and charter schools ($24,396,000 in appropriations mostly paid on basis): $21,348,000 in aid entitlements for school districts and charter schools participating in VPK, driven by VPK pupil units and costs. $ 5,744,000 increase in general education aid entitlement for operating capital aid for all districts statewide, driven by an increase in the equalizing factor for operating capital revenue -- intended to neutralize the statewide levy impact of the VPK program $604,000 to MDE for pre-k administrative cost, including one-time IT costs. Funding for later years will cover approximately the same number of participants as in FY

11 Voluntary Prekindergarten - 4 Funding (continued): Funding is broken down into four buckets, based on percentage of state total kindergarten enrollment: Minneapolis and St. Paul School Districts 10% Metro Suburban School Districts 40% Non-Metro School Districts 43% Charter Schools 7% Within each bucket, funding is prioritized based on: Concentration of the prior year kindergarten students eligible for free and reduced-priced lunch by site and, The proximity of three- and four-star rated Parent Aware programs to the district or charter. 11

12 Funding (continued): Voluntary Prekindergarten - 5 Participating students will be included in district / charter school enrollment, Average Daily Membership (ADM) and pupil units ADM = ratio of program hours to 850, with a maximum of 0.6 ADM. Pupil weighting factor = 1.0, so the pupil units will be the same as the average daily membership. Students enrolled in programs that provide the minimum of 350 hours of instruction will be counted as 0.41 pupil unit. Students in programs that provide 425 hours will be counted as 0.5 pupil unit Students in programs that provide 510 or more hours will be counted as 0.6 pupil unit. Remodeling cost for Pre-K Added to LTFM Revenue for participating districts 12

13 Voluntary Prekindergarten - 6 Applications and Approval Summary Twin Cities Metro Suburbs Nonmetro Districts Charters Totals Applications with Program Approval: Districts/ Charters Sites Participants 455 3,018 6, ,139 Funding Approved (Including partially funded sites): Districts/ Charters Sites Participants 240 1,220 1, ,302 No Funding Due to Cap: Districts/ Charters Sites Participants 215 1,798 4, ,837 education.state.mn.us 13

14 Voluntary Prekindergarten - 7 Summary Statistics for Funded Sites Average Revenue per Particpant Twin Cities Metro Suburbs Nonmetro Districts Charters Totals State Aid Levy Total Lowest Oct 2015 Free and Reduced Price Lunch Concentration for Kindergarten at Funded Sites: $ 8,240 $ 6,834 $ 5,645 $ 8,297 $ 6,464 $ 1,065 $ 739 $ 698 $ - $ 690 $ 9,305 $ 7,574 $ 6,343 $ 8,297 $ 7, % 54.7% 60.0% 57.1% 54.7% education.state.mn.us 14

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17 2016 SCHOOL FINANCE LEGISLATION Equity Revenue For FY 2017 FY 2019, makes nonmetro school districts eligible for a 16% increase in the sliding scale portion of equity revenue. Districts whose administrative headquarters are in the 7 county metro area continue to receive a 25% increase over the initial calculation for this revenue. Beginning in FY 2020, all districts, metro and nonmetro, will receive the same 25% increase over the initial calculation for this revenue. For FY 2017 only, the revenue increase is all paid in state aid. 17

18 2016 SCHOOL FINANCE LEGISLATION Early Repayment Of Maximum Effort Loans Allows a district with an outstanding capital loan balance that received a capital loan before January 1, 2007 to close the loan by repaying the full outstanding original principal on the loan by November 30, 2016, without repaying the interest on the loan. Estimated one-time savings to state general fund = $53 million Excludes bonds issued after 11/30/16 or >3 years after loan issuance, whichever is later, from required debt service levy for purposes of calculating repayment to state; effectively ending ability of most maximum effort districts to issue one-day bonds If full outstanding original principal on loan is paid by 11/30/2016, the following districts will receive an early repayment incentive grant to offset the loss of one-day bonding funds: Cromwell, Caledonia, Laporte, Littlefork, Roseau, East Central Totals $2.2 million per year for 5 years 18

19 2016 OTHER LEGISLATION Tax Bill (Vetoed But May be Addressed in Special Session) Maximum Effort Loan Aid For all districts with loan outstanding as of 6/30/2016 Annual aid = one-fifth of the amount of interest paid on the loan between December 1, 1997, and June 30, 2016 Must be used to reduce property taxes levied on net tax capacity $3.2 M / year per year for 5 years School Building Bond Ag Credit Eligible Property: All class 2a, 2b, and 2c property (agricultural land, rural vacant land, managed forest land), under section , Subdivision 23 other than property consisting of the house, garage, and immediately surrounding one acre of land of an agricultural homestead. Credit amount: 40 percent of the property's eligible net tax capacity multiplied by the school general debt service tax rate (excludes OPEB Debt) Estimated at $40.8 million for FY 18, $42.4 million for FY 19 District by district estimates available on MDE web site 19

20 2016 OTHER LEGISLATION Pension Bill (Vetoed But May be Addressed in Special Session) Early session discussions about raising employer contribution for TRA by 1 percent. Many stakeholders opposed this increase without additional funding to offset the cost. The final bill included: Lowering the investment return assumption for Teachers Retirement Association (TRA) to 8 percent, TRA cost-of-living adjustment to be lowered to 1 percent for one year Minnesota State Retirement System (MSRS) COLA to be lowered to 1.75 percent for one year beginning Jan. 1, A half-percent employer contribution rate increase for the St. Paul Teachers Retirement Fund Association (SPTRFA) This limited sustainability measure saves the systems $81.5 million. 20

21 HOW ARE WE DOING? STATE INVESTMENT IN E-12 EDUCATION Spending for Current Biennium over Base Excluding Shifts & Shift Paybacks ($ Millions) 2011 legislation $ legislation -0- $ legislation $ legislation $ 54 $ legislation $ legislation $ 80 $

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23 HOW ARE WE DOING? STATE INVESTMENT IN PreK-12 EDUCATION General Education Formula Fiscal Formula Inflation Year Increase (CPI) 2012 $ 50 (1.0%) 2.9% 2013 $ 50 (1.0%) 1.7% 2014 $ 78 (1.5%) 1.6% 2015* $105 (1.9%) 0.7% 2016 $117 (2.0%) 0.7%** 2017 $119 (2.0%) 1.8%** 2018 N/A 2.4%** 2019 N/A 2.4%** * Adjusted for pupil unit weight change ** July 2016 Estimates 23

24 School Funding Trends and Issues Show trend in basic formula vs inflation here 24

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31 Source: MDE 31

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35 SCHOOL FUNDING TRENDS, FY 11 FY 17 General Education Revenue Excluding Referendum and Local Optional per ADM by Strata Current $ End of 2016 Session Estimates FY 2011 FY 2017 Increase % Increase MPLS & ST PAUL 8,588 9, % OTHER METRO- INNER 6,899 7,927 1, % OTHER METRO - OUTER 6,640 7, % NONMET>=2K 6,887 7, % NONMET 1K-2K 7,020 7, % NONMET < 1K 7,342 8,433 1, % CHARTER TOT 7,605 8,787 1, % STATE TOTAL 7,061 8, % 35

36 SCHOOL FUNDING TRENDS, FY 11 FY 17 Referendum and Local Optional Revenue per ADM by Strata Current $ End of 2016 Session Estimates FY 2011 FY 2017 Increase % Increase MPLS & ST PAUL 1,336 1, % OTHER METRO- INNER 1,452 1, % OTHER METRO - OUTER 1,325 1, % NONMET>=2K 607 1, % NONMET 1K-2K % NONMET < 1K 801 1, % CHARTER TOT % STATE TOTAL 1,087 1, % 36

37 SCHOOL FUNDING TRENDS, FY 11 FY 17 State Special Education Revenue per ADM Including Tuition Adjustments By Strata, Current $ End of 2016 Session Estimates FY 2011 FY 2017 Increase % Increase MPLS & ST PAUL 1,435 1, % OTHER METRO- INNER 799 1, % OTHER METRO - OUTER 978 1, % NONMET>=2K 968 1, % NONMET 1K-2K 764 1, % NONMET < 1K 770 1, % CHARTER TOT 1,329 1, % STATE TOTAL 1,096 1, % 37

38 SCHOOL FUNDING TRENDS, FY 11 FY 17 Long-Term Facilities Maintenance Revenue per ADM (General & Debt Funds) By Strata, Current $ End of 2016 Session Estimates FY 2011 FY 2017 Increase % Increase MPLS & ST PAUL % OTHER METRO- INNER % OTHER METRO - OUTER % NONMET>=2K % NONMET 1K-2K % NONMET < 1K % CHARTER TOT #DIV/0! STATE TOTAL % 38

39 SCHOOL FUNDING TRENDS, FY 11 FY 17 MISC GENERAL FUND REVENUE / ADM (e.g., Q Comp, Integration, Literacy, CTE, Charter Lease) By Strata, Current $ End of 2016 Session Estimates FY 2011 FY 2017 Increase % Increase MPLS & ST PAUL % OTHER METRO- INNER % OTHER METRO - OUTER % NONMET>=2K % NONMET 1K-2K % NONMET < 1K % CHARTER TOT 1,317 1, % STATE TOTAL % 39

40 SCHOOL FUNDING TRENDS, FY 11 FY 17 Total General Ed, State Spec Ed, Facilities Maint & Misc General Fund State Aid & Levy / ADM By Strata, Current $ End of 2016 Session Estimates FY 2011 FY 2017 Increase % Increase MPLS & ST PAUL 12,942 14,207 1, % OTHER METRO- INNER 10,314 12,397 2, % OTHER METRO - OUTER 9,670 11,501 1, % NONMET>=2K 9,016 10,987 1, % NONMET 1K-2K 8,829 10,588 1, % NONMET < 1K 9,364 11,366 2, % CHARTER TOT 10,285 12,505 2, % STATE TOTAL 9,913 11,872 1, % 40

41 SCHOOL FUNDING TRENDS, FY 11 FY 17 Total General Ed, State Spec Ed, Facilities Maint & Misc General Fund State Aid & Levy / ADM By Strata, Inflation-Adjusted (CPI) 2017 $ End of 2016 Session Estimates FY 2011 FY 2017 Increase % Increase MPLS & ST PAUL 14,320 14, % OTHER METRO- INNER 11,413 12, % OTHER METRO - OUTER 10,700 11, % NONMET>=2K 9,976 10,987 1, % NONMET 1K-2K 9,770 10, % NONMET < 1K 10,361 11,366 1, % CHARTER TOT 11,380 12,505 1, % STATE TOTAL 10,969 11, % 41

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43 Source: MDE 43

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45 Source: MDE 45

46 Source: MDE 46

47 Source: MDE

48 Source: MDE 48

49 5) State General Fund Budget End of 2016 Regular Session ($ in millions) FY FY Beginning Balance $2,103 2,696 Revenues 42,356 45,804 Spending 41,763 44,754 Balance Before Reserves 2,696 3,747 Cash Flow & Budget Reserve 1,947 1,947 Stadium Reserve Forecast Balance $729 $1,776 49

50 Selected PreK-12 Finance Issues for 2016 Legislature Rough Cost Estimates Based on Pay Schedule $ in Millions FY 2018 FY Biennium Basic Formula: Inflationary 2.4% per Year Spec Ed: Eliminate Non-Federal Portion of Cross Subsidy Pre-K: Increase Participation from 5.5% in FY 17 to 20% in FY 18 and 40% in FY Early Learning Scholarships Q Comp - Eliminate Cap School Counselors --Bring ratio to national average - 50% local match Improve Debt Service Equalization (levy over 10% of ANTC eq. at 100% of state Avg ANTC/PU - levy savings not neutralized) Total 690 1,027 1,717 50

51 Questions? More detailed summaries and spreadsheets are available on MDE web site (education.state.mn.us) For general questions, please contact: Tom Melcher, Director Jon VanOeveren School Finance Division General Ed Funding Supervisor education.state.mn.us 51