MISSOURI’S FOUNDATION FORMULA & JCPS

PRELIMINARY BUDGET

SHIFTING MONEY AROUND THE STATE

Current Reality

• Current formula implemented in 2006-07• Designed to be phased in over 7 years

– Fully funded 2012-13• Requires about $120m each year to be phased in• Shortfall has existed in each of the last 3 years, and will next year• Stimulus funds softened some of the blow ($153m in FY13)• Every year the formula becomes more expensive

o Increasing Costs + Flat Appropriations = More Withholdings• DESE is currently applying a straight reduction to every district,

because there is no legislative guidance to the contraryo Legislation Prohibits Adjusting SAT During Phase-In

Funding Formula

Weighted Average Daily Attendance (WADA)X State Adequacy Target (SAT)-Set to increase in FY13 & FY14X Dollar Value Modifier (DVM) - This is decreasing in FY13−− Local Effort based on 2005 Assessed Valuation= Formula funding if +, but if – then hold harmless Also HH if payment per WADA < 2005 payment per WADA

Many Changes in FY13• Final Year of Phase In

– $100 Million State Wide Increase in Cost– $1.1 Million New Funding JCPS

• Recalculation of DVM– $29 Million State Wide Decrease in Cost– $200,000 Lost Funding for JCPS

• JCPS DVM Going From 1.038 to 1.034.

• Recalculation of WADA Thresholds– No Official Calculation on State Impact but Will Decrease the

Cost– $300,000 Lost Funding for JCPS

WADA Threshold Changes2011-12 2012-13 Difference

Total ADA (Includes SS) 8,097 8,147 50

F&R Lunch Threshold % 32.0% 38.8%

F&R Lunch Threshold # 2,591 3,161F&RL Students 4,225 4,225 0

F&RL WADA 408 266 -142

LEP Threshold % 0.9% 1.8%

LEP Threshold # 73 147

LEP Students 195 195

LEP WADA 73 29 -44

Total WADA 8578 8442 -136

Even though we gained 50 students our WADA count goes down by 136. We will be paid on the prior year. JCPS misses out on $300,000 in funding for those 50 students, if the thresholds did not change

Many Changes in FY13-Huge SAT Increase

• Recalculate Every 2 Years– Original SAT Calculation = $6,117 – 1st SAT Recalculation = $6,117

• Actually went down but law won’t allow reduction– 2nd SAT Recalculation = $6,131 (0.23% Increase)– 3rd SAT Recalculation = $6,716 (9.54% Increase)

• $6,423 in FY13 – Phase in ½ of the increase• Removed 5% “Throttle” on growth in 2009 in anticipation

of increased gaming money from the passage of Prop A.

Many Changes in FY13-Huge SAT Increase

• In FY13 the SAT goes from $6,131 to $6,423, which increases the cost of the formula by $292 million.

• In FY14 the SAT goes from $6,423 to $6,716, which increases the cost of the formula by $238 million.

• These Increases Make the Formula About $700 Million Underfunded.

Many Changes in FY13-But Not Funding

• While there are changes that increase the cost of the formula by nearly $400 Million in FY13

• Initial FY13 Budget shows $5 Million Increase– 0.1% Increase – Record Appropriation

• With this many changes in the formula and no new money, there are massive shifts of money from district to district all over the state.

As If That Wasn’t Bad Enough

• DESE is currently applying a straight reduction to every district, because there is no legislative guidance to the contrary– During the Phase-In, SAT Adjustments are Prohibited

• When the formula is fully phased-in in FY13 “The state adequacy target may be adjusted to accommodate available appropriations”– Only place in current legislation that addresses how to

deal with a short fall.– Does “May” mean “Shall”?

Current Options–If No Legislation Passes• Currently All Districts Receiving About 94%

Funding.• Option 1 – Continue to Prorate All Districts

– Proration drops to 86.39% – JCPS GAINS $1.9 Million (+12.2%)

• Option 2 – Adjust SAT– SAT Drops from $6,423 to $5,749– JCPS LOSES $1.3 Million (-8.5%)– Hold Harmless Districts Receive 100% Funding.

• Roughly a 6% Increase

We Saw This Coming Years Ago

FY 13 MAY vs. SHALL

Proposed Legislative Fix

• SB 454 – Sen. Pearce– All Districts Share in the Underfunding– HH Districts Get 1/2 the Reduction as Formula Dist.

• Formula Proration – 84.8%• HH Proration – 92.4%

– JCPS Gains $1.6 Million (10.2%)

Proposed Legislative Fix

• HB 1043 – Rep Thompson - Original– All Districts Share in the Underfunding– HH Districts Get 1/3 the Reduction as Formula Dist.

• Formula Proration – 84.1%• HH Proration – 94.7%

– JCPS Gains $1.25 Million (8.2%)

Concerns with Current Proposals

• Both HB1043 and SB 454 Treat JCPS Very Well• If total school funding is flat and we get more

money, it is coming at the expense of another district.– SB Shifts About $35 Million in FY13– HB Shifts About $27 Million in FY13

Concerns with Current Proposals

• SAT goes up again in FY14 which increases the cost of the formula another $238 Million

• Not expecting school funding to grow that much• Shifting money around the state again• If total school funding is flat and we get more

money, it is coming at the expense of another district.– SB Shifts About $25 Million in FY14– HB Shifts About $19 Million in FY14

Concerns With Current Proposals• Baring any other guidance except the statement that

DESE may adjust the State Adequacy Target next year, most believe that is the position DESE will take. – Remember this is the only option where JCPS loses

money, but is the most likely to occur.• Under this scenario HH districts go to 100% funding.• Under either of the “fix” bills HH districts continue to

participate in the underfunding and actually get much less money due to huge increase in SAT.

• Why would they allow this legislation to pass?

Benefits of Current Proposal

• Targets for future funding– Goals to get to full funding– Without targets it is too easy to shortchange

education funding – Original bills have unrealistic funding targets

• Smoothing of DVM calculation– 3 year average– Will reduce wild swings in funding

• HB 1043 Amended – Rep Thompson– All Districts Share in the Underfunding– HH Districts Get 1/3 the Reduction as Formula Dist.

• Formula Proration – 88.9%• HH Proration – 96.3%

– Reinstate 5% “Throttle” on SAT growth• Reduces Massive Shift of $

– JCPS Gains $600,000(4.0%)– Chance of support from Formula and HH districts– Realistic Funding Targets

Proposed Legislative Fix

Straight Prorate SAT Reduction SB454 HB1043 HB1043 & 98% Floor0

100

200

300

400

500

10%+6% to 10%2% to 6%+ or – 2%-2% to -6%-6% to -10%-10%+

Summary of How Districts Are Impacted

Straight Proration

Reduce SAT SB454 HB1043

AmdChange In $ $1,903,990 -$1,321,662 $1,592,390 $621,634

Change In % 12.2% -8.5% 10.2% 4.0%

Summary of Possibilities for JCPS

If No Legislation Passes

Description of Revenue Changes $ Amount

LOCAL PROPERTY TAX-$9 Million New Construction $300,000

STATE AID-Reduce SAT to Accommodate Formula Underfunding * -$550,000

PROP C – Increased State Collections and Increased Students $150,000

Interest Income (90 day T-Bill has to go higher than 0.1% Someday) $100,000

County Stock Insurance -$300,000

TOTAL CHANGE IN REVENUE -$300,000

FY13 PRELIM BUDGET-Revenue Changes

* Move $740,000 of State Aid back into Operating Funds after we move our Debt Service Levy back up to $.222. We are really losing $1.3 Million in State Aid.

FY13 PRELIM BUDGET-Expense Changes

Description of Expenditure Changes $ Amount

Salary-Operate Teacher Schedule & 1.8% to All Other Classes $872,400

Benefits Associated with Raises (Retirement, Medicare, OASDI) $143,886

Health Insurance-5% Increase in Board Contribution $300,000

Staff Retirements -$250,000

Increase Summer School Pay for $2,500 to $2,700 $60,000

PSRS/PEERS Rate Increases (Remain at 14.5% & 6.86%) $0

Transportation -$100,000

Energy-Increase by 10% (Electricity, Natural Gas, Diesel Fuel) $202,400

TOTAL CHANGE IN EXPENDITURES $1,228,686

FY13 PRELIM BUDGET-Fund Balance

Description of Fund Balance Change $ Amount

FY2012 Change in Fund Balance -$300,786

+ Change in Revenues FY13 vs. FY12 -$300,000

- Change in Expenditures FY13 vs. FY12 $1,228,686

- Change In Transfers Out of Operating Fund FY13 vs. FY12 -$400,000

TOTAL CHANGE IN FUND BALANCE FY2013 -$1,429,472

• REVENUES CONTINUE TO BE VERY DIFFICULT TO BUDGET

• CHANGES MADE IN HEALTH INSURANCE, RETIREMENT, & TRANSPORTATION HAVE BEEN HUGE IN ALLOWING US TO MAINTAIN OUR CURRENT LEVELS OF EDUCATION

• FUTURE FISCAL STABILITY REMAINS POSSIBLE

SUMMARY