School Finance Overview

An Overview to School Finance

Unit 1 An Overview of the State's Role in Education

Module 1

­­­STATE ROLE IN­­­­­­ EDUCATION FINANCE

History

In the 1973 case San Antonio School District v. Rodriguez, the U.S. Supreme Court ruled that education “is not among the rights afforded explicit protection under our Federal Constitution," but that "no other state function is so uniformly recognized as an essential element of our society's well-being." Rodriguez effectively removed the constitutional burden for providing public education away from the federal government and placed it squarely on the states. Since Rodriguez, state high courts in all but seven states have ruled with varying outcomes on whether their state systems were "equitably" or "adequately" providing public education as required by their respective state constitutional provisions.

Rodriguez effectively removed the constitutional burden for providing public education away from the states and placed it squarely on the federal government.

  • True
  • False

Module 2

State legislative responses to these rulings have varied, but perhaps the long-term aggregate result is that states today collectively provide the largest share of funding for public education in the United States, surpassing the total local government share of funding—including local property tax revenues—for the first time in 1979. In 1950, for instance, states contributed 40 percent of the $5.4 billion total in K-12 revenues nationwide while local governments and the federal government contributed 57 percent and 3 percent respectively.

States’ share of total K-12 funding peaked in 2001 when states contributed almost 7 percent more than local governments to the $530 billion of total K-12 revenues for that year, according to the National Center for Education Statistics (NCES). Current and historical K-12 revenues figures can be found at NCES.

Module 3

States also bear the burden of ensuring the statewide education finance system is founded on sound governance principles. A sound state school finance system:

  • Provides equity for both students and taxpayers.
  • Is efficient, making the best possible use of resources.
  • Provides adequate resources to local school districts so that they may achieve state and local educational goals and standards.
  • Incorporates fiscal accountability through generally accepted budgeting, accounting, and auditing procedures.
  • Promotes predictability and stability of education revenues and expenditures over time.
  • Supports student learning.

Module 4

Education Finance Litigation in the States

Post Rodriguez, an estimated 45 states have undergone legal challenges to their school finance systems.  Information on the most recent litigation is below.

Current Litigation

As of December 2014, NCSL has identified at least seven states in the midst of education finance litigation alleging state school finance systems or the foundation level funding for those systems violates their states' respective constitutional education clauses:

Post Rodriguez, an estimated _______ states have undergone legal challenges to their school finance systems.

  • 15
  • 25
  • 35
  • 45

Module 5

Connecticut
Connecticut Coalition for Justice in Education Funding v. Rell, 990 A.2d 206 (Conn. 2010) – In March 2010, the Connecticut Supreme Court reversed a trial court's decision to dismiss the case and remanded the case back to the trial court "to determine as a question of fact whether the state's educational resources and standards have in fact provided the public school students in this case with constitutionally suitable educational opportunities." A decision from the trial court is expected in 2014.
 

Florida
Citizens for Strong Schools, Inc. v. Florida State Board of Education – In September 2012, the Florida Supreme Court refused to consider the defendants' appeal to dismiss the case. The case is now moving forward in the pretrial phase.

 

Module 6

Kansas
Gannon v. State of Kansas – On January 10, 2013, a three-member panel ruled in favor of the plaintiffs, enjoining the state from implementing appropriations legislation that pegs per pupil state aid below the $4,492 constitutional floor. In March 2014, the Supreme Court of Kansas ordered the Legislature to remedy inequities in the school finance system but refrained from opining on the adequacy issue. The following May, the Legislature adding $129 million into the finance system targeted at property poor districts, thus fulfilling its court-ordered equity obligation. Then, on December 30, 2014, a three-judge panel ruled the finance system is inadequately funded. More to come. 

New Jersey
Abbott v. Burke – State is in the process of complying with a 2011 judicial order to fully fund School Funding Reform Act of 2008. The most recent order is the twenty-first reiteration of the ongoing line Abbott cases that started in the mid-1980s.

Module 7

New York
 Maisto v. State of New York (previously named Hussein v. State) – Trial date set for January 21, 2015. Small cities initiated this action under the precedent set in Campaign for Fiscal Equity v. State of New York, 655 N.E.2d 661 (N.Y. 1995) (CFE I) and Campaign for Fiscal Equity v. State of New York, 801 N.E.2d 326 (N.Y. 2003) (CFE II).

New Yorkers for Students' Educ. Rights (NYSER) v. The State of New York – Plaintiffs filed a complaint in February 2014 alleging the state failed to comply with an order resulting from Campaign for Fiscal Equity Inc. v. State of New York, 8 N.Y.3d 14 (2006) (CFE III) to increase funding for New York City schools. On November 18, 2014, a trial judged dismissed the state's motion to dismiss.

In ______________________________________________the Legislature adding $129 million into the finance system targeted at property poor districts, thus fulfilling its court-ordered equity obligation.

  • Abbott v. Burke
  • Gannon v. State of Kansas
  • Maisto v. State of New York
  • Connecticut Coalition for Justice in Education Funding v. Rell,

Module 8

Texas
Texas Taxpayer & Student Fairness Coalition (TTSFC) v. Scott – In February 2013, Judge John Dietz declared that the Texas public school finance system "fails to provide substantially equal access to revenue" and is "not adequately funded" in violation of the Texas Constitution. The state is currently readying its appeal.

Washington
McCleary v. State, 269 P.3d 227 (Wash. 2012) – The Washington Supreme Court ruled in favor of plaintiffs and retained jurisdiction of the case "to monitor implementation" of its opinion.

Module 9

Recently Resolved Litigation

Since 2012, at least seven states have witnessed resolutions to school finance legal challenges.

Alaska
Moore v. State – In January 2012 the state settled the litigation with the plaintiffs.

California
Robles-Wong v. State and CQE v. State – This pair of recent cases in California have  been dismissed by the trial courts. Plaintiffs have yet to appeal the rulings. For more information visit California School Boards Association - Education Legal Alliance.

Since 2012, at least ___________ states have witnessed resolutions to school finance legal challenges.

  • five
  • seven
  • twelve
  • seventeed

Module 10

Colorado
Lobato v. State of Colorado, 304 P.3d 1132 (Colo. 2013) – Trial court initially ruled for plaintiffs in December 2011. In late May 2013, the Colorado Supreme Court reversed the trial court's ruling, handing a stinging legal defeat to the plaintiffs. The opinion reads in part:

The public school financing system enacted by the General Assembly complies with the Colorado Constitution. … It is rationally related to the constitutional mandate that the General Assembly provide a ‘thorough and uniform’ system of public education. … It also affords local school districts control over locally-raised funds and therefore over ‘instruction in the public schools.’ … As such, the trial court erred when it declared the public school financing system unconstitutional. We accordingly reverse.

Illinois
Carr v. Koch, --- N.E.2d ----, 2012 IL 113414, 2012 WL 6115485 (Ill. 2012) – In November 2012, the Illinois Supreme Court ruled that plaintiff taxpayers lacked standing to challenge the constitutionality of the state's education funding statute.

Module 11

North Carolina

Hoke County Bd. of Educ. v. State, 749 S.E.2d 451 (N.C. 2013) – In September 2012, the Court of Appeals of North Carolina affirmed a trial court's order mandating the state not to deny any eligible at-risk four year old admission to the North Carolina Pre–Kindergarten Program. However, almost a year later in November 2013, the North Carolina Supreme Court held that the issues on appeal from the September 2012 ruling were made moot following legislative amendments to North Carolina’s pre-kindergarten program.

Rhode Island
Woonsocket Sch. Comm. v. Chafee, 89 A.3d 778 (R.I. 2014) – In May, 2014, the Supreme Court of Rhode Island upheld a trial court decision granting the state's motion to dismiss the plaintiffs' complaint citing separation of powers concerns and legal precedent that grant the General Assembly broad plenary power over financing public education.

[T]he factual allegations in plaintiffs’ complaint make a strong case to suggest that the current funding system is not beneficial to students in Pawtucket and Woonsocket, especially when compared to other municipalities. We are sensitive to plaintiffs’ concerns, and yet our prior case law clearly declares that the General Assembly has exclusive authority to regulate the allocation of resources for public education.

Module 12

South Carolina
Abbeville Co. Sch. Dist. v. State of South Carolina – In November 2014, over two years after hearing oral arguments in the case, the Supreme Court of South Carolina held for the plaintiffs, but added:

[T]he winner here is not the Plaintiff Districts, but fittingly, the students in those districts and throughout the State. Further, there is no loser. The substance of our finding today places before the parties a new opportunity, resting solidly on this Court's precedent, but leaning forward towards a conversation unencumbered by blame. The Defendants and the Plaintiff Districts must identify the problems facing students in the Plaintiff Districts, and can solve those problems through cooperatively designing a strategy to address critical concerns and cure the constitutional deficiency evident in this case.

 

Module 13

State Constitution Education Clauses

Every state constitution contains a clause that requires the state maintain a system of free public education. Legal scholarship identifies four categories of education clauses in state constitutions that impose a duty on legislatures to provide for public schools. The categories range from I to IV, from weakest to strongest, in terms of the strength of the fiduciary duty imposed on the state, particularly the state legislature, to provide public education. Additional legal scholarship has found no correlation between the language of these clauses and litigation outcomes.

 

Category I

(16 states)

Category II

(18 states)

Category III

(8 states)

Category IV

(8 states)

Prof. Thro's definition:

“merely mandate a system of free public schools”

“mandate that the system of public schools meet a certain minimum standard of quality, such as ‘thorough and efficient’”

“distinguished from the Category I and II clauses by both a ‘stronger and more specific education mandate’ and ‘purposive preambles’”

“impose the greatest obligation on the state legislature…; they provide that education is ‘fundamental,’ ‘primary,’ or ‘paramount’”

Example of Constitutional Language:

The Legislature shall establish and maintain a system of free public schools wherein all the children of the State may be educated. (Okla. Const. art. XIII, § 1)

The General Assembly shall provide for the maintenance and support of a thorough and efficient system of public education to serve the needs of the Commonwealth. (Pa. Const. art. III, § 14)

The stability of a republican form of government depending on the morality and intelligence of the people, it shall be the duty of the Legislature to establish and maintain a general and uniform system of public schools wherein tuition shall be without charge, and equally open to all; and to adopt all suitable means to secure to the people the advantages and opportunities of education. (S.D. Const. art. VIII, § 1)

It is the paramount duty of the state to make ample provision for the education of all children residing within its borders, without distinction or preference on account of race, color, caste, or sex. (Wash. Const. art. IX, § 1)

Citations:

Ala. Const. art. XIV, § 256; Alaska Const. art. VII, § 1; Ariz. Const. art. XI, § 1; Conn. Const. art. VIII, § 1; Haw. Const. art. X, § 1; Kan. Const. art. VI, § 1; La. Const. art. VIII, § 1; Miss. Const. Art. 8, § 201; Neb. Const. art. VII, § 1; N.M. Const. art. XII, § 1; N.Y. Const. art. XI, § 1; N.C. Const. art. IX, § 2; Okla. Const. art. XIII, § 1; S.C. Const. art. XI, § 3; Utah Const. art. X, § 1; and Vt. Const. ch. 2, § 68.

Ark. Const. art. XIV, § 1; Colo. Const. art. IX, § 2; Del. Const. art. X, § 1; Idaho Const. art. IX, § 1; Ky. Const. § 183; Md. Const. art. VIII, § 1; Minn. Const. art. XIII, § 1; Mont. Const. art. X, § 1; N.J. Const. art. VIII, § 4; N.D. Const. art. VIII, § 1; Ohio Const. art. VI, § 3; Or. Const. art. VIII, § 3; Pa. Const. art. III, § 14; Tenn. Const. art. XI, § 12; Tex. Const. art. VII, § 1; Va. Const. art. VIII, § 1; W.Va. Const. art. XII, § 1; and Wis. Const. art. X, § 3

Cal. Const. art. IX, § 1; Ind. Const. art. VIII, § 1; Iowa Const. art. XI, 2d, §3 ; Mass. Const. pt. 2, ch. 5, § 2; Nev. Const. art. XI, § 2; R.I. Const. art. XII, § 1; S.D. Const. art. VIII, § 1; and Wyo. Const. art. VII, § 1

 

 

 

 

 

 

 

 

 

 

How many states fall into category I and use this type of example of Constitutional Language: The Legislature shall establish and maintain a system of free public schools wherein all the children of the State may be educated. (Okla. Const. art. XIII, § 1)

  • 18
  • 16
  • 8

Unit 2 Charter School Funding and Wealth Equalization Options

Module 1

Texas Education Code (TEC) and Texas Administrative Code (TAC) 

TEC, §12.106; 19 TAC §100.1041

 

History/Relevant Background Information

The primary source of funding for charter schools comes from the Foundation School Program (FSP) and is based on weighted average daily attendance (WADA), a measure of the number and type of students attending school. It is calculated by taking the average daily attendance (ADA) and making adjustments based on the number of students participating in special education, career and technology education, bilingual/ESL education, state compensatory education, and gifted/talented education programs. A charter school’s Tier I allotment is based on a state-wide average adjusted allotment and is entirely state funded since charter schools do not have local tax revenue.

Charter School Funding may be adjusted based on the number of students participating in special education, career and technology education, bilingual/ESL education, state compensatory education, and gifted/talented education programs.

  • True
  • False

Module 2

Because charter schools do not collect local taxes, they do not directly receive Tier II funding or Additional State Aid for Tax Relief (ASATR). However, they do receive an entitlement for Tier II based on state average district tax rates and ASATR that is based the greater of their 2009–2010 HB1 revenue per WADA or the state average HB1 revenue per WADA.

Charter schools may also receive funds if they choose to provide transportation to students or participate in health insurance for their employees through TRS ActiveCare. Charter schools are not entitled to participate in the Instructional Facilities Allotment program or the Existing Debt Allotment program (TEC, §46.036).

 

Year

Funding

2005–2006

                         416,922,899

2006–2007

                         543,404,716

2007–2008

                         645,980,086

2008–2009

                         757,942,158

2009–2010

                         932,033,962

2010–2011

                      1,059,492,496

2011–2012

                      1,165,995,037

2012–2013

                      1,330,813,238

2013–2014

                      1,566,192,827

2014–2015*

                      1,789,733,538

Module 3

Chapter 41 Wealth Equalization Options and Procedures

Texas Education Code (TEC) References

TEC, Chapter 41, Equalized Wealth Level

History and Relevant Background Information

Chapter 41 of the Texas Education Code (TEC) makes provisions regarding the equity of public education funding. The law requires school districts designated as property wealthy to share their local tax revenue with districts that are property poor. The relative wealth of a school district is calculated by dividing the taxable value of property located within the district by the weighted average daily attendance (WADA) of that district. According to the TEC, §42.302(a), WADA is calculated by adding the Tier I allotments, making some adjustments, and dividing that sum by the amount of the basic allotment.

The relative wealth of a school district is calculated by dividing the taxable value of property located within the district by the weighted average ___________attendance (WADA) of that district.

  • yearly
  • weekly
  • daily

Module 4

The Chapter 41 provisions reflect a long history of school finance litigation regarding disparities in education resources among school districts. They provide all school districts with substantially equal access to similar revenue per student for a similar tax effort (73rd Texas Legislature, 1993, Senate Bill 7). Providing districts with this equal access was achieved through a system that both provides a guaranteed yield on each penny of maintenance and operations (M&O) tax levied by property-poor districts and recaptures revenue on the tax collections of property-wealthy districts whose wealth per student exceeds the equalized wealth level.

 

 

Summary of Recapture

 

 

 

 

Year

C41 Districts

Option 3

Option 4

Total:

 

 

 

 

 

2012-2013

319

$1,045,367,648

$21,225,514

$1,066,593,162

 

 

 

 

 

2013-2014

332

$1,185,793,458

$23,819,572

$1,209,613,030

 

 

 

 

 

2014-2015

356

$1,473,312,891

$19,034,651

$1,492,347,542

 

 

 

 

 

2015-2016*

380

$1,590,321,830

$1,292,251

$1,591,614,081

 

 

 

 

 

2016-2017**

379

$2,023,633,772

$0

$2,023,633,772

 

 

 

 

 

 

 

*Near Final

**Legislative Payment Estimate

Module 5

Description of the Program and Funding Element

The provisions for Chapter 41 designation are based on the TEC, §41.002, which establishes three equalized wealth levels. Each level represents the maximum property tax base that a school district is allowed to retain at various levels of tax effort. Once district personnel are notified of Chapter 41 status in mid-July, they must select an option for paying recapture costs by mid-January. Most either purchase attendance credits from the state (Option 3) or contract to educate nonresident students from a partner district (Option 4). Both of these options require voter approval.

Module 6

Before 2006–2007, school districts typically conducted elections to request voter authorization to exercise Option 3, Option 4, or both options. In 2006, the Texas Legislature authorized Chapter 41 districts to offset their costs for recapture against their state funding for Additional State Aid for Tax Reduction (ASATR), which is provided for property tax relief (see the TEC, §42.2516). Subsequently, the legislature passed additional provisions that allow a Chapter 41 district to forgo an election to authorize one or more options if the district received its first notification of Chapter 41 status in 2006–2007 or later and the state aid under Chapter 42 for the school year exceeds the recapture costs for that same year (see the TEC, §41.0041).

In 2006, the ___________________________ authorized Chapter 41 districts to offset their costs for recapture against their state funding for Additional State Aid for Tax Reduction (ASATR), which is provided for property tax relief.

  • Washington Legislature
  • Maryland Legislature
  • Texas Legislature
  • California Legislature

Module 7

The first of seven payments from Chapter 41 districts, either to the state (Option 3) or to their partner districts (Option 4), is due in mid-February, and the last payment is due in mid-August. During April, the commissioner evaluates the status of all recapture payments owed from prior school years. Districts with unpaid balances from prior school years are considered delinquent unless the amount due is received by May 31 of that year.

If a district fails to fully comply with all wealth reduction requirements according to the contract submitted to and approved by the commissioner for a school year requiring wealth equalization, the commissioner must take action to ensure that wealth equalization occurs (see the TEC, Chapter 41, Subchapter G, and the TEC, §41.203). The commissioner’s action(s) to achieve wealth equalization for prior years becomes effective July 1 of the current school year.

 

Module 8

The commissioner evaluates the status of Chapter 41 districts for the current school year. Districts are considered delinquent for any of the following reasons:

  • failure to submit the required documentation,
  • lack of compliance with the payment schedule as determined by statute under Option 3,
  • failure to make the minimum recapture payments identified in the notification of delinquency.

Districts that have not met the requirements and provisions of Chapter 41 are not allowed to adopt an M&O tax rate until wealth equalization has been achieved.

The commissioner evaluates the status of Chapter 41 districts for the current school year. Districts are considered delinquent for any of the following reasons:

  • failure to submit the required documentation,
  • lack of compliance with the payment schedule as determined by statute under Option 3.
  • failure to make the minimum recapture payments identified in the notification of delinquency.

Unit 3 Charter School Attendance, Allotments and Costs

Module 1

Charter School Attendance

Texas Education Code (TEC) and Texas Administrative Code (TAC) References

TEC, §42.004; 19 TAC §129.1023 and §129.1025

History/Relevant Background Information

Charter schools report charter level attendance information at the end of each six-week attendance reporting period by using a web-based application supported by the Division of State Funding in the Texas Education Agency (TEA). This attendance reporting application is designed in accordance with the District Six-Week Attendance Report requirements outlined in the Student Attendance Accounting Handbook.

Module 2

Description of Procedure

Following each web-based attendance submission, an updated annual ADA is estimated and used as the basis for determining each charter school’s Foundation School Program (FSP) payments during the school year. The purpose of this process is to ensure that charter school funding is based on actual attendance as much as possible. This helps to avoid material settle-up adjustments that could cause hardships to charter schools.

At the end of the school year, charter schools are required to submit attendance data through the Public Education Information Management System (PEIMS). The data reported through the PEIMS are used to calculate the actual FSP earnings of charter schools and to determine the near-final settle-up amounts.

The purpose of reporting charter level attendance using the web-based application supported by the Division of State Funding in the Texas Education Agency (TEA) is to ensure that charter school funding is based on _________________ as much as possible.

  • punctuality
  • actual attendance
  • absences

Module 3

Average Daily Attendance (ADA) and Weighted ADA (WADA)

Texas Education Code (TEC)

TEC, §42.005 (ADA) and §42.302 (WADA)

 

History/Relevant Background Information

ADA is primarily used to calculate Tier I funding, while WADA is used to calculate Tier II funding and wealth equalization recapture.

Module 4

Description of Funding Elements

ADA is the number of students in average daily attendance, or the sum of attendance for each day of the minimum number of days of instruction as described under the TEC, §25.081(a), divided by the minimum number of days of instruction.

ADA = Sum of Attendance Counts ÷ Days of Instruction

Alternately:

  1. for a district that operates under a flexible year program under the TEC, §29.0821, the quotient of the sum of attendance for each actual day of instruction as permitted by the TEC, §29.0821(b)(1), divided by the number of actual days of instruction as permitted by the TEC, §29.0821(b)(1); or
  2. for a district that operates under a flexible school day program under the TEC §29.0822, as calculated by the commissioner in accordance with the TEC §29.0822(d).

Module 5

There is also an optional method of calculating ADA for districts with significant migrant populations, authorized by 19 TAC §129.1021. Districts in which the total district enrollment contains 5.0% or more students who have certificates of eligibility in the migrant students record transfer system and reported as migrant through the Public Education Information Management System (PEIMS) shall have the district's annual ADA calculated by using the best four of the six-week periods.

WADA is the weighted average daily attendance figure used in several state funding formulas to calculate the amount of state and local funds a district is entitled to.

An optional method of calculating ADA for districts that contains 5.0% or more students with certificates of eligibility in the migrant students record transfer system and reported as migrant in the Public Education Information Management System (PEIMS):

  • shall have the district's annual ADA calculated by using the best three of the six-week periods.
  • shall have the district's annual ADA calculated by using the best five of the six-week periods.
  • shall have the district's annual ADA calculated by using the best four of the six-week periods.

Module 6

How Is WADA Calculated?
A district's WADA is calculated by first subtracting from a district's Tier I entitlement any transportation funding the district is due, the district’s new instructional facilities allotment (NIFA), the district's TxVSN allotment, the district's high school allotment, and 50 percent of the CEI adjustment. The resulting amount is then divided by the district's basic allotment amount to arrive at a district's WADA.

+ Tier I entitlement

– transportation allotment

– NIFA

– TxVSN allotment

– high school allotment

– 50% of CEI adjustment                       
= adjusted Tier I entitlement

WADA = adjusted Tier I entitlement ÷ district's basic allotment amount

Module 7

Basic Allotment

Texas Education Code (TEC) and Texas Administrative Code (TAC)

TEC, Chapter 42, Subchapter B; 19 TAC §203.25

History/Relevant Background Information

The basic allotment is the legislatively mandated apportionment of funds from the general revenue funds that goes to each school district to provide a basic level of education for the district’s residents.

Module 8

Description of Funding Element

The TEC, §42.101(a), defines the basic allotment. For each student in average daily attendance, not including the time students spend each day in special education programs in an instructional arrangement other than mainstream or career and technology education programs, for which an additional allotment is made under Subchapter C, a district is entitled to an allotment equal to the lesser of $4,765 or the amount that results from the following formula:

A = $4,765 × (DCR ÷ MCR), where:

A is the allotment to which a district is entitled;

DCR is the district's compressed tax rate, which is the product of the state compression percentage, as determined under the TEC, §42.2516, multiplied by the maintenance and operations (M&O) tax rate adopted by the district for the 2005 tax year; and

MCR is the state maximum compressed tax rate, which is the product of the state compression percentage, as determined under the TEC, §42.2516, multiplied by $1.50.

The basic allotment is the legislatively mandated apportionment of funds from the general revenue funds that goes to each school district to provide a basic level of education for the district’s residents.

  • True
  • False

Module 9

The TEC, §42.101(a), applies beginning with the 2013-2014 school year. For the 2009–2010 through 2012–2013 school years, Subsection (a) applies, except each reference to $4,765 in that subsection is replaced with an amount equal to the greater of:

(1)  $4,765; or

(2)  the amount equal to the product of .0165 and the average statewide property value per weighted student.

However, a greater amount for any school year may be provided by appropriation. The table below shows the basic allotment in place for the 2009–2010 through 2016-2017 school years.

 

School Year

Basic Allotment

2009–2010

$4,765

2010–2011

$4,765

2011–2012

$4,765

2012–2013

$4,765

2013–2014

$4,950

2014–2015

$5,040

2015-2016

$5,140

2016-2017

$5,140

Module 10

Cost of Education Index (CEI)

Texas Education Code (TEC) Reference  TEC, §42.102

 

History/Relevant Background Information

The concept of adjusting education funding for variations in cost began in a 1984 special session with the creation of the Price Differential Index. The State Board of Education (SBOE) was directed to create a replacement for this temporary index and undertook this in 1987, but the study was moved to the Legislative Education Board (LEB) and the Legislative Budget Board (LBB) in 1989. The Foundation School Fund Budget Committee adopted rules based on research by LEB and LBB in 1991.

The current CEI attempts to adjust for varying economic conditions across the state, based mainly on the size of the district, the teacher salaries of neighboring districts, and the percentage of low-income students in the district in 1989–1990. The index has not been updated since that time.

 

Module 11

Description of Funding Element

Each district’s CEI is applied to seventy-one percent of the Basic Allotment (BA) to calculate the Adjusted Basic Allotment (ABA) using the following formula:

ABA = BA × {[(CEI – 1) × .71] + 1}

The CEI also contributes to the calculation of Weighted Average Daily Attendance (WADA), as 50 percent of the adjustment is a part of the numerator in the calculation of WADA as seen in the formula below:

WADA = [Tier 1 – (trans + NIFA + VSN + HS Allotment + ½ CEI)] ÷ Basic Allotment

The value of the CEI ranges from a low of 1.02 to a high of 1.20, with an average of 1.08.  The revenue produced for school districts by the CEI is estimated to be $2,289,996,413 for the 2016-2017 school year.

The value of the CEI ranges from a low of 1.02 to a high of 1.20, with an average of ___________ .

  • 1.04
  • 1.08
  • 1.12
  • 1.16

Unit 4 Weighted School Funding and State Compensatory Education

Module 1

Weighted Student Funding

Texas Education Code (TEC) References

TEC, §§42.151–42.154 and §42.156

History/Relevant Background Information

The Foundation School Program (FSP) has a system of weighting that delivers additional funding for services to students with certain characteristics. The regular program has a weight of 1.00 and this entitlement provides the bulk of non-categorical costs for general operations. Career and technology education and special education have full-time equivalent (FTE) replacement weights.

These weights apply only to the hours students are enrolled in the program, and the FTE attendance is subtracted before the regular program allocation is calculated. The special education mainstream weight is an exception (not an FTE replacement, but an add-on to the regular program cost for the student). 

Module 2

Add-on weights* that are not adjusted for daily instructional time are bilingual education, gifted and talented education, and compensatory education.  

Instructional Arrangement

Weight

This instructional arrangement is used for a student —

Career & Technology

1.35

who receives work-based learning instruction (previously vocational adjustment classes [VAC]).

Special Education:

Homebound

5

who is confined at home or hospital bedside for a minimum of four consecutive weeks for medical reasons only. The medical condition is documented by a physician licensed to practice in the United States.

Hospital Class

3

who is provided special education instruction in a hospital facility or a residential care and treatment facility not operated by the school district.

Speech Therapy

5

who has a disability and is provided specially designed instruction, at no cost to the parents, to meet the student's unique needs. (Speech-language pathology services can be the only special education service provided to a student.)

Resource Room

3

who attends three special education classes in the resource room.

Self-Contained

3

, on a departmentalized campus, who attends four special education classes and three general education classes each day.

Off Home Campus

2.70

with a disability who is served, but not residing, in the facility.

VAC

2.30

who works half of the school day and attends classes the other half of the day.

State School Students

2.80

who resides in a state school.

Residential Care and Treatment (RCT) Facility

4

who resides in an RCT.

Mainstream

1.10*

who is provided special education and related services in the general classroom in accordance with the student's IEP.

 

Pregnancy Related

2.41

who receives support services including compensatory education home instruction (CEHI) during pregnancy, prenatal, and postpartum periods to help her adjust academically, mentally, and physically and stay in school.

Bilingual Education

.10*

of limited English proficiency who is provided bilingual education and special language programs.

Gifted & Talented

.12*

who exhibits high performance capability in an intellectual, creative, or artistic area.

Compensatory Education

.20*

who is educationally disadvantaged or who is a student who does not have a disability and resides in a residential placement facility in a district in which the student's parent or legal guardian does not reside.

The two categories of Weighted School Funding that both have the weighted value of 5 are: (choose two of the following).

  • Career and Technology
  • Homebound
  • Speech Therapy
  • Bilingual Education

Module 3

State Compensatory Education (SCE)

Texas Education Code (TEC) and Texas Administrative Code (TAC)

TEC, §42.152(b); TAC §61.1027

History/Relevant Background Information

The SCE allotment was authorized by the 74th Legislature, and became effective May 30, 1996.  

Year

  Allotment

2009-2010

$3,006,059,883

2010-2011

$3,128,023,289        

2011-2012

$3,212,868,678

2012-2013

$3,310,473,117        

2013-2014

$3,494,489,936

2014-2015

$3,620,843,780

2015-2016*

$3,770,582,164

2016-2017**

$3,855,835,594

Module 4

Description of Program

Compensatory education is defined in law as programs and/or services designed to supplement the regular education program for students identified as at risk of dropping out of school.

The goal of compensatory education programs is to reduce any disparity in performance on assessments or in rates of high school completion between students at risk of dropping out of school and all other district students.

Funding allocated for compensatory education programs and/or services is based on the number of educationally disadvantaged students in a district. The number of educationally disadvantaged students is determined by averaging the highest six months of student enrollment in the National School Lunch Program (NSLP) for free or reduced-price lunches or in the School Breakfast Program (SBP) for the prior federal fiscal year.

For each student who is educationally disadvantaged or who does not have a disability and resides in a residential placement facility in a district in which the student’s parent or legal guardian does not reside, a district is entitled to an annual allotment equal to the adjusted basic allotment multiplied by 0.2.

Module 5

Data reported for SCE eligibility claims must include one of the following sources:

 

  • NSLP or SBP information received through the Texas Unified Nutrition Programs System (TX-UNPS) of the Texas Department of Agriculture (TDA); or
  • A contract between the school district or charter school and the TDA to provide NSLP or SBP services; or
  • A contract between the school district or charter school and a school district to provide NSLP or SBP services; or
  • The Alternative SCE Basic Monthly Claim, submitted directly to the Texas Education Agency (TEA).

Compensatory education is defined in law as programs and/or services designed to supplement the regular education program for students identified as

  • high excellers.
  • at risk of dropping out of school.

Unit 5 Transportation Funding and Facility Allotments

Module 1

Transportation Funding and Reporting

Texas Education Code (TEC) and Statutory References

The TEC, §34.002, states that the Department of Public Safety (DPS) will establish safety standards for school buses; TEC, §34.003, establishes the type of vehicles that may be used to transport students; TEC, §34.007, provides that school boards may establish economical public school transportation systems and states that school bus drivers must meet the standards and qualifications adopted by the DPS; TEC, §42.155, defines the type of student transportation that is eligible for funding.

The General Appropriations Act: Article III establishes the funding rates for eligible transportation, which were established in 1984.

Module 2

History/Relevant Background Information

The legislature has historically provided funding assistance to school districts that provide student transportation. Basic funding is for home-to-school or school-to-home transportation provided to regular eligible students who live more than two miles from their campus of regular attendance and for special needs students who require special transportation to attend school. There is also a provision for limited funding of transportation provided to regular eligible students who live fewer than two miles from their campus if they live in an area designated as a hazardous traffic area by the school board.

Additionally, if a district establishes that an extreme hardship case exists and a student needs to be transported to or from school by a parent or parent’s designated agent, the district is eligible for funding of mileage if it reimburses the parent for providing the transportation.

Basic funding is for home-to-school or school-to-home transportation provided to regular eligible students who live ____________ from their campus of regular attendance and for special needs students who require special transportation to attend school.

  • more than one mile
  • more than two miles
  • more than three miles

Module 3

Statute provides for funding of transportation of students between campuses or between a campus and another location to attend career and technology instruction. According to agency policy, as of the 2010-2011 school year, all intra-district home-to-school or school-to-home transportation becomes eligible if students meet the requirements. Thus home-to-school or school-to-home transportation of students to magnet schools and campuses and transportation home for students that stay after school for tutorials or other after school programs, will be eligible.

See the table below for transportation allotment totals for the past several years.

Year

Allotment

2008-2009

$310,081,278

2009-2010

$315,533,110

2010-2011

$362,679,513

2011-2012

$344,091,910

2012-2013

$344,925,094

2013-2014

$356,269,533

2014-2015

$360,000,470

2015-2016*

$370,527,893

2016-2017**

$370,160,336

Module 4

After the completion of each school year, each district must file the Transportation Route Services Report and the Student Transportation Operations Report. The Route Services Report communicates the eligible service (mileage and ridership) that the district provided during the school year. It is the primary source of information for determining the district’s transportation allotment. The Operations Report details all costs and all mileage the district incurred for student transportation. This report includes ineligible service, such as transportation to and from field trips or sports activities.

Description of Program/Funding Element

The transportation allotment is part of Foundation School Program (FSP) funding and is included as a separate line item on the Summary of Finances. Districts file their transportation reports through the web-based FSP Payment System.

The Route Services Report is the primary source of information for determining the district’s transportation allotment. The Operations Report details all costs and all mileage the district incurred for student transportation.

  • True
  • False

Module 5

Instructional Facilities Allotment (IFA) Program

Texas Education Code (TEC) and Texas Administrative Code (TAC) References

TEC, Chapter 46, Subchapter A; 19 TAC §61.1032

History/Relevant Background Information

The IFA program was authorized in House Bill 4 by the 75th Legislature in the spring of 1997 and became effective September 1, 1997. The IFA program provides funding to school districts that assists with debt service payments on qualifying bonds and lease-purchase agreements.

To receive IFA program assistance, a district must submit an application to the Texas Education Agency (TEA). The proposed bond or lease-purchase proceeds must be for the purchase, construction, renovation, and/or expansion of instructional facilities. There is a deadline for applications, after which the TEA State Funding Division ranks all eligible applications in order of property wealth per student, which is based on average daily attendance (ADA).

Module 6

State assistance is awarded beginning with those eligible districts that have the lowest property wealth and continues until all available funds are used. If a district meets and maintains IFA conditions, Texas statute guarantees IFA state aid for the life of the debt that has been approved for funding. See the table below for a history of IFA appropriations.

 

*New money: Money that is appropriated for new IFA eligible bonded debt

 

Round

Deadline

Fiscal Year

Amount Designated for New Debt

 

1

Sept. 1997

1997–1998

initial appropriation all new debt

 

2

Dec. 1997

1998–1999

initial appropriation all new debt

 

3

June 1999

1999–2000

$50 million new money* (Senate Bill (SB) 4)

 

4

June 2000

2000–2001

$50 million new money (SB4)

 

5

June 2001

2001–2002

$50 million new money (Rider 2)

 

6

June 2002

2002–2003

$50 million new money (Rider 2)

 

 

 

2003­–2004

no new money

 

7

June 2004

2004–2005

$20 million new money (House Bill 3459)

 

 

 

2005–2006

no new money

 

8

June 2007

2006–2007

$50 million new money (Rider 97b)

 

 

 

2007–2008

no new money

 

9

June 2008

2008–2009

$87.5 million new money

 

 

 

2009–2010

no new money

 

10

June 2010

2010–2011

$75 million new money

 

 

2011–2012

no new money

 

 

2012–2013

no new money

 

 

2013–2014

no new money

State assistance is awarded beginning with those eligible districts that have the lowest property wealth and continues until all available funds are used.

  • True
  • False

Module 7

Description of Program

An IFA allotment represents the amount of eligible debt service that can be considered for state aid. The total allotment is comprised of state and local funds. The state share and local share are adjusted annually based on changes in ADA, property values, and the amount of eligible annual debt service.

A district is required to either levy sufficient taxes, or to designate excess maintenance and operations (M&O) or interest and sinking (I&S) tax collections from the 1999–2000 school year (or later) to cover the local share of the allotment. State aid under the IFA program provides a guaranteed yield of $35 per penny of tax effort per unweighted ADA. 

Module 8

For the IFA, the “ADA” used for calculating state aid is the greater of 1) the number of students in average daily attendance in the district, as determined under TEC, §42.005, or 2) 400. Legislative Planning Estimates (LPE) data are used to calculate fall payments. District Planning Estimates (DPE) data are used to calculate settle-up payments the following fall. Payments are made once during the fall.

A limitation on assistance is determined by comparing the district’s size factor with its debt service payments:

  1. Size factor = ADA x $250 (or $100,000, whichever is greater)
  2. Highest annual debt service = the highest debt service payment due within the biennium in which the application is being made
  3. Limitation on assistance = lesser of size factor or highest annual debt service payment of biennium

Once the limitation on assistance is determined, the amount of assistance is calculated by determining the amount needed to guarantee a yield of $35 per unweighted ADA per penny of tax effort.

Module 9

Example: District ABC has property values of $100,000,000; ADA of 1,000; and annual debt service payments of $100,000.

 

  • Taxable property value = $100,000,000 property value ÷ $100 assessed valuation = $1,000,000
  • Tax yield per penny = $1,000,000 taxable property value x .01 = $10,000
  • Tax yield per penny per student = $10,000 ÷ 1,000 ADA = $10.00 local revenue
  • State aid per penny = $35.00 guaranteed yield – $10.00 local revenue = $25.00 state aid
  • Percentage debt service assistance paid as state aid = ($25 ÷ $35) x 1 = 71.43%
  • Amount of IFA state assistance = $100,000 annual debt service x 71.43% state share = $71,429
  • Amount of IFA local share = $100,000 annual debt service – $71,429 state share = $28,571

State aid under the IFA program provides a guaranteed yield of ________ per penny of tax effort per unweighted ADA.

  • $15
  • $25
  • $35
  • $45

Module 10

New Instructional Facility Allotment (NIFA)

Texas Education Code (TEC) and Texas Administrative Code (TAC) References: TEC, §42.158; 19 TAC  §61.1034

History/Relevant Background Information: The TEC, §42.158, enacted by Senate Bill 4 of the 76th Texas Legislature, 1999, created the New Instructional Facility Allotment (NIFA) for public school districts. The legislature did not provide funding under this allotment for the 2011–2012 through 2014-2015 school years. However, funding has been made available for the 2015–2016 and 2016–2017 school years. The NIFA is provided for operational expenses associated with the opening of a new instructional facility and is available to all public school districts and open- enrollment charter schools that construct new instructional facilities that meet the requirements of the statute and rules.

Module 11

Description of Program: The NIFA provides support for opening a new campus through a reimbursement of $250 per student in average daily attendance (ADA) in the first year of operation of the new campus, plus $250 for each additional student in ADA in the second year of operation. Only completely new facilities are eligible for funding.

The total amount appropriated for the program for the current biennium is limited by statute to $23.75 million per year. There are no spending requirements associated with this allotment.

Module 12

NIFA Allotments:

 

Year

Final Prorated Allotment

Number of Campuses

2007-2008

$24,715,125

281

2008-2009

$26,000,000

295

2009-2010

$22,081,885

295

2010-2011

$25,374,178

264

2011-2012

$0

 

2012-2013

$0

 

2013-2014

$0

 

2014-2015

$0

 

2015-2016

$9,728,755

80

2016-2017

$18,159,402*

206

*requested

Module 13

Requirements:

Any school district, including a district required to act under Chapter 41, Education Code may receive the benefit of the allotment.

To be eligible for the NIFA:

  • The facility for which funds are requested must be a newly constructed instructional site (campus) used for teaching the curriculum required by the Chapter 28, Education Code
  • The new facility must have its own campus ID number as designated by the Texas Education Agency (TEA).
  • The new facility must have its own principal or be eligible to receive an accountability rating through standard analysis as described in the most current Accountability Manual.
  • The new facility must have its own assigned instructional staff and instructional program distinct from other facilities.
  • The new facility must have its own record of expenditures that is not a subset of another school budget and attendance data that can be reported for those students assigned to its campus.
  • The new facility must be physically separate from other existing school structures. However, a covered walkway may connect the new facility to another building.

Module 14

The NIFA application is available online through the Foundation School Program (FSP) Payment System; all NIFA applications must be submitted through this system. A Texas Education Agency Secure Environment (TEASE) user ID and password are required to access the FSP Payment System. Announcements are sent to all FSP users when the NIFA online application becomes active.

Applicants must provide information about the number of instructional days for the district, the number of instructional days on the eligible campus, the projected enrollment of the eligible campus, and the expected first and last days of instruction on the eligible campus.

Documents required to be uploaded as part of the application include a photograph of the newly built instructional facility, a site plan, a floor plan, a demolition plan (if applicable) and a copy of a legal document that clearly describes the nature and dates of construction. This document may be a copy of a contract, certification of project compliance, or certification of substantial completion.

NIFA provides support for opening a new campus through a reimbursement of _________per student in average daily attendance (ADA) in the first year of operation , plus _________ for each additional student in ADA in the second year of operation.

  • $150, $150
  • $250, $250
  • $350, $350

Unit 6 Texas Tax, Education and Administrative Codes

Module 1

Tax Increment Reinvestment Zones (TIRZ)

Texas Tax Code (TTC) and Texas Education Code (TEC) References:

TTC, §311.003; TEC §42.2514

History/Relevant Background Information

Tax increment financing is a tool that local governments can use to publicly finance needed structural improvements and enhanced infrastructure within a defined area. These improvements are usually undertaken to promote both the viability of existing businesses and to attract new commercial enterprises to such an area, which is referred to as a Tax Increment Reinvestment Zone (TIRZ). The statutes governing tax increment financing are located in the Texas Tax Code, Chapter 311.

Module 2

For each school year, a school district, including a school district that is otherwise ineligible for state aid under Texas Education Code, Chapter 42, is entitled to state aid in an amount equal to the amount the district is required to pay into the tax increment fund for a reinvestment zone under Section 311.013(n), Tax Code.

 

History of Supplemental Payments

Tax Year

School Year

No. of Districts Receiving Payments

Payment Amount

2009

2009-2010

18

$35,917,644

2010

2010-2011

19

$33,729,170

2011

2011-2012

19

$34,207,107

2012

2012-2013

19

$32,981,177

2013

2013-2014

17

$33,649,737

2014

2014-2015

18

$38,792,374

2015

2015-2016

16

$41,025,441

Tax increment financing is a tool that local governments can use to publicly finance needed structural improvements and enhanced infrastructure within a defined area.

  • True
  • False

Module 3

Description of Program

The costs of improvements to a TIRZ are repaid by each taxing unit that levies taxes against the property. Specifically, each taxing unit can choose to dedicate all, a portion, or none of its future tax revenues toward repayment. These are the revenues that can be attributed to improvements within the TIRZ that resulted in the increase in property values. The additional tax revenue that is received from the affected properties is referred to as the tax increment. Each taxing unit determines the percentage of its tax increment, if any, it will commit toward repayment of the cost of financing the public improvements.

Module 4

Texas Economic Development Act (Chapter 313)

Texas Education Code (TEC) References

TEC, §61.1019; TEC, §42.2515

History/Relevant Background Information

This section implements §42.2515 (Additional State Aid for Ad Valorem Tax Credits Under Tax Credits Under Texas Economic Development Act).  In accordance with §42.2515, a school district, including a school district that is otherwise ineligible for state aid under Chapter 42, is entitled to state aid in an amount equal to the amount of all tax credits applied against ad valorem taxes of the school district in each year that tax credits were applied, pursuant to the Texas Tax Code, Chapter 313, also known as the Texas Economic Development Act.

School districts eligible to receive additional state aid under §42.2515, must apply to the commissioner of education in order to receive additional state aid equal to the qualifying ad valorem tax credits issued under Chapter 313, Subchapter D, subject to certain annual limitations.

 

Module 5

Description of Program

 

This program allows school districts to attract new taxable property and create jobs by offering a tax credit and an eight-year limitation on the appraised value of a property for the maintenance and operations (M&O) portion of the school district property tax. The property remains fully taxable for the purposes of any school district debt service tax.

 

Total number of applicants

99

   

Number of eligible applicants

20

   

Eligible applicants who have applied for a tax credit

14

   

Eligible applicants who have been paid

14

   

Eligible applicants who have not applied (see chart below for detail)

6

   

Average amount of tax credit

$197,222

   

Number of districts that qualify for a tax credit (by year)

12

The Texas Economic Development Act allows school districts to attract new taxable property and create jobs by offering a tax credit and an eight-year limitation on the appraised value of a property for the maintenance and operations portion of the school.

  • True
  • False

Module 6

Additional State Aid for Tax Reduction (ASATR)

Description of Funding

To ensure that no school district lost money due to the tax relief effort in 2006 (which reduced districts’ local M&O tax rates by one-third by 2008), the Texas Legislature guaranteed that every district be held harmless by providing Additional State Aid for Tax Reduction (ASATR) for their lost local tax collections. To do this a “revenue target” was established for each school district based on the revenue they would have received prior to the local tax rate compression.

Module 7

Districts’ revenue targets are calculated on a per-student basis and can change due to enrollment growth or decline.

When determining if a district is eligible for ASATR, the Texas Education Agency (TEA) is required to calculate how much a district would receive under the state’s current formulas and compare it to the district’s target revenue amount.  A district where the formula amount is less that their target revenue amount is held harmless by being provided an ASATR amount.

The hold harmless is only for tax effort up to $1.00. Revenue from tax effort based on tax increases since tax compression was implemented is not included in the hold harmless.

In 2009, the legislature simplified the target revenue system and rolled a number of smaller allotments into the targets in House Bill 3646. At the same time, the formula funding elements were increased with the intention of eventually moving districts away from reliance on ASATR.

 

Module 8

Year

ASATR

Number of Districts

 

2006–2007

$2,248,072,863

1,217

 

2007–2008

$5,675,234,952

1,221

 

2008–2009

$5,388,417,197

1,212

 

2009–2010

$2,175,492,971

969

 

2010–2011

$2,481,703,888

979

 

2011–2012

$2,110,912,668

975

 

2012–2013

$609,919,822

452

 

2013–2014

$439,056,872

327

 

2014–2015

$234,872,748

225

 

2015-20161

$316,948,868

220

 

2016-20171

$250,963,935

192

 

2017-20182

0

0

 

1. Estimated Amounts

 

2. ASATR scheduled to be eliminated in 2017-18 school year per SB1, 1st. Called Session, 82nd Legislature.

 
 

To ensure that no school district _____________ due to the tax relief effort in 2006 the Texas Legislature guaranteed that every district be held harmless by providing Additional State Aid for Tax Reduction (ASATR).

  • gained money
  • lost money

Module 9

Continued increases to the basic allotment, increased local property tax collections, and the 2011 implementation of a reduction factor (target revenue adjustment factor - set at 92.63% for the 2016-17 biennium), have reduced the amount of money paid out through ASATR.

In 2011, the Legislature also repealed ASATR effective September 1, 2017.

 

In 2011, the Legislature also repealed ASATR effective ___________________

  • September 1, 2016.
  • September 1, 2017.
  • September 1, 2018.
  • September 1, 2019.

Module 10

Available School Fund (ASF) Payments

Texas Education Code (TEC)

TEC, §42.251(b) and §43.001(b)

History/Relevant Background Information

All Texas school districts and charter schools are entitled, under the Texas Constitution, to receive payments from the ASF for each eligible student enrolled. The ASF is primarily made up of revenue generated by the state's fuel tax and the Permanent School Fund.

Charter schools began receiving ASF payments in March 2013.

Module 11

Description of Funding Element

The ASF serves as a finance method for the Foundation School Program (FSP). This source of revenue helps pay the state's FSP payments to school districts and charter schools. For charter schools and most districts, ASF funding is not received in addition to the funding making up the schools' and districts' FSP state aid, but as a part of the funding making up that state aid.

The ASF is primarily made up of revenue generated by the ____________________and the ____________________________. (Choose two that apply)

  • local homeowner's tax
  • state's fuel tax
  • Permanent School Fund
  • county tax

Module 12

ASF payments are based on a district's or charter school's prior year average daily attendance (ADA). The payment rate per ADA (the distribution rate) is adopted each year by the State Board of Education. ASF payments are referred to as “per capita” payments. The following table shows the payment rates for the last several years.

 

Year

Rate

Allotment ($)

2001–2002

236.00

882,115,931

2002–2003

371.00

1,416,832,762

2003–2004

334.00

1,300,948,054

2004–2005

393.00

1,558,282,468

2005–2006

317.00

1,276,255,334

2006–2007

394.00

1,624,852,326

2007–2008

280.00

1,170,922,357

2008–2009

258.00

1,093,744,680

2009–2010*

274.06

1,179,465,191

2010–2011*

466.68

2,037,709,255

2011–2012

251.75

1,118,031,221

2012–2013

469.22

2,174,014,726

2013–2014

261.37

1,228,221,219

2014–2015

263.60

1,257,967,998

2015–2016

180.32

873,163,821

2016–2017

388.00

1,909,226,221

 

* For the 2009–2010 and 2010–2011 school years, a portion of the per capita payment was funded with State Fiscal Stabilization Fund (SFSF) funds provided by the American Recovery and Reinvestment Act (ARRA) of 2009. 

 

Module 13

Staff Salary Subsystem

Texas Education Code (TEC) and Texas Administrative Code (TAC) References  

TEC, §22.107 and §42.2513 19 TAC §61.1018

History/Relevant Background Information

In the past, the Foundation School Program (FSP) System Staff Salary subsystem has been used to collect employee counts for the calculation of several school district allotments: additional state aid for professional salaries, additional state aid for staff salary increases, additional state aid for school employee health benefits, and a salary allotment for professional staff.

House Bill 3646, 81st Legislature, 2009, repealed the TEC, §42.2512, related to additional state aid for professional salaries; §42.2514, related to additional state aid for school employee health benefits; and §42.2516(b)(2), related to the salary allotment for professional staff.

 

Module 14

As a result, the Texas Education Agency (TEA) no longer uses the Staff Salary subsystem to collect the number of full-time classroom teachers, full-time counselors, full-time librarians, or full-time registered nurses for these purposes. Funding related to the repealed provisions is now included in “revenue at the compressed tax rate” (RACR), a component of the foundation funding formula known as Additional State Aid for Tax Reduction (ASATR).

The TEC, §42.2513, related to additional state aid for staff salary increases, and the related provisions in the TEC, §22.107, remain in law, however, and provide aid for salaries of nonprofessional staff (the "staff salary allotment". The TEA continues to use the Staff Salary subsystem to collect employee counts for the purpose of calculating this state aid.

As a result of House Bill 3646, the Texas Education Agency (TEA) no longer uses the Staff Salary Subsystem to collect 'employee counts' of full-time _______________________________________________. (Check all that apply)

  • classroom teachers
  • counselors
  • librarians
  • registered nurses

Module 15

Description of Funding Element

 

The Staff Salary subsystem is used by school districts, charter schools, regional education service centers, and transportation co-ops to submit employee counts for use in calculating these entities' preliminary and actual staff salary allotments for eligible staff. Annual allotments are based on the following rates for full-time (FT) and part-time (PT) staff:

  • $500 per FT staff
  • $250 per PT staff

 

Module 16

Eligible staff are defined as follows:

Full-Time Staff – A full-time employee is an active contributing member of the Teacher Retirement System of Texas (TRS), works 30 or more hours each week, and cannot be a full-time classroom teacher, a full-time librarian, a full-time registered nurse, a full-time counselor, or an administrator.

Part-Time Staff – A part-time employee is an active contributing member of the TRS, works fewer than 30 hours each week, and cannot be a part-time classroom teacher, a part-time librarian, a part-time registered nurse, a part-time counselor, or an administrator. 

Staff employed by a fiscal agent or a charter school that is contracted to run a school district campus should be reported by the fiscal agent or the charter school.

The online FSP System and Staff Salary subsystem require registration with the TEA through the TEA Secure Environment (TEASE).

Module 17

The following table shows staff salary allotment totals for the past several years.

 

Year

Allotment

2008-2009

$133,695,687

2009-2010

$138,669,723

2010-2011

$136,033,164

2011-2012

$132,270,210

2012-2013

$133,865,531

2013-2014

$132,357,619

2014-2015

$137,989,417

2015-2016*

$142,758,301

2016-2017**

$142,682,489

 

*Near Final

**Legislative Payment Estimate

Annual allotments from the Staff Salary Subsystem are based on the following rates for full-time (FT) and part-time (PT) staff:

  • $100 per FT staff $50 per PT staff
  • $200 per FT staff $75 per PT staff
  • $500 per FT staff $250 per PT staff
  • $1000 per FT staff $500 per PT staff

Unit 7 Introduction to PSF and BGP

Module 1

Permanent School Fund (PSF) Bond Guarantee Program (BGP)

Texas Education Code (TEC) and Texas Administrative Code (TAC) References

TEC, §§45.051–45.063; 19 TAC §33.65 and §33.67

Module 2

History/Relevant Background Information

On November 8, 1983, Article 7, Section 9(b), of the Texas Constitution, which provides for the guarantee of school district bonds by the Permanent School Fund (PSF), was approved. In 2011, the Legislature added charter schools to the program.

The Bond Guarantee Program (BGP) allows for bonds that are properly issued by a school district or a charter school to be fully guaranteed by the corpus of the PSF with the approval of the commissioner of education. The guarantee has received “AAA” ratings from the major bond rating services and replaces the need for private bond insurance.

Module 3

School District Bond Guarantee Program Summary

 

Year

 Number of Issues Guaranteed During Fiscal Year for School Districts

Par Amount of  Issues Guaranteed During Fiscal Year

Balance at End of Year

2005-2006

219

$6,442,863,008

$37,793,429,328

2006-2007

384

$12,322,360,214

$44,856,621,419

2007-2008

226

$7,582,194,413

$49,860,572,025

2008-2009

93

$2,726,179,439

$50,032,724,439

2009-2010

192

$2,995,779,016

$49,301,683,338

2010-2011

344

$7,340,621,874

$52,653,930,546

2011-2012

348

$7,196,995,486

$53,634,455,141

2012-2013

345

$8,565,825,610

$55,218,889,156

2013-2014

312

$8,442,626,511

$58,061,805,783

2014-2015

543

$17,286,017,818

$63,197,514,047

On November 8, 1983, Article 7, Section 9(b), of the Texas Constitution, which provides for the guarantee of school district bonds by the Permanent School Fund (PSF), was approved.

  • True
  • False

Module 4

Description of Program

To participate in the BGP, districts must apply to the Texas Education Agency (TEA) and be approved by the commissioner. The TEA reviews each application according to both statutory requirements and State Board of Education (SBOE) rules. This review includes confirming that the application is complete and accurate and that the district is financially sound.

The TEA also reviews the district’s School FIRST or Charter FIRST rating, its annual financial audit report, its accreditation status, its intervention status, its accountability rating, and the complaints database that is maintained by the agency. Charter districts must have a preliminary investment grade credit rating to be considered for the guarantee.

Module 5

Applications for new money issues are collected each calendar month and processed at one time. Districts receive notification of their award of the guarantee on the 15th business day of the month following the month in which the application was received. Applications for the refunding of previously PSF-guaranteed issues are processed as they are received. Applications for the refunding must show a present-value savings to the district in order to be considered.

In the event of default by a district, bond holders will receive all payments due them from the corpus of the PSF. The payments will then be recovered from the district’s next state aid payment. If the district fails to pay the principal or the interest on a bond as it is stated to mature, other amounts not due and payable are not accelerated and do not become due and payable by virtue of the district's default.

In the event that two or more payments are made from the PSF on behalf of a district, the commissioner may request that the attorney general institute legal action to compel the district to comply with the duties required of it by law in respect to the payment of the bonds. The BGP has not had a district default on its bond payments in the history of the program.

Module 6

The capacity of the fund to guarantee bonds under the BGP is limited by state law and by an Internal Revenue Service (IRS) private letter ruling received by the TEA. State law and the IRS rule limit the amount that the fund can guarantee to 5 times the cost value of the PSF on December 16, 2009. However, current SBOE rules limit the capacity to 3.25 times that value. The SBOE has further restricted the capacity by establishing an amount of capacity, currently 5%, to be held in reserve.

Capacity available to charter districts is limited to the percentage of available capacity that is equal to the percentage of students enrolled in charter schools. This percentage is calculated on an annual basis. Up to 50% of the capacity available to charter districts can be used to refund existing debt. Also, the board has further restricted charter capacity by establishing an additional 5% to be held in reserve.

In addition, the SBOE has limited approval of the guarantee to a district with less debt than a district that falls at the 90th percentile of either annual debt service per student in average daily attendance (ADA) or total debt service per ADA at the time of the application. The limitation does not apply to a school district that has enrollment that is 25% higher than the enrollment reported five years earlier and/or that called the election authorizing the issuance of bonds before July 15, 2004.

An application processing fee of $1,500 is due at the time of application.

To participate in the BGP (Bond Guarantee Program), districts must apply to the Texas Education Agency (TEA) and be approved by the commissioner. The TEA reviews the following: (Check all that apply)

  • the district’s school FIRST or Charter FIRST rating
  • its annual financial audit report
  • its accreditation status
  • its intervention status
  • its accountability rating
  • and the complaints database that is maintained by the agency

Unit 8 Existing Debt and Settle Up

Module 1

Existing Debt Allotment

Texas Education Code (TEC) and Texas Administrative Code (TAC) References

Texas Education Code, Chapter 46, Subchapter B, Assistance with Payment of Existing Debt

 

Texas Administrative Code, Chapter 61, Subchapter CC, Commissioner’s Rules Concerning School Facilities §61.1035, Assistance with Payment of Existing Debt

Module 2

History/Relevant Background Information

In 1999, the 76th Texas Legislature added Subchapter B to Chapter 46 of the Texas Education Code (TEC) to create the Existing Debt Allotment (EDA) program. The EDA program operates without applications and has no award cycles. This program provides tax rate equalization for local debt service taxes. By providing a guaranteed yield on Interest and Sinking fund (I&S) taxes levied by school districts to pay the principal of and interest on eligible bonds, the program guarantees a specific amount of state and local funds per student for each cent of tax effort up to $0.29 per $100 of assessed valuation. Currently, the guaranteed yield for EDA provides $35 per student in average daily attendance (ADA) per penny of tax effort.

Module 3

Only general obligation bonds are eligible for the EDA program. Lease-purchase agreements authorized by Local Government Code, §271.004, are not eligible. Debt service for which the district currently receives assistance through the Instructional Facilities Allotment in accordance with TEC Subchapter A, Chapter 46 is not eligible to receive state assistance. The eligibility of bonds for the EDA program is determined by the first payment of debt service in accordance with TEC §46.033. Refunding bonds as defined by TEC §46.007 are also eligible for EDA assistance.

Within the Existing Debt Allotment (EDA) program, only general obligation bonds are eligible for the EDA program. Lease-purchase agreements authorized by Local Government Code, §271.004, are not eligible.

  • True
  • False

Module 4

The eligibility date for the EDA program was amended by the passage of House Bill 3646, 81st Texas Legislature. Section 76 of the bill changed the TEC, §46.033, to provide a permanent roll-forward provision to establish bond eligibility for the EDA program. The amendments to the section deleted the eligibility dates in the statute and replaced those dates with references to the last year of the preceding biennium. As a result, bonds that were issued during a biennium, with the first payment made during that biennium, will become automatically eligible for the EDA in the following biennium without the need for legislative action.

Module 5

School Year

 

Eligible

Total EDA

State Share EDA

Local Share EDA

2001

 

 

$1,377,795,915

$480,242,778

$897,553,137

2002

 

644

$1,723,164,642

$539,788,447

$1,183,376,195

2003

 

702

$1,681,711,954

$455,155,036

$1,226,556,918

2004

 

717

$2,047,175,433

$486,959,077

$1,560,216,356

2005

 

713

$2,025,217,238

$430,719,054

$1,594,498,184

2006

 

735

$2,382,028,792

$499,301,990

$1,882,726,802

2007

 

728

$2,458,681,079

$440,195,413

$2,018,485,666

2008

 

779

$2,960,884,716

$452,378,233

$2,508,506,483

2009

 

778

$3,093,205,369

$352,631,600

$2,740,573,769

2010

 

801

$3,517,767,114

$308,941,752

$3,208,825,362

2011

 

796

$2,835,488,527

$303,671,908

$2,531,816,619

2012

 

818

$2,961,378,464

$352,678,027

$2,608,700,437

2013

 

810

$2,968,716,633

$341,489,457

$2,627,227,176

2014

 

833

$3,214,137,729

$356,355,214

$2,857,782,515

2015

 

817

$3,227,611,771

$315,186,012

$2,912,425,759

2016

 

855

$3,417,376,693

$321,848,553

$3,095,528,140

2017

 

856

$6,149,541,093

$263,761,699

$3,170,462,090

Module 6

Settle-Up Process

Texas Education Code (TEC) Reference

TEC, §42.254 (requires legislative payment estimates) and §42.258 (requires recovery of overallocated Foundation School Program funds)

Module 7

 

In discussing property values and tax collections as they relate to current year FSP allocations and settle-up, it may be helpful to note the following: the property values used in FSP formulas are prior year property values; however, the tax collection amounts used in FSP formulas are based on estimates of current year property values.


Illustration:

Fiscal Year

2016

2017

School  Year

2015–2016

2016–2017

Tax Year Values Based On

2014

2015

Tax Year Collections Based On

2015

2016

 

In the Settle Up Process the property values used in FSP formulas are _______________________ ; however, the tax collection amounts used in FSP formulas are based on estimates of ____________________________. (Choose the correct answers.)

  • current year property values, prior year property values
  • prior year property values, current year property values.

Module 8

A school district's initial FSP allocation is based on estimated property value, property tax collections, and attendance data. The TEC, §42.254, requires the Texas Education Agency (TEA) and the Texas Comptroller to submit these estimated data, known as legislative payment estimates (LPEs), to the legislature in the fall before each biennial legislative session so that the legislature can use them for budgetary purposes.

A district's scheduled payments for a school year are based on its initial allocation as calculated using LPEs. At certain points throughout the year, the TEA receives revised tax, attendance, and current year property value data. These revised data are known as district planning estimates (DPEs). A school district's final allocation, or "earnings," for the year are calculated using DPEs, once all revised data are available.

Throughout the year as revised data become available, the TEA produces a series of state aid reports, known as Summary of Finances (SOF) reports, for each school district. The reports show both LPE and DPE information, as well as initial and revised allocation amounts. Districts can use these reports to determine whether they are being under- or overpaid and can budget accordingly in anticipation of settle-up. Districts can also use tools such as the state aid templates available on our website under the Resources heading for this purpose.

Module 9

The settle-up process begins after the close of each state fiscal year on August 31 and is actually made up of two steps: near-final settle-up and final settle-up.

The year-end, or “near-final,” settle-up occurs when Public Education Information Management System (PEIMS) attendance data become available. At this time, tax collection data that are used to estimate districts' FSP state aid are updated with revised estimates of tax collections that have been reported by districts through the online FSP System. The updated attendance and tax collection data are used to produce a “near-final” SOF, showing the actual amount of state aid each district or school was due.

The postaudit, or “final,” settle-up occurs after the release of data from school district and charter school audits. This settle-up uses the final tax collections each district reported in the J-1 schedule of its annual financial audit report and any other updates or changes to data elements that have occurred since the year-end settle-up.

The Settle Up Process begins after the close of each state fiscal year on August 31 and is actually made up of two steps: (choose the two that apply).

  • initial settle up
  • near-final settle-up.
  • final settle-up
  • completed final settle up

Module 10

Following each settle-up process, the TEA pays out additional aid to any districts and charter schools that were underpaid and recovers aid from districts and charter schools that were overpaid, as required by the TEC, §42.258. Districts and charter schools that have been underpaid during a school year receive a lump-sum payment for the funds that are owed them, typically in late September following the close of the fiscal year.

Usually, overpayments are recovered from a district's or charter school's scheduled FSP payments over the remainder of the current fiscal year (the fiscal year following the year for which the district or charter school was overpaid). If the overpayment cannot be recovered from a district's or charter school's scheduled FSP payments over the remainder of the current fiscal year, the TEA will request and obtain a refund.

 

Module 11

School Year

Amount Overpaid to Districts

Amount Underpaid to Districts

2000

$404,221,565

$113,365,330

2001

$802,780,773

$111,946,357

2002

$231,450,237

$205,422,728

2003

$301,538,341

$418,831,795

2004

$247,762,059

$416,136,321

2005

$258,661,588

$565,906,839

2006

$261,410,812

$223,768,558

2007

$789,327,547

$242,132,688

2008

$791,058,084

$140,624,857

2009

$1,071,736,623

$256,205,935

2010

$558,927,407

$617,405,755

2011

$593,234,018

$1,126,816,765

2012

$696,289,208

$237,995,397

2013

$851,847,997

$398,262,353

2014

$391,888,221

$307,693,127

2015

$473,428,522

$489,029,583

2016

$315,386,672

$474,697,344

Districts and charter schools that have been underpaid during a school year receive a lump-sum payment for the funds that are owed them, typically in late ________________ following the close of the fiscal year.

  • July
  • August
  • September
  • December

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