SCHOOL FINANCE for New Superintendents MASA Finance and Budget Part 1 Presented by Terri Yetter Assistant Director, Division of School Finance September 16, 2016
Topics 1) School Funding Basics 2) Major Components of School Finance System: a) General Education Revenue b) Categorical Revenues 3) Operating versus Bond Referendum 4) Long-Term Facilities Maintenance Revenue 5) Navigating MDE Website 6) Resources 7) MDE Contacts for School Finance Information 2
School Funding Basics: How Does Funding Work in Minnesota? The state legislature has primary responsibility for school funding. It sets funding levels and the mix of state aid and local levies in state statutes. Funding is based mainly on the count of students served: the greater the student count, the larger the funding. Funding per student varies among districts and charter schools depending on student and district / school characteristics. State and federal special education formulas, while significant, do not cover the full cost of special education services; the resident school district is responsible for most unfunded special education costs of openenrolled and charter school students State statutes allow school districts to raise additional revenues through voter approval (operating referendums, bond issues) 3
Basics: Terminology Fiscal Year: State July 1 - June 30 (Currently State FY 2017) Federal October 1 September 30 (Currently Federal FY 2016) Pupil Accounting: Average Daily Membership (ADM) = the average number of pupils enrolled in the school district throughout the school year. Regular ADM limited to 1.0 for each student. Extended Time ADM (Students served more than full-time in a learning year program) limited to 0.2 ADM per student; used only for extended time revenue. Pupil Weights: Grade Level FY 15 and Later Weight Pre-K and K Disabled 1.0 Regular K 1.0 Full time/.55 Part Time Grades 1-6 1.0 Grades 7-12 1.2 Pupil Units = ADM x Pupil Weights (Sometimes called Weighted ADM or WADM) 4
Basics: Terminology Pupil Accounting (Continued): Two Types of Pupil Units (PU): Resident Pupil Units = Resident ADM X Pupil Weight (Resident ADM includes all MN public school students residing in the district) Adjusted Pupil Units = Resident PU + PU for nonresidents attending the district under alternative attendance programs (e.g., open enrollment) - PU for residents attending another district or charter school under alternative attendance programs 5
Basics: Terminology Property Tax Base Two tax bases used for school levy calculations: Referendum Market Value = Estimated market value, excluding: Ag Land & Buildings (Note: house, garage, and one acre are not exempt) Seasonal Recreational Residential Used only for operating referendum, local optional, transition and equity levy calculations Adjusted Net Tax Capacity (ANTC) = (Taxable market value for all types of property x Statutory class rate) / Sales ratio Used for all other school levies, including debt service levies Note: For long-term facilities maintenance revenue, a variation of ANTC excluding ½ of the value of agricultural land is used to calculate the state and local shares of the revenue 6
Basics: Terminology Property Tax Base (continued) Taxable Market Value = Estimated Market Value Market Value Exclusion Market value exclusion = 40% of first $76,000 of value, less 9% of value over $76,000 (no exclusion for homes valued at $413,800 or above) Net Tax Capacity = Taxable Market Value X Class Rate Class Rates are statutory percentages applied to taxable market value: Residential Homestead: First $500,000 1.00% Remainder 1.25% Agricultural Land and Buildings (homestead) (Taxes Payable 2016) First $2,140,000 0.55% Over $2,140,000 1.00% Commercial and Industrial First $150,000 1.50% Remainder 2.00% Seasonal Rec. Residential First $500,000 1.00% Remainder 1.25% 7
Basics: Terminology Property Tax Base (Continued) Sales Ratio = Estimated Market Value / Actual Sales Price (Computed by State Revenue Department based on comparison of assessor s estimates of market values with actual sales prices.) Adjusted Net Tax Capacity = Net Tax Capacity / Sales Ratio 8
Overall Public Finance System Property Taxation Taxable Market Value Taxes Paid ($642 Billion) ($9.290 Billion) by Property Type, Taxes Payable in 2016 Seasonal Rec 4% Residential Homestead 47% Seasonal Rec 3% Residential Homestead 41% Agricultural 23% Other Residential 12% Commercial/ Indust 14% Agricultural 9% Commercial/ Indust 35% Other Residential 12% Source: HRD 9
Property Taxes Payable in 2016 By Type of Government $9.290 Billion County 31% Special 4% School Districts 28% City 23% Townships 2.5% State 9% TIF 2.5% Source: HRD 10
Where the Money Comes From: FY 16 State General Fund $23.056 Billion Estate & Gift 1% MA Surcharges 1% All Other 1% Fund Balance In 9% Individual Income 46% Non-Tax Revenue 3% Statewide Property Tax 4% Mort & Deed 1% Sales 23% Corporate 8% Liquor/Cigarette/ Gambling 3% Source: HRD 11
Where the Money Goes: FY 16 State General Fund Spending $20.401 Billion All Other 1% Debt Service 3% K-12 Education 42% Environment & Eco Dev 1% Health&Human Services 28% Higher Ed 8% State Govt 4% Intergovt Aids 8% Criminal Justice 5% Source: HRD 12
3) Major Components of the School Finance System Total Revenue for Education: $12.374 Billion FY 2016 Fees 4.3% General Education 53.4% Federal 5.6% Facilities 10.1% Community Ed 2.1% Special Education 9.2% Op. Referendum 5.6% Local Option 2.8% Source: HRD 13
General Education Revenue by Component $7.651 Billion FY 2016 Transition.4% Gifted.2% Local Option 4.6% Basic 71.4% Referendum 9.1% Small Schools. 2% Op. Capital 2.7% Equity 1.4% EL.7% Trn Sparsity.8% Op. Sparsity.3% Compensatory 7.1% Declining.1% Extend time 1.0% Source: HRD 14
General Education Revenue by Component FUNDING COMPONENT REASON FUNDING BASIS BASIC UNIFORMED ALLOWANCE FOR ALL PUPILS FIXED AMOUNT PER APU DECLINING SOFTENS IMPACT OF DECLINING ENROLLMENT FIXED AMOUNT PER APU PENSION ADJUSTMENT REV ADD'L AID FOR DISTS WITH HIGH PENSION COSTS FIXED AMOUNT PER APU VARIES BY DIST GIFTED & TALENTED REVENUE FOR GIFTED & TALENTED PROGRAMS FIXED AMOUNT PER APU EXTENDED TIME PROGRAMS OUTSIDE OF THE REGULAR SCHOOL DAY FIXED AMOUNT PER EXTENDED TIME PU COMPENSATORY STUDENTS FROM FAMILIES WITH LIMITED INCOME CONCENTRATION OF STUDENTS ELIGIBLE FOR FREE AND REDUCED MEAL COUNTS ENGLISH LEARNER (EL) STUDENTS WITH LIMITED ENGLISH PROFICIENCY FIXED AMOUNT PER EL ADM (MIN 20) PLUS CONCENTRATION FACTOR SMALL SCHOOLS REVENUE ADD'L AID FOR DISTS WITH APU LESS THAN 960 SLIDING SCALE AMOUNT PER APU SPARSITY ISOLATION COMBINED WITH LOW ENROLLMENT SLIDING SCALE AMOUNT PER APU TRANSPORT SPARSITY ADD'L AID FOR SPARSLEY POPULATED DISTRICTS REGRESSION FORUMLA OPERATING CAPITAL BUILDING MAINTENANCE AND EQUIPMENT SLIDING SCALE AMOUNT PER APU BASED ON AGE OF BUILDINGS LOCAL OPTIONAL REVENUE ADD'L OPTIONAL LEVY EQUALIZED REV FOR DISTS FIXED AMOUNT PER APU EQUITY REVENUE REVENUE TO PROMOTE FUNDING EQUITY PRIMARITY SLIDING SCALE BASED ON REFERENDUM PER APU TRANSITION HOLD HARMLESS PROTECTION AGAINST REV LOSS FIXED AMOUNT PER APU VARIES BY DIST REFERENDUM REV FROM VOTER & BOARD APPROVED REF FIXED AMOUNT PER APU VARIES BY DIST ALT ATTENDANCE ADJUST ADJUSTMENTS TO REV FOR VARIOUS FACTORS DEPENDS ON DIST CHARACTERISTICS 15
General Education Revenue Restrictions Basic Skills Compensatory English Learner (EL) Gifted & Talented Operating Capital Learning & Development Staff Development (2% set aside) See UFARS Chapter 10, Restricted Grids http://education.state.mn.us/mde/dse/schfin/fin/ufars/ 16
Operating vs Bond Referendum - Purpose Operating Referendum General operations of the school district Bond Referendum Authorizes the sale of bonds School construction projects OPEB liability Capital Projects Referendum Down payment on future construction costs Specific capital projects (technology) 17
Operating vs Bond Referendum - Duration Operating Referendum 10-year maximum Bond Referendum 30-year maximum Most school districts issue 20-year bonds for major building projects Capital Projects Referendum 10-year maximum 18
Operating vs Bond Referendum - Elections Operating Referendum Only on general election day (1 st Tuesday in November) Exceptions: If the district is in SOD If the election is held by mail ballot Bond and Capital Projects Referendum At any time allowed by under the state s regular election laws 19
Operating vs Bond Referendum - Frequency Operating Referendum Only one per year Bond Referendum More than once per year 180 waiting period after election failed If failed a second time, must wait one year before election for same question for the same project and the same amount of bonds Capital Projects Referendum No limit to the number of times per calendar year 20
Operating vs Bond Referendum Tax Base Operating Referendum Referendum Market Value (RMV) Bond Referendum Net Tax Capacity (NTC) Includes value of JOBZ property Capital Projects Referendum Net Tax Capacity (NTC) 21
Operating vs Bond Referendum Equalization Operating Referendum 3 tiers of equalized revenue: 1 st Tier: $300 EQF: $880,000 2 nd Tier: $760 EQF: $510,000 1 st Tier: $1,517 EQF: $290,000 Bond Referendum Equalized above 15.74% of NTC: 1 st Tier: $15.74%-26.24% EQF: $4,430 2 nd Tier: >26.24% EQF: $8,003 Capital Projects Referendum No equalization aid 22
Long Term Facilities Maintenance Revenue M.S. 123B.595 Long Term Facilities Maintenance (LTFM) Revenue replaces revenue from: 123B.591 Deferred Maintenance 123B.59 Alternative Facilities 123B.57 Health and Safety Used of revenue remain the same 23
Long Term Facilities Maintenance Revenue Per pupil revenue adjusted for building ages FY 2017: $193 FY 2018: $292 FY 2019: $380 Additional Revenue Approved IAQ, fire and asbestos projects >$100,000 Remodeling costs for VPK districts Or Hold Harmless 24
Long Term Facilities Maintenance Revenue Revenue uses: Deferred Maintenance a district or co-operative can restore facilities it owns to a like new condition (replacement and deferred maintenance to prevent further erosion). Accessibility architectural barriers to accessibility can be removed to meet the needs of persons with a disability. Health and Safety remove or correct school hazards identified by legislature in Minnesota Statutes 123B.57, Subd. 6. 25
Long Term Facilities Maintenance Revenue Revenue may not be used for: Construction of new facilities, remodeling of existing facilities, purchase portable classrooms. Note: Deferred capital and maintenance is more restrictive than remodeling Finance lease purchase, installment purchase or other deferred payments agreement. Energy efficiency projects under 123B.65, post secondary instruction or administration, or a purpose unrelated to elementary and secondary education. Violence prevention and facility security, ergonomics or emergency communication devices. 26
Long Term Facilities Maintenance Revenue MDE provides the format for ten-year plan submission The MDE expenditure format is a summary totaled by finance code and is a reflection of the district s detailed plan The revenue plan offers flexible funding options and is used in conjunction with the expenditure plan to determine the timing and method of funding facility needs 27
Long Term Facilities Maintenance Revenue School districts must submit: Ten Year Expenditure Plan (Excel spreadsheet) Ten Year Revenue Projection (Excel spreadsheet) LTFM Revenue Statement of Assurances Minutes of school board adoption of the ten year plan Intermediate districts and Co-operative districts submit: The LTFM Cooperative Allocation Worksheet rather than the ten year revenue spreadsheet 28
Long Term Facilities Maintenance Revenue Additional Submissions: Additional narrative if H&S > $100,000 Additional narrative if project > $2,000,000 Bond schedules for each category of bonds All documentation sent to MDE is board approved first Districts, Schools and Educators > School Finance > Facilities and Technology http://education.state.mn.us/mde/dse/schfin/fac/ 29
Long Term Facilities Maintenance Revenue Revenue spreadsheet has four main sections Per pupil calculation Additional revenue originating from old law or new law Hold harmless calculation Total revenue, aid and levy, Funds 01 and 07 amounts Several options are available to speed up or slow down expenditures for facility projects - Annually spend revenue - Save for future projects - New debt for large or several projects - Combinations of above 30
Long Term Facilities Maintenance Revenue Restricted/Reserved Fund Balances As of June 30, 2016, Deferred Maintenance (Balance Sheet Account 405), Health and Safety (Balance Sheet Account 406) and Alternative Facilities (Balance Sheet Account 409) will have fund balances and will be reported on the FY 2016 audited financial statements. As of July 1, 2016, Deferred Maintenance and Alternative Facilities Restricted/Reserved Fund Balances will roll into the new LTFM fund balance. 31
Long Term Facilities Maintenance Revenue LTFM Questions: Allowed uses of revenue, process and timelines, expenditure projection spreadsheet, health and safety revenue application, health and safety data base, health and safety FY 2016 closeout: contact Dale Sundstrom at dale.sundstrom@state.mn.us or (651)582-8605. Revenue projection spreadsheet, FY 2016 health and safety levy adjustments, LTFM aid entitlement and levy calculations, LTFM required debt: contact Lonn Moe at lonn.moe@state.mn.us or (651) 582-8569. UFARS account coding questions and FY 2016 Fund Balance closeout: contact Deb Meier at debra.a.meier@state.mn.us or (651)582-8656 or Sarah Miller at sarah.c.miller@state.mn.us or (651)582-8370. 32
Navigating MDE Website MDE > Districts, Schools and Educators > School Finance 33
Navigating MDE Website MDE > Districts, Schools and Educators > School Finance > Financial Management 34
Navigating MDE Website MDE > Districts, Schools and Educators > Data Submissions 35
Navigating MDE Website MDE > Data Center > Data Reports and Analytics * Scroll down to School Finance Reports or School Finance Spreadsheets 36
Resources - Legal Context Minnesota Statutes: 120A Compulsory Attendance, School Calendar 122A Q Comp, Staff Development 123A ALCs, District Reorganization 123B Fee Law, Facilities Funding, UFARS, SOD,Transportation 124D Enr. Options, PSEO, Charter Schools, Community Ed, Integration, Nutrition 125A Special Education and Special Programs 125B Technology, Telecommunications/Internet Access Equity Aid 126C General Education Funding, Levies, District Borrowing, Capital loans 127A MDE responsibilities, Payment Metering Session Laws: Education Omnibus Bill and other legislation includes amendments to statutes, uncodified (one-time) laws, and appropriations. Statutes & Session Laws available online at: https://www.revisor.mn.gov/pubs 37
MDE Guidance: Resources Legal Context Superintendent E-mails School Business Bulletins UFARS Manual MARSS Manual SERVS Webinars Federal Regulations: Specific program regulations (e.g., IDEA, Title I) OMB Omni Circular: Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), published December 2013, and effective for Federal awards made on or after December 26, 2014 38
Resources Communications Districts, Schools and Educators > Superintendents http://education.state.mn.us/mde/dse/supt/ Superintendent Mail MDE Weekly Superintendent Mail Archive of past years District Reporting Calendar Organized by month MDE > About MDE > Calendar http://education.state.mn.us/mde/about/cal/ MDE calendar of events, conferences and webinars Subscribe here from any content area: To get emails when that page is updated Checklist of all potential areas to subscribe Does not include Data Analytics webpage 39
Resources Budgeting Data Center > Data Reports and Analytics http://w20.education.state.mn.us/mdeanalytics/data.jsp MDE Revenue Projection Model For current year budget and accounting entries General Education Interactive Projection Model (What-if) For projecting general education revenue Financial Trends District Revenue Forecast Updated for November, February and End of Session Forecasts School Finance > General Ed > Referendum http://education.state.mn.us/mde/dse/schfin/gened/ref/ Operating Referendum Simulation Through Calendar Year 2016 Elections 40
Resources School Finance Financing Education in Minnesota http://www.house.leg.state.mn.us/fiscal/files/15fined.pdf Minnesota School Finance: A Guide for Legislators http://www.house.leg.state.mn.us/hrd/pubs/mnschfin.pdf Minnesota School Finance History http://education.state.mn.us/mde/dse/schfin/ Legislation/Bill Summaries http://education.state.mn.us/mde/about/rule/leg/ 41
Resources - Local and Regional Contacts Meet with district staff to find out who manages what data submitted to MDE for funding calculations and payments, and set up a process to ensure that data is submitted in an accurate and timely manner: Business manager / accountant, MARSS coordinator, special education director? Make sure there is good communication among staff submitting data (e.g., special ed director, business manager) If the district is part of a regional organization, find out what reports and information are available through the region. 42
MDE Financial Management Contacts Sarah Miller Jenny Charles Financial Mgt Training, Credit Enhancement, Charter School Lease Aid, Federal Reporting & Statutory Operating Debt (SOD) Statutory Operating Debt (SOD) Education Finance Specialist Education Finance Specialist Division of School Finance Division of School Finance Sarah.C.Miller@state.mn.us or 651-582-8370 jennifer.charles@state.mn.us or 651-582-8257 Jessica Aretz Deb Meier Consolidated Financial and Profile Reports, UFARS Accounting, Manual & Training, CPA Financial Audits, MDE Single Audit, Indirect Cost Reporting, MOE, Financial Data Requests Education Finance Specialist Education Finance Specialist Division of School Finance Division of School Finance Jessica Aretz@state.mn.us or 651-582-8276 Debra.A.Meier@state.mn.us or 651-582-8656 Mary Weigel Supervisor, Financial Management/Reporting Division of School Finance Mary.Weigel@state.mn.us or 651-582-8770 education.state.mn.us 43
MDE Special Education Funding Contacts Paul Ferrin Michael Brooks Supervisor, Special Education Funding & Data SERVS Financial & EDRS Application, Tech Division of School Finance Assistance & MOE Mde.spedfunding@state.mn.us Division of School Finance mde.spedfunding@state.mn.us Open Position Electronic Data and Reporting Systems (EDRS) Division of School Finance mdespedfunding@state.mn.us Michelle Jones Jill Bemis Tuition, Child Count & Discretionary Applications Calculation of State Special Education Aid, SERVS Financial & EDRS Application Federal Construction Remodeling & Vehicle Division of School Finance Approval, ADSIS mdespedfunding@state.mn.us mdespedfunding@state.mn.us education.state.mn.us 44
MARSS Student Contacts Julie Belisle Jeanne Krile Student Transportation PSEO, ADM/EDRS Reporting Division of School Finance Division of School Finance Julie.Belisle @state.mn.us Jeanne.Krile@state.mn.us 651-582-8265 651-582-8637 Kelly Wosika Marilynn Loehr Student Accounting MARSS Coordinator Division of School Finance Division of School Finance Kelly.Wosika@state.mn.us Marilynn.Loehr@state.mn.us 651-582-8855 651-582-8456 Sharon Peck Supervisor, Student Accounting Division of School Finance Sharon.Peck@state.mn.us 651-582-8811 education.state.mn.us 45
General Education Funding Contacts Jon Van Oeveren Dave Lobejko Supervisor, General Education Funding Q Comp Revenue, Levy Certification Division of School Finance Division of School Finance Jon.Vanoeveren@state.mn.us Dave.Lobejko@state.mn.us 651-582-8375 651-582-8383 Michael Schwartz Bill Kiesow General Education and Referendum Revenue Lease Levy Approval, School Reorganization Division of School Finance Division of School Finance Michael.Schwartz@state.mn.us Bill.Kiesow@state.mn.us 651-582-8399 651-582-8456 Laurena Schlottach-Ratcliff Jan Carlson General Education Revenue Integration, Career Tech, & Community Service Division of School Finance Fund Revenues, OPEB Levies Laurena.Schlottach-Ratcliff@state.mn.us Division of School Finance 651-582-8461 Jan.Carlson@state.mn.us 651-582-8342 Greg Sogaard Adult Basic Education, Tribal Contract Revenue Nonpublic Pupil Aid Division of School Finance Greg.Sogaard@state.mn.us 651-582-8858 education.state.mn.us 46
Budgeting/Payments Contacts Judy Kuck Supervisor, Budgeting/Facilities Division of School Finance Judy.Kuck@state.mn.us 651-582-1613 Ann VanDiest Patti Scott IDEAS State Aid Payments Special Projects, Revenue Projection Model Division of School Finance Division of School Finance Ann.VanDiest@state.mn.us Patti.Scott@state.mn.us 651-582-8745 651-582-8646 Dale Sundstrom Chris Kubesh LTFM Plan and H&S Project Approvals Review & Comment, Revenue Projection Model Division of School Finance Division of School Finance Dale.Sundstrom@state.mn.us Chris.Kubesh@state.mn.us 651-582-8605 651-582-8319 education.state.mn.us 47
Other Contacts SERVS Financial How to gain access and utilize SERVS Financial mde.servsfinancial@state.mn.us Error messages and malfunctions when using SERVS mde.helpdesk@state.mn.us MARSS Student Reporting Minnesota Automated Student Reporting System (MARSS) contact: Marss@state.mn.us Title Programs Title Programs mde.nclb@state.mn.us. Special Education Special Education Funds mde.spedfunding@state.mn.us. education.state.mn.us 48
Ques+ons? Terri Yetter Assistant Director, School Finance Minnesota Department of Education (651) 582-8868 Terri.Yetter@state.mn.us 49