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SPRING FINANCE WORKSHOP At the WASBO Accounting Conference March 20, 2013 DPI School Finance Team http://sfs.dpi.wi.gov/

SPRING FINANCE WORKSHOP At the WASBO Accounting Conference March 20, 2013 DPI School Finance Team http://sfs.dpi.wi.gov/. UPDATES:. Budget Proposal Energy Efficiency Exemption OPEB Indirect Cost Combined Report Security System Update

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SPRING FINANCE WORKSHOP At the WASBO Accounting Conference March 20, 2013 DPI School Finance Team http://sfs.dpi.wi.gov/

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  1. SPRING FINANCE WORKSHOP At the WASBO Accounting Conference March 20, 2013 DPI School Finance Team http://sfs.dpi.wi.gov/

  2. UPDATES: • Budget Proposal • Energy Efficiency Exemption • OPEB • Indirect Cost • Combined Report • Security System Update • Updated Reports – Transfer of Service, Transportation, & Foster/Group Home • Odds and Ends – Membership Audit of Summer School Fees, Common School Fund, Referendum Information

  3. 2013-15 Governor’s Biennial Budget Proposal – School Finance Items

  4. Governor’s Biennial Budget Overview This presentation will address the Governor’s proposal for the state’s 2013-15 Biennial Budget regarding: • Revenue Limits • General State Aids • Expansion of the Independent Charter Program • Expansion of the Parental Choice Program • New Special Needs Scholarship Program • Categorical Aids – including Performance Based Funding Grants • Other K-12 Education related items … from a School Finance perspective …

  5. Budget Development Timeline The Governor introduced his Budget Proposal in February, and now… • The Joint Committee on Finance will review and can modify budget provisions (Spring) • Then both houses of the Legislature will pass their own versions of a Budget Proposal • Conference Committee will work out differences between the House & Senate versions and send to the Governor for approval (possibly with vetoes) … likely in June or possibly July of 2013

  6. Budget Development Timeline While there has already been news about proposed changes to the Governor’s proposal by legislators, we do not know what the Legislature will ultimately send to the Governor for his approval. So at this time, we will present information on the Governor’s Proposal.

  7. Governor’s Biennial Budget Overview Summary of School Finance Related Proposals • Provides no Per Pupil increase for Revenue Limits • Increases state General/Equalization Aid by 1% annually • No changes for most existing categorical aid programs. • New School Performance Incentive categorical aid program. • New Special Needs Scholarship Program. • Increases per pupil funding for the Milwaukee and Private School Parental Choice programs; expands the Private School Parental Choice Program (currently just Racine is eligible) • Increases per pupil funding and expands the Independent Charter Program (creates new Charter Oversight Board) • No changes to the School Levy Tax Credit/First Dollar Credit

  8. State Support for K-12 Education under the Governor’s 2013-15 Proposed Budget Appropriations and Percent Change from the Prior Year: ($ in Millions) Category2012-132013-142014-15 General Equalization Aids $4,293.7 $4,336.6 (1%) $4,380.0 (1%) • High Poverty Aid $ 16.8 $ 16.8 (0%) $ 16.8 (0%) • Categorical Aids $ 653.9 $ 612.0 (-6.4%*) $ 677.9 (10.8%) • School Levy Tax Credit $ 897.4 $ 897.4 (0%) $ 897.4 (0%) State Residential Schools $ 11.2$ 10.8 (-9.6%) $ 10.8 (0%) Statewide Totals $5873.0 $5,873.6 (0%) $5,982.9 (1.9%) • *Reflects removal of $42.5 M for one-time Per Pupil Adjustment Aid.

  9. Revenue Limits The Governor’s Budget does not change current law with respect to Revenue Limits for the 2013-14 or 2014-15 school years: • $0 per pupil adjustment in both years • Low Revenue Ceiling threshold would increase from $9,000 to $9,100 for 2013-14 & 2014-15 • The “Base Hold Harmless” exemption (line 7B) will revert to it’s original mechanism (next slide) • No changes to any existing exemptions to the revenue limit

  10. Revenue Limits Base Hold Harmless exemption – review: • Had been altered by the Legislature for 2011-12 & 2012-13 but will return to normal for 2013-14 • Ensures that a districts revenue authority, after the Per-Pupil and Low Revenue Ceiling adjustments are made, but prior to any exemptions, is not less than the Line 1 Base Revenue on the worksheet. • EXAMPLE calculation at the end of this presentation for your reference

  11. Revenue Limits Base Hold Harmless exemption – review: • Recall that the Base Hold Harmless exemption is a non-recurring exemption – as such, it will be removed from the subsequent year’s base revenue • Districts that qualify for the Base Hold Harmless exemption that also have declining enrollment will be able to utilize the Declining Enrollment Exemption (which is also a non-recurring exemption)

  12. General State Aid The Governor’s Budget provides: • Increases of 1% annually in the appropriation for General (Equalization) School Aids: • $42.9 M in FY14 and $43.4 M in FY15 • No changes to the Equalization Aid formula itself • Increases in district-specific lapses for expanded Choice program and for the all-district lapse for Independent (2r) Charter program come out of this General Aid increase. • Steady funding for the High Poverty Aid Program ($16.83 M) • District allocations will change based on 2012 data for Free & Reduced Price Lunch eligibility and 2012-13 membership. • High Poverty Aid will continue to be treated as General Aid, i.e., reduces the receiving district’s levy.

  13. Independent Charter Program Existing Independent Charter Program (MPS & Racine): • Per pupil payment increases to $7,852 for FY14 and $7,931 for FY15 (1% annual increases) • Estimates enrollments at 8,600 FTE in FY14 and 9,600 FTE in FY15 • Increases total cost estimate from $62.2 million in FY13 to $67.5 million in FY14 and $76.1 million in FY15, based on per pupil payment and estimated enrollments above • Retains current law method of paying for Independent Charter Program costs by applying a proportionate reduction to all districts’ General Aid payment

  14. Expansion of Independent Charter Program New Provisions – Independent (2r) Charter Program: • Creates a Charter School oversight Board responsibility for approving new independent charter school authorizers • Independent charter schools may be established only by contract and must be operated by a Charter School Governing Board* • New independent charter schools would be eligible for the same per pupil payment as under the existing program • The costs of new independent charter schools coming in under this expansion would be paid for in the same manner is the existing program – a proportionate deduction to General Aid payment for all public school districts * Except for existing independent charter school authorizer, which may continue to operate a charter school that has already been established.

  15. Expansion of Independent Charter Program New Provisions – Independent (2r) Charter Program: • Removes current law restrictions on who may attend an independent charter school (location/residence). • Permits a public school district to prohibit a resident pupil from attending an independent charter school unless: • The district’s (aid) membership is 4,000 FTE or greater, and • Two or more of the public schools in the district were placed, in the same year, a performance category of either “fails to meet expectations” or “meets few expectations” based on accountability report issued by DPI (i.e., the School Report Cards)

  16. Expansion of Independent Charter Program New Provisions – Independent (2r) Charter Program: • The proposal specifies how charter schools may prioritize applications, testing requirements, as well as certain requirements for the DPI • Non-fiscal, operational type questions regarding the expanded Choice program should be directed to the DPI School Management Services Team: http://sms.dpi.wi.gov/

  17. Parental Choice Program Existing Parental Choice Programs (MPS/Racine): • Per pupil payment remains at $6,442 for FY14 and for FY15, increases to $7,050 for K-8, and $7,856 for high school pupils • Estimates FY14/FY15 enrollments at 25,500/27,000 FTE for MPS and 750/1,000 FTE for Racine • Increases total cost estimate from $154 million in FY13 to $169 million in FY14 and $201 million in FY15, based on per pupil payment and estimated enrollments above • Retains current law “district share” requirement: 38.4% of estimated costs is deducted from district’s general aid payment

  18. Expansion of Parental Choice Program As of FY14, expand eligibility to districts in which : • Membership of at least 4,000 FTE (i.e., aid membership) • Two or more of the public schools in the district were placed, in the same year, a performance category of either “fails to meet expectations” or “meets few expectations”, based on an accountability report issued by DPI (i.e., the School Report Cards) • At least 20 pupils in a district must have applied to attend a participating private school under the program

  19. Expansion of Parental Choice Program As under the existing Parental Choice Program: • Newly eligible private schools would receive a per pupil payment of $6,442 in FY14 & $7,050 (K-8)/$7,856 (HS) in FY15 • Pupils participating in the Choice program would not be counted for purposes of general aid or revenue limit membership by the resident district • New “Choice” districts would pay for 38.4% of the cost of the choice vouchers awarded to resident pupils via a deduction to the district’s General Aid payment • The deduction for the Parental Choice Program is applied to the October 15th Aid Certification, thus … • Districts with a deduction from General Aid for Choice pupils would have the ability to levy for that aid deduction

  20. Expansion of Parental Choice Program Other Provisions: • Pupil’s family income =< 300% of the Federal Poverty Limit • Participating private school must be accredited or pre-accredited by August 1st prior to begin of school year • Statewide enrollment limits of 500 in FY14 and 1,000 in FY15 (does not provide specifics as to how DPI is to manage statewide enrollment limits) • The proposal specifies how private schools may prioritize applications, testing requirements, as well as certain requirements for the DPI • Non-fiscal, operational type questions regarding the expanded Choice program should be directed to the DPI School Management Services Team: http://sms.dpi.wi.gov/

  21. NEW: Special Needs Scholarship Program Beginning in FY14, a child with a disability may receive a scholarship to attend a school of their choice, including a: • Public school outside the pupil’s district of residence • Charter school • Private school • The following conditions must be met: • The school has notified DPI of intent to participate and has accepted the pupil • A private school must be approved by DPI or accredited • An IEP has been completed for the child • In the previous school year, the child attended a public school, a charter school, a private school under the Parental Choice Program, or did not attend school in WI

  22. NEW: Special Needs Scholarship Program Under the Governor’s proposal: • DPI is required to review the pupil’s IEP and determine the scholarship amount, based on formula established in the proposal (lesser of “state average” by formula, or “actual cost” to the school as with existing choice program). • Scholarship pupils would be counted by the district of residence for purposes of revenue limits & aid membership. • A reduction would be made to the General Aid payment of the resident district in an amount equal to the scholarships awarded to all the resident pupils of that district. This reduction in aid would lapse to the State’s General Fund. • The scholarship would be paid directly to the school that the pupil attends from a separate appropriation in the State’s General Fund. In effect, the aid reduction to the resident district is used to offset the costs of the scholarships. • When a pupil receives a scholarship, the pupil’s district of residence is directed to count the scholarship amount towards Federal Maintenance-of-Effort requirements

  23. NEW: Special Needs Scholarship Program Under the Governor’s proposal: • Pupil’s family is not required to meet an income test • Number of scholarship recipients in a given school year may not exceed 5% of the number of children with disabilities residing in Wisconsin in the previous school year. • Pupil would be entitled to receive the scholarship as long as the pupil attends an eligible school, until the pupils graduates from High School or through the end of the term in which the pupil turns 21 (whichever comes first). • Transportation – if pupil uses scholarship to attend: • Private School – resident district may be required to provide transportation (existing ss. 121.54 applies) • Public School – if transportation is specified in the pupils IEP, the district of attendance is required to provide transportation; if not, parent is responsible

  24. NEW: Special Needs Scholarship Program This presentation has touched on the issues pertaining to the financial implications of the proposed Special Needs Scholarship Program, however … There are many other issues involved with this proposed program, including: • Responsibilities of DPI, the district or charter/private school of attendance and the resident school district • Rights of the pupil receiving the scholarship These issues are still under review by the Department’s School Management Services Team and Special Education Team.

  25. Existing Categorical Aid Programs With a few exceptions, funding for Categorical Aid programs remain at current levels for both years: • Special Education, Transportation, SAGE, Sparsity, Bilingual-Bicultural programs, Nutrition programs, Gifted & Talented programs, 4K Start-up Grants – no funding changes • School Library Aid: reduced in FY14 then increased in FY15, based on estimate of available revenues: FY13: $37 million FY14: $32 million FY15: $34 million • Transportation Reimbursement: increases the rate for pupils transported over 12 miles from $220 to $275 (funded w/in base) • Per Pupil Adjustment Aid: received by districts for 2012-13 (up to $50/pupil, based on utilization of levy authority) is eliminated [had been created as a one-time aid program]

  26. NEW: School Performance Incentive Program The Governor proposes to create a new categorical aid program that awards funds to school boards based on performance of individual schools in the district: • At least one school in the district must be placed in the requisite “performance category” • Specifies the basis of performance category to be “the accountability report published for the school under s.115.385 [new] at the end of the immediately preceding school year”- i.e., the Department’s recently created School Report Card. • Any awards made under this program are only for the year in which the award is made; schools may be determined eligible year after year, but awards do not build a district’s base revenue.

  27. NEW: School Performance Incentive Program Proposal includes three distinct aid programs: • $24 million for “High Performing Schools” – school(s) placed in either of the top two categories • $30 million for “Improving Schools” – school(s) that increased their numeric score on the accountability report by at least three points compared to prior year • $10 million for “Low Performing Schools” – school(s) placed in the lowest category if the school board submits a written “school improvement plan” for each school (for which award is sought) and the DPI determines the plan(s) meet criteria specified under the proposal

  28. NEW: School Performance Incentive Program Award amounts would be awarded to School Boards, but determined on a school basis, as follows: “High Performing Schools” ($24 million) – for each school: (state appropriation )/ (number of pupils enrolled in eligible schools statewide ) x number of pupils enrolled in a school “Improving Schools” ($30 million) – for each school: (state appropriation) / sum of (pupils enrolled in eligible schools x point increase by school) x number of pupils enrolled in a school *Note that for this aid, pupils are weighted to reflect magnitude of increase on the Report Card. “Low Performing Schools” ($10 million) No formula is specified in the proposal

  29. NEW: School Performance Incentive Program To be eligible for an award a School Board must: • Submit an “intent to participate” notice to DPI within 60 days after the accountability reports are published • By September 1st, 2014 establish a policy for the distribution of funding awarded under this program to a school(s) in the district: • The Board’s policy may not prescribe the manner in which funds are to be used by the school(s); however, • The Board’s policy may identify and prioritize goals and objectives towards which the funds may be applied. • If both of the above requirements are met, a School Board must distribute the full award amount to the eligible school(s) [proposal does not specify a date by which the DPI must distribute the awards to a School Board of eligible school(s)]

  30. Other School Finance Related Items Part Time Open Enrollment “Course Options” – expansion of Part-Time Open Enrollment : • Permits pupils at any grade level to participate • Permits attendance at any UW institution, WI Technical College, non-profit institution of higher education, tribal college, charter school or other educational provider approved by the department • School Boards are responsible for tuition payments (as established by DPI ) to the institution of higher education • Permits a School Board to deny pupil’s request to enroll in a course under this program if the Board determines the course does not satisfy a HS graduation requirement or the course does not support the pupil’s “Academic and Career Plan” (newly created in the Governor’s Proposal) • Allows for pupil whose request is denied to appeal to DPI [ss.118.52]

  31. Other School Finance Related Items Part Time Open Enrollment Attendance by pupils enrolled in home-based private education: • Permits home-based private education pupils to take up to two courses per semester at any public school, provided space is available at that school and pupil meets standards of admission to the course • No longer restricted to just High School pupil or courses • Allows the district of attendance to count a home-based private education pupil enrolled in courses at a school in the district for aid membership purposes, at 0.25 FTE per course taken (up to maximum of two courses allowed, or 0.50 FTE) • These pupils could NOT be counted for purposes of revenue limit membership [ss. 118.53, new]

  32. Other School Finance Related Items Charter Schools • Increases flexibilities for Instrumentality Charter Schools: • Requires an instrumentality charter contract to specify a per pupil payment “commensurate” with the school district’s average per pupil costs; • Grants the school operator sole discretion over budget, curriculum, professional development and personnel (exceptions for health and safety) • Prohibits a school board from imposing on a charter school any requirement from which a charter school would otherwise be exempt.

  33. Other School Finance Related Items Charter Schools • Permits a school board to grant a petition to convert all of a district’s schools to charter schools, without the current law requirement that at least 50% of teachers in the district sign the petition and that the district provide a non-charter alternative to any resident pupil who so requests • Creates a proficiency-based charter school teaching license, under which any person who has a bachelor’s degree and who can demonstrate proficiency in a subject may receive a license to teach that subject in a charter school

  34. Other School Finance Related Items Miscellaneous • Provides for an alternative pupil count date if a school will be closed for a regularly scheduled holiday, or closed for a reason approved by the school board, on the statutorily dictated pupil count dates • Extends the length of time during which a consolidated school district is eligible to receive additional equalization aid, from five to seven years after consolidation (gradual reduction of the rate of aid benefit the base guarantee in last two years)

  35. Other K-12 Items District Operations • Require all schools to provide academic /career planning services to pupils in grades 6 to 12 by the 2017-18 school year • Provide funding to DPI to purchase & implement a software program to support academic/career planning and learning, and to implement training school district staff who provide advising services to pupils • Prohibit DPI from requiring that an instructor must be physically present in a classroom during the delivery of instruction in a digital environment

  36. Other K-12 Items Assessment and Accountability • Provide funding to DPI to implement: • ACT Suite and Next Generation Assessments • SMARTER/Balance & Dynamic Learning Assessments in FY15 • Provide the State Superintendent with authority to adopt/approve assessments for the 9th and 11th grades • Require schools (including charter schools) to administer the assessments approved by the State Superintendent for the 9th and 11th grades for all pupils in public, charter and Parental Choice program schools • Require DPI to annually publish school & district report cards and place each school into one five performance categories • Provide funding for expansion of early reading assessment program to pupils in 4K, 1st and 2nd grades (currently 5K)

  37. Other K-12 Items Educator Effectiveness / Teacher Licensing • Provide funding to DPI to develop and implement the state’s new Educator Effectiveness (EE) system to evaluate principals and teachers (as mandated by ss. 115.45) • Require DPI to count teaching experience gained under an emergency teaching license for specific assignments as experience for purposes of an equivalency teaching license or an administrator license • Require an EE system rating of “effective” or “highly effective” for a person to receive a Master Educator Grant from DPI • Provide additional funding for teachers who receive a Master Educator License from DPI or certification from the National Board for Professional Teaching Standards • Eliminates the requirement that teachers of online courses fulfill an additional 20 hours of professional development in online learning; prohibit DPI from imposing such a requirement.

  38. Energy Efficiency Exemption • Performance Contract Requirement • All projects (whether one year or funded by debt service) must be governed by a performance contract under s. 66.0133 • DPI does not oversee this requirement, but we do require you to certify compliance in the portal. Please consult legal counsel to ensure project compliance • DOA has information available for state agencies that may provide useful background information

  39. Energy Efficiency Exemption • Resolution adopted by school board by November 1 in the school year in which a tax is to be levied for the expenditure. • Put the resolution into referendum portal with the type as Board resolution to exceed revenue cap for energy efficiency (even if debt service is being used)

  40. Energy Efficiency Exemption • Debt Service • Bonds or notes may be issued for up to 20 years • Does not change the requirements related to the $1 million limit on non-referendum debt • Requires annual resolution by the board for the amount that will be levied using the energy exemption and expended that fiscal year

  41. Energy Efficiency Exemption • Debt Service • Payments should be treated the same way as other non-recurring referenda • Currently, there is a disconnect between the exemption amount (Line 10C) and the levy amount (Line 14B) • The exemption amount is the payment being made during the fiscal year (whether a one-year or debt service project). The Fund 38 non-referendum debt service levy amount is based on the upcoming calendar year payment

  42. Energy Efficiency Exemption • There is a revenue limit penalty for any exemption amount not expended during the fiscal year • District prepares an addendum to the following year’s budget summary reporting results of energy savings from the expenditure and copies that information into the referendum portal under that resolution • More information is available at: • http://sfs.dpi.wi.gov/sfs_enrgyrevlim

  43. Fund 73 OPEB Trust Reminders • PHYSICAL CASH TRANSACTIONS • The contribution to the trust must have cash movement by July 30. • The implicit rate subsidy must have cash movement from trust to district funds. • NO BOOK ENTRIES, NO NETTING TRANSACTIONS

  44. Fund 73 OPEB Trust Reminders • Budget for Trust Activity • Expenditure for contribution should be in the districts budget. • If additional funds are contributed, budget should be amended. • Implicit rate subsidy credit to object 241 should be in accounted for in budget.

  45. Fund 73 OPEB Trust Reminders • Payment of Retiree Benefits • Once a district elects to establish and fund an OPEB trust, the retiree benefits that were funded must be paid out of the trust. • Exception may be termination benefits such as accumulated sick leave. Implicit rate subsidy for those benefits still applies if you use trust. • No more pay as you go. • Retiree benefits include both payments to insurance vendors and implicit rate subsidy.

  46. Fund 73 OPEB Trust Reminders • Allocation of district activity • Contributions to the trust up to the ARC must be allocated to active employee plan members • By FTE or Salary • This changed from a suggestion to a requirement a few years ago. • Implicit Rate Subsidy should be credited to the active employee plan members healthcare costs, Object 241. • Allocated in the same manner as the Contribution

  47. Fund 73 OPEB Trust Reminders • Contributions over ARC • If the contribution exceeds the ARC, it is not allocated to active employee functions. • Amount in excess of the ARC is coded to Function 292000, Object 218. • Amount in excess of ARC can all go to Fund 10 or can be allocated to current employee Funds, still 292000-218. Treatment must be consistent from year to year. • Not eligible for special education categorical aid or current year federal grants.

  48. Fund 73 OPEB Trust Reminders • Implicit Rate Subsidy • If a district has retirees on their health insurance plan, there will be an implicit rate subsidy. • Exception: Some self funded plans may not have implicit rate subsidy payback if actual costs method is used. • Implicit rate subsidy needs to be paid from the Fund 73 trust to the district in cash. This will be a credit to active employee plan member health care costs, object 241. It will lower a districts shared costs.

  49. Fund 73 OPEB Trust Reminders • Plan Member Contributions • If the retirees pay a portion of their healthcare costs, these should be deposited directly into the Fund 73 trust. • If that is not an option, district should record them in a Due to Fund 73 liability account. • They should never be revenue or expenditures in the district funds.

  50. Fund 73 OPEB Clarifications • Requirements to Establish OPEB trust for DPI purposes and funding trust • All DPI requirements must be met by the fiscal year end, June 30 in order to qualify as an expenditure in that year. • Physical cash contribution must be within 30 days of fiscal year end, or July 30, only for districts which have satisfied those requirements by June 30. • Board Approval, Trust Agreement, Actuarial Study and Legal Opinion to DPI by June 30.

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