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Optimizing Indirect Cost Rates for Texas Education Programs

This document outlines proposed changes to indirect cost rates under the Foundation School Program for Texas schools, including adjustments for special programs and spending constraints. It details the impact of House Bill 3646 and the requirements for minimum expenditure in various education programs. The focus is on increasing the indirect cost rate to 45% to allocate resources efficiently and address funding disparities. The text also addresses adjustments to weights, allotments, and spending mandates to improve the effectiveness of school funding.

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Optimizing Indirect Cost Rates for Texas Education Programs

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  1. Proposed SBOE Rules for Maximum Allowable Indirect Cost Under Foundation School Program Committee on School Finance/Permanent School Fund Workshop October 16, 2009 Thomas D. Canby, Jr. Director of Research and Technology Texas Association of School Business Officials

  2. Authority Change Indirect Cost Rate • House Bill 3646, 81st Texas Legislature, 2009 • TEC, §42.1541 • Directed SBOE • Increase by rule the indirect cost allotments • Special education, • Bilingual education, and • Career and technical education programs • Effective for School Year 2009-2010

  3. Special Program Spending Requirements • Pre-81st Legislative Session • School Year 2008-2009 • 100 % - 15 % Indirect Cost Rate = 85% Minimum Expenditure Requirement • Compensatory education program • Gifted and talented education, • Bilingual education, and • Special education programs • 90% Minimum Expenditure Requirement • Career and Technical Education • Unchanged for many years

  4. HB 3646 - SCE Allotment • HB 3646, §42.152(c), • Indirect Cost Rate State Compensatory Education increased • From up to 15% to 45%

  5. SCE Change Background • Late in 81st Legislative Session • HB 3636 Amended • Texas Education Code §42.152(c) • Statutory provisions for SCE indirect cost rate • Spending mandate increase for FSP Special Programs • Resulted from increase to FSP Basic Allotment • Unfunded mandate - significant • Legislative solution • Increase indirect cost rate from up to 15% to 45% • Necessary avoid unintended consequences to Regular Education

  6. Misnomer • Use of term indirect cost rate • Misnomer • Change to 45% • Necessary to free up resources to fund Regular Education Allotment

  7. Adjustments and Weights • Funding Weights • FSP Special Programs • Did not change – Have changed little since 1984

  8. Special Education Spending vs FSP Allotment

  9. G&T Spending vs FSP Allotment

  10. Bilingual Spending vs FSP Allotment

  11. Career Tech Ed Spending vs FSP Allotment

  12. SCE Spending vs FSP Allotment

  13. Spending Constraints • FSP Revenue Limits • Target Revenue Amounts per WADA • FSP State aid and Local Property Taxes • May vary $1,000 or more between similar districts

  14. Foundation School Program • Select Committee on Public School Finance Weights, Allotments, and Adjustments • HB 3646 • Comprehensive review of weights, • Allotments and • Adjustments under the public school finance system

  15. School Year 2009-2010 • Major changes • Funding instructional programs • Not practical • Disruptive

  16. There are numerous special provisions in the law that apply only to a few districts or students Simplified

  17. Equalized System • Combined state and local revenue add to target amount per student • Higher local property values • Higher tax collections • Lower state aid • Lower local property values • Lower tax collections • Higher state aid • Current year’s attendance

  18. Tier I • Basic Allotment • Starting place number set by legislature • 2008-2009 = $3,218 • 2009-2010 = $4,765 • ≈ 48 % • Exception: Districts with tax rate < $1.50 in 2005-2006 • Increase is smaller • Only a few significantly less

  19. Adjustments and Weights • Did not change – Have changed little since 1984 • Basic Allotment Adjustments • Environment • Cost of Education Index – Last updated 1990 • Small School • Mid-Sized School • Exception: Ch 41 Districts • Program Weights • Exception: New programs

  20. Environment Adjustments • Cross Roads ISD – 563 ADA

  21. Tier I Programs • Calculated from Adjusted Allotment • Regular Program • Special Education • Career and Technology • Gifted & Talented • Compensatory Education • Bilingual Education

  22. Tier I Programs • SCE = SCE Students * Program Weight * AA • Example: • 2008-2009 328.7 * .2 * $4,241 = $245,564 • 2009-2010 328.7 * .2 * $5,905 = $425,987

  23. Tier I • Programs Not calculated from AA • New Instructional Facilities • Transportation • High School Allotment

  24. Hold Harmless • Target Revenue Amounts per WADA • HB 1 • 2005-2006 • Old law 2006-2007 • HB 3646 • Old Law 2009-2010 + $120 • Old law includes HB 1 targets • $350 maximum • May vary $1,000 or more between similar districts • $60 per WADA minimum spending for salary increase

  25. HB1, HB 3646 Comparison • Cross Roads ISD @ 2008-2009 ADA

  26. Indirect Cost • Set at up to 45% in legislation for SCE • SBOE charged to: “…increase the indirect cost allotments … to reflect the increased total … funding reflected by the basic allotment….” • TEA Staff Recommendations will maintain spending near 2008-2009 levels

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