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Basics of School Finance

Basics of School Finance. Understanding Funding and Class Size. The General Assembly said in 2005:.

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Basics of School Finance

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  1. Basics of School Finance Understanding Funding and Class Size www.GeorgiaEducation.org

  2. The General Assembly said in 2005: No later than October 1, 2005 the State Board of Education shall develop rules and regulations requiring that each local board of education provide information as specified by the state board and which is not specifically made confidential by law, including school site budget and expenditure information and site average class size by grade, to members of the school council and the general public. www.GeorgiaEducation.org

  3. Understanding School Funding www.GeorgiaEducation.org

  4. Before asking what happens to the money a school receives, it is helpful to first know how schools are funded. www.GeorgiaEducation.org

  5. Why is this important to know? • The public cannot hold schools accountable for how money is spent unless it understands how the money is earned. • Finance drives policy. Policies are only ideas and promises until money is provided to implement them. • Tax reform efforts often conflict with education reform efforts since tax relief decreases the revenue available. • Effective advocacy requires understanding the financial impact of any proposal. www.GeorgiaEducation.org

  6. Sources of School Funding • Federal funds • Generally tied to specific programs with no discretion for spending • Traditionally targeted to students with special needs or greater educational deficits • State funds • Provides some funds for the operation and building of schools • About 39% of the state budget goes to K-12 education • Local funds • Funds to operate schools come from local property taxes • Funds to build schools come from a SPLOST or bonds www.GeorgiaEducation.org

  7. 2006 Average Revenue Per FTE* *FTE is full-time equivalent student. It will be explained further in this presentation. www.GeorgiaEducation.org

  8. Quality Basic Education • The Quality Basic Education Act (QBE) was passed in 1985 and revised several times since. This is the school funding formula. • Think of funding in terms of students, teachers and classes. The QBE formula determines which classes the state will fund, how many teachers it will pay for to teach those classes, and how many students can be in a class. www.GeorgiaEducation.org

  9. Which classes are funded? There are 19 instructional programs that are contained in the QBE formula. • These “programs” are what we commonly think of as grades and classes. • For example: Kindergarten, grades 9-12, and ESOL are three of the programs. • A weight is assigned to each program based on the comparative cost of each. Grades 9-12 are the lowest at 1.000; Special Education Category IV is the highest at 5.7995. www.GeorgiaEducation.org

  10. How many teachers does the state pay for? The state uses a funding ratio to decide how many teachers to pay for in each program. For instance, grades 1-3 receive funding for one teacher for every 17 FTEs. • This does not mean that grades 1-3 can have only 17 students. • The funding ratio and class size requirements are two different things. • The formula considers only how many FTEs there are in a school system, not where they are. • If a system had 54 FTEs in first grade, it would earn only 3 teachers even if those 54 students were in four different schools. www.GeorgiaEducation.org

  11. Why FTEs instead of students? • The FTE count is not the number of students in the seats, it is a measure of the time students spend in the 19 instructional programs. • Instead of counting the actual number of students in a school, weighted full-time equivalent (FTE or WFTE) student counts are used to measure enrollment. • State funding is completely based on the FTE count. • The following slides show two examples of how this works. www.GeorgiaEducation.org

  12. FTE Count Example • Susie Jones is a fourth grader who spends four of six periods a day in her regular classroom (weighted at 1.0319), one period in the English to Speakers of Other Languages class or ESOL (weighted at 2.5234), and one period in the gifted class (weighted at 1.6642). • Using the weights in the funding formula, Susie is counted as 1.3859 FTEs. [(4x1.0319)+(1x2.5234)+(1x1.6642)]/6 The weights and base amount are listed under QBE Funding at: http://www.gadoe.org/doe/finances/index.asp www.GeorgiaEducation.org

  13. Another FTE Count Example • Pierre Rogers is a 10th grader taking 5 regular classes and a Study Hall. • Study Hall is not an instructional program in QBE funding, so the system earns nothing for Pierre for that period. • Pierre is counted as 0.833 FTE[(5x1.000)+(1x0)]/6=0.833. www.GeorgiaEducation.org

  14. Putting It Together – The Money The weighted FTE is multiplied by the base amount of the state funds. • If the state set the base amount earned for each FTE at $2642, the system would earn $3,662 from the state to educate Susie ($2642 x 1.3859 = $3662). • Using the same base amount, the system earns $2,201 for Pierre($2642 x 0.833 = $2201). • Weights and base amount used are those set for FY 2008. www.GeorgiaEducation.org

  15. Putting It Together – The Teachers The FTEs counted in each program are totaled and the teacher funding ratio is applied. • Using Susie’s example: • 23 FTEs earn one fourth grade teacher • Susie is 0.688 FTE in the fourth grade program since she is in there only 4 periods of the day. (4x1.0319)/6=0.688 • A student in the fourth grade classroom all 6 periods would count as 1.0319 FTEs towards the 23 needed to earn a teacher. (6x1.0319)/6=1.0319 www.GeorgiaEducation.org

  16. There are also adjustments made to the base amount earned by a system to reflect the actual experience and education of the teachers in the classroom. Teachers earn money based upon years of service and education levels. This is not taken into account in the examples. www.GeorgiaEducation.org

  17. QBE Summary • QBE is the state funding formula. • It refers to grades and classes as programs. • It specifies which programs the state will fund. • It counts both how many students are in each program and how much of their day is spent in the program to get the FTE count. • The FTE count is used to determine how much money the system will receive and what personnel the state will pay for. www.GeorgiaEducation.org

  18. Local Five Mill Share • The local five mill share is the portion of the instructional costs the state requires each local school system to pay with locally raised funds. The funds are raised through property taxes. • Systems must contribute an amount equal to 5 mills of property tax generated locally to receive state funds. • The dollar amount of the five mill share is deducted from the amount earned by the system under the QBE formula. • The system receives the “net” earnings: QBE formula minus the local five mill share. The system does not send the amount of the five mills to the state or any other system. www.GeorgiaEducation.org

  19. Local Five Mill Example • A system earns $25.4 million under the QBE formula based upon the number and kinds of students it has. • The value of one mill in this county is $702,118. A property tax of 5 mills would raise $3.5 million (702,118 x 5 = 3.5 million). • The system then receives $21.9 million (25.4 – 3.5 = 21.9) from the state in QBE earnings. The $3.5 million raised locally remains part of the local school system budget. www.GeorgiaEducation.org

  20. Equalization • Equalization Grants are based on a formula that compares the relative property tax wealth of all counties in the state. • These grants provide additional funding to systems at or below the 75th percentile of per FTE property tax wealth in proportion to the amount of mills levied above the required 5 mills. (25% of systems have greater per FTE property wealth) www.GeorgiaEducation.org

  21. Equalization • The intent is to equalize the disparity between the systems that can easily raise local funds due to the high value of a mill and the systems that struggle to raise local funds due to the low value of a mill. (The value of property varies greatly from county to county.) • It is also an incentive for local systems to tax themselves in order to be eligible to receive equalization grants. www.GeorgiaEducation.org

  22. Equalization Example • A county’s property tax digest is $556 million based upon all property valued at 40% of its market value. • The system FTE count is 4,389. • The per FTE property tax wealth is $126,680 ($556 million/4,389=$126,680) • If 57% of the systems had a higher per FTE property tax wealth, this system would be at the 43rd percentile and eligible for an equalization grant. • The local board of education has levied a total of 16.8 mills (up to a limit of 20 mills). • The system receives an equalization grant of $936,056 based on the relative value of 11.8 mills(Levied 16.8 – Required 5= 11.8 Eligible for Equalization). www.GeorgiaEducation.org

  23. Summary of State Funding • State funding for education is based on: • The QBE formula earnings minus the local five mill share • Categorical grants such as transportation • Equalization grants • The Governor’s Education Finance Task Force is looking for a better, more easily understood way to fund education. See www.ie2.org for more information on the task force. www.GeorgiaEducation.org

  24. Allotment Sheet • An Allotment sheet is a spreadsheet computed by the Department of Education to show exact earnings under the QBE formula, the local five mill share, and categorical grants such as transportation for each school system in Georgia. • In 2000, allotment sheets were available by school and by system. Subsequent changes in the law deleted the school-based allotment sheet. • System allotment sheets be found at www.gadoe.org. www.GeorgiaEducation.org

  25. Expenditure Controls Expenditure controls govern spending of state QBE funds at the local level. • Under the A+ Reform Act of 2000, expenditure controls were set at the school (site) level. Each school earned funds based on their student population and the funds had to be spent at that school on the specific program for which they were earned (with the exception of an amount reserved for central office expenses). • Legislation has delayed these requirements and instead put system-level expenditure controls in place. Revenue is based on what the system as a whole earns. The funds then may be spent, with a few restrictions, at the discretion of the local board at any school in the system without regard to which school earned it. www.GeorgiaEducation.org

  26. Example of Expenditure Controls • The system receives $21.9 million for its 10 schools. • $17.7 million of that is earned for the 19 direct instruction programs under the QBE formula. • $700,000 of the $17.7 million is earned by the early intervention, remedial and alternative education programs. This money must be spent on these programs, but it can be spent at any school. • The local board of education can allocate the remaining $17 million to any school for any of the programs. • $600,000 was earned for media and can be spent for media materials or personnel at any school. www.GeorgiaEducation.org

  27. Example of Expenditure Controls • $170,000 was earned for 20 additional days of instruction. Up to $25,500 may be used to transport students to these opportunities for extra instruction. • The system earned $103,000 for professional development. 90% of it ($92,700) must be spent on professional development. The remainder may be reserved for administrative costs to the central office. • The remainder is spent on other indirect costs of instruction. www.GeorgiaEducation.org

  28. Pop Quiz • Which state legislative committees determine how revenues are raised? • Which state legislative committees determine how revenues are spent? It is important to know how the money flows if you want to advocate for either more money for education or for money to be spent in a different way. www.GeorgiaEducation.org

  29. Answers • House Ways and Means and Senate Finance committees determine how revenue is raised. Proposals for new taxes must originate in the House. • House and Senate Appropriations committees determine how the money is spent. Both committees have a K-12 education subcommittee. The budget originates in the House. www.GeorgiaEducation.org

  30. Local Funds • The amount of local funds available depends on the millage rate set by the local board of education and the value of a mill. • Funds raised locally stay locally and may be used as the local board decides. • State law requires that all local budgets be balanced – local school systems cannot spend more than they take in. www.GeorgiaEducation.org

  31. Local Budget Process • Superintendent submits budget to the local board of education (LBOE). • LBOE may hold budget workshops to discuss the budget. • LBOE holds public hearing(s) to take comments on proposed budget. • LBOE publishes proposed millage. • LBOE adopts budget. • Some systems allow principals some discretion over their budgets or at least part of it. In that case, principals submit their proposed budget to the Superintendent. www.GeorgiaEducation.org

  32. Discuss • If your school received $50,000 to spend, how would you recommend it be spent? • What advice would you give the local board of education regarding the annual budget? • Would you prefer the state funds be directed to the school level or the system level? Why? www.GeorgiaEducation.org

  33. The School Council’s Role in School Funding • By law, school councils are part of the accountability process. • The school council’s role is to monitor the process, ask questions as needed, and communicate information to the school community. • School Councils might ask: • What is the total amount of funds available at the school level? At the system level? • What choices have been made to shift funds? • Has the categorical breakdown of expenditures changed? For example, is more being spent for transportation and less on instruction? • Do the changes reflect a focus on student achievement? www.GeorgiaEducation.org

  34. Additional Resources • System level revenue and expenditures are on the state report card at www.gaosa.org. • The Governor’s Education Finance Task Force: www.ie2.org. • Information on the Georgia General Assembly is available at www.legis.state.ga.us and www.GeorgiaEducation.org www.GeorgiaEducation.org

  35. Understanding Class Size www.GeorgiaEducation.org

  36. Class Size Terms Funding ratio – the number of FTEs needed to earn state funds for a single class in each QBE program (for example, grades 4 and 5 earn one teacher for every 23 FTEs) www.GeorgiaEducation.org

  37. How many can be in a class? • The State Board of Education (rule 160-5-1-.08) and state law (O.C.G.A. 20-2-182) determines maximum class size. • The funding ratio for teachers per FTE and maximum class size are often confused. They are two separate policy choices. www.GeorgiaEducation.org

  38. Why are the class size and funding ratio different? • Students don’t come in even bunches. • If the funding ratio is 1:23 and a school has 47 students, it would earn 2.04 teachers. One class could have 23 students, the other 24. • If the class size maximum was 23, no class could exceed 23 and the students would have to be divided into 3 classes. One teacher would have to be paid almost completely with local funds. www.GeorgiaEducation.org

  39. Class Size Reductions • Class size reduction was a central part of the A+ Reform Act of 2000. • After the economic downturn in 2002, class size reductions were delayed and the system average maximum class size was created. www.GeorgiaEducation.org

  40. Class Size Reductions • Grades K-8 core classes are, however, now capped at 20% above the funding. • The core courses are math, science, social studies, and language arts. • There is no longer a system average for these classes. www.GeorgiaEducation.org

  41. Class Size Reductions • Core classes in grades 9-12 are also capped beginning in 2007-2008, but the local board can decide to allow any of those classes to go up to 32. • If the local board votes to raise the high school class size, they must notify the school council and the State Board. www.GeorgiaEducation.org

  42. Class Size • State Board of Education determines maximum class sizes not set in state law. State Board of Education Rules • The state board cannot reduce class sizes if it creates local costs. • Local boards can use local funds to reduce class size from state maximums. www.GeorgiaEducation.org

  43. Effect of Class Size • Although parents and teachers commonly seek funding to lower class sizes, the research is mixed on the effect of small class size on student achievement, particularly after grade 3. • There are other reasons to advocate for smaller classes, such as student safety in science labs. Teachers may desire smaller classes for better discipline or for the ability to spend more instructional time with each student. www.GeorgiaEducation.org

  44. What Does Matter Research shows some things have a major impact on student achievement: • The preparation of teachers to teach content, to differentiate instruction, and to manage the classroom • The readiness of students to learn when they arrive at school each day • The adjustment of instruction based on assessments www.GeorgiaEducation.org

  45. The School Council’s Role in Class Size • School councils were made part of the accountability process to balance the flexibility given to school systems. School councils should ask: • What are the class sizes by grade in our school? • Are class sizes within the law and regulations? • Are smaller classes needed? • Find out what the needs are for your school and then let the policymakers know. www.GeorgiaEducation.org

  46. Basics of School Finance Understanding Funding and Class Size www.GeorgiaEducation.org

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