New Directors WorkshopNew Directors Workshop
Nashville, TennesseeNashville, Tennessee
August 13-14, 2014August 13-14, 2014
Understanding the BEPUnderstanding the BEP
History of the BEP
1977 – Enactment of the Tennessee Foundation Program, a fundingformula that increased state contribution and used local propertyvalues to determine a county’s ability to pay
Late 1980’s – study of Tennessee Foundation Program
State Board of Education began working with various groups toreform education funding
TFP appropriations were approximately $900 million
Weaknesses in the TFP
•Inadequate
•No adjustment for inflation
•Targeted “formula” – inflexible funding
•Insignificant amount of funding resulting from consideration of localability to pay
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History of the BEP
1977 – Enactment of the Tennessee Foundation Program, a fundingformula that increased state contribution and used local propertyvalues to determine a county’s ability to pay
Late 1980’s – study of Tennessee Foundation Program
State Board of Education began working with various groups toreform education funding
TFP appropriations were approximately $900 million
Weaknesses in the TFP
•Inadequate
•No adjustment for inflation
•Targeted “formula” – inflexible funding
•Insignificant amount of funding resulting from consideration of localability to pay
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History of the BEP
1988 – 77 small school systems sued the state, claiming TN’sfunding formula was inequitable. TN Supreme Court agreedand ordered the state to develop a plan to correct the schoolfunding program.
1992 – passage of the Education Improvement Act (EIA),which implemented a new funding formula, called the BasicEducation Program
•Funding mechanism with components necessary forfunding a “basic” education
•No “targeted” funding
•Funding is flexible; BEP is a funding formula, not aspending plan
•Formula considers local ability to pay at a more significantlevel
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History of the BEP
2007 – BEP 2.0
Significant changes to the formula
•Teacher salary component $40,000
•Instructional component funded at 75% by state
•Medical insurance funded at 50%
•CDF eliminated
•Fiscal capacity model from CBER/Fox
•100% funding of at risk students
•ELL teachers funded at 1:20
•ELL translators funded at 1:200
Partially funded (approximately 50%)
No additional funding since 2007
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How Does the BEP Work?
Two Separate Parts:
•Funding
– Department of Education determines need.
– Based on 45 components and associated unit costs
•Equalization – based on Local Ability to Pay or Fiscal Capacity
–Determines state and local shares
–Fiscal Capacity Indices provided by:
»Tennessee Advisory Commission on IntergovernmentalRelations (TACIR)
»UT Center for Business and Economic Research (CBER)
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Determining Total Funding
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BEP Inputs
BEP
ADMs
Salaries,Benefits
CDF
UnitCosts
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BEP Components (45)
Instructional
•Regular Education
•Vocational Education
•Special Education
•Elementary & Secondary Guidance
•Elementary Art, Music and Physical Education
•Elementary & Secondary Librarians
•ELL Instructors and Translators
•Principals
•Elementary and Secondary Assistant Principals
•System-wide Supervisors (Regular, Special & Vocational Education)
•Special Education Assessment Personnel
•Social Workers & Psychologists
•Staff Benefits & Insurance
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BEP Components
Classroom
•K-12 At-risk Class Size Reduction
•Duty-free Lunch
•Textbooks
•Classroom Materials & Supplies
•Instructional Equipment
•Classroom Related Travel
•Vocational Center Transportation
•Technology
•Nurses
•Assistants (Instructional, Special Education & Library)
•Staff Benefits & Insurance
•Substitute Teachers
•Alternative Schools
•Exit Exams
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BEP Components
Non-classroom
•Superintendent
•System Secretarial Support
•Technology Coordinators
•School Secretaries
•Maintenance & Operations
•Custodians
•Non-instructional Equipment
•Pupil Transportation
•Staff Benefits & Insurance
•Capital Outlay
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Determining Need - ADMs
ADMs (average daily membership) drive the Formula– funded on prior year’s ADMs.
Funding months and weighting
•Month 2 – 12.5%Month 6 – 35%
•Month 3 – 17.5%Month 7 – 35%
5th month used for school-based positions
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Determining Need - ADMs
ADMs determine:
•Positions
– Teachers, supervisors, assistants etc. generated by ratios ofpositions to students
–Positions multiplied by unit costs to generate funding dollars
•Other Components
– ADMs are multiplied by a Unit Cost for supplies, equipment,textbooks, travel, capital outlay, etc.
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Sample How To Sheet - Positions
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Sample How To Sheet - Positions
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Sample How To Sheet - Positions
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Unit Costs – source and calculation
Equipment, supplies, travel, substitute teachers
•3 year average
•Average is inflated up two years
Textbooks
•3 year average
•Average is inflated up one year
Alternative Schools, Duty Free Lunch, Maintenance &Operations
•Prior year value is inflated up one year
Capital Outlay
•Square footage cost obtained from RS Means publication
•Formula – each ADM generates square footage, multiplied by a cost, thenamortized to arrive at a yearly cost
•Includes architect fees and equipment
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Sample How To Sheet – Unit Costs
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Cost Differential Factor (CDF)
Used to adjust BEP funding in systems where the cost of livingin the county is greater than the statewide average
Compares county wages in non-government industries tostatewide wages
Counties with above-average wages according to this indexreceive an increase
Increase is applied to salaries, retirement contributions andFICA contributions
Eliminated in BEP 2.0
Counties receiving an adjustment currently receive 50% of thecalculated CDF
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Sample How To Sheet - CDF
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Equalization
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Fiscal Capacity
CBER Model (model in BEP 2.0)
•Determines a county’s capacity to raise local revenues foreducation from its property and sales tax base.
•Each county’s fiscal capacity is the sum of:
–The County’s equalized assessed property plus IDBs multiplied by astatewide average property tax rate for education (1.1937) plus
–The County’s sales tax base multiplied by a statewide sales tax ratefor education (1.5883%)
•Each county’s fiscal capacity index is the ratio of its fiscalcapacity to the total statewide fiscal capacity
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Fiscal Capacity
TACIR Model (complex multiple-regression model)
•Per pupil own-source revenue
•Per pupil equalized property assessment
•Per pupil taxable sales
•Per capita income
•Tax Burden
•Service Burden
•Additional variables
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CBER Calculation Example
Volunteer County
Equalized Assessed Property plus IDBs (3 year average)$905,473,467
Sales Tax Base (3 year average)$274,689,881
Fiscal Capacity = ($905,473,467 x 1.1937% + ($274,689,881 x 1.5883%)
= $95,019,021 + $4,362,899
= $99,381,920
= $99.381.920 / $2,904,953,952 (state total)
Fiscal Capacity Index (CBER) = 3.42%
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Fiscal Capacity Used in FY 15 BEP
50% of TACIR Model & 50% of CBER Model
Volunteer County Index
•(TACIR Capacity Index x 50%) + (CBER Capacity Index x50%)
»(1.83% x 50%) + (1.71% x 50%)
» 0.915% + .855%
» = 1.77%
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Equalization
Volunteer County – calculation of state instructional share
Total instructional amount
generated by formula X LEA Fiscal Capacity X 70%
_________________________________________________________
LEA instructional amount generated by formula
= State Share of Instructional Funding
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Equalization
Volunteer County – calculation of state/local instructional shares
3,388,244,000 X 1.7% X .70
__________________________________ = 60.43%
45,411,000
45,411,000 X 60.43% = 27,444,000 (state share)
45,411,000 X 39.57% = 17,967,000 (local share)
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Equalization
Same formulas for classroom and non-classroom components
Total classroom amount
generated by formula X LEA Fiscal Capacity X 75%
________________________________________________
LEA classroom amount generated by formula
Total non-classroom amount
generated by formula X LEA Fiscal Capacity X 50%
________________________________________________
LEA non-classroom amount generated by formula
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Sample Allocation Sheet - Equalization
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Maintenance of Effort
Supplanting test used to insure maintenance of local effort
Governed by TCA 49-2-203 and TCA 49-3-314
Budgeted local revenue must be equal to or greater than theprevious year’s budgeted amount, unless ADMs havedecreased
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Sample - Maintenance of Effort Test
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Sample - Maintenance of Effort Test
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3% Fund Balance Test
If budgeted expenditures exceed revenues, LEA musthave 3% of operating expenditures in fund balancebefore budget will be approved by the State.
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Uses of Fund Balance
Governed by TCA 49-3-352(c)
Provisions applicable after operating budget isadopted
• . . . Shall be available to offset shortfalls of budgetedrevenues . . .
• . . . Shall be available to meet unforeseen increases inoperating expenses
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Uses of Fund Balance
The accumulated fund balance in excess of three percent (3%)of the budgeted annual operating expenses for the currentfiscal year may be budgeted and expended for any educationpurposes but must be recommended by the board ofeducation prior to appropriation by the local legislative body.
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Uses of Fund Balance
In other words, there is no requirement to have 3% ofoperating expenditures in fund balance – BUT LEAs cannotuse fund balance unless the fund balance exceeds 3% ofoperating expenditures.
If fund balance is in excess of 3% of operating expenditures,then the excess can be used for any education purpose, aslong as the use is first approved by the board of education.
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Sample – 3% Fund Balance Test
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Stability Provision
An LEA is on stability if the total state BEP funds it generates in thecurrent year are less than the total state BEP funds generated theprevious year.
Occurs most often due to declining ADMs.
Provides a one-year grace period before funding is reduced.
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Sample Allocation Sheet FY15 - Stability Provision
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Sample Allocation Sheet FY14 - Stability Provision
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Mandatory Increase
Allows systems on stability to receive additional funds forstate-mandated increases in salary, TCRS contributions orinsurance.
Receives mandatory increase amount for each BEP generatedposition.
Received in addition to stability amount
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Sample Allocation Sheet - Mandatory Increase
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For further information . . .
Tennessee Basic Education Program: An Analysis
•See legislative brief
State Board of Education
•BEP Blue Book – up to date data on BEP components
•Recommendations of BEP Review Committee
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QUESTIONS?
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FRAUD, WASTE or ABUSE
Citizens and agencies are encouraged to report fraud, waste or abuse in Stateand Local government.
NOTICE: This agency is a recipient of taxpayer funding. If you observe anagency director or employee engaging in any activity which you consider tobe illegal, improper or wasteful, please call the state Comptroller’s toll-freeHotline:
1-800-232-5454
Notifications can also be submitted electronically at:
http://www.comptroller.tn.gov/hotline
