Governor Signs “Negative” Supplemental School Aid Bill for FY2014-15

PA 5 of 2015 (HB 4110) was signed into law this week with several changes to the FY 2014-15 School Aid Fund appropriation. In our January 16, 2015 eblast, we detailed the Consensus Revenue Estimating Conference (CREC) report of the General Fun/General Purpose (GF/GP) revenue reductions and the potential to use School Aid Fund (SAF) surplus funds to “fix” the GF/GP funding issues. As part of the Governors’ FY 2015-16 budget release that we detailed in the February 17, 2015 eblast, the current year funding changes were unveiled and much of what we saw then is reflected in the negative supplemental appropriations bill for school aid.

In total, the moves shifted costs or reduced funding from GF/GP to school aid, benefiting the GF/GP by $250,310,800. Other technical cost adjustments as agreed upon at the CREC were also included in the supplemental. Both House and Senate Fiscal Agencies have provided detailed analysis, which can be seen on our web page dedicated to the FY2014-15 budget.

Notable funding changes include:

• $167,110,800 - Fund shift of Community College Operations to the SAF
• $2,000,000 - Fund shift of University Retiree Health Care Costs to SAF
• $2,200,000 - Transfer of responsibility to fund Library MPSERS Cap from MDE budget to the SAF
• $80,000,000 - Elimination of the remaining 147d MPSERS additional payment to fund the MPSERS UAL

The shifting of Community College Operations to the SAF for FY2014-15 represents total funding for community colleges from school aid of $307,191,300! If you were to equate that to a per pupil dollar amount for K-12 operations it represents almost $204 per pupil! In addition, if you take the school aid funding being used for University Operations from FY2014-15 of $204,567,900 which equates to nearly $136 per K-12 pupil, the SAF is funding these two areas at the cost of $340 per K-12 pupil! That represents 4.1% of the current year $7,251 minimum foundation including equity payment!

With all the shifting of costs to the SAF and the fact that the Senate Fiscal Agency has released information that the GF/GP is now $171 million above the January CREC estimates, will we see if the state backs off of the raid on the SAF?

Elimination of Section 147d Funding!
The supplemental also included the elimination of the Section 147d funds which will most likely cause some accounting adjustments to be made at the district level. The funds received by the district in their November state aid payment will be the only funds received by the district for that categorical. The Office of Retirement Services (ORS) and the Michigan Department of Education (MDE) have been working on guidance which is expected to be released in the next few days. The bottom line on Section 147d funding is that expenses should be recorded to the extent of revenues that are received. The net effect is $0!

Check your budget and identify that what you estimated for Section147d revenue equals the expense you anticipated! We’ve heard a few districts may have used the “state-wide” payroll rate as estimated by ORS as a part of their budget for retirement expense and now realize the revenue and expense isn’t netting to $0 in their budget!

When we get more information, we will pass it on!

Audit and FID Date changes and More Transparency Reporting!
As part of PA 5 of 2015, Section 18 of the School Aid Budget, district reporting requirements were also changed. The date for submission of district financial information to the department was changed to November 1! If you recall in the current state School Aid Bill, this date was moved from November 15 to October 15. With the change it’s recommended that you discuss any implications on the timing of your district's audit with your auditing firm.

More transparency reporting was also added in the supplemental bill. If you recall the “Transportation Funding Bill” package included Senate Bill 80 (SB 80), which would require additional reporting of employee reimbursements on district’s websites if Proposal 15-1 passes. Language was added to the supplemental bill that includes three new requirements which were also in SB 80, so regardless of the vote on the ballot proposal, schools are now required to comply with additional transparency reporting.

The new requirements include posting of:

• Written policy governing procurement of supplies, materials and equipment.
• Written policy establishing specific categories of reimbursable expenses, as described in section 1254 (2) of the revised school code, MCL 380.1254
• Either the district’s accounts payable check register for the most recent school fiscal year or a statement of the total amount of expenses incurred by board members or employees of the district that were reimbursed by the district for the most recent school fiscal year.

We anticipate that MDE will be providing some guidance on the form and manner of the reporting, but for the most part this would be done on an annual basis. As we receive information we will forward it on to you!

Once again, we have posted the bill language and analysis from both the House and Senate Fiscal Agencies for your review on our web page dedicated to the FY 2014-15 budget.

Stay tuned for more information on the budget process as the House and Senate have both introduced budget documents; HB 4316 and SB 201. Using the Governor’s proposal as the starting point, we expected to start to see the direction each will take by Spring Break 2015!

David and Bob