April 12, 2013

Senate Appropriations Sub-Committee moves 2013-14 Budget Proposal
SB 182

This week the Senate introduced their 2013-14 School Aid bill which is slightly lower than the Governor’s spending level but changes the target areas which in the end, decreases general funding available at the local level. We’ll break down the bill citing the similarities and differences between the Governors recommendation, the current House version and the Senate version. Although we are still early in this process, the contentious points are starting to become more evident.

The Governor and the House seem to be continuing the categorical funding methodology, but the Senate seems to be providing fewer categorical opportunities but increasing district foundation levels. The long debate over “equity” seems to be the driving force for the Senate proposal, where the Governor and House are more focused on the “carrot and stick” approach and the continued effort to minimize retirement net costs at the district level. This is certainly gearing up to be an interesting budget debate, stay tuned for the latest in as these proposals move through the chambers!

You will notice that we used our March 20, 2013 eblast as a starting point for the following comparison. The information titled “Senate:” under each heading has been added to show their proposal for the sections listed. As usual, we will hit the highlights, but for a more in depth analysis please visit our web page dedicated to the 2013-14 School Aid budget.

Section 6(4) - Pupil Membership Blend
Governor: Continues the 10% February and 90% October calendar year count blend for FTE calculation for 2013-14.
House: Changes the membership blended count to be 80% of the October count and 20% of the FOLLOWING February count for 2013-14.
Senate: Changes the membership blended count to be 90% of the October count and 10% of the FOLLOWING February count for 2013-14.

Section 11S – Education Reserve Fund
Governor: No Language
House: No Language
Senate: Appropriates an additional $22 million into an Educational Reserve Fund for future use, essentially cutting funding that the House allocated to 2013-14.

Section 20 (8) and (9) - 100% Online Programs Foundation
Governor: No language.
House: Establishes a foundation allowance for 2014-15 for cyber school or pupils attending a district under seat time waiver for 100% online class. Foundation is equal to 80% of the districts foundation where it is located, not to exceed the public school academy foundation of $7,109.
Senate: No Language

Section 20 (10) - Foundation Allowances for District Consolidations or Annexations
Governor: No change from 2012-13.
House: Establishes the foundation of consolidated districts at the higher foundation of the consolidated districts or the per pupil weighted average of the consolidated districts plus $100, whichever is less.
Senate: Concurs with House proposal

Section 21f – Online Courses
Governor: Allow students in grade 5-12 to enroll in 2 online courses per semester with consent of the parent or legal guardian, or more than 2 courses if prior success with online instruction can be demonstrated. Also provides for a statewide catalog of courses offered to be housed by the Michigan Virtual University.
House: Revises Governors proposal to limit to 7-12 graders only, eliminates the statewide catalog maintained by MVU and establishes a cap on the amount a district would pay to 1/12 of the districts foundation allowance if on semesters or 1/18 of the foundation if on trimesters.
Senate: Concurs with Governor, plus adds language ensuring only one FTE in total would be counted between the resident and educating district, cyber school students can enroll in courses at other districts, the statewide catalog would be housed at MDE, and payment for online courses would be 50% upon enrollment and 50% upon successful completion.
 
Sections 22a and 22b - Foundation Allowance:
Governor: Maintains minimum foundation at $6,966; Small Class Size grants are eliminated but replaced with up to $100 per pupil for districts with a revised foundation level below $7,500, or up to an additional $50 for revised foundation levels over $7,500.
House: Maintains minimum foundation at $6,966; Small Class Size grants are continued but reduced to 70% of the district small class size grant allocation for 2012-13. All districts will receive at least the minimum foundation level of $6,966 regardless of the reduction in small class size grant.
Senate: Increases Basic Foundation by $50 for 2013-14 to $8,069 and increases Minimum Foundation by $100 for 2013-14 to $7,066. Small Class Size grants are continued but reduced to 85% of the district small class size grant allocation for 2012-13. Adds language that district must comply with Section 21f Online Courses, to receive 22b funds.

Section 22c – One-Time Foundation Equity Payment
Governor: Provides a one-time equity payment for all districts below $7,000 up to $34 per pupil, establishing the total of Section 22c and Sections 22a and 22b to be a minimum of $7,000 per pupil.
House: Concurs with Governors proposal.
Senate: Provides an equity payment ensuring all district are funded at least $7,100 per pupil. This establishes the total of Section 22c and Sections 22a and 22b to be a minimum of $7,100 per pupil. THIS PAYMENT WOULD BE BUILT INTO THE BASE ONGOING FUNDING IN SUBSEQUENT YEARS.

Section 22f – Best Practice Incentive Grants
Governor: Reduces best practice incentive funds from the current year $52 per pupil to $16 per pupil for 2013-14.
House: Reduces best practices to a $100 placeholder, meaning no per pupil allocation allocated.
Senate: Repeals this section; eliminates categorical
 
Section 22i – Tech Infrastructure Grants
Governor: Reduces funding to $13.5 million for 2013-14, down from $50 million for the current year. To be used to prepare for online growth assessment implementation in 2014-15.
House: Maintains the current year $50 million allocation for 2013-14. Districts would not be eligible for funds under this section if they do not comply with the “right to work” (RTW) Penalty language included below.
Senate: Repeals this section; eliminates categorical

Section 22j - District Performance Grants
Governor: Maintains current year funding of $30 million for 2013-14.
House: Increases allocation to $46.4 million for 2013-14 to cover an increase in district eligibility based on 2011-12 MEAP results. Districts would not be eligible for funds under this section if they do not comply with the “right to work” (RTW) Penalty language included below.
Senate: Concurs with House proposal with the exception of the “right to work” (RTW) penalty. No penalty in Senate proposal.

Section 22i and Section 22j RTW Penalty Language
Governor: No language.
House:  Districts and ISDs do not qualify for funding under these sections unless they satisfy all of the following:

• Has not done either of the following:
• Extended or renewed a contract after Dec. 10, 2012 and before Mar. 28, 2013 that would not have expired until after Sept. 30, 2013. Can waive this requirement by showing annual savings of 10% (employee or union wage concessions, health care benefits, pension contributions or other employment issues that are quantifiable).
• Extended, renewed, or entered into a contract after Dec. 10, 2012 and before Mar. 28, 2013 with the length of the new contract that exceeds the length of the prior contract it replaces. Can waive this requirement by showing annual savings of 10% (employee or union wage concessions, health care benefits, pension contributions or other employment issues that are quantifiable).
• Has not entered into a contract after Dec. 10, 2012 and before Mar. 28, 2013 that contains only terms that for a union security agreement, closed-shop provision, or other related provisions. These would include Letters of Agreement that many districts have passed or are contemplating related to the agency shop issue.

Senate: No language

Section 22g – Consolidation Innovation Grants
Governor: Eliminates one-time funding of grant for 2013-14.
House: Concurs with Governors proposal.
Senate: Concurs with Governors proposal.

Section 22m – Computer Adaptive Tests
Governor: No Language
House: No Language
Senate: Provides $18 million appropriation for the support of computer adaptive testing. Allows for year-long access to adaptive testing online for all students, statewide. MDE to facilitate provider selection.

Section 25 – Pupil Transfer Process
Governor: Maintains current language that implements for 2013-14 pupil transfer accounting for days of instruction to be reported to MDE for districts that receive pupils after the September count day and request funding for the transfer student for the number of instructional days of education provided by the receiving district.
House: Eliminates this section and replaces with Section 25e – Pupil Transfer Process.
Senate: Concurs with House proposal.

Section 25e – Pupil Transfer Process
Governor: No language.
House: Requires CEPI, MDE, ISD’s and Locals develop a pupil transfer application modeled after the graduation and drop out application which would allow districts to report student migration between districts between the October and February count days and adjust district FTE’s accordingly for state aid purposes.
Senate: Concurs with House proposal and adds a November 1, 2013 completion deadline for application process development.

Section 32d – Great Start Readiness Program
Governor: Major revisions to the program area including mandatory contracting out of 20% of allocated slots to public and private for-profit and non-profit community providers. Increases program allocation $65 million, totaling $174.6 million in 2013-14. Enhanced funding of individual slots to $3,625 for 2013-14 from $3,400, and provides an additional 16,000 half-day slots. 90% of program participants must live in families with income less than 300% of federal poverty level.
House: Increases current year funding by $50 million totaling $159 million for 2013-14 and provides for an additional 11,800 slots at the $3,625 funding level per slot. 80% of program participants must live in families with income less than 250% of federal poverty level.
Senate: Concurs with Governors proposal with the following exceptions. Services would be provided first to the neediest based on income, with all program participants being at or below 300% of the Federal Poverty Level. Providers would also set-a-side 10% of the funding for enrollment of children after the program start date. Also requires that the program policies that are more stringent between GSRP and Head Start are adhered to in delivering these services. Also allows for the ISD to retain any remaining slots if the department verifies that the ISD attempted to contract out the required 20% of their slots, but was not successful.
 
Section 56 –Special Education - Millage Equalization
Governor: Continues the current $36,881,100 appropriation for 2013-14 and returns the formula to that used prior to 2012-13. Establishes the taxable value per pupil equalization amount at $166,000 for 2013-14.
House: Concurs with Governors proposal, but revises the taxable value per pupil equalization amount to $169,900 for 2013-14. Also adds language that no individual ISD will receive more than 62.9% of the total allocation under this section.
Senate: Concurs with Governors appropriation level, but limits any one ISD allocation to 62.9% of the total. Establishes the taxable value per pupil equalization amount at $169,900 for 2013-14.

Section 62 – Vocational Education - Millage Equalization
Governor: Continues the current $9,000,000 appropriation for 2013-14 and returns the formula to that used prior to 2012-13. Establishes the taxable value per pupil equalization amount at $185,300 for 2013-14.
House: Concurs with Governors proposal, but revises the taxable value per pupil equalization amount to $186,500 for 2013-14. Also adds language that no individual ISD will receive more than 38.4% of the total allocation under this section.
Senate: Concurs with Governors appropriation level, but limits any one ISD allocation to 38.4% of the total. Establishes the taxable value per pupil equalization amount at $186,500 for 2013-14.

Section 81 – Intermediate School District (ISD) Operations
Governor: Maintains current year funding of $62.1 million for operations and $2 million for best practices for 2013-14.
House: Maintains current year funding of $62.1 million for operations but reduces best practices to a $100 placeholder for 2013-14.
Senate: Eliminates Best Practice incentives, but allocates the $2 million from best practices into the Section 81 base. Total allocation for 2013-14 proposed at $64.1 million.

Section 98 – Michigan Virtual University (MVU)
Governor: Increases 2013-14 funding by $10 million, totaling $14.4 million to operate Michigan Virtual School (MVU) and the Michigan Virtual Learning Research Institute (MVLRI).
House: Maintains current year funding of $4.4 million for 2013-14.
Senate: Concur with Governors proposal, but funds each Governor proposed component with a $100 placeholder’s, with the exception of the statewide catalog which would be funded through MDE rather than MVU. Also adds a MVU reporting requirement and a $100 placeholder for a statewide IT academy program.

Section 101 – Instructional Days and Hours
Governor: Maintains current law for the minimum instructional days and hours at 1,098 hours and a minimum of 170 instructional days. Allows for 38 hours of professional development for teachers as pupil instruction toward the required hours.
House: Maintains the current minimum required hours at 1,098 instructional hours, but increases minimum required days to 175 beginning in 2014-15. Eliminates the ability for the district to use 38 hours of professional development for teachers as pupil instruction toward the required hours.
Senate: Concurs with Governors proposal.

Section 147a – MPSERS – Cost Offset
Governor: Maintains current year funding of $155 million and calculation based on prior year payroll information as submitted to MPSERS for 2013-14.
House: Concurs with Governors proposal.
Senate: Repeals this section; eliminates categorical.

Section 147b – MPSERS – Reserve Fund
Governor: Eliminates reserve fund contribution for 2013-14. Balance available in fund is $174 million of which $150 million to be used in 2013-14 to partially fund Section 147c.
House: Concurs with Governors proposal.
Senate: Concurs with Governors proposal.

Section 147c – State Share of Unfunded Liabilities
Governor: Increases funding of MPSERS reforms based on P.A. 300 of 2012. Total allocation for 2013-14 proposed at $403.3 million. Used to “buy-down” unfunded accrued liability to provide the 20.96% of payroll district contribution cap on the liability.
House: Concurs with Governors proposal.
Senate: Concurs with Governors proposal and includes addition $1.3 million GF/GP to cover MPSERS rate cap for district libraries.

 Wow! That’s a quit a difference! So…what are the high points on the Senate version in a consolidated, easy to understand bullet format? Here we go:

• Membership Count: 90/10 based on October and the FOLLOWING February
• Basic Foundation increases by $50 to $8,069 and increases the Minimum Foundation $100 to $7,066; Small Class Size @ 85% of 2012-13 district allocation with a minimum of $7,066.
• Equity Payment of $34 for 2013-14, which is added to the minimum foundation in years forward, increasing the minimum foundation to $7,100.
• MPSERS Cost Offset categorical ELIMINATED
• MPSERS Buy Down stabilizes Unfunded Accrued Liability at 20.96%
• Section 25 eliminated but replaced with similar “student accounting/funding following the student” idea with a process development date deadline of November 1, 2013
• Best practices for both ISD and LEA’s ELIMINATED; funds for ISD’s of $2 million moved into the Section 81 base.
• Tech Infrastructure grants ELIMINATED; Performance funds maintained and allocation increased to accommodate qualifying districts. Language was ELIMINATED that penalizes districts that settle agreements putting off the implementation of right to work legislation
• Provides for current instructional days at 170 in 2014-15, continuing 1,098 hours minimum, and pupil count day submittal date changes as proposed by the Governor.

These are the high points and we have posted the detailed information on the web page specifically dedicated to the School Aid budget process for 2013-14. We will continue to follow the development of the proposal and get you the details you need to continue updating your budget scenarios!

David and Bob