Presentation on theme: "10/8/2014 1 E-12 Education Finance Shift Discussion Eric L. Nauman, Fiscal Analyst 296-5539."— Presentation transcript:
10/8/ E-12 Education Finance Shift Discussion Eric L. Nauman, Fiscal Analyst
10/8/ Getting “Shifty” Pre Shift Environment Aid Payment Schedule – No Shift Shift History & Summary Aid Payment Schedule – Pre & Post 2011 Session Aid Payment Schedule – After the 2011 Session Accounting for the Shifts Where to Get More Information Aid Payment Shift Property Tax Recognition Shift How A Legislative PTRS Works Current PTRS Under Unallotment Basic Terms & Shifted E-12 Programs Table of Contents
10/8/ Aid Payment Shift Current Payment 60/40 Auto- Buyback Final Payment Entitlement 90/10 73/27
10/8/ Basic Terms The percentage of an entitlement that is paid in the fiscal year after the state aid is generated. Difference between prior year’s entitlement and that year’s current payment (MS127A.45, subd. 9). The amount of state aid that the state pays to districts and charter schools in a given year. In most cases, an appropriation consists of a portion of an aid entitlement from the “current” fiscal year and a “final” payment from an aid entitlement from the prior fiscal year. Appropriation (Education Context) Final Payment Aid Entitlement 100 percent of the state aid a district or a charter school is eligible to receive in a given fiscal year. Aid may actually be paid in a separate fiscal year Current Payment The percentage of an entitlement that is paid in the fiscal year in which the state aid is generated. Payment Schedule A schedule which expresses the amount of education aid entitlements that are paid as a “current” payment and the amount that is paid as a “final” payment. Must add to 100%.
10/8/ Basic Terms An adjustment to the balance of current and final payment percentages which constitute the state aid appropriation made to schools. In an “unshifted” environment, school aid payments are comprised of a combination of 90% of the current year’s entitlement added to 10% of the prior year’s entitlement. Payment Shift The appropriation is metered to schools in 23 payments throughout the year – roughly every two weeks
10/8/ E-12 Programs on Payment Schedule General Education Abatement Aid Consolidation Transition Revenue Nonpublic Pupil Aid Nonpublic Pupil Transportation Aid Charter School Building Lease Aid Charter School Start-Up Aid Integration Aid Magnet School Start-Up Aid Success for the Future Tribal Contract Schools Special Education – Regular Special Education – Excess Cost Travel for Home-Based Services Transition Programs – Students with Disabilities Health and Safety Aid
10/8/ E-12 Approps on Payment Schedule Debt Service Equalization Aid Alternative Facilities Bonding Aid Deferred Maintenance Basic Support Grants for Libraries Multicounty, Multitype Library Systems Regional Library Telecommunications Aid School Readiness Early Childhood Family Education Aid Health and Developmental Screening Aid Community Education Adults with Disabilities Program Aid School Age Care Aid Adult Basic Education Aid
10/8/ School Payment Shift Entitlements (amounts generated by formula) $100 Current Payment$90 $100Appropriations 2013 Mechanics of Payment Schedule (Without Shift) $100 Fiscal Year Payment Schedule 90%/ 10% 90%/ 10% 90%/ 10% 90%/ 10% 90%/ 10% $90 Final Payment + $10 From FY $10 $100
10/8/ School Payment Shift Entitlements (amounts generated by formula) $100 Current Payment$90 $100Appropriations 2013 Mechanics of Aid Payment Shift ( biennium & Feb 2011 Fcst law) $100 Fiscal Year Payment Schedule 90%/ 10% 73%/ 27% 70%/ 30% 90%/ 10% 90%/ 10% $73 $90 $70 Final Payment + $10 From FY $10 + $30 + $27+ $10 $ 83 $97$120$100 Entitlements: Under a payment shift, there is not adjustment to entitlements. A payment shift creates a delay of WHEN schools receive aid. It does not reduce the amount.
10/8/ School Payment Shift Entitlements (amounts generated by formula) $100 Current Payment$90 $100Appropriations 2013 Where We’re At Today (2011 E-12 Education Bill) $100 Fiscal Year Payment Schedule 90%/ 10% 73%/ 27% 70%/ 30% 60%/ 40% 60%/ 40% $73 $60 $70 Final Payment + $10 From FY $10 + $30 + $27+ $40 $ 83 $97 $90$100 FY Biennium FY Biennium Confusing Comparison: The shift percentage in FY 2012 is 10 percentage points lower than the prior year, BUT is 30 percentage points lower than the Feb Fcst for FY 2012.
10/8/ Property Tax Recognition Shift (PTRS) Levy Recognition H.F UFARS Final Payment Unallotment Aid Cut Recognition Percentage
10/8/ Basic Terms Property Tax Recognition Shift (PTRS) A PTRS is an accounting entry that takes a portion of a district’s property tax revenue and moves it back one year. (ie. PT revenue that would otherwise be revenue in FY 2012 is shifted into FY 2011) The second step is to reduce state aid in an amount equal to the property taxes shifted forward. This generates one-time savings. The current PTRS was enacted by the legislature in The amount shifted will grow over time as property taxes grow.
10/8/ Property Tax Recognition Shift Calendar Year 2011 Oct Jan ‘11 May July 1 Property taxes paid FY 2011 FY 2012 Dec Property taxes paid Property tax revenue recognized by districts School property taxes currently paid in two separate years, BUT prior to FY 2011 both May and October payments were “recognized” by districts as revenue in the later fiscal year. Prior to Change Rules governing recognition dates based on statute and UFARS.
10/8/ Property Tax Recognition Shift Calendar Year 2011 Oct Jan ‘11 May July 1 Property taxes paid FY 2011 FY 2012 Dec Property taxes paid Property tax revenue recognized by districts Prior to ChangeLegislative Change – Creating a Shift Step #1 – Change Levy Recognition Step #2 – GenEd Appropriation Reduction Aid cut in FY 11 by $515 million* Increase Levy Revenue by $515 million * in FY 11 *Based on Feb. 11 Fcst
10/8/ Accounting for the Shift Levy Recognition MS 16A.152 Budget Balance Fund Balance Forecasts Automatic Buybacks One-time
10/8/ Shift Accounting Aid Payment Shift (73%, 70% & 90%) (60% in FY12 & later) Shift Savings Budget Balance & the Shifts (Dollars in 000s, Relative to Feb 11 Fcst) ($1,382,368) * $1,382,368 FY FY ($1,897,382) $1,316,124 Property Tax Recog Shift ($515,014) ($66,244) *Aid shift numbers include tax credits. FY Enacted Budget February 2011 Forecast FY Difference ($831,351) ($2,213,719) ($79,917) ($13,673) ($911,268) ($2,227,392)
10/8/ Contingent Shift Buy-Back Because shifts have historically been used as a defacto “budget reserve” a system was created in 2004 to pay them back automatically. This law remains in effect today. Shifts are paid back when the Commissioner of MMB “determines that there will be a positive unrestricted budgetary general fund balance at the close of the biennium.” In order of precedence: (1) Cash flow account, (2) budget reserve, (3) payment shift,(4) property tax recognition shift and two other small payments. This process used once already. Shifts from 2002 & 2003 sessions were paid back in two years.
10/8/ Contingent Shift Buy-Back MS.16A.152 Budget Reserve and Cash Flow Accounts If on the basis of a forecast of general fund revenues and expenditures, the commissioner of management and budget determines that there will be a positive unrestricted budgetary general fund balance at the close of the biennium, the commissioner of management and budget must allocate money to the following accounts and purposes in priority order: (1) the cash flow account established in subdivision 1 until that account reaches $350,000,000; (2) the budget reserve account established in subdivision 1a until that account reaches $653,000,000; (3) the amount necessary to increase the aid payment schedule for school district aids and credits payments in section 127A.45 to not more than 90 percent rounded to the nearest tenth of a percent without exceeding the amount available and with any remaining funds deposited n the budget reserve; (4) the amount necessary to restore all or a portion of the net aid reductions under section 127A.441 and to reduce the property tax revenue recognition shift under section 123B.75, subdivision 5, by the same amount………..
10/8/ History of E-12 Shifts Payment Shift Unallotments UFARS Recognition Percentage Contingent Buyback PTRS
10/8/ Education Budget Education Shift Savings – A History of Legislative Changes Fiscal Year 2003 Payment 83/17 ( $437.5 M) Nov Fcst TypeLevel Amount When Enacted (if known) Year Paid Back 2004** Payment 80/20 ($185.3 M) Nov Fcst 2004** PTRS 48.6 ( $230.3 M ) Feb Fcst 1983 PTRS 32% ($240.7 M) Partially in ’85, ’96-’ PTRS 24% shift reduced 1988 PTRS 27% shift expanded PTRS 31% shift expanded PTRS 37% shift expanded * PTRS 50% shift expanded Partially in ‘ PTRS 37.4% shift reduced 1996 PTRS 18.1% shift reduced 1997 PTRS 7% shift reduced 1997 Payment 90/10 shift reduced 1999 PTRS 0% PTRS eliminated *Previous shift high point in FY 1993, $688 million owed to schools. **2004 the Legislature passed the contingent shift buyback language.
10/8/ Education Budget Education Shift Changes – A History of Legislative Changes Fiscal YearTypeLevel Amount When Enacted (if known) Year Paid Back 2005 Payment 81.9/18.1 $116.3 M Nov Fcst 2005 Payment 84.3/15.7 $143.7 M Feb Fcst 2006 Payment 84.3/15.7 $355.0 M Nov Fcst 2006 PTRS 10.8% $265.9 M Nov Fcst 2006 PTRS 0% $72.9M Feb Fcst 2011* PTRS 48.6% ($561.5M ) Based on pos fcst 2010* Payment 73%/27% ( $1,160.4M) Based on pos fcst * Shifts initially created by Gubernatorial unallotment process and subsequently codified into law Payment 70%30% ($207.7M) Based on pos fcst 2012 Payment 60%/40% ($739.2M ) Based on pos fcst
10/8/ Briefing Summary There are two kinds of Education shifts -- Aid Payment Shifts -- Property Tax Recognition Shift Neither type makes any changes in the revenue that districts have to spend Shifts have a lengthy history in Minnesota budgeting -- Frequently used as a budget reserve Current law requires shifts to be paid back once MN forecasts positive budget balances in the general fund -- Reasonable assumptions project over $3.6 billion in contingent spending (based on current law) -- This spending will occur prior to having any resources available for other budget purposes
10/8/ Where to Get More Information Department of Education; PTRS Shift Explanation Letter nouncement/ pdf Senate Counsel, Research and Fiscal Analysis, This briefing will be archived at: Senate Counsel, Research and Fiscal Analysis, 2011 Final Education Act Aid Tracking: Final Education Act Property Tax Tracking: House Research School Finance Guide For Legislators
10/8/ Minnesota Senate E-12 Education Staff Minnesota Senate E-12 Education Staff Nonpartisan Staff Shelby McQuay, Research Analyst 651/ Eric L. Nauman, Fiscal Analyst 651/ Ann Marie Butler Yunker, Counsel 651/ Caucus Staff Greg Marcus, Education Committee Administrator 651/ Ed Cook, Republican Research 651/ Danna Elling, DFL Research 651/