1. E-12 Education Finance Shift Discussion
Eric L. Nauman,
Fiscal Analyst
12/30/2018

2. Getting “Shifty” Unallotment Authority Aid Payment Shift
Basic Terms & Shifted E-12 Programs
Aid Payment Schedule – No Shift
Aid Payment Schedule – Legislatively Enacted Shift
Aid Payment Schedule – Gubernatorial Unallotments
Property Tax Recognition Shift
Pre Shift Environment
How A Legislative PTRS Works
Current PTRS Under Unallotment
Cash Flow Delay – M.S. 127A.46
Shift History
Where to Get More Information
12/30/2018

3. Unallotment Authority
MMB
“Defer”
Current Biennium
Budget Reserve
Gubernatorial Authority
16A.152
“Suspend”
12/30/2018

4. Unallotment Authority – 16A.152
Statutory Language in Your Packets
Key Language for E-12 Unallotments
(b) An additional deficit shall, with the approval of the governor, and after consulting the legislative advisory commission, be made up by reducing unexpended allotments of any prior appropriation or transfer. Notwithstanding any other law to the contrary, the commissioner is empowered to
prior statutorily created obligations which would prevent effecting such reductions.
defer or suspend
Spreadsheets Also Included in Packets
12/30/2018

5. School Payment Shift H.F.2323 Auto-Buyback 90/10 Unallotment 73/27
Current Payment
Final Payment
12/30/2018

6. Basic Terms Aid Entitlement Current Payment Final Payment
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.
Final Payment
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).
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%.
Appropriation
The amount of state aid that the legislature pays to districts and charter schools in a given year. In many 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.
12/30/2018

7. Basic Terms Payment Shift
An adjustment to the balance of current and final payment percentages which constitute the state aid appropriation made to schools.
For most state aid schools’ payments are comprised of a combination of 90% of the current year’s entitlement added to 10% of the prior year’s entitlement.
The appropriation is metered to schools in 23 payments throughout the year – roughly every two weeks
12/30/2018

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
12/30/2018

9. 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
12/30/2018

10. School Payment Shift Mechanics of Payment Schedule (Without Shift)
Fiscal Year
2009
2010
2011
2012
2013
Entitlements
(amounts generated by formula)
$100
$100
$100
$100
$100
Payment
Schedule
90%/
10%
90%/
10%
90%/
10%
90%/
10%
90%/
10%
From
FY 2008
Current Payment
$90
$90
$90
$90
$90
Final Payment
+ $10
+ $10
+ $10
+ $10
+ $10
Appropriations
$100
$100
$100
$100
$100
12/30/2018

11. School Payment Shift
Mechanics of Aid Payment Shift (Legislative Enacted)
Fiscal Year
2009
2010
2011
2012
2013
Entitlements
(amounts generated by formula)
$100
$100
$100
$100
$100
Payment
Schedule
90%/
10%
73%/
27%
73%/
27%
73%/
27%
73%/
27%
From
FY 2008
Current Payment
$90
$73
$73
$73
$73
Final Payment
+ $10
+ $10
+ $27
+ $27
+ $27
Appropriations
$100
$ 83
$100
$100
$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.
Under Current Law: An enacted shift is paid back when forecasted revenues EXCEED forecasted expenditures (16A.152, subd. 2). No legislative action is required.
12/30/2018

12. School Payment Shift Where We’re At (Gubernatorial Unallotment)
FY Biennium
FY Biennium
Fiscal Year
2009
2010
2011
2012
2013
$100
Entitlements
(amounts generated by formula)
$100
$100
$100
$100
Payment
Schedule
90%/
10%
73%/
27%
73%/
27%
90%/
10%
90%/
10%
From
FY 2008
Current Payment
$90
$73
$73
$90
$90
Final Payment
+ $10
+ $10
+ $27
+ $27
+ $10
Appropriations
$100
$ 83
$100
$117
$100
Returning to “Real Numbers”: In the Nov ’09 Forecast, the payback of the $17 in hypothetical is equal to $1.2 billion. This is a legal liability that the state must pay.
If codified, the forecasted 90/10 schedule in the next biennium remains at 73/27 and reduces E-12 expenditures by $1.2 billion AND triggers the automatic buyback language based on positive forecasted revenues and expenditures.
12/30/2018

13. Property Tax Recognition Shift (PTRS)
H.F.2323
UFARS
Aid Cut
Unallotment
Recognition Percentage
Levy Recognition
Final Payment
12/30/2018

14. 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.
12/30/2018

15. Property Tax Recognition Shift
Calendar Year 2011
Prior to Change
FY 2011
FY 2012
Jan ‘11
May
July 1
Oct
Dec
Property taxes paid
Property taxes paid
Property tax revenue recognized by districts
Property tax revenue recognized by districts
School property taxes currently paid in two separate years, BUT prior to unallotments both May and October payments were “recognized” by districts as revenue in the later fiscal year.
Rules governing recognition dates based on statute and UFARS.
12/30/2018

16. Property Tax Recognition Shift
Calendar Year 2011
Prior to Change
Legislative Change – Creating a Shift
FY 2011
FY 2012
Jan ‘11
May
July 1
Oct
Dec
Step #1 –Change Levy Recognition
Property taxes paid
Property taxes paid
Property tax revenue recognized by districts
Property tax revenue recognized by districts
Legislatively Enacted
Increase Levy Revenue by
$561.5 million * in FY 11
Aid cut in FY 11 by
$561.5 million*
GenEd appropriation cut w/legislative action
Step #2 – GenEd Appropriation Reduction
*Based on Nov. 09 Fcst
12/30/2018

17. Property Tax Recognition Shift
Calendar Year 2011
PTRS Under Unallotment
FY 2011
FY 2012
Jan ‘11
May
July 1
Oct
Dec
Step #1 –Change Levy Recognition
Property taxes paid
Property taxes paid
Property tax revenue recognized by districts
Property tax revenue recognized by districts
Increase Levy Revenue by
$561.5 million * in FY 11
UFARS Definition altered to require earlier recognition
Step #2 – GenEd Appropriation Reduction
Aid cut in FY 11 by
$561.5 million*
Governor used unallotment authority to reduce GenEd appropriation.
Will not be automatically bought back because of adjustment to UFARS definition unless legislature mandates a change.
*Based on Nov. 09 Fcst
12/30/2018

18. 127A.46 Change in Payment of School Aids (Cash Flow)
Sept 1
1986 Session
Cash Flow Borrowing
District Reserve
Cash Balances
May 30
12/30/2018

19. Statutory General Fund shortfalls expected in March-May 2010
Shortfalls driven by inadequate cash available to meet the payment obligations of the General Fund.
Chart based on Minnesota Management & Budget cash flow analysis.
12/30/2018

20. Cash Flow Delay – 127A.46 Statutory Language in Your Packets
Original Authority Passed in 1986
Original statute applied only to fiscal year 1987.
The 1987 legislature amended the language to make it part of permanent statute.
FY 2010 is the first occasion in which this statute has been applied
12/30/2018

21. Cash Flow Delay – 127A.46
Requires MMB to modify school district payments to reduce the need for short-term borrowing by the state.
Establishes a formula for delaying state aid payments
Formula is a ceiling. State cannot delay payments greater than the formula. Formula must be fully implemented prior to cash-flow borrowing by the state.
Formula recognizes district cash, investments, certificates of indebtedness.
Formula has not been changed since original 1986 law.
Does not apply to charter schools.
Payment modifications may not begin before Sept. 1 & must end by May 30
Unlike the payment shift, this delay only operates within the confines of a single fiscal year.
12/30/2018

22. Cash Flow – 127A.46
MMB and the MDE will implement statute on March 15, March 30, & April 15 school district aid payments
$423.3 million will be delayed from 231 school districts (69% of total)
Approximately 614,000 resident pupil units (65% of total) are educated in affected districts.
In implementation, the MDE adjusted formula to reduce the amount of funds delayed and create a higher threshold before districts are affected by the delay.
April 30 and May 15 payment will return to normal schedule
May 30 payment will be normal -- plus it will pay the entire delayed $423.3 million from March and April.
See district-by-district data run.
12/30/2018

23. Recognition Percentage
History of E-12 Shifts
Unallotments
UFARS
PTRS
Contingent Buyback
District Cash flow
Recognition Percentage
Payment Shift
12/30/2018

24. Education Budget
Education Shift Savings – A History of Legislative Changes
Amount
(if known)
Year Paid
Back
Fiscal Year
Type
Level
PTRS % ($240.7 M) Partially in ’85, ’96-’99
PTRS % shift reduced
PTRS % shift expanded
PTRS % shift expanded
PTRS % shift expanded
1993* PTRS % shift expanded Partially in ‘94
PTRS % shift reduced
PTRS % shift reduced
PTRS % shift reduced
Payment / shift reduced
PTRS % PTRS eliminated
Payment / ( $437.5 M) Nov Fcst
2004** Payment / ($185.3 M) Nov Fcst
2004** PTRS ( $230.3 M ) Feb Fcst
*Previous shift high point in FY 1993, $688 million owed to schools.
**2004 the Legislature passed the contingent shift buyback language.
12/30/2018

25. Education Budget
Education Shift Savings – A History of Legislative Changes
Amount
(if known)
Year Paid
Back
Fiscal Year
Type
Level
Payment / $116.3 M Nov Fcst
Payment / $143.7 M Feb Fcst
Payment / $355.0 M Nov Fcst
PTRS % $265.9 M Nov Fcst
PTRS % $72.9M Feb Fcst
2010* Payment %/27% $1,160.4M Scheduled for FY 2012.
2011* PTRS % $561.5M Unknown
* Shifts created by Gubernatorial unallotment process.
12/30/2018

26. Contingent Shift Buy-Back
2004 forecast bill (Laws 2004, Ch. 272, Art. 3, Sect. 1) created a structure to pay shifts back automatically.
In order of precedence: (1) Cash flow account, (2) budget reserve, (3) payment shift and (4) property tax recognition shift
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.”
This process used once already. Shifts from 2002 & 2003 sessions were paid back in two years.
12/30/2018

27. Where to Get More Information
Senate Counsel, Research and Fiscal Analysis,
This briefing will be archived at:
Department of Education; PTRS Shift Explanation Letter
Senate Counsel, Research and Fiscal Analysis,
Unallotment Issue Brief:
Senate Counsel, Research and Fiscal Analysis,
Gubernatorial Unallotment Tracking:
12/30/2018

28. Where to Get More Information
Senate Counsel, Research and Fiscal Analysis,
E-12 Budget Detail, End of Session, Unallotments, November Forecast:
Department of Management and Budget, Payment Delay Letter:
Department of Management and Budget, Payment Delay Data Run:
Department of Management and Budget, Cash Flow Report:
12/30/2018

29. Minnesota Senate E-12 Education Staff
Nonpartisan Staff
Shelby McQuay,
Research Analyst
651/
Eric Nauman,
Fiscal Analyst
651/
Ann Marie Butler Yunker,
Counsel
651/
Caucus Staff
Daron Korte,
Committee Administrator
651/
Jeri Wenzel,
Committee Legislative Assistant
651/
Danna Elling,
K-12, Majority Research
651/
Ed Cook,
Republican Research
651/
12/30/2018