1. State Fiscal Stabilization Fund Update to Arizona Association of School Business Officials July 22, 2009 Arizona Office of Economic Recovery Janice K. Brewer, Governor

2. Arizona’s Fiscal Crisis

3. State Fiscal Stabilization Fund (SFSF) Pursuant to the American Recovery and Reinvestment Act (ARRA) the U.S. Department of Education allocated $1.017 billion in SFSF monies to Arizona Funds available in FY 09, 10, & 11 to offset education cuts to K-12 and higher education as well as encourage progress along four reform criteria as stipulated in ARRA

4. Reform Criteria Develop rigorous college and career-ready standards and assessments Establish Pre-K through college data systems to track and foster performance and improvement Improve teacher effectiveness and the equitable distribution of qualified teachers Provide intensive support and interventions to the lowest performing schools

5. SFSF Has Two Components… Education Stabilization Fund (82%/$832 M) The State must use this fund for the support of public elementary, secondary and higher education Government Services Fund (18%/$185 M) The State may use this fund for education, public safety, or other government services solely at the discretion of the Governor

6. …Distributed in Two Phases Phase I: 2/3 rds of the SFSF is sent to the State following a relatively straight-forward initial application ($557M) Phase II: Remaining 1/3 rd will be distributed in the fall of 2009 following a more detailed state application to US DOE ($275M)

7. Rules of the Road: MOE and Mandatory Restorations Maintenance of Effort (MOE): State Funding cannot drop below FY 06 funding levels as long as federal funds exist Mandatory Restorations: K-12 and Higher Education must be funded at higher of 2008 or 2009 funding levels as long as federal funds exist For LEAs, the 2009 funding level is higher

8. FY 2009 Restorations = $433 M For FY 2009, the total restorations = $433 M Mandated Restoration for Higher Education for FY 2009 cuts: $183M Mandated Restoration for K-12: $250 M To offset reductions that occurred in the May budget fix for FY 2009 Note: No requirement to restore $123 M in reductions from January budget fix for FY 2009 pursuant to the ARRA guidance from U.S. Department of Education

9. FY 2010 Amounts = ??? FY 2010 Restoration and Award amounts cannot be determined until budget is final, due to ARRA Shortfall Clause

10. Shortfall Clause In the event that insufficient funds are available to restore all LEAs and IHEs to higher of 08/09 funding levels: The Governor shall allocate Education Stabilization funds between K-12 and Higher Education in proportion to the relative shortfall in State support

11. Award Estimates for FY10-FY11 Application6/30 Budget 7/6 Budget * = est. LEA Eligible Reductions 10: $300 M 11: $ 0 10: $439 M 11: $0 10: $191 M 11: $ ? SFSF Funds10: $223 M 11: $ 0 10: $257 M 11: $0 10: $191 M 11: $ 90 M* IHE Eligible Reductions 10: $226 M 11: $ 0 10: $244 M 11: $ 0 10: $ 53 M 11: $ ? SFSF Funds10: $176 M 11: $ 0 10: $142 M 11: $ 0 10: $ 53 M 11: $ 65 M*

12. Reporting For each year of funding, the state must provide reports regarding the uses, distribution, and effects of funds received among other requirements LEAs will be able to meet requirements through use of ADE grant management system Arizona Office of Economic Recovery has purchased reporting software package to facilitate ARRA reporting. First report due to US DOE on October 10

13. Process: Phase I, Step 1 Apply for funds: Governor Brewer filed an application on May 21 to qualify Arizona for the first two-thirds of the SFSF Arizona’s application was approved on June 4

14. Phase I, Step 2 Establish the application process for local education agencies (school districts and charter schools) and institutes of higher education (universities and community colleges) COMPLETED Create the application COMPLETED Establish accounting, transparency and reporting methodologies IN PROCESS

15. Phase I, Step 3 Evaluate applications: The process used to evaluate the applications will be straightforward, with attention paid to accounting and oversight strategies

16. Phase I, Step 4 Allocate Funds: Distribute funds to local education agencies and institutions of higher education in accordance with allocation guidelines Inform recipients of reporting requirements including the information mandated for quarterly reports to the U.S. Department of Education

17. Phase II Emphasis will be on education reform following ARRA mandates and guidance from the U.S. Department of Education The U.S. Department of Education will release the guidance and funding application for Phase II later this year

18. $832 Million (82% SFSF) State Fiscal Stabilization Fund (SFSF)* *based on initial application EDUCATION STABILIZATIONGOVERNMENT SERVICES Governor issues application for funds $1.017 Billion Funds available for ARRA administration and other uses at the discretion of the Governor with certain restrictions and reporting requirements. Available for use in FY 2009, 10, & 11. OSPB Office of Economic Recovery Shortfall Clause: The Governor shall allocate those funds between K-12 and Higher Education in proportion to the relative shortfall in State support. Funds available in FY 09, 10, & 11 to offset education cuts to K-12 and higher education as well as progress along four reform criteria as stipulated in ARRA K-12 $250 Million GENERAL STIPULATIONS The Governor must commit funds before September 30, 2011. For each year the state must provide reports regarding the uses, distribution, and effects of funds received among other requirements. 2/3 of total funds are distributed by the Department following the initial application (Phase I). 1/3 is distributed in FY 2010 after additional information including reform progress is received (Phase II). Restore K-12 Funding (greater of ’08 or ’09) Restore Higher Education (greater of ’08 or ’09) $185 Million (18% SFSF) FY 2009 Community Colleges $29 Million Universities $154 Million FY 2010 $433 Million$399 Million

19. For more information Arizona Office of Economic Recovery www.azrecovery.gov American Recovery and Reinvestment Act www.recovery.gov