understanding the bep
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TASBO Breakout SessionMurfreesboro, Tennessee
November 16, 2011
Understanding the BEP
History of the BEP
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1977—enactment of Tennessee Foundation Program—funding formula that increased state’s contribution and used local property value to determine a county’s ability to pay.
Late 1980’s—Tennessee Foundation Program (TFP)State Board of Education began working with various
groups to reform education fundingTFP appropriations were around $900 millionWeaknesses in the TFP:
InadequateNo adjustment for inflationTargeted “formula”—inflexible fundingInsignificant amount of funding for consideration of local ability to
pay
History of the BEP
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1988—77 Small school systems sued the state, claiming TN’s funding formula was inequitable. TN Supreme Court agreed and ordered the state to develop a plan to correct the school funding program.
1992—passage of the Education Improvement Act, which implemented a new funding formula, called the Basic Education Program (BEP).Funding mechanism with components necessary for
funding a “basic” educationNo “targeted” funding.Funding is flexible: BEP is a funding formula not a
spending plan.Formula considers local ability to pay at a more
significant level.
History of the BEP
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2007—BEP 2.0 passedLargest increase in state funding for
education--$280 millionNot fully implemented. Cost to fully
implement-$205 million BEP (Old Model)
BEP 2.0 current BEP 2.0 full implementation
$36,515 Salary Unit Cost
$38,000 Salary Unit Cost
$40,000 Salary Unit Cost
100% TACIR 50% TACIR, 50% CBER 100% CBER100% CDF 50% CDF Eliminate CDF38.5% At Risk Funding
100% At Risk Funding 100% At Risk Funding
1:45 ELL, 1:450 Translators
1:30 ELL, 1:300 Translators
1:20 ELL, 1:200 Translators
65% State Share Instructional
70% State Share Instructional
75% State Share Instructional
FY12 BEP--By the Numbers
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950,244$3,754,398,00062,370$76.75$38,700560,000
FY12 BEP--By the Numbers
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950,244—Total funded ADMs$3,754,398,000—State Cost of BEP62,370—Professional positions generated
$76.75—Unit cost for Textbooks$38,700—Teacher Salary Unit Cost560,000—At Risk Students
BEP—many inputs
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BEP
Unit Costs
ADMsCDF
Fiscal Capacity
Salaries, Retirem
ent, Insuranc
e
How Does the BEP Work?
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Two Separate Parts:Funding—Department of Education determines need.
Local Ability to Pay or Fiscal Capacity—Tennessee Advisory Commission on Intergovernmental Relations (TACIR) and UT Center for Business and Economic Research (CBER) provide fiscal capacity indices.
Determining Need--ADMs
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ADMs (average daily membership) drive the Formula—funded on prior year’s ADMsRegular ADMs, Special Ed Identified and
Served, Vocational WFTEADMFunding months and weighting
month 2 - 12.5% month 6 - 35.0%month 3 - 17.5% month 7 - 35.0%
ADMs generate:Positions—teachers, supervisors, assistantsFunding dollars—ADMs are multiplied times a Unit Cost
Supplies, equipment, textbooks, travel, capital outlay, etc.
Unit Costs—source and calculation
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Equipment, supplies, travel, substitute teachers—actual costs from E-reporting.3 year averageaverage is inflated up two fiscal years
Textbooks—projected current year cost obtained from Office of Textbook Services3 year averageaverage is inflated up one year
Alternative Schools, Duty Free Lunch, Maintenance and OperationsPrior year value inflated up one year
Capital OutlaySquare footage cost obtained from RS Means publicationFormula –each ADM generates square footage, multiply times cost,
include architect fees and equipment. Then amortize to arrive at yearly cost.
BEP Components by Category (45)
Instructional Classroom Non-classroomRegular EducationVocational EducationSpecial EducationElementary GuidanceSecondary GuidanceElementary ArtElementary MusicElementary Physical EducationElementary Librarians (K-8)Secondary Librarians (9-12)ELL InstructorsELL TranslatorsPrincipalsAssistant Principals ElementaryAssistant Principals SecondarySystem-wide Instructional SupervisorsSpecial Education SupervisorsVocational Education SupervisorsSpecial Education Assessment PersonnelSocial WorkersPsychologistsStaff Benefits and Insurance
K-12 At-risk Class Size ReductionDuty-free LunchTextbooksClassroom Materials and SuppliesInstructional EquipmentClassroom Related TravelVocational Center TransportationTechnologyNursesInstructional AssistantsSpecial Education AssistantsLibrary AssistantsStaff Benefits and InsuranceSubstitute TeachersAlternative schoolsExit Exams
SuperintendentSystem Secretarial SupportTechnology CoordinatorsSchool SecretariesMaintenance and OperationsCustodiansNon-instructional EquipmentPupil TransportationStaff Benefits and InsuranceCapital Outlay
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Instructional Category—State Funds 70%
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Classroom Category—State Funds 75%
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Non-Classroom Category—State Funds 50%
Non-Classroom (continued)
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Per Pupil Own-Source Revenue
Per Pupil Equalized Property Assessment
Per Pupil Taxable Sales
Per Capita Income
Ratio of total equalized residential and farm assessment in each county divided by the total equalized property assessment. This variable is intended as a proxy for a county’s potential ability to export taxes. A high residential/farm ratio indicates a low ability to pass taxes on to non-residents.
Amount of local money that the school systems in the county report that they spend on education, divided by enrollment (average daily membership (ADM)
Total property assessment for the county area, equalized by the appropriate county appraisal-to-sales ratio, and then divided by ADM. This is a measure of the local ability to raise revenue.Local sales tax base divided by ADM-measure of the local ability to raise revenue.
Per capita income is included in the fiscal capacity model as a proxy measurement for ability to pay for education; and forall other local revenue not accounted for by property or sales taxes.Tax Burden
Service BurdenIncluded as a reflection of spending needs. It equals average daily membership divided by countypopulation. The greater the number of pupils per 100 residents, the greater the fiscal burden for each taxpayer.
Fiscal CapacityTACIR Model
CBER Model (New Model)The new formula determines a county’s
capacity to raise local revenues for education from its property and sales tax base.
Each county’s fiscal capacity is the sum of: The county’s equalized assessed property
plus IDBs multiplied by a statewide average property tax rate for education (1.1583%)
The county’s sales tax base multiplied by a statewide sales tax rate for education (1.5570%)
Each county’s fiscal capacity index is the ratio of its fiscal capacity to total statewide fiscal capacity.
CBER Calculation ExampleDavidson County
Equalized Assessed Property plus IDBs (3-year average): $ 19,130,924,199
Sales Tax Base (3-year average): $ 10,702,878,267
Fiscal Capacity =($19,130,924,199 x 1.1583%)+ ($10,702,878,267 x 1.5570%)
= $221,593,495+ $166,643,815
= $388,237,310
= $ 388,237,310 /$2,754,000,000 (state total)
Fiscal Capacity Index = 14.10%
Fiscal Capacity Used in FY12 BEP
50% of TACIR Model & 50% of CBER Model
Davidson County Index(TACIR Capacity Index x .50) + (CBER
Capacity Index x .50)14.50% x.50 + 14.10% x.50 =14.30%
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$ 3,200,000,000
Statewide BEP Instructional Salaries - State and Local
(before fiscal capacity)
30% Statewide Local Required Match
$ 960,000,000
Local Required Dollars for Instructional Funding
$ 280,000,000
BEP-Generated Davidson County Funding Before Fiscal
Capacity
14.30% Davidson County Fiscal Capacity
$ 137,280,000
Davidson County Local Share Requirement (rounded)
$ 142,720,000
Amount After Subtracting Local Match
49.0% State Percentage
51.0% Local Share Percentage
$ 870,000,000
Statewide BEP Classroom Funding - State and Local (before fiscal capacity)
25% Statewide Local Required Match $ 217,500,000
Local Required Dollars for Classroom Funding
$ 76,000,000
BEP-Generated Davidson County Funding Before Fiscal Capacity
14.30% Davidson County Fiscal Capacity $ 31,103,000
Davidson County Local Share Requirement (rounded)
$ 44,897,000 Amount After Subtracting Local Match
59.1% State Percentage40.9% Local Share Percentage
$ 1,600,000,000
Statewide BEP Non-Classroom Funding - State and Local (before fiscal capacity)
50% Statewide Local Required Match
$ 800,000,000 Local Required Dollars for Non-Classroom Funding
$ 150,000,000
BEP-Generated Davidson County Funding Before Fiscal Capacity
14.30% Davidson County Fiscal Capacity
$ 114,400,000
Davidson County Local Share Requirement (rounded)
$ 35,600,000 Amount After Subtracting Local Match
24.0% State Percentage76.0% Local Share Percentage
Instructional Funding
Classroom Funding
Non-Classroom Funding
Total State BEP Funding$223,217,000
Davidson County BEP Funding Example
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Coffee County BEP Funding Example
$ 3,200,000,000
Statewide BEP Instructional Salaries - State and Local (before fiscal
capacity)30% Statewide Local Required Match
$ 960,000,000
Local Required Dollars for Instructional Funding
0.80% Coffee County Area Fiscal Capacity $
7,680,000 Coffee County Area All Schools Local
Share Requirement (rounded)
50% Coffee County Schools Percent of ADM
$ 14,100,000
BEP-Generated Coffee County Schools Funding Before Fiscal
Capacity $
3,840,000 Coffee County School System Share
of Local Share Requirement $
10,260,000 Amount After Subtracting Local
Match73% State Percentage27% Local Share Percentage
$ 870,000,000
Statewide BEP Classroom Funding - State and Local (before fiscal capacity)
25% Statewide Local Required Match $ 217,500,000
Local Required Dollars for Classroom Funding
0.80% Coffee County Area Fiscal Capacity $
1,740,000 Coffee County Area All Schools Local
Share Requirement (rounded)50% Coffee County Schools Percent of ADM
$ 4,000,000
BEP-Generated Coffee County Schools Classroom Funding Before Fiscal Capacity
$ 870,000
Coffee County School System Share of Local Share Requirement
$ 3,130,000 Amount After Subtracting Local Match
22% State Percentage78% Local Share Percentage
Instructional Funding
Classroom Funding
Non-Classroom Funding $ 1,600,000,000
Statewide BEP Non-Classroom Funding - State and Local (before fiscal capacity)
50% Statewide Local Required Match $ 800,000,000
Local Required Dollars for Non-Classroom Funding
0.80% Coffee County Area Fiscal Capacity $
6,400,000 Coffee County Area All Schools Local Share
Requirement (rounded)50% Coffee County Schools Percent of ADM
$ 7,700,000
BEP-Generated Coffee County Schools Non-Classroom Funding Before Fiscal
Capacity $
3,200,000 Coffee County School System Share of
Local Share Requirement $
4,500,000 Amount After Subtracting Local Match58% State Percentage42% Local Share Percentage
Non-Classroom Funding
Total State BEP Funding$17,890,000
For further information….
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Tennessee Basic Education Program: An Analysishttp://www.comptroller1.state.tn.us/orea/See the Legislative Brief
State Board of Educationhttp://www.tn.gov/sbe/bep.htmlBEP Blue Book—up to date data on BEP
componentsRecommendations of BEP Review Committee
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Local Funding Requirements and the Basic Education
Program
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Maintenance of Effort• Supplanting test used to insure
maintenance of local effort.• Governed by:• TCA §49-2-203; and TCA §49-3-314• Budgeted local revenue must be equal or
greater than the previous year’s amount, unless ADMs have decreased.
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3% Fund Balance Test• If budgeted expenditures exceed
revenues, LEA must have 3% of operating expenditures in fund balance, before budget will be approved.
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TCA §49-3-352(c)Uses of Fund Balance
• Provisions applicable after operating budget is adopted.– …shall be available to offset shortfalls of
budgeted revenues…– …shall be available to meet unforeseen
increases in operating expenses.
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TCA §49-3-352(c)Uses of Fund Balance
• The accumulated fund balance in excess of three percent (3%) of the budgeted annual operating expenses for the current fiscal year may be budgeted and expended for any education purposes but must be recommended by the board of education prior to appropriation by the local legislative body.
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TCA §49-3-352(c)Uses of Fund Balance
• In other words, there is no requirement to have 3% of operating expenses in fund balance – but LEAs cannot use fund balance unless the fund balance exceeds 3% of operating expenses. If the fund balance is in excess of 3% of operating expenses, then the excess can be used for any education purposes, as long as the use is first approved by the board of education.
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