understanding the bep

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



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



65% 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


$ 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



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)


Local Required Dollars for Classroom Funding


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


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)


Local Required Dollars for Non-Classroom Funding


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

http://www.comptroller1.state.tn.us/orea/

http://www.comptroller1.state.tn.us/orea/

http://www.tn.gov/sbe/bep.html

http://www.tn.gov/sbe/bep.html

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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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• 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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• 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.

understanding the bep

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