Basics of School Finance

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Basics of School Finance

• Understanding Funding and Class Size

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The General Assembly said in 2005

• No later than October 1, 2005 the State Board of
  Education shall develop rules and regulations
  requiring that each local board of education
  provide information as specified by the state
  board and which is not specifically made
  confidential by law, including school site budget
  and expenditure information and site average
  class size by grade, to members of the school
  council and the general public.

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Understanding School Funding
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• Before asking what happens to the money a school
  receives, it is helpful to first know how schools
  are funded.

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Why is this important to know?

• The public cannot hold schools accountable for
  how money is spent unless it understands how the
  money is earned.
• Finance drives policy. Policies are only ideas
  and promises until money is provided to implement
  them.
• Tax reform efforts often conflict with education
  reform efforts since tax relief decreases the
  revenue available.
• Effective advocacy requires understanding the
  financial impact of any proposal.

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Sources of School Funding

• Federal funds
• Generally tied to specific programs with no
  discretion for spending
• Traditionally targeted to students with special
  needs or greater educational deficits
• State funds
• Provides some funds for the operation and
  building of schools
• About 39 of the state budget goes to K-12
  education
• Local funds
• Funds to operate schools come from local property
  taxes
• Funds to build schools come from a SPLOST or bonds

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2006 Average Revenue Per FTE
FTE is full-time equivalent student. It will be
explained further in this presentation.
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Quality Basic Education

• The Quality Basic Education Act (QBE) was passed
  in 1985 and revised several times since. This is
  the school funding formula.
• Think of funding in terms of students, teachers
  and classes. The QBE formula determines which
  classes the state will fund, how many teachers it
  will pay for to teach those classes, and how many
  students can be in a class.

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Which classes are funded?

• There are 19 instructional programs that are
  contained in the QBE formula.
• These programs are what we commonly think of as
  grades and classes.
• For example Kindergarten, grades 9-12, and ESOL
  are three of the programs.
• A weight is assigned to each program based on the
  comparative cost of each. Grades 9-12 are the
  lowest at 1.000 Special Education Category IV is
  the highest at 5.7995.

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How many teachers does the state pay for?

• The state uses a funding ratio to decide how many
  teachers to pay for in each program. For
  instance, grades 1-3 receive funding for one
  teacher for every 17 FTEs.
• This does not mean that grades 1-3 can have only
  17 students.
• The funding ratio and class size requirements are
  two different things.
• The formula considers only how many FTEs there
  are in a school system, not where they are.
• If a system had 54 FTEs in first grade, it would
  earn only 3 teachers even if those 54 students
  were in four different schools.

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Why FTEs instead of students?

• The FTE count is not the number of students in
  the seats, it is a measure of the time students
  spend in the 19 instructional programs.
• Instead of counting the actual number of students
  in a school, weighted full-time equivalent (FTE
  or WFTE) student counts are used to measure
  enrollment.
• State funding is completely based on the FTE
  count.
• The following slides show two examples of how
  this works.

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FTE Count Example

• Susie Jones is a fourth grader who spends four of
  six periods a day in her regular classroom
  (weighted at 1.0319), one period in the English
  to Speakers of Other Languages class or ESOL
  (weighted at 2.5234), and one period in the
  gifted class (weighted at 1.6642).
• Using the weights in the funding formula, Susie
  is counted as 1.3859 FTEs. (4x1.0319)(1x2.5234)
  (1x1.6642)/6

The weights and base amount are listed under QBE
Funding at http//www.gadoe.org/doe/finances/inde
x.asp
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Another FTE Count Example

• Pierre Rogers is a 10th grader taking 5 regular
  classes and a Study Hall.
• Study Hall is not an instructional program in QBE
  funding, so the system earns nothing for Pierre
  for that period.
• Pierre is counted as 0.833 FTE (5x1.000)(1x0)/6
  0.833.

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Putting It Together The Money

• The weighted FTE is multiplied by the base amount
  of the state funds.
• If the state set the base amount earned for each
  FTE at 2642, the system would earn 3,662 from
  the state to educate Susie (2642 x 1.3859
  3662).
• Using the same base amount, the system earns
  2,201 for Pierre (2642 x 0.833 2201).
• Weights and base amount used are those set for FY
  2008.

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Putting It Together The Teachers

• The FTEs counted in each program are totaled and
  the teacher funding ratio is applied.
• Using Susies example
• 23 FTEs earn one fourth grade teacher
• Susie is 0.688 FTE in the fourth grade program
  since she is in there only 4 periods of the day.
  (4x1.0319)/60.688
• A student in the fourth grade classroom all 6
  periods would count as 1.0319 FTEs towards the 23
  needed to earn a teacher. (6x1.0319)/61.0319

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• There are also adjustments made to the base
  amount earned by a system to reflect the actual
  experience and education of the teachers in the
  classroom. Teachers earn money based upon years
  of service and education levels. This is not
  taken into account in the examples.

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QBE Summary

• QBE is the state funding formula.
• It refers to grades and classes as programs.
• It specifies which programs the state will fund.
• It counts both how many students are in each
  program and how much of their day is spent in the
  program to get the FTE count.
• The FTE count is used to determine how much money
  the system will receive and what personnel the
  state will pay for.

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Local Five Mill Share

• The local five mill share is the portion of the
  instructional costs the state requires each local
  school system to pay with locally raised funds.
  The funds are raised through property taxes.
• Systems must contribute an amount equal to 5
  mills of property tax generated locally to
  receive state funds.
• The dollar amount of the five mill share is
  deducted from the amount earned by the system
  under the QBE formula.
• The system receives the net earnings QBE
  formula minus the local five mill share. The
  system does not send the amount of the five mills
  to the state or any other system.

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Local Five Mill Example

• A system earns 25.4 million under the QBE
  formula based upon the number and kinds of
  students it has.
• The value of one mill in this county is 702,118.
  A property tax of 5 mills would raise 3.5
  million (702,118 x 5 3.5 million).
• The system then receives 21.9 million (25.4
  3.5 21.9) from the state in QBE earnings. The
  3.5 million raised locally remains part of the
  local school system budget.

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Equalization

• Equalization Grants are based on a formula that
  compares the relative property tax wealth of all
  counties in the state.
• These grants provide additional funding to
  systems at or below the 75th percentile of per
  FTE property tax wealth in proportion to the
  amount of mills levied above the required 5
  mills. (25 of systems have greater per FTE
  property wealth)

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Equalization

• The intent is to equalize the disparity between
  the systems that can easily raise local funds due
  to the high value of a mill and the systems that
  struggle to raise local funds due to the low
  value of a mill. (The value of property varies
  greatly from county to county.)
• It is also an incentive for local systems to tax
  themselves in order to be eligible to receive
  equalization grants.

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Equalization Example

• A countys property tax digest is 556 million
  based upon all property valued at 40 of its
  market value.
• The system FTE count is 4,389.
• The per FTE property tax wealth is 126,680 (556
  million/4,389126,680)
• If 57 of the systems had a higher per FTE
  property tax wealth, this system would be at the
  43rd percentile and eligible for an equalization
  grant.
• The local board of education has levied a total
  of 16.8 mills (up to a limit of 20 mills).
• The system receives an equalization grant of
  936,056 based on the relative value of 11.8
  mills (Levied 16.8 Required 5 11.8 Eligible
  for Equalization).

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Summary of State Funding

• State funding for education is based on
• The QBE formula earnings minus the local five
  mill share
• Categorical grants such as transportation
• Equalization grants
• The Governors Education Finance Task Force is
  looking for a better, more easily understood way
  to fund education. See www.ie2.org for more
  information on the task force.

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Allotment Sheet

• An Allotment sheet is a spreadsheet computed by
  the Department of Education to show exact
  earnings under the QBE formula, the local five
  mill share, and categorical grants such as
  transportation for each school system in Georgia.
  
• In 2000, allotment sheets were available by
  school and by system. Subsequent changes in the
  law deleted the school-based allotment sheet.
• System allotment sheets be found at www.gadoe.org.

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Expenditure Controls

• Expenditure controls govern spending of state QBE
  funds at the local level.
• Under the A Reform Act of 2000, expenditure
  controls were set at the school (site) level.
  Each school earned funds based on their student
  population and the funds had to be spent at that
  school on the specific program for which they
  were earned (with the exception of an amount
  reserved for central office expenses).
• Legislation has delayed these requirements and
  instead put system-level expenditure controls in
  place. Revenue is based on what the system as a
  whole earns. The funds then may be spent, with a
  few restrictions, at the discretion of the local
  board at any school in the system without regard
  to which school earned it.

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Example of Expenditure Controls

• The system receives 21.9 million for its 10
  schools.
• 17.7 million of that is earned for the 19 direct
  instruction programs under the QBE formula.
• 700,000 of the 17.7 million is earned by the
  early intervention, remedial and alternative
  education programs. This money must be spent on
  these programs, but it can be spent at any
  school.
• The local board of education can allocate the
  remaining 17 million to any school for any of
  the programs.
• 600,000 was earned for media and can be spent
  for media materials or personnel at any school.

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Example of Expenditure Controls

• 170,000 was earned for 20 additional days of
  instruction. Up to 25,500 may be used to
  transport students to these opportunities for
  extra instruction.
• The system earned 103,000 for professional
  development. 90 of it (92,700) must be spent
  on professional development. The remainder may
  be reserved for administrative costs to the
  central office.
• The remainder is spent on other indirect costs of
  instruction.

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Pop Quiz

1. Which state legislative committees determine how
   revenues are raised?
2. Which state legislative committees determine how
   revenues are spent?

It is important to know how the money flows if
you want to advocate for either more money for
education or for money to be spent in a different
way.
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Answers

1. House Ways and Means and Senate Finance
   committees determine how revenue is raised.
   Proposals for new taxes must originate in the
   House.
2. House and Senate Appropriations committees
   determine how the money is spent. Both
   committees have a K-12 education subcommittee.
   The budget originates in the House.

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Local Funds

• The amount of local funds available depends on
  the millage rate set by the local board of
  education and the value of a mill.
• Funds raised locally stay locally and may be used
  as the local board decides.
• State law requires that all local budgets be
  balanced local school systems cannot spend more
  than they take in.

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Local Budget Process

• Superintendent submits budget to the local board
  of education (LBOE).
• LBOE may hold budget workshops to discuss the
  budget.
• LBOE holds public hearing(s) to take comments on
  proposed budget.
• LBOE publishes proposed millage.
• LBOE adopts budget.
• Some systems allow principals some discretion
  over their budgets or at least part of it. In
  that case, principals submit their proposed
  budget to the Superintendent.

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Discuss

• If your school received 50,000 to spend, how
  would you recommend it be spent?
• What advice would you give the local board of
  education regarding the annual budget?
• Would you prefer the state funds be directed to
  the school level or the system level? Why?

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The School Councils Role in School Funding

• By law, school councils are part of the
  accountability process.
• The school councils role is to monitor the
  process, ask questions as needed, and communicate
  information to the school community.
• School Councils might ask
• What is the total amount of funds available at
  the school level? At the system level?
• What choices have been made to shift funds?
• Has the categorical breakdown of expenditures
  changed? For example, is more being spent for
  transportation and less on instruction?
• Do the changes reflect a focus on student
  achievement?

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Additional Resources

• System level revenue and expenditures are on the
  state report card at www.gaosa.org.
• The Governors Education Finance Task Force
  www.ie2.org.
• Information on the Georgia General Assembly is
  available at www.legis.state.ga.us and
  www.GeorgiaEducation.org

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Understanding Class Size
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Class Size Terms

• Funding ratio the number of FTEs needed to earn
  state funds for a single class in each QBE
  program (for example, grades 4 and 5 earn one
  teacher for every 23 FTEs)

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How many can be in a class?

• The State Board of Education (rule 160-5-1-.08)
  and state law (O.C.G.A. 20-2-182) determines
  maximum class size.
• The funding ratio for teachers per FTE and
  maximum class size are often confused. They are
  two separate policy choices.

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Why are the class size and funding ratio
different?

• Students dont come in even bunches.
• If the funding ratio is 123 and a school has 47
  students, it would earn 2.04 teachers. One class
  could have 23 students, the other 24.
• If the class size maximum was 23, no class could
  exceed 23 and the students would have to be
  divided into 3 classes. One teacher would have to
  be paid almost completely with local funds.

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Class Size Reductions

• Class size reduction was a central part of the A
  Reform Act of 2000.
• After the economic downturn in 2002, class size
  reductions were delayed and the system average
  maximum class size was created.

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Class Size Reductions

• Grades K-8 core classes are, however, now capped
  at 20 above the funding.
• The core courses are math, science, social
  studies, and language arts.
• There is no longer a system average for these
  classes.

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Class Size Reductions

• Core classes in grades 9-12 are also capped
  beginning in 2007-2008, but the local board can
  decide to allow any of those classes to go up to
  32.
• If the local board votes to raise the high school
  class size, they must notify the school council
  and the State Board.

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Class Size

• State Board of Education determines maximum class
  sizes not set in state law. State Board of
  Education Rules
• The state board cannot reduce class sizes if it
  creates local costs.
• Local boards can use local funds to reduce class
  size from state maximums.

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Effect of Class Size

• Although parents and teachers commonly seek
  funding to lower class sizes, the research is
  mixed on the effect of small class size on
  student achievement, particularly after grade 3.
• There are other reasons to advocate for smaller
  classes, such as student safety in science labs.
  Teachers may desire smaller classes for better
  discipline or for the ability to spend more
  instructional time with each student.

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What Does Matter

• Research shows some things have a major impact on
  student achievement
• The preparation of teachers to teach content, to
  differentiate instruction, and to manage the
  classroom
• The readiness of students to learn when they
  arrive at school each day
• The adjustment of instruction based on assessments

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The School Councils Role in Class Size

• School councils were made part of the
  accountability process to balance the flexibility
  given to school systems. School councils should
  ask
• What are the class sizes by grade in our school?
• Are class sizes within the law and regulations?
• Are smaller classes needed?
• Find out what the needs are for your school and
  then let the policymakers know.

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Basics of School Finance

• Understanding Funding and Class Size