1. January 7, 2011 Overview of Governor’s Introduced Amendments to the 2010-2012 Direct Aid to Public Education Budget (and other Public Education Funding) – HB1500/SB800 Presented to the Virginia Association of School Superintendents Overview of Governor’s Introduced Amendments to the 2010-2012 Direct Aid to Public Education Budget (and other Public Education Funding) – HB1500/SB800 Presented to the Virginia Association of School Superintendents Kent C. Dickey Deputy Superintendent for Finance and Operations

2. January 7, 2011 2 Summary of Actions – Technical (Biennial Total $ Change) Note: The Chapter 874 2010-2012 budget adopted by the 2010 General Assembly is the base budget from which the Governor’s recommended amendments are made. The Governor’s current amendments are introduced in HB1500/SB800. Amounts shown below in parenthesis indicate reductions.  ($43.2 million) – Update Direct Aid accounts based on actual enrollment data and revised enrollment projections.  Reduced statewide ADM projection by 4,370 students in FY11 and 6,659 students in FY12 compared to Chapter 874 projections. Note: The Chapter 874 2010-2012 budget adopted by the 2010 General Assembly is the base budget from which the Governor’s recommended amendments are made. The Governor’s current amendments are introduced in HB1500/SB800. Amounts shown below in parenthesis indicate reductions.  ($43.2 million) – Update Direct Aid accounts based on actual enrollment data and revised enrollment projections.  Reduced statewide ADM projection by 4,370 students in FY11 and 6,659 students in FY12 compared to Chapter 874 projections.

3. January 7, 2011 Summary of Actions – Technical (Biennial Total $ Change)  $40.5 million – Update Sales Tax estimates  Sales tax estimates increase by $44.3 million in FY11 and $47.6 million in FY12.  ($7.4 million) – Update Categorical accounts for participation.  ($504,321) – Update Incentive accounts for participation.  ($292,500) – Adjust funding for National Board Certified Teacher grants based on actual number of eligible teachers in FY11. No change in FY12 funding.  $675,000 – Additional Lottery proceeds appropriated in FY12 based on latest revenue forecast used to support Lottery – funded programs.  $40.5 million – Update Sales Tax estimates  Sales tax estimates increase by $44.3 million in FY11 and $47.6 million in FY12.  ($7.4 million) – Update Categorical accounts for participation.  ($504,321) – Update Incentive accounts for participation.  ($292,500) – Adjust funding for National Board Certified Teacher grants based on actual number of eligible teachers in FY11. No change in FY12 funding.  $675,000 – Additional Lottery proceeds appropriated in FY12 based on latest revenue forecast used to support Lottery – funded programs. 3

4. January 7, 2011 Summary of Actions – Policy (Biennial Total $ Change)  ($33.0 million) – Transfer general fund supported programs to Lottery Service Area due to available balances from enrollment and participation updates.  In FY11, a portion of the Composite Index Hold Harmless will be paid with Lottery funds, and a portion of textbooks paid from Lottery in FY12.  ($8.4 million) – Update the cost of the Composite Index Hold Harmless account in FY11 based on HB1500/SB800 (cost currently based on the introduced 2010-2012 budget from December 2009 - HB/SB 30).  ($33.0 million) – Transfer general fund supported programs to Lottery Service Area due to available balances from enrollment and participation updates.  In FY11, a portion of the Composite Index Hold Harmless will be paid with Lottery funds, and a portion of textbooks paid from Lottery in FY12.  ($8.4 million) – Update the cost of the Composite Index Hold Harmless account in FY11 based on HB1500/SB800 (cost currently based on the introduced 2010-2012 budget from December 2009 - HB/SB 30). 4

5. January 7, 2011 Summary of Actions – Policy (Biennial Total $ Change)  $3.4 million – General fund increase for Basic Aid to offset a reduction in federal State Fiscal Stabilization Funds (SFSF) allocated to K-12 based on Virginia’s revised SFSF application. Since an equal amount is reduced from SFSF funds, the net impact on division funding is zero, but this action fully funds division Basic Aid entitlements in FY11.  Superintendent’s Memorandum number 314-10 dated December 17, 2010, provides additional information on the final 33 percent (Phase II) of funding from the SFSF allocated in FY11. Superintendent’s Memorandum number 314-10 Superintendent’s Memorandum number 314-10  $3.4 million – General fund increase for Basic Aid to offset a reduction in federal State Fiscal Stabilization Funds (SFSF) allocated to K-12 based on Virginia’s revised SFSF application. Since an equal amount is reduced from SFSF funds, the net impact on division funding is zero, but this action fully funds division Basic Aid entitlements in FY11.  Superintendent’s Memorandum number 314-10 dated December 17, 2010, provides additional information on the final 33 percent (Phase II) of funding from the SFSF allocated in FY11. Superintendent’s Memorandum number 314-10 Superintendent’s Memorandum number 314-10 5

6. January 7, 2011 Summary of Actions – Policy (Biennial Total $ Change)  Literary Fund transfer to support teacher retirement costs is reduced by $2.0 million in FY11 and increased by $2.0 million in FY12. These adjustments are offset by corresponding changes in general fund support for teacher retirement to maintain full funding; therefore, the net funding impact to divisions is zero.  No funding from the Literary Fund is anticipated to support a subsidy program or direct loans in FY11 or FY12.  Literary Fund transfer to support teacher retirement costs is reduced by $2.0 million in FY11 and increased by $2.0 million in FY12. These adjustments are offset by corresponding changes in general fund support for teacher retirement to maintain full funding; therefore, the net funding impact to divisions is zero.  No funding from the Literary Fund is anticipated to support a subsidy program or direct loans in FY11 or FY12. 6

7. January 7, 2011 Summary of Actions – Policy (Biennial Total $ Change)  $128,387 – Correct 2008 free lunch percentage for Petersburg City Public Schools.  $3.0 million – Performance Pay initiative in FY12 to support pilot programs in hard to staff schools.  Department of Education to establish guidelines o Grants awarded on a competitive basis to divisions that pilot models for awarding performance pay for instructional personnel in hard to staff schools. o Performance evaluation component must include measures of student progress. o School divisions must apply by June 15, 2011.  Language provided in the Appropriation Act  $128,387 – Correct 2008 free lunch percentage for Petersburg City Public Schools.  $3.0 million – Performance Pay initiative in FY12 to support pilot programs in hard to staff schools.  Department of Education to establish guidelines o Grants awarded on a competitive basis to divisions that pilot models for awarding performance pay for instructional personnel in hard to staff schools. o Performance evaluation component must include measures of student progress. o School divisions must apply by June 15, 2011.  Language provided in the Appropriation Act 7

8. January 7, 2011 Summary of Actions – Policy (Biennial Total $ Change)  $53.2 million – Funds the state share of a 2.0 percent professional VRS rate increase in FY12.  Language in Central Appropriations allowing localities the flexibility of requiring employees hired prior to July 1, 2010 to pay the 5.0 percent employee contribution. If localities opt to have these employees pay the full 5.0 percent, then a minimum of a 3.0 percent salary increase must be provided concurrently as well.  VRS to provide more guidelines.  ($57.6 million) – Reprogram funds provided for composite index hold harmless in FY12  Funds used to support VRS rate increase and performance pay pilots.  $53.2 million – Funds the state share of a 2.0 percent professional VRS rate increase in FY12.  Language in Central Appropriations allowing localities the flexibility of requiring employees hired prior to July 1, 2010 to pay the 5.0 percent employee contribution. If localities opt to have these employees pay the full 5.0 percent, then a minimum of a 3.0 percent salary increase must be provided concurrently as well.  VRS to provide more guidelines.  ($57.6 million) – Reprogram funds provided for composite index hold harmless in FY12  Funds used to support VRS rate increase and performance pay pilots. 8

9. January 7, 2011 Summary of Actions – Language Changes (2010-2012 Budget)  New language to clarify that localities electing to carry forward qualifying state funds from FY11 to FY12 must appropriate the funds to the school division for expenditure in FY12.  New language to clarify that the state and local matching funds used to support the Virginia Preschool Initiative program may not be used for capital outlay.  New language directing the Department of Education to prorate Textbook funding in the event that actual Lottery revenues do not meet the projection of Lottery revenues.  New language to clarify that localities electing to carry forward qualifying state funds from FY11 to FY12 must appropriate the funds to the school division for expenditure in FY12.  New language to clarify that the state and local matching funds used to support the Virginia Preschool Initiative program may not be used for capital outlay.  New language directing the Department of Education to prorate Textbook funding in the event that actual Lottery revenues do not meet the projection of Lottery revenues. 9

10. January 7, 2011 HB1500/SB800 as Introduced Direct Aid Budget Summary 10 FY 2011General FundNongeneral FundTotal Base Budget (Ch. 874)$4,739,288,334$1,540,436,627$6,279,724,961 Governor's Amendments($24,752,146)($5,431,113)($30,183,259) Total (HB1500/SB800)$4,714,536,188$1,535,005,514$6,249,541,702 FY 2012General FundNongeneral FundTotal Base Budget (Ch. 874)$4,903,098,078$1,400,575,628$6,303,673,706 Governor's Amendments($25,345,633)$2,675,000($22,670,633) Total (HB1500/SB800)$4,877,752,445$1,403,250,628$6,281,003,073

11. January 7, 2011 Summary of Actions – DOE Central Office (FY12 Changes)  Eliminate operational funding to the eight regional superintendent planning groups in FY12.  Eliminate funding for Virginia Preschool Initiative on-site reviews in FY12. These would be conducted by desk reviews.  Provide an additional $100,000 in FY12 for the Career Pathways program, which helps students become aware of the availability of vocational and technical educational programs.  Eliminate operational funding to the eight regional superintendent planning groups in FY12.  Eliminate funding for Virginia Preschool Initiative on-site reviews in FY12. These would be conducted by desk reviews.  Provide an additional $100,000 in FY12 for the Career Pathways program, which helps students become aware of the availability of vocational and technical educational programs. 11

12. January 7, 2011 Summary of Actions – Secretary of Education (FY12 Change)  Provides $600,000 in FY12 for establishing or supporting college partnership laboratory schools in the state. 12