Fall 2017 Conference Myrtle Beach SC

Outline SC Budget and Revenues “Convergence 2017” - Transportation and Pension Reform Economic and Budget Outlook Future Funding Possibilities Capital Improvement Funds (Current and Future)

South Carolina’s Budget and Revenues Appropriations & Revenues

FY 2017-18 Appropriation Sources General Fund (Gross) $8,533,988,000 Less Tax Relief Trust Fund ($583,649,169) Less Homestead Exemption Shortfall ($25,735,247) General Fund (Net Available) $7,924,603,584 Federal Funds $8,623,469,730 Other Funds $10,855,586,746 Total $27,429,395,307* **SC Total Personal Income in 2016 is $192.6 Billion. So, the State Budget represents about 14% of economic activity in SC.

FY 2017-18 Net General Fund Revenue Available Sales Tax $3,041,207,000 Individual Income Tax $4,295,400,000 Corporation Income Tax $ 329,486,000 Other Sources $ 868,270,000 TOTAL (Gross) $8,534,363,000 Less Tax Relief Trust Fund ($583,649,169) Less Homestead Exemption Shortfall ($25,735,247) Total (Net Available) $7,924,603,584

FY 2017-18 General Fund, EIA and Capital Reserve Appropriations “New Money” Recurring $417 Million One-time $ 95 Million CRF $ 139 Million Total: $651 Million Statewide Appropriations: Pension Stabilization $118 Million Employee Pay/Health/Dental/Pension $ 58 Million Hurricane Matthew and Pinnacle Mountain $ 69 Million Reserve Funds $ 22 Million Local Govt. Fund $ 10 Million Subtotal: $277Million State Agency Appropriations: K12 Education $ 80 Million Health & Environment $ 149 Million Higher Education $ 26 Million Econ. Develop, Tourism & Natural Resources $ 83 Million All Other $ 36 Million Subtotal: $ 374 Million

Why “Convergence. ”. Retirement Funding Reform & Why “Convergence?” Retirement Funding Reform & Transportation Funding Reform Both bills were the culmination of years of work in the legislative arena.

H3516, Transportation Funding

Road Funding…and Tax Cuts

H3726, Pension Reform and Funding

SCRS & PORS FUNDING IMPACT Act 13 of 2017 SCRS & PORS FUNDING IMPACT Expected new cash flow into SCRS and PORS from employers as a result of contribution increases required by Act 13 is $73.6 million for FY 2017-18, and an additional $36.8 million for each of the next 5 years. EMPLOYER IMPACT July 1 Employer Rate Increase General Fund Local Government Federal /Other Funds Total All Funding Sources Cumulative Total 2017 2.00% $73.6 $67.4 $95.4 $236.4 $236.2 2018 1.00% $36.8 $33.7 $47.7 $118.2 $354.6 2019 $472.8 2020 $591.0 2021 $709.2 2022 $827.4 Total Additional Funds to System over 6 years $3,191.4 ($ in millions)

FY 2017-18 GENERAL APPROPRIATIONS ACT PENSION FUNDING IN THE FY 2017-18 GENERAL APPROPRIATIONS ACT The General Assembly allocated $154.8 million funding to cover a portion (if not all) of the 2% employer contribution rate increases in FY 2017-18 for every employer that participates in SCRS or PORS as follows: The full 2% for: General-funded state and school district employees EIA-funded employees (teachers & other school employees funded through the EIA) 1% for: Federal-funded employees (including state agencies & colleges) Other-funded state and school district employees (also includes colleges) Local entities (counties, municipalities, associations, hospitals, special purpose districts)

Economic and Budget Outlook Let’s take a look at the state’s income growth and employment growth..

Show Me the Money An Unofficial Guesstimate of FY18-19 Available Revenues Recurring General Fund (Unofficial): $320 Million* DOT “Transfer Back”: $50 Million Road Bill Tax Cuts (Year 1): ($36 Million) Net “New Money”: $334 Million Non-Recuring FY17 Surplus: $0 CRF: $145 Million Net “Non-Recurring”: $145 Million *SFC staff estimate. Official Prelim. BEA estimate due mid-November 2017.

Lookout! More Budget Outlook…things to Watch Impact of Federal Tax Reform on South Carolina Taxpayers…and the General Fund? Phase-in of additional tax cuts from Roads Bill over multiple years. Pension – Implementation of Phase 1 – increasing employer costs. Pension – Phase 2? A new plan for new workers? Abbeville Equity Lawsuit (and School Bus Funding)? College Scholarships and Funding Impact of SDE grade scale change. It’s a Disaster - - - Natural Disaster Recovery requirements? “Shaken, Not Stirred” - - - is 2018 finally the “Year of Bond”? (Bond Bill, that is)

Original Base Student Cost At District Level: 6,000 students in a District One superintendent One fiscal officer One director of planning for every 3,000 students One assistant superintendent One program consultant for every 750 pupils Five secretaries

Original Base Student Cost At School Level (Minimum size of 375 students): One teacher for every 26 pupils One principal One assistant principal (if have more than 500 pupils) One secretary One attendance clerk One librarian One library aide (if have more than 500 pupils) One guidance counselor (if have more than 500 pupils)

Original Base Student Cost Other Items: $7 per pupil for instructional supplies, materials & library books $10 per staff member for in-service education Maintenance and Operational Costs Office Support Costs

Fiscal Year 1981-82 Total Appropriations to School Districts (Act 178 of 1981) Distribution to Subdivisions: Aid to School Districts- Education Finance Act $ 503,143,508 State Employer Contributions: State Retirement - Public School Employees $ 50,121,169 Group Life Insurance - Public School $ 2,148,050 Social Security - Public School Employees $ 48,585,472 Health Insurance - Public School Employees $ 22,627,040 Total State Employer Contributions $123,481,731

Fast forward to 2017…

EIA 1983-84 2017-18 % Teacher Salaries & Fringes $69,467,502 32%   % Teacher Salaries & Fringes $69,467,502 32% School Building Aid $66,738,136 31% Remediation Services to Students $60,500,000 28% Improve Student Learning (Advanced Placement Exams, Modernize Vocational equipment, 5K, etc.) $19,189,449 9% Other $1,370,773 1% Total: $217,265,860 1983-84   % Teacher Salaries & Fringes $224,345,370 28% SC Public Charter School District $100,556,551 13% Remediation Services to Students $79,551,723 10% 4K Public Schools $49,838,283 6% EAA $41,855,943 5% Transportation $41,198,813 Office of First Steps $29,336,227 4% Instructional Materials $20,922,839 3% Other $209,896,251 26% Total: $797,502,000 2017-18

House Education Reform Committee Do away with the forty year old formula. Goal is to have a new formula by 2020. Main goal is to roll up as many lines as we can this year. We have had Superintendent Spearman present, CFO’s from several districts, Revenue and Fiscal Affairs, and Melanie Barton with the EOC. Ultimately we want the districts to be given the money and let them spend it as they see fit, but hold them accountable.

Capital Improvement Funds

Abbeville Equity School Districts Capital Improvements Plan Proviso 1A.82 in the Fiscal Year 2017-18 Appropriations Act Funding ($55.8 Million) is provided to eligible school districts by the Department of Education for school facility upgrades Eligible districts are Plaintiff districts and those with greater than 80% poverty Eligible Projects Include: Health and Safety Upgrades Technology Upgrades inside school facilities Upgrades associated with career and technology education programs Deferred Maintenance needs described in the district’s capital improvement plan

Abbeville Equity School Districts Capital Improvements Plan Funding comes from: EIA Capital Improvements fund (N/R) $ 4.8 Million Revolving Student Loan Fund Transfer $16.0 Million EIA Prior Year Cash Balance $35.0 Million TOTAL $55.8 Million

Abbeville Equity School Districts Capital Improvements Plan Eligible Districts are: ALLENDALE CLARENDON 01 HAMPTON 02 LEE BAMBERG 02 WILLIAMSBURG FLORENCE 04 ORANGEBURG 03 JASPER MARION 10 BARNWELL 19 FAIRFIELD DILLON 04 FLORENCE 03 MARLBORO ORANGEBURG 05 CLARENDON 02 MCCORMICK CALHOUN COLLETON LEXINGTON 04 DORCHESTER 04 BARNWELL 29 HAMPTON 01 ORANGEBURG 04 LAURENS 56 GREENWOOD 51 BARNWELL 45 DARLINGTON SALUDA CHESTER LAURENS 55 CHESTERFIELD SUMTER 01 UNION RICHLAND 01 ANDERSON 03 CHEROKEE LEXINGTON 03 DILLON 03 ABBEVILLE FLORENCE 02 BAMBERG 01 FLORENCE 05 FLORENCE 01 BERKELEY CLARENDON 03 LEXINGTON 02

SC Education School Facilities Act-H.3343 Requires the State Department of Education to conduct a statewide facility assessment Requires school districts to maintain Facilities and Maintenance plans and to submit these plans annually to SDE. SDE, through its Facilities Office, shall review the plans and annually submit to the State Board of Education for approval. The priority list of $200 million of facilities need ranked based on several priority factors which include: 1. Current condition of facilities 2. Population trends 3. Millage and fee levels 4. District financial health 5. Ability to pay bonded indebtedness 6. Ability to incur debt without the need of a referendum After the State Board approves the priority list, the list is submitted to the General Assembly and the governor’s office.

The General Assembly may adopt a proviso or joint resolution annually to authorize an amount of debt to be issued during the next fiscal year. The State Board would then submit an amount equal to the General Assembly’s authorized amount to JBRC and SFAA for the issuance of G.O. (General Obligation) debt through the treasurer’s office. SDE would be responsible for verifying applications and district facility information and ensuring financial and program compliance. Financial assistance to districts could be in the form of grants, loans, or a fund of non- recurring appropriations for maintenance and smaller facility needs of the districts. The State Board together with the assistance from SDE would promulgate regulations as to the specifics of the program.

Abbeville Capital Improvement Fund (ACIF) SCDE Process Proviso 1A.82 requires SCDE to: Establish an application process Establish policies and procedures Prioritize projects with greatest need Recommend listing of projects to the State Board of Education (SBE) Submit an annual report to the Governor and General Assembly based on prior year ACIF activities Proviso 1A.82 requires the SBE to make an affirmative vote to award funds

SCDE Considerations - ACIF Timely distribution of funds District summer renovation activities Electronic application submissions only; multiple submission dates; minimize paper processes Feedback and guidance from eligible districts Focus Group of finance officials Priority for life safety, handicap accessibility, energy efficiency, technology upgrades inside school facilities, and deferred maintenance Top three district-defined priorities Compliance and Reporting Adherence to 2017 District Facilities Assessments Terms and Conditions – no new construction, plan review approvals, accounting and audit requirements Reporting – expenditures and activities

ACIF Requests for Funding Available for Projects $55,828,859 Requested by Districts $133,780,920 SBE Approvals by Nov. 14 $45,230,262 Yet to Allocate $10,598,597

ACIF Funded Projects The majority of projects relate to health and safety upgrades and deferred maintenance Within priority areas:

Next Steps Leverage State Energy Office funds where feasible Seek technical assistance from Office of School Facilities (OSF) when needed Obtain Plan Review, Building and Fire Marshal Approvals if needed Submit Quarterly Expenditure Reports to Finance Track Activities for inclusion in Annual Report to General Assembly Conclusion of Facility Assessments for some districts Questions: Delisa Clark, Director OSF, dclark@ed.sc.gov Michael Thom, Director Finance, mthom@ed.sc.gov