Budget Update for Oklahoma ASBO April 26, 2018 Pam Deering CCOSA/OASA Shawn Hime OSSBA

Funding: 2019 Appropriation Bill SB 1600 is the appropriations bill for FY 2019. It appropriates $2.9 billion to Common Education -- a $480.8 Million increase. It represents a 19% increase in appropriations and includes funding for the teacher and support employee pay raise, $33 million for textbooks/instructional materials and Restoration of FY 18’s $17 million funding cut. Fully funds the Ad Valorem Reimbursement Fund at $92.7M

FY 19 Education Appropriations SB 1600 GR Financial Support of Schools 1,373,201,301.00 Ed Reform Revolving Fund 818,166,976.00 Common Ed Tech Fund 50,470,751.00 Mineral Leasing Fund 2,850,000.00 Mineral Leasing Fund ‘17 210,984.00 Ok Ed Lottery Trust Fund 30,326,735.00 Lottery Trust Fund 2017 1,985,638.00 Public School Activity Fund 91,319,026.00 Textbooks & Instructional Materials 33,000,000.00 Certified FBA 315,478,030.00 Support FBA 171,905,086.00 State Department of Education 15,980,190.00 School Consolidation Assistance Fund 3,369,637.00 School Consolidation Fund 2017 220,626.00 TRS TRS 2017 Total 2,912,075,243.00

Teacher & Support Pay Raise Bills HB1023xx is the $353.5 million teacher pay raise bill. It will go into effect with the 2018-2019 school year and is a permanent raise for teachers. The bill: Funds an average $6,100 teacher pay raise -- the largest teacher pay raise in state history. Increases the minimum salary schedule by at least $5,000 at every level. Provides larger raises for more experienced teachers, including a $7,700 increase to the minimum salary schedule for a teacher with 25 years of experience. Requires school districts to give the pay increase to teachers even if the district currently pays above the state minimum. HB1026xx -- the $52 million support employee pay raise bill that guarantees each support employee a $1,250 raise.

New Revenue Bills HB 1010xx is the major revenue bill expected to generate more than $428.4 million from the following sources: Increase in the gross production tax (GPT) from 2 to 5 percent $1-a-pack cigarette tax 3-cent gas/6-cent diesel tax HB 1011xx caps itemized deductions and is projected to net an additional $94 million in revenue for FY19. HB 1019xx is the online sales tax bill. It earmarks revenue of right at $19.9 million annually for the Education Reform Revolving (1017) Fund. HB 3375 is the ball-and-dice gaming expansion projected to net about $24 million annually.

New Revenue* Bill New Revenue Annualized Amount HB 1010xx Oil & Gas Taxes $170,485,000 HB 1010xx Motor Fuel Tax $104,963,000 HB 1010xx Tobacco Taxes $153,028,000 HB 1011xx Income Tax Exemptions $ 94,015,000 HB 1019xx 3rd Party Online Sales Tax $ 19,600,000 HB 3375 Gaming Ball & Dice $ 24,000,000 Total $566,111,000 *Oklahoma Tax Commission

New Expenditures Bill New Expenditures Amount HB 1023xx Teacher Pay Raise $ 353,501,793 HB 1024xx State Employee Pay Raise $ 63,765,398 HB 1026xx Support Employee Pay Raise $ 52,000,000 Total $ 469,267,191

Additional Expenditures… Bill Expenditures Amount SB 1600 Textbooks $ 33,000,000 increase SB 1600 State Aid Formula $ 17,000,000 increase SB 1600 Flex Benefit Amount $ 24,600,000 increase

Distribution of Education Expenditures… State Aid: Projection for budgeting is to use $366 per WADM as an increase to the factor Textbooks: Projection to use approx. $49.00 per ADA for textbook allocation based on current statewide ADA — will change as ADA numbers are updated Revenue is in the state aid formula for teacher and support employee raises and operations while textbook money is outside the formula

School District Budget Considerations Consider your Temporary Appropriation and the increase in expenditures with the pay raises to ensure that you don’t exceed the appropriation when you encumber your payroll.

What is the Veto Referendum? Oklahoma Tax Payers Unite (Tom Coburn) Possible initiative to overturn any tax increase Authorized by the Oklahoma Constitution (Article V, Section 3) Possible challenge of HB1010xx Revenue Bill Waiting to see initiative petition language

What is the Veto Referendum? Cont… Many questions about the effects on: -Teacher Pay Raise—HB 1023xx, Effective August 1 -State Employee Pay Raise—HB 1024xx --Support Staff Pay Raise—HB 1026xx Legal questions around the effective dates of the legislation and the signed petition for revenue collection Legal questions around teacher contracts and implementation of teacher pay raise Legal questions around the possible loss of GR revenue to support the appropriations in HB3705 Concerns for other state agency budgets and the effect if revenue is lost

Questions???