Business Manager and CFO Roundtable Discussion October 17, 2018 Hank Johnson Consultant

Agenda Introductions Update on FIRST Changes Update on Texas Commission on Public School Finance Updates on Recent TEA Correspondence Questions and Comments

FIRST Rating Changes (Update) New 2020-2021 Ratings (Based on FY 2020 data) Adopted July 27, 2018 (See Texas Register) Point scales and ratings are different with these new rules School FIRST: 20 indicators (Proposed 21) Charter FIRST: 21 indicators New: “Ceiling Indicators”

SCHOOL FIRST RATINGS 2020–2021 RATING YEAR (BASED ON FY 2020 DATA) A = Superior Achievement 90-100 Points B = Above Standard Achievement 80-89 Points C = Meets Standard Achievement 60-79 Points 70-79 Points F = Substandard Achievement 0-59 Points 0-69 Points

FIRST Rating Changes Considerations to address the changes: Compare current financial position and practices to new indicators Identify areas of strengths and weaknesses Develop policies and practices to improve areas that need improvement Provide an update to the Board and Management Team on changes and where your LEA may need improvement Provide action plan Don’t wait

FIRST Rating Changes Link to Texas Register http://texreg.sos.state.tx.us/public/regviewer$ext.RegPage?sl=R &app=1&p_dir=&p_rloc=354630&p_tloc=&p_ploc=&pg=1&p_reg =354630&ti=19&pt=2&ch=109&rl=1001&issue=07/27/2018&z_ch k=3532376&z_contains=FIRST^^^

Texas Commission on Public School Finance - Update Property tax levy out pacing taxpayers ability to pay Improving outcomes Class size – 21 Teacher Quality Improved Pay Increasing pay for some Other than just years of experience

Texas Commission on Public School Finance

Texas Commission on Public School Finance – State and Local Year 1 Year 2 Year 3 Students 1,000 Tier 1 Guaranteed Yield $ 5,140 Guaranteed/Maximum $ 5,140,000 Tax Revenue @ 6% Growth $ 2,570,000 $ 2,724,200 $ 2,887,652 State Equalization $ 2,415,800 $ 2,252,348 Partner - Local Taxpayer 50% 53% 56% Partner - State 47% 44%

Funding Elements – 2016 & 2019 Basic Allotment $5,140 EWL Tier 1 2015-16 2018-19 Basic Allotment $5,140 EWL Tier 1 $514,000 EWL Tier 2 Level 2 $319,500 Tier 2 -Guaranteed Yield Level 1 $74.28 $106.28 Tier 2 - Guaranteed Yield Level 2 $31.95 Regular Program Adjustment Factor (RPAF) 1.0

Texas Commission on Public School Finance – Outcomes Working Group Restructure and/or adjust funding formula Fund through formula vs grants for targeted outcomes Add incentives to formula for achieved outcomes Realign Compensatory Ed funding Fund full day PreK Incentivize dual language programs Target funding for blended and/or personalized learning

Texas Commission on Public School Finance – Outcomes Working Group Costs $1.0 billion per year ($2.0 billion per biennium) $200 per student Increasing to an ultimate $2.5 billion per year ($5.0 billion per biennium) $450 per student

Texas Commission on Public School Finance – Expenditures Working Group Recommendations Reallocate Cost of Education Index (CEI) Funds Annual savings: $2.9 billion Reallocate Chapter 41 Hold Harmless Funds Annual savings: $30 million Reallocate Chapter 41 Early Agreement Credit Funds Annual savings: $50 million

Texas Commission on Public School Finance – Expenditures Working Group Recommendations Reallocate Gifted and Talented Allotment Funds Annual savings: $165 million Reallocate High School Allotment Funds Annual savings: $400 million Move from Prior Year Property Values to Current Year FY 2020 Savings: $1.8 billion

Texas Commission on Public School Finance – Expenditures Working Group Recommendations Base Compensatory Education Funding on a Campus Specific Spectrum Annual cost: $1.1 billion Base Transportation Funding on Mileage (80 cents) Annual cost: Neutral Provide Transportation Funding to Chapter 41 Districts Annual cost: $60 million

Texas Commission on Public School Finance – Expenditures Working Group Recommendations Recreate Small/Mid-Size District Adjustments as a Stand-Alone Allotment Annual cost: $0 to 400 million Increase New Instructional Facility Allotment (NIFA) Appropriation to $100 Million per Year Annual cost: $76.3 million Expand Career and Technology Allotment to Include Courses in 6th – 8th Grade Annual cost: $20 million

Texas Commission on Public School Finance – Expenditures Working Group Recommendations Create New Dual Language Allotment Annual cost: $15 to $50 million Create New Dyslexia Allotment Annual cost: $100 million Create New Early Childhood Support Allotment Annual cost: $780 million

Texas Commission on Public School Finance – Expenditures Working Group Recommendations Create a New Grade 3 Reading Incentive Program Annual cost: $400 million Create a New College, Career & Military Readiness Incentive Program Create a New Teacher Compensation Incentive Program Annual cost: $100 million

Texas Commission on Public School Finance – Expenditures Working Group Recommendations Create an Extended Year Incentive Program Annual cost: $50 million Utilize Remaining Funds from Reallocations to Increase the Basic Allotment Annual cost: TBD Link Tier II Copper Penny Yield to a Percentage of the Basic Allotment Annual cost: $TBD

Texas Commission on Public School Finance – Expenditures Working Group Recommendations Link Tier II Golden Penny Yield to a Set Percentile of the Wealth per Student Annual cost: $TBD

Upcoming Legislative Session Questions? Will the Legislature address funding for outcomes? Formula change Will the Legislature increase funding? On top of increased property tax Will the Legislature cap the guaranteed yield on tier 2 golden pennies? Will the Legislature continue to use Grants vs formula change for targeted programs?

Upcoming Legislative Session Copied from the Texas Tribune: “Education Commissioner Mike Morath told state leaders TEA would require $3.8 billion less in state funds for the coming biennium–even to meet ever-growing enrollment–because previous legislation automatically pegged property tax growth at 6.77 percent. That then leaves the state needing less to make up the total projection of what’s needed to fund schools at the level they are at now.”

Upcoming Legislative Session Where do we go from here?

Recent TEA Correspondence: Final 2017–2018 School FIRST and Charter FIRST Ratings Anticipated availability in the online School FIRST and Charter FIRST systems Late October Will be available to the public Based the LEA’s financial data for fiscal year 2017 Financial indicators specified in 19 Texas Administrative Code (Changes have been approved for future years) Final rating are considered for LEAs accreditation

Recent TEA Correspondence: Final 2017–2018 School and Charter FIRST Rating  Reporting requirements Public meeting to discuss and distribute Within 2 months Advertised once in newspaper No more than 30 days before meeting No fewer than 14 days before meeting Can be included in regular Board meeting Template for report available at: FIRST web page or FIRST Rating for Charter Schools web page

Recent TEA Correspondence: Validations of Fiscal Data Reported by LEAs for Federal Grants  The Federal Fiscal Compliance and Reporting Division will conduct random validations of the self-reported data related to federal grants programs Reports subject to validation this school year: SC5050 Request for Federal Funding and Indirect Cost Rate for Charter Schools Title I, Part A Comparability Computation Form SC9000 Annual Survey of Children in Local Residential Facilities for the Neglected/Delinquent

Recent TEA Correspondence: Validations of Fiscal Data Reported by LEAs for Federal Grants  Reports subject to validation this school year (Continued): SC9010 Survey of Children in Stage Agency Facilities Substitute System of Time and Effort Management Certification, Teacher Certifications, and Teacher Schedules Special Education Consolidated Federal Grant Application, Schedule BS6016 - Fiscal Compliance Requirements “Other data if needed”

Recent TEA Correspondence: Validations of Fiscal Data Reported by LEAs for Federal Grants  Purpose - To ensure that LEAs provide reasonable assurance that grant objectives have been met through: LEA’s system of accountability for federal grant funds LEA’s system of internal controls. Timeline for validations: Dependent on due date of reports and/or data submission Can occur anytime after data submission is due Any LEA can reasonably expect to be selected

Recent TEA Correspondence: 2018–2019 Significant Expansion of Enrollment—Open-Enrollment Charter Schools Open-enrollment charter schools awarded 2018–2019 Every Student Succeeds Act (ESSA), and/or Individual with Disabilities Education Act, Part B (IDEA-B) May qualify for additional funding under those grants if: They meet specific criteria defining significant expansion of enrollment. Significant Expansion of Enrollment Criteria for ESSA A minimum total student enrollment of 300 At least a 50% increase in the ages 5–17 student enrollment

Recent TEA Correspondence: 2018–2019 Significant Expansion of Enrollment—Open-Enrollment Charter Schools Significant expansion of enrollment for IDEA-B, must meet both of the following criteria: A minimum total student enrollment of 50 At least a 50% increase in the total student enrollment from previously reported student counts

Recent TEA Correspondence: School Health and Related Services (SHARS) Reporting Requirement LEAs must submit the SHARS Reimbursement Report if: Received IDEA-B grant funding in the 2017–2018 school year Regardless of whether they received SHARS The form is available from the GFFC Reports and Data Collections application Deadline for submitting the form is October 31, 2018.

Recent TEA Correspondence: Micro-Purchase Threshold - EDGAR Increases to the thresholds for micro-purchases and small purchases under the procurement rules in EDGAR: Effective as of July 1, 2018, for all federal grant recipients Micro-purchase threshold was increased from $3,500 to $10,000. The $10,000 is the maximum allowed in aggregate over the entire period of applicable grants

Recent TEA Correspondence: Micro-Purchase Threshold - EDGAR Increases to the thresholds for micro-purchases and small purchases under the procurement rules in EDGAR: Small purchase “simplified acquisition” threshold was increased from $150,000 to $250,000 but does not apply to ISDs/Charters in the State of Texas More restrictive Texas Education Code (TEC) 44.031 requiring competitive procurement methods be used for purchases valued at $50,000 or more.

Recent TEA Correspondence: Financial Hardship Transition Program and the Adjustment for Rapid Decline in Taxable Value of Property Districts do not need to apply to TEA to receive the payment from either program.  Payments are scheduled for this month, October 2018.  LEAs that are eligible for both programs, will receives funds for only the program that provides the greater amount. 

Recent TEA Correspondence: Attendance Projections for the 2019-2020 and 2020-2021 System opened on October 15, 2018. Deadline: Midnight on December 14, 2018. If submitted, your ADA and FTE estimates will be used in state aid calculations for school years 2019–2020 and 2020–2021. If not submitted, TEA will use the ADA and FTE estimates established in the Attendance Projections subsystem in state aid calculations for school years 2019–2020 and 2020–2021. Affects payments

Recent TEA Correspondence: Comparability of Service Upcoming LEA Deadline: Title I, Part A Comparability of Services Requirement for the 2018-2019 School Year: Each year, LEAs that receive Title I, Part A funding are required to document their compliance with the Title I, Part A comparability of services requirement under the Every Student Succeeds Act (ESSA). The deadline for submitting the CAD, and CCF if applicable, is November 16, 2018.

Recent TEA Correspondence: Comparability of Service All LEAs that receive Title I, Part A funding must complete and submit to TEA the Comparability Assurance Document (CAD). The CAD is now available for completion and submission electronically through an online survey.

Recent TEA Correspondence: Comparability of Service LEAs that do not meet one of the defined exemption criteria must also complete and submit to TEA the Comparability Computation Form (CCF). The CCF and instructions are available on the Title I, Part A Comparability of Services page of the TEA website and through the Grants and Federal Fiscal Compliance (GFFC) Reports and Data Collections secure application, accessible through TEAL.

Recent TEA Correspondence: Comparability of Service Potential Consequences of Failing to Comply Temporarily withhold cash payments pending correction of the deficiency or more severe enforcement action. Disallow all or part of the cost of an activity or action not in compliance. Wholly or partly suspend or terminate the federal award. Initiate suspension or debarment proceedings. Withhold further federal awards for the program. Take other remedies that may be legally available.

Update: SOF Template New Template August 17, 2018 Loads final 2017 values Adjusts NIFA

Reminder: AFR Due Dates Fiscal Year End June 30: November 27, 2018 Fiscal Year End August 31: January 28, 2019

Questions and Comments