Region I School finance update Latest News Regarding State Funding Al McKenzie, State Funding Director, Texas Education Agency

Agenda TEA Organizational Structure Status of Payment Cycle ASATR Implementation of Senate Bill 1 Compressed Tax Rate Adjustments Charter School Payments TEA Template Calculation of WADA Preparing for Next Biennium OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/26/2016

Organizational structure Kara Belew Deputy Commissioner of Finance Chief School Finance Officer (Leo Lopez) Chief Finance Officer (Shirley Beaulieu) Chief Investment Officer (Holland Timmons) Associate Commissioner for Grants and Fiscal Compliance (Nora Hancock) OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Office of school finance State Funding Financial Compliance State funding under Chapter 42 Financial Accountability Ratings System (FIRST) Recapture under Chapter 41 Student Attendance Accounting (SAAH) Facilities Funding under Chapter 46 Audit Permanent School Fund Bond Guarantee Program Financial Accountability System resource Guide (FASRG) OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

State Funding Contact Information Name Phone  Program Ashley Behnke 463-4834 OFSDP / OFYP / State Compensatory Education Al McKenzie    463-9186 Director, State Funding Amy Copeland    463-8732 Director, Foundation School Program (FSP) Operations Cassie Huggins 463-9232 PSF Bond Guarantee Program / NIFA Vacant 463-9260 FSP Reports / TEASE / Staff Salary / Tax Information Survey / Attendance Projections Nancy Kuhn 463-6313 FSP Reports / TEASE / Chapter 313 / TIRZ Jacqueline Pree 475-1217 IFA / EDA Nora Rainey 463-7298 FSP Operations Manager, Charter School Funding Danny Sanchez 463-9266 Transportation Kim Wall 463-4809 Chapter 41 Wealth Equalization 5/24/2016

Status of Foundation School program payment cycle OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Near Final 2015–2016 Near final summaries of finance (SOFs) for the 2015–2016 school year were published this month. These incorporate: PEIMS ADA and FTE counts Collections from tax collection survey Transportation module data if the district submitted! Staff salary data if the district submitted! Advanced career and tech FTEs Revised debt data OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Updates to the 2015–2016 Summary of Finances (SOF) Reports Legislative Payment Estimate District Planning Estimate Difference Average Daily Attendance 4,945,468 4,924,588 (20,888) WADA 6,668,676 6,673,490 4,814 M&O Tax Collections $21,349,705,139 $21,982,630,859 $632,925,720 FSP M&O State Aid $19,672,773,347 $19,842,828,359 $170,055,012 OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

$318 million in adjustments rolled to 2017 Near final 2015-2016 Negative balances have been transferred to reduce earnings in current year, and positive balances will be paid this week $318 million in adjustments rolled to 2017 $452 million Payments to be made Chapter 41 settle-up letters have been sent OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 1/25/2016

Updates for 2016–2017 OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Updates to 2016-2017 Basic allotment and equalized wealth level stay the same as 2015-16 ($5,140 and $514,000). The guaranteed yield for the golden pennies increases from $74.28 to $77.53 Compressed tax rate (CTR) conversions (if the district requested for LPE) Revised Available School Fund rate ($390) New Instructional Facilities Allotments (NIFA) for approved applications Attendance projections submitted by the district in October 2014 5 05/25/2016 OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY

Updates to the 2016–2017 Summary of Finances (SOF) Reports LPE property values used to calculate state share of FSP are the greater of the tax year 2015 T2 value from the comptroller or the 2014 T2 value increased by 4.56% M&O Tax Collections for LPE are the greater of the 2015 collections * 4.56% * 6.18% or 2016 PEIMS budgeted * 6.18% TEC 42.253 (b) requires TEA to make payments based on the estimates used at the time of the appropriation OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

2016–2017 Summary of Finances (SOF) Reports Setup The SOF now incorporates Compressed tax rate conversions Updated IFA and EDA allotments (expect payment in fall 2016) New payment classes using final 2015 property values Still to come NIFA allotments Updated M&O tax rates (February / March updates) SCE updates (March / April) OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Additional State Aid for Tax Reduction (ASATR) OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Total Statewide ASATR, 2006–2007 through 2017–2018 OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Statutory provisions for ASATR expire September 1, 2017 Status of ASATR Statutory provisions for ASATR expire September 1, 2017 No ASATR funds beginning in 2017–2018 school year ASATR estimated to deliver $220 million in state aid to 180 districts in 2016–2017 school year OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Potentially mitigating factors : Status of ASATR Potentially mitigating factors : tax rate conversion changes to school finance formulas in the next legislative session?? Districts should run templates with tax rate conversion and no ASATR in planning for 2017- 2018 OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Implementation of senate bill 1 OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Senate Bill 1 and the Summary of Finance (SOF) Senate Bill I raised the homestead exemption from $15K to$25K New school finance acronym: Additional State Aid for Homestead Exemption (ASAHE) Maintenance and Operations (M&O) hold-harmless is on line 2 of the “Other Programs Detail Report” I&S hold-harmless is on Line 52 of the SOF and includes detail for: I&S hold-harmless Eligible debt report Instructional Facilities Allotment (IFA) / Existing Debt Allotment (EDA) reports at $15k and $25k value The Texas Education Agency, Office of School Finance

M&O Hold-Harmless M&O dollars flow largely through formulas, not hold-harmless Total M&O state aid increase = $478 million Total reduced recapture = $73.4 million Total M&O hold-harmless = $10.3 million Who gets M&O hold-harmless? For 2017 the increase in the golden penny yield has basically eliminated the hold harmless The Texas Education Agency, Office of School Finance

SB 1 I&S hold-harmless provisions Districts are entitled to additional state aid if the increase in IFA and EDA was insufficient to cover the taxes lost to the homestead exemption increase “Taxes Lost” includes taxes necessary to cover debt that was eligible as of September 1, 2015, plus refundings The Texas Education Agency, Office of School Finance

I&S Hold-Harmless I&S hold-harmless is a more significant component of additional funds I&S state aid increased by $127 million with SB 1 implementation Of that, $83.9 million is ASAHE for facilities Who is likely to get facilities hold-harmless? Districts that do not receive IFA or EDA due to property wealth Districts that receive EDA, but that do not have full coverage due to biennial limit or $0.29 limit The Texas Education Agency, Office of School Finance

How Will Refundings Be Treated for ASAHE? All bonds with coupon date prior to 9/1/15 are eligible Left side of the “Eligible Debt for ASAHE” report shows debt service on all bonds eligible for ASAHE as of 9/1/15 Right side shows current-year debt service on those bonds plus any bonds refunding those bonds Total eligible debt = lesser of left or right column The Texas Education Agency, Office of School Finance

OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/262016

Compressed tax rate adjustments OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Compressed Tax Rate Adjustments What is fractional funding? Basic allotment downwardly adjusted for districts with CTRs below $1.00 State Basic Allotment $5,140 2006 Tax rate $1.35 Compressed Tax Rate $0.90 District Basic Allotment $4,626 The Texas Education Agency, Office of School Finance

Yield per Penny of Tax Effort in School Finance System The Texas Education Agency, Office of School Finance

Compressed Tax Rate Adjustments Does my district qualify? CTR must be below $1.00 Current-year M&O tax rate must be greater than the original CTR plus $0.06 Must request the conversion for 2015-2016 and 2016- 2017 Beginning in 2017-2018, conversion is automatic The Texas Education Agency, Office of School Finance

Compressed Tax Rate Conversions New letters required by September 1, 2016 for conversions to impact LPE Tax information survey will allow districts to change decision prior to near-final settle up in August of 2017 Tax rate conversions for all eligible districts in 2017– 2018 OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Compressed Tax Rate Adjustments Should my district request an adjustment? If tax rate conversion occurs: Tax effort shifted out of the zone of Tier 2 that is equalized at $31.95 per penny of tax effort into Tier 1 Tax effort shifted out of the zone of recapture governed by the equalized wealth level of $319,500 to the zone governed by the equalized wealth level of $514,000 For districts that receive ASATR, tax effort will be shifted out of Tier 2 into Tier 1, which counts against ASATR The Texas Education Agency, Office of School Finance

Charter School Payments Charter schools with more than 10 percent growth compared to the prior year can request payment acceleration Acceleration is automatic for three years Beginning in 2016-2017, the request will be made through the charter school module in TEASE OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Revised state aid template for 2016-2017 is posted It is populated with LPE data Results do not create a funding entitlement, the SOF is the official source for payment of state aid OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Template can be accessed from the state funding web page OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Link to template is in resources list on the foundation school program web page OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

TEA State aid template 5/24/2016 OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Calculation of WADA OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/26/2016

Calculation of wada WADA original purpose was just for tier II enrichment (1989) Became basis for recapture 1994 Became basis for ASATR 2007 Is an output of tier I Frequently used as the denominator in funding per student comparisons OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/26/2016

Adjusted Allotment calculation The $5,140 Basic Allotment per student is increased for school characteristics: -Increased for the school districts’ cost of education index; -Increased if the school district qualifies as small district or mid-size district After increases for school characteristics the BA is called the “Adjusted Basic Allotment” (ABA) The ABA (average $6,470) is used to calculate the tier I entitlements

Tier I Allotment for 2016-2017 Regular Program is $26.4 billion out of a total Tier I cost of $36.4 billion TEA Statewide Summary of Finances, May 3, 2016

Calculation Of WADA Tier I Entitlement Transportation Allotment High School Allotment Tier I Entitlement New Instructional Facilities Allotment 50% of CEI Adjustment Weighted Average Daily Attendance (WADA) Basic Allotment ($5,140)

Chapter 41 districts And WADA Positives negatives Get ASF NIFA High School Allotment With no local share Lose half of the CEI Don’t get transportation OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/26/2016

Debt Service IFA and EDA OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/26/2016

Debt Issuance (principal)

School district Debt Service and state funding 2006-2017

State Funding for IFA and EDA

Next Biennium 2018–2019 OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Attendance Projections Attendance projections module opened October 15th Affects cash flow (LPE) for 2018-19 biennium TEA uses a four-year average growth rate You can either accept or revise our projections Data must Submitted to TEA (do not leave form in Submitted to Superintendent status or we will use our projections) Revisions must be Approved by the TEA administrator OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Example of attendance projections not submitted to the tEa OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016

Questions??? Al McKenzie FSP Support Manager 512.463.9186 phone al.mckenzie@tea.texas.gov Amy Copeland FSP Operations Manager 512.463.8732 phone amy.copeland@tea.texas.gov OFFICE OF SCHOOL FINANCE TEXAS EDUCATION AGENCY 5/24/2016