1. Changes in Minnesota School Finance Context Since Working Group Report Issued in May 2011
Tom Melcher
June 25, 2012

2. Topics for Discussion Funding Changes:
Basic Formula
Literacy Aid
Small Schools Aid
One-Time Compensatory Aid
Other
Integration (Sunset and Task Force Recommendations)
Aid Payment and Property Tax Levy Shifts
Alternative Compensation Participation Approaching Cap
Staff Development Needs (Teacher/Principal Evaluation)
State General Fund Budget Outlook for FY 2014 – FY 2015

3. Basic Formula FY 2012: $50 (1%) increase, from $5,124 to $5,174
FY 2013: Additional $50 increase, from $5,174 to $5,224
Inflation Projections for FY 2012 and FY 2013:
CPI: % for FY 2012; 1.4% for FY 2013
IPD: % for FY 2012; 1.7% for FY 2013

4. Literacy Aid Begins in FY 2013 Includes Proficiency Aid and Growth Aid
Proficiency aid = $530 x grade 3 enrollment on October 1 of the previous year x three year average percent of third graders proficient on third grade reading MCA.
Growth aid = $530 x grade 4 enrollment on October 1 of the previous year x three year average percent of fourth graders making medium or high growth on the reading MCA.
For FY 2013 only, state total aid is capped at $48,585,000 (97.8% proration projected)

5. Small Schools Aid
New component of general education revenue, beginning in FY 2013.
School districts with fewer than 1,000 AMCPU qualify for revenue on a sliding scale:
Allowance / AMCPU = $ x (1,000 – AMCPU) / 1,000
Charter schools are not eligible for this revenue.

7. One-Time Compensatory Aid
One-time aid for FY 2013.
The 20 largest districts in the state are eligible for this aid if their regular compensatory revenue per compensatory pupil unit (free + ½ of reduced price lunch count) is less than $1,400 per compensatory pupil unit. The aid equals the amount needed to bring the district’s compensatory aid up to the $1,400 level.
This revenue must be used for basic skills purposes as defined in Minn. Stat. §126C.15, subdivision 1. The allocation by building is to be determined locally.

8. One-Time Compensatory Formula, FY 2013

9. One-Time Compensatory Aid February 2012 Forecast Estimates
Current
Comp. $/
Additional $
Adj Count
/Adj Count
Poverty
(Free +
to Reach
Estimated
Conc.
1/2 Red.)
$1,400
Revenue
276
MINNETONKA 6%
242
1,158
685,441
194
LAKEVILLE
11%
448
952
1,113,551
112
EASTERN CARVER CO.
14%
630
770
1,018,097
284
WAYZATA
15%
666
734
1,137,581
272
EDEN PRAIRIE
18%
743
657
1,102,436
728
ELK RIVER
19%
764
636
1,527,203
196
ROSEMOUNT
804
596
2,910,280
833
SOUTH WASHINGTON CO.
17%
831
569
1,666,751 11
ANOKA-HENNEPIN
27%
1,156
244
2,551,260
621
MOUNDS VIEW
1,224
176
482,603
535
ROCHESTER
31%
1,332 68
347,220

10. One-Time Compensatory Aid February 2012 Forecast Estimates
Current
Comp. $/
Additional $
Adj Count
/Adj Count
Poverty
(Free +
to Reach
Estimated
Conc.
1/2 Red.)
$1,400
Revenue
191
BURNSVILLE
37%
1,502
622
NORTH ST PAUL-MAPLE.
41%
1,561
271
BLOOMINGTON
35%
1,565
279
OSSEO
34%
1,744
281
ROBBINSDALE
42%
1,748
742
ST. CLOUD
44%
1,778
709
DULUTH
1,939
1.2
MINNEAPOLIS
63%
2,475
625
ST. PAUL
69%
2,572

11. Other Funding Formula Changes 2011 Legislation
Permanent School Fund / Endowment
Charter schools eligible for payments (~$28/ADM);
Funds allocated on adjusted ADM instead of resident ADM
Training & Experience Revenue repealed
Late Contract Penalty repealed
Early Graduation Scholarships / Military Service Awards
Charter school lease aid grandfather and state charter school startup aid repealed

12. Integration Revenue 2011 Legislation
The current integration funding formula remains in effect through FY 2013.
Integration revenue statute is repealed beginning in FY 2014; however, funding for a replacement program remains in the base budget for FY 2014 and FY 2015
The current integration rule remains in effect with no sunset.
Interdistrict desegregation transportation funding remains in the base for FY 2014 and later
Integration Revenue Replacement Advisory Task Force established to develop recommendations for repurposing integration revenue

13. Integration Revenue Task Force Recommendations
Create the “Achievement and Integration for Minnesota (AIM)” program funded through existing categorical revenue..…
Ensure accountability and oversight at the Department (MDE)…
Clearly focus and define limited uses of AIM revenue…
Examine the merits of one collaborative Metropolitan Integration School District …..

14. Integration Revenue Task Force Recommended Fiscal Principles
1. Cap the existing revenue program at the current level.
2. Level the fiscal disparities between demographically similar districts:
Reduce the disproportionality between tiers starting in FY 14.
Create incentives for districts to cooperate to reduce racial enrollment disparities using voluntary measures (public school choice).
3. Set aside .02 percent (%) of revenue to ensure oversight and accountability at the Minnesota Department of Education.
MDE will withhold revenue for districts not making progress towards goals.

15. Integration Revenue Task Force Recommended Fiscal Principles (Continued)
4. Create a fiscal model that is predictable over time and stable in two-year increments.
5. Define percentages of allowable expenditures in statute:
At least 80 percent (%) of revenue is spent on students.
Twenty percent (20%) spent on professional development and administration.
Administrative costs may not exceed 10 percent (%).

16. School Shift Summary February 2012 Forecast
Aid Payment 64.3 – 35.7 (vs 90-10) $1.873 Billion
Property Tax Shift 48.6% of Gross Levy) $563 Million
_____________
Total School Shift (as of 6/30/2013) $2.436 Billion

17. Repayment of School Shifts
M.S. 16A.152 requires unrestricted state general fund budget balances to be allocated in the following order:
$350 Million to state’s cash flow account
$653 million to state’s budget reserve account
Pay back school aid payment shift
Pay back school tax shift
Current payment percent remains at 64.3% to begin FY 2013
Re-evaluated with November forecast:
If state budget improves, increase current percent ($73 M for each 1% increase)
If state budget gets worse, current percent remains 64.3 unless changed by legislation

18. Alternative Teacher Compensation Status Update
MS 126C.10, Subd. 34, limits state total basic alternative teacher compensation (Q Comp) aid to $75,636,000.
New teacher evaluation requirements have triggered increased interest.
Basic aid was $43,027,000 in FY 2012, and is projected to increase to $49,759,000 in FY 2013 and to $63,425,000 in FY 2014.
(FY 2014 projection includes Anoka, Minneapolis, Bloomington, Burnsville and West St Paul, but not St Paul. Adding St Paul would make the total $69,963,000.)
When basic aid reaches the cap, MDE will no longer be able to approve new districts, creating an equity issue. A decision will be needed on whether to accept the equity issue, increase the cap, or go with a new approach.

19. Teacher Evaluation Process (2011 Legislation)
The annual teacher evaluation process:
establishes a three-year professional review cycle and includes at least one summative evaluation performed by a trained evaluator
agreed upon teacher value-added assessment models and state and local measures of student growth for 35 percent of teacher evaluation results;
student engagement and connection measures
requires qualified and trained evaluators to perform summative assessments;
requires support to improve the performance of teachers
is to be coordinated with staff development activities;
may allow time for peer coaching and teacher collaboration;
may include mentoring and induction programs;

20. Teacher Evaluation Process Panel
Requires a teacher evaluation process be adopted in all districts.
Requires MDE to develop a default model to be used should the district and teachers fail to adopt a model by “joint agreement”
MDE model expected to be ready to present to the Commissioner in December 2012
It will be piloted in school districts during 2013/14 school year
Full implementation the 2014/15 school year

21. Principal Evaluation Model
Requires each district to adopt and maintain an annual principal evaluation as a duty of the superintendent
MDE developed a model that may be used by districts. Model completed and reported to legislature on February 1, 2012
Model to be piloted in 16 school districts during school year and all districts must implement in 2013/14 school year
Requires district to support and provide professional development to improve a principal's instructional leadership and organizational management skills

22. Staff Development Needs (Teacher/Principal Evaluation)
What will be the implementation and staff development costs for both the Principal and Teacher evaluation processes?
Trained evaluators
Assessment costs (35%)
Staff Development requirements
Cost of surveys (principal’s, student connectedness)

23. State General Fund Budget End of 2012 Legislative Session ($ in millions)
FY FY
Beginning Balance $1,289 $ 1,068
Revenues , ,861
Spending* ,086** ,902
Balance before Reserves 1,
Cash Flow Account
Budget Reserve
Stadium Reserve
Budget Balance $ ($1,047)
* Net spending after school shifts
** Reflects $318 million K-12 Education shift buyback

24. Questions? For general questions, please contact:
Tom Melcher, Director
School Finance Division
For full text of report and district-by-district runs:
See MDE web site at: