January 26, 2009 Mabe

Education Aid in the Proposed Fiscal 2010 State Budget Presentation to the Maryland Association of Boards of Education

Department of Legislative Services Office of Policy Analysis Annapolis, Maryland January 26, 2009

Presentation Outline • State budget environment • Fiscal 2009 education aid • Mandated fiscal 2010 education aid levels • Reductions to education aid proposed in the Budget Reconciliation and Financing Act (BRFA) • Help from the federal government … ? 1

State Budget • Despite the tax increases approved at the 2007 special session, estimated fiscal 2009 general fund revenues are only 0.9% above fiscal 2008 general fund revenues. Fiscal 2010 revenues are expected to grow by just 0.5% over fiscal 2009. • There is a gap of $2.0 billion between projected ongoing general fund revenues and projected “current services” general fund spending for fiscal 2010. • State aid to local school systems makes up 39.0% of projected fiscal 2009 general fund revenues. Even with proposed reductions to school funding programs, education aid would comprise approximately 39.3% of fiscal 2010 general fund revenues. 2

Since the End of the 2008 Session •

The Board of Public Works reduced discretionary education aid by a total of $3.6 million. The largest reduction was to the school improvement grants ($2.75 million).

•

An error was discovered in the wealth base used for fiscal 2009 aid calculations. – The error resulted in an underpayment to Montgomery County schools of $24.2 million and overpayments to 17 school systems totaling $30.8 million. (See Appendix for overpayments.) – The proposed fiscal 2010 State budget includes a $24.2 million deficiency appropriation for Montgomery County, but does not assume reductions in funding for the 17 systems that were overpaid.

•

The proposed fiscal 2010 budget assumes a 50% reduction to fiscal 2009 geographic cost of education index (GCEI) aid that is expected to be approved by the Board of Public Works. 3

Fiscal 2009 Direct Education Aid School System

Legislative Appropriation

($ in Thousands) Montgomery BPW County Actions Deficiency

Assumed GCEI Reduction

Current Estimates

Difference From Appropriation

Allegany Anne Arundel Baltimore City Baltimore

$86,718 281,114 841,539 518,256

($8) (17) (41) (42)

$0 0 0 0

$0 (2,588) (6,516) (1,607)

$86,711 278,508 834,982 516,608

($8) (2,605) (6,557) (1,648)

Calvert Caroline Carroll Cecil

86,488 42,992 143,863 98,994

(1) (2) (2) (10)

0 0 0 0

(715) 0 (787) 0

85,771 42,989 143,074 98,984

(716) (2) (789) (10)

Charles Dorchester Frederick Garrett

152,214 30,735 205,966 25,485

(7) (3) (6) (5)

0 0 0 0

(1,038) 0 (1,899) 0

151,169 30,732 204,061 25,480

(1,045) (3) (1,905) (5)

Harford Howard Kent Montgomery

210,759 197,053 10,471 407,387

(14) (3) (2) (41)

0 0 0 24,171

0 (1,462) (43) (9,187)

210,745 195,587 10,425 422,330

(14) (1,465) (46) 14,943

Prince George's Queen Anne's St. Mary's Somerset

918,943 30,848 95,025 23,600

(59) (1) (7) (3)

0 0 0 0

(11,809) (165) (64) 0

907,074 30,683 94,954 23,597

(11,869) (165) (71) (3)

Talbot Washington Wicomico Worcester

10,509 140,800 110,318 17,135

(5) (13) (9) (6)

0 0 0 0

0 0 0 0

10,504 140,787 110,309 17,129

(5) (13) (9) (6)

Unallocated

43,999

(3,306)

0

0

40,693

(3,306)

$4,731,209

($3,614)

$24,171

$4,713,886

($17,323)

Total

4

($37,880)

Fiscal 2010 Education Aid •

Funding for some discretionary programs is reduced or eliminated in the budget allowance: – GCEI is proposed at 30% rather than the 100% phase in level that had been anticipated (saves $88.5 million); – School improvement grants are reduced $3.9 million from the fiscal 2009 amount; – State gifted and talented funding is eliminated (saves $414,000 from the fiscal 2009 amount); and – Environmental education is reduced by 50% (saves $775,000).

•

Mandated Bridge to Excellence formula aid increases $59.3 million over the original appropriations for fiscal 2009. After considering the 2009 deficiency for Montgomery County, mandated Bridge to Excellence aid is up $35.1 million. 5

Aid with Full Mandated Amounts ($ in Thousands)

Direct Fiscal 2010 Aid at Mandated Levels

Change from Fiscal 2009

Thornton Formulas

Nonpublic Placements

Other Direct Aid

Total Direct Aid

Thornton Formulas

Allegany Anne Arundel Baltimore City Baltimore

$84,765 263,654 802,500 491,308

$915 10,457 25,969 15,525

$1,296 3,665 8,066 8,618

$86,975 277,776 836,535 515,451

$246 (882) 1,169 (1,390)

$9 104 257 154

Calvert Caroline Carroll Cecil

83,503 42,100 137,341 95,822

933 225 3,575 1,883

1,203 733 1,303 1,234

85,639 43,058 142,219 98,939

(145) 62 (903) (73)

Charles Dorchester Frederick Garrett

147,417 29,817 198,549 24,530

1,340 65 2,321 202

1,650 771 1,808 717

150,407 30,654 202,678 25,448

Harford Howard Kent Montgomery

203,744 191,889 9,332 435,031

5,082 3,429 124 13,628

1,584 2,263 904 6,413

Prince George's Queen Anne's St. Mary's Somerset

868,006 29,714 92,722 23,359

28,746 357 719 0

Talbot Washington Wicomico Worcester

10,337 139,679 114,770 16,767

27 1,662 219 0

School System

Unallocated Total

Nonpublic Placements

Other Direct Aid

Total Direct Aid

Percent Change

$9 46 127 80

$264 (732) 1,552 (1,157)

0.3% -0.3% 0.2% -0.2%

9 2 35 19

3 5 13 9

(132) 69 (855) (45)

-0.2% 0.2% -0.6% 0.0%

(780) (83) (1,422) (37)

13 1 23 2

5 3 17 3

(762) (78) (1,383) (32)

-0.5% -0.3% -0.7% -0.1%

210,410 197,581 10,361 455,072

(406) 1,952 (69) 32,552

50 34 1 135

20 8 3 55

(336) 1,994 (64) 32,742

-0.2% 1.0% -0.6% 7.8%

6,733 873 1,404 356

903,485 30,945 94,844 23,715

(3,984) 254 (122) 115

285 4 7 0

110 5 5 3

(3,589) 262 (110) 118

-0.4% 0.9% -0.1% 0.5%

597 1,836 1,270 658

10,960 143,178 116,258 17,425

453 2,362 5,953 293

0 16 2 0

456 2,391 5,950 297

4.3% 1.7% 5.4% 1.7%

(1,649)

-4.1%

3 12 (5) 3

0

11,476

27,568

39,044

0

114

(1,762)

$4,536,655

$128,880

$83,523

$4,749,059

$35,116

$1,276

($1,219)

The chart includes mandated direct aid at full formula levels and discretionary direct aid at proposed levels.

6

$35,172

0.7%

Proposed Reductions to Aid •

The Budget Reconciliation and Financing Act (BRFA) proposes several changes to mandated direct education aid. – Supplemental grants: the calculation is adjusted and the 1% guarantee is changed to a hold harmless. ($43.3 million savings) – Nonpublic placements: the State and local shares of costs for nonpublic placements are altered to split costs 50/50 after the initial local share. ($48.3 million) – Quality teacher incentives: salary signing bonuses are eliminated and stipends for national certification and for working in high-needs schools are adjusted. ($5.3 million) – Aging schools: up to $6.1 million can be funded with bond premiums. ($5.6 million in savings and $11.7 million in general fund savings)

•

These actions are contingent on legislative approval; however, other reductions to the budget may be necessary if the proposed reductions are not approved.

•

Teachers’ retirement payments are not altered in the proposed budget. 7

Distribution of BRFA Reductions ($ in Thousands) Supplemental Grants

Nonpublic Placements

($434) 0 (14,143) (691)

($343) (3,921) (9,738) (5,822)

0 (816) (1,707) (471)

Charles Dorchester Frederick Garrett Harford Howard Kent Montgomery

School System Allegany Anne Arundel Baltimore City Baltimore Calvert Caroline Carroll Cecil

Prince George's Queen Anne's St. Mary's Somerset

Teacher Quality Incentives

Aging Schools

Total

$0 0 0 0

($89) (460) (1,263) (795)

($866) (4,382) (25,144) (7,308)

(350) (84) (1,341) (706)

0 0 0 0

(35) (46) (125) (87)

(385) (945) (3,173) (1,265)

(538) (712) (175) (561)

(502) (25) (870) (76)

0 0 0 0

(46) (35) (166) (35)

(1,086) (771) (1,212) (672)

(978) 0 (264) 0

(1,906) (1,286) (47) (5,111)

0 0 0 0

(198) (80) (35) (548)

(3,081) (1,366) (346) (5,659)

(19,772) 0 (2,073) 0

(10,780) (134) (270) 0

0 0 0 0

(1,100) (46) (46) (35)

(31,652) (180) (2,389) (35)

0 0 0 0

(35) (123) (97) (35)

(45) (746) (179) (35)

Talbot Washington Wicomico Worcester

0 0 0 0

(10) (623) (82) 0

Unallocated

0

(4,304)

(5,325)

($48,330)

($5,325)

Total

($43,335)

8

0 ($5,558)

(9,629) ($102,548)

Aid with BRFA Adjustments ($ in Thousands)

Direct Fiscal 2010 Aid at Reduced Levels

Change from Fiscal 2009

Thornton Formulas

Nonpublic Placements

Other Direct Aid

Total Direct Aid

Thornton Formulas

Nonpublic Placements

Other Direct Aid

Total Direct Aid

Percent Change

Allegany Anne Arundel Baltimore City Baltimore

$84,331 263,654 788,357 490,617

$572 6,536 16,231 9,703

$1,207 3,205 6,803 7,823

$86,109 273,395 811,391 508,143

($187) (882) (12,974) (2,081)

($334) (3,818) (9,481) (5,668)

($80) (414) (1,136) (716)

($601) (5,114) (23,591) (8,465)

-0.7% -1.8% -2.8% -1.6%

Calvert Caroline Carroll Cecil

83,503 41,284 135,634 95,351

583 140 2,234 1,177

1,169 688 1,178 1,147

85,255 42,113 139,046 97,674

(145) (753) (2,610) (544)

(341) (82) (1,305) (687)

(31) (41) (112) (79)

(517) (877) (4,028) (1,310)

-0.6% -2.0% -2.8% -1.3%

Charles Dorchester Frederick Garrett

146,879 29,105 198,374 23,969

837 41 1,451 126

1,605 736 1,642 682

149,321 29,882 201,467 24,776

(1,318) (795) (1,598) (598)

(489) (24) (847) (74)

(41) (31) (149) (31)

(1,848) (850) (2,594) (703)

-1.2% -2.8% -1.3% -2.8%

Harford Howard Kent Montgomery

202,766 191,889 9,068 435,031

3,176 2,143 78 8,518

1,386 2,183 870 5,865

207,329 196,216 10,015 449,413

(1,383) 1,952 (333) 32,552

(1,855) (1,252) (45) (4,976)

(178) (72) (31) (493)

(3,417) 628 (410) 27,083

-1.6% 0.3% -3.9% 6.4%

Prince George's Queen Anne's St. Mary's Somerset

848,234 29,714 90,648 23,359

17,966 223 449 0

5,633 827 1,358 321

871,833 30,765 92,455 23,680

(23,756) 254 (2,195) 115

(10,495) (130) (262) 0

(990) (41) (41) (31)

(35,241) 82 (2,499) 83

-3.9% 0.3% -2.6% 0.4%

Talbot Washington Wicomico Worcester

10,337 139,679 114,770 16,767

17 1,039 137 0

562 1,713 1,173 623

10,915 142,431 116,079 17,391

453 2,362 5,953 293

(10) (607) (80) 0

(31) (110) (102) (31)

412 1,644 5,771 262

3.9% 1.2% 5.2% 1.5%

School System

Unallocated Total

0

7,173

22,243

29,416

$4,493,320

$80,550

$72,641

$4,646,511

0 ($8,219)

The chart includes mandated direct aid with BRFA adjustments and discretionary direct aid at proposed levels.

9

(4,190)

(7,087)

(11,277)

-27.7%

($47,054)

($12,102)

($67,375)

-1.4%

Supplemental Grants: Mandated Example 1A

Calculation of State Financial Assistance for Public Education (SFAPE) and Supplemental Grant for Fiscal 2010 at Mandated Level Prince George's County Fiscal 2010 SFAPE

Fiscal 2009 SFAPE Foundation 50% of GCEI Compensatory Education Special Education Formula Limited English Proficiency Guaranteed Tax Base Student Transportation 50% of Teachers' Retirement

$516,275,226 5,904,747 189,184,778 40,498,599 55,117,079 24,867,739 34,236,967 45,071,516

Supplemental Grant Total SFAPE Needed in FY 2010 for 1% Increase

0 $911,156,650 $920,268,217

Bridge to Excellence Formula Aid

$871,989,881

Foundation 60% of GCEI Compensatory Education Special Education Formula Limited English Proficiency Guaranteed Tax Base Student Transportation 50% of Teachers' Retirement SFAPE Subtotal Supplemental Grant Total SFAPE

$495,593,625 7,030,940 186,673,328 40,825,735 54,102,863 6,829,606 36,659,084 56,949,364 $884,664,545 35,603,672 $920,268,217

Bridge to Excellence Formula Aid $868,006,146 Fiscal 2009-2010 Dollar Change ($3,983,735) Percent Change -0.5%

10

Supplemental Grants: BRFA Example 1B

Calculation of State Financial Assistance for Public Education (SFAPE) and Supplemental Grant for Fiscal 2010 at Proposed BRFA Level Prince George's County Fiscal 2010 SFAPE

Fiscal 2009 SFAPE Foundation 100% of GCEI Compensatory Education Special Education Formula Limited English Proficiency Guaranteed Tax Base Student Transportation 100% of Teachers' Retirement

$516,275,226 11,809,493 189,184,778 40,498,599 55,117,079 24,867,739 34,236,967 90,143,031

Foundation 100% of GCEI Compensatory Education Special Education Formula Limited English Proficiency Guaranteed Tax Base Student Transportation 100% of Teachers' Retirement SFAPE Subtotal Supplemental Grant Total SFAPE

Supplemental Grant 0 Total SFAPE $962,132,912 Needed in FY 2010 for Hold Harmless $962,132,912 Bridge to Excellence Formula Aid

$871,989,881

$495,593,625 11,718,233 186,673,328 40,825,735 54,102,863 6,829,606 36,659,084 113,898,728 $946,301,202 15,831,710 $962,132,912

Bridge to Excellence Formula Aid $848,234,184 Fiscal 2009-2010 Dollar Change ($23,755,697) Percent Change -2.7%

11

Supplemental Grants: Mandated Example 2A

Calculation of State Financial Assistance for Public Education (SFAPE) and Supplemental Grant for Fiscal 2010 at Mandated Level Allegany County Fiscal 2009 SFAPE

Fiscal 2010 SFAPE

Foundation 50% of GCEI Compensatory Education Special Education Formula Limited English Proficiency Guaranteed Tax Base Student Transportation 50% of Teachers' Retirement

$44,990,618 0 21,636,974 6,033,691 165,017 7,682,900 4,009,175 3,378,030

Supplemental Grant Total SFAPE Needed in FY 2010 for 1% Increase

0 $87,896,405 $88,775,370

Bridge to Excellence Formula Aid

$84,518,375

Foundation 60% of GCEI Compensatory Education Special Education Formula Limited English Proficiency Guaranteed Tax Base Student Transportation 50% of Teachers' Retirement SFAPE Subtotal Supplemental Grant Total SFAPE

Bridge to Excellence Formula Aid Fiscal 2009-2010 Dollar Change Percent Change

12

$43,943,534 0 21,955,960 5,750,333 147,187 8,224,315 4,309,669 4,010,735 $88,341,733 433,637 $88,775,370

$84,764,635 $246,260 0.3%

Supplemental Grants: BRFA Example 2B

Calculation of State Financial Assistance for Public Education (SFAPE) and Supplemental Grant for Fiscal 2010 at Proposed BRFA Level Allegany County Fiscal 2009 SFAPE

Fiscal 2010 SFAPE

Foundation 100% of GCEI Compensatory Education Special Education Formula Limited English Proficiency Guaranteed Tax Base Student Transportation 100% of Teachers' Retirement

$44,990,618 0 21,636,974 6,033,691 165,017 7,682,900 4,009,175 6,756,060

Supplemental Grant Total SFAPE Needed in FY 2010 for Hold Harmless

0 $91,274,435 $91,274,435

Bridge to Excellence Formula Aid

$84,518,375

Foundation 100% of GCEI Compensatory Education Special Education Formula Limited English Proficiency Guaranteed Tax Base Student Transportation 100% of Teachers' Retirement SFAPE Subtotal Supplemental Grant Total SFAPE

Bridge to Excellence Formula Aid Fiscal 2009-2010 Dollar Change Percent Change

13

$43,943,534 0 21,955,960 5,750,333 147,187 8,224,315 4,309,669 8,021,470 $92,352,468 0 $92,352,468

$84,330,998 ($187,377) -0.2%

Summary of Changes in Aid ($ in Millions) Change from FY09 to Mandated FY10 Level

Change from FY09 to Proposed FY10 Level

$7,000

$7,000

$5,336

$6,000

$5,508

$4,000 $3,000

$5,336

$6,000

$5,406

$5,000 Total Aid

Total Aid

$5,000

$7,000

$4,714

$4,749

$4,000 $3,000

$4,714

$4,647

$3,000

$2,000

$2,000

$1,000

$1,000

$1,000

$622

$759

FY09

Mandated FY10

Retirement

Direct Aid Retiremt Total Aid

FY 2009 $4,714 622 $5,336

Mandated FY 2010 $4,749 759 $5,508

$0

Direct Aid

$ Chg $35 137 $172

% Chg 0.7% 22.1% 3.2%

Direct Aid Retiremt Total Aid

$5,406

$4,749

$4,647

$759

$759

Mandated FY10

BRFA FY10

$4,000

$2,000

$0

$5,508

$5,000 Total Aid

$6,000

Change from Mandated to Proposed FY10

FY 2009 $4,714 622 $5,336

$622

$759

FY09

BRFA FY10

$0

Retirement

Direct Aid

Proposed FY 2010 $4,647 759 $5,406

$ Chg ($67) 137 $70

14

Retirement

% Chg -1.4% 22.1% 1.3%

Mandated Proposed FY 2010 FY 2010 Direct Aid $4,749 $4,647 Retiremt 759 759 Total Aid $5,508 $5,406

Direct Aid

$ Chg ($103) 0 ($103)

% Chg -2.2% 0.0% -1.9%

Potential Federal Help •

As introduced, the American Recovery and Reinvestment Act of 2009 includes $13 billion in Title I funding and $13 billion in Individuals with Disabilities Education Act (IDEA) funding to be distributed over two years ($6.5 billion for each program each year).

•

Maryland’s share would total approximately $400 million, $180 million for Title I and $220 million for IDEA ($90 and $110 million annually).

•

If the legislation is passed with these amounts, the federal funds could provide some temporary relief to school operating budgets that will not be receiving large State aid increases.

•

Additional funding is also included in the bill for education technology ($1 billion total and an estimated $13.6 million for Maryland) and school construction ($14 billion/$191 million).

•

The bill also includes a State Fiscal Stabilization Fund that would total approximately $64 billion. Maryland’s share of the fund would be an estimated $1.16 billion ($580 million per year). At least 61% of the funds (roughly $350 million per year) would have to be used for public K-12 and higher education. 15

Appendix

Fiscal 2009 Overpayments Overpayments due to Wealth Base Error ($ in Thousands) Allegany Anne Arundel Baltimore City Baltimore

$879 5,154 0 5,992

Harford Howard Kent Montgomery

Calvert Caroline Carroll Cecil

896 357 1,430 976

Prince George's Queen Anne's St. Mary's Somerset

68 497 1,418 0

Charles Dorchester Frederick Garrett

2,545 338 2,148 0

Talbot Washington Wicomico Worcester

0 1,770 1,241 0

State Total

$30,838 16

$1,963 3,167 0 0