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04/11/231
E-12 Education FinanceE-12 Education FinanceShift DiscussionShift Discussion
Eric L. Nauman,Fiscal Analyst296-5539
04/11/232
Getting “Shifty”Getting “Shifty”
Pre Shift Environment
Aid Payment Schedule – No Shift
Shift History & Summary
Aid Payment Schedule – Pre & Post 2011 SessionAid Payment Schedule – After the 2011 Session
Accounting for the Shifts
Where to Get More Information
Aid Payment Shift
Property Tax Recognition Shift
How A Legislative PTRS WorksCurrent PTRS Under Unallotment
Basic Terms & Shifted E-12 Programs
Table of ContentsTable of Contents
04/11/233
Aid Payment ShiftAid Payment Shift
Current Payment
60/40
Auto-
Buyback
Final Payment
Entitlement
90/10
73/27
04/11/234
Basic TermsBasic Terms
The percentage of an entitlement that is paid in the fiscal year after the state aid is generated. Difference between prior year’s entitlement and that year’s current payment (MS127A.45, subd. 9).
The amount of state aid that the state pays to districts and charter schools in a given year. In most cases, an appropriation consists of a portion of an aid entitlement from the “current” fiscal year and a “final” payment from an aid entitlement from the prior fiscal year.
Appropriation (Education Context)
Final Payment
Aid Entitlement100 percent of the state aid a district or a charter school is eligible
to receive in a given fiscal year. Aid may actually be paid in a separate fiscal year
Current PaymentThe percentage of an entitlement that is paid in the fiscal year in
which the state aid is generated.
Payment ScheduleA schedule which expresses the amount of education aid entitlements
that are paid as a “current” payment and the amount that is paid as a “final” payment. Must add to 100%.
04/11/235
Basic TermsBasic Terms
An adjustment to the balance of current and final payment percentages which constitute the state aid appropriation made to schools.
In an “unshifted” environment, school aid payments are comprised of a combination of 90% of the current year’s entitlement added to 10% of the prior year’s entitlement.
Payment Shift
The appropriation is metered to schools in 23 payments throughout the year – roughly every two weeks
04/11/236
E-12 Programs on Payment ScheduleE-12 Programs on Payment Schedule
• General Education• Abatement Aid• Consolidation Transition Revenue• Nonpublic Pupil Aid• Nonpublic Pupil Transportation Aid• Charter School Building Lease Aid• Charter School Start-Up Aid• Integration Aid• Magnet School Start-Up Aid• Success for the Future• Tribal Contract Schools• Special Education – Regular• Special Education – Excess Cost• Travel for Home-Based Services• Transition Programs – Students with Disabilities• Health and Safety Aid
04/11/237
E-12 Approps on Payment ScheduleE-12 Approps on Payment Schedule
• Debt Service Equalization Aid• Alternative Facilities Bonding Aid• Deferred Maintenance• Basic Support Grants for Libraries• Multicounty, Multitype Library Systems• Regional Library Telecommunications Aid• School Readiness• Early Childhood Family Education Aid• Health and Developmental Screening Aid• Community Education• Adults with Disabilities Program Aid• School Age Care Aid• Adult Basic Education Aid
04/11/238
School Payment Shift School Payment Shift
Entitlements(amounts generated by
formula)
2010 2011 20122009$100
Current Payment $90
$100Appropriations
2013
Mechanics of Payment Schedule (Without Shift)
$100$100$100$100Fiscal Year
Payment Schedule
90%/10%
90%/10%
90%/10%
90%/10%
90%/10%
$90 $90$90$90
Final Payment + $10
FromFY 2008
+ $10 + $10+ $10 + $10
$100 $100 $100 $100
04/11/239
School Payment Shift School Payment Shift
Entitlements(amounts generated by
formula)
2010 2011 20122009$100
Current Payment $90
$100Appropriations
2013
Mechanics of Aid Payment Shift (2010-11 biennium & Feb 2011 Fcst law)
$100$100$100$100Fiscal Year
Payment Schedule
90%/10%
73%/27%
70%/30%
90%/10%
90%/10%
$73 $90$90$70
Final Payment + $10
FromFY 2008
+ $10 + $30+ $27 + $10
$ 83 $97 $120 $100
Entitlements: Under a payment shift, there is not adjustment to entitlements. A payment shift creates a delay of WHEN schools receive aid. It does not reduce the amount.
04/11/2310
School Payment Shift School Payment Shift
Entitlements(amounts generated by
formula)
2010 2011 20122009$100
Current Payment $90
$100Appropriations
2013
Where We’re At Today (2011 E-12 Education Bill)
$100$100$100$100Fiscal Year
Payment Schedule
90%/10%
73%/27%
70%/30%
60%/40%
60%/40%
$73 $60$60$70
Final Payment + $10
FromFY 2008
+ $10 + $30+ $27 + $40
$ 83 $97 $90 $100
FY 2010-11 Biennium
FY 2012-13 Biennium
Confusing Comparison: The shift percentage in FY 2012 is 10 percentage points lower than the prior year, BUT is 30 percentage points lower than the Feb Fcst for FY 2012.
04/11/2311
Property Tax Recognition Shift Property Tax Recognition Shift (PTRS)(PTRS)
Levy Recognition
H.F.2323
UFARS
Final Payment
Unallotment
Aid Cut
Recognition Percentage
04/11/2312
Basic TermsBasic Terms
Property Tax Recognition Shift (PTRS)
A PTRS is an accounting entry that takes a portion of a district’s property tax revenue and moves it back one year. (ie. PT revenue that would otherwise be revenue in FY 2012 is shifted into FY 2011)
The second step is to reduce state aid in an amount equal to the property taxes shifted forward. This generates one-time savings.
The current PTRS was enacted by the legislature in 2010. The amount shifted will grow over time as property taxes grow.
04/11/2313
Property Tax Recognition ShiftCalendar Year 2011
Oct Jan ‘11 May July 1
Property taxes paid
FY 2011
FY 2012
Dec
Property taxes paid
Property tax revenue recognized by districts
Property tax revenue recognized by districts
School property taxes currently paid in two separate years, BUT prior to FY 2011 both May and October payments were “recognized” by districts as revenue in the later fiscal year.
Prior to Change
Rules governing recognition dates based on statute and UFARS.
04/11/2314
Property Tax Recognition ShiftCalendar Year 2011
Oct Jan ‘11 May July 1
Property taxes paid
FY 2011
FY 2012
Dec
Property taxes paid
Property tax revenue recognized by districts
Property tax revenue recognized by districts
Prior to ChangeLegislative Change – Creating a Shift
Step #1 –Change Levy Recognition
Step #2 – GenEd Appropriation
Reduction
Aid cut in FY 11 by
$515 million*
Increase Levy Revenue by
$515 million * in FY 11
*Based on Feb. 11 Fcst
04/11/2315
Accounting for the ShiftAccounting for the Shift
Levy Recognition
MS 16A.152
Budget
Balance
Fund Balance
Forecasts
Automatic
Buybacks
One-time
04/11/2316
Shift AccountingShift Accounting
Aid Payment Shift (73%, 70% & 90%)
(60% in FY12 & later)
Shift Savings
Budget Balance & the Shifts (Dollars in 000s, Relative to Feb 11 Fcst)
($1,382,368) * $1,382,368
FY 2010-11 FY 2012-13
($1,897,382) $1,316,124
Property Tax Recog Shift
($515,014) ($66,244)
*Aid shift numbers include tax credits.
FY 2012-13 Enacted BudgetFebruary 2011 Forecast FY 2012-13
Difference
($831,351) ($2,213,719)
($79,917) ($13,673)
($911,268) ($2,227,392)
04/11/2317
Contingent Shift Buy-BackContingent Shift Buy-Back
Because shifts have historically been used as a defacto “budget reserve” a system was created in 2004 to pay them back automatically. This law remains in effect today.
Shifts are paid back when the Commissioner of MMB “determines that there will be a positive unrestricted budgetary general fund balance at the close of the biennium.”
In order of precedence: (1) Cash flow account, (2) budget reserve, (3) payment shift,(4) property tax recognition shift and two other small payments.
This process used once already. Shifts from 2002 & 2003 sessions were paid back in two years.
04/11/2318
Contingent Shift Buy-BackContingent Shift Buy-BackMS.16A.152 Budget Reserve and Cash Flow AccountsIf on the basis of a forecast of general fund revenues and expenditures, the commissioner of
management and budget determines that there will be a positive unrestricted budgetary general fund balance at the close of the biennium, the commissioner of management and budget must allocate money to the following accounts and purposes in priority order:
(1) the cash flow account established in subdivision 1 until that account reaches $350,000,000;(2) the budget reserve account established in subdivision 1a until that account reaches $653,000,000;(3) the amount necessary to increase the aid payment schedule for school district aids and credits payments in section 127A.45 to not more than 90 percent rounded to the nearest tenth of a percent without exceeding the amount available and with any remaining funds deposited n the budget reserve;(4) the amount necessary to restore all or a portion of the net aid reductions under section 127A.441 and to reduce the property tax revenue recognition shift under section 123B.75, subdivision 5, by the same amount………..
04/11/2319
Shift AccountingShift Accounting
3,623 3,727 3,808 3,895
SCRFA, ELNauman
04/11/2320
History of E-12 ShiftsHistory of E-12 Shifts
Payment Shift
Unallotments
UFARS
Recognition Percentage
Contingent
Buyback
PTRS
04/11/2321
Education BudgetEducation BudgetEducation Shift Savings – A History of Legislative Changes
Fiscal Year
2003 Payment 83/17 ( $437.5 M) Nov. 2005 Fcst
Type Level Amount When
Enacted (if known)
Year PaidBack
2004** Payment 80/20 ($185.3 M) Nov. 2005 Fcst
2004** PTRS 48.6 ( $230.3 M ) Feb. 2006 Fcst
1983 PTRS 32% ($240.7 M) Partially in ’85, ’96-’99
1985 PTRS 24% shift reduced
1988 PTRS 27% shift expanded 1996-1999
1990 PTRS 31% shift expanded 1996-1999
1992 PTRS 37% shift expanded 1996-1999 1993* PTRS 50% shift expanded Partially in ‘94
1994 PTRS 37.4% shift reduced
1996 PTRS 18.1% shift reduced
1997 PTRS 7% shift reduced
1997 Payment 90/10 shift reduced
1999 PTRS 0% PTRS eliminated
*Previous shift high point in FY 1993, $688 million owed to schools.
**2004 the Legislature passed the contingent shift buyback language.
04/11/2322
Education BudgetEducation BudgetEducation Shift Changes – A History of Legislative Changes
Fiscal Year Type Level
Amount When Enacted
(if known)
Year PaidBack
2005 Payment 81.9/18.1 $116.3 M Nov. 2004 Fcst
2005 Payment 84.3/15.7 $143.7 M Feb. 2005 Fcst
2006 Payment 84.3/15.7 $355.0 M Nov. 2005 Fcst
2006 PTRS 10.8% $265.9 M Nov. 2005 Fcst
2006 PTRS 0% $72.9M Feb. 2006 Fcst
2011* PTRS 48.6% ($561.5M ) Based on pos fcst
2010* Payment 73%/27% ( $1,160.4M) Based on pos fcst
* Shifts initially created by Gubernatorial unallotment process and subsequently codified into law.
2011 Payment 70%30% ($207.7M) Based on pos fcst
2012 Payment 60%/40% ($739.2M ) Based on pos fcst
04/11/2323
Briefing SummaryBriefing Summary
There are two kinds of Education shifts -- Aid Payment Shifts-- Property Tax Recognition Shift
Neither type makes any changes in the revenue that districts have to spend
Shifts have a lengthy history in Minnesota budgeting-- Frequently used as a budget reserve
Current law requires shifts to be paid back once MN forecasts positive budget balances in the general fund-- Reasonable assumptions project over $3.6 billion in contingent spending (based on current law)-- This spending will occur prior to having any resources available for other budget purposes
04/11/2324
Where to Get More InformationWhere to Get More Information
Department of Education; PTRS Shift Explanation Letterhttp://www.education.state.mn.us/mdeprod/groups/Communications/documents/
Announcement/014480.pdf
Senate Counsel, Research and Fiscal Analysis,This briefing will be archived at:http://www.senate.leg.state.mn.us/departments/scr/presentations/index.php#header
Senate Counsel, Research and Fiscal Analysis,2011 Final Education Act Aid Tracking:http://www.senate.mn/departments/fiscalpol/tracking/2011/Edu_AidSS.pdf
2011 Final Education Act Property Tax Tracking:http://www.senate.mn/departments/fiscalpol/tracking/2011/Edu_PropTaxSS.pdf
House Research School Finance Guide For Legislatorshttp://www.house.leg.state.mn.us/hrd/pubs/mnschfin.pdf
04/11/2325
Minnesota Senate E-12 Education StaffMinnesota Senate E-12 Education Staff
Nonpartisan Staff
Shelby McQuay, Research Analyst 651/296-5259
Eric L. Nauman, Fiscal Analyst 651/296-5539
Ann Marie Butler Yunker, Counsel 651/296-5301
Caucus Staff
Greg Marcus, Education Committee
Administrator 651/296-5312
Ed Cook, Republican Research 651/296-0129 Danna Elling, DFL Research 651/296-7089