Www.GeorgiaEducation.org Basics of School Finance Understanding Funding and Class Size

www.GeorgiaEducation.org

Basics of School Finance

Understanding Funding and Class Size


The General Assembly said in 2005:

No later than October 1, 2005 the State Board of Education shall develop rules and regulations requiring that each local board of education provide information as specified by the state board and which is not specifically made confidential by law, including school site budget and expenditure information and site average class size by grade, to members of the school council and the general public.


Understanding School Funding


Before asking what happens to the money a school receives, it is helpful to first know how schools are funded.


Why is this important to know?

The public cannot hold schools accountable for how money is spent unless it understands how the money is earned.

Finance drives policy. Policies are only ideas and promises until money is provided to implement them.

Tax reform efforts often conflict with education reform efforts since tax relief decreases the revenue available.

Effective advocacy requires understanding the financial impact of any proposal.


Sources of School Funding Federal funds

Generally tied to specific programs with no discretion for spending

Traditionally targeted to students with special needs or greater educational deficits

State funds Provides some funds for the operation and building of

schools About 39% of the state budget goes to K-12 education

Local funds Funds to operate schools come from local property taxes Funds to build schools come from a SPLOST or bonds


2006 Average Revenue Per FTE*

$652

$3,336

$4,086

FederalStateLocal

*FTE is full-time equivalent student. It will be explained further in this presentation.


Quality Basic Education The Quality Basic Education Act (QBE)

was passed in 1985 and revised several times since. This is the school funding formula.

Think of funding in terms of students, teachers and classes. The QBE formula determines which classes the state will fund, how many teachers it will pay for to teach those classes, and how many students can be in a class.


Which classes are funded?

There are 19 instructional programs that are contained in the QBE formula.

These “programs” are what we commonly think of as grades and classes.

For example: Kindergarten, grades 9-12, and ESOL are three of the programs.

A weight is assigned to each program based on the comparative cost of each. Grades 9-12 are the lowest at 1.000; Special Education Category IV is the highest at 5.7995.


How many teachers does the state pay for?

The state uses a funding ratio to decide how many teachers to pay for in each program. For instance, grades 1-3 receive funding for one teacher for every 17 FTEs.

This does not mean that grades 1-3 can have only 17 students.

The funding ratio and class size requirements are two different things.

The formula considers only how many FTEs there are in a school system, not where they are.

If a system had 54 FTEs in first grade, it would earn only 3 teachers even if those 54 students were in four different schools.


Why FTEs instead of students? The FTE count is not the number of students in

the seats, it is a measure of the time students spend in the 19 instructional programs.

Instead of counting the actual number of students in a school, weighted full-time equivalent (FTE or WFTE) student counts are used to measure enrollment.

State funding is completely based on the FTE count.

The following slides show two examples of how this works.


FTE Count Example Susie Jones is a fourth grader who spends four

of six periods a day in her regular classroom (weighted at 1.0319), one period in the English to Speakers of Other Languages class or ESOL (weighted at 2.5234), and one period in the gifted class (weighted at 1.6642).

Using the weights in the funding formula, Susie is counted as 1.3859 FTEs. [(4x1.0319)+(1x2.5234)+(1x1.6642)]/6

The weights and base amount are listed under QBE Funding at: http://

www.gadoe.org/doe/finances/index.asp


Another FTE Count Example

Pierre Rogers is a 10th grader taking 5 regular classes and a Study Hall.

Study Hall is not an instructional program in QBE funding, so the system earns nothing for Pierre for that period.

Pierre is counted as 0.833 FTE [(5x1.000)+(1x0)]/6=0.833.


Putting It Together – The Money

The weighted FTE is multiplied by the base amount of the state funds.

If the state set the base amount earned for each FTE at $2642, the system would earn $3,662 from the state to educate Susie ($2642 x 1.3859 = $3662).

Using the same base amount, the system earns $2,201 for Pierre ($2642 x 0.833 = $2201).

Weights and base amount used are those set for FY 2008.


Putting It Together – The Teachers

The FTEs counted in each program are totaled and the teacher funding ratio is applied.

Using Susie’s example: 23 FTEs earn one fourth grade teacher Susie is 0.688 FTE in the fourth grade program

since she is in there only 4 periods of the day. (4x1.0319)/6=0.688

A student in the fourth grade classroom all 6 periods would count as 1.0319 FTEs towards the 23 needed to earn a teacher. (6x1.0319)/6=1.0319


There are also adjustments made to the base amount earned by a system to reflect the actual experience and education of the teachers in the classroom. Teachers earn money based upon years of service and education levels. This is not taken into account in the examples.


QBE Summary QBE is the state funding formula. It refers to grades and classes as programs. It specifies which programs the state will fund. It counts both how many students are in each

program and how much of their day is spent in the program to get the FTE count.

The FTE count is used to determine how much money the system will receive and what personnel the state will pay for.


Local Five Mill Share The local five mill share is the portion of the

instructional costs the state requires each local school system to pay with locally raised funds. The funds are raised through property taxes.

Systems must contribute an amount equal to 5 mills of property tax generated locally to receive state funds.

The dollar amount of the five mill share is deducted from the amount earned by the system under the QBE formula.

The system receives the “net” earnings: QBE formula minus the local five mill share. The system does not send the amount of the five mills to the state or any other system.


Local Five Mill Example A system earns $25.4 million under the QBE

formula based upon the number and kinds of students it has.

The value of one mill in this county is $702,118. A property tax of 5 mills would raise $3.5 million (702,118 x 5 = 3.5 million).

The system then receives $21.9 million (25.4 – 3.5 = 21.9) from the state in QBE earnings. The $3.5 million raised locally remains part of the local school system budget.


Equalization Equalization Grants are based on a

formula that compares the relative property tax wealth of all counties in the state.

These grants provide additional funding to systems at or below the 75th percentile of per FTE property tax wealth in proportion to the amount of mills levied above the required 5 mills. (25% of systems have greater per FTE property wealth)


Equalization The intent is to equalize the disparity between

the systems that can easily raise local funds due to the high value of a mill and the systems that struggle to raise local funds due to the low value of a mill. (The value of property varies greatly from county to county.)

It is also an incentive for local systems to tax themselves in order to be eligible to receive equalization grants.


Equalization Example A county’s property tax digest is $556 million based

upon all property valued at 40% of its market value. The system FTE count is 4,389. The per FTE property tax wealth is $126,680 ($556

million/4,389=$126,680) If 57% of the systems had a higher per FTE property tax

wealth, this system would be at the 43rd percentile and eligible for an equalization grant.

The local board of education has levied a total of 16.8 mills (up to a limit of 20 mills).

The system receives an equalization grant of $936,056 based on the relative value of 11.8 mills (Levied 16.8 – Required 5= 11.8 Eligible for Equalization).


Summary of State Funding State funding for education is based on:

The QBE formula earnings minus the local five mill share

Categorical grants such as transportation Equalization grants

The Governor’s Education Finance Task Force is looking for a better, more easily understood way to fund education. See www.ie2.org for more information on the task force.


Allotment Sheet An Allotment sheet is a spreadsheet computed

by the Department of Education to show exact earnings under the QBE formula, the local five mill share, and categorical grants such as transportation for each school system in Georgia.

In 2000, allotment sheets were available by school and by system. Subsequent changes in the law deleted the school-based allotment sheet.

System allotment sheets be found at www.gadoe.org.


Expenditure Controls

Expenditure controls govern spending of state QBE funds at the local level.

Under the A+ Reform Act of 2000, expenditure controls were set at the school (site) level. Each school earned funds based on their student population and the funds had to be spent at that school on the specific program for which they were earned (with the exception of an amount reserved for central office expenses).

Legislation has delayed these requirements and instead put system-level expenditure controls in place. Revenue is based on what the system as a whole earns. The funds then may be spent, with a few restrictions, at the discretion of the local board at any school in the system without regard to which school earned it.


Example of Expenditure Controls The system receives $21.9 million for its 10

schools. $17.7 million of that is earned for the 19 direct

instruction programs under the QBE formula. $700,000 of the $17.7 million is earned by the early

intervention, remedial and alternative education programs. This money must be spent on these programs, but it can be spent at any school.

The local board of education can allocate the remaining $17 million to any school for any of the programs.

$600,000 was earned for media and can be spent for media materials or personnel at any school.


Example of Expenditure Controls $170,000 was earned for 20 additional days of

instruction. Up to $25,500 may be used to transport students to these opportunities for extra instruction.

The system earned $103,000 for professional development. 90% of it ($92,700) must be spent on professional development. The remainder may be reserved for administrative costs to the central office.

The remainder is spent on other indirect costs of instruction.


Pop Quiz

1. Which state legislative committees determine how revenues are raised?

2. Which state legislative committees determine how revenues are spent?It is important to know how the money flows if you

want to advocate for either more money for education or for money to be spent in a different way.


Answers

1. House Ways and Means and Senate Finance committees determine how revenue is raised. Proposals for new taxes must originate in the House.

2. House and Senate Appropriations committees determine how the money is spent. Both committees have a K-12 education subcommittee. The budget originates in the House.


Local Funds The amount of local funds available

depends on the millage rate set by the local board of education and the value of a mill.

Funds raised locally stay locally and may be used as the local board decides.

State law requires that all local budgets be balanced – local school systems cannot spend more than they take in.


Local Budget Process Superintendent submits budget to the local board

of education (LBOE). LBOE may hold budget workshops to discuss the

budget. LBOE holds public hearing(s) to take comments on

proposed budget. LBOE publishes proposed millage. LBOE adopts budget. Some systems allow principals some discretion

over their budgets or at least part of it. In that case, principals submit their proposed budget to the Superintendent.


Discuss If your school received

$50,000 to spend, how would you recommend it be spent?

What advice would you give the local board of education regarding the annual budget?

Would you prefer the state funds be directed to the school level or the system level? Why?


The School Council’s Rolein School Funding By law, school councils are part of the accountability

process. The school council’s role is to monitor the process, ask

questions as needed, and communicate information to the school community.

School Councils might ask: What is the total amount of funds available at the

school level? At the system level? What choices have been made to shift funds? Has the categorical breakdown of expenditures

changed? For example, is more being spent for transportation and less on instruction?

Do the changes reflect a focus on student achievement?


Additional Resources System level revenue and expenditures

are on the state report card at www.gaosa.org.

The Governor’s Education Finance Task Force: www.ie2.org.

Information on the Georgia General Assembly is available at www.legis.state.ga.us and www.GeorgiaEducation.org


Understanding Class Size


Class Size Terms

Funding ratio – the number of FTEs needed to earn state funds for a single class in each QBE program (for example, grades 4 and 5 earn one teacher for every 23 FTEs)


How many can be in a class?

The State Board of Education (rule 160-5-1-.08) and state law (O.C.G.A. 20-2-182) determines maximum class size.

The funding ratio for teachers per FTE and maximum class size are often confused. They are two separate policy choices.


Why are the class size and funding ratio different? Students don’t come in even bunches. If the funding ratio is 1:23 and a school has

47 students, it would earn 2.04 teachers. One class could have 23 students, the other 24.

If the class size maximum was 23, no class could exceed 23 and the students would have to be divided into 3 classes. One teacher would have to be paid almost completely with local funds.


Class Size Reductions

Class size reduction was a central part of the A+ Reform Act of 2000.

After the economic downturn in 2002, class size reductions were delayed and the system average maximum class size was created.



Grades K-8 core classes are, however, now capped at 20% above the funding.

The core courses are math, science, social studies, and language arts.

There is no longer a system average for these classes.



Core classes in grades 9-12 are also capped beginning in 2007-2008, but the local board can decide to allow any of those classes to go up to 32.

If the local board votes to raise the high school class size, they must notify the school council and the State Board.


Class Size

State Board of Education determines maximum class sizes not set in state law. State Board of Education Rules

The state board cannot reduce class sizes if it creates local costs.

Local boards can use local funds to reduce class size from state maximums.


Effect of Class Size Although parents and teachers commonly seek

funding to lower class sizes, the research is mixed on the effect of small class size on student achievement, particularly after grade 3.

There are other reasons to advocate for smaller classes, such as student safety in science labs. Teachers may desire smaller classes for better discipline or for the ability to spend more instructional time with each student.


What Does Matter

Research shows some things have a major impact on student achievement:

The preparation of teachers to teach content, to differentiate instruction, and to manage the classroom

The readiness of students to learn when they arrive at school each day

The adjustment of instruction based on assessments


The School Council’s Rolein Class Size School councils were made part of the

accountability process to balance the flexibility given to school systems. School councils should ask:

What are the class sizes by grade in our school?

Are class sizes within the law and regulations? Are smaller classes needed? Find out what the needs are for your school

and then let the policymakers know.


Basics of School Finance

Understanding Funding and Class Size

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Www.GeorgiaEducation.org Basics of School Finance Understanding Funding and Class Size