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MFP Task Force MeetingJanuary 26, 2006

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MFP FORMULAISSUES FOR 2006-07 MFP

FORMULA

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Responsibilities of MFP Task Force

The State Board of Elementary and Secondary Education recommended the Ad Hoc MFP Task Force be reconvened to discuss six school finance related issues and make recommendations to BESE for consideration.

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Introduction of MFP Issues Equity of the Local Wealth Factor Adequacy of the Base Per Pupil Amount Timing of Student Membership Count Level 3 for Hurricane Impacted

Districts BESE Authority in Natural Disasters (HR

20) 70% Requirement (HCR 77)

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Equity of the Local Wealth Factor

Two items to consider regarding equity: First, to improve equity one approach is

considering “personal income” within the district.

This approach, combines income and property and sales capacities in the calculation of the local wealth factor.• Considered a few years ago, but not

implemented For discussion at the next meeting, the

Department will prepare a simulation that depicts the impact of using this procedure on the MFP funding distribution.

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Equity Anomalies to Consider Second, due to Hurricanes Katrina and

Rita, some adjustments in the local wealth factor may be necessary

•Consideration given to lowering the wealth inputs for Orleans, St. Bernard, and Plaquemines.

•Consideration given to capping wealth inputs for areas receiving a high number of displaced citizens and/or increased economic activity.

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Ed Week’s Quality Counts – Resource Equity Score Consideration should be given to

Louisiana’s successes in equity when exploring possible changes to the MFP formula.

Louisiana recently received another above-average grade in Resource Equity in the Education Week publication Quality Counts.

•Grade of B and a State Ranking of 7th

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Ed Week’s Quality Counts – Resource Equity Score

•The score is comprised of the following: Wealth-Neutrality Score (.025) - 30.67 out

of 33.3 points awarded McLoone Index (93.3%) - 25 out of 33.3

points awarded Coefficient of Variation (9.9%) - 27.33 out

of 33.4 points awarded o The score on the coefficient-of-variation measure,

for example, indicates a relatively low level of disparity in per-pupil funding across districts in the state.

•Total points - 83

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Adequacy of the MFP Base Level 1 Per Pupil Amount Initially, the MFP Base Per Pupil Amount of Level

1 was recalculated annually using actual prior year expenditures of the districts.

Beginning in 1996-97, the Base Per Pupil Amount was frozen until the MFP was “fully funded.”

Beginning in 2000-01, the Base Per Pupil Amount has been increased 2.75% each year.

For your review and discussion at the next meeting, the Department has prepared 1) a comparison of the 2003-04 Base Per Pupil Amount per weighted student to the FY 2003-04 actual expenditures, and 2) calculation of a per pupil expenditure amount based on mandated costs for FY 03-04.

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Timing of Student Count Two years ago, the MFP student membership count

was changed to a prior year basis. Change worked well for both the state and local

districts because it allowed a more stable revenue/expenditure amount on which to prepare budgets.

However, the Hurricanes of 2005 caused over 100,000 students to be “displaced.”

Many schools in the Orleans area are just now beginning to reopen and several more will reopen in August 2006.

Should the MFP stay with a prior year membership number making adjustments for Orleans, St. Bernard and Plaquemines or should the MFP revert back to a current year membership number?

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Level 3 for Hurricane Impacted Districts A major resizing has occurred for Orleans

and St. Bernard. Orleans is down from over 60,000

students in Fall 2004 to under 10,000 in January 2006.

There are certain “fixed costs” associated with a retiree pool that was previously based on over 60,000 students.

Should the MFP provide funding in Level 3 to assist Orleans and St. Bernard with these fixed overhead costs?

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BESE Authority in Natural Disasters (HR 20) HR 20 of 2005 requested SBESE to

consider adding language to the MFP formula to allow SBESE to make adjustments in MFP payments in cases of natural disasters.

Recognizing there are constitutional limits to SBESE authority, any language would need to provide “temporary authority” to suspend or reduce MFP monthly payments until such time as the legislature could approve any such adjustments permanently.

Do you agree or disagree?

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HCR 77 by

Rep. Mike Powell

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HCR 77 by Rep. Powell This resolution urges and requests SBESE to

adopt an MFP formula for FY 2006-2007 that requires: •at least seventy percent of local school

system general fund monies to be expended at the school building level for instructional services and,

•further requires at least sixty-five percent of the general fund monies be spent at the classroom level for instruction of students by teachers and instructional staff members.

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Current MFP 70% Requirement Beginning with the change in the MFP

formula in 1992-93, the need for a broad parameter requiring a specified expenditure percentage was recognized. • This broad parameter was designed to allow

flexibility in specific expenditure decisions by the local school systems.

The 70% Expenditure Requirement currently in SCR 125 is calculated using the Annual Financial Report information submitted by the LEAs each year.

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70% Requirement – Summary The definition of instructional activities in

the 70% Requirement currently includes:

Instruction (NCES definition) Teacher Salaries, Instructional Aides, and Materials and Supplies

PLUS

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70% Requirement – Summary

Instructional Equipment

Pupil Support such as Attendance and Social Work Services, Guidance,

Health, Psychological Services, Speech Pathology and Audiology Services, and Occupational Therapy–Related Services

Instructional Support such as Improvement of Instruction, Instruction and

Curriculum Development, Instructional Staff Training, Other Improvement of Instruction Services, and Library/Media Services.

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70% Requirement Definitions Through this Requirement, SBESE

recognized that there are additional expenses beyond teacher salaries, instructional supplies, and instructional aides that are required to educate children.

SBESE’s goal has always been to recognize expenditures as Instructional if they “touch the child.”

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70% Requirement Definitions

Instruction Definition - includes the activities dealing directly with the interaction between teachers and students.• Teaching may be provided in a school classroom, in

another location such as a home or hospital, and in other learning situations such as those involving cocurricular activities.

Teaching may also be provided through some other approved medium, such as television, radio, computer, Internet, multimedia telephone, and correspondence, that is delivered inside or outside the classroom or in other teacher-student settings.

• Included here are the activities of aides or classroom assistants of any type (clerks, graders, teaching machines, etc.) who assist in the instructional process.

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70% Requirement Definitions Support Services—Students Definition -

Activities designed to assess and improve the well-being of students and to supplement the teaching process.

•Attendance and Social Work Services.

•Guidance Services.

•Health Services.

•Psychological Services.

•Speech Pathology and Audiology Services.

•Occupational Therapy–Related Services.

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70% Requirement Definitions Support Services—Instruction

Definition - Activities associated with assisting the instructional staff with the content and process of providing learning experiences for students.• Improvement of Instruction.

• Instruction and Curriculum Development.

• Instructional Staff Training.

• Other Improvement of Instruction Services.

• Library/Media Services.

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What is the 65 Percent Solution? The 65% Solution is being promoted

by an organization called First Class Education.

The goal of this organization is to change the law in all 50 states by the end of 2008 to require that at least 65% of what taxpayers spend on K – 12 education actually makes it to the classroom

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First Class Education Plan

Five basic components of the proposal:•Each school district should spend at least

65% of its operating budget on classroom instruction as defined by the National Center for Education Statistics (NCES)

•If a school district is currently spending less than 65% on classroom instruction, then it would need to increase this percentage by 2% or greater annually until this goal is met.

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First Class Education Plan

•If a school district determined special circumstances prevented it from reaching either the 2% or the 65% goal, it could seek a one year renewable waiver from the State Superintendent of Education.

•If a school district is currently spending less than 65% on classroom instruction, then it would need to increase this percentage by 2% or greater annually until this goal is met.

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First Class Education Plan

•The State Superintendent would have sole authority to grant or deny the one year waiver request.

•State Legislatures will be specifically left the task to set penalties to encourage compliance with the measure.

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Definition of “in the classroom”

NCES defines classroom expenditures as costs associated with direct classroom instruction such as:•Classroom Teachers, Personnel•General Instructional Supplies•Instructional Aides•Activities – Field Trips, Athletics, Music, Arts•Tuition paid to out-of-state districts•Private Institutions for Special Needs

Students

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Definition of “outside the classroom” NCES defines outside the classroom

expenditures as:•Administration•Plant Operations and Maintenance•Food Service•Transportation•Instructional Support including

Librarians•Teacher Training and Curriculum•Student Support, Nurses, Counselors

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Standard and Poor’s Review of the 65 Percent Solution

•The 65 Percent Solution comes at a time when many education reform initiatives place their emphasis on measurable student outcomes, as opposed to financial inputs.

•Mandating a specific spending allocation is not likely to provide a “silver bullet” solution to raising student achievement.

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Standard and Poor’s Review of the 65 Percent Solution•Data in nine states that are currently considering instituting a 65 Percent Solution shows no significant positive correlation between the percentage of funds that districts spend on instruction and the percentage of students who score proficient or higher on state reading and math tests.

•Some of the highest-performing districts spend less than 65% and some of the lowest-performing districts spend more than 65%.

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Standard and Poor’s Review of the 65 Percent Solution

•The data show that there is no minimum instructional spending allocation that necessarily produces higher student achievement. The percentage allocation to instruction may need to vary from one district to another for legitimate reasons. Small districts, in particular, may find that their non-instructional spending is largely comprised of fixed costs that cannot be reduced.

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Standard and Poor’s Review of the 65% Solution•The debate over the 65 Percent Solution primarily focuses on the definition of the terms “classroom instruction” and district “operating budgets” which represent the numerator and denominator respectively in calculating the percentage of district spending attributable to student instruction.

•Numerator - There is no NCES data category specifically called “classroom instruction.”

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Standard and Poor’s Review of the 65% SolutionNumerator Issues

•Critics of the 65 Percent Solution assert that “classroom instruction” should be defined to include the NCES categories of “Instruction Expenditures” and “Instructional Staff Support Services” which includes professional development and library services, and “Pupil Support Services” which includes nurses and counselors.

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Standard and Poor’s Review of the 65% SolutionDenominator Issues

•Operating Expenditures includes certain operating functions that tend to vary considerably across districts for reasons outside of their control. For example, districts that have very different geographic boundaries and population densities may face very different transportation expenditures. Consequently, a calculation of district spending based upon Operating Expenditures may not be analytically comparable across districts.

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States in Which the 65% Solution is Active•Action taken by Legislature:

•Louisiana – Legislature HCR 77

•Kansas – Legislature set public policy goal of sending 65% of funding to schools to the classroom.

•Action taken by Governor:

•Texas – Governor issued an executive order requiring all schools to spend 65% of their budgets in the classroom

•Possible Ballot Issue:

Arizona Missouri

Colorado Ohio

Florida Washington

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Calculate a “Classroom” Percentage

1. Specify items in the numerator

2. Specify items in the denominator

3. Specify which funds are included

4. Determine if equipment is included or excluded

5. Revenues vs. Expenditures

6. Set the cut off point (65% or some other %)

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Revenues vs. Expenditures Many school districts have sales tax revenues

that were approved by the voters and dedicated by law for specific purposes.

These revenues cannot be redirected, regardless of passing or failing a spending test.

Is it realistic to expect school boards to make progress in that regard, when they simply do not have a choice?

Sales tax revenues and property tax revenues are most often dedicated by the voters for specific uses and which may not be changed or redirected.

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Revenues vs. Expenditures

Many districts spend more in the general fund that it gets in revenues, brought back in balance by using prior fund balances, or because of certain authorized transfers from special revenue funds which are reported as Other Sources.

Statewide, the transfers to the General Fund from Other Sources was a little over $198.9 million.

Would it be reasonable to apply the percentage requirements as a percent of General Fund Revenues?  After all, it is General Fund revenues that can be directed, or re-directed by local boards, not Special Revenues or their associated expenditures.

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Possible Items in Numerator

• All Instruction (exclude Adult Education)?

• Any Student Support Services (e.g. Guidance or Health)?

• Any Instructional Support Services (e.g. library/media or Academic Assessment)?

• Any School Administration (e.g. Principal’s Office)?

• Any Plant Operations and Maintenance (e.g. Security or Safety)?

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Possible Items in Denominator

• 1000 Instruction (exclude Adult Education)

• 2100 Student Support Services

• 2200 Instructional Support Services

• 2300 General Administration

• 2400 School Administration

• 2800 Central Services

• Plant Operations and Maintenance

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Possible Items in Denominator

• 2700 Student Transportation

• 2900 Other Support 2900

• 3000 Non-Instructional

• 3100 Fund Services

• 3200 Enterprise Operations

• 3300 Community Services

• 4000 Facilities Acquisition and Construction Services

• 5000 Debt Service

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Which Funds Should be Included

• General Fund (State and Local) - $4,331.7 Million

• Other Special Funds (State and Local) – $493.8 Million

• Special Fund Federal (Federal) - $228.1 Million

• Federal NCLB (Federal) - $299.4 Million

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Equipment Spending

• General Fund - $44.7 Million

• Other Special Funds – $12.1 Million

• Special Fund Federal - $15.0 Million

• Federal NCLB (Federal) - $7.3 Million

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DISCUSSIONAND

RECOMMENDATIONS

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