School District Revenues Benny L. Gooden ASBO July 9, 2012
SF101A-School Finance - Revenues
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Reasons for Attendance ASBO Certification Credit Personal
Knowledge Base Revenue portion of Tier 1 initial training Tier 1
annual update or Tier 2 annual training Professional Interaction
with Colleagues To avoid the wrath of the State Board of Education
To add excitement to an otherwise dull life
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Plan for the Day Sources of Revenue Issues in making
projections Revenue Trends Related Issues/Legislative Updates etc.
Issues which lead to Trouble
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Legal Authority for School District Revenue in Arkansas
Constitution of Arkansas (1874 as Amended) Article 14 1. Free
school system 2. School funduse Purposes 3. School
taxBudgetApproval of tax rate Amendments 11, 40 & 74 4.
Supervision of schools
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Legal Authority continued Constitutional Amendments Amendment
40Budget publication/restricted use of school funds Amendment 59Tax
rate rollbacks after reappraisals Amendment 7425 mill uniform rate
of tax Amendment 79Property tax relief
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Selected Statutory Guidelines for School District Finance-
Powers & Duties of Board of Directors Attend meetings of school
board. Determine mission and direction of district. Adhere to state
and federal laws. Enact, enforce and obey policies. Employ staff.
Understand and oversee school district finances. Manage facilities.
Approve curriculum and ensure that it is taught. Visit district
schools and classrooms. Obtain training and professional
development. Do all other things necessary and lawful.. 6-13-620
A.C.A. Revised 2009
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(6)Understand and oversee school district finances required by
law to ensure alignment with the school districts academic and
facility needs and goals, including without limitation: (A)
Reviewing, adopting and publishing the school districts budget; (B)
Overseeing and monitoring the school district finances, including:
Revenues Expenditures Investments Debts Obligations Inventory Real
Property
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(6)Understand and oversee school district finances (C)
Borrowing money as necessary, but in no case shall the school board
of directors permit the school district to end the fiscal year with
a negative legal balance; (D) Entering into contracts for goods and
services necessary to operate the school district; (E) Buying,
selling, renting, and leasing real property and personal property
on behalf of the school district; (F) Receiving, reviewing, and
approving each annual financial audit report and presenting it to
the public.
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Statutory Guidelinescontinued Publication of budget--Amt. 40
6-13-622 Appointment of Treasurer 6-13-701 Deposit of School Funds
6-20-222 Requirements for financial reporting 6-20-2103 &
6-20-2201 et.seq Records as required by ADE District debt-current
& bond 6-20-401 6-20-801 et.seq. 6-20-1201 et.seq. Public
School Funding Act 6-20-2301 et.seq. Selected Penalty
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Statutory Guidelines..continued Board disbursing officer
6-13-618 Best Financial Practices 6-15-2301 Classified School
Employee Minimum Salary Act 6-17-2203 Teacher compensation
guidelines 6-17-2104 and 6-17-2403 Independent Audit deadlines
6-20-180 Training Requirements 6-20-1805 Educational Excellence
Trust Funds 6-5-307 Selected
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Certifications by Superintendent Two of many.. X 9 8 pages X 9
6 pages
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Arkansas schools receive more than 90% of resources in these
categories.
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The Big Question:
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How much Total Revenue will your school district receive in
2012-2013? What effect does Legislative action or changes in local
economic conditions have on resources for the coming year? ADM
increased or decreased Assessed valuation changed Total
Revenue
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Guessing is not Preferred Using systematic techniques to
develop reasonable and defensible estimates of school revenue
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Why are accurate projections important? To provide a stable
fiscal environment To gain the confidence of board of education,
staff and community To verify the revenue calculations of others To
avoid fiscal distress
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All Categories of Revenue Must be Considered Local State
Federal
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Factors Determining Local Revenue Assessed Valuation Tax Rate
(Millage) Collection Rate Other Local Revenue/Miscellaneous
Funds
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Assessed Valuation Real Property Residential
Business/Industrial Agricultural/Timber Minerals Personal Property
Business Vehicles/Aircraft Livestock Utility Property
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Abstract of Assessed Valuation Source: County
Assessor/Clerk
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Current Taxes/ 40% 36%Pullback From Abstract of Assessments
Source: ADE Website
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How Does 40% Pullback work in Arkansas school finance?
ASSESSMENT YEAR FISCAL YEAR JAN JULY 40% Pullback 60% Current40%
Pullback 60% Current40% Pullback 60% Current 40% Pullback 60%
Current Each FISCAL year contains: Taxes due and payable in that FY
(Current Tax) Taxes due and payable in the next FY (40% Pullback)
Ending Soon !!!!!
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A 40% Pullback Transition Vocabulary Revenue receipts: include
local taxes actually collected from July 1-June 30 regardless of
assessment year. Deferred: revenues in excess of 40% to which
district is entitled for future fiscal year. Accrued: revenues
included in the imputed 40% from the future fiscal year, but not
actually received. Phase-out: Adjustments made to accrued revenues
during a period of up to ten (10) years following June 30, 2012.
Defined by 6-20-401 Know status
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Transition options to end 40% Pullback ImmediateAbsorb either
accrual or deferral revenue in the current year budget. Advantage:
This makes change in one year. Disadvantage: There will be an
apparent increase or decrease in the legal fund balance. Phase
inAccrual may be reduced by 10% per year, i.e. 36% in 2011-2012,
32% in 2012- 2013, etc. Advantage: Effect in one year is minimized.
Disadvantage: Accounting can become problematic for a number of
years.
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Revenue Estimation after the 40% Pullback Concept is eliminated
Look at collection trends from several past years. Determine tax
revenue received as current taxes in the July 1-December 30 period.
Determine tax revenue received as current taxes in the January 1
June 30 period. Make estimates based on past history- TRENDS.
Consider changes in assessed valuation in estimating for future
fiscal year.
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During the 40% Pullback TransitionRemember: The immediate or
gradual transition away from 40% pullback does not result in
additional revenuenor does it result in less revenue. The effect is
only a matter of timing for the recognition of revenues resulting
from ad valorem taxes. This point must be made clear to educators,
school board members and the public.
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Abstract of Assessment ADE Certification Signature
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Assessment Abstract Issues Signatures by appropriate officials
Accuracy of Data Amendments during the year If you dont check it,
who will?
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Establishing Trend Data Assessed Valuation-by Category
Collection Rates Current Tax Delinquent Tax Amendment 79-Homestead
Credit Excess Commissions 36%40% PullbackIf Applicable Interest on
taxes held by Collector Timing of Revenue Receipts Average Daily
Membership (ADM)
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Historical Trends in Assessed Valuation Growth in dollars and
Percent 5-year averages
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Trends are Influenced by A variety of Factors Economy Unusual
activity Appraisal Cycles Mistakes
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Review Trends in Context Past History Environmental Changes
Economic Growth or Decline Population Changes Reappraisal Cycles
Legislative Action
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Assessed Valuation/Tax Rate Verify Assessed Valuation as
Certified by County Assessor and Clerk to ADE Verify Tax Rate as
Certified by the Quorum Court in accordance with ballot language
approved at Annual School Election Verify millage allocation as
approved by voters
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Other Property Tax Issues Mandatory Reappraisals 3-year vs.
5-year cycle Limits on annual additions to individual property
assessments Amendment 79 Frozen assessments for those 65/over
Amendment 59 rollbacks 10 % maximum increase from all sources
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Review of Assessed Valuation From A Sample District Year 1 Real
$ 94,533,310 Personal $ 36,722,125 Utility $ 6,562,305 Total $
137,817,740 Year 2 Real $ 83,400,923 -11,132,387 -11.77% Personal $
48,638,552 +11,916,427 +32.45% Utility $ 7,092,685 + 530,380 +8.08%
Total $ 139,132,160 Increase of $ 1,314,420 +.95%
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Property Taxes Include: Current Taxes * Amendment 79
Replacement Homestead Credit (* Included in both current taxes and
36% pullback) 36% Pullback * Delinquent Taxes Excess Commissions
Interest on taxes held by Collector All these comprise Net Revenue
Ending Soon Or NOT
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Collection Rate Determination Delinquent Taxes Tax
Collector/Treasurer Excess Commissions Assessor Never Collected
Total Tax Deductions = Current Tax & 36% Pullback Monitor
Property Tax Rebate Payments Why is This Important? Ending
Soon
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Estimating Collection Rate 1.48%Never Collected
3.49%Delinquent.75%Tax Collector/Treasurer 2.10%Excess Commissions
2.0 %Assessors Office 90.18%Current Taxes/36% Pullback Includes
Homestead Rebate 100% Total Source: Fort Smith Public Schools
Ending Soon NOW
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Tax Rate Considerations Timeline for Budget of Expenditures and
Proposed Tax Rate Publication 60 days prior to annual school
election Multiple County Districts Consolidation/Annexation of
Districts Multiple rates in merged districts ADE Certification of
Bonded Debt Payment and Available Mills
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Property Tax Timelines JulyJan July Jan July Year 1
AssessmentsTax Bills IssuedTax Pmt Deadline Fiscal Year School
Election Publication Fiscal Year School Election Year 2
AssessmentsTax Bills IssuedTax Pmt Deadline
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Calculation of Revenue: Checking your estimate Assessed
Valuation X Millage Rate Total Property Tax Revenue X Collection
Rate Allocated as: Current Taxes 36% Pullback Amdt. 79-Homestead
Credit Plus:Delinquent Taxes Excess Commissions Important: Total
must not exceed 100% of collection in any year! Ending Soon
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Millage Rates-Schools 25 mills for maintenance and operation
(Amendment 74) Additional maintenance and operation (Approved by
Voters) Debt Service Mills to pay debt (Approved by Voters) Regular
bonds/Mandatory Call bonds Dedicated Maintenance and operation
(Approved by Voters)
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Voted Millage vs. Actual Application- A Sample District Voted
Millage 6.90 Debt Service 25.00 M & O N/A Dedicated M & O
31.90 Total Actual Application 6.45 Required Debt 25.45 M & O
Avail. 25.00 Amdt 74 N/A Ded/M & O.45 Excess Debt 31.90
Total
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Property Tax Reminders 36% Pullback is at 100% Collection
Delinquent tax, Excess Commissions, Fee Office Costs and taxes not
collected are taken from Current Tax Estimates M & O Tax Rate
must be 25 mills or higher The BEST estimate is one supported by
past collection history! Ending Soon
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Other Local Revenue Payments in lieu of Taxes Mineral leases,
Severance Tax, etc. Contributions Interest Private, Foundation,
Corporate Grants Rentals of district facilities Fees for tuition,
services, etc. All Activity Funds *Maintained Separately
Vending/beverage contracts
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Payments in Lieu of Taxes Act 9 of 1960 authorized issuance of
exempt bonds to finance industrial development. Cities and Counties
must authorize with notification of affected taxing entities.
Payments in lieu of taxes are negotiable. Payments made by
financing recipients are distributed by the County Collector.
Revenues are included as miscellaneous funds for the purpose of
Foundation Aid calculations.
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Miscellaneous Funds Defined by Act 825 of 2007 Clarified by Act
266 of 2011 Federal forest reserves Federal grazing rights Federal
mineral rights Federal impact aid Federal flood control Wildlife
refuge funds Severance taxes Revenue in lieu of taxes Local sales
and use taxes dedicated to Education 6-20-2303
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Miscellaneous Funds included in Foundation Aid calculation
Average of previous five-years If a district did not receive a
category of miscellaneous funds in the previous year, then that
category of miscellaneous funds will not be included in the
calculation for the next school year. Payments in lieu of taxes
only are counted in proportion of URT to total millage rate.
Calculations are made annually.
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Insomnia Local Revenue Issues to Cause Insomniaor Worse
Reappraisal of residential property with a decline in value
(Re)determination of the reappraisal cycle Litigation regarding gas
well values/determination of well values Taxpayer challenges to
values Economic impact of recession Tax Increment Financing
Districts (TIF)
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Local Revenue-Recording Pentamation Reports from Levels II and
III Recorded using Revenue Code Series 1xxxx Refer to Financial
Accounting Handbook provided by ADE to secure latest revenue codes.
Additional changes may be announced in Commissioners Memos.
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ADE State Aid Notice Source: Arkansas Department of Education
Keep all State Aid Notices for future reference
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Revised State Aid Notice Compare changes to original and ask
Why?
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State Foundation Aid is a combination of: Local Funds per
student based on local assessed valuation x URT x 98% State Funds
to bring total aid to established adequacy level per student $
6,267* $ 2,816 $ 3,451 Rate for 2012-2013 EXAMPLES
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Amendment 74 Approved in 1996 25 mill Uniform Tax for
Maintenance and Operation @ 98% Collection Assessed Valuation X.025
X 98% This revenue source should grow 3-4% annually in a normal
economic environment as statewide assessed valuations increase.
Based on the Arkansas Supreme Court decision, state general revenue
can be decreased when URT revenues exceed required funding for
adequacy.
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2012-2013 Foundation Funding per ADM Aid Per Student The
Foundation Aid per Student is not subject to adjustment for
fluctuations in state revenue. However a higher amount must be
approved by the General Assembly each biennium as Adequacy is
defined. $ 6,267*
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State Foundation Aid for each school district is determined by:
Legislative Appropriation for Foundation Aid per studentDetermined
to be ADEQUATE Uniform Tax (Amendment 74) Assessed Valuation x 25
mills x 98% 100 % of Miscellaneous Funds (Five-year average) TOTAL
Prior Years ADM (3 quarters) Used to compute Total Aid
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2012-2013 Example Foundation Aid Adequacy $ 6,267 AV
$139,132,160 X URT.025 X 98% $ 3,408,737 Miscellaneous Funds $
73,200 TOTAL LOCAL RESOURCES $ 3,482,437 3 Qtr. ADM for prior year
1,236.54
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2012-2013 Examplecont. Total Local Resources $ 3,482,437
Students (ADM) 1,236.54 LOCAL RESOURCES PER ADM $ 2,816 Adequate
Foundation Aid $ 6,267 State Aid per ADM $ 3,451 Total State
Foundation Aid ?????
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2012-2013 Examplecont. Total State Aid Per ADM $ 3,451 X Prior
Year ADM (3 Qtr.) 1,236.54 = Total State Foundation Aid $ 4,267,299
Compare local calculations to State Aid Notice. Minor variations
will likely result from rounding.
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Requirements for Tracking Foundation Aid as it relates to
Expenditures A unique Fund/Source of Fund Code is required for the
several categories of expenditures paid with Foundation Aid and
selected other state funds. Refer to FIN-09-047, FIN-10-008 and
FIN-11-080 to clarify coding requirements. The purpose of this
distinction is purportedly to determine the actual amount of
educational services purchased by the level of state funding
determined as Adequacy.
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Combinations of: Declines in Average Daily Membership (ADM)
Changes in Assessed Valuation All require individual analysis in
each district Warning Signs
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Counting Students Enrollment-Represents the number of students
eligible to attend at any time. ADA-Average Daily Attendance
Represents the average number of students in attendance on each
day. ADM-Average Daily Membership Represents the average number of
enrolled students in attendance and absent on each day. Each
statistic results in slightly different results in determining
resources/expenditure per student
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Student Data Calculation ADA Days Attended Days in Session
Average Daily Attendance = ADM = ( Days Attended)+( Days Absent)
Days in Session Average Daily Membership Enrollment = 1.Aggregate
2.Cumulative 3.Date Specific
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What about the 98% collection assumption used to compute
Foundation Aid? Beginning in 2007-2008 Act 272 of 2007 provides a
guarantee of funding equal to the 98% collection from local ad
valorem taxes as anticipated in the State Foundation Aid formula.
Adjustments will be made following calculations of actual
collections. Supplemental payments will be made from a Legislative
appropriation. Refunds of tax collections in excess of 98% will be
required. Act 633 of 2011 modified data collection.
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State Funding Categories Unrestricted Foundation Funding Aid
General Facilities Funding Supplemental Millage Incentive Funding
Special Needs Isolated Adequacy Declining Enrollment Funding
Declining Enrollment Adequacy Student Growth Funding 98% of
URT
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State Funding Categories Restricted Alternative Learning
Environment English Language Learners NSL State Categorical Funding
NSL Growth Funding Professional Development Bonded Debt Assistance
Isolated Funding Special Needs Isolated Funding Special Needs
Isolated Transportation Educational Excellence Trust Fund
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National School Lunch Students (NSLA) Eligibility for free or
reduced-price meals 90% or greater at $1,549 per student 70% but
less than 90% at $1,033 per student Less than 70% at $517 per
student Paid in 2012-2013 based on student data from the previous
October 1. Consideration for districts with significant growth
Defined as 1% increase in three successive years. Transition
process for increase or decrease--3 years
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Alternative Learning Environment (ALE) Based on $4,228 per ADM
for FTE students enrolled during the previous school year. Subject
to rules promulgated by the State Board of Education.
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Secondary Vocational Center Based on $3,250 per student served
during the prior year. MaybeUnless the pie is divided into smaller
pieces
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English-language learner (ELL) Based on $305 per student
identified as an English-language learner Proficiency is subject to
state- approved English proficiency assessment instrument Subject
to rules promulgated by State Board of Education.
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Professional Development Funding Based on an amount up to $ 52
per student as determined by the previous school year ADM. ($42.38
in 2011-2012) Subject to rules promulgated by State Board of
Education
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Additional Reporting Required for Selected Revenue Sources
General Facilities Funding Distance Learning Gifted and Talented
Student Growth Declining Enrollment Special Education Catastrophic
Occurrences Special Education Services Technology Grants Debt
Service funding supplement 6-20-2201 A.C.A.
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Spending Requirements for Categorical Funds Act 1220 of 2011
Effective by June 30, 2012 At least 85% of NSLA Funds must be spent
Transfer authority among categories is granted Commissioner may
grant waivers Balance in categorical funds shall not exceed 20% of
annual allocation Provisions for 10% annual reduction required
Failure to comply results in deduction Subject to rules promulgated
by State Board of Education
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Academic Facilities Partnership Funding Requires current local
school district facility master plan Establishes standards for
maintenance Requires that 9% of Foundation funding be dedicated for
facility costs Establishes standards for academic facilities
Provides for designation of school districts in academic facilities
distress with various sanctions and corrective action Provides for
state inspections Provides Partnership funding for approved
facilities
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Academic Facilities Wealth Index Computation Act Applicable
wealth index is based on the value of one mill per student in each
school district as determined by total assessed valuation of
taxable real, personal and utility property divided by the ADM. The
results for all school districts are ranked from lowest to highest
and allocated into percentiles, and assigning the 100 th percentile
to the district corresponding to the percentile of student millage
rankings of 99.5 percentile. State shares result from subtracting
school districts percentage share from 100% and assuming that
districts at or above the 99.5 percentile are at that level.
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Student Growth Funding Beginning in 2007-2008 Student Growth
Funding is computed on a quarterly basis by comparing each quarter
ADM with the three quarter ADM of the preceding year. Payments will
be made based on a quarterly computation. Increases based solely on
consolidation or annexation are excluded. A final adjustment will
be made in the following fiscal year. Overpayments must be
refunded.
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Declining Enrollment Funding Requires a decline in ADM over the
two immediately preceding school years. Funding equals the
difference between the average of the two immediately preceding
years ADM and the ADM for the previous year multiplied by the
current year Foundation funding amount. No district shall receive
both declining enrollment funding and student growth funding during
the same fiscal year.
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Other State Aid Issues Educational Excellence Trust Fund
Increase above highest year since 1991 must be used to increase
salaries to certified staff including FICA and Teacher Retirement
matching Salary Schedule Requirements Required Expenditures in
targeted categories Increases cannot be used for increments based
on education or experience in 2005-2006 and thereafter. (Act 2165
of 2005)
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State Revenue-Recording Pentamation Reports recorded in Levels
II and III reporting Record State revenues using Revenue Code
Series 3xxxx Refer to ADE Handbook for correct code designations.
Revisions will be announced through Commissioners Memos.
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Federal Aid Issues Basic Premise: Federal Aid is categorical
and tied to specific programs and purposes. If the Act approved by
Congress, CFR language or ADE written interpretations do not
authorize a particular use, Federal revenues must be segregated and
used as specifically authorized.
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Key Federal Items Safeguard signed grant award letter. Account
for revenues as directed by ADE with Source of Funds code. Be aware
of timing.State FY, Federal FY, carryover provisions. Keep careful
records for all employees especially pro-rated employees paid from
Federal funds.
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Federal AidRecording Pentamation Reports recorded in Levels II
and III reporting Record Federal revenues using Revenue Code Series
4xxxx Refer to ADE Handbook for correct code designations.
Additional rules and changes will be announced in Commissioners
Memos.
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Resources Include: Arkansas Department of Education Training
through Educational Service Cooperatives ADE/Professional Group
Listserve(s) County Officials Other School Leaders Auditors
Publications ASBO AAEA
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The Best Revenue Estimate is one based on past experience and
upon Reasonable Projections!