A Microsoft Word version of this letter is available for download and PRINTING.

September 16, 2009

Subject: 2009–10 Preliminary Summary of Finances

TO THE CHARTER SCHOOL ADMINISTRATOR ADDRESSED:

A preliminary Summary of Finances (SOF) for the 2009–10 school year has been posted to the School Finance website of the Texas Education Agency (TEA) at http://www.tea.state.tx.us/school.finance/funding/sofweb7.html. This letter explains the changes to funding formulas authorized with the passage of House Bill 3646 (HB 3646) and provides information about the SOF report.
HB 3646 – This bill authorized a number of significant changes to the formulas used to deliver Foundation School Program (FSP) funding to charter schools. In addition to transitioning all charter schools to the state average formula, the bill made changes to the basic allotment, guaranteed yield, and equalized wealth levels. Most hold harmless provisions were repealed, and the calculation of additional state aid for tax reduction (ASATR) was modified. Following is a summary of changes to the formulas.

• Basic Allotment – The basic allotment is set at $4,765 for 2009–10. The local fund assignment (LFA) is now calculated with a school district’s compressed tax rate (2005 adopted maintenance and operations [M&O] rate multiplied by 0.6667) rather than $0.86. The basic allotment is prorated for districts with an LFA below $1.00. As a result of the varying basic allotments for school districts, the state average basic allotment for charter schools is currently $4,625.
• Spending Requirements – The State Board of Education (SBOE) is currently considering a proposal to change the spending requirements from 85 percent to
  55 percent for the Tier I allotments subject to the spending rules. We will add the adopted spending requirements to the SOF report in October.  
• Tier II – The first level of Tier II was collapsed into the basic allotment so that the guaranteed yield for enrichment is paid on the tax effort that exceeds the compressed tax rate. The guaranteed yield for the first six cents of tax effort will be equalized to the same yield generated by the Austin Independent School District. The pennies of tax effort that exceed the compressed tax rate plus six cents continue to generate a yield of $31.95 per student in weighted average daily attendance (WADA).
• Revenue Targets – New revenue targets are based on the funding a charter school would have received in 2009–10 had HB 3646 not passed. As a result, the revenue target will vary by charter school depending in part on whether the charter school would have been funded under the 100 percent state average formula or the 70 percent state average/30 percent resident district formula under House Bill 1, 79th Legislature, Third Called Session, 2006, (HB 1 [79-3]) for the 2009–10 school year. The bill guarantees a charter school will receive an increase in revenue of at least $120 per WADA more than the charter would have received under HB 1 (79-3). No charter may receive an increase in revenue greater than $350 per WADA.
• High School Allotment – The high school allotment was moved to Chapter 42, Subchapter C, where the other special program authorizations are found. The fund code for this allotment has changed from 428 to 199. The new program intent code is 31.
• Certain Professional Staff Salary Allotment – The authorization for the certain professional staff salary allotment was repealed, but the funding received by charter schools for this allotment becomes part of the new revenue target beginning with the 2009–10 school year.
• Military Dependent Allotment – A new allotment for students who are dependents of a member of the military service was authorized. Charter schools with students whose parents are on active duty and students whose families have been relocated because of an action related to the Defense Base Closure and Realignment Act of 1990 are eligible to receive an allotment of $650 per eligible student in average daily attendance (ADA). Funding for this allotment is contingent on a direct appropriation or the identification of an FSP surplus. This allotment did not receive a direct appropriation this biennium. The commissioner will determine whether there is an FSP surplus during the last half of the 2009–10 school year.
• Penalty for Tax Rate Below Compressed Rate – The subsection that previously authorized an explicit penalty for levying a tax rate below the compressed rate was repealed. Please note that the revised basic allotment provides for proportional reduction of Tier I funding for compressed tax rates that fall below $1.00. 
• Provisions Repealed – A number of provisions were repealed. Note: The funding provided by the repealed provisions becomes part of districts’ new revenue targets.
  • Additional aid for school employee benefits
  • Per pupil allotment – provided $110 per WADA
  • Educator pay increase (Rider 86) – provided $23.63 per WADA
• American Recovery and Reinvestment Act of 2009 (ARRA) – Funds available to the state through the ARRA will be used to fund part of the formula funding received by charter schools during the 2009–10 and 2010–11 school years. First, the increases in FSP formula funding generated by the changes in the formula yields authorized in HB 3646 will be financed by the State Fiscal Stabilization Fund (SFSF) funds available through the ARRA. The SOF identifies the dollar amounts that will be funded with the SFSF funds. Charter schools will be required to make an application for these funds through the TEA eGrants system. Additional information about the application process and federal requirements regarding the use of these funds is available at the following web page: http://burleson.tea.state.tx.us/GrantOpportunities/forms/GrantProgramSearch.aspx
• Pay Increase – HB 3646 provides for a pay increase for the 2009–10 and 2010–11 school years for charter school employees who would be subject to the minimum salary schedule (MSS employees) if they were employed by a school district. These employees include classroom teachers, full-time nurses, full-time counselors, and full-time librarians. Although full-time speech pathologists are not MSS employees, they are also eligible for this pay increase. The pay increase must be the greater of 1) $80 per month, or $800 per year for the standard ten-month contract, or 2) the amount that can be delivered using $60 per WADA, considering the increased contributions for social security and retirement. If your charter school adopted a 2008–09 salary schedule, your charter school is required to provide the mandated pay increase in addition to any increase that an employee would have been entitled to under the charter’s 2008–09 salary schedule.

A summary of relevant information about the data used in the 2009–10 SOF report, including planned updates, is provided in the following paragraphs.

• Student Counts – All student counts (ADA, full-time equivalents [FTEs], and enrollment counts) shown on this report are estimates based on either the July 2009 FSP Six-Week Attendance projections or on the estimates submitted via the FSP Payment System Estimate module. Subsequently, the TEA will update the student counts monthly using attendance data projections from the FSP Payment System Six-Week Attendance Reports and in November 2010 using Public Education Information Management System (PEIMS) attendance data for the “near-final” settle-up. Your charter school’s budget should be based on the student enrollment and program participation that are expected to actually occur during the year. Your charter school should carefully monitor its state aid payments during the year, which may differ from actual earnings at year end, creating an overpayment or underpayment condition.
• Estimated M&O Tax Collections – To estimate the M&O tax collection amounts for school districts, the TEA used estimated property values and tax rates and adjusted for district average collection rates. The 2009 local property values were estimated by increasing the local 2008 taxable values by 2.98 percent. The 2008 adopted tax rates and average collection rates were used to estimate tax collections. If a school district was awarded an IFA for a lease-purchase agreement, the district’s current share of the IFA allotment has been subtracted from the estimate of M&O tax collections. In this release, the 2008–09 amounts have been used as an estimate. Please note that M&O tax collections will not be updated again until the “final” settle-up occurs for the 2009–10 school year. As a result, payments to charter schools during the school year will not reflect the update in tax collections. This represents a change in the schedule for updating school district entitlements from what has occurred in the past.
• Certain Professional Staff and Staff Salary Allotment – The certain professional staff salary allotment and staff allotment included in this report are based on the October 2008 data submitted via the FSP Payment System’s Staff Salary Data module. Once the October 2009 data have been submitted, the 2009–10 estimated salary allotments will be updated. In November 2010, the near-final SOF report will use the average of all 12 months of 2009–10 data from the FSP Payment System Staff Salary Data module to calculate the salary allotments.
• Transportation Allotment – The transportation allotment is based on your charter school’s 2008–09 transportation allotment as calculated from 2008–09 route services data submitted via the Transportation module of the FSP Payment System. This allotment will be updated in March 2010.
• Technology Allotment – The technology allotment is based on a rate of $29.43 multiplied by your charter school’s 2009–10 estimated refined ADA, and accounted for in the special revenue fund 11. This rate is subject to change.
• 2009–10 State Aid Template – A link to the 2009–10 Estimate of State Aidtemplate is available on the School Finance State Funding web page at http://ritter.tea.state.tx.us/school.finance/charter/chrt10.html.

As always, the TEA strongly advises your charter school to project state aid based on the best available information. Your charter school should complete the 2009–10 Estimate of State Aid template or an equivalent state aid estimation process. The greatest value of the SOF is in explaining the basis of cash distributions to charter schools. Estimation of state aid earned can be significantly impacted by factors not known to the State Funding Division.

If you have any questions concerning these reports, please contact Nora Rainey by telephone at (512) 463-7298 or by email at Nora.Rainey@tea.state.tx.us.
Sincerely,

Helen Daniels
Director, State Funding Division