Public Education Funding Overview

1. Public Education Funding Overview Prepared for LWV ForumSeptember 25, 2019

2. Overview • Delaware educates over 139,000 K-12 students each year • 19 School Districts • 16 Geographic Districts • 3 County-based Vocational Technical • 22 Charter Schools (2019-2020 SY) • 15 – New Castle County • 6 – Kent County • 1 – Sussex County

3. Overview • Delaware spends, on average, $15,153 per student • 80.4% personnel, 19.6% non-personnel • Majority is state-funded • 62.5% state • 32.1% local • 5.4% federal

4. Delaware Public Education • Districts and charters are responsible for the direct education of students and administration of local operations. • The Department of Education (DOE) provides regulatory oversight, technical assistance/support and statewide advocacy on policy. • Districts and charter schools are NOT run directly by DOE … the Secretary of Education is not “the boss” of the Superintendents, Heads of School, or their Boards!

5. Roles • School Board: • Hold policy and decision making authorities granted by existing law. • District Leadership: • Deliver educational programs; conduct school operations; administer district finances; and, evaluate, supervise and support its staff to fulfill the district’s educational goals. • Citizen Budget Oversight Committee: • Review the annual budget and monthly financial reports.

6. Roles • Elected Officials: • Hold policy and decision making authorities granted by existing law.  • Community: • Vote, support, recipient of educational services; • Booster organizations, PTA/PTO, foundations.

7. School Finance / Accounting

8. Fund Sources • State Funds: • Division I, Division II, Division III. • Targeted funds • Local Funds: • Current Expense Tax, Tuition Tax, Match Tax, Debt Service Tax, Cafeteria, Rentals, Local Grants, etc. • Federal Funds: • IDEA, Title I, Title II, Title III, Title IV, Perkins, etc. • Bond/Capital Funds: • Construction, Renovation, Minor Capital.

9. First State Financials (FSF) • The State’s accounting system used for processing all financial transactions. • Built on the PeopleSoft financial management system. • Payroll is disbursed through PHRST. • All school district funds are deposited into a bank account managed by the State. • Interest is earned on the local portion of funds and distributed to school districts.

10. State Funds

11. State Funds • Authority: • 14 Delaware Code • 14 Delaware Administrative Code • Operating Budget Act, Bond and Capital Improvements Act, Grant-in-Aid, other acts of the General Assembly

12. State Funds • Division I Funds: • Formula driven system of state funding; • One “unit” pays the state share of salary and benefits for one teacher or two paraeducators; • State pays salary and benefits based on education and experience, as provided on pay scale; • Intended to fund approximately 70% of teacher salary with balance provided by local funds; • Units generate other positions (administrators, secretaries, other support staff) based on various formulas. • As of Fiscal Year 2019 one “unit” is worth, on average, $71,546 including state share of salaries, OECs and health insurance.

13. State Funds • September 30th unit count: • Conducted annually; • Certified by the Department of Education; • Determines the amount of Division I, II, and III state funding appropriated to each school district in the current fiscal year. • Drives some of the other allocations of state and federal funds

14. State Funds Units of Pupils: • 1 Preschool Unit = 12.8 students; • 1 K-3 Unit = 16.2 students; • 1 4-12 Regular Education Unit = 20 students; • 1 4-12 Basic Special Education Unit (Basic) = 8.4 students; • 1 Pre K-12 Intensive Special Education Unit (Intensive) = 6 students; • 1 Pre K-12 Complex Special Education Unit (Complex) = 2.6 students.

15. State Funds • Division II Funds: • Provides for resources in the classroom. • One Division I unit generates one Division II unit. • Two components: • All Other Costs and Vocational All Other Costs ($2,925 per unit*); • Energy ($2,387 per unit*). • Vocational programs generate additional Division II units depending on the type of program. *Unit values as of Fiscal Year 2020

16. State Funds • Division III Equalization Funds: • Intended to alleviate local funding disparities between property rich and property poor districts; • Designed to be inversely related to district ability to tax itself; • Proportionately related to district effort in taxing itself; and, • Districts’ individual Division III per unit values are “frozen.”

17. State Funds • Other State Entitlements and Block Grants: • Academic Excellence • Technology Block Grant • Educational Sustainment • Student Success Block Grant • Opportunity Fund • Private Placements • Transportation • Professional Development

18. Federal Funds

19. Federal Funds • Consolidated Grant Application Allocations: • Federal Elementary and Secondary Education Act (ESEA) Title I; • Perkins (Career and Technical Education); • Individual with Disabilities Education Act (IDEA); • Title II (Improving Teacher Quality); • Title III (Immigrant Student Education Program); • Title III (English Learner); • Title IV (Student Support and Academic Enrichment); • State Professional Development Funds.

20. Federal Funds • Federal funds are restricted to the purpose and time period during which money may be spent. • The State receives and approves district applications and allocates funds to districts as a “subgrantee” of the State. • Must comply with the Department’s amendment process for shifts in spending between categories (the greater of 15% or $5,000).

21. Local Funds

22. Local Funds • Local school district and charter school funds are considered “public funds” regardless of source or purpose. • Subject to rules around expenditure, etc. • Some are restricted in potential use • Majority of local revenue is from taxes • Charter schools may not levy taxes; majority of their local revenue is transfer of tax receipts from geographical districts

23. Local Funds • Current Expense Tax (property or capitation) - general operations: • For the three vocational technical school districts, the maximum current expense rate can only be increased through legislative approval; • For the 16 geographical districts, the maximum current expense rate must pass referenda.

24. Local Funds • Referendum “cycle”

25. Local Funds • Tuition Tax - special needs students for Pre-K, Intense and Complex students (not the entire special education population):   • Within district, in other districts, and private placements. • Match Tax - State programs that authorize a local match: • Minor Capital - 60% State, 40% Local; • Other Match - Reading Specialists, Math Specialists, Technology, Extra Time, Student Success Block Grant and Opportunity Fund.

26. Local Funds • Debt Service Tax - pays principal and interest on local bonds authorized by referenda*: • Debt Service rates do not need to be approved in referenda; • A “good faith” Debt Service estimate rate is given in a referendum campaign*; • The School Board approves a Debt Service tax rate.

27. Local Funds • Other local funds districts/charters may receive commonly include (but are not limited to): • Cafeteria/School Nutrition • Rentals/Building Use Fees • Athletic Gate, Box Office • Interest • Indirect Costs • Private Grants • Student activity fees

28. Local Funds – Impact of Choice/Charter • Local funds follow the student to their school of choice or charter school • Amount per student is differentiated by needs-based special education category • Geographic districts may have net inflow or outflow of funds based on choice

29. Capital Projects / Debt Service

30. Major Capital - Approval Process • District identifies project needs. • Board votes to approve projects. • District submits request for a Certificate of Necessity (CN) to DOE. Issuance of a CN is required prior to referendum. • No referendum is needed for vocational technical school districts. • After referendum passage, project seeks funding through the State Bond Bill. • Depending on the wealth of the district, the State will fund between 60% to 80% of the cost of the project.

31. Local Debt Service Requirements • Debt Service pays the cost of funding Major Capital Improvement projects. • Debt service tax rates must be approved annually. • Debt service tax rates may change over the life of a 20-year bond.

32. Charter School Funding

33. Charter School Funding • Sources of Funding • Funding is primarily driven by the number of students enrolled in the school as of the September 30th unit count • Three primary funding sources: • State Funds • Local Funds (primarily property taxes from resident districts) • Federal Funds • Other sources of local funds: • Athletic gate receipts • Facility rental fees • Student payments for school lunch • Fundraising, donations and private grants

34. Charter School Funding • State Funds • Charter schools receive a preload of their estimated state funds in July. • Calculations are based on May 1 Unit Count. • 85% preload for majority of charter schools. • 50% preload for new schools and schools on formal review or probation. • New charter schools receive another 25% of their preload funding in October and the final reconciled amount in February. • Remainder is reconciled after the September 30th Unit Count is certified. • Charter schools receive a second transfer of state funds in December. • The final reconciliation is completed in January and the final transfer of state funds occurs in February.

35. Charter School Funding • State Funds • Division I Units • Funding for classroom teachers (units). • Funding for administrators and other instructional staff (units). • For example: principals, assistant principals, supervisors, nurses, etc. • Schools earn Division I teaching units based upon the following ratios: • Grades K-3: 1 teacher unit per 16.2 students • Grades 4–12: 1 teacher unit per 20 students • Basic Special Education: 1 teacher unit per 8.4 students • Intensive Special Education: 1 teacher unit per 6 students • Complex Special Education: 1 teacher per 2.6 students

36. Charter School Funding • State Funds • Division I: Salaries & Benefits • State salary schedules for teacher and administrative units are based on education level and years of experience. • Charter schools receive funding for teacher and administrative units based on the state salary schedules. • Other Employment Costs (OECs) are calculated at the state determined rate (Pension, FICA, Medicare, Unemployment Insurance). • Charter schools have the autonomy to create their own salary schedules. • For reference, in school districts, state funding accounts for approximately 70% of the salary for a teacher or administrator with the remaining 30% paid from local or other state funds.

37. Charter School Funding • State Funds • Division II • Provides funding for classroom resources to support instruction. • Two components: • All Other Costs (AOC) • Energy • Current rates are included in the annual budget act.

38. Charter School Funding • State Funds • Division III: Equalization • Compensates for local funding disparities caused by differing property tax bases in Delaware school districts. • Inversely related to districts’ “ability” to pay (tax base): • “Richer” (higher tax base) districts get less funding. • “Poorer” (lower tax base) districts get more funding. • For charter schools, the funding is based on the student’s district of residence and is included in the state fund allocation.

39. Charter School Funding • State Funds • Pupil Transportation • Student eligibility for transportation: • K-6 grade students: Residence greater than 1 mile from school. • 7-12 grade students: Residence greater than 2 miles from school. • Charter Funding • Rate per transportation eligible student is based on Vo-Tech expenditures. • Rate is determined by dividing Vo-Tech transportation expenditures by the number of transportation eligible students and multiplying by 70%. • Rate multiplied by the number of transportation eligible students in the charter school. • Transportation funding is included in state funds.

40. Charter School Funding • State Funds • Other State Funds • Flexible Use • Educational Sustainment • Minor Capital Improvement (MCI) • Specific Purpose • Technology Block Grant • Homeless/Foster Care Transportation • Mentoring Pilot • Opportunity Fund • Student Success Block Grants • Unique Alternatives

41. Charter School Funding • Local Funds (Property Taxes) • Charter schools do not have the authority to levy taxes. • Geographic districts transfer property tax funds to charter schools based on the number of students enrolled in each school. • The local funding follows the student from their district of residence to the charter school in which they enroll as of September 30th.

42. Charter School Funding • Local Funds (Property Taxes) • Funding is calculated based on the prior year local fund expenditures of the student’s district of residence. • Certain local fund expenditures are excluded from the calculation: • Financing of school buildings (debt service); • Minor Capital Improvement (MCI); • Cafeteria operations; • Tuition; and, • Other local expenditures deemed by the Secretary of Education to be inappropriate for inclusion. • Needs Based Funding is used to calculate a rate per student based on: • Grade level; and, • Education level (Regular, Basic, Intensive, Complex). • The greater the needs of the student, the greater the funding allocation.

43. Charter School Funding • Local Funds • New fiscal year rates are available by September 1. • Rates can fluctuate significantly from year to year. • Use conservative estimates when drafting preliminary budgets. • Charter schools receive 35% of their estimated local funds from school districts after the preliminary charter bill is run by September 15. • There is no set deadline in Delaware Code for the processing of preload transfers. • The remaining balance due is reconciled after the September 30th unit count is certified. • Final transfers occur by December 31 each year.

44. Charter School Funding • Other Local Revenue • (Donations, private grants, facility use fees, athletic gate receipts, cafeteria receipts, etc.) • Revenues from these sources are considered public funds that must be used in a manner consistent with the approved charter and are subject to audit. • Donations and/or grants may or may not be considered public funds, depending on the conditions placed by the donor/grantor. • In the absence of restrictions or conditions, grants and/or donations are considered public funds.

45. Charter School Funding • Federal Funds • Federal funds are always restricted: • Purpose; and, • Time period. • Charter schools submit annual application for Federal funds via the Consolidated Grant Application. • The State approves the application and grants funds to districts and charters as sub-grantees of the State.

46. Charter School Funding • Federal Funds • Reauthorization of Elementary and Secondary Education Act of 1965 (ESEA) • Title Programs (Titles I, II, III, IV, etc.) • Based upon the percentage of low income students • Special Education Programs • Individuals with Disabilities Act (IDEA B) • IDEA Preschool (available to schools serving children ages 3-5) • Career and Technical Education Programs • Grants to States (Carl D. Perkins Act)

47. Charter School Funding • Federal Funds • Other Federal programs available to charter schools to provide funding for students eligible for free and reduced priced meals: • School Breakfast Programs • School Lunch Programs • Summer Nutrition Programs

48. Other Items • PTA / PTO / Booster Clubs: • External; • Independent; • Vary by district/charter. • Purchasing Card “PCard”: • State’s credit card.

49. Other Items • Auditor of Accounts: • Review retained documents to determine the accuracy and validity of financial data and the propriety of transactions. • Conduct periodic audits to ensure compliance with State law, regulatory requirements, and the district’s own internal control plan. • Require school districts to maintain transactional receipts and supporting documents in an established manner for: • Invoices • Bills • Statements • Letters • Vouchers • Other documents pertaining to receipts and disbursements

50. Questions