Understanding the BEP
TASBO Breakout Session
Murfreesboro, Tennessee
November 16, 2011
History of the BEP
 1977—enactment of Tennessee Foundation Program—
funding formula that increased state’s contribution and used
local property value to determine a county’s ability to pay.
 Late 1980’s—Tennessee Foundation Program (TFP)
 State Board of Education began working with various groups to
reform education funding
 TFP appropriations were around $900 million
 Weaknesses in the TFP:
 Inadequate
 No adjustment for inflation
 Targeted “formula”—inflexible funding
 Insignificant amount of funding for consideration of local ability to pay
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History of the BEP
 1988—77 Small school systems sued the state, claiming TN’s funding
formula was inequitable. TN Supreme Court agreed and ordered the state to
develop a plan to correct the school funding program.
 1992—passage of the Education Improvement Act, which implemented a
new funding formula, called the Basic Education Program (BEP).
 Funding mechanism with components necessary for funding a “basic”
education
 No “targeted” funding.
 Funding is flexible: BEP is a funding formula not a spending plan.
 Formula considers local ability to pay at a more significant level.
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History of the BEP
 2007—BEP 2.0 passed
 Largest increase in state funding for education--$280 million
 Not fully implemented. Cost to fully implement-$205 million
BEP (Old Model)
BEP 2.0 current
BEP 2.0 full
implementation
$36,515 Salary Unit Cost
$38,000 Salary Unit Cost
$40,000 Salary Unit Cost
100% TACIR
50% TACIR, 50% CBER
100% CBER
100% CDF
50% CDF
Eliminate CDF
38.5% At Risk Funding
100% At Risk Funding
100% At Risk Funding
1:45 ELL, 1:450 Translators 1:30 ELL, 1:300 Translators
1:20 ELL, 1:200 Translators
65% State Share
Instructional
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75% State Share Instructional
70% State Share Instructional
FY12 BEP--By the Numbers
 950,244
 $3,754,398,000
 62,370
 $76.75
 $38,700
 560,000
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FY12 BEP--By the Numbers
 950,244—Total funded ADMs
 $3,754,398,000—State Cost of BEP
 62,370—Professional positions generated
 $76.75—Unit cost for Textbooks
 $38,700—Teacher Salary Unit Cost
 560,000—At Risk Students
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BEP—many inputs
ADMs
Fiscal
Capacity
CDF
Unit Costs
7
BEP
Salaries,
Retirement,
Insurance
How Does the BEP Work?
 Two Separate Parts:
 Funding—Department of Education
determines need.
 Local Ability to Pay or Fiscal Capacity—
Tennessee Advisory Commission on
Intergovernmental Relations (TACIR) and UT
Center for Business and Economic Research
(CBER) provide fiscal capacity indices.
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Determining Need--ADMs
 ADMs (average daily membership) drive the Formula—
funded on prior year’s ADMs
 Regular ADMs, Special Ed Identified and Served, Vocational
WFTEADM
 Funding months and weighting
 month 2 - 12.5% month 6 - 35.0%
 month 3 - 17.5% month 7 - 35.0%
 ADMs generate:
 Positions—teachers, supervisors, assistants
 Funding dollars—ADMs are multiplied times a Unit Cost
 Supplies, equipment, textbooks, travel, capital outlay, etc.
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Unit Costs—source and calculation
 Equipment, supplies, travel, substitute teachers—actual costs from E-reporting.
 3 year average
 average is inflated up two fiscal years
 Textbooks—projected current year cost obtained from Office of Textbook
Services
 3 year average
 average is inflated up one year
 Alternative Schools, Duty Free Lunch, Maintenance and Operations
 Prior year value inflated up one year
 Capital Outlay
 Square footage cost obtained from RS Means publication
 Formula –each ADM generates square footage, multiply times cost, include architect
fees and equipment. Then amortize to arrive at yearly cost.
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BEP Components by Category (45)
Instructional
Classroom
Non-classroom
Regular Education
Vocational Education
Special Education
Elementary Guidance
Secondary Guidance
Elementary Art
Elementary Music
Elementary Physical Education
Elementary Librarians (K-8)
Secondary Librarians (9-12)
ELL Instructors
ELL Translators
Principals
Assistant Principals Elementary
Assistant Principals Secondary
System-wide Instructional Supervisors
Special Education Supervisors
Vocational Education Supervisors
Special Education Assessment Personnel
Social Workers
Psychologists
Staff Benefits and Insurance
K-12 At-risk Class Size Reduction
Duty-free Lunch
Textbooks
Classroom Materials and Supplies
Instructional Equipment
Classroom Related Travel
Vocational Center Transportation
Technology
Nurses
Instructional Assistants
Special Education Assistants
Library Assistants
Staff Benefits and Insurance
Substitute Teachers
Alternative schools
Exit Exams
Superintendent
System Secretarial Support
Technology Coordinators
School Secretaries
Maintenance and Operations
Custodians
Non-instructional Equipment
Pupil Transportation
Staff Benefits and Insurance
Capital Outlay
Instructional Category—State Funds 70%
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Classroom Category—State Funds 75%
13
Non-Classroom Category—State Funds 50%
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Non-Classroom (continued)
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Fiscal Capacity
TACIR Model
Per Pupil Own-Source Revenue
Amount of local money that the school systems in the county report that they spend on education, divided by
enrollment (average daily membership (ADM)
Per Pupil Equalized Property Assessment
Total property assessment for the county area, equalized by the appropriate county appraisal-to-sales ratio, and
then divided by ADM. This is a measure of the local ability to raise revenue.
Per Pupil Taxable Sales
Local sales tax base divided by ADM-measure of the local ability to raise revenue.
Per Capita Income
Per capita income is included in the fiscal capacity model as a proxy measurement for ability to pay for education; and for
all other local revenue not accounted for by property or sales taxes.
Tax Burden
Ratio of total equalized residential and farm assessment in each county divided by the total equalized property assessment.
This variable is intended as a proxy for a county’s potential ability to export taxes. A high residential/farm ratio indicates a
low ability to pass taxes on to non-residents.
Service Burden
Included as a reflection of spending needs. It equals average daily membership divided by county
population. The greater the number of pupils per 100 residents, the greater the fiscal burden for each taxpayer.
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CBER Model (New Model)
 The new formula determines a county’s capacity to raise
local revenues for education from its property and sales
tax base.
 Each county’s fiscal capacity is the sum of:
 The county’s equalized assessed property plus IDBs
multiplied by a statewide average property tax rate for
education (1.1583%)
 The county’s sales tax base multiplied by a statewide sales
tax rate for education (1.5570%)
 Each county’s fiscal capacity index is the ratio of its fiscal capacity
to total statewide fiscal capacity.
CBER Calculation Example
Davidson County
Equalized Assessed Property plus IDBs (3-year average):
$ 19,130,924,199
Sales Tax Base (3-year average):
$ 10,702,878,267
Fiscal Capacity
=($19,130,924,199 x 1.1583%)+ ($10,702,878,267 x 1.5570%)
= $221,593,495+ $166,643,815
= $388,237,310
= $ 388,237,310 /$2,754,000,000 (state total)
Fiscal Capacity Index
= 14.10%
Fiscal Capacity Used in FY12 BEP
50% of TACIR Model & 50% of CBER Model
Davidson County Index
(TACIR Capacity Index x .50) + (CBER Capacity Index x .50)
14.50% x.50 + 14.10% x.50 =14.30%
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Davidson County BEP Funding Example
Classroom Funding
Instructional Funding
$
3,200,000,000
30%
Statewide BEP Instructional Salaries State and Local (before fiscal capacity)
$
960,000,000
$
280,000,000
BEP-Generated Davidson County Funding
Before Fiscal Capacity
14.30%
$
$
137,280,000
142,720,000
$
25%
217,500,000
$
76,000,000
Davidson County Local Share
Requirement (rounded)
Amount After Subtracting Local Match
49.0%
State Percentage
51.0%
Local Share Percentage
Statewide BEP Classroom Funding - State and Local
(before fiscal capacity)
Statewide Local Required Match
Local Required Dollars for Classroom Funding
BEP-Generated Davidson County Funding Before Fiscal
Capacity
Davidson County Fiscal Capacity
$
31,103,000
Davidson County Local Share Requirement (rounded)
$
44,897,000
59.1%
40.9%
Amount After Subtracting Local Match
State Percentage
Local Share Percentage
Non-Classroom Funding
Davidson County Fiscal Capacity
Total State BEP Funding
$223,217,000
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870,000,000
14.30%
Statewide Local Required Match
Local Required Dollars for Instructional
Funding
$
$
1,600,000,000
Statewide BEP Non-Classroom Funding - State and Local (before
fiscal capacity)
50%
Statewide Local Required Match
$
800,000,000
Local Required Dollars for Non-Classroom Funding
$
150,000,000
BEP-Generated Davidson County Funding Before Fiscal Capacity
14.30%
Davidson County Fiscal Capacity
$
114,400,000
Davidson County Local Share Requirement (rounded)
$
35,600,000
Amount After Subtracting Local Match
24.0%
State Percentage
76.0%
Local Share Percentage
22
Coffee County BEP Funding Example
Classroom Funding
$
870,000,000
25%
$
Instructional Funding
3,200,000,000
30%
$
Statewide BEP Instructional Salaries - State and
Local (before fiscal capacity)
Statewide Local Required Match
$
960,000,000 Local Required Dollars for Instructional Funding
0.80%
$
7,680,000
50%
$
3,840,000
Coffee County School System Share of Local
Share Requirement
$
10,260,000
Amount After Subtracting Local Match
State Percentage
Local Share Percentage
3,130,000
22%
78%
Coffee County Schools Percent of ADM
BEP-Generated Coffee County Schools Funding
Before Fiscal Capacity
Coffee County Area Fiscal Capacity
Coffee County Area All Schools Local Share Requirement
1,740,000
(rounded)
50%
Coffee County Schools Percent of ADM
BEP-Generated Coffee County Schools Classroom
4,000,000
Funding Before Fiscal Capacity
Coffee County School System Share of Local Share
870,000
Requirement
$
Coffee County Area All Schools Local Share
Requirement (rounded)
14,100,000
73%
27%
$
Coffee County Area Fiscal Capacity
$
State Percentage
Local Share Percentage
$
1,600,000,000
Statewide BEP Non-Classroom Funding - State and Local
(before fiscal capacity)
Statewide Local Required Match
Non-Classroom Funding
50%
$
800,000,000
0.80%
6,400,000
50%
$
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Amount After Subtracting Local Match
Non-Classroom Funding
$
Total State BEP Funding
$17,890,000
Local Required Dollars for Classroom Funding
0.80%
$
$
217,500,000
Statewide BEP Classroom Funding - State and Local
(before fiscal capacity)
Statewide Local Required Match
7,700,000
$
3,200,000
$
4,500,000
58%
42%
Local Required Dollars for Non-Classroom Funding
Coffee County Area Fiscal Capacity
Coffee County Area All Schools Local Share Requirement
(rounded)
Coffee County Schools Percent of ADM
BEP-Generated Coffee County Schools Non-Classroom
Funding Before Fiscal Capacity
Coffee County School System Share of Local Share
Requirement
Amount After Subtracting Local Match
State Percentage
Local Share Percentage
For further information….
 Tennessee Basic Education Program: An Analysis
 http://www.comptroller1.state.tn.us/orea/
 See the Legislative Brief
 State Board of Education
 http://www.tn.gov/sbe/bep.html
 BEP Blue Book—up to date data on BEP components
 Recommendations of BEP Review Committee
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Local Funding Requirements and
the Basic Education Program
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Maintenance of Effort
• Supplanting test used to insure maintenance of local
effort.
• Governed by:
•
TCA §49-2-203; and TCA §49-3-314
• Budgeted local revenue must be equal or greater than
the previous year’s amount, unless ADMs have
decreased.
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27
3% Fund Balance Test
• If budgeted expenditures exceed revenues, LEA
must have 3% of operating expenditures in fund
balance, before budget will be approved.
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TCA §49-3-352(c)
Uses of Fund Balance
• Provisions applicable after operating budget
is adopted.
– …shall be available to offset shortfalls of budgeted
revenues…
– …shall be available to meet unforeseen increases in
operating expenses.
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TCA §49-3-352(c)
Uses of Fund Balance
• The accumulated fund balance in excess of
three percent (3%) of the budgeted annual
operating expenses for the current fiscal
year may be budgeted and expended for any
education purposes but must be recommended by the board
of education prior to appropriation by the local legislative
body.
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TCA §49-3-352(c)
Uses of Fund Balance
•
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In other words, there is no requirement to have 3% of
operating expenses in fund balance – but LEAs cannot use
fund balance unless the fund balance exceeds 3% of
operating expenses. If the fund balance is in excess of 3%
of operating expenses, then the excess can be used for any
education purposes, as long as the use is first approved by
the board of education.