Transcript Document

E-12 Education Finance
Shift Discussion
Eric L. Nauman,
Fiscal Analyst
296-5539
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Table of Contents
Getting “Shifty”
Aid Payment Shift
Basic Terms & Shifted E-12 Programs
Aid Payment Schedule – No Shift
Aid Payment Schedule – Pre & Post 2011 Session
Aid Payment Schedule – After the 2011 Session
Property Tax Recognition Shift
Pre Shift Environment
How A Legislative PTRS Works
Current PTRS Under Unallotment
Accounting for the Shifts
Shift History & Summary
Where to Get More Information
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Aid Payment Shift
60/40
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Basic Terms
Aid Entitlement
100 percent of the state aid a district or a charter school is eligible
to receive in a given fiscal year. Aid may actually be paid in a
separate fiscal year
Current Payment
The percentage of an entitlement that is paid in the fiscal year in
which the state aid is generated.
Final Payment
The percentage of an entitlement that is paid in the fiscal year after
the state aid is generated. Difference between prior year’s
entitlement and that year’s current payment (MS127A.45, subd. 9).
Payment Schedule
A schedule which expresses the amount of education aid entitlements
that are paid as a “current” payment and the amount that is paid
as a “final” payment. Must add to 100%.
Appropriation (Education Context)
The amount of state aid that the state pays to districts and charter
schools in a given year. In most cases, an appropriation consists of a
portion of an aid entitlement from the “current” fiscal year and a
“final” payment from an aid entitlement from the prior fiscal year.
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Basic Terms
Payment Shift
An adjustment to the balance of current and final payment
percentages which constitute the state aid appropriation made
to schools.
In an “unshifted” environment, school aid payments are comprised
of a combination of 90% of the current year’s entitlement added
to 10% of the prior year’s entitlement.
The appropriation is metered to schools in 23 payments
throughout the year – roughly every two weeks
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E-12 Programs on Payment Schedule
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General Education
Abatement Aid
Consolidation Transition Revenue
Nonpublic Pupil Aid
Nonpublic Pupil Transportation Aid
Charter School Building Lease Aid
Charter School Start-Up Aid
Integration Aid
Magnet School Start-Up Aid
Success for the Future
Tribal Contract Schools
Special Education – Regular
Special Education – Excess Cost
Travel for Home-Based Services
Transition Programs – Students with Disabilities
Health and Safety Aid
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E-12 Approps on Payment Schedule
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Debt Service Equalization Aid
Alternative Facilities Bonding Aid
Deferred Maintenance
Basic Support Grants for Libraries
Multicounty, Multitype Library Systems
Regional Library Telecommunications Aid
School Readiness
Early Childhood Family Education Aid
Health and Developmental Screening Aid
Community Education
Adults with Disabilities Program Aid
School Age Care Aid
Adult Basic Education Aid
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School Payment Shift
Mechanics of Payment Schedule (Without Shift)
Fiscal Year
Entitlements
2009
$100
2010
$100
2011
$100
90%/
10%
90%/
10%
90%/
10%
2012
$100
2013
$100
(amounts generated by
formula)
Payment
Schedule
90%/
10%
90%/
10%
Current Payment $90
$90
$90
$90
$90
Final Payment + $10
+ $10
+ $10
+ $10
+ $10
$100
$100
$100
$100
Appropriations
$100
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School Payment Shift
Mechanics of Aid Payment Shift (2010-11 biennium & Feb 2011 Fcst law)
Fiscal Year
Entitlements
2009
$100
2010
$100
2011
$100
90%/
10%
73%/
27%
70%/
30%
2012
$100
2013
$100
(amounts generated by
formula)
Payment
Schedule
90%/
10%
90%/
10%
Current Payment $90
$73
$70
$90
$90
Final Payment + $10
+ $10
+ $27
+ $30
+ $10
$ 83
$97
$120
$100
Appropriations
$100
Entitlements: Under a payment shift, there is not adjustment to entitlements. A payment
shift creates a delay of WHEN schools receive aid. It does not reduce the amount.
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School Payment Shift
Where We’re At Today (2011 E-12 Education Bill)
FY 2010-11 Biennium
Fiscal Year
Entitlements
2009
$100
2010
$100
2011
$100
90%/
10%
73%/
27%
70%/
30%
FY 2012-13 Biennium
2012
$100
2013
$100
(amounts generated by
formula)
Payment
Schedule
60%/
40%
60%/
40%
Current Payment $90
$73
$70
$60
$60
Final Payment + $10
+ $10
+ $27
+ $30
+ $40
$ 83
$97
$90
$100
Appropriations
$100
Confusing Comparison: The shift percentage in FY 2012 is 10 percentage points lower
than the prior year, BUT is 30 percentage points lower than the Feb Fcst for FY 2012.
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Property Tax Recognition Shift
(PTRS)
H.F.232
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Basic Terms
Property Tax Recognition Shift (PTRS)
A PTRS is an accounting entry that takes a portion of a district’s
property tax revenue and moves it back one year. (ie. PT
revenue that would otherwise be revenue in FY 2012 is shifted
into FY 2011)
The second step is to reduce state aid in an amount equal to the
property taxes shifted forward. This generates one-time
savings.
The current PTRS was enacted by the legislature in 2010.
The amount shifted will grow over time as property
taxes grow.
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Property Tax Recognition Shift
Calendar Year 2011
Prior to Change
Jan ‘11
May
July 1
Oct
Property taxes paid
Property taxes paid
Property tax revenue
recognized by districts
Property tax revenue
recognized by districts
Dec
School property taxes currently paid in two separate years, BUT prior to FY 2011 both
May and October payments were “recognized” by districts as revenue in the later
fiscal year.
Rules governing recognition dates based on statute and UFARS.
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Property Tax Recognition Shift
Prior
Legislative
to Change
Change – Creating a Shift
Jan ‘11
Step #1 –
Change Levy
Recognition
Calendar Year 2011
May
July 1
Property taxes paid
Oct
Dec
Property taxes paid
Property tax revenue
recognized by districts
Property tax revenue
recognized by districts
Increase Levy Revenue by
$515 million * in FY 11
Step #2 – GenEd
Appropriation
Reduction
Aid cut in FY 11 by
$515 million*
*Based on Feb. 11 Fcst
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Accounting for the Shift
MS
16A.152
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Shift Accounting
Budget Balance & the Shifts
(Dollars in 000s, Relative to Feb 11 Fcst)
February 2011 Forecast
Enacted Budget
FY 2010-11
FY 2012-13
FY 2012-13
Aid Payment Shift
($1,382,368) *
$1,382,368
($831,351)
FY 2012-13
Difference
($2,213,719)
(73%, 70% & 90%)
(60% in FY12 & later)
Property Tax
Recog Shift
Shift Savings
($515,014)
($66,244)
($1,897,382)
$1,316,124
($79,917)
($13,673)
($911,268) ($2,227,392)
*Aid shift numbers include tax credits.
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Contingent Shift Buy-Back

Because shifts have historically been used as a defacto
“budget reserve” a system was created in 2004 to pay them
back automatically. This law remains in effect today.

Shifts are paid back when the Commissioner of MMB
“determines that there will be a positive unrestricted
budgetary general fund balance at the close of the
biennium.”

In order of precedence: (1) Cash flow account, (2) budget
reserve, (3) payment shift,(4) property tax recognition shift
and two other small payments.

This process used once already. Shifts from 2002 & 2003
sessions were paid back in two years.
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Contingent Shift Buy-Back
MS.16A.152 Budget Reserve and Cash Flow Accounts
If on the basis of a forecast of general fund revenues and expenditures, the
commissioner of management and budget determines that there will be a
positive unrestricted budgetary general fund balance at the close of the
biennium, the commissioner of management and budget must allocate money to
the following accounts and purposes in priority order:
(1) the cash flow account established in subdivision 1 until that account reaches
$350,000,000;
(2) the budget reserve account established in subdivision 1a until that account
reaches $653,000,000;
(3) the amount necessary to increase the aid payment schedule for school district
aids and credits payments in section 127A.45 to not more than 90 percent
rounded to the nearest tenth of a percent without exceeding the amount
available and with any remaining funds deposited n the budget reserve;
(4) the amount necessary to restore all or a portion of the net aid reductions
under section 127A.441 and to reduce the property tax revenue recognition shift
under section 123B.75, subdivision 5, by the same amount………..
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Shift Accounting
3,623
3,727
3,808
3,895
SCRFA,
ELNauman
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History of E-12 Shifts
Unallotments
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Education Budget
Education Shift Savings – A History of Legislative Changes
Fiscal Year
Amount When
Enacted (if known)
Type
Level
1983
PTRS
32%
($240.7 M)
1985
1988
PTRS
PTRS
24%
27%
shift reduced
shift expanded
1990
1992
1993*
1994
1996
1997
1997
1999
PTRS
PTRS
PTRS
PTRS
PTRS
PTRS
Payment
PTRS
31%
37%
50%
37.4%
18.1%
7%
90/10
0%
shift expanded
shift expanded
shift expanded
shift reduced
shift reduced
shift reduced
shift reduced
PTRS eliminated
2003
2004**
2004**
Payment
Payment
PTRS
83/17
80/20
48.6
( $437.5 M)
($185.3 M)
( $230.3 M )
Year Paid
Back
Partially in ’85, ’96-’99
1996-1999
1996-1999
1996-1999
Partially in ‘94
Nov. 2005 Fcst
Nov. 2005 Fcst
Feb. 2006 Fcst
*Previous shift high point in FY 1993, $688 million owed to schools.
**2004 the Legislature passed the contingent shift buyback language.
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Education Budget
Education Shift Changes – A History of Legislative Changes
Fiscal Year
Type
Level
Amount When
Enacted
Year Paid
Back
(if known)
2005
Payment
81.9/18.1
$116.3 M
Nov. 2004 Fcst
2005
Payment
84.3/15.7
$143.7 M
Feb. 2005 Fcst
2006
Payment
84.3/15.7
$355.0 M
Nov. 2005 Fcst
2006
PTRS
10.8%
$265.9 M
Nov. 2005 Fcst
2006
PTRS
0%
$72.9M
Feb. 2006 Fcst
2010*
Payment
( $1,160.4M)
Based on pos fcst
73%/27%
2011*
PTRS
48.6%
($561.5M )
2011
Payment
70%30%
($207.7M)
Based on pos fcst
2012
Payment
60%/40%
($739.2M )
Based on pos fcst
Based on pos fcst
* Shifts initially created by Gubernatorial unallotment process and subsequently codified into law.
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Briefing Summary
There are two kinds of Education shifts
-- Aid Payment Shifts
-- Property Tax Recognition Shift
Neither type makes any changes in the revenue that districts have to spend
Shifts have a lengthy history in Minnesota budgeting
-- Frequently used as a budget reserve
Current law requires shifts to be paid back once MN forecasts positive budget balances
in the general fund
-- Reasonable assumptions project over $3.6 billion in contingent spending (based
on current law)
-- This spending will occur prior to having any resources available for other budget
purposes
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Where to Get More Information
Senate Counsel, Research and Fiscal Analysis,
This briefing will be archived at:
http://www.senate.leg.state.mn.us/departments/scr/presentations/index.php#header
Department of Education; PTRS Shift Explanation Letter
http://www.education.state.mn.us/mdeprod/groups/Communications/documents/An
nouncement/014480.pdf
Senate Counsel, Research and Fiscal Analysis,
2011 Final Education Act Aid Tracking:
http://www.senate.mn/departments/fiscalpol/tracking/2011/Edu_AidSS.pdf
2011 Final Education Act Property Tax Tracking:
http://www.senate.mn/departments/fiscalpol/tracking/2011/Edu_PropTaxSS.pdf
House Research
School Finance Guide For Legislators
http://www.house.leg.state.mn.us/hrd/pubs/mnschfin.pdf
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Minnesota Senate E-12 Education Staff
Nonpartisan Staff
Caucus Staff
Shelby McQuay,
Research Analyst
651/296-5259
Greg Marcus,
Education Committee
Administrator
651/296-5312
Eric L. Nauman,
Fiscal Analyst
651/296-5539
Ann Marie Butler Yunker,
Counsel
651/296-5301
Ed Cook,
Republican Research
651/296-0129
Danna Elling,
DFL Research
651/296-7089
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