COMMONWEALTH OF VIRGINIA

DEPARTMENT OF EDUCATION

P.O. BOX 2120

RICHMOND, VIRGINIA 23218-2120

SUPTS. MEMO NO. 223

December 19, 2003

INFORMATIONAL

TO:

Division Superintendents

 

FROM:

Jo Lynne DeMary

Superintendent of Public Instruction

 

SUBJECT:

2004-2006 Biennial Budget as Introduced

by Governor Warner

 

Governor Warner presented his 2004-2006 biennial budget on Wednesday, December 17, 2003, before a joint session of the Senate Finance, the House Appropriations, and the House Finance committees. This budget will be considered by the 2004 Session of the General Assembly, which is scheduled to convene on January 14, 2004. The Governors recommendations for the 2004-2006 Direct Aid to Public Education budget include technical updates to the Standards of Quality (SOQ), incentive, and categorical accounts, and funding for new and existing initiatives. Attachment A to this memorandum provides detailed descriptions of the funding proposed by the Governor for the 2004-2006 Direct Aid budget. Budget proposals for the departments Central Office budget that pertain to school divisions are also summarized in Attachment A.

 

Major proposals in the 2004-2006 introduced budget include:

 

       Updating costs of the SOQ, incentive, and categorical accounts;

       Adopting the Board of Educations proposed new program for prevention, intervention, and remediation, which replaces the existing SOQ remediation program and provides additional funding to school divisions;

       Instituting a No Loss funding provision;

       Continuing the SOL Web-based Technology Initiative funded through Virginia Public School Authority (VPSA) note proceeds;

       Continuing the interest rate subsidy program to support school construction in both years of the biennium;

       Continuing funding for the direct grants to school divisions; and,

       Providing additional funding to continue the departments SOL testing program, and to comply with the federal No Child Left Behind (NCLB) Act.

 

Beyond these initiatives, Governor Warner has proposed increased funding for four additional initiatives, all of which are contingent on a series of actions outlined in his introduced budget, including a number of tax reform proposals. A fifth adjustment includes an additional reduction in the employer share of retirement rates paid to the Virginia Retirement System (VRS). To accommodate these contingent initiatives in our estimates of payments to school divisions, we have prepared two scenarios for calculating division entitlements. These two scenarios are described below and in Attachment A of this memorandum.

 

Funding Scenario One With No Contingent Amendments

 

     VRS Rate at 8.41 percent The VRS employer contribution rate will be set at 8.41 percent (with the VRS retirement rate at 7.82 percent and the retiree health care credit at 0.59 percent). This scenario does not include the contingent initiatives that are listed under the second funding scenario discussed below. (See Attachment B for estimated entitlement information by school division under this scenario.)

 

Funding Scenario Two With Contingent Amendments

 

     VRS Rate at 7.15 percent - The VRS employer contribution rate will be reduced to 7.15 percent (with the VRS retirement rate at 6.56 percent and the retiree health care credit rate at 0.59 percent). (See Attachment C for estimated entitlement information by school division under this scenario.)

 

     Salary Increase in Fiscal Year 2006 - A salary increase of three percent, effective December 1, 2005, would be provided for SOQ instructional and support positions. State funding for the salary increase is estimated at $50.1 million in fiscal year 2006. (See Attachment C for estimated entitlement information by school division under this scenario.)

 

     Fully Fund the Support Cost of Competing Adjustment at 24.61 Percent Funding will be included for the state share of cost of the cost of competing factor at 24.61 percent for all SOQ funded support positions in the nine school divisions that comprise Planning District Eight. (See Attachment C for estimated entitlement information by school division under this scenario.)

 

     Increase the Number of Teachers for English as a Second Language (ESL) Funding will be provided to increase the ESL staffing standard from ten teachers for every one thousand limited English proficient students to seventeen teachers for every one thousand limited English proficient students. (See Attachment C for estimated entitlement information by school division under this scenario.)

 

     Expand the At-Risk Four-Year-Old Program This program will be expanded to serve a greater number of at-risk four-year-olds through reducing the number of Title I students deducted from the number of unserved students. (See Attachment C for estimated entitlement information by school division under this scenario.)

 

For planning purposes, school divisions should prepare their local budgets based upon both of these funding scenarios until more information is available concerning the final budget passed by the 2004 General Assembly. Information on the final 2004-2006 budget should be available by March 2004.

 

Attachments B and C to this memorandum list the estimated school division entitlements for fiscal years 2005 and 2006 for the SOQ, incentive, and categorical accounts based on the Governors introduced 2004-2006 budget. Please note that the entitlements shown in Attachment B are based on the Governors introduced budget without contingencies. The entitlements shown in Attachment C are based on the Governors introduced budget with the contingent initiatives included. The entitlements shown in Attachments B and C are based on the Department of Educations latest projections of March 31 average daily membership (ADM). The entitlements shown in Attachments B and C do not include the direct grants (Group IV accounts) authorized by the General Assembly that are unique to certain school divisions.

 

Several of the categorical account entitlements (Group III accounts) shown in Attachments B and C are funded on a reimbursement basis; therefore, the amounts listed are calculated based on the departments latest projected entitlements. Final payments on these accounts in fiscal years 2005 and 2006 will be based on actual reimbursements.

 

In addition to the entitlement information contained in Attachments B and C, two downloadable Excel files have been created to assist school divisions in calculating projected state entitlements and local matches for fiscal years 2005 and 2006 for SOQ, incentive, and categorical Direct Aid programs. One Excel file contains entitlement information based on the Governors introduced budget without contingencies. Another Excel file contains entitlement information based on the Governors introduced budget including the contingent initiatives.

 

These files give divisions the opportunity to change ADM to test the effect on state funding and projected local matches using the departments projected ADM or a local projection of ADM. Attachment D to this memorandum provides detailed instructions for accessing the Excel files from the Department of Educations website. The Excel files may be downloaded from the following address:

 

http://www.pen.k12.va.us/VDOE/Finance/Budget/calctools.html

 

Although we have confidence in the accuracy of our ADM projections on a statewide basis, experience has shown that the accuracy of our projections for individual localities may vary. When localities believe that they have more accurate projections of their March 31 ADM, they are encouraged to substitute their estimates for those provided in this memorandum when using the Excel calculation files. Also, please note that changing the ADM in these files only changes the estimated funding for accounts that are funded on the basis of ADM. The funding for all other accounts remains the same.

 

It is important to remember that the information provided in Attachments B and C and in the Excel calculation templates relates to the Governors 2004-2006 budget as introduced. The House of Delegates and the Senate will have the opportunity to amend the Governors budget proposals during the 2004 General Assembly session. The General Assembly will adopt a final 2004-2006 biennial budget before the end of the session, which is scheduled for March 13, 2004; therefore, the entitlements contained in Attachments B and C and in the Excel calculation templates are projections only and are subject to change throughout the session. The department will provide additional information during the General Assembly session as changes to Direct Aid entitlements occur.

 

Attachments E and F summarize several of the major data inputs that are updated in the calculation of Direct Aid accounts for the 2004-2006 biennium. Attachment E lists the sources of various input data updated for 2004-2006; Attachment F shows the SOQ funded instructional salaries used for 2004-2006.

 

Finally, Attachments G and H contain information on the potential local share of savings for SOQ funded positions resulting from the reduced VRS retirement rates (reduced from the VRS Board certified rate of 8.1 percent for the employer share of retirement and 0.59 percent for the retiree health care credit) and the continuation of the group life premium holiday (0.00 percent versus the VRS Board certified rate of 0.46 percent). Please note that actual local savings will vary based upon local salary rates and the actual number of employees enrolled in VRS.

 

Questions regarding the introduced 2004-2006 budget and projected fiscal years 2005 and 2006 Direct Aid entitlements may be directed to Dan Timberlake, assistant superintendent for finance, or budget office staff at (804) 225-2025.

 

JLD/mmv

 

Attachments

 

/administrators/superintendents_memos/2003/inf223a.pdf

/administrators/superintendents_memos/2003/inf223b.pdf

/administrators/superintendents_memos/2003/inf223c.pdf

/administrators/superintendents_memos/2003/inf223d.pdf

/administrators/superintendents_memos/2003/inf223e.pdf

/administrators/superintendents_memos/2003/inf223f.pdf

/administrators/superintendents_memos/2003/inf223g.pdf

/administrators/superintendents_memos/2003/inf223h.pdf