COMMONWEALTH OF VIRGINIA

DEPARTMENT OF EDUCATION

P.O. BOX 2120

RICHMOND, VIRGINIA 23218-2120

SUPTS. MEMO NO. 47

March 3, 2004

INFORMATIONAL

TO:

Division Superintendents

 

FROM:

Jo Lynne DeMary

Superintendent of Public Instruction

 

SUBJECT:

Changes to the Introduced Fiscal Year 2004 and the 2004-2006 Biennial Budgets Proposed by the House of Delegates and by the Senate

 

On Sunday, February 22, 2004, the Senate Finance and House Appropriations Committees adopted changes to the 2004-2006 biennial budget as introduced by Governor Warner (reference Informational Superintendent's Memorandum No. 223, dated December 19, 2003) as well as changes to the amended fiscal year 2004 budget proposed by Governor Warner (reference Informational Superintendent's Memorandum No. 222, dated December 19, 2003). The committees proposed changes were adopted last week by the full membership of the House of Delegates and the Senate. The adopted changes affect fiscal years 2004, 2005, and 2006. Fiscal year 2004 began on July 1, 2003, and ends on June 30, 2004. Fiscal year 2005 begins on July 1, 2004, and ends on June 30, 2005. Fiscal year 2006 begins on July 1, 2005, and ends on June 30, 2006.

 

The introduced budget for the 2004-2006 biennium (HB/SB 30) and the amended fiscal year 2004 budget (HB/SB 29) are the budgets against which the House of Delegates and the Senate made changes. The attachments to this memorandum provide information on the changes adopted by the House and by the Senate. Unless changes are specifically noted in the attachments, Governor Warners proposals contained in the introduced versions of HB/SB 29 and HB/SB 30 were adopted. The House and Senate amendments include Governor Warners proposed executive amendments to his budget that were not included in the introduced budget (HB/SB 30) on December 17, 2003. These amendments must be adopted specifically by the House of Delegates and by the Senate to be included in the final budget.

Major changes proposed by the House of Delegates and the Senate to 2004-2006 introduced budget include:

 

       The House and Senate propose to eliminate the locally generated revenue deduction from Basic Aid costs; the Senate also proposes to eliminate the federal revenue deduction from Basic Aid costs.

 

       The Senate proposes to use the pooled employer contribution rate of 6.56 percent of salary for professional and instructional positions for both years of the biennium for Virginia Retirement System (VRS) payments. This would be the rate funded in the state payments to school divisions and also the rate charged to school divisions by VRS.

 

The House proposes a new approach to funding VRS payments for professional and instructional positions. State payments to school divisions will be based only on the normal cost employer contribution rate. For both years of the 2004-2006 biennium, this rate will be 6.03 percent of salary. In fiscal year 2005, school division payments to VRS will be based only on the normal cost employer rate so the rate charged would be the same rate as the rate funded by the state or 6.03 percent of salary.

 

In fiscal year 2006, however, school division payments to VRS will be based upon the normal cost employer rate plus a portion of the rate needed to address the unfunded costs in the teacher retirement pool. The employer contribution rate for state funding would remain at the normal cost employer rate of 6.03 percent but the employer rate charged to school divisions by VRS would increase to an estimated 6.62 percent of salary. Beginning in fiscal year 2006, school divisions would be responsible for paying 100 percent of a portion of the unfunded liability rate above the normal cost rate. In fiscal year 2006, the increase from the normal cost employer rate of 6.03 percent to 6.62 percent is approximately one-third of the current unfunded liability. Each year after fiscal year 2006, the rate charged to school divisions would increase by one-third of the unfunded liability rate until the full funding rate is achieved. No state payments would be made to school divisions to pay the cost of the unfunded liability rate.

 

       The House and Senate propose to eliminate the compensation supplement proposed by the Governor as a contingent amendment in fiscal year 2006.

 

       The House proposes to eliminate: 1) the Student Achievement Grants program, and 2) additional funding proposed by Governor Warner for English as a Second Language, cost of competing for support positions, and the SOQ remediation program adopted by the Board of Education. The House also reduces At-risk Four-year-old funding through changes in the funding formula.

 

       The Senate proposes to provide additional funding for Standards of Quality positions that were adopted by the Board of Education, as well additional funding to fully fund administrative positions in Basic Aid, to eliminate the one-month rollover of fringe benefit payments, and for the At-risk Four-year-old program.

 

       The House and Senate propose additional funding from an increase in the estimated one-cent sales tax (in fiscal years 2004, 2005, and 2006).

 

       The Senate proposes additional funding in fiscal year 2005 and 2006 for technical corrections to SOQ funding identified after the release of the Governors introduced budget.

 

The attachments to this memorandum include:

 

       Attachment A A narrative summary of changes proposed by the House of Delegates and by the Senate to Governor Warners amended fiscal year 2004 budget (HB/SB 29) and his 2004-2006 introduced budget (HB/SB 30).

 

 

 

 

 

 

Please note that the budgets adopted by the Senate and by the House of Delegates, as well as technical corrections to funding calculations that are not fully funded, and that are reflected in the entitlements contained in Attachments B through E are based on the departments latest projections of average daily membership (ADM) for each school division. If you wish to see the effects of a different ADM on funding for your school division, please use the calculation tool described in the following paragraph.

 

In addition to the above attachments, four downloadable Excel files were created to assist divisions in calculating projected state entitlements and required local matches for the Direct Aid to Public Education accounts. Attachment F to this memorandum provides detailed instructions for accessing these Excel files from the Web. The four Excel files calculate school division funding based on the House and the Senate budget proposals for fiscal year 2004 and for fiscal years 2005 and 2006. The files allow you to use the departments or your own projections of ADM in calculating state entitlements and local matches.

 

The Excel files are located on the departments website and 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 divisions may vary. When divisions 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 file to project division entitlements. Also, please note that changing the ADM in this file only changes the estimated funding for accounts that are funded on the basis of ADM in this file. The estimated funding changes occur only in this file and all other accounts in this file remain the same.

 

Attachments B through E and the Excel calculation tools include funding for various technical corrections that were identified after the Governor submitted his introduced budgets. If sufficient savings in actual costs are not obtained or if additional funds are not made available when payments must be made, Basic Aid payments may have to be reduced or prorated proportionally across all school divisions. Division entitlements presented in attachments B through E and in the Excel calculation tools show full funding for these technical corrections and do not include an estimated proration amount in the event sufficient funding is not available. Please see Attachment A for more information regarding the status of this funding.

 

The recommendations proposed by the House of Delegates and by the Senate are not final. A Conference Committee will make final recommendations after differences between the House and Senate budget proposals have been resolved. The current legislative calendar indicates that the Conference Committee's recommendations will be presented to each chamber during the week of March 8th for consideration and final adoption.

 

Final action by each chamber will occur before adjournment of the 2004 Session, which currently is scheduled for March 13, 2004. After final actions have been taken, the department will provide you and your governing body with additional information concerning the budget in a regulatory superintendents memorandum. After adjournment, the budgets will be presented to the Governor. The Governor will have several options that include signing each budget with no changes, returning each budget to the General Assembly with vetoes, returning each budget to the General Assembly with amendments, or returning each budget to the General Assembly with some combination of vetoes and amendments. The General Assembly will consider any vetoes or amendments at their reconvened veto session currently scheduled for April 21, 2004.

 

If you have any questions, or need additional information, please contact Daniel S. Timberlake, assistant superintendent for finance, or budget office staff at (804) 225-2025.

 

/administrators/superintendents_memos/2004/inf047a.pdf
/administrators/superintendents_memos/2004/inf047b.pdf
/administrators/superintendents_memos/2004/inf047c.pdf
/administrators/superintendents_memos/2004/inf047d.pdf
/administrators/superintendents_memos/2004/inf047e.pdf
/administrators/superintendents_memos/2004/inf047f.pdf

JLD/kcd

 

Attachments