COMMONWEALTH OF VIRGINIA

DEPARTMENT OF EDUCATION

P.O. BOX 2120

RICHMOND, VIRGINIA 23218-2120

SUPTS. MEMO NO. 3

May 17, 2004

REGULATORY

TO:	Division Superintendents
FROM:	Jo Lynne DeMary Superintendent of Public Instruction
SUBJECT:	2004-2006 Biennial Budget Passed by the 2004 Special Session of the General Assembly

Section 22.1-93, Code of Virginia, requires the Department of Education to provide ...estimates to be used for budgetary purposes relative to the Basic School Aid Formula. The revenue estimates provided in this memorandum represent the state funding that is projected to be distributed to school divisions in fiscal years 2005 and 2006 based on the 2004-2006 biennial budget adopted by the General Assembly on May 7, 2004, at the 2004 Special Session. The adopted budget affects fiscal years 2005 and 2006. 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 2004 Special Session of the General Assembly adopted changes to the 2004-2006 biennial budget as introduced by Governor Warner (reference Informational Superintendent's Memorandum No. 223, dated December 19, 2003). The General Assemblys adopted budget significantly increases state funding for public education. Highlights of the changes in the General Assemblys adopted budget for the 2004-2006 biennium include:

• Provides $10.2 million over the biennium for targeted education initiatives for meeting requirements of the No Child Left Behind Act;
• Provides a net increase (after the Basic Aid offset) of $12.2 million in fiscal year 2005 and $14.7 million in fiscal year 2006 from a reforecast of the existing one percent sales tax revenue dedicated to public education and for additional levies under the one percent sales tax dedicated to public education authorized by House Bill 5018;
• Provides a net increase (after the Basic Aid offset) of $36.5 million in fiscal year 2005 and $46.0 million in fiscal year 2006 from half of the one-quarter-cent sales tax dedicated to public education authorized by House Bill 5018;
• Provides an additional $22.6 million in fiscal year 2005 and $28.1 million in fiscal year 2006 for the At-risk Four-year-old program;
• Provides $55.0 million in fiscal year 2005 and $55.6 million in fiscal year 2006 to reverse the deduction of local revenues from Basic Aid;
• Provides $108.4 million in fiscal year 2005 and $109.1 million in fiscal year 2006 to partially reverse the deduction of certain federal revenues from Basic Aid;
• Provides $105.7 million in fiscal year 2005 and $220.3 million in fiscal year 2006 to fund three standards in the SOQ recommended by the Board of Education (i.e., elementary resource teachers, support and instructional technology positions, and secondary planning period);
• Provides $22.7 million in fiscal year 2005 and $23.0 million in fiscal year 2006 to fund 100 percent of the prevailing cost of certain administrative positions in Basic Aid;
• Provides $3.5 million in fiscal year 2005 and $3.7 million in fiscal year 2006 to increase the cost of competing adjustment for school divisions in Planning District Eight from 20.92 percent to 24.61 percent;
• Provides $9.1 million in fiscal year 2005 and $10.6 million in fiscal year 2006 to increase the number of SOQ funded instructional positions from 10 to 17 per 1,000 limited English proficient students;
• Increases the funding cap on Governors Schools from 1,300 students to 1,500 students per school;
• Establishes the employer rate for VRS retirement at 6.03 percent in fiscal year 2005 and 6.62 percent in fiscal year 2006, and the employer rate for the retiree health care credit at 0.55% both years;
• Provides $118.8 million in bond proceeds over the biennium for continuation of the SOL Web-based Technology Initiative as proposed in the introduced budget; and,
• Eliminates the No Loss, Compensation Supplement, Student Achievement Grants, and SOL Remediation programs that were proposed in the introduced budget.

The introduced budget for the 2004-2006 biennium (introduced as HB/SB 30 at the regular session; reintroduced as HB/SB 5001 for the special session) is the budget against which the General Assembly adopted changes. The attachments to this memorandum provide information on the changes to the introduced budget that were adopted by the General Assembly. Unless changes are specifically noted in the attachments, Governor Warners proposals contained in the introduced version of HB/SB 5001 were adopted as outlined in Informational Superintendents Memorandum No. 223, dated December 19, 2003.

The attachments to this memorandum include:

Attachment A A narrative summary of changes, adopted by the 2004 Special Session of the General Assembly, to Governor Warners 2004-2006 introduced budget (HB/SB 5001). These changes are noted as "Final General Assembly Action" and are highlighted in bold text. For reference purposes, this attachment also repeats the information presented in Informational Superintendent's Memorandum No. 223, dated December 19, 2003, which described the changes proposed by the Governor, and Informational Superintendents Memorandum No. 47, dated March 3, 2004, which described the changes proposed by the House of Delegates and the Senate.

• Attachment B A report showing projected state entitlements for each school division for fiscal years 2005 and 2006 for the Standards of Quality (SOQ), incentive, and categorical accounts based on the final General Assembly actions.

• Attachment C Instructions for downloading the Excel calculation file from the departments website.

• Attachment D Budget language amendments for the 2004-2006 biennium that impact school divisions.

Attachment B shows the projected state funding entitlements for each school division for fiscal years 2005 and 2006 based on the budget adopted by the General Assembly. The entitlements shown in Attachment B are divided into three groups designated by the Roman numerals to the left of the accounts. The first group (I) lists all of the Standards of Quality accounts; the second group (II) lists all of the incentive-based accounts that require school divisions to apply for the funds and to meet certain criteria; the third group (III) lists all of the categorical accounts. Several of the categorical account entitlements (Group III accounts) shown in Attachment B are funded on a reimbursement basis and represent projected funding based on the departments latest projected entitlements using the most recent data available to the department; however, final payments on these accounts in fiscal years 2005 and 2006 will be based on actual reimbursements. The entitlements shown in Attachment B do not include the direct grants (Group IV accounts) authorized by the General Assembly that are unique to certain school divisions.

The projected division entitlements for fiscal years 2005 and 2006 contained in Attachment B and in the Excel calculation file (referenced below) include funding for various technical corrections that were identified after the Governor submitted his introduced budget. The General Assembly did not provide additional funding for these technical corrections; however, the General Assembly directed that school division entitlements and per pupil amounts reflect these corrections. The per pupil amounts and total funding amounts contained in Attachment B and in the Excel calculation file reflect those corrections for all school divisions. These corrections total approximately $12.5 million in fiscal year 2005 and $13.1 million in fiscal year 2006 or approximately 0.5% of the total projected Basic Aid entitlements each year. 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 among all school divisions. Projected division entitlements presented in Attachment B and in the Excel calculation file show full funding for these technical corrections and do not include an estimated proration amount in the event sufficient funding is not available.

Please note that the 2004-2006 budget adopted by the General Assembly and the entitlements contained in Attachment B are based on the departments latest projections of March 31 average daily membership (ADM) for each school division for those accounts that use ADM in determining the amount of funding. If you wish to see the effects of a different ADM on funding for your school division in those accounts where funding is based on ADM, please use the Excel-based calculation file described in the paragraph below.

In addition to the entitlement information contained in Attachment B, a downloadable Excel file has been created to assist school divisions in calculating projected state entitlements and required local matches in fiscal years 2005 and 2006 for the SOQ, incentive, and categorical accounts. The Excel file calculates projected school division funding based on the budget for fiscal years 2005 and 2006 that was adopted by the General Assembly. This file gives divisions the opportunity to test the effect on state funding and local match requirements of using the departments projected ADM or a local projection of ADM. Attachment C to this memorandum provides detailed instructions for accessing the Excel file from the Department of Education website. The Excel file 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 a more accurate projection of their March 31 ADM, they are encouraged to substitute their projection for the departments projection when using the Excel calculation file to project division entitlements and required local matches. 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. The estimated funding changes occur only in this file and all other accounts in this file remain the same. (Attachment B contains projected entitlement information for each school division in PDF format. This attachment shows projected entitlements based on the departments projected ADM only and cannot be modified.)

The budget bill for the 2004-2006 biennium passed by the 2004 Special Session of the General Assembly (i.e., HB/SB 5001) now goes to Governor Warner for action. The Governor will have several options that include signing the budget bill as presented to him with no changes, returning the budget bill to the General Assembly with vetoes, returning the budget bill to the General Assembly with amendments, or returning the budget bill to the General Assembly with some combination of vetoes and amendments. He must take this action prior to the reconvened veto session scheduled for June 16, 2004, when the General Assembly will consider any amendments or vetoes proposed by Governor Warner.

Consequently, unless signed by Governor Warner with no changes, the budget bill as adopted by the General Assembly will not become final until after the reconvened session has concluded and the Governor signs the budget bill into law. In the event budget changes are made at the reconvened session that affect school divisions, you will be notified in another memorandum.

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.

JLD/kcd

Attachments

/administrators/superintendents_memos/2004/reg003a.pdf

/administrators/superintendents_memos/2004/reg003b.pdf

/administrators/superintendents_memos/2004/reg003c.pdf

/administrators/superintendents_memos/2004/reg003d.pdf

C: local governing bodies