COMMONWEALTH OF VIRGINIA

DEPARTMENT OF EDUCATION

P.O. BOX 2120

RICHMOND, VIRGINIA 23218-2120

SUPTS. MEMO NO. 24

May 20, 2005

ADMINISTRATIVE

TO:

Division Superintendents

 

FROM:

Jo Lynne DeMary

Superintendent of Public Instruction

 

SUBJECT:

State Entitlements for Fiscal Year 2005 Based on Actual March 31, 2005, Average Daily Membership (ADM), Adjustments to the Fiscal Year 2005 Basic Aid Entitlement, and Preliminary Fiscal Year 2005 Prorated Basic Aid Entitlements

 

Administrative Superintendents Memorandum Number 10, dated March 4, 2005, required school divisions to report average daily membership (ADM) as of March 31, 2005, as part of the 2004-2005 Spring Student Record Collection. The data reported by divisions were used to recalculate all ADM-based entitlements for fiscal year 2005. On a statewide basis, actual March 31, 2005, adjusted ADM was 0.03 percent less than the projected March 31, 2005, ADM on which the state budget was based. Current appropriations in the Direct Aid to Public Education budget are not sufficient to pay school divisions their full ADM entitlements for fiscal year 2005. This appropriation shortfall is attributable to the unfunded technical corrections contained in the current appropriation act, Chapter 951, 2005 Acts of Assembly.

 

Detailed information on the unfunded technical corrections in fiscal year 2005 has been provided to you through several communications over the last year. Most recently, this information was communicated through Regulatory Superintendents Memorandum Number 1, dated March 4, 2005, and Informational Superintendents Memorandum Number 97, dated May 6, 2005.

 

Currently, the total funding shortfall for fiscal year 2005 is contained in the Basic Aid account. All other formula-based accounts are fully funded to support payment of the full entitlement to each division. At the present time, Basic Aid is under funded by $11.7 million, or 0.46 percent of the total Basic Aid entitlement. As the department identifies unspent balances in other accounts, this shortfall will be reduced. Pursuant to the appropriation act, the Department of Education is authorized to prorate any remaining shortfall across all school divisions. The department will continue to seek additional balances from other accounts that can be used to decrease the shortfall and the resulting proration in Basic Aid. It is anticipated that divisions will be notified of the final proration factor and prorated Basic Aid entitlement for fiscal year 2005 by early June. Recurring Direct Aid payments reflecting final March 31, 2005, ADM and any required prorations will be made on the June 16th and June 30th, 2005, electronic funds transfers (EFT).

 

The information in this memorandum contains the final state entitlements due to school divisions in fiscal year 2005 for ADM-based accounts. For the purpose of showing the full final entitlement based on actual March 31, 2005, ADM, Basic Aid has not been prorated in these calculations. This memorandum also provides information on the preliminary prorated Basic Aid entitlement based on the appropriations currently available for payment. In addition, where available, final entitlement payments are shown for other Direct Aid accounts that are not based on ADM. Entitlements for some accounts that require school divisions to submit reimbursements have not been finalized for the year and the entitlements shown are estimates only.

 

An Excel file is provided that shows full state entitlements (i.e., unprorated), the preliminary prorated Basic Aid entitlement, required local effort for the Standards of Quality (SOQ) accounts, and required local matches for incentive-based accounts based on actual March 31, 2005, ADM. Please note that, unlike previous Excel calculation files for fiscal year 2005 provided by the department, this file does not offer an option to change ADM for fiscal year 2005 since March 31, 2005, ADM is now final; however, the projected ADM used to calculate fiscal year 2006 entitlements may be changed in this file to reflect local projections of ADM.

 

Attachment A to this memorandum provides detailed instructions for accessing the Excel file from the departments website. The Excel file can be accessed from the departments website at:

 

http://www.doe.virginia.gov/VDOE/Finance/Budget/calctools.html

 

The Excel file allows you to view the preliminary prorated Basic Aid entitlement or the unprorated Basic Aid entitlement amount by using toggle buttons in the "State & Local Funds Worksheet" of the file. The prorated Basic Aid entitlement reflects the payment divisions can expect to receive for fiscal year 2005 based on current appropriations with no additional adjustments to account for the transfer of other unspent balances. The fiscal year 2005 Basic Aid entitlement shown for each division is prorated based on a statewide proration factor of 0.46 percent. Please be aware that this scenario likely represents the worst case for proration. As unspent balances are identified in other accounts, they will be applied to the Basic Aid shortfall thus increasing the final Basic Aid payment.

 

The prorated Basic Aid entitlement shown for each division on the State & Local Funds Worksheet does not reflect any of the necessary adjustments to Basic Aid that affect the final Basic Aid payment. The Basic Aid adjustments for each division, where applicable, are shown in the Adjustments to FY05 Basic Aid sheet and represent deductions from the final Basic Aid entitlement. The required local share shown for Basic Aid is based on the full entitlement and is not reduced to reflect any proration. By law, school divisions are required to match the unprorated Basic Aid entitlement amount in meeting required local effort for fiscal year 2005. Amounts shown for other accounts in this view of the file are the full entitlement amounts. The accounts affected by March 31, 2005, ADM appear in the file in bold italics.

 

The Full Entitlements (Unprorated) button in the "State & Local Funds Worksheet" should be selected to see the unprorated Basic Aid entitlement for fiscal year 2005. The accounts affected by March 31, 2005, ADM appear in this view of the file in bold italics and are shown as the full entitlement. As stated above for the prorated entitlement, the unprorated Basic Aid entitlement shown for each division on the State and Local Funds worksheet does not reflect any of the necessary adjustments to Basic Aid that affect the final Basic Aid payment. The Basic Aid adjustments for each division, where applicable, are shown in the Adjustments to FY05 Basic Aid sheet and represent deductions from the final Basic Aid entitlement.

 

At this time, school divisions should use the prorated Basic Aid entitlement amount (less adjustments) in projecting final state revenues for fiscal year 2005. The full Basic Aid entitlement amount is provided for your information only. Detail on the calculation of the prorated Basic Aid entitlements for all school divisions is shown in the "Proration Amounts" worksheet of the Excel file. This same data is provided in Attachment B to this memorandum.

 

Please also note the following when reviewing the data contained in the Excel file:

 

1. Basic Aid: As stated above, the fiscal year 2005 state payment for Basic Aid contained in the Excel calculation file sheet labeled State and Local Funds Worksheet does not reflect any required adjustments authorized by the appropriation act for circumstances such as overpayments or payments made on behalf of school divisions to the schools for the deaf and the blind, mental health/mental retardation facilities, or summer Governors School programs. The adjustments made to fiscal year 2005 Basic Aid entitlements are described below and are listed in the sheet labeled Adjustments to FY05 Basic Aid. The amounts in the last column of this sheet are the fiscal year 2005 prorated entitlements for Basic Aid for each division that include the necessary adjustments for final payment.

 

2. Sales Tax: The sales tax estimates contained in the Excel calculation file represent the amounts used to compute the Basic Aid entitlement for fiscal year 2005. As required by law, these estimates are based on those contained in the final appropriation act for fiscal year 2005 (Chapter 951, 2005 Acts of Assembly). As required by Chapter 951, in the event that the actual revenues from the state sales and use tax returned (on the basis of the latest triennial count of school age population) for sales in the fiscal year in which the school year begins are different from the number estimated as the basis for this appropriation, the estimated revenues shall not be adjusted. Please be aware, however, that sales tax payments to school divisions are based on actual revenues of the state sales and use tax dedicated to public education. These actual payments may differ from the estimates provided in this worksheet. Final information on actual sales tax receipts on cash and accrual bases will be posted on the departments website in July as part of the fiscal year 2005 Annual School Report information.

 

3. Fringe Benefits: The fringe benefit amounts contained in the Excel calculation file are the actual amounts you will receive for fiscal year 2005 on a cash basis. Fringe benefit amounts shown on an accrual basis will be posted on the departments website in July as part of the fiscal year 2005 Annual School Report information.

 

4.       Incentive and Categorical Accounts: Group II incentive accounts represent the full entitlement for actual participation in fiscal year 2005. For certain Group III categorical accounts, the entitlements do not reflect final participation or reimbursement levels for the year and should be considered only as estimated entitlements.

 

5.       VPSA Technology: VPSA Technology (i.e., SOL Web-based Technology Initiative) entitlements reflect the total entitlement that is allocated to the school division for the note issue offered in the fiscal year (e.g., the spring 2005 issue for fiscal year 2005). They do not reflect actual reimbursement payments requested and paid to the school division. Please be aware that entitlements for regional programs are included in school division fiscal agent totals; however, actual reimbursements for the spring 2005 issue may be made directly to regional programs from State Non-Arbitrage Program (SNAP) allocations if SNAP accounts are set-up separately for each regional program.

 

6.       Local Lottery Distribution: The distribution of local lottery revenue to school divisions is based on the per pupil amount of $236.95 listed in the current appropriation act for fiscal year 2005 (Chapter 951). The semi-monthly lottery payments for fiscal year 2005 will be adjusted for actual ADM beginning with the June 16, 2005, electronic funds transfer (EFT).

 

Adjustments to the Fiscal Year 2005 Basic Aid Entitlement for Certain School Divisions

 

The appropriation act directs that adjustments for students in mental health or mental retardation facilities be made against a school divisions Basic Aid payment. Following this precedent and because Basic Aid is the largest Direct Aid account, the departments normal practice is to adjust Basic Aid for other types of routine adjustments to school division payments. Consequently, various adjustments will be made to the fiscal year 2005 state Basic Aid entitlements for certain school divisions beginning with the June 16, 2005, EFT. Where applicable, these adjustments will reduce the fiscal year 2005 Basic Aid entitlement paid to school divisions. As noted above, the estimated adjustments to Basic Aid (as of the June 16, 2005, EFT) are shown in the sheet labeled Adjustments to FY05 Basic Aid in the Excel file. The Basic Aid adjustments for fiscal year 2005 are as follows:

 

1.  Overpayment of At-risk Account For some divisions, an adjustment for overpayment of At-risk funding is necessary where actual ADM is lower than the projected ADM on which payments were based during the year and also due to a correction in the funding formula that reduced final entitlements. This adjustment reduces the affected divisions Basic Aid entitlement that will be reported the 2004-2005 Annual School Report.

 

2.  Driver Education Funds Portion of Basic Aid As required by the appropriation act in Item 146 C.2.e.1) of Chapter 951, 2005 Acts of Assembly, this adjustment reduces the Basic Aid entitlement for school divisions that are not eligible to receive Driver Education funds in fiscal year 2005 due to non-compliance with the requirements of Section 22.1-205 C., Code of Virginia. The reduced Basic Aid entitlement should be reported in Revenue Source Code 240202 on your 2004-2005 Annual School Report. This adjustment reduces the affected divisions Basic Aid entitlement that will be reported the 2004-2005 Annual School Report.

 

3.  Local Tuition for Summer Residential Governors Schools Lists the local share of tuition for Summer Residential Governors Schools paid by the department on behalf of school divisions and that is owed to the department in fiscal year 2005. This deduction reduces the affected divisions Basic Aid payment, but not the Basic Aid entitlement.

 

4.  Local Tuition for Foreign Language Academies Lists the local share of tuition for Foreign Language Academies paid by the department on behalf of school divisions and that is owed to the department in fiscal year 2005. This deduction reduces the affected divisions Basic Aid payment, but not the Basic Aid entitlement.

 

5.  Mental Health Local Share of Cost This adjustment is for the school divisions share of the cost of educating children in state mental health hospitals. The data used to calculate this adjustment are based on the 2003-2004 school year. This adjustment to the division Basic Aid entitlement is in accordance with Item 146 C.2.d. paragraphs 1) and 2) of Chapter 951, 2005 Acts of Assembly. This deduction reduces the affected divisions Basic Aid payment, but not the Basic Aid entitlement.

 

6.  Mental Retardation Local Share of Cost This adjustment is for the school divisions share of the cost of educating children in state mental retardation facilities. The data used to calculate this adjustment are based on the 2003-2004 school year. This adjustment to the division Basic Aid entitlement is in accordance with Item 146 C.2.d. paragraphs 1) and 2) of Chapter 951, 2005 Acts of Assembly. This deduction reduces the affected divisions Basic Aid payment, but not the Basic Aid entitlement.

 

7.  Local Tuition for Schools for the Deaf and the Blind This adjustment is for the local tuition payment for students enrolled at the Virginia Schools for the Deaf and the Blind (VSDB). If you have students from your school division enrolled at VSDB and MD-Hampton or VSDB-Staunton during fiscal year 2005, Virginia Board of Education regulation 8VAC20-80-130.H. requires the Department of Education to adjust your state Basic Aid payment to capture the local share of the cost of educating these students. These funds are then transferred to the two schools to offset the cost of educating those students. This adjustment is based on the December 1, 2004, enrollment for each school. This deduction reduces the affected divisions Basic Aid payment, but not the Basic Aid entitlement.

 

Reporting Adjustments to Basic Aid on the Annual School Report

 

In order to maintain proper accounting for adjustments made to Basic Aid entitlements for payments made on behalf of school divisions (adjustments 3 through 7 above), it is necessary for each school division to report the full entitlement or gross revenue of Basic Aid funds under revenue source code 240202 (Basic School Aid) on the 2004-2005 Annual School Report. To balance this gross Basic Aid revenue on the 2004-2005 Annual School Report, school divisions with adjustments to Basic Aid for Summer Residential Governors Schools, Foreign Language Academies, Mental Health/Mental Retardation facilities, or Schools for the Deaf and the Blind should report these adjustment amounts as expenditures in the Instruction Function (61000) and Object Code 3000 (Purchased Services), using the appropriate program(s).

 

For those divisions where Basic Aid was adjusted for overpayments in the At-risk account (item 1 above), the amount of the overpayment must be deducted from your unadjusted Basic Aid entitlement. Report this reduced Basic Aid entitlement in revenue source code 240202 on your 2004-2005 Annual School Report. A deduction to Basic Aid for non-eligibility of Driver Education funds (item 2 above) should be treated in the same manner.

 

Special Reminder on Carry-Over Provision Language in Chapter 951, 2005 Acts of Assembly (Fiscal Year 2005 to Fiscal Year 2006)

 

As communicated in Informational Superintendents Memorandum No. 109, dated May 20, 2005, Chapter 951 permits unexpended state funds as of June 30, 2005, to be carried forward by school divisions to fiscal year 2006 for the following Direct Aid to Public Education accounts only:

 

1.         SOL Algebra Readiness (revenue source code 240405)

2.         School Construction Grants Program (revenue source code 240306)

3.         Lottery (revenue source code 240233)

4.         Competitive Leadership Grant (revenue source code 240294)

5.         Textbooks (revenue source code 240214)

 

To carry forward fiscal year 2005 state funds to fiscal year 2006 for the five accounts listed above, the school division must have actually received the state funds in fiscal year 2005. State funds received by school divisions in fiscal year 2005 for the School Construction Grants Program and Lottery may also be paid into escrow accounts pursuant to Sections 22.1-175.5 and 22.1-100.1, Code of Virginia, respectively, and carried forward indefinitely.

 

Except for the five accounts listed above, all other state Direct Aid funds received by school divisions in fiscal year 2005 should be expended by June 30, 2005; otherwise, any unexpended fiscal year 2005 state funds are subject to the reversion requirement of Section 22.1-100, Code of Virginia.

 

In the event additional fund sources are identified that may be used to support additional Basic Aid payments, you will be notified in another memorandum of any changes to the required proration of Basic Aid payments for fiscal year 2005. If you have any questions concerning the information in this memorandum, please contact Daniel S. Timberlake, assistant superintendent for finance, or budget office staff at (804) 225-2025.

 

JLD/kcd

 

Attachments

 

http://www.doe.virginia.gov/administrators/superintendents_memos/2005/adm024a.pdf

http://www.doe.virginia.gov/administrators/superintendents_memos/2005/adm024b.pdf