Superintendent's Memo #265-09

State seal, Commonwealth of Virginia

COMMONWEALTH of VIRGINIA
Department of Education

September 18, 2009

TO: Division Superintendents

FROM: Patricia I. Wright, Superintendent of Public Instruction

SUBJECT: Governor Kaine's Fiscal Year 2010 Budget Reduction Plan

Governor Kaine announced his executive spending reduction plan to address the fiscal year 2010 revenue shortfall on September 8, 2009. The budget reduction plan amends the current 2008-2010 biennial budget (i.e., Chapter 781, 2009 Acts of Assembly). Fiscal year 2010 began on July 1, 2009, and ends on June 30, 2010. The Governor's reduction plan can be accessed in its entirety on the Virginia Department of Planning and Budget's website at the following address:

http://dpb.virginia.gov/forms/20090908-1/Reductions2010.PDF

The actions taken by the Governor in the reduction plan regarding the fiscal year 2010 Direct Aid to Public Education budget include the following:

State SOQ payments for these benefits will be reduced by approximately 50 percent (from January to June 2010) to account for the premium holiday in the fourth quarter.   The following charts are provided to assist in understanding the rates on which school divisions will be billed by VRS from June to March, 2009, and the equivalent rates on which state SOQ payments for these benefits will be paid to school divisions for the full fiscal year:
FY10 FRINGE BENEFIT RATES
(PAID BY SCHOOL DIVISIONS TO VRS):
FY 2010 EMPLOYER RATE
Rates for Division Payments to VRS July 2009 to March 2010
FY 2010 EMPLOYEE RATE
Rates for Division Payments to VRS July 2009 to June 2010
Instructional VRS (Does not include RHCC - see below)
8.81%
5.00%
Non-professional Support VRS
7.62%
5.00%
Group Life
0.27%
0.52%
Retiree Health Care Credit (Paid as part of the VRS per pupil amount)
1.04%

FY10 FRINGE BENEFIT RATES
(STATE FUNDS PAID TO SCHOOL DIVISIONS):
FY 2010
EMPLOYER RATE

Rate for State Payments July 2009 to June 2010
Instructional VRS (Does not include RHCC - see below)
6.61%
Non-professional Support VRS
5.72%
Group Life
0.20%
Retiree Health Care Credit (Paid as part of the VRS per pupil amount)
0.78%

The fiscal year 2010 changes to Direct Aid funding contained in the Governor's reduction plan will be included in the Governor's introduced caboose budget bill to be released on December 18, 2009. Please remember that the reduction plan strategies only address fiscal year 2010 funding and are subject to change at the 2010 Session of the General Assembly. The Governor's introduced budget for the 2010-2012 biennium will separately address funding recommendations for fiscal year 2011 and fiscal year 2012 and is also scheduled for release on December 18, 2009. It is also important to note that the strategy of using federal SFSF funds for Basic Aid is contingent upon approval by the U.S. Department of Education (USED). If USED does not approve actions related to this strategy, then the reduction plan will need to be reconsidered.

Attachment A to this memorandum lists the estimated state payments (and local matches) for each school division for the SOQ, incentive, categorical, and Lottery accounts for fiscal year 2010 based on the Governor's budget reduction plan. The estimated payments shown in Attachment A are based on the Virginia Department of Education's (VDOE) latest projections of March 31 average daily membership (ADM) for fiscal year 2010. The projected payments shown in Attachment A do not include the direct grants (Financial Assistance for Supplemental Education service area) authorized by the General Assembly that are unique to certain school divisions. Please note that the fiscal year 2010 funding projections for Basic Aid contained in Attachment A and in the Excel calculation file include estimated division allocations of federal funds provided from the K-12 portion of the State Fiscal Stabilization Fund authorized under ARRA.

Several of the categorical, incentive, and Lottery account payments shown in Attachment A are funded on a reimbursement basis and represent the department's latest projected payments. However, final payments on these accounts in fiscal year 2010 will be based on actual, eligible reimbursement requests submitted by school divisions.

Because Attachment A shows projected funding for each school division (based on the department's projected March 31 ADM only) in PDF format, the entitlements cannot be changed to test the impact of different ADM assumptions. If you wish to see the effects of a different ADM projection on funding for your school division in those accounts where funding is based on ADM, please use the Excel calculation file described in the next paragraph.

In addition to the funding information contained in Attachment A, a downloadable Excel file has been created to assist school divisions in calculating projected state funding and projected required local matches for fiscal year 2010 for most Direct Aid programs based on the Governor's fiscal year 2010 budget reduction plan. The Excel calculation file containing the revised state funding estimates for fiscal year 2010 is located on the following website:

http://www.doe.virginia.gov/school_finance/budget/calc_tools/index.shtml.

Attachment B to this memorandum provides detailed instructions for accessing the Excel file from the VDOE website.

The Excel file gives divisions the opportunity to change projected March 31 ADM to test the effect on projected state funding and projected local match requirements using the department's projected ADM or a local projection of ADM for those accounts funded on the basis of ADM. (Attachment A contains projected state funding and required local match information for each school division in PDF format based on the department's projected ADM only and cannot be modified.) 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 state funding and required local matches.

Changing the projected March 31 ADM in the Excel file only changes the estimated funding for accounts that are funded on the basis of ADM. The estimated funding for all other accounts are unaffected by changing ADM in this file and, therefore, remain the same.

Also note that sales tax estimates in the Excel calculation file are revenue projections only. Actual sales tax payments made to school divisions in fiscal year 2010 on a semi-monthly basis will be based on actual sales tax receipts. Pursuant to the appropriation act, the Basic Aid entitlement calculation is based on the estimated sales tax appropriation only and is not adjusted for actual sales tax revenues received during the year.

Questions regarding the Governor's fiscal year 2010 budget reduction plan may be directed to Kent Dickey, assistant superintendent for finance, or budget office staff at (804) 225-2025.

PIW/bkl

Attachments:

a. Projected Fiscal Year 2010 Payments Based on the Governor's Reduction Plan (PDF)

b. State Payment Calculation Template Instructions (PDF)