COMMONWEALTH of VIRGINIA
Department of Education

May 17, 2011

TO: Division Superintendents

FROM: Patricia I. Wright, Superintendent of Public Instruction

SUBJECT: Final Fiscal Year 2011 State Entitlements Based on Actual March 31, 2011, ADM and Adjustments to the Fiscal Year 2011 Basic Aid Entitlement

Pursuant to Chapter 890, 2011 Acts of Assembly, school divisions were required to report average daily membership (ADM) as of March 31, 2011, to the Department of Education.  The data reported by divisions were used to recalculate all ADM-based state entitlements for fiscal year 2011.  On a statewide basis, actual March 31, 2011, unadjusted ADM was 169.87 less than the projected unadjusted ADM on which the current state budget for fiscal year 2011 (Chapter 890, 2011 Acts of Assembly) is based.  Consequently, school divisions will receive their full ADM-based state general fund entitlement payments for fiscal year 2011 with no changes other than the routine adjustments that are made to the Basic Aid entitlements for some divisions each year as described later in this memorandum.  For accounts supported by the Lottery Proceeds Fund, those entitlement payments are subject to the final deposit of actual Lottery proceeds for fiscal year 2011.  In the event that actual Lottery revenue for fiscal year 2011 does not meet the estimate contained in Chapter 890, 2011 Acts of Assembly, the Textbooks account in the Lottery Service Area will be prorated first to accommodate any shortfall, with additional accounts to follow if the shortfall exceeds the Lottery-funded appropriation for Textbooks.  For more information about this proration, please review the section titled “Incentive, Categorical, and Lottery Funded Accounts” below.  The semi-monthly Standards of Quality (SOQ) and Lottery account payments for fiscal year 2011 will be adjusted for actual ADM beginning with the May 31, 2011, electronic funds transfer (EFT).

The information in this memorandum contains the final state funding due to school divisions (as of the date of this memorandum) in fiscal year 2011 for ADM-based accounts.  Also, where available, final entitlements are shown for other Direct Aid accounts that are not calculated based on ADM.  Entitlements for some accounts that require school divisions to submit reimbursements have not been finalized for the year so the entitlement amounts shown are estimates only.

The Excel calculation file referenced in this memorandum shows state entitlements, required local effort for the SOQ accounts, and required local matches for Lottery-funded accounts calculated based on actual March 31, 2011, ADM.  The accounts affected by actual March 31, 2011, ADM appear in the Excel file in bold font.  Please note that, unlike previous Excel calculation files for fiscal year 2011 provided by the Department, this file does not offer an option to change ADM for fiscal year 2011 since ADM is now final.  The calculation template can be downloaded from the Department of Education Web site at: http://www.doe.virginia.gov/school_finance/budget/calc_tools/index.shtml.

Attachment A to this memorandum provides detailed instructions for accessing the Excel entitlement file.

Attachment B to this memorandum shows the final fiscal year 2011 entitlements for each school division for the SOQ and Lottery-funded accounts that are based on actual March 31, 2011, ADM.  Also included in the calculation template are the routine adjustments to the fiscal year 2011 state Basic Aid entitlement amounts, which are explained in further detail below.

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

1. Basic Aid: The fiscal year 2011 state Basic Aid entitlement amount contained in the “State & Local Funds Worksheet” in the Excel calculation file reflects the sum of the state’s share of Basic Aid funded by both the state’s general fund and the portion of Basic Aid funded from the federal State Fiscal Stabilization Fund (SFSF).  In addition, this amount also reflects any required reductions for payments made on behalf of school divisions to the Virginia School for the Deaf and the Blind or state mental health/mental retardation facilities.  The adjustments made to the fiscal year 2011 Basic Aid entitlements detailing the portion of the SFSF used to fund a portion of the state’s share of Basic Aid are provided in the sheet labeled “Federal Funds for Basic Aid.”  The adjustments made to fiscal year 2011 Basic Aid entitlements for payments made on behalf of school divisions are described below and are listed in the sheet labeled “Adjustments to FY2011 Basic Aid.”  The total amount to be paid to school divisions in fiscal year 2011 for Basic Aid from state general funds and SFSF is also provided in this sheet.
   
   
2. Sales Tax: The fiscal year 2011 sales tax estimates contained in the Excel calculation file represent the Department of Taxation’s official forecast of sales tax included in the Chapter 890 budget (2011 Acts of Assembly).  The sales tax estimates contained in Chapter 890 must be used to compute the Basic Aid entitlement for fiscal year 2011.  Chapter 890 specifically states:
   
   “…In the event that the actual revenues from the state sales and use tax dedicated to public education and those sales tax revenues transferred to the general fund from the Public Education Standards of Quality/Local Real Estate Property Tax Relief Fund and appropriated in this Item (both of which are returned on the basis of the 2008 triennial census of school age population in the first year and the 2008 triennial census in the second year) 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 state sales and use tax revenues shall not be adjusted.”
   
   
3. Incentive, Categorical and Lottery-Funded Accounts: Incentive accounts represent the full entitlement for actual participation in fiscal year 2011.  The entitlements listed for certain Lottery and Categorical accounts do not reflect final participation or reimbursement levels for the year and are shown as estimated entitlements only.  Accounts that have not been finalized for the year as of the date of this memorandum are noted in the Excel calculation file.
   
   In addition, if actual Lottery proceeds for fiscal year 2011 do not meet the estimate contained in Chapter 890, the Textbook per pupil amount will be adjusted down to prevent payments for Lottery-funded accounts from exceeding available Lottery proceeds.  In the event this situation occurs, Textbook account payments will continue to be adjusted through the end of the fiscal year as balances become available and final remaining deposits from the Lottery Department are received.  The final deposit of Lottery proceeds for fiscal year 2011 will not be made until on or around June 22nd, so school divisions can only be notified by e-mail about final entitlements prior to the June 30th EFT.  Therefore, divisions will need to monitor receipts carefully through June 30th for Lottery-funded accounts.
   
   
4. VPSA Technology: VPSA Technology (i.e., SOL Web-based Technology Initiative) payments reflect the total amount that is allocated to the school division for the note issue offered in the designated year.  They do not reflect actual reimbursement payments requested and paid to the school division.  Please be aware that payments for regional programs are included in school division fiscal agent totals; however, actual reimbursements for the spring 2011 issue may be made directly to regional programs from State Non-Arbitrage Program (SNAP) accounts if SNAP accounts are established separately for the regional program.

Adjustments to the Fiscal Year 2011 Basic Aid Entitlement for
Certain School Divisions

As in past years, the Department’s normal practice for making certain types of adjustments to school division payments is to adjust Basic Aid since it is the largest Direct Aid account.  The appropriation act directs that adjustments for the local share of cost of educating students in mental health or mental retardation facilities and adjustments for divisions ineligible to receive Driver Education funds be made against a school division’s Basic Aid payment.  Similar adjustments to Basic Aid are made for local tuition for students attending the Virginia School for the Deaf and the Blind.  Consequently, various adjustments will be made to the fiscal year 2011 state Basic Aid payments for certain school divisions beginning with the May 31, 2011, EFT.  Where applicable, these adjustments will reduce the fiscal year 2011 Basic Aid entitlement paid to school divisions.  As noted above, the estimated adjustments to Basic Aid (as of the May 31, 2011, EFT) are shown in the sheet labeled “Adjustments to FY2011 Basic Aid.”  Pursuant to Chapter 890, 2011 Acts of Assembly, the Basic Aid adjustments for fiscal year 2011 shown in the Excel file are as follows:

1. Driver Education Funds Portion of Basic Aid – This adjustment reduces the Basic Aid entitlement for school divisions that are not eligible to receive state Driver Education funds in fiscal year 2011. 
   
   
2. Mental Health Local Share of Cost – This adjustment is for the school division’s share of the cost of educating children in state mental health hospitals.  The data used to calculate this adjustment are based on the 2009-2010 school year. 
   
   
3. Mental Retardation Local Share of Cost – This adjustment is for the school division’s share of the cost of educating children in state mental retardation facilities.  The data used to calculate this adjustment are based on the 2009-2010 school year. 
   
   
4. Local Tuition for the Virginia School for the Deaf and the Blind – This adjustment is for the local tuition payments for students enrolled at the Virginia School for the Deaf and the Blind (VSDB) in Staunton.  If you have students from your school division enrolled at VSDB during the 2010-2011 school year (fiscal year 2011), §22.1-348, Code of Virginia, and Virginia Board of Education regulation 8VAC20-80-130.H. require 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 VSDB to offset the cost of educating the students.  This adjustment is based on the December 1, 2010, school enrollment.

Reporting Basic Aid Adjustments on the 2010-2011
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 two through four 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 2010-2011 Annual School Report.  To balance this gross Basic Aid revenue on the 2010-2011 Annual School Report, school divisions with adjustments for mental health/mental retardation facilities or the Virginia School 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 Codes.

For those divisions where the final Basic Aid payment was adjusted for non-eligibility for Driver Education funds in item one above, the amount of the overpayment will be deducted from your unadjusted or full Basic Aid entitlement as shown in the Annual School Report.  The reduced Basic Aid entitlement amount will be shown on the “Revenues” worksheet under revenue source code 240202 on your Annual School Report.  No further reporting action is required, since the adjusted Basic Aid entitlement will show the reduction, but school divisions should make note of this adjustment and can reference Attachment C to this memorandum for further detail on the four adjustments to the fiscal year 2011 Basic Aid entitlement.

If you have any questions concerning the information in this memorandum, please contact Kent Dickey, deputy superintendent for finance and operations, or budget office staff at (804) 225-2025.

PIW/bkl

Attachments:

1. Payment Calculation Template Instructions (PDF)
2. Payment Sheets FY 2011 - Chapter 890 (PDF)
3. Adjustments to FY 2011 Basic Aid Payments (PDF)