Fiscal Note - SB 0360 - Charter Schools and Revisions to Local and State Funding For Schools
L.R. NO. 0820-02
BILL NO. SB 360 With SCA 1
SUBJECT: Education, Elementary and Secondary: Charter Schools, Local and
State Funding
TYPE: Original
DATE: March 17, 1997
FISCAL SUMMARY
ESTIMATED NET EFFECT ON STATE FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
School Building
Revolving Fund $10,000,000 $10,000,000 $10,000,000
General Revenue ($174,146,087 to ($174,150,343 to ($174,151,631 to
Fund UNKNOWN) UNKNOWN) UNKNOWN)
Gaming Proceeds
for Education Fund $0 $0 $0
State School
Moneys Fund $0 $0 $0
Total Estimated
Net Effect on All ($164,146,087 to ($164,150,343 to ($164,151,631 to
State Funds UNKNOWN) UNKNOWN) UNKNOWN)
ESTIMATED NET EFFECT ON FEDERAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
None $0 $0 $0
Total Estimated
Net Effect on All
Federal Funds $0 $0 $0
ESTIMATED NET EFFECT ON LOCAL FUNDS
FUND AFFECTED FY 1998 FY 1999 FY 2000
Local Government UNKNOWN TO UNKNOWN TO UNKNOWN TO
(UNKNOWN) (UNKNOWN) (UNKNOWN)
FISCAL ANALYSIS
ASSUMPTION
Officials from the State Treasurer's Office, Gaming Commission, Secretary of
State's Office, State Auditor's Office, Missouri Western State College,
Southwest Missouri State University, State Tax Commission, Attorney General's
Office and Department of Labor assume the proposal would have no fiscal
impact on them.
Officials from the Coordinating Board For Higher Education assume the bill
would not have a fiscal impact on them. They assume the Missouri Tuition
Assistance Program would appear to be entirely administered and financed
through school districts and DESE. However, an affiliation of a charter
school and a public college or university could have an unknown fiscal impact
on the college or university. A change in tax levies for school districts
could have an unknown fiscal impact on a community college district.
Officials from the Public School Retirement System assume the changes would
not amount to a substantial proposed change as defined in Section 105.660,
RSMo.
Officials from the Normandy School District assume more than 20% of its
student population are eligible for free and reduced price lunch. Therefore,
they assume the proposal would provide additional state aid to the district.
The exact amount is uncertain because additional funds would be contingent on
the savings out of the state's desegregation budget. Normandy officials
assume allowing school choice in metropolitan schools could result in a loss
to the district of $5,847 per student if state and local funds followed
students who participated in the program. Normandy officials assume the
provision for dealing with financially failing or academically deficient
schools would have no fiscal impact. They assume that allowing public
schools to sponsor charter schools with a separate board of governors and
separate financial accountability would result in the local school board
losing access to significant dollars to operate the total school district.
If just one charter school would be commissioned in the Normandy School
District and enrolled 300 students, the district's general fund would lose
approximately $5,847 per student, or $1,754,100.
Officials from the Department of Elementary and Secondary Education (DESE)
assume the following:
Only ten million dollars of the Riverboat Gambling Proceeds would be
deposited in the School Building Revolving Fund. If the formula is fully
funded, this provision could require $10 million from other funding sources,
for example, General Revenue, to be used for the formula. The provision in
Section 166.300.2 is inconsistent with the provision in Section 160.534.
DESE based their assumptions on section 160.534 being followed.
DESE states that the adjustment of the multiplier on the guaranteed tax base
(163.011.10) was not an effort to lower the cost of the formula. DESE
assumes the language was intended to be cost neutral. No savings in the full
funding cost of the foundation formula was assumed.
DESE assumes the charter schools, in the aggregate would not cost the state
any additional money, but would redistribute state aid among districts. DESE
assumes there would be the potential that some private or parochial schools
would become charter schools. DESE states there are about 100,000 students
in such schools. The average distribution on line 1 of the formula is $3,700
per student. The potential cost of this provision could not be determined.
Transfers of students between districts could have some fiscal impact to the
full funding cost of the formula. However, no assumption could be made about
this impact since which students would transfer is unknown. Any student who
transferred to a district with a higher tax rate would increase the cost to
fully fund the formula.
DESE assumes Senate Committee Amendment 1 would modify the sales tax
provision contained in the legislation. It would limit the sales tax to only
the Kansas City School District. Since Kansas City is already at the maximum
tax levy that can earn state aid on line one of the formula, this provision
would have no state cost.
The changes in line 14 of the formula would increase the cost to fully fund
the formula by $164.10 million as follows:
Cost of 14a with graduation rate less current cost of line 14 = $199.6 -
$182.8 = $16.8 million
Cost for districts above 70% poverty = $269.1 - 182.8 = $86.30 million
Cost for districts between 20-70% poverty = $61.0 million
Total for line 14 = $16.8 + $86.3 + $61.0 = $164.10 million
DESE officials assume the total fiscal impact for all provisions = $10
million + 164.1 million = $174.1 million.
The Oversight Division has included $10,000,000 in the School Building
Revolving Fund in the fiscal impact.
DESE officials assume one FTE supervisor ($33,048) would be needed to comply
with the requirements of the act including charter schools, approval of
required personnel assignment plans (section 166.260) and other provisions.
The Oversight Division has included unknown income to school districts from
potential education earnings taxes and sales taxes in Kansas City. These
taxes would require voter approval. Oversight has not included a fiscal
impact for the Fund for Charter Schools and Alternative Educational
Opportunities, since this would be subject to appropriation and would be
loans repaid by school districts. Oversight has included an unknown cost to
the General Revenue Fund for potential scholarships, administered by local
school districts, for the Missouri Tuition Assistance Program. Oversight has
also included an unknown cost for charter schools in the state and local
fiscal impact sections for private or parochial schools becoming charter
schools, sponsored by the State Board of Education or school districts.
FISCAL IMPACT - State Government FY 1998 FY 1999 FY 2000
(10 Mo.)
SCHOOL BUILDING REVOLVING FUND
Transfer from Gaming Proceeds for
Education Fund $10,000,000 $10,000,000 $10,000,000
Loans would be made to school districts from the School Building Revolving
Fund for capital improvements. The loans would be repaid with interest.
GENERAL REVENUE FUND
Cost-Department of Elementary and
Secondary Education
Personal Service ($28,217) ($34,721) ($35,589)
Fringe Benefits (8,050) (9,906) (10,154)
Expense and Equipment (9,820) (5,716) (5,888)
Missouri Tuition Assistance Program
and Charter Schools (unknown) (unknown) (unknown)
Foundation Formula (174,100,000) (174,100,000) (174,100,000)
Total Cost-DESE ($174,146,087 ($174,150,343 ($174,151,631
to to to
UNKNOWN) UNKNOWN) UNKNOWN)
GAMING PROCEEDS FOR EDUCATION
FUND
Savings-State School Moneys Fund $10,000,000 $10,000,000 $10,000,000
Cost-School Building Revolving Fund ($10,000,000) ($10,000,000) ($10,000,000)
ESTIMATED NET EFFECT ON GAMING
PROCEEDS FOR EDUCATION FUND $0 $0 $0
STATE SCHOOL MONEYS FUND
Income-General Revenue Fund $10,000,000 $10,000,000 $10,000,000
Loss-Gaming Proceeds
For Education Fund ($10,000,000) ($10,000,000) ($10,000,000)
ESTIMATED NET EFFECT ON
STATE SCHOOL MONEYS FUND $0 $0 $0
FISCAL IMPACT - Local Government FY 1998 FY 1999 FY 2000
(10 Mo.)
Income-Education Earnings Tax/Sales Tax
Kansas City UNKNOWN UNKNOWN UNKNOWN
Cost-Distribution of Education Earnings Tax/
Sales Tax
Kansas City (UNKNOWN) (UNKNOWN) (UNKNOWN)
ESTIMATED NET EFFECT ON
CITIES $0 $0 $0
Income-School Districts
Education Earnings Tax/Sales Tax UNKNOWN UNKNOWN UNKNOWN
Foundation Formula $164,100,000 $164,100,000 $164,100,000
Total Income-School Districts UNKNOWN UNKNOWN UNKNOWN
Cost-School Districts
Sponsoring Charter Schools (UNKNOWN) (UNKNOWN) (UNKNOWN)
ESTIMATED NET EFFECT ON
SCHOOL DISTRICTS UNKNOWN UNKNOWN UNKNOWN
TO TO TO
(UNKNOWN) (UNKNOWN) (UNKNOWN)
ESTIMATED NET EFFECT ON
LOCAL GOVERNMENT UNKNOWN UNKNOWN UNKNOWN
TO TO TO
(UNKNOWN) (UNKNOWN) (UNKNOWN)
The education earnings tax and sales tax would require approval of the voters
of the political subdivision.
FISCAL IMPACT - Small Business
Small businesses operating as charter schools could receive state and local
funding. Small businesses could be required to pay an education earnings tax
and/or sales tax upon voter approval.
DESCRIPTION
The proposal would require the excursion gambling boat proceeds deposited in
the Gaming Proceeds for Education Fund in excess of the amount transferred to
the School District Bond Fund to be transferred in the following priority:
the first fifty million would be transferred to the State School Moneys Fund
to fully fund the district entitlements less deductions in lines 1 to 10, the
next ten million would be transferred to the School Building Revolving Fund,
and any remainder would be transferred to the State School Money Fund for the
foundation formula.
The proposal would require the school board of any school district whose
graduation rate is below 65% to determine which schools in the district meet
the criteria as being academically deficient. The school board would have
the authority to reconstitute the school with new teachers and administrative
staff.
When any school district lapses prior to the State Board of Education
attaching the territory to another district, DESE would appoint a special
administrative board to conduct a public hearing to recommend the
reassignment of the territory within the district, supervise the financial
operations, maintain and preserve the finances and continue operation of
educational programs. The board would consist of two residents of the school
district, who would serve without compensation, and one school administrator
who would be compensated with district funds. The authority of the board
would expire at the end of the third full school year following its
appointment, unless extended by the State Board. The board could act as a
sponsor of one or more charter schools.
Any school district located in a county containing a city with a population
in excess of 300,000 persons or in a county with a population in excess of
900,000 persons or in a city not within a county, could accept and enroll
non-resident students. The enrolling district would be entitled to receive
the higher of the state aid that would be paid to the district if the student
would be counted as a resident pupil of the district, or the state aid that
would otherwise be paid to the student's district of residence.
The proposal would change the definitions of "district adjusted gross income
per return" and "state adjusted gross income per return" to include tax
return information from the third preceding year, rather than the second
preceding year under current law.
The proposal would define "current operating costs" as all expenditures for
instruction for grades K-12 and support services excluding capital outlay and
debt service less revenue from food services, student activities and payments
from other districts.
"Fiscal instructional ratio of efficiency" would be the quotient of the sum
of the district's current operating costs for all pre-kindergarten through
grade twelve direct instructional and direct pupil support service functions,
plus the cost of supplies for operation of the facilities housing the
programs divided by the sum of the districts current operating cost for
pre-kindergarten through grade twelve, plus all tuition revenue received from
other districts and placed in the teachers' or incidental funds.
The proposal would change the definition of "free and reduced lunch eligible
pupil count" to be an average from the last Wednesday in January for the
second and third preceding school years.
The "graduation rate" is defined in the proposal as graduates divided by
graduates plus dropouts.
The "guaranteed tax base" would be equal to the average of the state
equalized assessed value per pupil for the second and third preceding years
times two and one hundred twelve thousandths.
In equalizing the operating levy, the aggregate tax rates for teachers,
incidental, and building funds would be multiplied by the percent of true
value as determined by the State Tax Commission on or before March 15th of
the second year preceding the year in which the evaluation would be
effective. Under current law, the preceding year is used.
The "poverty concentration ratio" is defined as the free and reduced lunch
eligible pupil count for the third preceding year divided by the number of
resident students.
The proration factor added to the formula in line 14 (b) would be set as
needed to ensure that the total annual payments would be no greater than the
amount of savings in desegregation payments for the current year as compared
to FY 1997.
The categorical add-on for free and reduced lunch eligible pupil count would
be multiplied by 20% plus the greater of zero or the district graduation rate
minus five percent minus the statewide average graduation rate.
A categorical add-on would be added based on the poverty concentration ratio.
School districts could borrow from the teachers' fund, incidental fund or
capital projects fund to meet obligations in another of those funds, provided
repayment is made within the same fiscal year.
School districts would be required to annually approve and publish a budget,
which would be an open and public record, and additional reporting elements
would be required.
The audit report would contain the auditor's opinion as to whether salary
compensation amounts reported to retirement systems were accurate, based on
comparing district payroll records with retirement system records. The audit
opinion would indicate whether the district receipts are in compliance with
section 168.151 (payment by teachers of school expenditures).
The Children At-Risk in Education Program would be partially funded by line
14 (b) of the foundation formula (poverty concentration ratios). Eligible
school districts would submit a personnel assignment plan detailing how each
student would have contact with tutors and teachers, which would be approved
by DESE before the district could receive line 14 (b) revenue.
Riverboat gaming revenues in excess of those appropriated to fund lines 1-10
of the foundation formula would fund the School Building Revolving Fund.
Only loans, not grants, would be funded by the fund. The proposal would add
more eligibility requirements for loans and rank the order districts would be
offered credit. The proposal would specify repayment requirements.
The rate of tuition charged by a sending district would be the lesser of the
product of the equalized, adjusted operating levy for school purposes of the
sending district times the guaranteed tax base per eligible pupil for the
current payment year or under current law, the per pupil cost of maintaining
the district's grade level grouping which includes school attended.
The proposal would remove principals from being included in the probationary
period of the first three years of employment. Principals would serve at the
pleasure of the school superintendent. If a principal would be removed, he
or she would retain tenure rights of a teacher.
A school district or State Board of Education could sponsor a charter school,
which would be a nonprofit corporation. The school could be affiliated with
a college, university, community college or community-based nonprofit entity.
The proposal includes charter school requirements and application process.
Each school district would provide an annual amount equal to the product of
the school district's equalized, adjusted operating levy for school purposes
for the current year times the guaranteed tax base per eligible pupil times
the number of resident pupils attending the charter school. A charter school
and local school board could agree by contract for services to be provided by
the school district to the charter school. A charter school could not charge
tuition or impose fees that a school district is prohibited from imposing.
The proposal would create a Fund for Charter Schools and Alternative
Educational Opportunities from which the State Board of Education could grant
loans for public charter schools or school districts for providing
alternative educational opportunities. Any funds not paid to a district
because its fiscal instructional ratio of efficiency deviates more than five
percent from the state average would be credited to the fund for charter
schools and alternative educational opportunities.
The governing body of any city located in more than one county with a
population of more than 300,000 inhabitants could vote to approve an
education earnings tax of no more than one-half percent. They could also
vote to approve a sales tax of one percent, which would be distributed to
school districts. The State Board would credit the tax revenue to an
equivalent property tax rate for the district. The sales tax proposition
could include a provision that for the second and subsequent years after
approval of the tax a district could reduce its property tax levy rate by at
least 25% but not more than 50% of the amount of tax rate credited to the
district by the State Board. The proposal would create a Missouri Tuition
Assistance Program, administered by local school districts with graduation
rates below 60% to provide scholarships for college, university, vocational
or technical schools. School districts would select qualified students to
receive grants.
This legislation is not federally mandated, would not duplicate any other
program and would not require additional capital improvements or rental
space.
SOURCES OF INFORMATION
Department of Elementary and Secondary Education
Gaming Commission
State Tax Commission
Attorney General's Office
Public School Retirement System
State Auditor's Office
Secretary of State's Office
Coordinating Board For Higher Education
Department of Labor
MO Western State College
Southwest Missouri State University
Normandy School District
State Treasurer's Office
Normandy School District
NOT RESPONDING: Office of Administration (Budget and Planning)
This Fiscal Note is not an official copy and should not be quoted or cited.