Feb 19 2013

Funding Education 101 – Part 1 – Where the Money Comes From

Members of the Unified School Board

I’m going to be very honest. I haven’t been following the blow by blow with the School Board. Too many meetings, too little information, in writing, too much speculation.

I like hard facts. I’m not interested in drama unless that drama furthers something relevant. For a whole host of reasons, some of which I covered in my last post, hard facts are hard to come by.

With that in mind, and at the request of the author of the Schooling Memphis blog I submit this 101 on education funding. The funding side is the easy part. Expenditures are the hard part. Where the money will come from is the debate. So to have that debate, its best to have a solid understanding of where the money has come from in the past.

I’ve not spoken to the author of Schooling Memphis personally, but he/she seems to have much more of a stomach for the minutiae than I do and is providing far better coverage of the blow by blow issues coming up with the USB than anyone, including and in some cases especially professional media. Keep an eye on that blog. I found it illuminating, even though I didn’t find it until after my last post.

Different Funds for Different Functions

Some of this will be review, but it bears repeating. There are two places revenue go: General Fund and Special Revenue Fund.

The General Fund is where money goes that deals with day-to-day school operations. The single greatest expense in the General fund is for payroll.

The Special Revenue Fund deals with “special” usually grant or need based programs.

For the purposes of this post, I’m going to talk about General Fund revenue, though I may touch on the other near the end.

From Whence It Comes

The money, aka revenue, to pay for public schools comes from four primary sources. In order of revenue they are:

State Government Appropriations
County Government Appropriations
County Sales Taxes
Federal Government
Other Sources

Once upon a time, Memphis Government also contributed, but that horse has left the stable and for the purposes of the upcoming budget year, its irrelevant.

How It Gets there

State Government – The TN state legislature makes an appropriation to fund the state BEP (Basic Education Program). This amount is based on the amount the TN Board of Education determines is required to fulfill the mandate set forth in the State Constitution to fund education.

The State Board of Education uses a formula detailed in the Blue Book that describes how the state will fund education. In addition, the State releases a Handbook for local computation that helps Local Educational Agencies (LEA) determine how to budget. All that culminates into a document that lists all the allocations from State government for the year.

There are two spreadsheets in this allocation. The first describes the basic level of the BEP. The second describes mandatory increases to the state’s portion of the allocation.

Go back to the first spreadsheet. Subtract column 8 from column 4 and you get a number that is the state mandated minimum of County funding for education.

The first estimates for the next school year are released in April. The document linked above is the final document for the 2012-13 school year.

County Appropriations – Because the state constitution says the state will fund education, and because Counties are, in essence, extensions of the state, Counties are required to contribute to the funding of their local schools. The minimum amount varies, but its all based on the BEP formula and Maintenance of Effort (MOE), a phrase that probably still causes some City Council Members to toss and turn at night.

Its important to note, this is the amount the County must fund via property taxes through the budget process. Sales taxes aren’t in this mix. Because both are from “County” sources, its easy to get confused about that.

County Local Option Sales TaxPolitifactTN actually has a pretty good explainer on this from the November election, or you could just go read TCA §§ 67-6-712, which is a round-about way of saying 1/2 of local sales taxes collected AUTOMATICALLY goes to schools.

Federal Government – I think there’s a perception that the Feds pay all this money for education.

They don’t. Lots of mandates, but not much money to carry out those mandates.

In reality, the majority of money that MOST school systems receive from the Feds is for Special Revenue or money we’re not really talking about right now.

How Much and How Many

Rather than write something flowery about the numbers, I’ll just show them to you. This is where the money came from for the current school year:

Use the scroll bar at the bottom to scroll further right. —->

This information is based on data contained in the following documents:

Current MCS Budget p. 92 | Current SCS Budget p. 5 | Shelby County Budget – Education p. 5

You’ll note: the “per pupil” number is lower than you’ve probably ever heard it being in years. That’s because this isn’t the ENTIRE budget for the schools. No, that adds another $350m to the mix. This is just the money for “General Operations” (Teachers, Buildings, Transportation, utilities, insurance, support staff, Administration). It should also be noted that Shelby Co. Schools calculates this by Average Daily Attendance, not enrollment. A nice accounting trick if I do say so myself.

You may be shocked to see that Shelby Co. spends some $400 less per student…but you shouldn’t be. County schools are generally newer, meaning fewer repairs are necessary. Newer also means more energy efficient.

What have we learned

It takes a lot of money to fund education. Way more than most people pay in County Property taxes (mine were less than $1200 and I think that’s a great value for public education and the rest of government).

The current cost of the “General Fund” for all education in Shelby Co. is $1.23b. The USB is asking for $1.3b, a difference of $70m. Based on what I know of the existing budgets, they’re not too far off the mark.

Next time, I’ll talk about the real cost of education, and how much we haven’t been paying. I may also delve into that $200m decrease I talked about last time.

Until then…