NOTE: As provided in LFC policy, this report is intended for use by the standing finance committees of the legislature.  The Legislative Finance Committee does not assume responsibility for the accuracy of the information in this report when used in any other situation.

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(Parenthesis ( ) Indicate Expenditure Decreases)

Relates to SB37 and HB87

SOURCES OF INFORMATION

State Department of Public Education (SDE)

SUMMARY

Synopsis of HEC Amendment

The House Education Committee amendment reduces the appropriation from $2,832.1 to $1,690.4 and makes a technical correction to clarify that the current year is the same as fiscal year 2000.

Synopsis of Bill

House Bill 70 appropriates $2,832.1 to SDE for expenditure in fiscal years 2000 and 2001 to provide funding for additional units to school districts experiencing enrollment growth equal to or greater than one percent.

Significant Issues

School districts experiencing enrollment growth greater than one percent, when compared to the preceding year, are eligible for enrollment growth. In FY00, 13 districts are eligible to receive additional units and funding for marginal enrollment growth.

During the 1999 First Special Session, school districts with rapid enrollment growth raised concerns that as a result of moving to the use of prior year 40^th day and December 1 membership for 1999-2000, the formula did not provide sufficient funding for enrollment growth. Language was included in the 2000 General Appropriation Act to increase the marginal growth factor from 0.5 to 1.0.

One unanticipated consequence in the shift from using current year membership to using prior year membership resulted in districts with membership greater than one percent, no longer being able to generate program units for growth students the first year in which they are enrolled. In the current fiscal year they are receiving 1.0 units for each additional student (language in the 2000 General Appropriation Act). Previously, new students were counted in the grade in which they were enrolled plus districts received an additional .50 units for each additional student through the enrollment growth factor for a total of 1.50 units. This bill would provide funds to increase the marginal growth formula factor from 1.0 to 1.86.

In July 1998, SDE hired a private contractor to conduct an evaluation of the enrollment growth factor, variables and methodology for the at-risk index, and funding for special education ancillary and related services personnel. With regard to enrollment growth, the contractor recommended amending the public school funding formula to increase the enrollment growth factor from 1.0 to 1.86 per additional student from the 40^th day of the prior year to the 40^th day of the current year. The 1.86 factor is based upon the average number of units generated by a student in 1998-99 and thus was determined by taking the total number of statewide units in 1998-99 divided by the total membership in 1998-99.

FISCAL IMPLICATIONS

This bill appropriates $2,832.1 from the general fund to SDE for expenditure in fiscal years 2000 and 2001. Any unexpended or unencumbered balance remaining at the end of fiscal year 2001 shall revert to the general fund.

According to SDE, two different methodologies were used to calculate additional growth units and cost for FY2000:

1. Growth units are calculated by determining the increase in membership between the 1998-99 funded membership and the 1999-2000 40^th day membership. Based on this method, the amount required to fund the additional units is $1,690.4

2. Growth units are calculated by determining the increase in membership between 1998-99 40^th day membership and the 1999-2000 40^th day membership. Based on this method, the amount required to fund the additional units is $2,129.4.

CONFLICT/DUPLICATION/COMPANIONSHIP/RELATIONSHIP

Relates to HB87 and SB37. Both bills propose amending the public school funding formula to increase the growth multiplier from .5 to 1.86 for each new student in a district with growth equal to or greater than one percent.

OTHER SUBSTANTIVE ISSUES

It should be noted that the recommendation by the contractor represents a significant shift in policy from the concept of funding marginal cost increases for growth in enrollment from one year to the next. In 1990 a new factor for enrollment growth was added to the public school funding formula. At that time, it was agreed that growth be funded on the margin. That is, provide additional funding for the marginal incremental cost of adding one student to an established classroom. The marginal cost factor added to the formula in 1990 was 0.5.

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