Legislative UpdateAlabama Educational Technology ConferenceSeptember 2010

Lisa A. WoodardSchool Superintendents of AlabamaDirector, Research and Legislation

There is no good, just bad and ugly.

Education Trust Fund Growth*fueled by income and sales tax2007 6.5% FY07 budget was based on 8.62% growth$118M less than lawmakers expected2008 1.52% FY08 budget was based on 5.04% growthGrowth rate was 1.29%Budgeted $1B more than could be sustained200911% proration$678M less in tax receipts than last year20109.5% prorationYear to date receipts through August are 1.78% less than August of last yearFY 11 budget could be prorated by 3-5%

* Source: Alabama Finance Department and State Department of Education (August 9, 2010)

Lost Education Dollars

YearLossBudget Appropriation Reduction FY09$332,093,756

Proration Reduction FY09$703,669,549

Budget Appropriation Reduction FY10$670,995,900

Proration Reduction FY10$543,970,000

Budget Appropriation Reduction FY11$173,442,901

TOTAL$2,077,286,304

Appropriations to Revenues

Chart1

6.735.94

6.395.7

5.735.23

5.55.48

Projected Revenues

ETF Appropriations

ETF Revenues

Sheet1

FY08FY09FY10FY11

ETF Appropriations6.736.395.735.5

ETF Revenues5.945.75.235.48

STATE REVENUE(October through August)Source: Alabama Finance Department, September 2010

Education Trust FundAmount(millions)% change from same period last yearIncome tax$2,609.8 7.07%Sales tax$1,454.8 9.09%Utility tax $373.0 1.38%Use tax $215.9 1.80%Other revenue $85.6.0008%TOTAL$4,739.1 1.78%

Headlines 09/24/10Budget woes to last years, Alabama school officials say Montgomery Advertiser (AP) - Sep 24, 2010 Alabama school officials see severe budget problems ahead TuscaloosaNews.com - Sep 24, 2010 Ala school chiefs: sharp budget drop in 3 years The-Dispatch.com - Sep 23, 2010 Alabama school budgets plummet $1.2B in three years Montgomery Advertiser (AP) - Sep 23, 2010 Alabama school officials say budget has dropped sharply over 3 years; more cuts ahead News Channel 19 - Sep 23, 2010 CCBOE could be in red by next week CullmanTimes.com - Sep 23, 2010

How did Alabama compare to its neighbors in state & local tax collected per person in FY08?Source: Birmingham News, Census Bureau

StateTaxes per personNational rankingAdditional $ available to spend on services over Alabamas state and local governmentsAlabama$3,00249thFlorida$400926th$5.17 billionGeorgia$3,48134th$2.69 billionMississippi$3,13346th$376 millionTennessee$3,04548th$451 millionSouth Carolina$2,92350th

How did we get here?

Increases Since FY 2006FY 2007 $289 million increase in salaries5% pay raise plus 2.75% for two extra days to total 7.75%

FY 2008 $283 million increase in salaries7% pay raise adjusted upward to 7.13% to correct FY 2007 error

FY 2009 through FY $21 million2010 increase for TRS rate adjustment

TOTAL SINCE FY 2006 - $593 million

*

Chart1

58.43

4.35

1.4

6.93

1.5

Income Tax

Use Tax

Sales Tax

Utility Tax

Other Taxes

Sources of ETF Revenue

Sheet1

Sources of ETF Revenue

Income Tax (58.43%)58.43

Use Tax (4.35%)4.35

Sales Tax (1.4%)1.4

Utility Tax (6.93%)6.93

Other Taxes (1.5%)1.5

To resize chart data range, drag lower right corner of range.

ETF Tax RevenuesRely heavily on personal income

Rely heavily on commodity spending

Rely heavily on discretionary spending

It is still about jobs

*

Unemployment in Alabama

9.2% in Alabama at the end of August

193,000 Alabamians are unemployed

Poverty Statistics*Census Bureau poverty level is $21,954 per year for a family of 4Americans living below the poverty line14.3%43.5 million1 out of 7 Americans1 out of 5 children15-year high51million are living without insurance1 out of 6

These statistics are close to the numbers in the 60s when Lyndon B. Johnson launched his War on Poverty

Business Insider, an investment news website, identifies Alabama as No. 1 in having the highest poverty rate compared to the national average.

*Based on Census Bureau report, September 2009

FY10Assumed trust fund growth of +1.72%

On October 1, 2009, there was $350 million less than anticipated 11% proration (FY09)7.5% proration (declared for FY10 on the 1st day)Additional 2% proration (declared on 8/16/10 with 2 weeks left in FY10)Equivalent of 25.6% proration will come out of the September check (must go back to Oct. 1 allocation)$78 million cut to K-12$5.22 billion for FY10 budget

Timing and ProrationExample: Autauga County

Amount Appropriated from state for FY10$19,569,833Oct. 1, 2009--Reduced by 7.5% $18,102,095

12 monthly payments$1,508,507

September 16, 2009 Additional 2% proration of appropriated levelFor Autauga County, the 12th check reduced by $391,397$1,117,111

FY11FY11 assumes trust fund growth of +1.19%

Could begin with proration at 3-5%

Many school systems have or will have to go to the bank to meet payrollWhen proration is declared, dollars appropriated for salaries are prorated by the STATE but LOCAL SCHOOL SYSTEMS must still pay the full salary

Many will create long-term debt just to meet state mandates

FY 12 Revenues (est.)* As projected by Executive Budget Office and this is a very ambitious estimate

Revenue AmountContinuing Tax RevenueBased on 2.5% growth* Prior year tax revenue base forward ($5.4B)$5,524,206,536Transfers, Reversions& MiscellaneousNone at this time$0Adjustments to Tax BaseIncrease in APSCA Debt Service$44,133,595TOTAL FUNDS AVAILABLE$5,480,072,941

FY12 Expenditures

ExpendituresAmountContinuing Appropriations$5,495,772,478Estimated increase for PEEHIP$80,000,000Estimated increase for TRS$25,000,000Return Fleet Renewal to ETF$33,040,170

Replace State Fiscal Stabilization Funds for OCE$179,434,391Replace ARRA for Higher Education$118,743,545TOTAL APPROPRIATION BUDGET$5,931,990,584

Expenditures to Revenues*Based on level funding at FY 11 levels w/adjustments for salaries/benefits

TOTAL APPROPRIATION BUDGET$5,931,990,584TOTAL FUNDS AVAILABLE$5,480,072,940Where the budget discussions begin- ($451,917,643)* If you pay back the Rainy Day Fund(Havent made one payment in 2 years)$109,347,707TOTAL($561,265,350)

More Bad NewsThere are no reservesRainy Day Fund --$0MProration Prevention Account-$0ARRA is goneJobs bill funds will be goneConsumer spending has changedLocal revenue is probably downBusinesses are closingUnemployment is probably up in your communityThere is no support for any new tax

Why Vote?November 2 is election day60% of education dollars come from the stateThe Legislature controls every penny.The Legislature determines pay raises, technology funds, library enhancement, instructional supply funds, etc.how much state money will go to your retirement (and when you will retire) and your healthcareCould see major changes in Washington and MontgomeryA lot of people making decisions who dont understand education fundingIssue shiftVote for candidates who support educationIf you dont know who they are, lets talk

Candidates for Governor

Issue ShiftCharter SchoolsIncreasing support for public charter schools60% of Americans support increasing the number availablePerformance PayCurrent pay is on a single salary schedule and does not include performance evaluations based on classroom observations, student achievement , or other factorsCompetitive federal money vs Allocated federal moneyContinuing resolution calls for increases in only two programs--both operated as competitive grants -- for FY 2011 (Congressional year)Race to the Top with $1.35 billion in new money, and Investing in Innovation with $500 million in new moneyCollege for all84% of Americans agree that all high schools students should be well-prepared for college and a careerNumber increases to 91% when you substitute the word college with more education beyond high schoolSource: 42nd Annual Phi Delta Kappa/Gallup Poll, September 2010

What Lies Ahead?

Dangerous Water

Two OptionsIncrease revenue to ETFClose loopholesFind new sources of revenueLittle support for new taxesHave employees assume more of the costs (health/retirement)]Mississippi recently required employees to contribute 9% of salary to retirement (Alabama requires 5%)Reduce daysIncrease divisors

Cut Services

SSAs FY11 PrioritiesFully Fund the Foundation First

Develop stable funding for education

Recover operational dollars by restoring these items to the appropriated FY09 levels

Amendment TwoOn the ballot on Nov. 2

Would change the 1-mill county tax renewal (authorized under Article XIV, Section 269, as amended by Amendment 111 of the state constitution) to a simple majority vote of the people.

Currently requires three-fifths of voters to approve. If the amendment on the ballot is approved in November, the approval vote will change from three-fifths to a simple majority.

If approved in November, the renewal vote for this tax will be in line with the other taxes authorized in the Constitution.

Not a new tax AND if your system chooses to add this1-mill tax, the people still have to vote on it.Vote YES

QUESTIONS?https://files.me.com/lawoodard/swxvoz

*Imbalance between Revenues and Expenditures Began in FY08****Anyone hear paid once a month? Imagine hearing on Sept. 16 that you pay check at the end of the month will be reduced by 25.6% of your yearly salary.

For example: $45,000 teacher salary, receives $3750 per month BUT in September that teacher is told that the check will only be for ***Many of you may have one of these 20 or 30 year taxes and it may be up for renewal. **