Basic Education Program (BEP) Enhancement 1. How do we determine funding for K-12 education in Tennessee? Funding for K-12 schools in Tennessee comes from a mix of state and local sources. State funding for K-12 education is determined by the General Assembly through the general appropriations act and state budget each year. It is both determined and distributed pursuant to the Basic Education Program (BEP), which is the state’s K-12 education funding formula. 2. What is the Basic Education Program (BEP)? The Basic Education Program (BEP) is the state’s K-12 education funding formula. It was enacted in 1992 in response to a successful legal challenge by many of the state’s small school systems, which argued the state’s existing funding mechanism did not provide equal educational opportunities to their students. The BEP includes 45 components, such as teachers, textbooks, technology, transportation, etc., that the state board of education has determined to be necessary for schools to provide a common, basic level of service to all students. The BEP distributes funding to individual school districts based, in part, on each community’s ability to pay for education through local resources. 3.

What improvements does Governor Haslam’s BEP Enhancement provide?

The Governor’s proposed BEP enhancement improves the BEP by more than $220 million in new funding – the largest improvement without a tax increase in the history of the BEP. Specifically, the Governor’s BEP enhancement plan includes the following new investments:   

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Approximately $105 million for teacher salaries – the largest increase without a new tax in the history of the BEP; Nearly $30 million to fund the 12th month of insurance for teachers; $15 million for recurring technology funds for our schools – an amount that doubles our current investment and addresses concerns related to devices, infrastructure and instruction; Nearly $20 million to better serve high need student populations; and Almost $50 million to address enrollment growth and inflationary costs.

4. When was the last major revision to the BEP? At the urging of Governor Bredesen, the General Assembly adopted revisions to the BEP in 2007. These revisions, known as BEP 2.0, established new funding goals and set the state on a new path of determining how we divide available revenue among our schools. The provisions of BEP 2.0 were to be phased in as revenue was made available through the state budget. 5. How much additional funding for education was established by BEP 2.0? Upon adoption of BEP 2.0, the General Assembly made a substantial investment in education for the 2008 fiscal year. However, with the downturn in economic conditions, additional funding improvements were put on hold. In 2011, upon his election, Governor Haslam prioritized education funding and began establishing substantial funding improvements for our schools in his

proposed budgets. In fact, upon taking office, the governor and the General Assembly have exceeded the funding goals set by BEP 2.0 by an estimated $178 million dollars.1 For example, BEP 2.0 set the teacher salary component of the BEP at $38,000 with a goal of the state picking up 75 percent of the cost. Under Governor Haslam, the state has held to 70 percent but has made significant improvements to the salary component with today’s figure at $42,065 and a proposed figure of $44,430 for FY 17. In fact, to date, Governor Haslam and the General Assembly have increased state funding for teacher salaries by more than $240 million since 2011 with an additional $105 million proposed for next year – the largest improvement in the history of the BEP without a tax increase. 6. What concerns have arisen with BEP 2.0 since its adoption? While the statewide funding goals established by BEP 2.0 have actually been exceeded, much debate and discussion have occurred since the adoption of BEP 2.0 around the distribution of funds to local school districts. Over the course of the last two years, through the BEP Task Force, the BEP Review Committee and other means, Governor Haslam, the administration and education stakeholders have been studying the BEP extensively and, while it is clear all school districts support more funding, it is also clear there is no consensus on how this funding should be divided. 7. Why is BEP legislation necessary? Current law requires the state to distribute funds according to the provisions of BEP 2.0 as funding is made available. However, as previously noted, considerable debate and disagreement exist on this point. For the past nine years, due to funding constraints as well as the ongoing debate, the state has used and equally weighted two distribution models – TACIR, the original formula model created by the Tennessee Advisory Commission on Intergovernmental Relations, and CBER, the model created by the University of Tennessee Center for Business and Economic Research and implemented upon the adoption of BEP 2.0. Each model results in different funding outcomes for school districts and, thus, many districts have argued for a complete return to the TACIR model and some have argued for full implementation of the CBER approach. Legislation is necessary to bring certainty and clarity to the funding formula while at the same time providing a record funding increase for our schools. 8. Why are the models used for funding distribution important? The BEP itself is the result of a successful legal challenge to the state’s former funding distribution mechanism. The plaintiffs argued that the state was not providing an equal opportunity to the students in communities with less ability to pay for education through local resources. The Tennessee Supreme Court agreed and the state was required to provide lower wealth communities with a higher percentage of state funds through the funding formula.

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Includes Governor Haslam’s proposed FY 17 Budget.

9. How does the Governor’s BEP Enhancement seek to distribute education funds to local schools? The BEP Enhancement proposal maintains the state’s existing method of distributing resources and the approach that has been utilized for the past nine years, equally weighting the TACIR and CBER models. Because this codifies the existing policy, all school districts benefit from the funding improvements included in both the legislation and budget and no district loses based on a redistribution of funds that would result from a return to the TACIR model, full implementation of the CBER model or the development of an entirely new mechanism. 10. Why should the state use two different fiscal capacity models? While the utilization of two distribution models may seem counterintuitive, after careful study and review of multiple scenarios, we have learned what we do today actually results in a distribution that is fair, equitable and reasonable. In fact, we’ve seen recent national research2 that has confirmed Tennessee as one of the most effective states in terms of equity, and, regardless of the model or models we use, this must be our first goal. Not only has our the Tennessee Supreme Court ruled that the state must provide equitable opportunities for all of our students but equity is also the first principle of a high quality education finance system identified by the BEP Task Force. In addition, research has shown that accuracy can be improved by combining mechanisms derived from multiple methods that differ and draw from different sources of information.3 11. The proposal funds the Cost Differential Factor (CDF) at 25 percent in FY 17. What is the Cost Differential Factor (CDF)? The county cost differential factor (CDF) is an add-on to the BEP formula used to adjust funding in systems where the cost of hiring employees is deemed to be greater than the statewide average. The BEP uses CDF to provide additional salary dollars to impacted systems. The CDF multiplies the average wage in each of a set of nongovernmental industries by the proportion of the statewide labor force employed in that industry. Counties with above-average wages according to this index receive an increase, and counties with average or below-average wages do not. BEP 2.0 eliminates CDF from the formula. However, because BEP 2.0 has not been fully phased in, systems receiving CDF adjustments are currently receiving 50 percent of the total calculated CDF. The policy behind elimination is that as the state makes large investments in salary for all districts, the need for CDF diminishes. In the current fiscal year, CDF impacts only five counties (Davidson, Shelby, Williamson, Anderson and Sullivan). The CDF has been a subject of scrutiny for several years and there have been questions about the methodology and overall fairness of the distribution of CDF funds. For example, funding for CDF essentially comes from the 90 counties that receive no CDF allocations in that those funds are not available for general statewide salary increases. 2 3

The Education Trust. (http://edtrust.org/map/) Combining Forecasts. J. Scott Armstrong. The Wharton School, University of Pennsylvania. 2001.

Since 2011, Governor Haslam and the administration have worked together to invest more than $240 million for teacher salaries. With this year’s additional investment of nearly $105 million, it makes sense to make an adjustment to CDF by reducing the current percentage and to revisit this item each year in conjunction with additional salary improvements. Put simply, maintaining CDF at its current level is not sustainable if the state is going to maintain equity and continue to make large investments in teacher compensation for all. Under the governor’s BEP Enhancement proposal, no school district receives a reduction in funding and CDF funding earned to date will be part of a district’s minimum funding level. This means future CDF payments will be adjusted and placed back into the formula to benefit all teachers throughout the state. 12. The BEP Enhancement Plan makes some changes to the definition of “at-risk” for funding purposes? What are the changes and why are they necessary? For funding purposes, current law defines “at-risk” as eligible for free and reduced price lunch under federal guidelines and the BEP provides additional funding for this category of students. Recently, federal school nutrition rules were revised and all students in a school can eat for free if a certain percentage of students qualify under a process called direct certification. Direct certification allows students to qualify for free and reduced price meals without their families completing household survey forms documenting income due to the families’ participation in other government programs such as the Supplemental Nutrition Assistance Program (SNAP) and Temporary Assistance for Needy Families (TANF). These federal changes impact state at-risk funding by reducing the necessity for families and districts to complete, receive and submit forms for each student and family desiring to receive free and reduced price meals. In addition, these changes in federal rules create some uncertainty at the state level by potentially resulting in unintended state budget consequences. By utilizing direct certification, the state can streamline the process, reduce unnecessary paperwork for school districts and address state at-risk student funding in a manner that is revenue neutral. 13.

What specific improvements are being made for high need populations?

The BEP Enhancement proposal provides additional funds to school districts to assist them in serving two high need populations – English language learners (ELL) and special education students. Presently, the budget funds one ELL teacher for every 30 students and one ELL translator for every 300 students. The governor’s proposal maintains the goal set by BEP 2.0 of having ratios of 1:20 and 1:200. For FY 17, the governor’s budget proposes ratios of 1:25 and 1:250 and will recognize costs schools are already incurring to serve this population of students.

To better serve our special education students and remove the present funding disincentive to placing students in the most beneficial and inclusive learning environment, the proposal condenses the existing 10 special education options and caseload allocations to four and thereby more equitably distributes special education funding among the categories of students. This will not only result in better services to students based on their Individualized Education Program (IEP) but also bring the state in line with federal requirements, which prohibit funding state funding mechanisms from emphasizing specific disabilities or placements when determining funding. 14. How does the proposal ensure improvements for teacher pay are actually used to improve compensation? From its inception, the BEP has been meant as a funding plan vs. a spending plan with considerable flexibility provided to school districts to meet their own unique needs. However, all funds earned through the instructional components – salaries and benefits – must be spent on salaries or benefits. Recently, we have heard concerns from teachers about BEP salary funds being used primarily to pay for insurance benefits. And, while insurance is certainly representative of compensation and ties directly to teachers’ paychecks, the governor’s BEP proposal does seek to bring some additional clarity and specificity to the use of salary funds. Here is how it will work: if a school district is below the state weighted average teacher salary, it will be required to use salary funds strictly for salaries and, if the district is above the state average salary, it will be permitted to continue to operate under the current law, which allows the funds to be expended on salaries or benefits. Provisions are included in the legislation to give credit for unfunded growth or the loss of instructional funding due to enrollment decreases. 15.

How does the proposal address early graduates?

The BEP Enhancement proposal removes the funding disincentive related to early graduates. Under present law, if a student graduates in December, he or she is not counted for funding purposes in the later months, which are the months most heavily weighted for funding purposes. The governor’s proposal will include early graduates in enrollment figures for the remainder of the year.