Inaccurate data from Agency of Education hurts school budgeting, complicates spending cap debate

Brad James

Vermont education finance manager Brad James. File photo by Hilary Niles/VTDigger

School boards have had a difficult time planning budgets under new spending thresholds, and revelations about inaccurate data from the Agency of Education will likely make that tough job even harder.

This week in testimony before lawmakers, representatives from the Agency of Education said they misinterpreted a section of the law dealing with the new allowable growth spending thresholds and unintentionally provided school districts with erroneous per pupil spending amounts for FY17 for the budgets they are currently putting together.

While the agency told lawmakers about the problem this week, officials have not yet informed school districts.

Agency of Education officials say they haven’t released new numbers to school districts because they are trying to find a way to “craft language to make sure everyone understands the new intent.”

A letter to be issued Friday afternoon or first thing next week will include a caveat about the possiblity of further changes based on what happens in the Legislature, according to Stephanie Brackin, the spokeswoman for AOE.

“We didn’t want to send it out without trying to do it appropriately, so that we aren’t upsetting these really hard working school boards, they have a heavy lift right now and we wanted to get them good information,” Brackin said.

On Tuesday, Brad James, the finance manager for the agency, Mark Perrault, of the Joint Fiscal Office, and Peter Griffin, a lawyer with legislative counsel, told the House Committee on Education that they had discovered discrepancies in the state numbers.

The Agency of Education left out exclusions such as principal and interest on capital construction expenditures, excessive special education funding over $50,000, payments districts make into the state teacher retirement fund and some others which were always included under the old system of excess spending thresholds. AOE thought they didn’t apply under the new Allowable Growth mechanism that is in section 37 of Act 46.

Michael Sirotkin

Michael Sirotkin

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“The threshold will be lower. The per pupil will be lower. The numbers are going to vary but not by much,” James said on Thursday.

“Are there cases where people have been working under the wrong assumptions and will there be some instances where a school district is putting out a budget with one less teacher because they didn’t have the right information?” asked Sen. Micheal Sirotkin, D-Chittenden.

“Yes, the answer is yes, but I don’t know who they are. Conversely, it may benefit somebody who was cutting a teacher to find out they don’t need to,” James replied.

“Are school districts aware of the new numbers?” asked Sirotkin.

“No,” James said.

Lawmakers never intended for the exclusions to go away. They drafted a letter of intent between themselves and AOE to clarify this. “As you know, Sec. 37 contains the spending thresholds of Act 46, which were based on the structure of the then-current law excess spending penalty, it was our understanding that the threshold amounts in Sec. 37 would be calculated based on the definition of “education spending” that was reduced by the exclusions listed in 16 V.S.A. 4001 (6)(B).” The letter was signed by both chairs of the House and Senate education panels.

The excess spending thresholds that were in place before Act 46 was enacted allowed the agency to compare spending per pupil after the exclusions were backed out. Lawmakers thought that was what would happen under the new spending thresholds.

But AOE read the language differently and added the amount of additional spending for each district to the full FY2016 spending per pupil figure. The Allowable Growth Percentage remains the same, but it is added to a different base. This will result in a lower per pupil amount districts are allowed to spend, but any exclusions will not be counted against them.

For instance, Norwich was told in August that they should base their per pupil threshold amount on $17,450, with an allowable growth rate of 1.22 percent but the new calculation puts the school districts threshold at $15,905, with the same AGP, according to documents provided by James to the Senate Committee on Education. Norwich has capital and extraordinary special education costs – both of which are now excluded and won’t count against them.

James estimates that approximately 85 percent to 90 percent of school districts have capital construction costs. School districts that paid off a bond last year and can no longer claim it as an exclusion could find themselves in a difficult position.

“In most cases it won’t have a significant impact because you are looking at reduced numbers from both years,” James explained. “The ones who will be impacted are the ones that have a sizable swing from year-to-year in students, if you are taking on new debt or an extended debt service – we don’t know what the impact is going to be because we have not seen any FY17 data.”

It further states that the threshold amount would be added to the prior year’s education spending as reduced by those exclusions and then compared to the current year’s education spending with those exemptions. This means that school districts will be looking at a lower spending amount but that is because they are able to pull out these special costs which will not count against them.

The Vermont Superintendents Association, the Vermont School Board’s Association and the Vermont Association of School Business Officials chose not to wait any longer for AOE to inform school boards of the mess up. On Friday morning, Jeff Francis, executive director of VSA sent a letter that said: “As I understand it, the original calculation did not apply the exclusions identified under 16 VSA 4001 (6) (B) – primarily construction and extraordinary special education costs.

Francis said the agency told business managers last fall that districts “could not apply these exclusions when calculating FY2017 education spending per equalized pupil.”

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“I do not fully understand the implications of this very late change on individual school district budgeting approaches, but it seems highly likely that some districts were contending with a presumed threshold amount that has now changed, in some cases significantly,” Francis said. “That, seemingly, calls into question the integrity of the entire threshold mechanism and the budget processes influenced by it.”

Francis said that lawmakers spent Friday morning trying to get their heads around the impact that the change in spending numbers will have on school districts. “The implications need to be understood from district to district and it is difficult to comprehend the effects because the calculation doesn’t affect every district in the same way,” he said.

The timing of the discovery of the inaccurate numbers couldn’t be more challenging for school districts — some of which have already finalized budgets based on the wrong information, according to Francis. “Even if you could foster an understanding on everybody’s part of what this change is and what it means the timing alone makes the situation untenable,” Francis said.

The revelations further complicate the House Ed Committee’s plans to keep cost containment controls in Act 46. The Senate wants to repeal the spending thresholds, and the House has proposed a 0.9 percentage point increase in the spending cap, but members appear to be split on the issue.

“The changes being made whether to recall the allowable growth threshold or add 0.9 percent this late in the budgeting process puts boards and administrators in an untenable position and the only responsible course of action is to repeal,” said Nicole Mace, executive director of the VSBA.

Norwich School Board Chair Neil O’Dell is not sure how the change will affect the school’s budget. “All of the items in play right now – the change in the per pupil calculation, possible repeal, possible 0.9 increase – are making it very challenging in a very time constrained environment,” O’Dell said.

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