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Legislative Update

Legislative Update. Lisa A. Woodard School Superintendents of Alabama Director, Research and Legislation. Alabama Educational Technology Conference September 2010. There is no good, …just bad and ugly. Education Trust Fund Growth* fueled by income and sales tax. 2007 6.5%

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Legislative Update

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  1. Legislative Update Lisa A. Woodard School Superintendents of Alabama Director, Research and Legislation Alabama Educational Technology Conference September 2010

  2. There is no good, …just bad and ugly.

  3. Education Trust Fund Growth*fueled by income and sales tax • 2007 6.5% • FY07 budget was based on 8.62% growth • $118M less than lawmakers expected • 2008 1.52% • FY08 budget was based on 5.04% growth • Growth rate was 1.29% • Budgeted $1B more than could be sustained • 2009 11% proration • $678M less in tax receipts than last year • 2010 9.5% proration • Year to date receipts through August are 1.78% less than August of last year • FY 11 budget could be prorated by 3-5% * Source: Alabama Finance Department and State Department of Education (August 9, 2010)

  4. Lost Education Dollars

  5. Appropriations to Revenues

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

  7. Headlines 09/24/10 • Budget woes to last years, Alabama school officials sayMontgomery Advertiser (AP) - Sep 24, 2010 • Alabama school officials see severe budget problems aheadTuscaloosaNews.com - Sep 24, 2010 • Ala school chiefs: sharp budget drop in 3 yearsThe-Dispatch.com - Sep 23, 2010 • Alabama school budgets plummet $1.2B in three yearsMontgomery Advertiser (AP) - Sep 23, 2010 • Alabama school officials say budget has dropped sharply over 3 years; more cuts aheadNews Channel 19 - Sep 23, 2010 • CCBOE could be in red by next weekCullmanTimes.com - Sep 23, 2010

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

  9. How did we get here?

  10. Increases Since FY 2006 • FY 2007 – $289 million increase in salaries • 5% pay raise plus 2.75% for two extra days to total 7.75% • FY 2008 – $283 million increase in salaries • 7% pay raise adjusted upward to 7.13% to correct FY 2007 error • FY 2009 through FY – $21 million • 2010 increase for TRS rate adjustment • TOTAL SINCE FY 2006 - $593 million

  11. ETF Tax Revenues • Rely heavily on personal income • Rely heavily on commodity spending • Rely heavily on discretionary spending • It is still about jobs

  12. Unemployment in Alabama • 9.2% in Alabama at the end of August • 193,000 Alabamians are unemployed

  13. Poverty Statistics* • Census Bureau poverty level is $21,954 per year for a family of 4 • Americans living below the poverty line • 14.3% • 43.5 million • 1 out of 7 Americans • 1 out of 5 children • 15-year high • 51million are living without insurance • 1 out of 6 • These statistics are close to the numbers in the 60’s 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

  14. FY10 • Assumed 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

  15. Timing and Proration • Example: Autauga County

  16. FY11 • FY11 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 payroll • When 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

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

  18. FY12 Expenditures

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

  20. More Bad News • There are no reserves • Rainy Day Fund --$0M • Proration Prevention Account-$0 • ARRA is gone • Jobs bill funds will be gone • Consumer spending has changed • Local revenue is probably down • Businesses are closing • Unemployment is probably up in your community • There is no support for any new tax

  21. Why Vote? • November 2iselection day • 60% of education dollars come from the state • The 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 healthcare • Could see major changes in Washington and Montgomery • A lot of people making decisions who don’t understand education funding • “Issue shift” • Vote for candidates who support education • If you don’t know who they are, let’s talk

  22. Candidates for Governor

  23. “Issue Shift” • Charter Schools • Increasing support for public charter schools • 60% of Americans support increasing the number available • Performance Pay • Current pay is on a single salary schedule and does not include performance evaluations based on classroom observations, student achievement , or other factors • Competitive federal money vs Allocated federal money • Continuing 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 money • College for all • 84% of Americans agree that all high schools students should be well-prepared for college and a career • Number increases to 91% when you substitute the word “college” with “more education beyond high school” Source: 42nd Annual Phi Delta Kappa/Gallup Poll, September 2010

  24. What Lies Ahead? Dangerous Water

  25. Two Options • Increase revenue to ETF • Close loopholes • Find new sources of revenue • Little support for new taxes • Have employees assume more of the costs (health/retirement)] • Mississippi recently required employees to contribute 9% of salary to retirement (Alabama requires 5%) • Reduce days • Increase divisors • Cut Services

  26. SSA’s FY11 Priorities • Fully Fund the Foundation First • Develop stable funding for education • Recover operational dollars by restoring these items to the appropriated FY09 levels

  27. Amendment Two Vote YES • On 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.

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

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