Issues in Finance

1
Issues in Finance

• GAEL Secretary and Support Personnel Conference
• September, 2007

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Taxes and the Budget
Snapshot of State Spending FY 1991 (7.6B) FY 2007 (17.6B)
Education 51.4 53.8
Medicaid and PeachCare 9.0 12.5
Health and Social Services 12.3 8.9
Criminal Justice 9.6 9.9
Transportation 6.6 3.8
Debt Service 4.6 4.9
Homeowners Tax Relief Credit 2.5
All Other State Agencies 6.5 3.8
Over 75 of the state budget is spent on
education, healthcare, and criminal justice.
These three areas drive the state budget and are
increasing both in cost and population faster
than overall inflation and population growth.
3
Existing and Emerging Needs

• Georgia is the 9th largest and 5th fastest
  growing state.
• Populations served by state government programs
  are growing faster than overall population.
• Overall population growth 1990-2005 39
• Medicaid population growth 1990-2005 126
• Prison population growth 1990-2005 153
• There are existing education, healthcare,
  transportation, and other service demands, as
  well as the emerging needs of our growing
  population.

4
Linking Taxes and the Budget

• Georgia needs a tax system that fairly raises
  sufficient revenues to meet the education,
  healthcare, criminal justice, environmental, and
  transportation needs of a modern, growing 21st
  century state.

5
Adequacy of Funds

• Georgians are paying less in state taxes as a
  percent of income.

6
Fairness of Tax System

• Georgia has a regressive tax system.

7
Budget Outlook FY 2008 and Beyond

• Continued Federal Budget Cuts
• Continued Population Growth and Demographic
  Changes
• Education
• Healthcare
• Transportation
• School Funding Lawsuit

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Tax Cut Culture But at What Cost?

• Potential tax cuts
• Property tax caps
• Eliminate ad valorem tax on cars
• Eliminate or further reduce corporate income tax
• Eliminate income tax on seniors
• Additional sales tax exemptions
• TABOR Limits on growth of state and local
  revenue growth
• House and Senate Study committees

9
Policy Solutions

• Comprehensive Tax Reform and Modernization
• Solidify tax base (Relevant to 21st century
  economy)
• Raise sufficient revenues
• Withstand downturns
• Fair and equitable state tax system
• Targeted tax cuts

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Contact Info

• Alan Essig
• 100 Edgewood Ave
• Suite 1040
• Atlanta, GA 30303
• 404-420-1324
• www.GBPI.org

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How are Public School Systems Funded?Federal
Funds 7.40State Funds 51.26Local Funds
41.34According to the Georgia Department of
Education website.
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State Funding
State Funds

• QBE Quality Basic Education Act - includes the
  formula used to earn funds through a
  partnership involving state and local revenues
• Some state revenue for public education is
  allocated through a set called categorical
  grants - for example, thats how transportation
  is funded.
• The state pays each system an amount of money for
  each student based on a QBE foundation
  formula.

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What is added to the QBE foundation formula?
State Funds

• The QBE foundation formula is weighted to allow
  for differences in cost between grade levels,
  classes and/or students with different needs.
• The QBE foundation formula for FY05 2,362,
  which is the revenue earned from the state for
  one regular high school student. This amount is
  then added to or weighted.

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Qualifying for QBE Funds
State Funds

• Districts are required to levy the equivalent of
  at least five mills in property taxes as a basic
  local commitment.
• All districts then have revenues equal to the
  local five mill share (LFMS) deducted from
  their total QBE earnings, and the state pays the
  balance of the earnings.

15
Local Funding
Local Funds

• Property taxes make up the primary source of
  revenue for local school systems. These funds are
  used for the operating budget.
• Special Purpose Local Option Sales Tax (SPLOST)
  funds can be used for capital expenditures like
  buildings and technology, but NOT salaries and
  other operating expenses.

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What Did Georgia School Systems Spend on
Instruction in 2004?The average that Georgias
local school systems spent per FTE in 2004
7,261.37Of that amount, 5,031.41 went
directly to instructionPer FTE or Full Time
Equivalent student According to Georgia
Department of Education website.
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Funding Challengesin Georgia

• Underfunded Mandates
• Three of many examples
• - Textbooks - State does not pay the full cost
  of a textbook
• - Instructional equipment and supplies used by
  teachers in the classroom
• - Sick leave - funds used to pay for substitute
  teachers

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Funding Challengesin Georgia

• Salaries - State does not pay the cost of many
  benefits associated with teacher salaries (e.g.
  Social Security costs)
• Increasing enrollments - means increased need for
  teachers (salaries/ benefits), classrooms,
  textbooks, etc.

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Funding Challengesin Georgia

• Recruitment and retention of highly qualified
  teachers
• Need to educate an increasingly diverse student
  population
• Competition for funding at the state level -
  Medicaid, Public Safety, etc.

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Funding Challengesin Georgia

• Limited sources of revenue
• - School systems have little flexibility in
  using state or federal funding
• Use of SPLOST or bond revenues has limited
  flexibility
• Wide variance among systems in wealth limits
  ability to raise revenue

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Current IssuesChallenging Boards of Education

• State Funding
• Adequacy in Funding Court Case
• SPLOST and Bond Referendums
• Accountability for Student Achievement
• NCLB
• Promotion and Retention
• Changing Demographics
• Class Size
• Highly Qualified Teachers
• Charter Schools/Vouchers
• SACS and BOE Governance
• Fluctuating Economy

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Local revenues are the only place the local Board
has any discretion.Local Revenues usually
makes up 25 to 45 of the Total General Fund
Revenues.85 to 90 of the total General Fund
Expenditures is in salaries, most of which are
mandated
Key Points
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State Budget Revenue 20,230,620,936 FY 2008
Proposed
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State ExpendituresFY 2008 Proposed
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General Information

• 180 School Systems (159 County/21 City) Plus
  Others
• Approximately 2,159 Schools
• Elementary - 1,284
• Middle - 450
• High - 415
• K-12 - 10
• Full-Time Equivalent Students 1,607,836
• Certificated Personnel 123,638
• Other
• Pending Lawsuit (Adequacy)
• Governors Education Finance Task Force (Weights
  Task Force)
• Adequacy vs. Equity

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Full-Time Equivalent Students
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QBE Austerity Reductions By Year