Call to Order and Roll Call
The meeting of the Education Assessment and Accountability Review Subcommittee was held on Friday, November 21, 2014, at 10:00 AM, in Room 131 of the Capitol Annex. Senator Mike Wilson, Co-Chair, called the meeting to order, and the secretary called the roll.
Legislative Guests: Representatives Derrick Graham and Arnold Simpson.
Guests: Clyde Caudill, Kentucky Association of School Administrators; Brenda McGowan, Kentucky Education Association.
Acceptance of Office of Education Accountability Report: Education Revenue, Expenditure, and Staffing Over 10 Years
Sabrina Olds, Research Analyst, Office of Education Accountability (OEA), said appropriations for elementary and secondary education increased from $3.2 billion in 2004 to $4.2 billion in 2013. The appropriations for each category of the report includes the Education Professional Standards Board, School Facilities Construction Commission, Kentucky Teacher Retirement System, Kentucky Department of Education (KDE), and the Support Education Excellence in Kentucky (SEEK). OEA’s report specifically concentrates on KDE and SEEK funds.
Ms. Olds said in fiscal year 2004, KDE was allocated $585.6 million growing to $926.9 million in 2013. In 2004, the SEEK allocations was approximately $2.4 billion and increased to $2.9 billion in 2013. The SEEK budget was 75.3 percent of the total budget in 2004 and decreased to 69.4 percent by 2013. In 2004, KDE received a total of $3.56 billion in total revenues and by 2014, the revenues grew to $4.74 billion. When adjusted for inflation during this time period, the growth was only $284 million. The majority of KDE’s revenues come from the general fund budget.
Ms. Olds said KDE’s operating expenses were almost $13 million in 2004, and increased to almost $31 million in 2013. The biggest increase in operating expenses occurred in 2008 because of the Kentucky Education Network (KEN) upgrade which increased the local bandwidth for local school districts. The personnel expenditures for KDE in 2004 were $60.77 million and increased to $100.56 million by the end of 2013. The large increase in expenditures is mainly due to the addition of Career and Technical Education to KDE.
In response to Senator Alice Forgy Kerr’s question regarding bandwidth debt service, Ms. Olds said the KEN upgrade was in fiscal year 2008, and the increase occurred in operating expenses.
Ms. Olds said KDE has several different categories of staffing and the number of KDE staff in Frankfort has decreased since 2004. Also, KDE used different memorandum of agreements (MOAs) with different entities, inside and outside the state of Kentucky. Some MOAs are temporarily used by KDE, and some are used for different companies contracted by KDE. In 2004, 76 people with MOAs were at KDE, and that number increased to 110 in 2013. In 2013, a majority of MOAs were paid for by federal funds due to Federal Title I school improvement funds.
In response to Chairman Mike Wilson’s question regarding education recovery staff retirement and benefits, Ms. Olds said education recovery staff are being paid with federal funds and the retirement and benefits comes out of the federal grants.
Approval of October 6, 2014, Meeting Minutes
Upon motion from Senator Alice Forgy Kerr, seconded by Senator David Givens, the October 6, 2014, meeting minutes were approved by voice vote.
Ms. Olds said OEA’s first recommendation is that KDE should track staff provided through MOAs annually by full time equivalent for internal and external reporting.
Ms. Olds said KDE enters into personal service contracts (PSCs) with individuals and businesses similar to MOAs. The number of PSC decreased from 72 in 2009, to 51 in 2013.
In response to Senator Alice Forgy Kerr’s question regarding staffing of PSCs prior to 2009, Ms. Olds said OEA does have staffing numbers from the previous years, and she would provide them to the committee at a future date.
In response to Chairman Mike Wilson’s question regarding PSCs, Ms. Olds said PSCs are contracts that are normally with a specific person but can be with vendors such as ACT for example.
In response to Representative Rita Smart’s question regarding PSCs being advertised by KDE, Hiren Desai, Associate Commissioner, KDE, said it is in statute that a PSC has to be advertised for at least seven days.
In response to Senator David Givens’s question regarding PSCs impacting the retirement system, Mr. Desai said if the PSC employee is a former retiree and comes back to work for an agency that is a part of the Kentucky Teacher Retirement System (KTRS), that agency will have to pay into KTRS again.
Ms. Olds spoke about local school districts total revenue and said on-behalf revenues include payments from KDE such as KTRS portion, health insurance, and technology. Some school districts have inconsistently and incorrectly captured some of the on-behalf payments over the ten year period. In 2004, revenues excluding on-behalf payments were $5.1 billion and increased to $6.7 billion by 2013. When adjusting for inflation, the total revenue without on-behalf increased by about $300 million.
Ms. Olds said OEA’s second recommendation is that KDE should work with school districts to ensure that on-behalf revenues and expenditures are recorded correctly.
Ms. Olds said most of the revenues local school districts receive flow from KDE. Overall, local revenues experienced the largest dollar increase during the past ten years. Other revenues received are bond sales, surplus items, and one time money the school districts received for a fire or natural disaster.
In response to Chairman Mike Wilson’s questions regarding accurate numbers with local revenues, Ms. Olds said all local revenue is through a tax that a school board has levied or for fees and dues approved by the school board. Sales and use tax is collected by the Revenue Cabinet, not by the school district.
Chairman Mike Wilson said he is not as concerned with the activity fees as he is with making sure school districts are providing accurate information regarding taxes.
In response to Senator David Givens’s question regarding dollars that are not provided in the report and in lieu of tax payments, Ms. Olds said most activity fees are not provided in the report and in lieu of tax payments are recorded at the state level, not the local level.
Ms. Olds said investment income and child nutrition were the only two areas of decline in the total local revenue over the past ten years. The report suggests that part of the decline in child nutrition may be due to some school districts participating in the Community Eligibility Option Program.
In response to Senator Alice Forgy Kerr’s question regarding the Community Eligibility Option Funds, Ms. Olds said the funds are provided by the federal government and 104 school districts in Kentucky are participating in the program.
Ms. Olds spoke about expenditures by function at local school districts and said the largest amount of funding went toward classroom instruction. In 2004, instruction made up 49.7 percent of total spending and by 2013, the percent of spending declined to 43.3. The decline in spending for instruction over the past ten years is due to school districts spending more money on debt service. In 2004, debt service spending was at 4.8 percent and increased to 12.1 percent by 2013.
In response to Representative Rita Smart’s question regarding the increase in debt service, Ms. Olds said the cost of school supplies and the cost of renovation to schools have gone up tremendously over the past ten years.
Chairman Mike Wilson said construction costs have gone up significantly over the last ten years and that can contribute to the increase in debt service spending.
In response to Senator Alice Forgy Kerr’s question regarding the categories of expenditures by function, Ms. Olds said student support are the staff that help student learning without being in the classroom; instructional staff support are the staff like librarians, and guidance counselors; district administration includes board of education members and school superintendents; school administration are principals; business support is the finance staff including payroll; plant operations is maintenance workers and custodians; transportation is bus drivers and expenses for the buses; food service is the cooks and food that is purchased for the cafeteria; other noninstructional is community service and adult education; and facilities and construction are schools being built and maintained.
Representative Derrick Graham said from 2004 to 2013, the population of students in school districts has increased which can lead to an increase in funding for classroom instruction and debts service.
Ms. Olds spoke about per-pupil current expenditures from Kindergarten to grade 12 and said average daily attendance was used for pupil count, not school enrollment. Instruction was the largest expense in 2013, costing $4,760 per pupil. Plant operations was the second largest expense costing districts $884 per pupil.
In response to Senator David Givens’s question regarding money being backed out per pupil, Ms. Olds said page 54 of the report shows the total expenditure of students along with per pupil.
Ms. Olds said OEA’s third recommendation is that KDE should ensure that districts are coding expenditures correctly on annual financial reports.
Ms. Olds spoke about expenditures by type in local school districts and said the largest dollar increase over the past ten years was in salaries, but the largest percentage increase over the ten years was in debt service and miscellaneous. Also, employee benefits almost doubled from $242 million in 2004, to $471 million in 2013.
Ms. Olds said OEA’s fourth recommendation is that districts should ensure that they are not violating KRS 160.280 for per diem payments for board members, and should update their board policies to conform with statutory requirements.
Ms. Olds said over the past ten years, increases in school districts’ share of retirement benefits have greatly increased. In 2004, districts were paying $24.5 million for the employers’ portion of teachers’ retirement for federally funded employees. In 2011, school districts began contributing 0.25 percent of KTRS retiree medical insurance fund and by 2016, the medical insurance fund will top out at a three percent rate. In 2013, the school districts were sharing responsibility along with what they were already paying for the federally funded positions. Ms. Olds said each school district is responsible for paying all of classified employees’ retirement.
Ms. Olds said in 2004, school districts received $441 million to educate special education students but spent $456 million. In 2013, school districts received $566 million for special education but spent $697 million.
In response to Senator David Givens’s question regarding local revenue in special education, Ms. Olds said the revenues and expenses shown on the graph do not show local revenue, and the gap between the two is made up by local funds.
In response to Representative Graham’s question regarding Title I funding, Ms. Olds said Title I funds are used to support students on free or reduced lunches.
Ms. Olds said the revenue for transportation at local school districts over the past ten years has not changed much while the expenses in transportation over the same time have increased immensely. In 2004, school districts were expending $56 million more on transportation than what was received. By 2013, that amount had doubled.
In response to Representative Rita Smart’s question regarding funding for school districts that do not provide transportation, Ms. Olds said school districts that do not provide transportation do not receive funds.
In response to Senator Alice Forgy Kerr’s question regarding school districts that do not provide transportation and how it affects school attendance, Ms. Olds said the law does not state that a district has to provide transportation. She does not know how it affects school attendance but that would be something she would research.
In response to Senator David Givens’s question regarding revenue sources for transportation, Ms. Olds said the majority of the revenue comes from the state.
Representative Derrick Graham said independent school districts usually choose not to provide transportation because the location of the school and students residence makes it easy for students to walk or take a city bus to school.
Ms. Olds said student/staff ratios included Kindergarten through grade 12 teachers and the ratios were based on membership at the end of the school year, not average daily attendance. During the past ten years, the student population grew per staff and classified staff grew as well.
In response to Senator David Givens’s question regarding the number of teachers at the end of the school year, Ms. Olds said teachers were only reported once a year on professional staff data forms sent to KDE by October 1st of each school year.
In response to Chairman Mike Wilson’s question regarding teachers’ aides, Ms. Olds said teachers’ aides are considered classified staff.
Ms. Olds said OEA’s fifth recommendation is that KDE and Jefferson County Public Schools (JCPS) should work together to ensure JCPS chart of accounts is set up correctly in MUNIS. This will ensure data is pulled correctly into KDE’s professional staff data and classified staff data module.
In response to Chairman Mike Wilson’s question regarding MUNIS, Ms. Olds said MUNIS is the financial accounting system that all school districts are required to use.
In response to Senator Alice Forgy Kerr’s question regarding JCPS not setting up their chart of accounts correctly, Ms. Olds said JCPS sets up their payroll differently than all the other school districts which does not correlate with how the MUNIS system works.
Ms. Olds said in 2004, the staff to administrator ratio for an average district was 21.24 and dropped to 20 by 2013. However, in 2013, the school districts with the fewest administrators relative to staff had 39 staff for every administrator while the lowest district had fewer than six staff per administrator.
In response to Chairman Mike Wilson’s question regarding a student to administrator ratio, Ms. Olds said that ratio was not included in the report, but she could provide that information to the committee at a later date.
In response to Senator David Givens’s question regarding what creates the huge disparity in the highest to lowest staff to administrators ratio in school districts, Ms. Olds said the size of smaller school districts compared to larger school districts creates a huge disparity in staff to administrator ratios.
Ms. Olds said OEA’s final recommendation is that KDE should review the non-academic reporting requirements to ensure certified and classified staff are reported correctly to the US Department of Education.
Acceptance of Office of Education Accountability Report
Upon motion from Senator Alice Forgy Kerr, seconded by Representative Rita Smart, OEA’s report as amended was accepted by voice vote.
Chairman Mike Wilson said the next EAARS meeting will be December 10th and at that time the committee will give final approval for OEA’s Research Agenda for 2015.
With no further business before the committee, the meeting adjourned at 12:03 p.m.