School Support

MEMORANDUM

Date: October 3, 2013

To: School District Superintendents, Charter School Directors, Business Managers

From: Tom Melcher, Director, School Finance Division

Subject: Aid and Tax Shift Buyback Update

Laws 2013, Chapter 116, Article 7, Section 20, provides that any state unrestricted fund balance as of June 30, 2013, be directed first, to increase the current year state aid payment percentage up to 90 percent, and second, to reduce the percentage of early levy recognition (tax shift). The commissioner of Minnesota Management and Budget has certified to the commissioner of Education the amount available to implement these changes for the biennium is $636 million.

Based on this estimate, the department will implement the change from 86.4 percent current year state aid payments to 90 percent in the October 15 state aid payment period. School districts will see an increase in the October 15 state aid payment equal to approximately 27 percent of the difference between state aid metered entitlements at 90 percent less the general reduction and state aid metered entitlements at 86.4 percent less the general reduction. The remainder of the increase will occur incrementally based on statutory percentages in Minnesota Statutes, section 127A.45, throughout the remainder of the year.

Remaining funds will be used to decrease the tax shift percentage from the current level of 48.6 percent. Under Minnesota Statutes, section 127A.441, tax shift adjustments to aid occur as late in the fiscal year as possible. Therefore, the tax shift pay back resulting from the decreased tax shift percentage will occur on June 20, 2014.

The change in the tax shift percentage will also affect the receipts used in the metering formula for allocating 90 percent current payments among pay periods. This will slightly impact the timing of metered payments during the remainder of the fiscal year. This change will be implemented in the October 30 state aid payment period.

With the change to 90 percent current aid payments, provisions of Minnesota Statutes, section 124D.11, Subdivision 9 (a), will also be implemented to return charter schools to a 24-period payment schedule July 15 through June 30, rather than the 16-period payment schedule July 15 through February 28. In a July 16 memo to superintendents, directors and business managers, charter schools were advised that in the event of implementation, the schools will have been over advanced state aid, because the 16-period schedule was established based on a 60 percent current year payment percentage to closely duplicate a 90 percent current year payment percentage for the periods July 15 through February 28. With the current year payment percentage at 86.4 percent, each current year payment to charter schools through the September 30 payment period has been about 43 percent more than would occur at a 90 percent current payment schedule for 24-payment periods. As a result, charter schools will not receive a current year payment for two to three payment periods until they are due state aid based on the 24-period schedule.

Initial cash flow projections for the remainder of the fiscal year will be provided with the October 15 IDEAS payment. Revised cash flow projections reflecting updated tax shift information will be provided with the October 30 IDEAS payment. Contact Audrey Bomstad at audrey.bomstad@state.mn.us if you have questions regarding this information.