sequestration impacts on arizona charter schools

Copyright © 2013 Charter School Capital, Inc.

Sequestration Impacts On AZ Charter

Schools

June 18, 2013

2 Copyright © 2013 Charter School Capital, Inc.

WELCOME

•  Panelists – John Helgeson, Charter School Capital – Frank Yanez, FMY Consultants – Lynne Adams, Osborn Maledon

•  What is sequestration? •  What are the impacts? •  How will it impact my charter school? •  What should I plan for?

Agenda


What Is Sequestration?


WHAT IS SEQUESTRATION?

•  Budget Control Act of 2011 – Creates a mechanism to encourage a “give and take” in budget

negotiations known as sequester – Implementation is sequestration

•  Definition – “Sequestration is a mechanism to enforce deficit reduction by motivating

Congress to compromise on budget negotiations or face mandatory cuts of $85B.”

– Forces federal budget cuts – Budget cuts like this are bad policy

Definition



•  Legislators in DC not able to create a budget with appropriate cuts to reduce the federal budget deficit

•  What is the budget deficit? – Deficit versus debt

•  No compromise made •  $85B of mandatory cuts go in to effect and will impact every federal program

Politics



Federal Deficit – FY 2008 - 2015

0

200

400

600

800

1000

1200

1400

1600

2008 2009 2010 2011 2012 2013 2014 2015

US Federal Deficit - FY 2008 - 2014



•  Began March 1 of this year •  Continue through end of Federal Fiscal Year (Sept 30) •  This year cuts will be implemented over 7 months instead of 12 months •  Feel more painful because of reduced timeframe this calendar year

When?



•  Unknown •  If Congress does not agree to a compromise, then the sequester will continue •  Next year it would start in September, so cuts implemented across 12 months

rather than 7 months this year

Is this one time?



What Are The Impacts?


SEQUESTRATION IMPACTS

Pre-cut federal spending on elementary/secondary ed

School Lunch (Dept. of Ag)

23%

Title 1 (Ed) 20%

Special Ed (Ed) 16%

Head Start (HHS) 9%

Other 21%

School Improvements

(Ed) 9%

Impact Aid (Ed) 2%

Total = $78B



Non-exempt defense

discretionary 28%

Non-exempt nondefense discretionary

funding 18%

Medicare 7%

Non-exempt nondefense mandatory programs

18%

Non-exempt defense

mandatory programs

29%

Overall $85B in Cuts

What is being cut?



Title 1, $740

Impact Aid, $58

Special Ed, $644

Head Start, $406

Teacher Quality State Grants, $126

21st Century Community

Learning Ctrs, $59

Rural Ed, $9

Federal cuts in $ millions to education

$2 Billion in total cuts across programs



•  Effects are not universal because states and individuals benefit from programs differently

•  Impact timing depends on program and local delivery system •  Federal funding for education cut 5.2% •  It appears students most impacted will be those from disadvantaged areas

and those with special needs, although ALL federal funding is reduced – Title 1 and Special Ed being hit hardest – Many Federal programs help those from disadvantaged areas and with

cuts, these areas will be hit the most

What are the impacts?



•  Charters will be particularly hard hit – Facility costs won’t be reduced to account for less funding, so entirety of

budget cuts will be forced to come from smaller classroom budgets – Nationally on average, charter school students received $4,000 less each

year than peers in traditional public schools – In Arizona, disparity is $1,900 – Cuts in spending or significant delays in payment for key programs and

services such as Special Education, Title 1 and Impact Aid o Title I, II, IDEA, NSLP and Impact Aid could be reduced 5-6% o Requirements for programs will not be lessened o Less money to run programs with the same requirements o Decision on where to attain the money that is being lost to continue

programs at current level of success

General impacts to charter schools


How Will Cuts Impact You?


HOW WILL CUTS IMPACT YOU?

•  $52.9M in cuts statewide •  Title 1

– $18M cut – 240 teacher and aide jobs at risk – 19,000 fewer students would be served – 70 fewer schools would receive funding

•  Education for Children with Disabilities – $10M cut – 120 fewer teachers, aides, and staff who help children with disabilities

•  National Education Association puts loss higher suggesting more than 1,000 teachers could be laid off hurting more than 100,000 students

Impacts to Arizona schools



•  Title 1 and Special Education cuts will hit schools next month (July) – These programs are “forward funded,” so no cuts last fiscal year – Schools receive funding in July and October – DOE has stated that the total amount of cuts will be made in July

payments •  Schools will start new fiscal year with significantly reduced federal funds •  Good news? No delayed funding for charter schools, just for district schools




•  School districts likely to see the greatest cuts in Title 1 funding – Tucson Unified District

o 8.8% cut = $2.4M – Phoenix Union High School District

o 8.7% cut = $1.5M – Mesa Unified District

o 1.9% cut = $454,077 •  Districts that receive impact aid (districts with reservation lands or military

bases) will continue to see significant reductions in impact aid funding




•  Tucson-area charter school in operation for 11 years •  Approximately 1,300 students, 2 campuses •  2013 Allocations

– Title I $835,376 – Title II $25,271 – IDEA $182,634

•  2014 Potential Reductions – Title I $49,553 – Title II $1,516 – IDEA $10,958

•  Total Potential Reduction -- $62,027

Scenario – Arizona Community Development Corp


What Can You Do?


WHAT CAN YOU DO?

•  Do the math and forecast so you know how much less you have to spend •  Don’t assume you will get the same funding amounts as last year because

Title 1 and IDEA cuts will hit for the first time in July •  Build in the potential for significant delays in payments •  Plan for the worst case scenario •  If you have questions…ask us – we’re here to help you

Plan


WHAT CAN YOU DO?

•  How will this impact new schools? •  As schools opt out, will these funds go to schools continuing Title I? •  What type of reduction should we be planning for? •  What is the impact on CSP grant for new schools? •  In FY13, our school experience 20% not paid for Impact Aid. What % should

we expect for FY14?

FAQs


Questions?



Thank You.


877-272-1001 Frank Yanez [email protected]