About the FBA Redistribution

Once again yesterday, we caught a glimpse of what happens when the state superintendent of public instruction doesn’t understand school finance…or schools for that matter.

Supt. Barresi directs OSDE to use remainder of activities funds  for teachers’ health insurance OKLAHOMA CITY (May 14, 2014) – As the Oklahoma State Department of Education (OSDE) has not yet received a supplemental appropriation for teachers’ health insurance premiums, known as the Flexible Benefit Allowance (FBA), state Superintendent of Public Instruction Janet Barresi has directed OSDE to use what remains in the schools’ activities funds to pay for the health insurance of Oklahoma’s fulltime district employees. “This action effectively depletes available funds left in the schools’ activities fund for the current fiscal year, but we must take care of our teachers,” Barresi said. “On top of everything else, our school districts must cover health insurance for their fulltime employees. These increased costs, which are in part a consequence of Obamacare, needed to be addressed.” The distribution of funds for FBA means that for the remainder of FY 2014 there will be a marginal reduction in funds for alternative education, Oklahoma Parents as Teachers (OPAT) program and professional development. Districts have the budgetary flexibility to move dollars to these programs, Barresi said. Districts today are being notified of the situation, but the action is pending final approval by the State Board of Education at its May 22 meeting. The FBA provides funding to districts to cover the cost of insuring eligible certified and support personnel. Based on data certified Jan. 1, districts have had an increase of more than 1,300 teachers and other fulltime employees eligible for state-funded insurance since January 2013. FY 2014 funds for the Reading Sufficiency Act and the ACE initiative, both critical education reforms, were provided in full to school districts earlier this year.

There are multiple issues at play here, but before I get to those, I should probably explain a couple of terms:

Flex Benefit Allowance (FBA) – Part of the funding school districts receive each year is designated to cover the health insurance costs of teachers and other school employees. Most school years, the SDE asks for a supplemental appropriation to cover the cost of premium increases.

Activities Budget – On this spreadsheet explaining the SDE’s budget request for the 2014-15 school year, the third bold line is the total of the activities budget. This includes a number of programs, such as the ones mentioned in the SDE bulletin. The three specifically that she’s cutting (Alternative Education, Oklahoma Parents as Teachers, and Staff Development) account for about $19.2 million of the activities budget. For some programs, such as ACE and RSA, districts receive their entire allocation in one lump sum near the beginning of the school year (more towards the middle this year). For these three, however, districts receive four equal allocations.

This decision by Superintendent Barresi means that districts won’t get their fourth payment for these three activities. Essentially, she is saying that districts can take the money they haven’t spent and move it into the FBA line to cover unmet expenses there.

There are three fundamental problems with this.

1. This gives the legislature a free pass on taking care of a shortfall, amounting to a last-minute budget cut to districts.
2. Some districts may have already spent or encumbered their entire allocations for these activities.
3. This may not be legal.

With the first concern, Barresi doesn’t see the problem. She thinks that districts can just move money around to cover any overages from these budgets. That’s just a budget cut from a different category. If District A is $250,000 short on the FBA line for the remainder of this fiscal year, and they lose $250,000 in funding from the state for other activities, they have to make it up somewhere. If the SDE doesn’t reposition the deck chairs, as Barresi has suggested, the district is still short $250,000 that they have to take from somewhere else. This is sleight of hand, nothing more.

The second shows a fundamental lack of understanding of how schools work. Alternative education and professional development run on a shoestring budget. School districts have already spent the money they’re going to use on these activities and are mostly just waiting on the reimbursement now. Those funds pay for teacher salaries, among other expenses. Districts made plans based on the amount they were allocated, not 75% of that amount.

As an example, Tulsa Public Schools projects more than $477,000 in cuts from this decision:

Tulsa Public Schools would be hit hard by a last-minute cut to the school activities fund proposed by State Superintendent Janet Barresi.

The Oklahoma State Department of Education announced late Wednesday that Barresi has directed $6.54 million budgeted for a variety of school activities to instead be used to cover a deficit in health insurance premiums for school employees.

TPS Chief Financial Officer Trish Williams said Thursday that TPS alone would lose more than $477,000 it was counting on to cover costs incurred during the school year that ends in two weeks.

The school district said it would lose $394,236 for alternative education programs, $21,000 for the Oklahoma Parents as Teachers parent education program and $61,896 for professional development.

It’s not just the programs named in the SDE’s bulletin, either.

Redistributing the $5.1 million in unencumbered funds means less will be available to schools for bonuses for National Board Certified Teachers; Advanced Placement teacher training; test fee assistance for students; the Oklahoma Student Information System; development of a component of the new Teacher Leader Effectiveness evaluations; the REACH literacy coaches who travel throughout the state; and third-grade reading readiness, according to Tricia Pemberton, an Education Department spokeswoman.

These are critical programs, and the impact on school districts will be significant, though varied. Once again, Barresi treats a nuanced problem with zero understanding of that nuance.

As to the legality of this decision, it is critical to remember that Barresi has tried this before – two years ago.

Early Friday, District 9 Rep. Marty Quinn stated as others were expressing frustration over the SDE’s intent to divert textbook funding that if it happened with the stopgap they were proposing, that he would vote against every education bill moving forward. District 2 Rep. John Bennett explained that a superintendent from his district had called him to explain that the SDE was keeping one-third of the textbook money. He then reminded the body that last year, the legislature trusted the SDE with a lump sum of funds and that the agency then failed to pay school employees’ flex benefits as legislated (requiring a supplemental appropriation this session). District 61 Rep. Gus Blackwell pointed out that the SDE has a history of ignoring legislative dictates. He followed up by threatening to deplete the agency’s budget if that happens again. District 64 Rep. Ann Coody mentioned that the Senate’s removal of line items in the SDE’s budget the last couple of years has led to unfunded mandates on schools.

Members of Superintendent Barresi’s own party were on the floor of the legislature saying that in a little over a year, she has already established a pattern of neglecting their will. Democrats like Joe Dorman, Ed Cannaday, Scott Inman, and Jerry McPeak were also vocal in their frustration over how she has performed. The fact that textbook funding was both restored and protected is huge. This means schools will not have their ability to pay for critical instructional materials depleted any further. It also means that the legislature will likely be more careful in the future when it tells the SDE what to do.

That’s from my post dated May 26, 2012, titled A Stern Rebuke. It seems that legislators didn’t like Barresi moving money from fund to fund and they wanted to proscribe how the SDE was to spend its allocation. They restored line items to the education budget, and that was that.

Additionally, this issue has come up before and was discussed at length in a ruling from the Attorney General’s office – in April 2003 (found using this search engine and entering the term Flexible Benefit).

You next ask whether a school district’s statutory obligation to pay a percentage of the cost of certified employees’ health care premiums is dependent upon the amount of funding the district receives from the State Board of Education. School districts receive State funds appropriated to the State Department of Education based on a State aid formula (see 70 O.S. 18-200.1 (A) (2002)), as well as State funds appropriated for specific purposes, such as the flexible benefit allowance. 2002 Okla. Sess. Laws ch. 388, sec 11. Since a school district’s obligation to pay 75% of the health care cost is reduced or offset by the amount of the legislatively-funded flexible benefit allowance, the question that arises is how the district’s obligation is calculated if a State revenue shortfall reduces the flexible benefit allowance funds that are allocated to school districts by the State Department of Education.

To refresh your memory, the 2002-03 school year was one of the worst in recent memory for the state budget. School districts laid off a lot of personnel. This is a long AG opinion (over 2,800 words), but the gist is that there is a limit to how low school districts can go in funding FBA for employees, and that they can only dip below 75 percent if there is a state revenue shortfall. What I’m not seeing is the shortfall. The state has the money, and the legislature has chosen not to allocate it to school districts. The state superintendent thinks she can just whip money from line to line in violation of legislative intent.

I’m not sure what the strategy is here. Maybe it’s another attempt to prove to teachers that she’s looking out for them. Maybe she is just trying to work Obamacare into the conversation because it plays to her base. I’ll give her credit for repeatedly asking the legislature to fund the shortage, but I’ll also consider that their reticence has something to do with the miasma I discussed a few days ago. At this point, I think the legislature is ready to repudiate anything she does – or look at it skeptically.

As should we all.

June 24^th can’t come soon enough.