State Fiscal Stabilization Fund

Update to Arizona Association of School Business Officials

July 22, 2009

Arizona Office of Economic RecoveryJanice K. Brewer, Governor

Arizona’s Fiscal Crisis

7,000

9,000

11,000

13,000

15,000

FY 2005 FY 2006 FY 2007 FY 2008 FY 2009 Est. FY 2010 Est. FY 2011 Est. FY 2012 Est. FY 2013 Est. FY 2014 Est.

$ in millions

Expenditures Revenues Federal with Sales Tax

1,323

2,531

4,000

State Fiscal Stabilization Fund (SFSF)

Pursuant to the American Recovery and Reinvestment Act (ARRA) the U.S. Department of Education allocated $1.017 billion in SFSF monies to Arizona

Funds available in FY 09, 10, & 11 to offset education cuts to K-12 and higher education as well as encourage progress along four reform criteria as stipulated in ARRA

Reform Criteria

Develop rigorous college and career-ready standards and assessments

Establish Pre-K through college data systems to track and foster performance and improvement

Improve teacher effectiveness and the equitable distribution of qualified teachers

Provide intensive support and interventions to the lowest performing schools

SFSF Has Two Components…

Education Stabilization Fund (82%/$832 M) The State must use this fund for the

support of public elementary, secondary and higher education

Government Services Fund (18%/$185 M) The State may use this fund for

education, public safety, or other government services solely at the discretion of the Governor

…Distributed in Two Phases

Phase I: 2/3rds of the SFSF is sent to the State

following a relatively straight-forward initial application ($557M)

Phase II: Remaining 1/3rd will be distributed in

the fall of 2009 following a more detailed state application to US DOE ($275M)

Rules of the Road: MOE and Mandatory Restorations

Maintenance of Effort (MOE): State Funding cannot drop below FY 06 funding levels as long as federal funds exist

Mandatory Restorations: K-12 and Higher Education must be funded at higher of 2008 or 2009 funding levels as long as federal funds exist• For LEAs, the 2009 funding level is higher

FY 2009 Restorations = $433 M

For FY 2009, the total restorations = $433 M Mandated Restoration for Higher Education

for FY 2009 cuts: $183M Mandated Restoration for K-12: $250 M

To offset reductions that occurred in the May budget fix for FY 2009

Note: No requirement to restore $123 M in reductions from January budget fix for FY 2009 pursuant to the ARRA guidance from U.S. Department of Education

FY 2010 Amounts = ???

FY 2010 Restoration and Award amounts cannot be determined until budget is final, due to ARRA Shortfall Clause

Shortfall Clause

In the event that insufficient funds are available to restore all LEAs and IHEs to higher of 08/09 funding levels:

The Governor shall allocate Education Stabilization funds between K-12 and Higher Education in proportion to the relative shortfall in State support

Award Estimates for FY10-FY11

Application 6/30 Budget

7/6 Budget* = est.

LEA Eligible Reductions

10: $300 M11: $ 0

10: $439 M11: $0

10: $191 M11: $ ?

SFSF Funds

10: $223 M11: $ 0

10: $257 M11: $0

10: $191 M11: $ 90 M*

IHE Eligible Reductions

10: $226 M11: $ 0

10: $244 M11: $ 0

10: $ 53 M11: $ ?

SFSF Funds

10: $176 M11: $ 0

10: $142 M11: $ 0

10: $ 53 M11: $ 65 M*

Reporting

For each year of funding, the state must provide reports regarding the uses, distribution, and effects of funds received among other requirements

LEAs will be able to meet requirements through use of ADE grant management system

Arizona Office of Economic Recovery has purchased reporting software package to facilitate ARRA reporting. First report due to US DOE on October 10

Process: Phase I, Step 1

Apply for funds:

Governor Brewer filed an application on May 21 to qualify Arizona for the first two-thirds of the SFSF

Arizona’s application was approved on June 4

Phase I, Step 2

Establish the application process for local education agencies (school districts and charter schools) and institutes of higher education (universities and community colleges) COMPLETED

Create the application COMPLETED Establish accounting, transparency and

reporting methodologies IN PROCESS

Phase I, Step 3

Evaluate applications:

The process used to evaluate the applications will be straightforward, with attention paid to accounting and oversight strategies

Phase I, Step 4

Allocate Funds:

Distribute funds to local education agencies and institutions of higher education in accordance with allocation guidelines

Inform recipients of reporting requirements including the information mandated for quarterly reports to the U.S. Department of Education

Phase II

Emphasis will be on education reform following ARRA mandates and guidance from the U.S. Department of Education

The U.S. Department of Education will release the guidance and funding application for Phase II later this year

$832 Million

(82% SFSF)

State Fiscal Stabilization Fund (SFSF)*

*based on initial applicationEDUCATION STABILIZATION GOVERNMENT SERVICESGovernor issues application for

funds

$1.017 Billion

Funds available for ARRA administration and other uses at the discretion of the Governor with certain restrictions and reporting requirements. Available for use in FY 2009, 10, & 11.

OSPB

Office of Economic Recovery

Shortfall Clause:

The Governor shall allocate those funds between K-12 and Higher Education in proportion to the relative shortfall in State support.

Funds available in FY 09, 10, & 11 to offset education cuts to K-12 and higher education as well as progress along four reform criteria as stipulated in ARRA

K-12

$250 Million

GENERAL STIPULATIONS•The Governor must commit funds before September 30, 2011.•For each year the state must provide reports regarding the uses, distribution, and effects of funds received among other requirements.•2/3 of total funds are distributed by the Department following the initial application (Phase I). •1/3 is distributed in FY 2010 after additional information including reform progress is received (Phase II).

Restore K-12 Funding (greater of ’08 or ’09)

Restore Higher Education

(greater of ’08 or ’09)

$185 Million

(18% SFSF)

FY 2009

Community Colleges

$29 Million

Universities

$154 Million

FY 2010

$433 Million $399 Million

For more information

Arizona Office of Economic Recoverywww.azrecovery.gov

American Recovery and Reinvestment Act

www.recovery.gov