Although the train carrying MPSERS reform seems to have been a heavy haul freightliner rather than a high speed passenger train, it has been moving, and yesterday pulled into the next station on its way to reform.  The Legislature convened on Wednesday to again deal with the issue of reforming the Michigan Public School Employees Retirement System (MPSERS).  The final agreement looks very similar to the version originally passed by the House, SB 1040 with substitute (H-3) with a few minor tweaks. 

Here are the high points of the final bill, which was passed by both the House and Senate, now on its way to the Governor for signature:

• Controls pension costs to districts by increasing employee contributions, reducing their multiplier or converting to defined contribution.
• Increases the retiree health insurance premium contribution of most existing and all future retirees to 20%.  Current retirees who are Medicare-eligible by January 1, 2013, would pay 10% of health care premiums instead of 20%.
• Provides for future employees to receive defined contribution instead of the current defined benefit for health care with an employer matching contribution of up to 2% of compensation into either a 401(k) or 457 plan.
• Continues the 3% employee contribution for retiree health but guarantees an employee's individual contributions.
• Begins prefunding health care benefits from a pay-as-you-go method to a combination of employee contributions, employer contributions and state funding.
• Caps the employer contribution rate at 24.46%, or the equivalent, of payroll.
• Reamortizes the cost of the early retirement program of 2010, extending it from 5 years to 10 years.
• Commission studies on converting to a defined contribution plan pension benefit for future employees and on the way to charge stranded costs other than by payroll, such as current operating costs (COE).

We have reviewed Section 147a funding language in the School Aid Bill and also discussed the matter with MDE and the passage of Senate Bill 1040 will not impact the district's allocation under this section.

The rate cap at 24.46 percent is positive for budgeting purposes, but it will mean that the School Aid Fund (SAF) will be responsible to fund any unmet required contributions determined by the actuaries. We are concerned that the state funding of MPSERS needed to keep the rate down may limit the ability for the SAF to provide any increases in the foundation allowance and other categoricals. This will be a key factor to watch over the next few years.

Watch our web page dedicated to the 2012 MPSERS Reform for more updates as we receive them.

The School Aid Bill that was passed by the Legislature and has since been signed by the Governor into law has many changes that will affect schools in the coming school year. An area that has been an issue for districts for quite some time seems to be somewhat resolved in the final bill.  We’ve all heard the stories about students enrolling in a district and after count day, moving to back to their home district or another district with no funding following them to assist the educating district with the added cost of the additional student. The fact that we only have two funding count days certainly has its limitations to resolve this.

During the School Aid Budget negotiations we heard about legislative initiatives to expand the number of count days, go to a daily attendance, and with the latest school aid re-write initiative, have the funding follow the student. A measure that was taken to assist with the issue was the expansion of Section 25, which up until the final bill, was used only for Strict Discipline Academies when students were enrolled between count days.  Many ISD’s and K-12’s had state aid payment adjustments reflecting this section last fiscal year. 

In the fiscal year 2012-13 School Aid Bill, ALL districts and PSA’s will be eligible to claim funding on a daily basis for days they educate students, including those that move between districts at any time during the school year.  This change certainly appears to resolve the issue of receiving students after count day with no funding following them, but at the same time, creates a whole new dimension of pupil and financial accounting issues that will need to be resolved for a smooth transition.

For more information the January 2012 and July 2012 School Aid Updates gave some explanation to how the section was implemented last fiscal year.  For 2011-12, it allowed Strict Discipline Academies (about 7 in the state) to receive a prorated share of a foundation grant from the referring resident district for pupils that transfer to the strict discipline academy after the count day, provided that they were counted by a district or public school academy on the count day.  MDE would then debit the pro-rated foundation for their attendance at the Strict Discipline Academy from the resident referring district.

You can find the 2012-13 School Aid Budget on the MSBO website at the following link: http://www.msbo.org/sites/default/files/sb961_fulltext.pdf   Refer to page 92 where Section 25 begins.  You will see that the text pertaining to alternative education programs and Strict Discipline Academies for 2011-12 has been lined out.  It has been replaced for 2012-13 with text allowing the same proration of foundation under similar circumstances for any student transferring from any local or intermediate school district to another local or intermediate school district after the count date.

In discussing the matter with MDE, they are working with CEPI and ISD pupil accounting specialists to come up with an electronic solution to the reporting of student transitions and other reporting concerns.  It is expected that there will be an electronic solution for this issue, but it may come at the cost of additional staff time in order to accomplish it.  One thing to remember, this section is available for use by a district, but is not mandated.  In other words, if you don’t want to participate in gaining state aid for students that enroll at your district after a count day, that’s your decision.  However, other districts may have students that move from your district to their district and claim the days, taking funding from your bottom line. 

We will keep you informed of MDE’s solution and the process by which you will need to report student changes during the year.  The State Aid payments for October and November are generally calculated using estimated student counts so it seems the first possible adjustments wouldn’t be until December at the earliest, giving some extra time to develop guidance from the department.

The School Aid Budget for 2012-13 included a couple of new twists to funding for “Best Practices.”  Section 22f, which is the best practice section for locals, increased the bar for implementation of best practices and now has a requirement of meeting 7 of 8 identified practices in order to receive an incentive payment of $52 per pupil for the 2012-13 fiscal year. 

A quick summary of the 8 best practices for locals is as follows: 

• Participate in School of Choice programs under Section 105 and Section 105c. (New)
• Measure student growth at least twice annually and report that growth to parents (New)
• Provide dual enrollment and other opportunities for post secondary coursework (New)
• Provide online learning opportunities (New)
• Act as policy holder for health care service benefits
• Provide a dashboard to parents and members of the community
• Obtain competitive bids on the provision of one or more non-instructional services
• Provide physical education consistent with the State Board’s policy adopted September 25, 2003 or provide health education consistent with the State Board’s policy adopted June 8, 2004 (New)

MDE released its guidance on the section 22f best practice incentive funding today and we have linked to it for your convenience “MDE Section 22f Best Practice Incentive Funding Guidance”

Also in the 2012-13 budget is an incentive for ISD’s to gain an additional 3.2% funding of their Section 81 funding.  The requirements to qualify for the incentive payment can be found under Section 81 in the bill. 

A quick summary of the 5 identified ISD best practices are as follows:

• Develop a service consolidation plan with the department in 2012-13 for implementation in 2013-14
• Obtain competitive bids for the provision of non-instructional services with a value of at least $50,000
• Develop a technology plan in accordance with department policy on behalf of constituent districts that integrates technology in the classroom and prepares teachers to use digital technology
• Provide a dashboard or scorecard demonstrating efforts to manage finances responsibly
• Work in a consortium with one or more intermediate districts to develop management information system requirements and bid specifications that can be used statewide

MDE also released guidance for the Section 81 incentive payment today and we have linked it for your convenience “MDE Section 81 Best Practice Incentive Funding Guidance”

We have had discussions with MDE on both of these sections and gave input to the guidance where appropriate.  Although there may be additional questions about current practices and how those relate to any of the requirements, the guidance is written in a manner that allows credit for things you are already doing.  The guidance does allow for some flexibility and local interpretation of what qualifies or even how you will post certain information.  This is a better approach than being overly prescriptive.

We will be monitoring both the listserv and the calls we receive to see if a FAQ document may be needed for specific questions.  At this point, please review the documents and if you have specific issues, email rdwan@msbo.org or simply put it on the listserv and we’ll respond as soon as possible, or investigate to provide you an answer.

David and Bob