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EdTec Connect Update: 2013-14 First Principal Apportionment is Certified

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The certification of the 2013-14 First Principal ("P1") Apportionment brings very little change since the Advance Apportionment was certified in July. The following is an update on funding rates, the Local Control Funding Formula (LCFF), cash flow schedule, the Education Protection Account (EPA), and other information based on the CDE's P1 certification.

Funding Rates at P1

As communicated by the CDE in the certification of the 2013-14 Advance Apportionment, specific LCFF calculations will not be made until the 2013-14 P2 certification in July. However, the CDE continues to recognize the LCFF "Gap" funding which will be incorporated in the P2 calculations. In both the Advance and First Principal Apportionments, the CDE has built in a percentage increase to general purpose funding for all schools. At the Advance Apportionment, we saw a 4.62% increase over 12-13 P2 rates. At P1, we are seeing a 4.63% increase over 12-13 P-Annual rates. This creates an increase in general purpose funding rates of $237-$283 per ADA over 2012-13 P2 rates, depending on grade span. The following table illustrates the increase from 2012-13 P2 and P-Annual rates to 2013-14 Advance and First Principal Apportionment rates:

As depicted above, per ADA rates have not changed significantly from the Advance to the First Principal Apportionment. However, individual school funding amounts have been adjusted for 2013-14 P1 certified ADA.

Please keep in mind that the P1 certification should not be used for 2013-14 budgeting. The adjusted rates are solely intended to distribute cash payments in light of LCFF increases to 2013-14 funding. Expected funding under LCFF should be calculated using tools such as the recently updated FCMAT calculator.

Prior Period Adjustments

A significant element of the P1 Apportionment is the adjustment to prior apportionments. Schools may have been over or underpaid in prior periods for state aid, property tax, or EPA due to changes in ADA, local in-lieu-of property tax rates, or other data used in apportionment calculations. One universal driver of these adjustments is the approximately $3 difference between 2012-13 P2 and P-Annual funding rates. Another driver is the slight change in the EPA percentage from 21.39% at P2 to 21.51% at P-Annual. Additionally, many (but not all) districts are experiencing an upward trend in property tax rates due to economic recovery. All of these changes will result in an adjustment to state aid.

These adjustments to prior year payments are incorporated in the P1 Apportionment. To view adjustments to state aid, reference the CDE schedule of Prior Year Recomputations and Adjustments. To identify adjustments to Property Tax and EPA, schools may compare these amounts in the funding exhibits for 2012-13 P2 and 2012-13 P-Annual.

LCFF Categoricals

As in the Advance Apportionment, the First Principal Apportionment also includes all of the categorical programs that are being consolidated into the LCFF. These funding amounts are based on 2012-13, adjusted for 2013-14 P1 ADA where appropriate. These amounts are added to the state aid funding to make up the total P1 Apportionment amount. This includes all categorical payments: the categorical block grant, EIA, old flexed programs like Supplemental Hourly Instruction and Arts and Music Grant, newer programs like the New Charter School Categorical Grant and even Class Size Reduction. The main benefit to switching these categoricals to the state aid apportionment schedule has been cash flow. The 5-5-9 schedule is much more favorable than, for example, the old Class Size Reduction schedule. To view the categoricals that are included in each school's P1 Apportionment payments, reference the CDE's Adjusted Local Control Funding Formula - Categorical State Aid schedule.

Cash Flow

While we enjoyed a deferral-free Fall, there will be two deferrals this Spring, in addition to the full June deferral. EdTec has planned for these deferrals all year. The published deferrals are less than what was expected for the majority of this school year, though slightly more than what was expected at the Governor's January Budget Proposal. The following table outlines the deferrals that are incorporated in the 2013-14 P1 Apportionment:


*Will be adjusted for P2

For school specific P1 payment schedules, please reference the CDE's published payment summary file.

Education Protection Account (EPA)

The Education Protection Account, which was created as a result of Proposition 30 in November 2012, continues to provide funding to charter schools. There is a slight update to the EPA entitlement calculation, due to the CDE's updated 2013-14 EPA revenue estimate of approximately $5.6B. As a result, EPA entitlements are calculated at 18.19% of block grant funding, up from 17.92% at the Advance Apportionment.

This increase will not impact total funding, but just the amount of funding allocated through the EPA. These funds will continue to be paid in quarterly installments through the 2018-19 school year. The first two payments of the school year were based on 2012-13 P2 ADA, and the third payment will reflect 2013-14 P1 updates to both ADA and the entitlement percentage.

Please note that newly operational schools in 2013-14 receive the minimum funding of $200/ADA.

Accounting

For the 2013-14 school year, all LCFF funding will be unrestricted and can be assigned resource code 0000. Keep in mind that this may change for some schools and districts in 2014-15, when Local Control Accountability Plans begin.

The CDE has updated the SACS coding for LCFF revenue for charter schools. The correct object code for LCFF revenue is now 8011. Object code 8015 will no longer be used, as it was only meaningful when charter schools were funded differently than districts. Object code 8011 should include all LCFF funds, including categoricals. In 2013-14, there is no need to separate out funds that are attributed to any specific categorical program, including EIA.

Stay Tuned for Additional Updates from EdTec

Overall, we are pleased that the CDE continues to recognize LCFF funding increases in the First Principal Apportionment payment schedule. We eagerly await the CDE's LCFF calculations at P2, but in the meantime are providing our clients with up-to-date LCFF forecasts based on the most recent information available.

As always, EdTec will continue to bring you the latest news from Sacramento, as well as how it affects your school.


EdTec clients, please contact your Client Manager if you have any questions.

If you’re not an EdTec client and would like to discuss our high quality charter school support services, or for an analysis of your budget or cash flow situation, contact us: askus@edtec.com

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