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$25 Million Shortfall in Education Funding

April 11, 2012

On March 30, finance officials in the Utah State Office of Education (USOE) discovered a problem in an Excel cell used to calculate the weighted pupil unit (WPU) numbers for the 2012-13 school year. The error, a failure to link the cell contents in the formula for calculated the WPU, resulted in a 773,000 WPU count when it really should have been 781,000. At funding of $2,842 per WPU, this resulted in the net under appropriation of approximately $25 million for FY 2012-13.

To put this in perspective, $25 million represents about eight-tenths of 1 percent of the overall $3 billion minimum school program (MSP) budget.

The error was discovered by USOE’s own financial staff who immediately brought it to the attention of the superintendency. Superintendent Larry K. Shumway assigned internal auditors to verify the numbers, which has since been done. Superintendent Shumway also reported the problem to Utah State Board of Education leadership, the Governor’s Office, Legislative leaders, the Legislative Fiscal Analyst’s Office (LFA), and the Governor’s Office of Planning and Budget (GOPB). Staff from USOE, LFA, and GOPB are working together to create systems that will prevent similar errors in the future.

The MSP has been left with carry forward balances in excess of $30 million in each of the past five years. The carry forward balances are typically allocated to the following year’s budget. As long as revenue projections don’t fall (which is not anticipated given the state of Utah’s economy), this year’s carry forward will be able to absorb all of the under appropriation. Even without the carry forward, legislative leaders are confident money can be found to fix the problem.

A further consequence of the error is that USOE Finance Director Larry Newton and Associate Superintendent for Business and Operations Todd Hauber submitted their resignations.

Q: If $25 million is missing, who has it?

There is no missing money. One of the Excel spreadsheet cells used to calculate the anticipated weighted pupil units for the next school year was inadvertently unlinked to the calculation for the final formula. Because of this the WPU count, which should have been 781,000, came out as only 773,000. In other words, the spreadsheet said there will be fewer students in Utah public schools next year than we really expect there will be. That led to a miscalculation of the total money needed in the budget to fully fund the anticipated growth.

Q: Why wasn’t this problem discovered in the budget process?

Because the amount was small relative to the overall size of the budget, the discrepancies questioned by leaders at USOE, the Legislature, LFA and GOPB were explained away by staff rather than thoroughly investigated. New processes are now being created to ensure thorough investigation in the future.

Q: $25 million is a lot of money to make up. Can this really be done?

While $25 million is a lot of money, it has to be viewed in proportion to minimum school program budget as a whole. The overall MSP budget for next year is $3,026,023,300. Consequently, $25 million is less than 1 percent of that budget. If one thinks of it in household terms, it amounts to $400 over the course of a year in a budget for a family earning $50,000. If the family projected their budget conservatively (giving cushion to meet demands without leaving extravagant leftovers at the end of the year) it is reasonable to think they could be left with $500 extra at the end of the year. They could apply $400 of that to fix the accounting error for this year and still carry $100 forward to next year.

Q: What is the minimum school program (MSP) and what are weighted pupil units?

The MSP is the total of three programs: the basic school program (sometimes referred to as “above the line”), related to basic school program (sometimes referred to as “below the line”) and voted and board leeways. In the most general terms, the basic school program is the money that local school districts and charter schools use to fund the basics of public education. The related to basic programs are specific education programs the Legislature funds like K-3 reading improvement programs, funding for technology or media centers, concurrent enrollment, etc. Voted and board leeways is money in the form of a state property tax guarantees for local school boards who, when they levy local property taxes, have relatively low property tax valuations. The WPUs is the funding mechanism of the basic program. Funding is based not solely on number of students, but also takes into consideration the type of student: e.g., “weighting” high schools students more since high schools are more expensive to operate than elementaries, “weighting” special education students more than regular students, etc.

Q: What’s next?

Utah State Office of Education officials will meet with Legislative leaders and staff and with representatives from the Governor’s Office to determine exactly what help is needed to keep schools unaffected by this error. There are pieces of the puzzle that aren’t yet known. The two biggest pieces are: how much carry forward will there be from this year’s budget and exactly how many student will there be next year? The answer to the first question won’t be known until after June 30, which is when the fiscal year ends. The answer to the second won’t be known until after Oct. 1, when the enrollment headcount takes place. Staff from the Utah State Office of Education, Legislature, and Governor’s Office are all working on a plan to see that this doesn’t happen again and will present their work to the respective elected representatives for further action.

Q: If this is just a technical budget error, why have two people resigned?

This was not the first technical budget error that has been discovered, though it was the most serious. Superintendent Shumway felt the mistake was both serious and not isolated so he accepted the resignations. Superintendent wants to ensure that the information leaders rely upon to make decisions is the most accurate information that can be had.

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From → 2012 Interim

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