Sequestration Impacts on Charter Schools

Copyright © 2013 Charter School Capital, Inc.

Sequestration Impacts On

Charter Schools

May 22, 2013

2 Copyright © 2013 Charter School Capital, Inc.

WELCOME

•  Panelists – John Helgeson, Charter School Capital – Frank Yanez, FMY Consultants – John Palmer, Orrick, Herrigton & Sutcliffe LLP

•  What is sequestration? •  What are the impacts? •  How will it impact my charter school? •  What should I plan for?

Agenda


What Is Sequestration?


WHAT IS SEQUESTRATION?

•  Budget Control Act of 2011 – Creates a mechanism to encourage a “give and take” in budget

negotiations known as sequester – Implementation is sequestration

•  Definition = – “Sequestration is a mechanism to enforce deficit reduction by motivating

Congress to compromise on budget negotiations or face mandatory cuts of $85B.”

– Forces federal budget cuts – Budget cuts like this are bad policy

Definition



Federal Deficit – FY 2008 - 2015

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2008 2009 2010 2011 2012 2013 2014 2015

US Federal Deficit - FY 2008 - 2014



•  Legislators in DC not able to create a budget with appropriate cuts to reduce the federal budget deficit

•  What is the budget deficit? – Deficit versus debt

•  No compromise made •  $85B of mandatory cuts go in to effect and will impact every federal program

Politics



•  Began March 1 of this year •  Continue through end of Federal Fiscal Year (Sept 30) •  This year cuts will be implemented over 7 months instead of 12 months •  Feel more painful because of reduced timeframe this calendar year

When?



•  Unknown •  If Congress does not agree to a compromise, then the sequester will continue •  Next year it would start in September, so cuts implemented across 12 months

rather than 7 months this year

Is this one time?



What Are The Impacts?


SEQUESTRATION IMPACTS

Non-exempt defense

discretionary 28%

Non-exempt nondefense discretionary

funding 18%

Medicare 7%

Non-exempt nondefense mandatory programs

18%

Non-exempt defense

mandatory programs

29%

Overall $85B in Cuts

What is being cut?



Federal spending on elementary/secondary ed

School Lunch (Dept. of Ag)

23%

Title 1 (Ed) 20%

Special Ed (Ed) 16%

Head Start (HHS) 9%

Other 21%

School Improvements

(Ed) 9%

Impact Aid (Ed) 2%

Total = $78B



Title 1, $740

Impact Aid, $58

Special Ed, $644

Head Start, $406

Teacher Quality State Grants, $126

21st Century Community

Learning Ctrs, $59

Rural Ed, $9

Federal cuts in $ millions

$2 Billion in total cuts across programs



•  Effects are not universal because states and individuals benefit from programs differently

•  Impact timing depends on program and local delivery system •  Federal funding for education cut 5.1% •  It appears students most impacted will be those from disadvantaged areas

and those with special needs – Title 1 and Special Ed being hit hardest – Many Federal programs help those from disadvantaged areas and with

cuts, these areas will be hit the most

What are the impacts?



•  Charters will be particularly hard hit – Facility costs won’t be reduced to account for less funding, so entirety of

budget cuts will be forced to come from smaller classroom budgets – Nationally on average, charter school students received $4,000 less each

year than peers in traditional public schools – In Arizona, disparity is $1,900 – Cuts in spending or significant delays in payment for key programs and

services such as Special Education, Title 1 and Impact Aid

General impacts to charter schools


How Will Cuts Impact You?


HOW WILL CUTS IMPACT YOU?

•  Teachers and schools – $17.7M primary and secondary education – 240 teacher and aide jobs at risk – 19,000 fewer students would be served – 70 fewer schools would receive funding

•  Education for Children with Disabilities – $10M cut – 120 fewer teachers, aides, and staff who help children with disabilities

•  National Education Association puts loss higher suggesting more than 1,000 teachers could be laid off hurting more than 100,000 students

Impacts to Arizona schools


HOW WILL CUTS IMPACT YOU?

•  School districts likely to see the greatest cuts in Title 1 funding – Tucson Unified District

o 8.8% cut = $2.4M – Phoenix Union High School District

o 8.7% cut = $1.5M – Mesa Unified District

o 1.9% cut = $454,077

Impacts to Arizona schools


What Can You Do?


WHAT CAN YOU DO?

•  Do math so you know how much less you have to spend •  Build in the potential for significant delays in payments •  Plan for the worst case scenario •  If you have questions…ask. We’re happy to help.

Plan


Questions?



Thank You.


877-272-1001 Frank Yanez [email protected]

Sequestration Impacts on Charter Schools

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