When a Tennessee school district's enrollment falls but its charter schools grow, which year's charter enrollment determines BEP funding?

Subject

Opinion No. 13-34, Distribution of Basic Education Program Funds to Charter Schools, April 24, 2013

Plain-English summary

Under the Basic Education Program (BEP) described in this 2013 opinion, a local education agency (LEA) generally received its current-year state allocation based on prior-year average daily membership (ADM). The opinion said an LEA with falling enrollment did not forfeit BEP funding when its current-year ADM fell below the prior year's figure.

The request described an LEA whose total enrollment fell while enrollment at its charter schools grew. The Attorney General concluded that the LEA had to allocate funds to those schools on a per-pupil basis for the students attending them during the current school year. The conclusion rested on Tenn. Code Ann. § 49-13-112, which tied charter allocations to the state and local funds actually received by the LEA. The opinion described this as full pass-through of BEP funds received by the LEA on a current per-pupil basis.

The opinion also distinguished initial charter allocations, which generally used prior-year ADM, from the allocation owed for the pertinent school year in the declining-LEA, growing-charter scenario. A footnote discussed how growth funds would reach charter schools when students new to an LEA enrolled there first. It did not make growth funds a condition of the answer to the question presented.

Currency note

This opinion was issued in 2013. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Background and statutory framework

How the LEA's allocation worked. Tenn. Code Ann. § 49-3-351(d), as quoted in the opinion, used prior-year ADM and related measures to calculate BEP funding. It permitted an increased allocation when the current-year measures, taken together, exceeded the prior year's by more than 2%, subject to appropriated funds. The opinion found no process in that provision for an LEA to forfeit current-year BEP funding because its current-year ADM was lower.

How charter allocations worked. The opinion said initial BEP allocations to existing charter schools used prior-year ADM; projected enrollment applied to new charter schools and schools adding a grade. It also identified two provisions of Tenn. Code Ann. § 49-13-112: subsection (b)(1) based annual charter allocations on 100% of state and local funds received by the LEA, and subsection (b)(2) used student enrollments for the same period used in allocating state BEP funds to the LEA.

The question answered. The LEA in the request received funding based on prior-year ADM, had lower total enrollment during the current year, and therefore received no growth funds. Its charter schools, however, had more students than in the previous year. The Attorney General read § 49-13-112 to require the LEA to pass through a per-pupil portion of the BEP funds it actually received for the charter schools' current-year ADM. The opinion cited Garrison v. Bickford, 377 S.W.3d 659, 773 (Tenn. 2012), for the rule of reading statutes according to their plain meaning to give effect to legislative intent.

New students and growth funds. A footnote quoted Tenn. Comp. R. & Regs. 0520-14-01.03(1)(e): if a student new to the LEA first enrolled in a charter school, the initial BEP distribution would not reflect that student. When the LEA later received growth funds reflecting the increased ADM, it had to allocate the funds for that student to the charter school attended.

Common questions

Could the LEA lose BEP funds because its total enrollment fell?

The opinion found no process in § 49-3-351(d) for forfeiting the current-year BEP allocation because current-year ADM was below the prior-year ADM on which that allocation was based.

If the LEA was funded on prior-year ADM, did the growing charter school receive funding only for its prior-year students?

No. In the scenario presented, the AG concluded that the LEA had to pass through a per-pupil portion of the funds it received for the students attending its charter schools in the current school year. The opinion separately described prior-year ADM as the basis for initial charter allocations.

What did the opinion say about students new to the LEA who first enroll in a charter school?

Its footnote said those students would not appear in the LEA's initial BEP distribution. If later growth-fund distributions reflected their enrollment, the LEA had to allocate those funds to the charter schools they attended.

Did the opinion resolve funding when both the LEA and its charter schools lost students?

No. The question assumed a decline in total LEA enrollment but an increase at the charter schools. The opinion did not decide how to calculate a charter allocation if its own enrollment fell.

Citations

Tenn. Code Ann. § 49-3-301(2) (ADM definition); § 49-3-351(d) (BEP allocation and adjustments); § 49-13-112 (charter allocations). Tenn. Comp. R. & Regs. 0520-14-01-.03(1) (initial allocations). Case: Garrison v. Bickford, 377 S.W.3d 659, 773 (Tenn. 2012).

Source

• Landing page: https://www.tn.gov/attorneygeneral/opinions.html
• Original PDF: https://www.tn.gov/content/dam/tn/attorneygeneral/documents/ops/2013/op13-034.pdf

Original opinion text

S T A T E O F T E N N E S S E E
OFFICE OF THE
ATTORNEY GENERAL
PO BOX 20207
NASHVILLE, TENNESSEE 37202

April 24, 2013

Opinion No. 13-34

Distribution of Basic Education Program Funds to Charter Schools

QUESTION

Under Tennessee law, a local education agency ("LEA") receives Basic Education Program ("BEP") funding for the current year based on the LEA's prior year total student enrollment, with the opportunity to receive additional BEP funding if the LEA has a certain growth in its total student enrollment in the current year. If an LEA experiences a drop in total enrollment for the current year, must the LEA pass through funds on a per-pupil basis to charter schools within the LEA based on the number of students that are attending the charter schools during the current year?

OPINION

Yes. The LEA must pass through funds on a per-pupil basis to charter schools within the LEA based on the students that attend the charter schools during the year the LEA funds are distributed.

ANALYSIS

The Department of Education provides BEP funds to school districts pursuant to a formula devised by the Tennessee Board of Education and in accordance with the funding procedure set forth in Tenn. Code Ann. § 49-3-351. This procedure takes into consideration a school's Average Daily Membership, or ADM, which term is defined at Tenn. Code Ann. § 49-3-301(2) as "the sum of the total number of days enrolled divided by the number of days school is in session during this period as provided in the rules and regulations of the state board." See Tenn. Code Ann. § 49-3-351(d).

The intent of Tenn. Code Ann. § 49-3-351(d), which governs the calculation of the amount of BEP funding distributed annually to each LEA, is to provide funding for the current year to the LEA based primarily on the LEA's prior year ADM with the opportunity for additional funds for an LEA if the LEA experiences a defined level of growth in ADM during the current year. This provision, however, evidences no intent or process whereby an LEA would forfeit any BEP funding for the current year if the current year ADM is less than the prior year ADM on which current year funding is based. See Tenn. Code Ann. § 49-3-351(d). As Tenn. Code Ann. § 49-3-351(d) specifically states:

Notwithstanding any other section or law to the contrary, the BEP of every LEA will be calculated on the basis of prior year ADM, or FTEADM, or identified and served special education students (I&S), with the following exceptions: if the LEA's current year ADM, FTEADM, and I&S, taken as a whole, exceeds by more than two percent (2%) the prior year's ADM, FTEADM, and I&S, taken as a whole, then that LEA's allocation of state funds shall be calculated on the basis of the current year's ADM, FTEADM, and I&S less the first two percent (2%) by which it exceeds the prior year's ADM, FTEADM, and I&S. The increased amount so calculated shall be distributed to the extent funds are appropriated for that specific purpose. If the funds appropriated for that purpose are insufficient to provide for the LEA's increased allocations, the commissioner shall apply a pro rata reduction to the increased amount each LEA is otherwise eligible to receive. If the funds appropriated for that purpose exceed the amount required to fund growth in excess of two percent (2%), then that percentage may be lowered to a percentage that may ensure that all funds appropriated are allocated and disbursed to LEAs. An estimated fifty percent (50%) of the appropriated amount shall be distributed to such an eligible LEA by February 1, with the remainder, subject to any adjustment of numbers by the department of education that may affect the remaining amount, to be distributed by the following June 30. In calculating the allocations under the BEP formula, the commissioner, with the approval of the state board of education and the commissioner of finance and administration, shall establish definitions of ADM, FTEADM, and I&S, which will be used to determine each LEA's BEP funding. It is the legislative intent that the definitions so established approximate as closely as possible full year ADM, FTEADM, and I&S.

Annual funding allocations for the current year for charter schools within an LEA are based on 100% of State and local funds received by the LEA. Tenn. Code Ann. § 49-13-112(b)(1). Student enrollments used in funding allocations for charter schools are to be for the same period used in allocating State funds to the LEA under the BEP. Tenn. Code Ann. § 49-13-112(b)(2). Initial BEP allocations to charter schools are based on the prior year's ADM, Tenn. Comp. R. & Regs. 0520-14-01-.03(1), and, for new charter schools or charter schools adding a new grade, projected enrollment. Tenn. Comp. R. & Regs. 0520-14-01-.03(1)(g).

As previously mentioned, the Department of Education makes adjustments to BEP allocations to an LEA based on current-year enrollment to recognize enrollment growth. See Tenn. Code Ann. §§ 49-3-351(d), -354(o). Under certain circumstances the funds allocated may be upwardly adjusted (referred to as "growth funds") to ensure that the appropriate BEP payment was made to the LEA. Tenn. Code Ann. § 49-3-351(d). These growth funds are distributed on February 1 and June 30, based on enrollment information provided to the Department of Education by the LEA. Id. Thus, by the end of the school year, an LEA receives BEP funds for all students enrolled to the extent that funds have been appropriated by the General Assembly for that purpose. Id. This includes students new to the LEA, whether they are enrolled in a school managed by the LEA or in a charter school authorized by the LEA. Tenn. Comp. R. & Regs. 0520-14-01.03(1)(e).¹

The question posed concerns the following factual scenario. An LEA receives BEP funding based on the prior year's ADM but experiences a total decrease in enrollment during the current year, resulting in an actual ADM lower than the prior year's ADM. While such an LEA would not receive growth funds due to its declining enrollment, the LEA would receive BEP funding for the total number of students enrolled in the prior year and, because of the actual decrease in enrollment for the current year, would receive funding for students in excess of the amount that would have been received if BEP funding were adjusted based on ADM in the current year. See Tenn. Code Ann. § 49-3-351(d). However, unlike the LEA, the student enrollment at the charter schools located within the LEA, whose students are a subset of the LEA's total student population, increased from the prior year to the current year. At issue is whether the LEA must pass through the per-pupil BEP funds to the charter schools to cover all of the students enrolled in those schools during the current year.

Where excess BEP funds are paid to the LEA because the original projected amount was overstated due to the use of forecasted data that did not meet expectations and the excess funds remain with the LEA, Tenn. Code Ann. § 49-13-112 provides that the LEA is obligated to pass through a per-pupil portion of the total BEP funds received for the charter schools for their ADM for the current school year. See Tenn. Code Ann. § 49-13-112 ("(a) A local board of education shall allocate to the charter school an amount equal to the per student state and local funds received by the LEA. . . . (b)(1) Allocations shall be based on one hundred percent (100%) of state and local funds received by the LEA") (emphasis added). The statutory language indicates a clear legislative intent that all funds provided to the LEA must be passed through to charter schools within that LEA on a current per-pupil basis. See, e.g., Garrison v. Bickford, 377 S.W.3d 659, 773 (Tenn. 2012) (stating the general rule of statutory construction that courts must ascertain and give effect to legislative intent by applying the plain meaning of the words used in a statute). Thus, the General Assembly intended to require full pass-through of all BEP funds actually received by an LEA to charter schools on a per-pupil basis in the pertinent school year.

ROBERT E. COOPER, JR.
Attorney General and Reporter

¹ Tenn. Comp. R. & Regs. 0520-14-01.03(1)(e) provides:

If students are new to the LEA and enroll first in a public charter school, their enrollment would not be reflected in the BEP formula used to determine the initial distributions to the LEA. But their enrollment would be reflected in the growth funds distributed in February and June. Thus, as the LEA receives increased funding in subsequent distributions to reflect the increased ADM, the LEA must allocate the funds for those students to the public charter schools they attend. LEAs can determine the amount to allocate by determining pro-rata shares of growth money based on the current district-wide ADM, and then divide the growth money by that figure to determine the amount to allocate to the public charter schools for each student.

WILLIAM E. YOUNG
Solicitor General

ADAM FUTRELL
Assistant Attorney General

Requested by:
The Honorable Kevin Huffman
Commissioner
Tennessee Department of Education
710 James Robertson Parkway
6th Floor, Andrew Johnson Tower
Nashville, Tennessee 37243-0375