Appropriations subcommittee adopts OPI indirect cost pool rates

The Joint Appropriations Subcommittee on Education on a voice vote adopted proposed indirect cost pool rates for the Office of Public Instruction (OPI) for the 2026–27 biennium, moving forward with the proprietary rates presented during a budget hearing.

OPI’s indirect cost pool is an internal service (proprietary) fund that allocates centralized administrative costs—payroll, accounting, budgeting and related services—to OPI programs by charging an indirect rate to state and federally funded programs. During the committee’s budget hearing, legislative analysts told members OPI submitted a federal indirect cost rate determination of about 18.37% for FY25 and anticipated a similar negotiated rate for FY26; the agency requested legislative approval to set the maximum internal rate near 19% (a 2 percentage point increase from the current legislatively approved 17%).

The committee heard that proprietary funds are handled differently than HB 2 appropriations: for internal service funds the legislature approves maximum rates and the fees that support program revenues rather than directly appropriating the funds. Committee staff described how revenues to the fund are generated monthly by applying the approved rate to the prior month’s direct personal services and expenditures in both state and federal programs; OPI negotiates the annual predetermined rate with the U.S. Department of Education and calculates it under federal regulations and Montana code.

During the hearing staff also reviewed OPI’s non‑budgeted proprietary funds beyond the indirect cost pool, including the Montana Drive advanced‑drivers program in Lewistown. That program operates as an enterprise fund and provides behind‑the‑wheel crash‑avoidance training to school bus drivers, driver‑education teachers and emergency personnel; the legislature reviews enterprise fund reports but does not set rates for those funds in the same manner as internal service funds.

Vice Chair Fuller moved to adopt the indirect cost pool rates as reflected in the proposed FY26 and FY27 columns. The committee took a voice vote; the motion passed. The committee’s executive action record shows the adoption of the proprietary rates for OPI, which the agency requested to reflect federal indirect cost determinations and to set the maximum fee the agency may charge.

The committee closed the OPI budget hearing and adopted the proprietary rates; the members indicated executive action would be recorded in the committee’s minutes.