Legislative subcommittee hears deep dive on how Montana calculates K‑12 'base aid' and where the money comes from

The Joint Appropriations Subcommittee on Education on Tuesday heard a detailed briefing from the Office of Public Instruction (OPI) on how Montana's K-12 "base aid" is calculated, the data needed to run the funding formulas and the three main revenue sources that pay those obligations.

Paul Taylor, a school finance official at the Office of Public Instruction, told the committee the presentation was intended as an "educational presentation" about how the budget request for base aid is developed. "Base aid or the base amount for school equity determines the largest state funding support for public school districts," Taylor said.

Why it matters: Base aid drives the single largest portion of state K-12 funding, shapes district budget limits and voting limits, and feeds the guaranteed tax base (GTB) formulas that send property-tax relief to low-wealth districts. Small changes in enrollment counts, special-education reports or state revenue estimates can shift hundreds of millions in how funds are distributed among districts.

Taylor walked legislators through the statutory components that together make up base aid under 20-9-306 and related sections of law. He summarized the principal pieces as: the direct state aid portion, the guaranteed tax base portion, and several 100%-state-paid components created after a past school-funding study (quality educator payments, at-risk payments, Indian education payments, and a data-for-achievement payment). Taylor explained those parts are combined for the biennial House Bill 2 request the OPI submits and that some historically separate line items (for example, special-education allowable-cost payments) are now folded into the base-aid request to provide flexibility and to reduce the chance of mid‑biennium shortfalls.

Key technical details and counting rules

- Enrollment: OPI emphasized that the formulas depend on two official count dates (the first Monday in October and the first Monday in February). Those counts are adjusted into "student count for A and B" by excluding certain students (for example, students under age 5, students 19 or older without an IEP, or those absent 11 consecutive days on a count date) and converting attendance into aggregate hours (quarter, half, three-quarter, full time) used to compute A & B funding units.

- Average number belonging (AMB): AMB is the central enrollment metric. OPI calculates current-year A & B and a three-year average A & B; districts are assigned the budget unit (elementary, middle or high) and the method that produces the most advantageous budget for that district. Taylor noted that some districts have separate budget units (elementary, middle, high) and that elementary and middle units must "hang together" while high schools may operate independently for the calculation.

- Direct State Aid and the per-pupil decrement: Taylor described how the per-A&B rate declines in steps for the first several hundred students (the "decrement") and then flattens at a fixed per‑student amount; the first student in the example he used for a high-school budget unit garnered $8,075 under the current rate table he displayed.

- Special education: The special-education allowable-cost allocation is computed off AMB and then divided into subcomponents. As presented, OPI allocates that pool to instructional and related-services block grants, disproportionate-cost reimbursement and a small cooperative/travel/admin slice. The OPI presenters said the instructional piece typically results in roughly $150 per pupil and the related-services portion near $50 per pupil in recent years, while the disproportionate-cost reimbursement is a separate calculation tied to trustee financial summaries (TFS) and local program expenditures.

- Other components: Taylor reviewed the quality-educator component (eligible positions and a per-FTE rate the presentation listed as $3,006.73), the Teach Act later-year bonuses for early-career teachers, the Indian Education for All payment (which now checks whether districts answered two nonfiscal accreditation questions and whether districts expended prior-year Indian-Ed receipts before receiving the full payment), early-literacy programs (jump-start summer and classroom-based programs that can generate 0.25 A&B for eligible participants), and provisions for extracurricular participation that can generate a 1/8 or 1/16 A&B in certain circumstances.

Revenue sources and cash-flow notes

Nancy Hall, OPI's budget office lead for the presentation, described the three main revenue sources that fund base aid under current law: the guarantee account (revenues from state trust lands managed by DNRC), the SCEPTER account (the state equalization and property tax reduction account fed by several standard mills), and the State General Fund which backfills the remainder. Hall said the guarantee account typically brings in about $50 million to $55 million in a year, and in the most recent year "it brought in $64,400,000." She and Taylor described how timing and reappraisal-driven shifts in taxable value can create a cash‑flow mismatch—state funds are paid to districts earlier in the year than some special-revenue receipts arrive, so the general fund often fronts money that later is offset when mill revenue is collected.

Data accuracy and operational risk

Nicole Thuot, manager of OPI's Education Data Collection Team, outlined why accurate, timely data are essential and described specific data fields that districts must supply: birth date, school and grade, service type (primary/partial/N for related-service-only students), start and end dates, IEP status, aggregate hours for part-time students, and various license and assignment codes for staff.

Thuot highlighted recurring operational risks: misreporting race/ethnicity at the fall count can alter American Indian achievement-gap and Indian-Ed distributions; trustee financial summaries (TFS) drive disproportionate-cost reimbursement and late edits to TFS can ripple across statewide special-education reimbursements; early-literacy and extracurricular rosters require separate enrollment flags; and fractional enrollments (students concurrently enrolled in more than one district or program) require careful reconciliation to avoid double-counting.

Committee follow-ups and direction

The committee asked OPI to post the detailed slide decks, to provide several data pulls for upcoming work sessions, and to quantify specific items requested by members. Chair Beatty asked for: a retrospective and projection on the significant-enrollment-increase allowance, a breakout of costs tied to the Anderson charter bills (House Bill 549 and the community-charter bill House Bill 562) distinguishing charter schools that remain within a district from standalone charter districts, a longitudinal FTE/budget-position series back to FY2016, and analysis of the teacher-license system costs vs. using the Department of Labor and Industry registry. The chair and other members also asked OPI to identify any additional funding needed to finish or modify the PowerSchool/data-modernization contract and to supply numbers on early graduates and how those counts affect A&B.

What the committee did not decide today

This session was instructional; members did not vote on any bills or appropriations. Taylor and other OPI staff repeatedly cautioned that the presentation and the numbers were background for upcoming budget negotiations and bill drafting, not final appropriations.

Tensions and uncertainties flagged by presenters

Presenters repeatedly flagged the GTB "lag" (the use of prior-year taxable valuations in subsidy calculations), the variability of guarantee-account receipts, and the complexity of reconciling multiple district student-information systems into a single authoritative dataset as key implementation risks that could affect distributions and cash flow. Taylor noted the statutory multiplier that inflates the statewide average for GTB qualification is capped at 2.62 under current law, meaning only legislation could change that cap.

Ending

OPI staff said they will post the non-fiscal and technical slides, provide the requested data pulls and follow up on the specific budget analyses requested by the chair. The committee recessed for a break and agreed to continue the technical review in a later work session before executive action on budget measures.