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    THE STATE EDUCATION DEPARTMENT / THE UNIVERSITY OF THE STATE OF NEW

    YORK / ALBANY, NY 12234

     TO: The Honorable the Members of the Board of Regents

    FROM: Johanna Duncan-Poitier

SUBJECT: Proposed Amendment of Section 174.2 of the Regulations

    of the Commissioner, Relating to State Aid

DATE: July 14, 2009

STRATEGIC GOAL: Goals 1 and 2

AUTHORIZATION(S):

    SUMMARY

Issue for Decision (Consent agenda)

    Should the Board of Regents adopt as a second emergency action the revised amendment to section 174.2 of the Commissioner’s Regulations, relating to State Aid?

Reason(s) for Consideration

    To conform the Commissioner's Regulations to changes in State statutes and to correct technical deficiencies.

Proposed Handling

     The proposed amendment has been revised in response to public comment and is being presented to the full Board for adoption as a second emergency action at the July 2009 Regents meeting. A statement of facts and circumstances which necessitate emergency action is attached.

Procedural History

    The proposed amendment was discussed by the EMSC Committee and adopted by the Full Board as an emergency action at the April Regents meeting.

Background Information

    The proposed amendment is necessary to reflect the Foundation Aid provisions enacted by Chapter 57 of the Laws of 2007 and to otherwise bring the Commissioner’s Regulations into compliance with those changes to the law.

    Chapter 57 of the Laws of 2007 changed the school funding system by replacing approximately 30 State Aid categories with a single Foundation Aid. Since pupil counts used to compute Operating Aid and other aids replaced by Foundation Aid are referenced in section 174.2 of the Commissioner’s Regulations, there is a need to

    amend this section to correct the existing statutory reference and to provide for the computation of aid on an enrollment-based pupil count ("average daily membership") rather than the previous attendance-based count ("average daily attendance"). The proposed amendment will enable the Department to accurately reflect the actual cost to districts of educating nonresident pupils.

    A Notice of Proposed Rule Making was published in the State Register on May 6, 2009. Supporting materials are available upon request from the Secretary to the Board of Regents.

     The proposed rule has been revised in response to public comment. An Assessment of Public Comment is attached.

The revisions include:

    ; In paragraph (3) of subdivision (a) of section 174.2, deleting the provision

    excluding "average daily attendance included in the daily membership of

    the school district pursuant to subdivision 8 of section 3602-c of the

    Education Law", relating to dual enrollment, from the computation of

    "average daily membership." The exclusion of dually-enrolled pupils from

    such calculation would have overstated the per-pupil cost of education

    because the expenditures associated with educating these students is a

    part of the overall expenditure used in the nonresident tuition computation.

    ; Deletion of obsolete, outdated language

    ; Revisions to ensure consistent terminology

    ; Correction of referenced citations

     Pursuant to the State Administrative Procedure Act, a revised proposed rule cannot be permanently adopted until after publication of a Notice of Revised Rule making in the State Register and expiration of a 30-day public comment period. However, the emergency rule which took effect on May 1, 2009 will expire on July 29, 2009. Therefore, a second emergency action is necessary for the preservation of the

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    general welfare in order to ensure that the emergency rule adopted at the April 2009 Regents meeting remains continuously in effect until such time as it can be adopted as a permanent rule, and thereby avoid disruption to the preparation and administration of contracts for the reimbursement of school districts which provide instruction to nonresident pupils for the 2009-2010 school year.

Recommendation

    Staff recommend that the Regents take the following action:

     VOTED: That section 174.2 of the Regulations of the Commissioner of Education be amended as submitted, effective July 30, 2009, as an emergency action upon a finding by the Board of Regents that such action is necessary for the preservation of the general welfare in order to immediately adopt clarifying and corrective revisions to the rule in response to public comment and to otherwise ensure that the emergency rule adopted at the April 2009 Regents meeting, which established the methodology for computing allowable tuition rates for nonresident pupils for public reporting by school districts, remains continuously in effect until such time as it can be adopted as a permanent rule, and thereby avoid disruption to the preparation and administration of contracts for the reimbursement of school districts which provide instruction to nonresident pupils for the 2009-2010 school year.

Timetable for Implementation

    The proposed amendment was adopted as an emergency rule at the April 20-21, 2009 Regents meeting, effective May 1, 2009, and will expire on July 29, 2009. If adopted by the Board of Regents at its July meeting, the second emergency adoption will become effective on July 30, 2009.

    It is anticipated that a revised rule will be presented for permanent adoption at the September Regents meeting, after publication of a Notice of Revised Rule Making in the State Register and expiration of the 30-day public comment period prescribed for revised rule makings in the State Administrative Procedure Act.

Attachment

PROPOSED AMENDMENT OF SECTION 174.2 OF THE REGULATIONS OF

    THE COMMISSIONER OF EDUCATION PURSUANT TO EDUCATION LAW

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SECTIONS 207, 2040, 2041, 2042, 2045 AND 3602, RELATING TO

    COMPUTATION OF NONRESIDENT PUPIL TUITION RATES

    STATEMENT OF FACTS AND CIRCUMSTANCES WHICH NECESSITATE

    EMERGENCY ADOPTION

     The proposed amendment is necessary to revise the Commissioner's Regulations to reflect the Foundation Aid provisions enacted by Chapter 57 of the Laws of 2007 and to otherwise bring the Commissioner's Regulations into compliance with other statutory changes. Chapter 57 of the Laws of 2007 changed the school funding system by replacing approximately 30 State Aid categories with a single Foundation Aid. Since pupils counts used to compute Operating Aid and other aids replaced by Foundation Aid are referenced in section 174.2 of the Commissioner’s Regulations, there is need to amend this section to correct the existing statutory reference and to provide for the computation of aid on an enrollment-based pupil count rather than the previous attendance-based count. The proposed amendment will enable the Department to accurately reflect the actual cost to districts of educating nonresident pupils.

     The proposed amendment was adopted as an emergency rule at the April 20-21, 2009 meeting of the Board of Regents, effective May 1, 2009. A Notice of Proposed Rule Making was published in the State Register on May 6, 2009. The proposed rule has been revised in response to public comment. Pursuant to the State Administrative Procedure Act, a revised rule cannot be permanently adopted until after publication of a Notice of Revised Rule Making and expiration of a 30-day public comment period. Because the Board of Regents meets at

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    fixed intervals, the earliest the proposed revised rule could be presented for permanent adoption, after publication of the Notice and expiration of the 30-day public comment period, would be the September 14-15, 2009 Regents meeting. However, the emergency rule which took effect on May 1, 2009 will expire on July 29, 2009. The expiration of the emergency rule could cause disruptions to the preparation and administration of contracts for the reimbursement of school districts which provide instruction to nonresident pupils for the 2009-2010 school year. In addition, the revised rule corrects certain deficiencies and clarifies certain provisions in the rule, in response to public comment.

     Therefore, a second emergency action is necessary for the preservation of the general welfare in order to immediately adopt clarifying and corrective revisions to the rule in response to public comment and to otherwise ensure that the emergency rule, which established the methodology for computing allowable tuition rates for nonresident pupils for public reporting by school districts, remains continuously in effect until such time as it can be adopted as a permanent rule, and thereby avoid disruption to the preparation and administration of contracts for the reimbursement of school districts which provide instruction to nonresident pupils for the 2009-2010 school year.

    It is anticipated that the proposed revised rule will be presented for permanent adoption at the September 14-15, 2009 Regents meeting, after publication of a Notice of Revised Rule Making in the State Register and expiration of the 30-day public comment period prescribed for revised rule makings in the State Administrative Procedure Act.

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PROPOSED AMENDMENT OF SECTION 174.2 OF THE REGULATIONS OF

    THE COMMISSIONER OF EDUCATION PURSUANT TO EDUCATION LAW

    SECTIONS 207, 2040, 2041, 2042, 2045 AND 3602

    ASSESSMENT OF PUBLIC COMMENT

     Since publication of a Notice of Proposed Rule Making in the State

    Register on May 6, 2009, the State Education Department received the following comments on the proposed rule.

    1. COMMENT:

     The proposed rule is not necessary and the State Aid formula changes resulting from the institution of Foundation Aid do not necessitate any regulatory changes. Concerns were also raised regarding fiscal impact.

    DEPARTMENT RESPONSE:

     The Department disagrees. Chapter 57 of the Laws of 2007 changed the school funding system by replacing approximately 30 State aid items with a single Foundation Aid, which is determined on the basis of "average daily membership" rather than "average daily attendance." The existing regulation is defective and the proposed rule is necessary to conform to changes enacted by Ch. 57, L. 2007 by correcting technical defects, and to reflect the intent of Ch. 57, L. 2007 and Education Law section 2045 in determining the cost to districts of educating nonresident pupils.

     The proposed rule is needed to replace a citation in 174.2(a)(3) to Education Law section 3602(8), which was repealed by Ch. 57, L. 2007, with the correct, current citation to Education Law section 3602(1)(l).

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     Moreover, Operating Aid was one of the State Aid categories that Ch. 57, L. 2007 replaced with Foundation Aid. Therefore, it was necessary to amend 174.2 to provide for calculations involving State aid received for operating expenses to be made on the basis of Foundation Aid.

     Finally, Education Law section 2045(1) requires that tuition for nonresident pupils may not exceed the difference between actual costs and State Aid. It was also necessary to amend section 174.2 because the State aid formula in the existing section 174.2 is defective and no longer reflects actual State aid under the Foundation aid formula established by Ch. 57, L. 2007.

    2. COMMENT:

     The computation of aidable costs should not include expenses related to special education students enrolled in BOCES programs.

    DEPARTMENT REPONSE;

     The Department agrees, but has determined that this issue is already addressed in the current methodology and does not require additional regulatory language.

    3. COMMENT:

     The term "aidable pupil units" where it first appears in the first sentence of paragraph (3) of subdivision (a) of section 174.2, should be replaced with the term "average daily membership" to be consistent with the proposed changes to "average daily membership" found elsewhere in such paragraph.

     DEPARTMENT RESPONSE:

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     The Department agrees and the proposed rule has been revised to

    include this change.

    4. COMMENT:

     The proposed pupil count used for average daily membership should be revised to include those nonpublic pupils who attend public schools for part of the day for special education, programs for the gifted and career education (dual enrollment) and should be used consistently throughout the regulation. In addition, the reference to "the additional aidable pupil units associated with pupils in special schools" reflects pupils that are not currently a part of average daily membership, and should be removed.

    DEPARTMENT RESPONSE:

     The Department agrees and the proposed rule has been revised to

    include these changes. The exclusion of dual-enrolled pupils would overstate the per-pupil cost of education because the expenditures associated with educating these students is a part of the overall expenditure used in the nonresident tuition computation. The reference to "pupils in special schools" is outdated and should be deleted.

AMENDMENT OF THE REGULATIONS OF THE COMMISSIONER OF

    EDUCATION

     Pursuant to Education Law sections 207, 2040, 2041, 2042, 2045 and 3602

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     Section 174.2 of the Regulations of the Commissioner of Education is amended, effective July 30, 2009, as follows:

    ? 174.2 Computation of tuition charges for nonresident pupils.

     The provisions of this section shall apply to all contracts [ entered into after January 1, 1975, ] for the reimbursement of a school district which provides instruction to a nonresident pupil. The charge for the instruction of each nonresident pupil shall not exceed the actual net cost of educating such pupil. If the accounting records of the school district providing such instruction are not maintained in a manner which would indicate the net cost of educating such pupil, a board of education, board of trustees or sole trustee of each school district shall compute the tuition to be charged for the instruction of each nonresident pupil admitted to the schools of such district, or for the education of whom such district contracts with a board of cooperative educational services, in accordance with the following formulae:

     (a) The tuition to be charged by a school district which provides full-day instruction for each nonresident pupil shall be computed as follows:

     (1) . . .

     (2) . . .

     (3) The net amount of State aid received by the school district, as defined in this paragraph, shall be distributed among the categories set forth in paragraph (2) of this subdivision in the same proportion that the [aidable pupil units] average daily membership in each of such categories bears to the [total

    aidable pupil units] average daily membership for the school district. [Such

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    aidable pupil units] For the purposes of this section, such average daily membership shall be computed in accordance with the provisions of paragraph l

    of subdivision [8] 1 of section 3602 of the Education Law, except that for the purpose of this computation the [additional aidable pupil units for pupils enrolled in special schools] enrollment of pupils attending under the provisions of paragraph c of subdivision 2 of section 4401 of the Education Law and the equivalent attendance of the school district, as computed pursuant to paragraph d of subdivision 1 of section 3602 of the Education Law, shall not be included in

    such computation. For the purposes of this section, net State aid shall include aid received in the general fund for operating expenses, textbooks, experimental programs, educational television, county vocational boards and boards of cooperative educational services, building aid, and other forms of State aid as approved by the department for inclusion herein, but shall not include transportation aid [ or aid attributable to pupils attending special schools ]. Net State aid shall also include the sum which is withheld from the school district for payment to the teacher's retirement fund.

     (4) . . .

     (5) The maximum nonresident pupil tuition which may be charged shall be determined by dividing the net cost of instruction of pupils in each category by the estimated average daily [attendance] membership of pupils in each category.

     (6) Refunds or additional charges shall be made at the conclusion of the school year based upon actual revenues, expenditures and average daily [attendance] membership.

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