Carolynn Polanchek, Associate Legislative Research Analyst
Carolynn.Polanchek@cot.tn.gov (615) 401-7972
The Basic Education Program, or BEP, is the funding formula for Tennessee’s
K-12 public schools. The BEP represents a huge portion of the state budget –
over $4.5 billion dollars, or more than a quarter of total state dollars in the
budget. The BEP formula is also exceedingly complex, with 45 different components
that generate funding and an equalization process that sets state and local shares
of funding. Given the magnitude of taxpayer funds involved, the Comptroller’s
Office has repeatedly emphasized the importance of independently verifying the BEP
and making the formula as transparent and understandable as possible.
This page is the culmination of our efforts to explain the BEP, and has been created to outline the basics of the BEP, allow users to download the BEP Calculator and see the BEP calculation, and provide some quick facts and statistics about school funding.
Basics of the Basic Education Program
Created in 1992, the Basic Education Program (BEP) is the main source of K-12 education
funding and distributes over $4.5 billion to public school districts. It has two
parts: a state share, and a required local match contributed by local school districts.
State and local shares are set based on each county’s fiscal capacity, or
ability to raise local revenue; counties with higher fiscal capacities receive less
state funding and must contribute more local matching dollars than counties with
less ability to raise local revenue. The BEP is split into four main categories,
which together contain 45 different components that generate funding – for
example, teacher salaries or textbooks – but districts have considerable flexibility
on how to spend their BEP money. For this reason, the BEP is often referred to as
a funding formula, not a spending plan.
The BEP generates funding based on 45 components grouped into four main categories
The BEP has four main categories:
- 1. Instructional Salary. The largest
category at over $3 billion in state and local
dollars for fiscal year 2017-18, the Instructional Salary category generates salaries
for classroom teachers and other staff with teaching licenses (such as librarians
- 2. Instructional Benefits. Created by
2016 legislation, the Instructional Benefits
category covers retirement contributions and insurance premiums for the same positions
in the Instructional Salary category.
- 3. Classroom. As it sounds, the Classroom
category contains materials used in the classroom
– textbooks, classroom supplies, and technology, for example.
- 4. Non-Classroom. The final BEP category
is the second largest and covers some remaining
and miscellaneous school expenses, such as school buses, maintenance and operations,
and capital outlay.
Within the four broad categories, 45 different components generate funding. All
are driven, in some form, by student enrollment – generally, the more students in
a district, the more BEP money the district receives. Each component is based on
a unit cost (i.e., $46,225 for each teacher’s salary, or $76.75 per textbook). By
adding up all 45 components, the BEP formula attempts to estimate the cost of running
a school and the amount of funding needed to provide a basic education.
4 Categories of the BEP Infographic
Author: Paige Donaldson
A funding formula, not a spending plan
The BEP is often referred to as a funding formula, not a spending
plan. Put simply, this means that while the BEP generates a set amount of
money for each component – $300,000 in a district under the classroom supplies
component, for example – the district does not necessarily have to spend that
money on that component. In other words, BEP funding is generally not “earmarked”
down to the component level; the district that receives $300,000 for classroom supplies
does not have to spend that money on supplies, but could instead put it toward teacher
salaries or classroom-related travel. This gives districts flexibility when determining
how to use BEP funds at the local level.
On a broader level, however, the BEP formula contains several more general spending
requirements. The overall pot of money in the Instructional Salary category must
be spent on teacher salaries, though districts do not have to spend the money on
specific types of teachers. For example, while a district does not have to spend
the money generated for P.E. teachers specifically on P.E. teachers, it must spend
that money on some sort of teacher salary in the Instructional Salary category.
Districts with an average teacher salary higher than the state average may spend
money generated in the Instructional Salary category on teacher benefits.
State law requires that Classroom category funding only be spent on Instructional
or Classroom items. Funding generated in the Non-Classroom category may be spent
in any of the BEP’s four categories.
BEP Funding Infographic
Author: Paige Donaldson
Non-Public School Choice Programs
Author: Linda Wesson
School Staffing Costs: From the BEP Formula to Paying Teachers in the Classroom
Author: Linda Wesson
The BEP sets state and local shares of funding based on a
county’s ability to pay for education
The BEP has two parts: a state share and a statutorily required local match. When
the BEP was created in 1992, one major change from the previous funding formula
was the BEP’s use of fiscal capacity to “equalize” state funding. This
equalization is intended to put all counties on a level playing field, regardless
of their size or relative wealth. The equalization process is based on each
county’s ability to pay for education, or fiscal capacity. Counties with less ability
to fund education – a lower fiscal capacity – receive more state funding
and have a lower local match than counties with more capacity to raise revenue.
Overall, the state pays a set percentage of each category: 70 percent of both Instructional
categories, 75 percent of the Classroom category, and 50 percent of the Non-Classroom
category. The actual match rates may vary widely from county to county, however.
For example, a county with a high fiscal capacity may receive a 55 percent, rather
than 70 percent, state share in the Instructional categories, with a 45 percent
local match. Conversely, a county with a low fiscal capacity may receive 90 percent
state funding and have a 10 percent local match.
Two models provide fiscal capacity data:
- 1. The Tennessee Advisory Commission on Intergovernmental Relations
(TACIR) model considers four different factors, including property and sales
tax base as a measure of local revenue and per capita personal income. The TACIR
model tends to work in favor of smaller counties with less local revenue.
- 2. The Boyd Center for Business and Economic Research (CBER)
at the University of Tennessee model uses two factors: property tax base
and sales tax base. The CBER model tends to work to the advantage of districts with
larger fiscal capacities; under the CBER model, the state often pays more state
funding for larger districts and less for smaller districts than under the TACIR
As set in law in 2016, the final fiscal capacity index equally weights data between
the two models. The calculation is done at the county level, so that all districts
within a county have the same fiscal capacity.
For more information regarding each index and its calculation, see the explanations
in the interactive text of the BEP Calculator.
Fiscal Capacity Infographic
Author: Paige Donaldson
Counties with high private sector wages receive additional
money for salaries
Somewhat analogous to a cost of living adjustment, Cost Differential Factor (CDF)
is, in a sense, a “cost of doing business” adjustment. CDF was developed
based on the idea that school districts in counties with generally higher wages
may need to offer higher salaries to attract and retain teachers. As a result, counties
with relatively higher than average wages in the private sector receive a CDF adjustment,
or additional BEP funding for salaries and retirement contributions.
Over the past decade, CDF has been gradually phased out. It was reduced to 50 percent
of its full calculated value in 2007, and 25 percent in fiscal year 2016-17. The
appropriations act for fiscal year 2017-18 further reduced CDF funding to 20 percent
of its calculated value.
In fiscal year 2017-18, five counties received CDF: Anderson, Davidson, Knox, Shelby,
At over $4.5 billion dollars and more than a quarter of all state dollars in the
budget, the Comptroller’s Office has repeatedly called for independent verification
of the BEP formula. The office has also advocated for increased transparency and
greater public understanding of the formula.
The Comptroller’s Office of Research and Education Accountability (OREA) has addressed
this need on all three fronts by recalculating and verifying the BEP formula, explaining
the computation of all 45 components in detail, and making the calculation publicly
available for all Tennesseans. The resulting BEP Calculator,
available for download below, uses input data for student enrollment, unit costs,
and other factors to reconstruct the entire BEP calculation from scratch. The Calculator
provides a step-by-step look at the entire BEP calculation for any combination of
districts and counties, and gives users the ability to run various "what if?"
scenarios. Users can adjust unit costs and funding ratios, such as teacher salaries
and insurance premiums, to see the impact of different inputs on state and local
Requires Microsoft Office 2013 or later. Users with Office 2010: Click here to download
a version compatible with your software.
Download User Guide
If you receive this error message when trying to run the Calculator,
please use the Office 2010 version, available for download underneath the red button.
Calculating the BEP independently from the Tennessee Department of Education (TDOE)
over the past two years has allowed OREA to identify several issues with the formula.
Fiscal year 2017-18
In fiscal year 2017-18, OREA found that funding had been misallocated for 141
of the state’s 142 school districts: overallocations to districts totaled $6.81
million and underallocations $9.74 million, for a net state underallocation of $2.94
million. Of the $4.5+ billion statewide total in fiscal year 2017-18, this discrepancy represented
a 0.06 percent difference in the total BEP allocation. No individual district experienced
more than a 1.97 percent gain or loss in its final state share.
OREA brought its revision points to the attention of TDOE in late August 2017. TDOE will make adjustments for the 122 districts with underallocations, and states that it has implemented review and verification procedures to ensure that all revision points are addressed.
OREA’s revision points:
- Inputted the updated CBER fiscal capacity index into the BEP calculation to reflect
the most recent data available to determine state and local shares;
- Corrected the coding of six elementary and special schools that were previously
classified as high schools, affecting the number of school based positions generated
for librarians, library assistants, and principals (similar issue previously noted);
- Revised the enrollment count used to estimate 12th grade students taking career
and technical college readiness exams to more accurately reflect the number of students
taking the tests (repeat revision point);
- Updated the number of miles transported for the career and technical transportation
component for one school in Carter County;
- Made technical corrections in the transportation component for the districts in
Shelby County and reran the regression with updated inputs;
- Corrected the Department of Children’s Services’ allocation for K-6 counselors (repeat
revision point); and
- Updated the per-pupil amount used in the Department of Children’s Services’ minimum
Fiscal year 2016-17
In fiscal year 2016-17, the dollar value of OREA’s changes was negligible: in
total, districts lost $835,000 in state funding and gained an additional $1,197,000
for a net statewide increase of $362,000 in state dollars. Of the $4.3+
billion statewide total in fiscal year 2016-17, this discrepancy represented a 0.00825
percent difference between TDOE’s calculation and OREA’s changes. No individual
district experienced more than a 0.22 percent loss or gain in its final state share,
and 37 districts saw no change in funding. OREA brought nine points of revision
to the attention of TDOE in late September 2016; in response, TDOE stated that it
intended to apply those changes to its calculation in the upcoming fiscal year 2017-18.
OREA’s revision points:
- Corrected the coding of five high schools previously classified as elementary schools,
affecting the number of school based positions generated for K-8 librarians, 9-12
librarians, 9-12 assistant principals, and K-8 library assistants;
- Eliminated rounding of overflow positions for 9-12 librarians, 9-12 assistant principals,
and school secretaries to comply with Public Chapter 1020 (2016), which eliminated
rounding for all positions;
- Corrected the Department of Children’s Services’ allocations for K-6 counselors,
psychologists, and social workers;
- Revised the ADM used to estimate 12th grade students taking career and technical
college readiness exams to more accurately project the number of students taking
- Updated the total miles transported for the career and technical transportation
- Updated the insurance rate for transportation and maintenance and operations personnel;
- Created a “blended” state and local share rate for the Instructional Salary and
Instructional Benefits category using all data from both categories, rather than
salary data only;
- Updated existing state and local share percentages for the Classroom and Non-Classroom
categories to reflect changes in allocations above; and
- Updated the mandatory increase calculation to reflect both the new Instructional
state/local split and changes in allocations above.
BEP Calculator presentation to legislative committees
February 7, 2017
|BEP formula base
|ADM growth and unit cost inflation
|Instructional salary unit cost increase
|Lowered English learner ratios
|Teacher retirement increase
|January insurance premium rate increase
|Total BEP formula funding
In addition to money used to fund the formula, growth funding and teacher salary equity funds are included in the BEP appropriation. Sevier County received an additional $1.84 million in fiscal year 2017-18 to offset diverted sales tax revenue from a Tourism Development Zone located within the county.
|BEP formula funding
|Teacher salary equity funds
|Sevier County supplement
|Total BEP appropriation
Any unspent BEP funds revert to the general fund at the end of the fiscal year. In fiscal year 2015-16, $20.4 million of BEP funding had not been spent at the end of the year; approximately $4.5 million was transferred to the Department of Education’s early childhood education program, and the remaining $15.9 million reverted.